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Press release from PR Newswire

/C O R R E C T I O N -- PepsiCo, Inc./

Thursday, February 14, 2013

/C O R R E C T I O N -- PepsiCo, Inc./07:00 EST Thursday, February 14, 2013In the news release, PepsiCo Reports Fourth Quarter and Full Year 2012 Results, issued Feb. 14, 2013 by PepsiCo, Inc. over PR Newswire, we are advised by the company that the last sentence in the third paragraph under "2013 Outlook" should read "within the company's long-term capital spending target of less than or equal to 5 percent of net revenue." rather than "within the company's long-term capital spending target of less than 5 percent of net revenue." as originally issued inadvertently. The complete, corrected release follows: PepsiCo Reports Fourth Quarter and Full Year 2012 Results -- Fourth quarter core(1) EPS $1.09 and reported EPS $1.06 -- Full year core EPS $4.10 and reported EPS $3.92 -- Organic(1) revenue grew 5 percent in the fourth quarter and in the full year. Reported net revenue declined 1 percent for the quarter and 1.5 percent for the full year, reflecting the impact of previously announced structural changes, a 53rd week in 2011 and unfavorable foreign exchange translation -- For 2013, company targets mid-single-digit organic revenue growth and 7 percent core constant currency(1) EPS growth -- Company expects to return approximately $6.4 billion to shareholders through dividends and share repurchases in 2013 -- Company announces quarterly dividend increase of 5.6 percent, starting in June 2013 PURCHASE, N.Y., Feb. 14, 2013 /PRNewswire/ -- PepsiCo, Inc. (NYSE: PEP) today reported core earnings per share of $1.09 for the fourth quarter of 2012 and $4.10 for the full year, on organic revenue growth of 5 percent for both the quarter and the full year."In 2012, we delivered 5 percent organic revenue growth, reflecting PepsiCo's many strengths: we're well positioned in attractive and highly complementary growth categories, our portfolio is diversified with products that have broad appeal and a global footprint that is balanced, and we have an enviable portfolio of iconic brands," said Chairman and CEO Indra Nooyi."We also took a number of significant steps in 2012 that will even better position our business for sustainable, long-term growth; we increased our brand investment, stepped up our innovation, improved our marketplace execution and embarked on an aggressive productivity program that will contribute to our profitability and act as a funding source of future investment."Our recent brand-building initiatives and innovation across the portfolio, including Quaker Real Medleys, Gatorade Energy Chews, Pepsi Next and Doritos Locos Tacos, are translating into success in the marketplace." "Just as importantly, we remain highly focused on generating attractive returns for our shareholders.  We returned $6.5 billion to shareholders in 2012 through a combination of share repurchases and dividends, and today announced an increase in our quarterly dividend that will take effect in June. "We're encouraged by the progress we're making and expect performance in the coming year to be consistent with our long-term targets."  (1) Please refer to the Glossary for the definitions of Non-GAAP financial measures including core, constant currency, organic and management operating cash flow. Operating and Marketplace Highlights Achieved 5 percent organic revenue growth in the quarter and for the full year with a good balance between volume growth(2) and price realization. PepsiCo Americas Foods organic revenue grew 8 percent in the quarter driven by organic revenue gains in all divisions, including Frito-Lay North America, Quaker Foods North America and Latin America Foods. Reported net revenue increased 3.5 percent in the quarter, with declines at FLNA and QFNA due to the impact of an extra reporting week in the fourth quarter of 2011. Frito-Lay North America and PepsiCo Americas Beverages market share trends in the U.S. improved sequentially in the fourth quarter reflecting disciplined execution and significant investments in advertising and marketing. AMEA organic revenue grew 8 percent in the quarter driven by low-double-digit organic volume growth in snacks and mid-single-digit organic volume growth in beverages. Reported net revenue in AMEA declined 13 percent in the fourth quarter, reflecting the impact of structural changes. On an organic basis, emerging and developing market revenue grew 9 percent in the quarter. On a reported basis, emerging and developing market net revenue was even with the prior year quarter, primarily due to beverage refranchisings in China and Mexico.     Substantially increased advertising and marketing expense by 50 basis points to 5.7 percent of net revenue during 2012, supporting the company's long-term brand-building initiatives. Delivered more than $1 billion of productivity savings during 2012 through disciplined cost management programs. The company remains on track to deliver $3 billion in productivity savings by 2015. Management operating cash flow (excluding certain items) was $7.4 billion in 2012. Cash flow from operations was $8.5 billion. Delivered a 20 percent reduction in net capital spending to 4.0 percent of 2012 net revenue. Returned $6.5 billion to shareholders in 2012 through $3.2 billion in share repurchases and $3.3 billion in dividends. (2) All 2012 volume growth measures reflect an adjustment to the base year (2011) for divestitures that occurred in 2012 and 2011, and exclude the impact of an extra reporting week in 2011.Summary of Fourth Quarter Financial PerformanceOrganic revenue grew 5 percent and reported net revenue declined 1 percent. Organic revenue growth was driven by balanced volume growth and effective net pricing. Structural changes, primarily refranchisings in China and Mexico, negatively impacted reported net revenue performance by 3 percentage points. An extra reporting week in the prior year quarter negatively impacted reported net revenue performance by 3 percentage points and foreign exchange translation had less than a 1 percent unfavorable impact in the quarter.  Core constant currency operating profit declined 7 percent reflecting the impact of increased commodity costs, increased advertising and marketing expense, higher pension expense, lapping gains related to certain divestitures and asset disposals in the fourth quarter of 2011, partially offset by productivity initiatives. Reported operating profit declined 1.5 percent and included the impacts of a lump sum pension settlement charge in the current year and an extra reporting week in 2011, partially offset by lower restructuring and certain impairment charges and merger and integration charges in the current year.  The company's core effective tax rate was 26.7 percent, below the prior year quarter primarily due to an adjustment to deferred tax liabilities. The company's reported effective tax rate was 15.4 percent reflecting the benefit of a tax court decision.  Core EPS was $1.09 and reported EPS was $1.06. Core EPS excludes a $0.14 per share tax benefit related to a tax court decision, an $0.08 per share charge related to a pension lump sum settlement, a $0.06 per share impact of certain restructuring, impairment and integration charges, and a $0.02 per share impact from mark-to-market net losses on commodity hedges. Mark-to-market gains and losses on commodity hedges are subsequently reflected in core division results when the divisions take delivery of the underlying commodity. Summary Fourth Quarter 2012 Performance (Percent Growth)  Reported Core Constant Currencya  OrganicbVolumec     Snacks4.5    Beverages2Net Revenue(1)5Operating Profitd(1.5)(7)EPS19(5)    Volumec   Net Revenue   Operating Profitd   OrganicRevenueCore ConstantCurrencyOperating ProfitPAF6e3.528(2)    FLNA5(1)3.553    LAF8e13813(4.5)    QFNA6 (0.5)(17)5(18)PAB-(4)(1)2.5(8)Europe1/(1)f1383.5(10)AMEA12/13f,g(13)(25)8(20)Total Divisions 6/4f (1) 2.5 5 (5)Total PepsiCo(1) (1.5) 5(7) a Core constant currency results are non-GAAP financial measures that exclude certain items affecting comparability. For more information about our core constant currency results, see "Reconciliation of GAAP and Non-GAAP Information" in the attached exhibits. Please refer to the Glossary for definitions of "Core" and "Constant currency".b Organic results are non-GAAP financial measures that adjust for impacts of acquisitions, divestitures and other structural changes, foreign exchange translation and a 53rd week in the fourth quarter of 2011. Please refer to the Glossary for additional information regarding organic results.c Volume growth measures adjusted to exclude the impact of a 53rd week in the fourth quarter of the base year (2011).d The reported operating profit performance was impacted by certain items excluded from our core results in both 2012 and 2011. See "Reconciliation of GAAP and Non-GAAP Information" in the attached exhibits for more information about these items. Please refer to the Glossary for the definition of "Core".e PAF and LAF volumes include 2 percentage points and 4 percentage points of benefit, respectively, related to acquisitions.f Snacks/Beverages.  g AMEA beverage volume includes an estimated benefit of 6 percentage points relating to co-branded juice drinks in China, after adjustment to include co-branded juice drink volume in China for the fourth quarter of the base year (2011).Summary Full Year 2012 Performance (Percent Growth) Reported Core Constant Currencya OrganicbVolumec     Snacks3    Beverages1Net Revenue(1.5)5Operating Profitd(5)(5)EPS(3)(5)   Volumec   Net Revenue   Operating Profitd   OrganicRevenueCore Constant CurrencyOperating Profit PAF5e4(2)7-    FLNA12142    LAF13e9(2)144    QFNA1(1)(13)1(12)PAB(1)(4.5)(10)1.5(11)Europe3/1f,g(1)1043AMEA14/10f,h(10)(16)104Total Divisions 6/2.5 f (1.5) (4) 5 (3)Total PepsiCo(1.5) (5) 5(5)a Core constant currency results are non-GAAP financial measures that exclude certain items affecting comparability. For more information about our core constant currency results, see "Reconciliation of GAAP and Non-GAAP Information" in the attached exhibits. Please refer to the Glossary for definitions of "Core" and "Constant currency".b Organic results are non-GAAP financial measures that adjust for impacts of acquisitions, divestitures and other structural changes, foreign exchange translation and a 53rd week in 2011. Please refer to the Glossary for additional information regarding organic results.c Volume growth measures adjusted to exclude the impact of a 53rd week in the fourth quarter of the base year (2011).d The reported operating profit performance was impacted by certain items excluded from our core results in both 2012 and 2011. See "Reconciliation of GAAP and Non-GAAP Information" in the attached exhibits for more information about these items. Please refer to the Glossary for the definition of "Core".e PAF and LAF volumes include 3 and 9 percentage points of benefit, respectively, related to acquisitions.f Snacks/Beverages.  g Europe snacks and beverage volumes include 2 percentage points and 1 percentage point of benefit, respectively, related to acquisitions.h AMEA beverage volume includes an estimated benefit of 4 percentage points relating to co-branded juice drinks in China, after adjustment to include co-branded juice drink volume in China for the fourth quarter of the base year (2011).Division Operating SummariesPepsiCo Americas Foods (PAF) Organic revenue grew 8 percent in the quarter driven by 5 percentage points of organic volume growth and 3 percentage points of effective net pricing. Reported net revenue increased 3.5 percent reflecting a 4-percentage-point negative impact from the extra reporting week in 2011, and a less than 1-percentage-point unfavorable impact from foreign exchange translation. Core constant currency operating profit declined 2 percent, reflecting higher commodity costs and increased advertising and marketing investments across all PAF divisions, partially offset by productivity initiatives and effective net pricing. For the full year, organic revenue grew 7 percent driven by 2 percentage points of organic volume growth and 5 percentage points of effective net pricing. Reported net revenue grew 4 percent reflecting a 1-percentage-point negative impact from the extra reporting week in 2011, and a 2-percentage-point unfavorable impact from foreign exchange translation. Core constant currency operating profit was even with the prior year, reflecting revenue gains and productivity initiatives, offset by higher commodity costs and increased advertising and marketing investments across all PAF divisions.Frito-Lay North America (FLNA)Organic revenue increased 5 percent in the quarter, reflecting a 5-percentage-point increase in organic volume and even effective net pricing. Reported revenue declined 1 percent reflecting the impact from the extra reporting week in the prior year quarter. For the full year, organic revenue grew 4 percent, reflecting a 1-percentage-point contribution from organic volume and 3 percentage points of effective net pricing. Full year reported revenue grew 2 percent, including 2 percentage points of negative impact from the extra reporting week in 2011. Core constant currency operating profit grew 3 percent in the quarter, and 2 percent for the full year. These results reflect organic revenue gains and productivity initiatives, partially offset by higher commodity costs and a significant increase in advertising and marketing investments.Latin America Foods (LAF)Organic revenue grew 13 percent in the quarter, reflecting 3 percentage points of organic volume growth and 10 percentage points of effective net pricing. Reported net revenue also grew 13 percent in the quarter, with a 1-percentage-point benefit from acquisitions and divestitures offset by a 1-percentage-point unfavorable foreign exchange translation impact.   Full-year organic revenue grew 14 percent, reflecting 4 percentage points of organic volume growth and 10 percentage points of effective net pricing. Reported net revenue increased 9 percent and included a 2-percentage-point benefit from acquisitions and divestitures and a 7-percentage-point unfavorable impact from foreign exchange translation.Core constant currency operating profit declined 4.5 percent in the quarter and rose 4 percent for the full year. These results reflect revenue growth and productivity gains offset by increased advertising and marketing expense and commodity cost inflation in both periods as well as lapping a gain from the sale of a fish business in Brazil in the fourth quarter of 2011.Quaker Foods North America (QFNA)Organic revenue grew 5 percent in the quarter and 1 percent for the full year driven primarily by organic volume gains. Reported net revenue declined 0.5 percent in the quarter and 1 percent for the full year, reflecting the impact from the extra reporting week in 2011. Core constant currency operating profit declined 18 percent for the quarter and declined 12 percent for the full year. This was driven principally by higher commodity costs and increased advertising and marketing expense in the quarter and the full year, and by lapping gains from a divestiture and an asset sale in the fourth quarter of 2011.  PepsiCo Americas Beverages (PAB)Organic revenue grew 2.5 percent in the quarter reflecting organic volume that was even with the prior year and 2.5 percentage points of effective net pricing. Non-carbonated beverages volume grew low-single-digits led by mid-single-digit volume growth at Gatorade, and CSD volume declined approximately 1 percent in the quarter.  For the full year, organic revenue grew 1.5 percent reflecting a 1-percentage-point organic volume decline, 3 percentage points of effective net pricing, and the impact of concentrate shipment timing.  Reported net revenue declines included the impacts of refranchising the division's Mexican bottling operation in 2011, which had a negative 2-percentage-point impact for the quarter and a negative 5-percentage-point impact for the full year, and of the extra reporting week in 2011, which had a negative 5-percentage-point impact for the quarter, and a negative 1-percentage-point impact for the year. Core constant currency operating profit declined 8 percent in the quarter and 11 percent for the full year, primarily reflecting increased commodity costs and higher advertising and marketing expense, partially offset by favorable effective net pricing and productivity initiatives. Operating profit comparisons were also impacted by a gain associated with the refranchising of the division's Mexico bottling operation in the fourth quarter of 2011.EuropeOrganic revenue grew 3.5 percent in the quarter and 4 percent for the full year. This reflected even organic volume and 3 percentage points of effective net pricing in the quarter and even organic volume performance on 4 percentage points of effective net pricing for the full year. Continued healthy volume growth in Russia and parts of Eastern Europe partially offset softer trends in Western Europe for the quarter and the full year.  Reported net revenue grew 1 percent in the quarter, including a 1-percentage-point unfavorable impact from foreign exchange translation, and a 1-percentage-point negative impact from the extra reporting week in 2011. Reported net revenue declined 1 percent for the full year, including a 7-percentage-point unfavorable impact from foreign exchange translation.  Core constant currency operating profit declined 10 percent in the quarter and grew 3 percent for the full year, reflecting significantly higher marketing investments and commodity cost inflation partially offset by productivity savings.  Asia, Middle East & Africa (AMEA)Organic revenue grew 8 percent in the quarter, led by low double-digit organic volume growth in snacks and mid-single-digit organic volume growth in beverages.  Reported net revenue declined 13 percent reflecting a 19-percentage-point negative impact from structural changes, principally the refranchising of bottling operations in China and an unfavorable 1-percentage-point impact from foreign exchange translation. For the full year, organic revenue grew 10 percent led by double-digit organic volume growth in snacks and mid-single-digit organic volume growth in beverages. Including structural changes and foreign exchange translation, reported net revenue declined 10 percent reflecting a 17-percentage-point negative impact from structural changes, principally the refranchising of bottling operations in China, and an unfavorable 3-percentage-point impact from foreign exchange translation. Core constant currency operating profit declined 20 percent for the fourth quarter and was up 4 percent for the full year. These results include the impact of lapping a gain on divestiture associated with the sale of the division's minority interest in its franchise bottler in Thailand in the fourth quarter of 2011.2013 OutlookFor 2013, the company expects 7 percent core constant currency EPS growth versus its fiscal 2012 core EPS of $4.10. Based on the current foreign exchange market consensus, the company expects that foreign exchange translation will have an unfavorable impact of up to 1 point on the company's full-year core EPS performance in 2013. Excluding the impact of structural changes and foreign exchange translation, organic revenue is expected to grow mid-single-digits, consistent with the company's long-term targets. The impact of structural changes, principally beverage refranchisings, are expected to reduce organic revenue growth by approximately 1 percentage point for the full year.  For 2013, the company expects low-single-digit commodity inflation, and productivity savings of approximately $900 million. The company also expects advertising and marketing expense to increase at or above the rate of net revenue growth. Below the operating line, the company expects higher interest expense driven by increased debt balances and a core effective tax rate of approximately 27 percent.The company is targeting over $9 billion in cash flow from operating activities and more than $7 billion in management operating cash flow (excluding certain items) in 2013.  Net capital spending is expected to be approximately $3 billion in 2013, within the company's long-term capital spending target of less than or equal to 5 percent of net revenue.Reflecting its commitment to return capital to shareholders, the company announced a new share repurchase program providing for the repurchase of up to $10 billion of PepsiCo common stock from July 1, 2013 through June 30, 2016, which will succeed the current repurchase program that expires on June 30, 2013. The company also announced a 5.6 percent increase in its annualized dividend to $2.27 per share from $2.15 per share, to take effect with the June 2013 payment. Under these programs, the company expects to return a total of $6.4 billion to shareholders in 2013 through dividends of approximately $3.4 billion, and share repurchases of approximately $3.0 billion. Conference Call At 8 a.m. (Eastern Time) today, the company will host a conference call with investors to discuss fourth-quarter results and the outlook for 2013. Further details, including a slide presentation accompanying the call, will be accessible on the company's website at www.pepsico.com/investors in advance of the call.  PepsiCo, Inc. and SubsidiariesCondensed Consolidated Statement of Income(in millions except per share amounts, unaudited, except year-ended 12/31/2011 amounts)Quarter EndedYear Ended12/29/201212/31/2011Change12/29/201212/31/2011ChangeNet Revenue $     19,954$     20,158(1)%$     65,492$     66,504(1.5)%Cost of sales9,6549,731(1)%31,29131,593(1)%Selling, general and administrative 8,0508,15024,97025,145expenses (1)%(1)%Amortization of intangible assets373024%119133(11)%Operating Profit 2,2132,247(1.5)%9,1129,633(5)%Interest expense (288)(272)6%(899)(856)5%Interest income and other 442489%915761%Income before income taxes 1,9691,999(1)%8,3048,834(6)%Provision for income taxes 302597(49)%2,0902,372(12)%Net income 1,6671,40219%6,2146,462(4)%Less:  Net income (loss) attributable to (13)19noncontrolling interests 6n/m3692%Net Income Attributable to PepsiCo $      1,661$      1,41517%$      6,178$      6,443(4)%Diluted  Net Income Attributable to PepsiCo per Common Share $        1.06$        0.8919%$        3.92$        4.03(3)%  Weighted-average common shares                              outstanding1,5641,5841,5751,597  Cash dividends declared per common    share $     0.5375$      0.515$     2.1275$      2.025n/m = not meaningfulA-1 PepsiCo, Inc. and SubsidiariesSupplemental Financial Information(in millions and unaudited, except year-ended 12/31/2011 amounts)Quarter EndedYear Ended12/29/201212/31/2011Change12/29/201212/31/2011ChangeNet RevenueFrito-Lay North America  $      4,102$      4,155(1)%$    13,574$   13,3222%Quaker Foods North America 815819(0.5)%2,6362,656(1)%Latin America Foods 2,7142,39913%7,7807,1569%   PepsiCo Americas Foods 7,6317,3733.5%23,99023,1344%PepsiCo Americas Beverages 6,0786,311(4)%21,40822,418(4.5)%Europe 4,2884,2311%13,44113,560(1)%Asia, Middle East & Africa 1,9572,243(13)%6,6537,392(10)%Total Net Revenue $    19,954$    20,158(1)%$    65,492$   66,504(1.5)%Operating ProfitFrito-Lay North America $      1,114$      1,0763.5%$     3,646$     3,6211%Quaker Foods North America 200239(17)%695797(13)%Latin America Foods 3863588%1,0591,078(2)%   PepsiCo Americas Foods 1,7001,6732%5,4005,496(2)%PepsiCo Americas Beverages 735740(1)%2,9373,273(10)%Europe 31322638%1,3301,21010%Asia, Middle East & Africa 117157(25)%747887(16)%Division Operating Profit 2,8652,7962.5%10,41410,866(4)%Corporate Unallocated   Mark-to-Market net impact (Losses)/Gains(61)(71)(14)%65(102)n/m   Merger and Integration Charges-(14)n/m-(78)n/m   Restructuring and Impairment Charges(2)(74)(97)%(10)(74)(86)%   Pension Lump Sum Settlement Charge(195)-n/m(195)-n/m   53rdWeek-(18)n/m-(18)n/m   Other (394)(372)6%(1,162)(961)21%(652)(549)19%(1,302)(1,233)6%Total Operating Profit $      2,213$      2,247(1.5)%$     9,112$     9,633(5)%n/m = not meaningfulA-2 PepsiCo, Inc. and SubsidiariesCondensed Consolidated Statement of Cash Flows(in millions) Year Ended 12/29/201212/31/2011(unaudited)Operating ActivitiesNet income $      6,214$      6,462Depreciation and amortization2,6892,737Stock-based compensation expense 278326Merger and integration charges 16329Cash payments for merger and integration charges (83)(377)Restructuring and impairment charges 279383Cash payments for restructuring charges (343)(31)Restructuring and other charges related to the transaction with Tingyi    (Cayman Islands) Holding Corp. (Tingyi)176-Cash payments for restructuring and other charges related to the    transaction with Tingyi (109)-Excess tax benefits from share-based payment arrangements (124)(70)Pension and retiree medical plan contributions (1,865)(349)Pension and retiree medical plan expenses 796571Deferred income taxes and other tax charges and credits 321495Change in accounts and notes receivable (250)(666)Change in inventories 144(331)Change in prepaid expenses and other current assets 89(27)Change in accounts payable and other current liabilities 548520Change in income taxes payable (97)(340)Other, net(200)(688)Net Cash Provided by Operating Activities 8,4798,944Investing ActivitiesCapital spending (2,714)(3,339)Sales of property, plant and equipment 9584Acquisition of Wimm-Bill-Dann Foods OJSC (WBD), net of cash and cash  equivalents acquired -(2,428)Investment in WBD -(164)Cash payments related to the transaction with Tingyi (306)-Other acquisitions and investments in noncontrolled affiliates (121)(601)Divestitures (32)780Short-term investments, net 6166Other investing, net 12(16)Net Cash Used for Investing Activities (3,005)(5,618)Financing ActivitiesProceeds from issuances of long-term debt 5,9993,000Payments of long-term debt (2,449)(1,596)Debt repurchase -(771)Short-term borrowings, net (1,461)303Cash dividends paid (3,305)(3,157)Share repurchases ? common (3,219)(2,489)Share repurchases ? preferred (7)(7)Proceeds from exercises of stock options 1,122945Excess tax benefits from share-based payment arrangements 12470Acquisition of noncontrolling interests (68)(1,406)Other financing (42)(27)Net Cash Used for Financing Activities (3,306)(5,135)Effect of exchange rate changes on cash and cash equivalents 62(67)Net Increase/(Decrease) in Cash and Cash Equivalents2,230(1,876)Cash and Cash Equivalents ? Beginning of Year 4,0675,943Cash and Cash Equivalents ? End of Year$      6,297$      4,067A-3 PepsiCo, Inc. and SubsidiariesCondensed Consolidated Balance Sheet(in millions except per share amounts)12/29/201212/31/2011Assets(unaudited)Current Assets Cash and cash equivalents $         6,297$          4,067 Short-term investments 322358 Accounts and notes receivable, net 7,0416,912 InventoriesRaw materials 1,8751,883Work-in-process 173207Finished goods 1,5331,7373,5813,827Prepaid expenses and other current assets 1,4792,277Total Current Assets  18,72017,441Property, plant and equipment, net 19,13619,698Amortizable intangible assets, net 1,7811,888Goodwill 16,97116,800Other nonamortizable intangible assets 14,74414,557Nonamortizable Intangible Assets 31,71531,357Investments in noncontrolled affiliates 1,6331,477Other assets 1,6531,021Total Assets $       74,638$        72,882Liabilities and EquityCurrent Liabilities Short-term obligations $         4,815$          6,205 Accounts payable and other current liabilities 11,90311,757 Income taxes payable 371192Total Current Liabilities 17,08918,154 Long-term debt obligations 23,54420,568 Other liabilities 6,5438,266 Deferred income taxes 5,0634,995Total Liabilities 52,23951,983 Commitments and Contingencies Preferred stock, no par value 4141 Repurchased preferred stock (164)(157) PepsiCo Common Shareholders' EquityCommon stock, par value 12/3¢ per share (authorized 3,600 shares, issued, net 2626of repurchased common stock at par value: 1,544 and 1,565 shares, respectively) Capital in excess of par value 4,1784,461Retained earnings 43,15840,316Accumulated other comprehensive loss (5,487)(6,229)Repurchased common stock, in excess of par (322 and 301 shares, respectively) (19,458)(17,870)Total PepsiCo Common Shareholders' Equity 22,41720,704Noncontrolling interests105311Total Equity 22,39920,899Total Liabilities and Equity $       74,638$        72,882A-4 PepsiCo, Inc. and Subsidiaries Supplemental Share and Stock-Based Compensation Data (in millions except dollar amounts, unaudited)Quarter EndedYear Ended12/29/201212/31/201112/29/201212/31/2011Beginning Net Shares Outstanding  1,5521,5681,5651,582Options Exercised/Restricted Stock Units and PEPUnits Converted452622Shares Repurchased  (12)(8)(47)(39)Ending Net Shares Outstanding 1,5441,5651,5441,565Weighted Average Basic 1,5461,5641,5571,576Dilutive Securities:  Options   10121114  Restricted Stock Units7766  PEPUnits----  ESOP Convertible Preferred Stock/Other 1111Weighted Average Diluted 1,5641,5841,5751,597Average Share Price for the Period $              69.91$             62.92$              68.34$             65.25Growth Versus Prior Year 11%(4)%5%1%Options Outstanding  68917697Options in the Money 67556672Dilutive Shares from Options 10121114Dilutive Shares from Options as a % of Options in the Money15%22%16%20%Average Exercise Price of Options in the Money $              58.96$             48.93$              56.42$             51.36Restricted Stock Units Outstanding 12121213Dilutive Shares from Restricted Stock Units 7766Dilutive Shares from PEPUnits ----Average Intrinsic Value of Restricted Stock Units Outstanding*$              65.60$             62.96$              65.41$             62.93Average Intrinsic Value of PEPUnits Outstanding*$              64.89$                    -$              64.78$                     -* Weighted average intrinsic value at grant date.A-5 PepsiCo, Inc. and SubsidiariesReconciliation of GAAP and Non-GAAP InformationOrganic GrowthQuarters Ended December 29, 2012 and December 31, 2011(unaudited)GAAP MeasurePercent ImpactNon-GAAP MeasureReported % ChangeOrganic % Change*Net Revenue Year over Year % ChangeQuarter Ended 12/29/2012Acquisitions and divestituresForeign exchange translation53rd week Quarter Ended 12/29/2012Frito-Lay North America(1)--75Quaker Foods North America(0.5)-(0.5)5.55Latin America Foods13(1)1-13   PepsiCo Americas Foods3.5--48PepsiCo Americas Beverages(4)2-52.5Europe1-113.5Asia, Middle East & Africa(13)191-8Total PepsiCo(1)30.535GAAP MeasurePercent ImpactNon-GAAP MeasureReported % ChangeOrganic % Change*Net Revenue Year over Year % ChangeQuarter Ended 12/31/2011Acquisitions and divestituresForeign exchange translation53rd weekQuarter Ended 12/31/2011Frito-Lay North America13--(7)6Quaker Foods North America4--(5)(2)Latin America Foods7-6-13   PepsiCo Americas Foods10-2(4.5)8PepsiCo Americas Beverages-4-(5)-Europe32(30)3(1)4Asia, Middle East & Africa16-1-17Total PepsiCo11(4)1.5(3)5* Organic percent change is a financial measure that is not in accordance with GAAP and is calculated by excluding the impact of acquisitions and      divestitures, foreign exchange translation and a 53rd week in the fourth quarter of 2011 from reported growth.Note - certain amounts above may not sum due to rounding.A-6 PepsiCo, Inc. and SubsidiariesReconciliation of GAAP and Non-GAAP Information (cont.)Organic GrowthYears Ended December 29, 2012 and December 31, 2011(unaudited)GAAP MeasurePercent ImpactNon-GAAP MeasureReported % Change Organic % Change*Net Revenue Year over Year % ChangeYear Ended 12/29/2012Acquisitions and divestituresForeign exchangetranslation53rd week Year Ended 12/29/2012Frito-Lay North America2--24Quaker Foods North America(1)--21Latin America Foods9(2)7-14   PepsiCo Americas Foods4(0.5)217PepsiCo Americas Beverages(4.5)4.5-11.5Europe(1)(2)7-4Asia, Middle East & Africa(10)173-10Total PepsiCo(1.5)32.515GAAP MeasurePercent ImpactNon-GAAP MeasureReported % ChangeOrganic % Change*Net Revenue Year over Year % ChangeYear Ended 12/31/2011Acquisitions and divestituresForeign exchange translation53rd weekYear Ended 12/31/2011Frito-Lay North America6--(2)3.5Quaker Foods North America--(1)(2)(2)Latin America Foods13-(2)-11   PepsiCo Americas Foods7-(1)(1)5PepsiCo Americas Beverages10** (1)(1)** Europe41** (3)-** Asia, Middle East & Africa17-(2)-16Total PepsiCo15** (1)(1)** * Organic percent change is a financial measure that is not in accordance with GAAP and is calculated by excluding the impact of       acquisitions and divestitures, foreign exchange translation and a 53rd week in the fourth quarter of 2011 from reported growth.** It is impractical to separately determine and quantify the impact of our acquisitions of PBG and PAS from changes in our pre-existing       beverage business since we now manage these businesses as an integrated system.Note - certain amounts above may not sum due to rounding.A-7  PepsiCo, Inc. and SubsidiariesReconciliation of GAAP and Non-GAAP Information (cont.)Year over Year Growth RatesQuarters Ended December 29, 2012 and December 31, 2011(unaudited)GAAP MeasureNon-GAAP MeasureNon-GAAP MeasureReported % ChangePercent Impact of Non-Core Adjustments Core* % ChangePercent Impact ofCore Constant Currency* % ChangeOperating Profit Year over Year % ChangeQuarter Ended 12/29/2012Commodity mark-to-market net impactMerger and integration chargesRestructuring andimpairment charges Restructuring and other charges related to the transaction with TingyiPension lump sum settlement charge53rd weekInventory fair value adjustmentsQuarter Ended 12/29/2012 Foreign exchange translationQuarterEnded 12/29/2012Frito-Lay North America3.5--(7)--7-3-3Quaker Foods North America(17)--(7)--5-(18)-(18)Latin America Foods8--(11)----(2.5)(2)(4.5)   PepsiCo Americas Foods2--(8)--5-(1)(1)(2)PepsiCo Americas Beverages(1)-(5)(7)--5(1)(8)-(8)Europe38-(38)(12)--3-(10)-(10)Asia, Middle East & Africa(25)--(3)8---(19)(1)(20)Division Operating Profit2.5-(5)(8)0.5-5-(5)-(5)Impact of Corporate Unallocated(4)-(2)(3)-8--(1.5)-(1.5)Total Operating Profit(1.5)-(7)(12)0.585-(7)-(7)Net income Attributable to PepsiCo17(6)-(7)Net income Attributable to PepsiCo per common share - diluted19(5)(0.5)(5)GAAP MeasureNon-GAAP MeasureNon-GAAP MeasureReported % ChangePercent Impact of Non-Core Adjustments Core* % ChangePercent Impact ofCore Constant Currency* % ChangeOperating Profit Year over Year % ChangeQuarter Ended 12/31/2011 Commodity mark-to-market net impactMerger and integration charges Restructuring andimpairment charges53rdweekInventory fair value adjustmentsQuarter Ended 12/31/2011 Foreign exchange translationQuarter Ended 12/31/2011Frito-Lay North America10--8(7)-10-10Quaker Foods North America9--8(6)-11-11Latin America Foods(8)--12--4712   PepsiCo Americas Foods5--9(5)-9211PepsiCo Americas Beverages1-(13)11(5)(3)(7)1(6)Europe--1326(3)-36238Asia, Middle East & Africa209--19--2275232Division Operating Profit7-(2)12(5)(1)101.512Impact of Corporate Unallocated(7)5(3)5-----Total Operating Profit15(5)17(5)(1)11212Net income Attributable to PepsiCo4829Net income Attributable to PepsiCo per common share - diluted59211* Core results and core constant currency results are financial measures that are not in accordance with GAAP and exclude the above adjustments.  See A-17 through A-19 for a discussion of each of these adjustments.Note - certain amounts above may not sum due to rounding.A-8  Reconciliation of GAAP and Non-GAAP Information (cont.)   Year over Year Growth RatesYears Ended December 29, 2012 and December 31, 2011(unaudited)GAAP MeasureNon-GAAP MeasureNon-GAAP MeasureReported % ChangePercent Impact of Non-Core Adjustments Core* % ChangePercent Impact ofCore Constant Currency* % ChangeOperating Profit Year over Year % ChangeYear Ended 12/29/2012Commodity mark-to-market net impactMerger andintegration chargesRestructuring and impairment charges Restructuring and other charges related to the transaction with TingyiPension lump sum settlement charge53rd weekInventory fair value adjustments Year Ended 12/29/2012 Foreign exchange translationYear Ended 12/29/2012Frito-Lay North America1--(1)--2-2-2Quaker Foods North America (13)--(1)--2-(12)-(12)Latin America Foods(2)-------(1.5)5.54   PepsiCo Americas Foods (2)--(1)--1.5-(1)1-PepsiCo Americas Beverages (10)-(3)1--1(1)(12)1(11)Europe10-(9)(3)--1(2)(3)63Asia, Middle East & Africa (16)--217---314Division Operating Profit (4)-(2)-1-1-(4)2(3)Impact of Corporate Unallocated (1)(2)(1)(1)-2--(2)-(2)Total Operating Profit(5)(2)(3)(1)121(0.5)(7)2(5)Net income Attributable to PepsiCo (4)(8)2(6)Net income Attributable to PepsiCo per common share - diluted   (3)(7)2(5)GAAP MeasureNon-GAAP MeasureNon-GAAP MeasureReported % ChangePercent Impact of Non-Core Adjustments Core* % ChangePercent Impact ofCore Constant Currency* % ChangeOperating Profit Year over Year % ChangeYear Ended 12/31/2011Commodity mark-to-market net impactMerger and integration charges Restructuring and impairment charges 53rdweekInventory fair value adjustmentsVenezuela currency devaluationAsset write-offFoundation contributionYear Ended 12/31/2011 Foreign exchange translationYear Ended 12/31/2011Frito-Lay North America7--2(2)----7-7Quaker Foods North America8--2(2)----8(0.5)8Latin America Foods7--5-----12(1)11   PepsiCo Americas Foods 7--3(2)----8(0.5)8PepsiCo Americas Beverages18-(13)3(1)(12)---(4)(0.5)(4)Europe15-14(1)(1)---18(4)14Asia, Middle East & Africa25--1-----27(2.5)24Division Operating Profit13-(4)3(1)(4)---7(1)6Impact of Corporate Unallocated  32(2)1--(1.5)(2)(1)(0.5)-(0.5)Total Operating Profit162(6)4(1.5)(4)(1.5)(2)(1)6(1)5Net income Attributable to PepsiCo 25(1)4Net income Attributable to PepsiCo per common share - diluted   37(1)5* Core results and core constant currency results are financial measures that are not in accordance with GAAP and exclude the above adjustments.  See A-17 through A-19 for a discussion of each of these adjustments.Note - certain amounts above may not sum due to rounding.A-9 PepsiCo, Inc. and SubsidiariesReconciliation of GAAP and Non-GAAP Information (cont.)Certain Line ItemsQuarters Ended December 29, 2012 and December 31, 2011(in millions except per share amounts, unaudited)GAAP MeasureNon-Core AdjustmentsNon-GAAP MeasureReportedCommodity mark-to-market net impactMerger andintegration chargesCore*Quarter Ended 12/29/2012Restructuring and impairment charges Restructuring and other charges related to the transaction with TingyiPension lump sum settlement chargeTax benefit related to tax court decisionQuarter Ended 12/29/2012Cost of sales $   9,654$      (43)$          -$          -$          -$          -$          -$   9,611Selling, general and administrative expenses $   8,050$      (18)$        (4)$      (86)$      (13)$    (195)$          -$   7,734Operating profit $   2,213$       61$         4$       86$       13$     195$          -$   2,572Interest expense $    (288)$          -$         5$          -$          -$          -$          -$    (283)Provision for income taxes $     302$       27$         3$       10$          -$       64$     217$     623Net income attributable to PepsiCo $   1,661$       34$         6$       76$       13$     131$    (217)$   1,704Net income attributable to PepsiCo per common share - diluted $    1.06$    0.02$        -$    0.05$    0.01$    0.08$   (0.14)$    1.09Effective tax rate 15.4%26.7%GAAP MeasureNon-Core AdjustmentsNon-GAAP MeasureReported Commodity mark-to-market net impactMerger and integration chargesInventory fair value adjustmentsCore*Quarter Ended 12/31/2011 Restructuring and impairment charges53rd weekQuarter Ended 12/31/2011Cost of sales $   9,731$        -$        -$        -$    (265)$        (5)$   9,461Selling, general and administrative expenses $   8,150$      (71)$    (155)$    (383)$    (248)$        -$   7,293Amortization of intangible assets $       30$        -$        -$        -$        (1)$        -$       29Operating profit $   2,247$       71$     155$     383$    (109)$         5$   2,752Interest expense $    (272)$        -$        -$        -$       16$        -$    (256)Interest income and other $       24$        -$        -$        -$        (1)$        -$       23Provision for income taxes $     597$       20$       31$       97$      (30)$         2$     717Net income attributable to PepsiCo $   1,415$       51$     124$     286$      (64)$         3$   1,815Net income attributable to PepsiCo per common share - diluted $    0.89$    0.03$    0.08$    0.18$   (0.04)$        -$    1.15Effective tax rate 29.9%28.4%*Core results are financial measures that are not in accordance with GAAP and exclude the above non-core adjustments.  See A-17 through A-19 for a discussion of each of these non-core adjustments.Note - certain amounts above may not sum due to rounding.A-10 PepsiCo, Inc. and SubsidiariesReconciliation of GAAP and Non-GAAP Information (cont.)Certain Line ItemsYears Ended December 29, 2012 and December 31, 2011(in millions except per share amounts, unaudited)GAAP MeasureNon-Core AdjustmentsNon-GAAP MeasureReportedCore*Year Ended 12/29/2012Commodity mark-to-market net impactMerger and integration chargesRestructuring and impairment charges Restructuring and other charges related to the transaction with TingyiPension lump sum settlement charge Tax benefitrelated to tax court decisionYear Ended 12/29/2012Cost of sales$ 31,291$       25$          -$          -$          -$        -$        -$ 31,316Selling, general and administrative expenses$ 24,970$       40$      (11)$    (279)$    (150)$    (195)$        -$ 24,375Operating profit$   9,112$      (65)$       11$     279$     150$     195$        -$   9,682Interest expense$    (899)$          -$         5$          -$          -$        -$        -$    (894)Provision for income taxes$   2,090$      (24)$         4$       64$      (26)$       64$     217$   2,389Net income attributable to PepsiCo$   6,178$      (41)$       12$     215$     176$     131$    (217)$   6,454Net income attributable to PepsiCo per common share - diluted$    3.92$   (0.03)$    0.01$    0.14$    0.11$    0.08$   (0.14)$    4.10Effective tax rate25.2%26.9%GAAP MeasureNon-Core AdjustmentsNon-GAAP MeasureReportedCommodity mark-to-market net impactInventory fair value adjustmentsCore*Year Ended 12/31/2011Merger and integration charges Restructuring and impairment charges53rd weekYear Ended 12/31/2011Cost of sales$ 31,593$        -$        -$        -$    (265)$      (46)$ 31,282Selling, general and administrative expenses$ 25,145$    (102)$    (313)$    (383)$    (248)$        -$ 24,099Amortization of intangible assets$     133$        -$        -$        -$        (1)$        -$     132Operating profit$   9,633$     102$     313$     383$    (109)$       46$ 10,368Interest expense$    (856)$        -$       16$        -$       16$        -$    (824)Interest income and other$       57$        -$        -$        -$        (1)$        -$       56Provision for income taxes$   2,372$       31$       58$       97$      (30)$       12$   2,540Noncontrolling interests$       19$        -$        -$        -$        -$         6$       25Net income attributable to PepsiCo$   6,443$       71$     271$     286$      (64)$       28$   7,035Net income attributable to PepsiCo per common share - diluted$    4.03$    0.04$    0.17$    0.18$   (0.04)$    0.02$    4.40Effective tax rate26.8%26.5%*Core results are financial measures that are not in accordance with GAAP and exclude the above non-core adjustments.  See A-17 through A-19 for a discussion of each of these non-core adjustments.Note - certain amounts above may not sum due to rounding.A-11  PepsiCo, Inc. and SubsidiariesReconciliation of GAAP and Non-GAAP Information (cont.)  Operating Profit by DivisionQuarters Ended December 29, 2012 and December 31, 2011(in millions, unaudited)GAAP MeasureNon-Core AdjustmentsNon-GAAP MeasureReportedCommodity mark-to-market net impactRestructuring and impairment chargesPension lump sum settlement chargeCore* Operating ProfitQuarter Ended 12/29/2012Merger and integration charges Restructuring and other charges related to the transaction with TingyiQuarter Ended 12/29/2012Frito-Lay North America$   1,114$          -$          -$        (2)$          -$          -$   1,112Quaker Foods North America200--2--202Latin America Foods386--9--395   PepsiCo Americas Foods1,700--9--1,709PepsiCo Americas Beverages735--26--761Europe313-444--361Asia, Middle East & Africa117--513-135Division Operating Profit2,865-48413-2,966Corporate Unallocated(652)61-2-195(394)Total Operating Profit$   2,213$       61$         4$       86$       13$     195$   2,572GAAP MeasureNon-Core AdjustmentsNon-GAAP MeasureReportedCommodity mark-to-market net impact53rd weekInventory fair value adjustmentsCore* Operating ProfitQuarter Ended 12/31/2011Merger andintegrationcharges Restructuring and impairment chargesQuarter Ended 12/31/2011Frito-Lay North America$   1,076$          -$          -$       76$      (72)$          -$   1,080Quaker Foods North America239--18(12)-245Latin America Foods358--48--406   PepsiCo Americas Foods1,673--142(84)-1,731PepsiCo Americas Beverages740-3581(35)5826Europe226-10677(8)-401Asia, Middle East & Africa157--9--166Division Operating Profit2,796-141309(127)53,124Corporate Unallocated(549)71147418-(372)Total Operating Profit$   2,247$       71$     155$     383$    (109)$         5$   2,752*Core results are financial measures that are not in accordance with GAAP and exclude the above non-core adjustments.  See A-17 through A-19 for a discussion    of each of these non-core adjustments.A-12  PepsiCo, Inc. and SubsidiariesReconciliation of GAAP and Non-GAAP Information (cont.)  Operating Profit by DivisionYears Ended December 29, 2012 and December 31, 2011(in millions, unaudited)GAAP MeasureNon-Core AdjustmentsNon-GAAPMeasureReported Commodity mark-to-market netimpactRestructuring and impairment chargesPension lump sum settlement chargeCore* Operating ProfitYear Ended 12/29/2012Merger and integration charges Restructuring and other charges related to the transaction with Tingyi Year Ended 12/29/2012Frito-Lay North America$   3,646$          -$          -$       38$          -$          -$   3,684Quaker Foods North America695--9--704Latin America Foods1,059--50--1,109   PepsiCo Americas Foods5,400--97--5,497PepsiCo Americas Beverages2,937--102--3,039Europe1,330-1142--1,383Asia, Middle East & Africa747--28150-925Division Operating Profit10,414-11269150-10,844Corporate Unallocated(1,302)(65)-10-195(1,162)Total Operating Profit$   9,112$      (65)$       11$     279$     150$     195$   9,682GAAP MeasureNon-Core AdjustmentsNon-GAAP MeasureReported Commodity mark-to-market net impactMerger and integration charges53rd weekInventory fair value adjustmentsCore* Operating ProfitYear Ended 12/31/2011 Restructuring and impairment chargesYear Ended 12/31/2011Frito-Lay North America$   3,621$          -$          -$       76$      (72)$          -$   3,625Quaker Foods North America797--18(12)-803Latin America Foods1,078--48--1,126   PepsiCo Americas Foods5,496--142(84)-5,554PepsiCo Americas Beverages3,273-11281(35)213,452Europe1,210-12377(8)251,427Asia, Middle East & Africa887--9--896Division Operating Profit10,866-235309(127)4611,329Corporate Unallocated(1,233)102787418-(961).Total Operating Profit$   9,633$     102$     313$     383$    (109)$       46$ 10,368*Core results are financial measures that are not in accordance with GAAP and exclude the above non-core adjustments.  See A-17 through A-19 for a discussion    of each of these non-core adjustments.A-13PepsiCo, Inc. and SubsidiariesReconciliation of GAAP and Non-GAAP Information (cont.)  (unaudited)  Net Cash Provided by Operating Activities Reconciliation (in millions) Year Ended12/29/2012Net Cash Provided by Operating Activities $               8,479Capital Spending (2,714)Sales of Property, Plant and Equipment 95Management Operating Cash Flow 5,860Discretionary Pension and Retiree Medical Contributions (after-tax) 1,051Merger and Integration Payments (after-tax) 63Payments Related to Restructuring Charges (after-tax) 260Capital Investments Related to the PBG/PAS Integration 10Capital Investments Related to the Productivity Plan 26Payments for Restructuring and Other Charges Related to     the Transaction with Tingyi117Management Operating Cash Flow excluding above Items $               7,387Emerging and Developing Markets Net Revenue Growth Reconciliation Quarter Ended 12/29/2012Reported Emerging and Developing Markets Net Revenue Growth -%Impact of Acquisitions and Divestitures 7Impact of Foreign Currency Translation 1Emerging and Developing Markets Organic Net Revenue Growth 9%Net Cash Provided by Operating Activities Reconciliation (in billions) 2013 GuidanceNet Cash Provided by Operating Activities $                   ~9 Net Capital Spending ~(3)Management Operating Cash Flow ~6 Certain Other Items* ~1 Management Operating Cash Flow excluding Certain Other Items $                   ~7 *Certain other items include discretionary pension and retiree medical contributions, merger and integration    payments, payments related to restructuring charges, capital investments related to the Productivity Plan and   payments related to tax settlements.Note - certain amounts above may not sum due to rounding.A-14Cautionary Statement Statements in this communication that are "forward-looking statements," including our 2013 guidance, are based on currently available information, operating plans and projections about future events and trends. Terminology such as "believe," "expect," "intend," "estimate," "project," "anticipate," "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 and tastes or otherwise; changes in the legal and regulatory environment; PepsiCo's ability to compete effectively; PepsiCo's ability to grow its business in emerging and developing markets or unstable political conditions, civil unrest or other developments and risks in the countries where PepsiCo operates; unfavorable economic conditions in the countries in which PepsiCo operates; increased costs, disruption of supply or shortages of raw materials and other supplies; failure to realize anticipated benefits from our productivity plan or global operating model; disruption of PepsiCo's supply chain; damage to PepsiCo's reputation; failure to successfully complete or integrate acquisitions and joint ventures into PepsiCo's existing operations; PepsiCo's ability to hire or retain key employees or a highly skilled and diverse workforce; trade consolidation or the loss of any key customer; any downgrade of our credit ratings; PepsiCo's ability to build and sustain proper information technology infrastructure, successfully implement its ongoing business transformation initiative or outsource certain functions effectively; fluctuations in foreign exchange rates; climate change, or legal, regulatory or market measures to address climate change; failure to successfully renew collective bargaining agreements or strikes or work stoppages; any infringement of or challenge to PepsiCo's intellectual property rights; and potential liabilities and costs from litigation or legal proceedings.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 SEC, 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-15Miscellaneous Disclosures In discussing financial results and guidance, the company may refer to certain non-GAAP measures. Reconciliations of any such non-GAAP measures to the most directly comparable financial measures in accordance with GAAP can be found in the attached exhibits, as well as on the company's website at www.pepsico.com in the "Investors" section under "Investor Presentations." Our non-GAAP measures exclude from reported results those items that management believes are not indicative of our ongoing performance and how management evaluates our operating results and trends.     Glossary  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.   Core: Core results are non-GAAP financial measures which exclude certain items from our historical results. In 2012, core results exclude the commodity mark-to-market net impact included in corporate unallocated expenses, merger and integration charges in connection with our acquisition of WBD, restructuring and impairment charges, restructuring and other charges related to the transaction with Tingyi, a pension lump sum settlement charge and a tax benefit related to a tax court decision. In 2011, core results exclude the commodity mark-to-market net impact included in corporate unallocated expenses, merger and integration charges, restructuring and impairment charges, an extra reporting week and certain inventory fair value adjustments in connection with our acquisitions of The Pepsi Bottling Group, Inc. (PBG), PepsiAmericas, Inc. (PAS) and WBD.  See above for reconciliations of this non-GAAP financial measure to the most directly comparable financial measure in accordance with GAAP. See "Reconciliation of GAAP and Non-GAAP Information" for additional information.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.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.Management operating cash flow: Net cash provided by operating activities less capital spending plus sales of property, plant and equipment. See above for a reconciliation of this non-GAAP financial measure to the most directly comparable financial measure in accordance with GAAP (operating cash flow).Management operating cash flow, excluding certain items: Management operating cash flow, excluding: (1) discretionary pension and retiree medical contributions, (2) merger and integration payments in connection with the PBG, PAS and WBD acquisitions, (3) restructuring payments, (4) capital investments related to the bottling integration, (5) capital investments related to the productivity plan, (6) payments for restructuring and other charges related to the transaction with Tingyi and (7) the tax impacts associated with each of these items, as applicable. This non-GAAP financial measure is our primary measure used to monitor cash flow performance. See above for a reconciliation of this non-GAAP financial measure to the most directly comparable financial measure in accordance with GAAP (operating cash flow).  See "Reconciliation of GAAP and Non-GAAP Information" for additional information.    A-16Mark-to-market gain or loss or 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.   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 an extra reporting week in 2011.  In excluding the impact of foreign exchange translation, we assume constant foreign exchange rates used for translation based on the rates in effect for the comparable prior-year period. See the definition of "Constant currency" for additional information.A-17Reconciliation of GAAP and Non-GAAP Information (unaudited) Division operating profit, core results, core constant currency results and organic results are non-GAAP financial measures as they exclude certain items noted below.  However, we believe investors should consider these measures as they are more indicative of our ongoing performance and with how management evaluates our operational results and trends.  Commodity mark-to-market net impactIn the quarter and year ended December 29, 2012, we recognized $61 million of mark-to-market net losses and $65 million of mark-to-market net gains, respectively, on commodity hedges in corporate unallocated expenses.  In the quarter and year ended December 31, 2011, we recognized $71 million and $102 million, respectively, of mark-to-market net losses on commodity hedges in corporate unallocated expenses. We centrally manage commodity derivatives on behalf of our divisions. These commodity derivatives include agricultural products, metals and energy. Certain of these commodity derivatives do not qualify for hedge accounting treatment and are marked to market with the resulting gains and losses recognized in corporate unallocated expenses. These gains and losses are subsequently reflected in division results when the divisions take delivery of the underlying commodity. Merger and integration chargesIn the quarter ended December 29, 2012, we incurred merger and integration charges of $9 million related to our acquisition of WBD, including $4 million recorded in the Europe segment and $5 million recorded in interest expense. In the year ended December 29, 2012, we incurred merger and integration charges of $16 million related to our acquisition of WBD, including $11 million recorded in the Europe segment and $5 million recorded in interest expense.  In the quarter ended December 31, 2011, we incurred merger and integration charges of $155 million related to our acquisitions of PBG, PAS and WBD, including $35 million recorded in the PAB segment, $106 million recorded in the Europe segment and $14 million recorded in the corporate unallocated expenses.  In the year ended December 31, 2011, we incurred merger and integration charges of $329 million related to our acquisitions of PBG, PAS and WBD, including $112 million recorded in the PAB segment, $123 million recorded in the Europe segment, $78 million recorded in corporate unallocated expenses and $16 million recorded in interest expense. These charges also include closing costs and advisory fees related to our acquisition of WBD.  Restructuring and impairment chargesIn the quarter ended December 29, 2012, we incurred merger and integration charges of $86 million in conjunction with our multi-year productivity plan (Productivity Plan), including $2 million recorded in the QFNA segment, $9 million recorded in the LAF segment, $26 million recorded in the PAB segment, $44 million recorded in the Europe segment, $5 million recorded in the AMEA segment, $2 million recorded in corporate unallocated expenses, and income of $2 million recorded in the FLNA segment representing adjustments of previously recorded amounts.  In the year ended December 29, 2012, we incurred restructuring charges of $279 million, in conjunction with our Productivity Plan, including $38 million recorded in the FLNA segment, $9 million recorded in the QFNA segment, $50 million recorded in the LAF segment, $102 million recorded in the PAB segment, $42 million recorded in the Europe segment, $28 million recorded in the AMEA segment and $10 million recorded in corporate unallocated expenses.  In the quarter and year ended December 31, 2011, we incurred restructuring charges of $383 million in conjunction with our Productivity Plan, including $76 million recorded in the FLNA segment, $18 million recorded in the QFNA segment, $48 million recorded in the LAF segment, $81 million recorded in the PAB segment, $77 million recorded in the Europe segment, $9 million recorded in the AMEA segment and $74 million recorded in corporate unallocated expenses. The Productivity Plan includes actions in every aspect of our business that we believe will 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. Restructuring and other charges related to the transaction with TingyiIn the quarter and year ended December 29, 2012, we recorded restructuring and other charges of $13 million and $150 million, respectively, in the AMEA segment related to the transaction with Tingyi.Pension lump sum settlement chargeIn the quarter and year ended December 29, 2012, we recorded a pension lump sum settlement charge of $195 million.Tax benefit related to tax court decisionIn the quarter and year ended December 29, 2012, we recognized a non-cash tax benefit of $217 million associated with a favorable tax court decision related to the classification of financial instruments.53rd week impactIn 2011, we had an extra reporting week (53rd week).  Our fiscal year ends on the last Saturday of each December, resulting in an extra week of results every five or six years.  The 53rd week increased net revenue by $623 million and operating profit by $109 million in the quarter and year ended December 31, 2011.Inventory fair value adjustmentsIn the quarter ended December 31, 2011, we recorded $5 million of incremental costs in cost of sales related to hedging contracts included in PBG's and PAS's balance sheets at the acquisition date. In the year ended December 31, 2011, we recorded $46 million of incremental costs in cost of sales related to fair value adjustments to the acquired inventory included in WBD's balance sheet at the acquisition date and hedging contracts included in PBG's and PAS's balance sheets at the acquisition date.Management operating cash flow (excluding certain items)Additionally, management operating cash flow (excluding the items noted in the Net Cash Provided by Operating Activities Reconciliation table) is the primary measure management uses to monitor cash flow performance.  This is not a measure defined by GAAP.  Since net capital spending is essential to our product innovation initiatives and maintaining our operational capabilities, we believe that it is a recurring and necessary use of cash.  As such, we believe investors should also consider net capital spending when evaluating our cash from operating activities.  Additionally, we consider certain other items (included in the Net Cash Provided by Operating Activities Reconciliation table) in evaluating management operating cash flow which we believe investors should consider in evaluating our management operating cash flow results.A-182013 guidance Our 2013 core tax rate guidance and our 2013 core constant currency EPS guidance exclude the commodity mark-to-market net impact included in corporate unallocated expenses, merger and integration charges in connection with our acquisition of WBD, restructuring and impairment charges and a one-time charge related to the Venezuela currency devaluation. Our 2013 organic revenue guidance excludes the impact of acquisitions, divestitures and other structural changes. In addition, our 2013 organic revenue and core constant currency EPS guidance excludes the impact of foreign exchange. We are not able to reconcile our full-year projected 2013 core tax rate guidance to our full-year projected 2013 reported tax rate or our 2013 core constant currency EPS growth to our full-year projected 2013 reported EPS growth because we are unable to predict the 2013 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. In addition, we are unable to reconcile our full-year projected 2013 organic revenue growth to our full-year projected 2013 reported net revenue growth because we are unable to predict the 2013 impact of foreign exchange due to the unpredictability of future changes in foreign exchange rates. Therefore, we are unable to provide a reconciliation of these measures.  A-19SOURCE PepsiCo, Inc.For further information: Investor, Jamie Caulfield, Senior Vice President, Investor Relations, +1-914-253-3035, jamie.caulfield@pepsico.com or Media, Melisa Tezanos, Senior Director, Media Bureau, +1-914-253-2599, melisa.tezanos@pepsico.com