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Basis of Presentation
 6 Months Ended
Jun. 16, 2012
Basis of Presentation

Basis of Presentation and Our Divisions

 

Basis of Presentation

 

Our Condensed Consolidated Balance Sheet as of June 16, 2012 and the Condensed Consolidated Statements of Income and Comprehensive Income for the 12 and 24 weeks ended June 16, 2012 and June 11, 2011, and the Condensed Consolidated Statements of Cash Flows and Equity for the 24 weeks ended June 16, 2012 and June 11, 2011 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 December 31, 2011. In our opinion, these financial statements include all normal and recurring adjustments necessary for a fair presentation. The results for the 12 and 24 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 March, April and May are reflected in our second quarter results.

In the first quarter of 2011, Quaker Foods North America (QFNA) changed its method of accounting for certain U.S. inventories from the last-in, first-out (LIFO) method to the average cost method. This change was considered preferable by management as we believe that the average cost method of accounting for all U.S. foods inventories improves our financial reporting by better matching revenues and expenses and better reflecting the current value of inventory. In addition, the change from the LIFO method to the average cost method enhances the comparability of QFNA’s financial results with our other food businesses, as well as with peer companies where the average cost method is widely used. The impact of this change on consolidated net income in the first quarter of 2011 was approximately $9 million (or less than a penny per share).

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, in proportion to revenue and volume, as applicable, and the recognition of income taxes using an estimated annual effective tax rate. Raw materials, direct labor and plant overhead, as well as purchasing and receiving costs, costs directly related to production planning, inspection costs and raw material handling facilities, are included in cost of sales. The costs of moving, storing and delivering finished product are included in selling, general and administrative expenses.

The following information is unaudited. Tabular dollars are in millions, except per share amounts. All per share amounts reflect common per share amounts, assume dilution unless otherwise noted, and are based on unrounded amounts. Certain reclassifications were made to the prior year’s amounts to conform to the 2012 presentation. This report should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended December 31, 2011.

 

Our Divisions

We are organized into four business units, as follows:

 

  1.

PepsiCo Americas Foods (PAF), which includes Frito-Lay North America (FLNA), Quaker Foods North America (QFNA) and all of our Latin American food and snack businesses (LAF);

 

  2.

PepsiCo Americas Beverages (PAB), which includes all of our North American and Latin American beverage businesses;

 

  3.

PepsiCo Europe, which includes all beverage, food and snack businesses in Europe and South Africa; and

 

  4.

PepsiCo Asia, Middle East and Africa (AMEA), which includes all beverage, food and snack businesses in AMEA, excluding South Africa.

Our four business units comprise six reportable segments (also referred to as divisions), as follows:

 

  •  

FLNA,

 

  •  

QFNA,

 

  •  

LAF,

 

  •  

PAB,

 

  •  

Europe, and

 

  •  

AMEA.

 

     12 Weeks Ended     24 Weeks Ended  
     6/16/12     6/11/11     6/16/12     6/11/11  

Net Revenue

         

FLNA

    $ 3,193      $ 3,090      $ 6,203      $ 5,994   

QFNA

      583        583        1,206        1,223   

LAF

      1,948        1,808        3,183        2,916   

PAB

      5,352        5,629        9,800        10,160   

Europe

      3,617        3,794        5,462        5,420   

AMEA

      1,765        1,923        3,032        3,051   
  

 

 

    

 

 

    

 

 

    

 

 

  
   $ 16,458      $ 16,827      $ 28,886      $ 28,764   
  

 

 

    

 

 

    

 

 

    

 

 

  
     12 Weeks Ended     24 Weeks Ended  
     6/16/12     6/11/11     6/16/12     6/11/11  

Operating Profit

         

FLNA

    $ 835      $ 853      $   1,615      $   1,627   

QFNA

      154        167        341        381   

LAF

      271        274        454        445   

PAB

      840        983        1,365        1,541   

Europe

      453        407        534        470   

AMEA

      165        299        313        445   
  

 

 

    

 

 

    

 

 

    

 

 

  

Total division

      2,718        2,983        4,622        4,909   

Corporate Unallocated

         

Net impact of mark-to-market on commodity hedges

      (79 )      (9 )      5        22   

Restructuring and impairment charges

      (3 )      –        (1 )      –   

Merger and integration charges

      (2 )      (12 )      (2 )      (54 ) 

Other

      (257 )      (208 )      (525 )      (397 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  
   $   2,377      $   2,754      $ 4,099      $ 4,480   
  

 

 

    

 

 

    

 

 

    

 

 

  

 

     Total Assets  
     6/16/12      12/31/11  

FLNA

    $ 6,109       $ 6,120   

QFNA

      1,177         1,174   

LAF

      4,613         4,731   

PAB

      31,980         31,187   

Europe

      18,523         18,479   

AMEA

      5,511         6,048   
  

 

 

     

 

 

  

Total division

      67,913         67,739   

Corporate(a)

      4,477         5,143   
  

 

 

     

 

 

  
   $ 72,390       $ 72,882   
  

 

 

     

 

 

  

 

(a) 

Corporate assets consist principally of cash and cash equivalents, short-term investments, derivative instruments and property, plant and equipment.