Document and Entity Information
Document and Entity Information | ||
3 Months Ended
Mar. 20, 2010 | Apr. 16, 2010
| |
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | 2010-03-20 | |
Document Fiscal Year Focus | 2,010 | |
Document Fiscal Period Focus | Q1 | |
Trading Symbol | PEP | |
Entity Registrant Name | PEPSICO INC | |
Entity Central Index Key | 0000077476 | |
Current Fiscal Year End Date | --12-25 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 1,612,718,843 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENT OF INCOME (USD $) | ||
In Millions, except Per Share data | 3 Months Ended
Mar. 20, 2010 | 3 Months Ended
Mar. 21, 2009 |
Net Revenue | $9,368 | $8,263 |
Cost of sales | 4,463 | 3,744 |
Selling, general and administrative expenses | 4,049 | 2,921 |
Amortization of intangible assets | 16 | 10 |
Operating Profit | 840 | 1,588 |
Bottling equity income | 709 | 25 |
Interest expense | (154) | (98) |
Interest income | 6 | |
Income before income taxes | 1,401 | 1,515 |
(Benefit from)/provision for income taxes | (33) | 374 |
Net income | 1,434 | 1,141 |
Less: Net income attributable to noncontrolling interests | 4 | 6 |
Net Income Attributable to PepsiCo | $1,430 | $1,135 |
Net Income Attributable to PepsiCo per Common Share | ||
Basic | 0.9 | 0.73 |
Diluted | 0.89 | 0.72 |
Cash Dividends Declared per Common Share | 0.45 | 0.425 |
1_CONDENSED CONSOLIDATED STATEM
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (USD $) | ||
In Millions | 3 Months Ended
Mar. 20, 2010 | 3 Months Ended
Mar. 21, 2009 |
Operating Activities | ||
Net income | $1,434 | $1,141 |
Depreciation and amortization | 376 | 314 |
Stock-based compensation expense | 47 | 54 |
2009 restructuring and impairment charges | 25 | |
Cash payments for 2009 restructuring charges | (26) | (124) |
PBG/PAS merger and integration costs | 321 | |
Cash payments for PBG/PAS merger and integration costs | (85) | |
Gain on previously held equity interests in PBG and PAS | (958) | |
Asset write-off | 145 | |
Non-cash foreign exchange loss related to Venezuela devaluation | 120 | |
Excess tax benefits from share-based payment arrangements | (29) | (7) |
Pension and retiree medical plan contributions | (640) | (1,042) |
Pension and retiree medical plan expenses | 113 | 96 |
Bottling equity income, net of dividends | 46 | (6) |
Deferred income taxes and other tax charges and credits | (127) | (2) |
Change in accounts and notes receivable | (155) | (114) |
Change in inventories | 309 | (139) |
Change in prepaid expenses and other current assets | (98) | (203) |
Change in accounts payable and other current liabilities | (616) | (413) |
Change in income taxes payable | 186 | 223 |
Other, net | (122) | (69) |
Net Cash Provided by/(Used for) Operating Activities | 241 | (266) |
Investing Activities | ||
Capital spending | (274) | (298) |
Sales of property, plant and equipment | 16 | 8 |
Acquisitions of PBG and PAS, net of cash and cash equivalents acquired | (2,833) | |
Acquisition of manufacturing and distribution rights from Dr Pepper Snapple Group, Inc. (DPSG) | (900) | |
Other acquisitions and investments in noncontrolled affiliates | (15) | (27) |
Short-term investments, by original maturity | ||
More than three months - purchases | (4) | (23) |
More than three months - maturities | 8 | 18 |
Three months or less, net | (6) | 12 |
Other investing, net | (3) | |
Net Cash Used for Investing Activities | (4,011) | (310) |
Financing Activities | ||
Proceeds from issuances of long-term debt | 4,216 | 1,044 |
Payments of long-term debt | (7) | (39) |
Short-term borrowings, by original maturity | ||
More than three months - proceeds | 21 | 12 |
More than three months - payments | (3) | (45) |
Three months or less, net | 1,010 | 362 |
Cash dividends paid | (712) | (669) |
Share repurchases - common | (735) | |
Share repurchases - preferred | (1) | (1) |
Proceeds from exercises of stock options | 267 | 91 |
Excess tax benefits from share-based payment arrangements | 29 | 7 |
Acquisition of noncontrolling interest in Lebedyansky from PBG | (159) | |
Other financing | (5) | |
Net Cash Provided by Financing Activities | 3,921 | 762 |
Effect of Exchange Rate Changes on Cash and Cash Equivalents | (145) | (62) |
Net Increase in Cash and Cash Equivalents | 6 | 124 |
Cash and Cash Equivalents - Beginning of year | 3,943 | 2,064 |
Cash and Cash Equivalents - End of period | 3,949 | 2,188 |
Non-cash activity: | ||
Issuance of common stock and equity awards in connection with our acquisitions of PBG and PAS, as reflected in investing and financing activities | $4,451 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEET (USD $) | ||
In Millions | 3 Months Ended
Mar. 20, 2010 | 12 Months Ended
Dec. 26, 2009 |
Current Assets | ||
Cash and cash equivalents | $3,949 | $3,943 |
Short-term investments | 198 | 192 |
Accounts and notes receivable, less allowance: 3/10 - $162, 12/09 - $90 | 6,204 | 4,624 |
Inventories | ||
Raw materials | 1,644 | 1,274 |
Work-in-process | 184 | 165 |
Finished goods | 1,455 | 1,179 |
Inventory, Net, Total | 3,283 | 2,618 |
Prepaid expenses and other current assets | 1,631 | 1,194 |
Total Current Assets | 15,265 | 12,571 |
Property, Plant and Equipment | 31,277 | 24,912 |
Accumulated Depreciation | (12,427) | (12,241) |
Property, Plant and Equipment, Net, Total | 18,850 | 12,671 |
Amortizable Intangible Assets, net | 2,048 | 841 |
Goodwill | 13,156 | 6,534 |
Other Nonamortizable Intangible Assets | 12,302 | 1,782 |
Nonamortizable Intangible Assets | 25,458 | 8,316 |
Investments in Noncontrolled Affiliates | 1,381 | 4,484 |
Other Assets | 1,142 | 965 |
Total Assets | 64,144 | 39,848 |
Current Liabilities | ||
Short-term obligations | 1,974 | 464 |
Accounts payable and other current liabilities | 9,553 | 8,127 |
Income taxes payable | 127 | 165 |
Total Current Liabilities | 11,654 | 8,756 |
Long-term Debt Obligations | 19,884 | 7,400 |
Other Liabilities | 6,607 | 5,591 |
Deferred Income Taxes | 4,143 | 659 |
Total Liabilities | 42,288 | 22,406 |
Commitments and Contingencies | ||
Preferred Stock, no par value | 41 | 41 |
Repurchased Preferred Stock | (146) | (145) |
PepsiCo Common Shareholders' Equity | ||
Common stock, par value 1 2/3 cents per share: Authorized 3,600 shares, issued 3/10 - 1,865 shares, 12/09 - 1,782 shares | 31 | 30 |
Capital in excess of par value | 4,510 | 250 |
Retained earnings | 34,496 | 33,805 |
Accumulated other comprehensive loss | (3,569) | (3,794) |
Less: repurchased common stock, at cost: 3/10 - 239 shares, 12/09 - 217 shares | (13,782) | (13,383) |
Total PepsiCo Common Shareholders' Equity | 21,686 | 16,908 |
Noncontrolling interests | 275 | 638 |
Total Equity | 21,856 | 17,442 |
Total Liabilities and Equity | $64,144 | $39,848 |
2_CONDENSED CONSOLIDATED BALANC
CONDENSED CONSOLIDATED BALANCE SHEET (Parenthetical) (USD $) | ||
In Millions | Mar. 20, 2010
| Dec. 26, 2009
|
Accounts and notes receivable, allowance | $162 | $90 |
Preferred Stock, par value | $0 | $0 |
Common stock, par value | 0.016667 | 0.016667 |
Common stock, Authorized | 3,600 | 3,600 |
Common stock, issued | 1,865 | 1,782 |
Repurchased common stock, shares | 239 | 217 |
3_CONDENSED CONSOLIDATED STATEM
CONDENSED CONSOLIDATED STATEMENT OF EQUITY (USD $) | |||||||||||||||||||
In Millions | Preferred Stock
| Repurchased Preferred Stock
| Common Stock
| Repurchased Common Stock
| Capital in Excess of Par Value
| Retained Earnings
| Accumulated Other Comprehensive Loss
| Total Common Shareholders' Equity
| Noncontrolling Interests
| Total
| |||||||||
Balance, beginning of year at Dec. 27, 2008 | $41 | ($138) | $30 | ($14,122) | $351 | $30,638 | ($4,694) | $476 | |||||||||||
Balance, beginning of year (in shares) at Dec. 27, 2008 | -0.5 | 1,782 | (229) | ||||||||||||||||
Redemptions (in shares) | |||||||||||||||||||
Stock option exercises (in shares) | 2 | ||||||||||||||||||
Other (in shares) | 1 | ||||||||||||||||||
Net income attributable to noncontrolling interests | 1,135 | 6 | 1,141 | ||||||||||||||||
Stock-based compensation expense | 54 | ||||||||||||||||||
Redemptions | (1) | ||||||||||||||||||
Cash dividends declared - common | (662) | ||||||||||||||||||
Stock option exercises/RSUs converted | (141) | [1] | |||||||||||||||||
Stock option exercises | 147 | ||||||||||||||||||
Currency translation adjustment | (1,018) | (87) | |||||||||||||||||
Cash dividends declared - preferred | (1) | ||||||||||||||||||
Withholding tax on RSUs converted | (31) | ||||||||||||||||||
Cash flow hedges, net of tax: | |||||||||||||||||||
Net derivative losses | (9) | (9) | |||||||||||||||||
Reclassification of derivative losses to net income | 3 | 3 | |||||||||||||||||
Cash dividends declared - RSUs | (1) | ||||||||||||||||||
Reclassification of pension and retiree medical losses to net income, net of tax | 25 | 25 | |||||||||||||||||
Unrealized losses on securities, net of tax | (5) | (5) | |||||||||||||||||
Other | 83 | ||||||||||||||||||
Balance, end of period (in shares) at Mar. 21, 2009 | 0.8 | -0.5 | 1,782 | (226) | |||||||||||||||
Balance, end of period at Mar. 21, 2009 | 41 | (139) | 30 | (13,892) | 233 | 31,109 | (5,698) | 11,782 | 395 | 12,079 | |||||||||
Balance, beginning of year at Dec. 26, 2009 | 41 | (145) | 30 | (13,383) | 250 | 33,805 | (3,794) | 638 | 17,442 | ||||||||||
Balance, beginning of year (in shares) at Dec. 26, 2009 | -0.6 | 1,782 | (217) | ||||||||||||||||
Share repurchases (in shares) | (14) | ||||||||||||||||||
Shares issued in connection with our acquisitions of PBG and PAS (in shares) | 83 | ||||||||||||||||||
Redemptions (in shares) | |||||||||||||||||||
Stock option exercises (in shares) | 7 | ||||||||||||||||||
Other (in shares) | (15) | ||||||||||||||||||
Net income attributable to noncontrolling interests | 1,430 | 4 | 1,434 | ||||||||||||||||
Stock-based compensation expense | 47 | ||||||||||||||||||
Share repurchases | (940) | ||||||||||||||||||
Redemptions | (1) | ||||||||||||||||||
Cash dividends declared - common | (744) | ||||||||||||||||||
Stock option exercises/RSUs converted | (248) | [1] | |||||||||||||||||
Distributions to noncontrolling interests, net | (352) | ||||||||||||||||||
Stock option exercises | 434 | ||||||||||||||||||
Currency translation adjustment | 120 | (15) | |||||||||||||||||
Withholding tax on RSUs converted | (29) | ||||||||||||||||||
Cash flow hedges, net of tax: | |||||||||||||||||||
Net derivative losses | (48) | (48) | |||||||||||||||||
Reclassification of derivative losses to net income | 18 | 18 | |||||||||||||||||
Cash dividends declared - RSUs | (2) | ||||||||||||||||||
Equity issued in connection with our acquisitions of PBG and PAS | 1 | 4,451 | |||||||||||||||||
Reclassification of pension and retiree medical losses to net income, net of tax | 136 | 136 | |||||||||||||||||
Unrealized losses on securities, net of tax | (1) | (1) | |||||||||||||||||
Other | 107 | 39 | 7 | ||||||||||||||||
Balance, end of period (in shares) at Mar. 20, 2010 | 0.8 | -0.6 | 1,865 | (239) | |||||||||||||||
Balance, end of period at Mar. 20, 2010 | $41 | ($146) | $31 | ($13,782) | $4,510 | $34,496 | ($3,569) | $21,686 | $275 | $21,856 | |||||||||
[1]Includes total tax benefit/(shortfall) of $18 million in 2010 and $(1) million in 2009. |
4_CONDENSED CONSOLIDATED STATEM
CONDENSED CONSOLIDATED STATEMENT OF EQUITY (Parenthetical) (USD $) | ||
In Millions | 3 Months Ended
Mar. 20, 2010 | 3 Months Ended
Mar. 21, 2009 |
Stock option exercises/RSUs converted, tax benefit/(shortfall) | $18 | ($1) |
5_CONDENSED CONSOLIDATED STATEM
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (USD $) | ||
In Millions | 3 Months Ended
Mar. 20, 2010 | 3 Months Ended
Mar. 21, 2009 |
Net income | $1,434 | $1,141 |
Other Comprehensive Income | ||
Currency translation adjustment | 105 | (1,105) |
Reclassification of pension and retiree medical losses to net income, net of tax | 136 | 25 |
Cash flow hedges, net of tax: | ||
Net derivative losses | (48) | (9) |
Reclassification of derivative losses to net income | 18 | 3 |
Unrealized losses on securities, net of tax | (1) | (5) |
Other Comprehensive Income (Loss), Net of Tax, Total | 210 | (1,091) |
Comprehensive Income | 1,644 | 50 |
Comprehensive loss attributable to noncontrolling interests | 11 | 81 |
Comprehensive Income Attributable to PepsiCo | $1,655 | $131 |
Basis of Presentation and Our D
Basis of Presentation and Our Divisions | |
3 Months Ended
Mar. 20, 2010 | |
Basis of Presentation and Our Divisions | Basis of Presentation and Our Divisions Basis of Presentation Our Condensed Consolidated Balance Sheet as of March20, 2010 and the Condensed Consolidated Statements of Income, Cash Flows, Equity and Comprehensive Income for the 12 weeks ended March20, 2010 and March21, 2009 have not been audited. These statements have been prepared on a basis that is substantially consistent with the accounting principles applied in our Annual Report on Form 10-K for the fiscal year ended December26, 2009. In our opinion, these financial statements include all normal and recurring adjustments necessary for a fair presentation. The results for the 12 weeks are not necessarily indicative of the results expected for the full year. While the majority of our results are reported on a period basis, most of our international operations report on a monthly calendar basis for which the months of January and February are reflected in our first quarter results. On February26, 2010, we completed our acquisitions of The Pepsi Bottling Group, Inc. (PBG) and PepsiAmericas, Inc. (PAS). The results of the acquired companies in the U.S. and Canada are reflected in our condensed consolidated results as of the acquisition date, and the international results of the acquired companies will be reported as of the beginning of our second quarter 2010, consistent with our monthly international reporting calendar. The results of the acquired companies in the U.S., Canada and Mexico are reported within our PAB segment, and the results of the acquired companies in Europe, including Russia, are reported within our Europe segment. Prior to our acquisitions of PBG and PAS, we recorded our share of equity income or loss from the acquired companies in bottling equity income in our income statement. Subsequent to our acquisitions of PBG and PAS, we continue to record our share of equity income or loss from Pepsi Bottling Ventures LLC in bottling equity income and our share of income or loss from other noncontrolled affiliates as a component of selling, general and administrative expenses. Additionally, in connection with our acquisitions of PBG and PAS, we recorded a gain on our previously held equity interests of $958 million, comprising $735 million which is non-taxable and recorded in bottling equity income and $223 million related to the reversal of deferred tax liabilities associated with these previously held equity interests. See also Acquisitions of PBG and PAS and Items Affecting Comparability in Managements Discussion and Analysis of Financial Condition and Results of Operations. As of the beginning of our 2010 fiscal year, the results of our Venezuelan businesses are reported under hyperinflationary accounting. See Our Business Risks and Items Affecting Comparability in Managements Discussion and Analysis of Financial Condition and Results of Operations. Our significant interim accounting policies include the recognition of a pro rata share of certain estimated annual sales incentives, and certain advertising and marketing costs, generally in proportion to revenue, and the recognition of income taxes using an estimated annual effective tax rate. Raw materials |
Acquisitions of PBG and PAS
Acquisitions of PBG and PAS | |
3 Months Ended
Mar. 20, 2010 | |
Acquisitions of PBG and PAS | Acquisitions of PBG and PAS On February26, 2010, PepsiCo announced that pursuant to the terms of merger agreements entered into on August3, 2009 (the Merger Agreements), PBG and PAS merged with and into Pepsi-Cola Metropolitan Bottling Company, Inc. (Metro), with Metro continuing as the surviving corporation and a wholly owned subsidiary of PepsiCo. We acquired PBG and PAS to create a more fully integrated supply chain and go-to-market business model, improving the effectiveness and efficiency of the distribution of our brands and enhancing our revenue growth. The total purchase price was approximately $12.6 billion, which included $8.3 billion of cash and equity and the fair value of our previously held equity interests in PBG and PAS of $4.3 billion. Under the terms of the Merger Agreements:(i) each outstanding share of common stock of PBG not held by Metro, PepsiCo or a subsidiary of PepsiCo or held by PBG as treasury stock (each, a PBG Share) was canceled and converted into the right to receive, at the holders election, either 0.6432 shares of common stock of PepsiCo (the PBG Per Share Stock Consideration) or $36.50 in cash, without interest (the PBG Cash Election Price), subject to proration provisions which provide that an aggregate 50% of such outstanding PBG Shares were converted into the right to receive common stock of PepsiCo and an aggregate 50% of such outstanding PBG Shares were converted into the right to receive cash and each PBG Share and share of Class B common stock of PBG held by Metro, PepsiCo or a subsidiary of PepsiCo was canceled or converted to the right to receive 0.6432 shares of common stock of PepsiCo; and (ii)each outstanding share of common stock of PAS not held by Metro, PepsiCo or a subsidiary of PepsiCo or held by PAS as treasury stock (each, a PAS Share) was canceled and converted into the right to receive, at the holders election, either 0.5022 shares of common stock of PepsiCo (the PAS Per Share Stock Consideration) or $28.50 in cash, without interest (the PAS Cash Election Price), subject to proration provisions which provide that an aggregate 50% of such outstanding PAS Shares were converted into the right to receive common stock of PepsiCo and an aggregate 50% of such outstanding PAS Shares were converted into the right to receive cash and each PAS Share held by Metro, PepsiCo or a subsidiary of PepsiCo was canceled or converted into the right to receive 0.5022 shares of common stock of PepsiCo. Each PBG or PAS stock option was converted into an adjusted PepsiCo stock option to acquire a number of shares of PepsiCo common stock, determined by multiplying the number of shares of PBG or PAS common stock subject to the PBG or PAS stock option by an exchange ratio (the Closing Exchange Ratio) equal to the closing price of a share of PBG or PAS common stock on the business day immediately before the acquisition date divided by the closing price of a share of PepsiCo common stock on the business day immediately before the acquisition date. The exercise price per share of PepsiCo common stock subject to the adjusted PepsiCo stock option is equal to the per share exercise price of PBG or PAS stock |
Intangible Assets
Intangible Assets | |
3 Months Ended
Mar. 20, 2010 | |
Intangible Assets | Intangible Assets 3/20/10 12/26/09 Amortizable intangible assets, net Acquired franchise rights $ 886 $ Reacquired franchise rights 140 Brands 1,455 1,465 Other identifiable intangibles 705 505 3,186 1,970 Accumulated amortization (1,138 ) (1,129 ) $ 2,048 $ 841 The change in the book value of nonamortizable intangible assets is as follows: Balance 12/26/09 Acquisitions Translation and Other Balance 3/20/10 FLNA Goodwill $ 306 $ $ 7 $ 313 Brands 30 1 31 336 8 344 QFNA Goodwill 175 175 LAF Goodwill 479 479 Brands 136 1 137 615 1 616 PAB(a) Goodwill 2,431 6,461 37 8,929 Reacquired franchise rights 7,659 38 7,697 Acquired franchise rights 689 903 (b ) 1,592 Brands 112 (3 ) 109 2,543 14,809 975 18,327 Europe(a) Goodwill 2,624 223 (108 ) 2,739 Reacquired franchise rights 806 806 Acquired franchise rights 500 500 Brands 1,378 (76 ) 1,302 4,002 1,529 (184 ) 5,347 AMEA Goodwill 519 2 521 Brands 126 2 128 645 4 649 Total goodwill 6,534 6,684 (62 ) 13,156 Total reacquired franchise rights 8,465 38 8,503 Acquired franchise rights 1,189 903 2,092 Total brands 1,782 (75 ) 1,707 $ 8,316 $ 16,338 $ 804 $ 25,458 (a) Net increases in 2010 relate primarily to our acquisitions of PBG and PAS. (b) Includes $900 million related to our upfront payment to Dr Pepper Snapple Group (DPSG) to manufacture and distribute Dr Pepper and certain other DPSG products. |
Stock-Based Compensation
Stock-Based Compensation | |
3 Months Ended
Mar. 20, 2010 | |
Stock-Based Compensation | Stock-Based Compensation In connection with our acquisition of PBG, we issued 13.4million stock options and 2.7million RSUs at a weighted-average grant price of $42.89 and $62.30, respectively, to replace previously held PBG equity awards. In connection with our acquisition of PAS, we issued 0.4million stock options at a weighted-average grant price of $31.72 to replace previously held PAS equity awards. Our equity issuances included 8.3million stock options and 0.6million RSUs which were vested at the acquisition date and were included in the purchase price consideration. The remaining 5.5million stock options and 2.1million RSUs issued are unvested and are being amortized over their remaining vesting period, up to 3 years. For the 12 weeks in 2010, we recognized stock-based compensation expense of $74 million ($47 million recorded as stock-based compensation expense and $27 million included in PBG/PAS merger and integration charges). Of the $74 million, $32 million was related to the unvested acquisition-related grants described above. For the 12 weeks in 2009, we recognized stock-based compensation expense of $54 million. In connection with our acquisitions of PBG and PAS, The Compensation Committee of PepsiCos Board of Directors elected to delay the annual equity award grant from the first quarter of 2010 to the second quarter of 2010, in order to ensure that all eligible employees receive grants on the same date and at the same market price. Our weighted-average Black-Scholes fair value assumptions are as follows: 12 Weeks Ended 3/20/10 3/21/09 Expected life 4yrs. 6yrs. Risk free interest rate 1.6 % 2.8 % Expected volatility(a) 18 % 17 % Expected dividend yield 2.8 % 3.0 % ( a ) Reflects movements in our stock price over the most recent historical period equivalent to the expected life. |
Pension and Retiree Medical Ben
Pension and Retiree Medical Benefits | |
3 Months Ended
Mar. 20, 2010 | |
Pension and Retiree Medical Benefits | Pension and Retiree Medical Benefits In connection with our acquisitions of PBG and PAS, we assumed sponsorship of pension and retiree medical plans that provide defined benefits to U.S. and certain international employees. As of the acquisition date, we preliminarily estimated and recorded the following assets and liabilities for these plans and recorded the net funded status: Pension Retiree Medical U.S. International Fair value of plan assets $ 1,633 $ 52 $ Projected benefit liability 2,161 90 393 Funded status $ (528 ) $ (38 ) $ (393 ) The components of net periodic benefit cost for pension and retiree medical plans (including, in 2010, the preliminary estimate of the impact of our acquisitions of PBG and PAS) are as follows: 12 Weeks Ended Pension Retiree Medical 3/20/10 3/21/09 3/20/10 3/21/09 3/20/10 3/21/09 U.S. International Service cost $ 61 $ 55 $ 14 $ 8 $ 12 $ 10 Interest cost 98 86 18 14 20 19 Expected return on plan assets (125 ) (107 ) (22 ) (18 ) Amortization of prior service cost/(benefit) 3 3 1 (4 ) (4 ) Amortization of experience loss 25 25 4 1 1 3 62 62 14 6 29 28 Special termination benefits 8 Total expense $ 70 $ 62 $ 14 $ 6 $ 29 $ 28 |
Income Taxes
Income Taxes | |
3 Months Ended
Mar. 20, 2010 | |
Income Taxes | Income Taxes A rollforward of our reserves for all federal, state and foreign tax jurisdictions, is as follows: 3/20/10 12/26/09 Balance, beginning of year $ 1,731 $ 1,711 Additions for tax positions related to the current year 38 238 Additions for tax positions from prior years 386 79 Reductions for tax positions from prior years (372 ) (236 ) Settlement payments (64 ) Statute of limitations expiration (1 ) (4 ) Translation and other 7 Balance, end of period 1,782 (a) $ 1,731 (a) Includes a preliminary estimate of amounts related to our acquisitions of PBG and PAS. |
Net Income Attributable to Peps
Net Income Attributable to PepsiCo per Common Share | |
3 Months Ended
Mar. 20, 2010 | |
Net Income Attributable to PepsiCo per Common Share | Net Income Attributable to PepsiCo per Common Share The computations of basic and diluted net income attributable to PepsiCo per common share are as follows: 12 Weeks Ended 3/20/10 3/21/09 Income Shares(a) Income Shares(a) Net income attributable to PepsiCo $ 1,430 $ 1,135 Preferred shares: Dividends Redemption premium (1 ) (1 ) Net income available for PepsiCo common shareholders $ 1,429 1,582 $ 1,134 1,555 Basic net income attributable to PepsiCo per common share $ 0.90 $ 0.73 Net income available for PepsiCo common shareholders $ 1,429 1,582 $ 1,134 1,555 Dilutive securities: Stock options and RSUs(b) 23 14 ESOP convertible preferred stock 1 1 1 1 Diluted $ 1,430 1,606 $ 1,135 1,570 Diluted net income attributable to PepsiCo per common share $ 0.89 $ 0.72 (a) Weighted-average common shares outstanding. (b) Options to purchase 20.7million shares in 2010 and 55.3million shares in 2009 were not included in the calculation of earnings per share because these options were out-of-the-money. Out-of-the-money options had an average exercise price of $67.02 in 2010 and $59.43 in 2009. |
Debt Obligations and Commitment
Debt Obligations and Commitments | |
3 Months Ended
Mar. 20, 2010 | |
Debt Obligations and Commitments | Debt Obligations and Commitments In the first quarter of 2010, we issued $4.25 billion of fixed and floating rate notes. The issuance was comprised of $1.25 billion of floating rate senior unsecured notes maturing in 2011 (the 2011 Floating Rate Notes), $1.0 billion of 3.10% senior unsecured notes maturing in 2015, $1.0 billion of 4.50% senior unsecured notes maturing in 2020 and $1.0 billion of 5.50% senior unsecured notes maturing in 2040. The 2011 Floating Rate Notes bear interest at a rate equal to the three-month London Inter-Bank Offered Rate (LIBOR) plus 3 basis points. A portion of the net proceeds from the issuance of these notes was used to finance our acquisitions of PBG and PAS. The remainder of the net proceeds from the issuance of these notes was designated for general corporate purposes. On February26, 2010, in connection with the transactions contemplated by the PBG Merger Agreement, Metro, PBG, Bottling Group, LLC and The Bank of New York Mellon (as successor to The Chase Manhattan Bank) (the PBG Trustee) entered into a First Supplemental Indenture (the PBG Supplemental Indenture) to the Indenture dated March8, 1999 (the PBG Indenture) between PBG, Bottling Group, LLC and the PBG Trustee.Pursuant to the PBG Supplemental Indenture, Metro assumed the due and punctual payment of the principal of (and premium, if any) and interest on the 7.00% Senior Notes due March1, 2029 (the 7.00% Notes) under the PBG Indenture.As of March20, 2010, the outstanding principal amount of the 7.00% Notes was approximately $1 billion. The 7.00% Notes are guaranteed by Bottling Group, LLC. On February26, 2010, in connection with the transactions contemplated by the PAS Merger Agreement, Metro, PAS and The Bank New York Mellon Trust Company, N.A. (as ultimate successor in interest to The First National Bank of Chicago) (the PAS IL Trustee) entered into a Second Supplemental Indenture (the PAS IL Supplemental Indenture) to the Indenture dated January15, 1993 (the PAS IL Indenture) between PAS and the PAS IL Trustee.Pursuant to the PAS IL Supplemental Indenture, Metro assumed the due and punctual payment of the principal of (and premium, if any) and interest on the 7.625% Notes due 2015 (the 7.625% Notes), the 7.29% Notes due 2026 (the 7.29% Notes), the 7.44% Notes due 2026 (the 7.44% Notes) and the 4.50% Notes due 2013 (the 4.50% Notes) under the PAS IL Indenture. As of March20, 2010, the outstanding principal amount of the 7.625% Notes was approximately $9 million, the outstanding principal amount of the 7.29% Notes was approximately $100 million, the outstanding principal amount of the 7.44% Notes was approximately $25 million and the outstanding principal amount of the 4.50% Notes was approximately $150 million. On February26, 2010, also in connection with the transactions contemplated by the PAS Merger Agreement, Metro, PAS and Wells Fargo Bank, National Association (the PAS MN Trustee, formerly known as Wells Fargo Bank Minnesota, National Association) entered into a First Supplemental Indenture (the PAS MN Supplemental Indenture) to the Indenture dated August15, 2003 (the PAS MN Indenture) between PAS and the PAS MN Trustee.Pursu |
Restructuring, Impairment and I
Restructuring, Impairment and Integration Charges | |
3 Months Ended
Mar. 20, 2010 | |
Restructuring, Impairment and Integration Charges | Restructuring, Impairment and Integration Charges In the first quarter of 2010, we incurred merger and integration charges of $312 million related to our acquisitions of PBG and PAS, including $193 million recorded in the PAB segment, $1 million recorded in the Europe segment, $88 million recorded in corporate unallocated expenses and $30 million recorded in interest expense. All of these charges, other than the interest expense portion, were recorded in selling, general and administrative expenses. These charges are being incurred to help create a more fully integrated supply chain and go-to-market business model, to improve the effectiveness and efficiency of the distribution of our brands and to enhance our revenue growth. These charges also include closing costs, one-time financing costs and advisory fees related to our acquisitions of PBG and PAS. In addition, we recorded $9 million of charges, representing our share of the respective merger costs of PBG and PAS, in bottling equity income. Substantially all cash payments related to the above charges are expected to be paid by the end of 2011. In total, these charges had an after-tax impact of $261 million or $0.16 per share. In the second half of 2009, we incurred $50 million of charges related to the merger of PBG and PAS, of which substantially all was paid in 2009. In the first quarter of 2009, we incurred a charge of $25 million ($19 million after-tax or $0.01 per share) in conjunction with our Productivity for Growth program. Our Productivity for Growth program was completed in 2009 with total charges in 2009 of $36 million ($29 million after-tax or $0.02 per share). These charges were recorded in selling, general and administrative expenses. The program included actions in all divisions of the business, including the closure of six plants that we believe will increase cost competitiveness across the supply chain, upgrade and streamline our product portfolio, and simplify the organization for more effective and timely decision-making. Substantially all cash payments related to these charges are expected to be paid by the end of 2010. A summary of our restructuring, impairment and integration activity in the first quarter of 2010 is as follows: SeveranceandOther Employee Costs(a) Asset Impairment OtherCosts Total 2010 merger and integration charges $ 83 $ 98 $ 140 $ 321 Cash payments (4 ) (81 ) (85 ) Non-cash charges (31 ) (98 ) (6 ) (135 ) Liability as of March20, 2010 $ 48 $ $ 53 $ 101 (a) Primarily reflects termination costs for approximately 345 employees. |
Financial Instruments
Financial Instruments | |
3 Months Ended
Mar. 20, 2010 | |
Financial Instruments | Financial Instruments We are exposed to market risks arising from adverse changes in: commodity prices, affecting the cost of our raw materials and energy, foreign exchange risks, and interest rates. In the normal course of business, we manage these risks through a variety of strategies, including the use of derivatives. Certain derivatives are designated as either cash flow or fair value hedges and qualify for hedge accounting treatment, while others do not qualify and are marked to market through earnings. Cash flows from derivatives used to manage commodity, foreign exchange or interest risks are classified as operating activities. See Our Business Risks in Managements Discussion and Analysis of Financial Condition and Results of Operations for further unaudited information on our business risks. For cash flow hedges, changes in fair value are deferred in accumulated other comprehensive loss within common shareholders equity until the underlying hedged item is recognized in net income. For fair value hedges, changes in fair value are recognized immediately in earnings, consistent with the underlying hedged item. Hedging transactions are limited to an underlying exposure. As a result, any change in the value of our derivative instruments would be substantially offset by an opposite change in the value of the underlying hedged items. Hedging ineffectiveness and a net earnings impact occur when the change in the value of the hedge does not offset the change in the value of the underlying hedged item. Ineffectiveness of our hedges has not been material. If the derivative instrument is terminated, we continue to defer the related gain or loss and then include it as a component of the cost of the underlying hedged item. Upon determination that the underlying hedged item will not be part of an actual transaction, we recognize the related gain or loss in net income immediately. We also use derivatives that do not qualify for hedge accounting treatment. We account for such derivatives at market value with the resulting gains and losses reflected in our income statement. We do not use derivative instruments for trading or speculative purposes. We perform assessments of our counterparty credit risk regularly, including a review of credit ratings, credit default swap rates and potential nonperformance of the counterparty. Based on our most recent assessment of our counterparty credit risk, we consider this risk to be low. In addition, we enter into derivative contracts with a variety of financial institutions that we believe are creditworthy in order to reduce our concentration of credit risk and generally settle with these financial institutions on a net basis. Commodity Prices We are subject to commodity price risk because our ability to recover increased costs through higher pricing may be limited in the competitive environment in which we operate. This risk is managed through the use of fixed-price purchase orders, pricing agreements, geographic diversity and derivatives. We use derivatives, with terms of no more than three years, to economically hedge price fluctuations related to a portion of our antic |
Recent Accounting Pronouncement
Recent Accounting Pronouncements | |
3 Months Ended
Mar. 20, 2010 | |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In June 2009, the Financial Accounting Standards Board (FASB) amended its accounting guidance on the consolidation of variable interest entities (VIE). Among other things, the new guidance requires a qualitative rather than a quantitative assessment to determine the primary beneficiary of a VIE based on whether the entity (1)has the power to direct matters that most significantly impact the activities of the VIE and (2)has the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. In addition, the amended guidance requires an ongoing reconsideration of the primary beneficiary. The provisions of this new guidance were effective as of the beginning of our 2010 fiscal year, and the adoption did not have a material impact on our financial statements. In the second quarter of 2010, the Patient Protection and Affordable Care Act (PPACA) was signed into law. The PPACA changes the tax treatment related to an existing retiree drug subsidy (RDS) available to sponsors of retiree health benefit plans that provide a benefit that is at least actuarially equivalent to the benefits under Medicare Part D. As a result of the PPACA, RDS payments will effectively become taxable in tax years beginning in 2013, by requiring the amount of the subsidy received to be offset against our deduction for health care expenses. The provisions of the PPACA require us to record the effect of this tax law change beginning in our second quarter of 2010, and consequently we expect to record a one-time related tax charge of approximately $40 million in the second quarter of 2010. We are currently evaluating the longer-term impacts of this new legislation. |