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Items Affecting Comparability
Our reported financial results in this Form 10-K are impacted by the following items in each of the following
years:
2019
Cost of
sales
Gross profit
Selling,
general and
administrative
expenses
Operating
profit
Other
pension
and
retiree
medical
benefits
(expense)/
income
Provision
for
income
taxes
(a)
Net income
attributable to
noncontrolling
interests
Net income
attributable
to PepsiCo
Reported, GAAP Measure
$ 30,132 $
37,029 $
26,738 $
10,291 $
(44) $
1,959 $
39 $
7,314
Items Affecting Comparability
Mark-to-market net impact
57
(57)
55
(112)
—
(25)
—
(87)
Restructuring and
impairment charges
(115)
115
(253)
368
2
67
5
298
Inventory fair value
adjustments and merger
and integration charges
(34)
34
(21)
55
—
8
—
47
Pension-related settlement
charges
—
—
—
—
273
62
—
211
Net tax related to the TCJ
Act
—
—
—
—
—
8
—
(8)
Core, Non-GAAP Measure
$ 30,040 $
37,121 $
26,519 $
10,602 $
231 $
2,079 $
44 $
7,775
60
2018
Cost of
sales
Gross
profit
Selling,
general and
administrative
expenses
Operating
profit
Other
pension
and retiree
medical
benefits
income
Interest
expense
(Benefit
from)/
provision
for
income
taxes
(a)
Net income
attributable to
noncontrolling
interests
Net income
attributable
to PepsiCo
Reported, GAAP
Measure
$ 29,381 $ 35,280 $
25,170 $
10,110 $
298 $
1,525 $ (3,370) $
44 $
12,515
Items Affecting
Comparability
Mark-to-market
net impact
(83)
83
(80)
163
—
—
38
—
125
Restructuring
and
impairment
charges
(3)
3
(269)
272
36
—
56
1
251
Merger and
integration
charges
—
—
(75)
75
—
—
—
—
75
Net tax related
to the TCJ
Act
—
—
—
—
—
—
28
—
(28)
Other net tax
benefits
—
—
—
—
—
—
5,064
—
(5,064)
Charges related
to cash
tender and
exchange
offers
—
—
—
—
—
(253)
62
—
191
Core, Non-GAAP
Measure
$ 29,295 $ 35,366 $
24,746 $
10,620 $
334 $
1,272 $
1,878 $
45 $
8,065
2017
Cost of sales
Gross profit
Selling,
general and
administrative
expenses
Operating
profit
Other
pension
and retiree
medical
benefits
income
Provision for
income taxes
(a)
Net income
attributable
to PepsiCo
Reported, GAAP Measure
$
28,796 $
34,729 $
24,453 $ 10,276 $
233 $
4,694 $
4,857
Items Affecting Comparability
Mark-to-market net impact
8
(8)
7
(15)
—
(7)
(8)
Restructuring and impairment charges
—
—
(229)
229
66
71
224
Provisional net tax related to the TCJ
Act
—
—
—
—
—
(2,451)
2,451
Core, Non-GAAP Measure
$
28,804 $
34,721 $
24,231 $ 10,490 $
299 $
2,307 $
7,524
(a) Provision for income taxes is the expected tax charge/benefit on the underlying item based on the tax laws and income tax rates applicable to the underlying
item in its corresponding tax jurisdiction.
Mark-to-Market Net Impact
We centrally manage commodity derivatives on behalf of our divisions. These commodity derivatives include
energy, agricultural products 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. Therefore, the divisions realize
the economic effects of the derivative without experiencing any resulting mark-to-market volatility, which
remains in corporate unallocated expenses.
Restructuring and Impairment Charges
2019 Multi-Year Productivity Plan
The 2019 Productivity Plan, publicly announced on February 15, 2019, will leverage new technology and
business models to further simplify, harmonize and automate processes; re-engineer our go-to-market and
61
information systems, including deploying the right automation for each market; and simplify our organization
and optimize our manufacturing and supply chain footprint. In connection with this plan, we expect to incur
pre-tax charges of approximately $2.5 billion, of which we have incurred $508 million plan to date through
December 28, 2019 and cash expenditures of approximately $1.6 billion, of which we have incurred
approximately $261 million plan to date through December 28, 2019. We expect to incur pre-tax charges of
approximately $450 million and cash expenditures of approximately $400 million in our 2020 financial
results, with the balance to be reflected in our 2021 through 2023 financial results. These charges will be
funded primarily through cash from operations. We expect to incur the majority of the remaining pre-tax
charges and cash expenditures in our 2020 and 2021 results.
2014 Multi-Year Productivity Plan
The 2014 Productivity Plan was completed in 2019. The total plan pre-tax charges and cash expenditures
approximated the previously disclosed plan estimates of $1.3 billion and $960 million, respectively.
See Note 3 to our consolidated financial statements for further information related to our 2019 and 2014
Productivity Plans.
We regularly evaluate productivity initiatives beyond the productivity plans and other initiatives discussed
above and in Note 3 to our consolidated financial statements.
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