PEPSICO, INC. PURCHASE, N.Y., April 26, 2017 /PRNewswire/ --
Reported (GAAP) First Quarter 2017 Results
First Quarter
Net revenue growth 1.6%
---
Foreign exchange impact on
net revenue (1)%
---
EPS $0.91
-----
EPS growth 43%
---
Foreign exchange impact on
EPS (2)%
-------------------------- ---
Organic/Core (non-GAAP)(1) First Quarter 2017 Results
First Quarter
Organic revenue growth 2.1%
---
Core EPS $0.94
-----
Core constant currency
EPS growth 7%
---------------------- ---
PepsiCo, Inc. (NYSE: PEP) today reported results for the first quarter 2017.
"We achieved solid revenue growth in the first quarter underpinned by global volume growth and positive net price realization, despite challenging food and beverage industry trading conditions in North America and continued volatility in a number of developing and emerging markets," said Chairman and CEO Indra Nooyi. "Our first quarter results were in line with our expectations, and we are on track to achieve our financial objectives for 2017."
(1) Please refer to the Glossary for
the definitions of non-GAAP
financial measures including
"Organic," "Core," "Constant
Currency," "Free Cash Flow
(excluding certain items)" and
"Division Operating Profit."
Please refer to "2017 Guidance
and Outlook" for additional
information regarding PepsiCo's
full-year 2017 growth
objectives and targets. PepsiCo
provides guidance on a non-GAAP
basis as the Company cannot
predict certain elements which
are included in reported GAAP
results, including the impact of
foreign exchange and commodity
mark-to-market adjustments.
Summary First Quarter 2017 Performance
Revenue Volume
------- ------
GAAP Reported % Change Percentage Point Impact Organic Volume % Growth
Foreign Exchange Translation Acquisitions, Divestitures and
Structural Changes Organic % Change Food/Snacks Beverages
FLNA 2 - - 2 (1.5)
--- --- --- ----
QFNA (3) - - (3.5) (1)
--- --- ---- ---
NAB 2 - (1) 1 (1)
--- --- --- ---
Latin
America 3 2 1 6 1 (3)
--- --- --- --- ---
ESSA 6 (2) - 4 3.5 (1)
--- --- --- --- ---
AMENA (9) 11 - 2 7 3
--- --- --- --- --- ---
Total 2 1 - 2 1 -
----- --- --- --- --- --- ---
Operating Profit and EPS
------------------------
GAAP Reported % Change Percentage Point Impact
Items Affecting Comparability Foreign Exchange Translation Core Constant Currency %
Change
FLNA 4 - - 4
--- --- --- ---
QFNA (1) - - (1)
--- --- --- ---
NAB 4 (1) - 3
--- --- --- ---
Latin America (24) 13 11 -
--- --- --- ---
ESSA 51 (29) 3.5 26
--- --- --- ---
AMENA n/m n/m 3 (25)
--- --- --- ---
Corporate
Unallocated (40) 40 - 1
------------ --- --- --- ---
Total 19 (19) 1 1
----- --- --- --- ---
EPS 43 (38) 2 7
--- --- --- --- ---
Note: Rows may not sum due to
rounding.
n/m -- Not meaningful due to the
impact of a 2016 impairment charge
to reduce the value of our 5%
indirect equity interest in Tingyi-
Asahi Beverages Holding Co. Ltd. to
its estimated fair value (charge
related to the transaction with
Tingyi).
Division operating profit (a non-
GAAP measure that excludes
corporate unallocated costs)
increased by 21 percent in the
quarter and was positively
impacted by items affecting
comparability (21 points) and
negatively impacted by foreign
exchange translation (1 point).
Core constant currency division
operating profit (a non-GAAP
measure) increased by 1 percent.
Organic revenue, core constant
currency and division operating
profit results are non-GAAP
financial measures. Please refer
to the reconciliation of GAAP and
non-GAAP information in the
attached exhibits and to the
Glossary for definitions of
"Organic," "Core," "Constant
Currency" and "Division Operating
Profit."
Summary of First Quarter Financial Performance:
-- Reported first quarter and year-ago results were impacted by:
-- Restructuring charges in conjunction with the multi-year
productivity plan we publicly announced in 2014; and
-- Commodity mark-to-market impacts.
-- Reported year-ago results were impacted by a charge related to the
transaction with Tingyi.
-- See A-6 to A-8 for further details on the above items.
-- Reported net revenue increased 1.6 percent. Foreign exchange translation
had a 1-percentage-point unfavorable impact on reported net revenue.
Organic revenue, which excludes the impacts of foreign exchange
translation and structural changes, grew 2.1 percent.
-- Reported and core gross margin contracted 45 basis points. Reported
operating margin expanded 240 basis points and core operating margin
contracted 30 basis points. Reported operating margin expansion reflects
the impact of the year-ago charge related to the transaction with
Tingyi.
-- Reported operating profit increased 19 percent and core constant
currency operating profit increased 1 percent. The impact of the charge
related to the transaction with Tingyi in the prior year had a
23-percentage-point favorable impact on reported operating profit
growth. Commodity mark-to-market adjustments reduced reported operating
profit growth by 4 percentage points. Foreign exchange translation
reduced reported operating profit growth by 1 percentage point.
-- The reported effective tax rate was 22.7 percent in the first quarter of
2017 and 31.9 percent in the first quarter of 2016. The first quarter
2016 tax rate was impacted by the charge related to the transaction with
Tingyi, which had no corresponding tax benefit. The core effective tax
rate was 22.5 percent and 24.7 percent in the first quarter of 2017 and
2016, respectively. The first quarter 2017 reported and core tax rate
reflects the positive impact of a change in the accounting for certain
aspects of share-based payments to employees.
-- Reported EPS was $0.91, a 43 percent increase from the prior year
period, primarily reflecting the impact of the year-ago charge related
to the transaction with Tingyi. Foreign exchange translation reduced
reported EPS growth by 2 percentage points.
-- Core EPS was $0.94, an increase of 5.5 percent. Excluding the impact of
foreign exchange translation, core constant currency EPS increased 7
percent (see schedule A-10 for a reconciliation to reported EPS, the
comparable GAAP measure).
-- Net cash used in operating activities was $199 million.
Discussion of First Quarter Division Results:
In addition to the reported net revenue performance as set out in the tables on pages 2 and A-9, reported operating results were driven by the following:
Frito-Lay North America (FLNA)
Positively impacted by productivity gains, partially offset by operating cost inflation.
Quaker Foods North America (QFNA)
Negatively impacted by higher advertising and marketing expenses, partially offset by productivity gains and lower raw material costs.
North America Beverages (NAB)
Positively impacted by productivity gains, lower raw material costs and favorable settlements of promotional spending accruals. These impacts were partially offset by operating cost inflation.
Latin America
Negatively impacted by operating cost inflation, higher advertising and marketing expenses, and higher raw material costs. In addition, restructuring charges and unfavorable foreign exchange negatively impacted operating profit performance by 13 percentage points and 11 percentage points, respectively. These impacts were partially offset by productivity gains.
Europe Sub-Saharan Africa (ESSA)
Positively impacted by productivity gains. Additionally, the impacts of higher prior-year restructuring charges and a prior-year impairment charge associated with certain production assets in Russia contributed 29 percentage points and 13 percentage points to operating profit growth, respectively. These impacts were partially offset by higher raw material costs, operating cost inflation and higher advertising and marketing expenses. Unfavorable foreign exchange reduced operating profit growth by 3.5 percentage points.
Asia, Middle East and North Africa (AMENA)
Positively impacted by a year-ago charge related to the transaction with Tingyi and productivity gains. These impacts were partially offset by higher raw material costs (in local currency terms, driven by a strong U.S. dollar) and operating cost inflation. Unfavorable foreign exchange reduced operating profit growth by 3 percentage points.
2017 Guidance and Outlook
The Company provides guidance on a non-GAAP basis as the Company cannot predict certain elements which are included in reported GAAP results, including the impact of foreign exchange and commodity mark-to-market adjustments.
Consistent with its previous guidance for 2017, the Company expects organic revenue growth of at least 3 percent. Based on current market consensus rates, foreign exchange translation is now expected to negatively impact reported net revenue growth by approximately 2 percentage points and the 53rd week in 2016 is expected to negatively impact reported net revenue growth by 1 percentage point.
Consistent with its previous guidance for 2017, the Company expects core earnings per share of $5.09, driven by the following expectations and factors:
2016 core earnings per share $4.85
Expected core constant
currency EPS growth 8%
Negative impact of foreign
currency translation(2) (3)%
Expected 2017 core earnings
per share $5.09
--------------------------- -----
Further, the Company continues to expect:
-- Approximately $10 billion in cash flow from operating activities and
approximately $7 billion in free cash flow (excluding certain items);
-- Net capital spending of approximately $3 billion;
-- Dividend payments of approximately $4.5 billion; and
-- Share repurchases of approximately $2 billion.
(2) Based on current foreign
exchange market consensus
rates.
Conference Call:
At 7:45 a.m. (Eastern Time) today, the Company will host a conference call with investors and financial analysts to discuss first quarter 2017 results and the outlook for 2017. Further details will be accessible on the Company's website at www.pepsico.com/investors.
PepsiCo, Inc. and Subsidiaries
Condensed Consolidated Statement of Income
(in millions except per share amounts, unaudited)
12 Weeks Ended
--------------
3/25/2017 3/19/2016 Change
--------- --------- ------
Net Revenue $12,049 $11,862 2%
Cost of sales 5,286 5,151 3%
----- -----
Gross profit 6,763 6,711 1%
Selling, general and
administrative
expenses 4,817 5,078 (5)%
Amortization of
intangible assets 13 14 (11)%
--- ---
Operating Profit 1,933 1,619 19%
Interest expense (252) (246) 2.5%
Interest income and
other 40 14 180%
--- ---
Income before income
taxes 1,721 1,387 24%
Provision for income
taxes 392 442 (12)%
--- ---
Net income 1,329 945 41%
Less: Net income
attributable to
noncontrolling
interests 11 14 (14)%
--- ---
Net Income Attributable
to PepsiCo $1,318 $931 41%
====== ====
Diluted
Net Income Attributable
to PepsiCo per Common
Share $0.91 $0.64 43%
Weighted-average
common shares
outstanding 1,440 1,459
Cash dividends declared
per common share $0.7525 $0.7025
A - 1
PepsiCo, Inc. and Subsidiaries
Supplemental Financial Information
(in millions and unaudited)
12 Weeks Ended
--------------
3/25/2017 3/19/2016 Change
--------- --------- ------
Net Revenue
-----------
Frito-
Lay
North
America $3,499 $3,418 2%
Quaker
Foods
North
America 598 617 (3)%
North
America
Beverages 4,460 4,361 2%
Latin
America 1,077 1,042 3%
Europe
Sub-
Saharan
Africa 1,445 1,359 6%
Asia,
Middle
East
and
North
Africa 970 1,065 (9)%
--- -----
Total
Net
Revenue $12,049 $11,862 2%
======= =======
Operating Profit/
(Loss)
-----------------
Frito-
Lay
North
America $1,060 $1,018 4%
Quaker
Foods
North
America 164 166 (1)%
North
America
Beverages 505 485 4%
Latin
America 132 175 (24)%
Europe
Sub-
Saharan
Africa 102 67 51%
Asia,
Middle
East
and
North
Africa 171 (148) n/m
Corporate
Unallocated (201) (144)
----
Total
Operating
Profit $1,933 $1,619 19%
====== ======
n/m - Not
meaningful
A - 2
PepsiCo, Inc. and Subsidiaries
Condensed Consolidated Statement of Cash Flows
(in millions, unaudited)
12 Weeks Ended
--------------
3/25/2017 3/19/2016
--------- ---------
Operating Activities
Net income $1,329 $945
Depreciation
and
amortization 477 481
Share-based
compensation
expense 72 69
Restructuring
and
impairment
charges 27 30
Cash payments
for
restructuring
charges (7) (30)
Charges
related to
the
transaction
with Tingyi
(Cayman
Islands)
Holding
Corp.
(Tingyi) - 373
Pension and
retiree
medical plan
expenses 44 60
Pension and
retiree
medical plan
contributions (79) (93)
Deferred
income taxes
and other
tax charges
and credits 129 19
Change in assets and
liabilities:
Accounts and
notes
receivable (128) (349)
Inventories (513) (530)
Prepaid
expenses and
other
current
assets (299) (255)
Accounts
payable and
other
current
liabilities (1,386) (661)
Income taxes
payable 172 318
Other, net (37) (72)
--- ---
Net Cash
(Used
for)/Provided
by Operating
Activities (199) 305
---- ---
Investing Activities
Capital
spending (317) (389)
Sales of
property,
plant and
equipment 12 25
Acquisitions
and
investments
in
noncontrolled
affiliates (36) -
Divestitures 41 55
Short-term investments, by
original maturity:
More than
three months
-purchases (3,436) (2,556)
More than
three months
-maturities 3,866 1,446
More than
three months
-sales 138 -
Three months
or less, net - 7
Other
investing,
net 1 -
--- ---
Net Cash
Provided by/
(Used for)
Investing
Activities 269 (1,412)
--- ------
Financing Activities
Proceeds from
issuances of
long-term
debt - 2,532
Payments of
long-term
debt (752) (1,251)
Short-term borrowings, by
original maturity:
More than
three months
-proceeds 28 -
More than
three months
-payments - (9)
Three months
or less, net 2,396 480
Cash
dividends
paid (1,098) (1,038)
Share
repurchases
-common (444) (619)
Share
repurchases
-preferred (1) (2)
Proceeds from
exercises of
stock
options 245 165
Withholding
tax payments
on RSUs,
PSUs and
PEPunits
converted (116) (99)
Other
financing (1) (2)
--- ---
Net Cash
Provided by
Financing
Activities 257 157
--- ---
Effect of
exchange
rate changes
on cash and
cash
equivalents 43 (22)
Net Increase/
(Decrease)
in Cash and
Cash
Equivalents 370 (972)
Cash and Cash
Equivalents,
Beginning of
Year 9,158 9,096
----- -----
Cash and Cash
Equivalents,
End of
Period $9,528 $8,124
====== ======
A - 3
PepsiCo, Inc. and Subsidiaries
Condensed Consolidated Balance Sheet
(in millions except per share amounts)
3/25/2017 12/31/2016
--------- ----------
(unaudited)
ASSETS
Current Assets
Cash and cash
equivalents $9,528 $9,158
Short-term
investments 6,461 6,967
Accounts and notes
receivable, net 6,848 6,694
Inventories:
Raw materials and
packaging 1,429 1,315
Work-in-process 220 150
Finished goods 1,633 1,258
----- -----
3,282 2,723
Prepaid expenses
and other current
assets 1,031 908
----- ---
Total Current
Assets 27,150 26,450
Property, Plant
and Equipment,
net 16,649 16,591
Amortizable
Intangible
Assets, net 1,259 1,237
Goodwill 14,584 14,430
Other
nonamortizable
intangible assets 12,338 12,196
------ ------
Nonamortizable
Intangible Assets 26,922 26,626
Investments in
Noncontrolled
Affiliates 2,003 1,950
Other Assets 639 636
--- ---
Total Assets $74,622 $73,490
======= =======
LIABILITIES AND EQUITY
Current Liabilities
Short-term debt
obligations $8,577 $6,892
Accounts payable
and other current
liabilities 13,067 14,243
Total Current
Liabilities 21,644 21,135
Long-Term Debt
Obligations 30,081 30,053
Other Liabilities 6,693 6,669
Deferred Income
Taxes 4,521 4,434
----- -----
Total Liabilities 62,939 62,291
Commitments and contingencies
Preferred Stock,
no par value 41 41
Repurchased
Preferred Stock (194) (192)
PepsiCo Common Shareholders' Equity
Common stock, par
value 1 2/3¢ per
share (authorized
3,600 shares;
issued, net of
repurchased
common stock at
par value: 1,430
and 1,428 shares,
respectively) 24 24
Capital in excess
of par value 3,857 4,091
Retained earnings 52,756 52,518
Accumulated other
comprehensive
loss (13,416) (13,919)
Repurchased common
stock, in excess
of par value (436
and 438 shares,
respectively) (31,499) (31,468)
------- -------
Total PepsiCo
Common
Shareholders'
Equity 11,722 11,246
Noncontrolling
interests 114 104
--- ---
Total Equity 11,683 11,199
------ ------
Total Liabilities
and Equity $74,622 $73,490
======= =======
A - 4
PepsiCo, Inc. and Subsidiaries
Supplemental Share-Based Compensation Data
(in millions except dollar amounts, unaudited)
12 Weeks Ended
--------------
3/25/2017 3/19/2016
--------- ---------
Beginning
Net Shares
Outstanding 1,428 1,448
Options
Exercised, Units
Restricted (PEPunits)
Stock Units Converted
(RSUs),
Performance
Stock Units
(PSUs) and
PepsiCo
Equity
Performance 6 5
Shares
Repurchased (4) (7)
--- ---
Ending Net
Shares
Outstanding 1,430 1,446
===== =====
Weighted
Average
Basic 1,428 1,446
Dilutive Securities:
Options 7 7
RSUs, PSUs,
PEPunits
and Other 4 5
ESOP
Convertible
Preferred
Stock 1 1
--- ---
Weighted
Average
Diluted 1,440 1,459
===== =====
Average
Share Price
for the
Period $106.86 $98.57
Growth
versus
Prior Year 8% 2%
Options
Outstanding 22 30
Options in
the Money 21 27
Dilutive
Shares from
Options 7 7
Dilutive
Shares From
Options as
a % of
Options in
the Money 34% 27%
Average
Exercise
Price of
Options in
the Money $70.32 $65.65
RSUs, PSUs,
PEPunits
and Other
Outstanding 8 10
Dilutive
Shares from
RSUs, PSUs,
PEPunits
and Other 4 5
Weighted-
Average
Grant-Date
Fair Value
of RSUs and
PSUs
Outstanding $101.86 $91.37
Weighted-
Average
Grant-Date
Fair Value
of PEPunits
Outstanding $68.94 $59.98
A - 5
Non-GAAP Measures
In discussing financial results and guidance, the Company refers to the following measures which are not in accordance with U.S. Generally Accepted Accounting Principles (GAAP): division operating profit, core results, core constant currency results, free cash flow, free cash flow excluding certain items, and organic results. We use these non-GAAP financial measures internally to make operating and strategic decisions, including the preparation of our annual operating plan, evaluation of our overall business performance and as a factor in determining compensation for certain employees. We believe presenting non-GAAP financial measures provides additional information to facilitate comparison of our historical operating results and trends in our underlying operating results, and provides additional transparency on how we evaluate our business. We also believe presenting these measures allows investors to view our performance using the same measures that we use in evaluating our financial and business performance and trends.
We consider quantitative and qualitative factors in assessing whether to adjust for the impact of items that may be significant or that could affect an understanding of our ongoing financial and business performance or trends. Examples of items for which we may make adjustments include: amounts related to mark-to-market gains or losses (non-cash); gains or losses associated with mergers, acquisitions, divestitures and other structural changes; charges related to restructuring programs; asset impairments (non-cash); amounts related to the resolution of tax positions; pension and retiree medical related items; debt redemptions; and remeasurements of net monetary assets. See below for a description of adjustments to our U.S. GAAP financial measures included herein.
Non-GAAP information should be considered as supplemental in nature and is not meant to be considered in isolation or as a substitute for the related financial information prepared in accordance with U.S. GAAP. In addition, our non-GAAP financial measures may not be the same as or comparable to similar non-GAAP measures presented by other companies.
Glossary
We use the following definitions when referring to our non-GAAP financial measures, which may not be the same as or comparable to similar measures presented by other companies:
Acquisitions and divestitures: All mergers and acquisitions activity, including the impact of acquisitions, divestitures and changes in ownership or control in consolidated subsidiaries and nonconsolidated equity investees.
Beverage volume: Volume shipped to retailers and independent distributors from both PepsiCo and our bottlers.
Constant currency: Financial results assuming constant foreign currency exchange rates used for translation based on the rates in effect for the comparable prior-year period. In order to compute our constant currency results, we multiply or divide, as appropriate, our current year U.S. dollar results by the current year average foreign exchange rates and then multiply or divide, as appropriate, those amounts by the prior year average foreign exchange rates.
Core: Core results are non-GAAP financial measures which exclude certain items from our historical results. For the periods presented, core results exclude the following items:
Commodity mark-to-market net impact: Change in market value for commodity contracts that we purchase to mitigate the volatility in costs of energy and raw materials that we consume. The market value is determined based on average prices on national exchanges and recently reported transactions in the marketplace.
In the 12 weeks ended March 25, 2017, we recognized $14 million of mark-to-market net losses on commodity hedges in corporate unallocated expenses. In the 12 weeks ended March 19, 2016, we recognized $46 million of mark-to-market net gains on commodity hedges in corporate unallocated expenses. In the year ended December 31, 2016, we recognized $167 million of mark-to-market net gains on commodity hedges in corporate unallocated expenses. We centrally manage commodity derivatives on behalf of our divisions. These commodity derivatives include agricultural products, energy and metals. Commodity derivatives that do not qualify for hedge accounting treatment are marked to market each period with the resulting gains and losses recorded in corporate unallocated expenses as either cost of sales or selling, general and administrative expenses, depending on the underlying commodity. These gains and losses are subsequently reflected in division results when the divisions recognize the cost of the underlying commodity in operating profit.
Restructuring and impairment charges
2014 Multi-Year Productivity Plan
In the 12 weeks ended March 25, 2017, we incurred restructuring charges of $27 million in conjunction with the multi-year productivity plan we publicly announced in 2014 (2014 Productivity Plan). In the 12 weeks ended March 19, 2016, we incurred
A - 6
restructuring charges of $30 million in conjunction with our 2014 Productivity Plan. In the year ended December 31, 2016, we incurred restructuring charges of $160 million in conjunction with our 2014 Productivity Plan. The 2014 Productivity Plan includes the next generation of productivity initiatives that we believe will strengthen our food, snack and beverage businesses by: accelerating our investment in manufacturing automation; further optimizing our global manufacturing footprint, including closing certain manufacturing facilities; re-engineering our go-to-market systems in developed markets; expanding shared services; and implementing simplified organization structures to drive efficiency.
Charge related to the transaction with Tingyi
In the 12 weeks ended March 19, 2016 and the year ended December 31, 2016, we recorded a pre- and after-tax impairment charge of $373 million to reduce the value of our 5% indirect equity interest in Tingyi-Asahi Beverages Holding Co. Ltd. (TAB) to its estimated fair value.
Charge related to debt redemption
In the year ended December 31, 2016, we paid $2.5 billion to redeem all of our outstanding 7.900% senior notes due 2018 and 5.125% senior notes due 2019 for the principal amounts of $1.5 billion and $750 million, respectively, and terminated certain interest rate swaps. As a result, we recorded a pre-tax charge of $233 million to interest expense, primarily representing the premium paid in accordance with the "make-whole" redemption provisions.
Pension-related settlement
In the year ended December 31, 2016, we recorded a pre-tax pension settlement charge of $242 million related to the purchase of a group annuity contract.
Division operating profit: The aggregation of the operating profit for each of our reportable segments, which excludes the impact of corporate unallocated expenses.
Effective net pricing: Reflects the year-over-year impact of discrete pricing actions, sales incentive activities and mix resulting from selling varying products in different package sizes and in different countries.
Free cash flow: Net cash provided by operating activities less capital spending, plus sales of property, plant and equipment. Since net capital spending is essential to our product innovation initiatives and maintaining our operational capabilities, we believe that it is a recurring and necessary use of cash. As such, we believe investors should also consider net capital spending when evaluating our cash from operating activities.
Free cash flow is used by us primarily for financing activities, including debt repayments, dividends and share repurchases. Free cash flow is not a measure of cash available for discretionary expenditures since we have certain non-discretionary obligations such as debt service that are not deducted from the measure.
Free cash flow excluding certain items: Free cash flow, excluding payments related to restructuring charges, discretionary pension and retiree medical contributions and the related net cash tax benefits. As free cash flow excluding certain items is an important measure used to monitor our cash flow performance, we believe this non-GAAP measure provides investors additional useful information when evaluating our cash from operating activities. See below for a reconciliation of this non-GAAP financial measure to the most directly comparable financial measure in accordance with U.S. GAAP (operating cash flow).
Net capital spending: Capital spending less cash proceeds from sales of property, plant and equipment.
Organic: A measure that adjusts for impacts of foreign exchange translation as well as the impact from acquisitions, divestitures and other structural changes, for the comparable period. This measure also excludes the impact of the 53(rd) reporting week in 2016. We believe organic revenue provides useful information in evaluating the results of our business because it excludes items that we believe are not indicative of ongoing performance or that we believe impact comparability with the prior year.
Raw material costs: Raw materials include the principal ingredients we use in our beverage, food and snack products, our key packaging materials and energy costs.
2017 guidance
Our 2017 core constant currency EPS growth guidance excludes the commodity mark-to-market net impact included in corporate unallocated expenses and restructuring and impairment charges. Our 2017 core constant currency EPS growth guidance also excludes the impact of foreign exchange translation. Our 2017 organic revenue growth guidance excludes the impact of acquisitions, divestitures and other structural changes, foreign exchange translation and the impact of a 53(rd) reporting week in 2016. We are not able to reconcile our full year projected 2017 core constant currency EPS growth to our full year projected 2017 reported EPS
A - 7
growth because we are unable to predict the 2017 impact of foreign exchange or the mark-to-market net impact on commodity hedges due to the unpredictability of future changes in foreign exchange rates and commodity prices. We are also unable to reconcile our full year projected 2017 organic revenue growth to our full year projected 2017 reported net revenue growth because we are unable to predict the 2017 impact of foreign exchange due to the unpredictability of future changes in foreign exchange rates and because we are unable to predict the occurrence or impact of any acquisitions, divestitures or other structural changes. Therefore, we are unable to provide a reconciliation of these measures.
A - 8
PepsiCo, Inc. and Subsidiaries
Reconciliation of GAAP and Non-GAAP Information
Organic Revenue Growth Rates
12 Weeks Ended March 25, 2017
(unaudited)
Percent Impact GAAP Non-GAAP
Measure Measure
Reported Organic
% Change % Change (a)
-------- -----------
Net Revenue Year over Year % Change Volume Effective Acquisitions, Foreign 12 Weeks 12 Weeks
Ended Ended
3/25/2017 3/25/2017
net pricing divestitures
and other
structural
changes exchange
translation
Frito-Lay North America (1) 3 - - 2 2
Quaker Foods North America (1) (2) - - (3) (3.5)
North America Beverages - 1.5 1 - 2 1
Latin America 0.5 6 (1) (2) 3 6
Europe Sub-Saharan Africa - 3.5 - 2 6 4
Asia, Middle East and North Africa 2 - - (11) (9) 2
Total PepsiCo - 2 - (1) 2 2
(a) Organic percent change is a
financial measure that is not
in accordance with GAAP and is
calculated by excluding the
impact of foreign exchange
translation, acquisitions,
divestitures and other
structural changes from
reported growth.
Note - Certain amounts above may not sum due
to rounding.
A - 9
PepsiCo, Inc. and Subsidiaries
Reconciliation of GAAP and Non-GAAP Information (cont.)
Year over Year Growth Rates
12 Weeks Ended March 25, 2017
(unaudited)
GAAP Non-GAAP Non-GAAP
Measure Measure
Measure
-------
Reported Percent Impact of Items Affecting
Comparability Core (a) Percent Core Constant
% Change Currency (a)
% Change Impact of
% Change
--------
12 Weeks Restructuring Charge 12 Weeks Foreign 12 Weeks Ended
Ended and related to Ended exchange 3/25/2017
3/25/2017 the 3/25/2017 translation
transaction
with
Operating Profit Year over Year % Change Commodity Tingyi
impairment
mark-to-market net impact charges (b)
---
Frito-Lay North America 4 - - - 5 - 4
Quaker Foods North America (1) - - - (1) - (1)
North America Beverages 4 - (1) - 3 - 3
Latin America (24) - 13 - (11) 11 -
Europe Sub-Saharan Africa 51 - (29) - 23 3.5 26
Asia, Middle East and North Africa n/m - 5 n/m (28) 3 (25)
Corporate Unallocated (40) 41 (1) - 1 - 1
--- --- --- --- --- --- ---
Total Operating Profit 19 4 - (23) - 1 1
Net Income Attributable to PepsiCo 41 4 2 6
Net Income Attributable to PepsiCo per common share - diluted 43 5.5 2 7
(a) Core results and core constant currency results are financial measures that are not in accordance with GAAP and exclude the above items affecting comparability. See A-6 through A-8 for a discussion of each of these adjustments.
(b) Restructuring and impairment charges include costs associated with the 2014 Multi-Year Productivity Plan. See A-6 through A-8 for a discussion of this plan.
Note - Certain amounts above may not sum due to rounding.
n/m - Not meaningful due to the impact of a 2016 impairment charge to reduce the value of our 5% indirect equity interest in TAB to its estimated fair value.
A - 10
PepsiCo, Inc. and Subsidiaries
Reconciliation of GAAP and Non-GAAP Information (cont.)
Certain Line Items
12 Weeks Ended March 25, 2017 and March 19, 2016
(in millions except per share amounts, unaudited)
12 Weeks Ended 3/25/2017
------------------------
Selling, Net income Net income
general attributable attributable
to PepsiCo to PepsiCo
per common
share -
Cost Gross Operating Provision for diluted Effective
of profit and profit income taxes tax rate
(a) (b)
sales administrative
expenses
Reported, GAAP Measure $5,286 $6,763 $4,817 $1,933 $392 $1,318 $0.91 22.7%
Items Affecting Comparability
Commodity mark-to-market net impact 19 (19) (33) 14 5 9 0.01 0.1
Restructuring and impairment charges (c) - - (27) 27 - 27 0.02 (0.3)
Core, Non-GAAP Measure (d) $5,305 $6,744 $4,757 $1,974 $397 $1,354 $0.94 22.5%
12 Weeks Ended 3/19/2016
------------------------
Net income Net income Effective
attributable to attributable to tax rate
PepsiCo PepsiCo per (b)
common share -
Cost Gross Selling, general Operating Provision for diluted
of profit and profit income taxes (a)
sales administrative
expenses
Reported, GAAP Measure $5,151 $6,711 $5,078 $1,619 $442 $931 $0.64 31.9%
Items Affecting Comparability
Commodity mark-to-market net impact 18 (18) 28 (46) (17) (29) (0.02) (0.4)
Restructuring and impairment charges (c) - - (30) 30 5 25 0.02 (0.2)
Charge related to the transaction with
Tingyi - - (373) 373 - 373 0.26 (6.6)
Core, Non-GAAP Measure (d) $5,169 $6,693 $4,703 $1,976 $430 $1,300 $0.89 24.7%
(a) Provision for income taxes is the
expected tax benefit/charge on the
underlying item based on the tax laws
and income tax rates applicable to the
underlying item in its corresponding tax
jurisdiction.
(b) The impact of items affecting
comparability on our effective tax rate
represents the difference in the
effective tax rate resulting from a
higher or lower tax rate applicable to
the items affecting comparability.
(c) Restructuring and impairment charges
include costs associated with the 2014
Multi-Year Productivity Plan. See A-6
through A-8 for a discussion of this
plan.
(d) Core results are financial measures that
are not in accordance with GAAP and
exclude the above items affecting
comparability. See A-6 through A-8 for
a discussion of each of these
adjustments.
Note - Certain amounts above may not
sum due to rounding.
A - 11
PepsiCo, Inc. and Subsidiaries
Reconciliation of GAAP and Non-GAAP Information (cont.)
Operating Profit/(Loss) by Division
12 Weeks Ended March 25, 2017 and March 19, 2016
(in millions, unaudited)
GAAP Items Affecting Comparability Non-GAAP
Measure Measure
------- -------
Reported Core (a)
-------- -------
Operating Profit 12 Weeks Ended Commodity Restructuring 12 Weeks Ended
3/25/2017 and 3/25/2017
impairment
charges (b)
mark-to-market
net impact
Frito-Lay North America $1,060 $ - $1 $1,061
Quaker Foods North America 164 - - 164
North America Beverages 505 - 2 507
Latin America 132 - 24 156
Europe Sub-Saharan Africa 102 - 4 106
Asia, Middle East and North Africa 171 - (6) 165
--- --- --- ---
Division Operating Profit 2,134 - 25 2,159
Corporate Unallocated (201) 14 2 (185)
---- --- --- ----
Total Operating Profit $1,933 $14 $27 $1,974
====== === === ======
GAAP Items Affecting Comparability Non-GAAP
Measure Measure
------- -------
Reported Core (a)
-------- -------
Operating Profit/(Loss) 12 Weeks Ended Commodity Restructuring Charge related 12 Weeks Ended
3/19/2016 to the 3/19/2016
transaction
with Tingyi
and impairment
mark-to-market charges (b)
net impact
---
Frito-Lay North America $1,018 $ - $(4) $ - $1,014
Quaker Foods North America 166 - - - 166
North America Beverages 485 - 7 - 492
Latin America 175 - - - 175
Europe Sub-Saharan Africa 67 - 19 - 86
Asia, Middle East and North Africa (148) - 5 373 230
---- --- --- --- ---
Division Operating Profit 1,763 - 27 373 2,163
Corporate Unallocated (144) (46) 3 - (187)
---- --- --- --- ----
Total Operating Profit $1,619 $(46) $30 $373 $1,976
====== ==== === ==== ======
(a) Core results are financial measures that
are not in accordance with GAAP and
exclude the above items affecting
comparability. See A-6 through A-8 for
a discussion of each of these
adjustments.
(b) Restructuring and impairment charges
include costs associated with the 2014
Multi-Year Productivity Plan. See A-6
through A-8 for a discussion of this
plan.
A - 12
PepsiCo, Inc. and Subsidiaries
Reconciliation of GAAP and Non-GAAP Information (cont.)
(unaudited)
Division Operating Profit Growth Reconciliation
12 Weeks Ended
3/25/2017
---------
Reported Operating Profit Growth 19 %
Impact of Corporate Unallocated 2
---
Division Operating Profit Growth 21
Restructuring and Impairment Charges -
Charge Related to the Transaction with
Tingyi (21)
Core Division Operating Profit Growth -
Foreign Exchange Translation 1
---
Core Constant Currency Division
Operating Profit Growth 1 %
===
Gross Margin Growth Reconciliation
12 Weeks Ended
3/25/2017
---------
Reported Gross Margin Growth (45) bps
Commodity Mark-to-Market Net Impact -
Core Gross Margin Growth (45) bps
===
Operating Margin Growth Reconciliation
12 Weeks Ended
3/25/2017
---------
Reported Operating Margin Growth 239 bps
Commodity Mark-to-Market Net Impact 50
Restructuring and Impairment Charges (3)
Charge Related to the Transaction with
Tingyi (314)
Core Operating Margin Growth (28) bps
===
Fiscal 2016 Diluted EPS Reconciliation
Year Ended
12/31/2016
----------
Reported Diluted EPS $4.36
Commodity Mark-to-Market Net Impact (0.08)
Restructuring and Impairment Charges 0.09
Charge Related to the Transaction with
Tingyi 0.26
Charge Related to Debt Redemption 0.11
Pension-Related Settlement Charge 0.11
Core Diluted EPS $4.85
=====
A - 13
PepsiCo, Inc. and Subsidiaries
Reconciliation of GAAP and Non-GAAP Information (cont.)
(unaudited)
Net Cash Provided by Operating Activities Reconciliation (in millions)
12 Weeks Ended
3/25/2017
---------
Net Cash Used for Operating
Activities $(199)
Capital Spending (317)
Sales of Property, Plant and
Equipment 12
---
Free Cash Flow (504)
Payments Related to Restructuring
Charges 7
Free Cash Flow Excluding Above Item $(497)
=====
Net Cash Provided by Operating Activities Reconciliation (in billions)
2017
Guidance
--------
Net Cash Provided by Operating
Activities $ ~ 10
Net Capital Spending ~ 3
--- ---
Free Cash Flow ~ 7
Discretionary Pension Contributions ~ -
Net Cash Tax Benefit Related to
Discretionary ~ -
Pension Contributions
Payments Related to Restructuring Charges ~ -
Net Cash Tax Benefit Related to
Restructuring ~ -
Charges
Free Cash Flow Excluding Certain
Items $ ~ 7
=== === ===
Note - Certain amounts above may not sum due to rounding.
A - 14
Cautionary Statement
Statements in this communication that are "forward-looking statements," including our 2017 guidance, are based on currently available information, operating plans and projections about future events and trends. Terminology such as "aim," "anticipate," "believe," "drive," "estimate," "expect," "expressed confidence," "forecast," "future," "goal," "guidance," "intend," "may," "objective," "outlook," "plan," "position," "potential," "project," "seek," "should," "strategy," "target," "will" or similar statements or variations of such terms are intended to identify forward-looking statements, although not all forward-looking statements contain such terms. Forward-looking statements inherently involve risks and uncertainties that could cause actual results to differ materially from those predicted in such forward-looking statements. Such risks and uncertainties include, but are not limited to: changes in demand for PepsiCo's products, as a result of changes in consumer preferences or otherwise; changes in, or failure to comply with, applicable laws and regulations; imposition or proposed imposition of new or increased taxes aimed at PepsiCo's products; imposition of labeling or warning requirements on PepsiCo's products; changes in laws related to packaging and disposal of PepsiCo's products; PepsiCo's ability to compete effectively; political conditions, civil unrest or other developments and risks in the markets where PepsiCo's products are made, manufactured, distributed or sold; PepsiCo's ability to grow its business in developing and emerging markets; unfavorable economic conditions in the countries in which PepsiCo operates; the ability to protect information systems against, or effectively respond to, a cybersecurity incident or other disruption; increased costs, disruption of supply or shortages of raw materials and other supplies; business disruptions; product contamination or tampering or issues or concerns with respect to product quality, safety and integrity; damage to PepsiCo's reputation or brand image; failure to successfully complete or integrate acquisitions and joint ventures into PepsiCo's existing operations or to complete or manage divestitures or refranchisings; changes in estimates and underlying assumptions regarding future performance that could result in an impairment charge; increase in income tax rates, changes in income tax laws or disagreements with tax authorities; failure to realize anticipated benefits from PepsiCo's productivity initiatives or global operating model; PepsiCo's ability to recruit, hire or retain key employees or a highly skilled and diverse workforce; loss of any key customer or changes to the retail landscape; any downgrade or potential downgrade of PepsiCo's credit ratings; PepsiCo's ability to implement shared services or utilize information technology systems and networks effectively; fluctuations or other changes in exchange rates; climate change or water scarcity, or legal, regulatory or market measures to address climate change or water scarcity; failure to successfully negotiate collective bargaining agreements, or strikes or work stoppages; infringement of intellectual property rights; potential liabilities and costs from litigation or legal proceedings; and other factors that may adversely affect the price of PepsiCo's publicly traded securities and financial performance.
For additional information on these and other factors that could cause PepsiCo's actual results to materially differ from those set forth herein, please see PepsiCo's filings with the Securities and Exchange Commission, including its most recent annual report on Form 10-K and subsequent reports on Forms 10-Q and 8-K. Investors are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date they are made. PepsiCo undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.
A - 15
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/pepsico-reports-first-quarter-2017-results-reaffirms-2017-financial-targets-300446008.html
SOURCE PepsiCo, Inc.
