Mail Stop 3561
April 11, 2006
Ms. Indra K. Nooyi
President and Chief Financial Officer
PepsiCo, Inc.
700 Anderson Hill Road
Purchase, New York 10577
RE: PepsiCo, Inc.
Form 10-K for Fiscal Year Ended December 31, 2005
Filed February 27, 2006
File No. 001-1183
Dear Ms. Nooyi:
We have reviewed your filing and have the following comments.
We have limited our review to only your financial statements and
related disclosures and will make no further review of your
documents. Where indicated, we think you should revise your
disclosures in future filings in response to these comments. If
you
disagree, we will consider your explanation as to why our comment
is
inapplicable or a revision is unnecessary. Please be as detailed
as
necessary in your explanation. In some of our comments, we may
ask
you to provide us with information so we may better understand
your
disclosure. After reviewing this information, we may or may not
raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your
filings.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
Form 10-K for Fiscal Year Ended December 31, 2005
General
1. We note from public media sources that you may have operations
in
and sales into Cuba, Iran, Sudan and Syria, countries identified
as
state sponsors of terrorism by the U.S. State Department and
subject
to sanctions administered by the U.S. Commerce Department`s Bureau
of
Industry and Security and the U.S. Treasury Department`s Office of
Foreign Assets Control. We note that the Form 10-K does not
contain
any information relating to operations in, or ties to, Cuba, Iran,
Sudan or Syria. Please describe your operations in, and ties to,
these countries, if any, and discuss their materiality to you in
light of their status as state sponsors of terrorism. Please also
discuss whether the operations, either individually or in the
aggregate, constitute a material investment risk to your security
holders. Your response should describe your current, historical
and
anticipated operations in, and contacts with, Cuba, Iran, Sudan
and
Syria, including through subsidiaries, affiliates, joint ventures
and
other direct and indirect arrangements.
2. Your materiality analysis should address materiality in
quantitative terms, including the approximate dollar amount of
revenues, assets and liabilities associated with Cuba, Iran, Sudan
and Syria. Please also address materiality in terms of
qualitative
factors that a reasonable investor would deem important in making
an
investment decision, including the potential impact of corporate
activities upon your reputation and share value. In this regard,
we
note that Arizona and Louisiana have adopted legislation requiring
their state retirement systems to prepare reports regarding state
pension fund assets invested in, and/or permitting divestment of
state pension fund assets from, companies that do business with
countries identified as state sponsors of terrorism. Harvard
University, Stanford University, Yale University, Dartmouth
College,
the University of California and other educational institutions
have
adopted policies prohibiting investment in, and/or requiring
divestment from, companies that do business with Sudan. Your
materiality analysis should address the potential impact of the
investor sentiment evidenced by these actions directed toward
companies operating in Cuba, Iran, Sudan and Syria. Please also
address the impact of any regulatory compliance programs you have
implemented in connection with business in Cuba, Iran, Sudan and
Syria, and any internal risk assessment undertaken in connection
with
business in those countries.
Item 7. Management`s Discussion and Analysis, page 18
Our Financial Results, page 43
Net Revenue and Operating Profits, page 45
3. Your presentation of "Division operating profit" and "Division
operating profit margin" represent non-GAAP measures. In future
filings please provide alongside these measures the disclosures
required by Item 10(e) of Regulation S-K. Please ensure your
disclosures justify the usefulness of presenting these measures
outside of the context of the SFAS 131 required reconciliation.
Refer to Question and Answer 21 in our Frequently Asked Questions
Regarding the Use of Non-GAAP Financial Measures (available on our
website at www.sec.gov).
Our Liquidity, Capital Resources and Financial Position, page 55
Credit Facilities and Long-Term Contractual Commitments, page 57
4. Please revise your tabular disclosure of contractual
commitments
in future filings to include estimated interest payments on your
debt. Since the table is aimed at increasing transparency of cash
flows, we believe these payments should be included in the table.
A
footnote to the table should provide appropriate disclosure
regarding
how you estimated the interest payments. If you choose not to
include these payments, a footnote to the table should clearly
identify the excluded item(s) and provide any additional
information
that is material to an understanding of your cash requirements.
Refer to SEC Release No. 33-8350.
Item 8. Financial Statements and Supplementary Data, page 58
Consolidated Statements of Cash Flows, page 59
5. In future filings please omit the subtotal captioned "Net
change
in operating working capital."
Consolidated Balance Sheets, page 61
6. In future filings please omit the subtotal for cash and cash
equivalents and short-term investments.
Notes to Consolidated Financial Statements, page 63
Note 2. Our Significant Accounting Policies, page 67
7. In light of your disclosure in Note 1 regarding various
reclassifications between cost of sales and selling, general and
administrative expenses, please revise your disclosures in future
filings to clarify the types of expenses included in cost of sales
and the types of expenses included in selling, general and
administrative expenses. For example, clarify whether purchasing
and
receiving costs, inspection costs, warehousing costs, and internal
transfer costs are included in cost of sales or selling, general
and
administrative expenses.
Item 9A. Controls and Procedures, page 98
8. Please revise your future disclosures regarding your principal
executive and financial officers` conclusion as to the
effectiveness
of your disclosure controls and procedures to ensure it
encompasses
the entire definition of disclosure controls and procedures in
Exchange Act Rules 13a-15(e) and 15d-15(e). Your current
disclosure
does not achieve this objective. Also confirm to us that your
disclosures regarding the effectiveness of your disclosure
controls
and procedures are still accurate considering the entire
definition
of disclosure controls and procedures, or otherwise amend this
Form
10-K accordingly.
Please respond to these comments within 10 business days or
tell
us when you will provide us with a response. Please furnish a
letter
that keys your responses to our comments and provides any
requested
information. Please understand that we may have additional
comments
after reviewing your responses to our comments. Please file your
response letter on EDGAR as a correspondence file.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging that:
* the company is responsible for the adequacy and accuracy of the
disclosure in the filing;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement has access to all information you provide to the staff
of
the Division of Corporation Finance in our review of your filing
or
in response to our comments on your filing.
If you have any questions regarding these comments, please
direct them to Adam Phippen, Staff Accountant, at (202) 551-3336.
In
his absence, direct your questions to Robyn Manuel at (202) 551-
3823.
Any other questions may be directed to me at (202) 551-3843.
Sincerely,
George F. Ohsiek, Jr.
Branch Chief
Ms. Indra K. Nooyi
PepsiCo, Inc.
April 11, 2006
Page 1