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Basis of Presentation | 8 Months Ended
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Sep. 05, 2015
Organization, Consolidation and Presentation of Financial Statements [Abstract] |
Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block] | Basis of Presentation and Our Divisions Basis of Presentation When used in this report, the terms “we,” “us,” “our,” “PepsiCo” and the “Company” mean PepsiCo, Inc. and its consolidated subsidiaries, collectively. Our Condensed Consolidated Balance Sheet as of September 5, 2015 and Condensed Consolidated Statements of Income and Comprehensive Income for the 12 and 36 weeks ended September 5, 2015 and September 6, 2014, and the Condensed Consolidated Statements of Cash Flows and Equity for the 36 weeks ended September 5, 2015 and September 6, 2014 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 27, 2014, except as set forth in the following paragraph. In our opinion, these financial statements include all normal and recurring adjustments necessary for a fair presentation. The results for the 12 and 36 weeks are not necessarily indicative of the results expected for the full year. Prior to the end of the third quarter of 2015, the financial position and results of operations of our Venezuelan snack and beverage businesses were included in our Condensed Consolidated Financial Statements. Effective as of the end of the third quarter of 2015, we do not meet the accounting criteria for control over our wholly-owned Venezuelan subsidiaries, and therefore we deconsolidated our Venezuelan subsidiaries from our Condensed Consolidated Financial Statements. See “Venezuela” below, and further unaudited information in “Our Business Risks” and “Our Liquidity and Capital Resources” in Management’s Discussion and Analysis of Financial Condition and Results of Operations. While our results in the United States and Canada (North America) are reported on a 12-week basis, most of our international operations report on a monthly calendar basis for which the months of June, July and August are reflected in our third quarter results. 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 or 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. This report should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended December 27, 2014. Our Divisions As previously disclosed, effective beginning with our third quarter of 2015, we realigned certain of our reportable segments to be consistent with certain changes to our organizational structure and how the Chief Executive Officer monitors the performance of these segments. Our historical segment reporting has been retrospectively revised to reflect our current organizational structure. We are organized into six reportable segments (also referred to as divisions), as follows:
1) | Frito-Lay North America (FLNA);
2) | Quaker Foods North America (QFNA);
3) | North America Beverages (NAB), which includes all of our beverage businesses in North America;
4) | Latin America, which includes all of our beverage, food and snack businesses in Latin America;
5) | Europe Sub-Saharan Africa (ESSA), which includes all of our beverage, food and snack businesses in Europe and Sub-Saharan Africa; and
6) | Asia, Middle East and North Africa (AMENA), which includes all of our beverage, food and snack businesses in Asia, Middle East and North Africa.
Net revenue and operating profit of each division are as follows:
| 12 Weeks Ended |  | 36 Weeks Ended
Net Revenue | 9/5/2015 |  |  | 9/6/2014 |  |  | 9/5/2015 |  |  | 9/6/2014 |
FLNA | $ | 3,555 |  |  | $ | 3,526 |  |  | $ | 10,326 |  |  | $ | 10,132 |
QFNA | 583 |  |  | 586 |  |  | 1,768 |  |  | 1,784 |
NAB | 5,360 |  |  | 5,148 |  |  | 14,771 |  |  | 14,435 |
Latin America | 2,283 |  |  | 2,413 |  |  | 5,921 |  |  | 6,293 |
ESSA | 2,918 |  |  | 3,794 |  |  | 7,227 |  |  | 9,460 |
AMENA | 1,632 |  |  | 1,751 |  |  | 4,458 |  |  | 4,631 |
Total division | $ | 16,331 |  |  | $ | 17,218 |  |  | $ | 44,471 |  |  | $ | 46,735 |
| 12 Weeks Ended |  | 36 Weeks Ended
Operating Profit | 9/5/2015 |  |  | 9/6/2014 |  |  | 9/5/2015 |  |  | 9/6/2014 |
FLNA | $ | 1,085 |  |  | $ | 1,025 |  |  | $ | 3,012 |  |  | $ | 2,824 |
QFNA (a) | 150 |  |  | 150 |  |  | 381 |  |  | 449 |
NAB (b) | 860 |  |  | 753 |  |  | 2,146 |  |  | 1,854 |
Latin America (c) | (994 | ) |  | 432 |  |  | (420 | ) |  | 1,183 |
ESSA | 398 |  |  | 481 |  |  | 860 |  |  | 1,111 |
AMENA (d) (e) (f) | 199 |  |  | 293 |  |  | 802 |  |  | 841 |
Total division | 1,698 |  |  | 3,134 |  |  | 6,781 |  |  | 8,262 |
Corporate Unallocated |  |  |  |  |  |  |
Mark-to-market net (losses)/gains | (28 | ) |  | (33 | ) |  | 10 |  |  | 32 |
Restructuring and impairment charges | (4 | ) |  | (15 | ) |  | (11 | ) |  | (20 | )
Other | (250 | ) |  | (239 | ) |  | (667 | ) |  | (724 | )
| $ | 1,416 |  |  | $ | 2,847 |  |  | $ | 6,113 |  |  | $ | 7,550 |
(a) | Operating profit for QFNA for the 36 weeks ended September 5, 2015 includes a pre-tax impairment charge of $65 million ($50 million after-tax) associated with our Muller Quaker Dairy (MQD) joint venture investment.
(b) | Operating profit for NAB for 12 and 36 weeks ended September 5, 2015 includes a gain of $37 million ($23 million after-tax) associated with the settlement of a pension-related liability from a previous acquisition.
(c) | Operating profit for Latin America for the 12 and 36 weeks ended September 5, 2015 includes a pre- and after-tax charge of $1.4 billion related to our change in accounting for our investments in our wholly-owned Venezuelan subsidiaries and our beverage joint venture. See “Venezuela” below.
(d) | Operating profit for AMENA for the 36 weeks ended September 5, 2015 includes a pre-tax gain of $39 million ($28 million after-tax) associated with refranchising a portion of our beverage businesses in India.
(e) | Operating profit for AMENA for the 12 and 36 weeks ended September 5, 2015 includes a pre- and after-tax charge of $73 million related to a write-off of the recorded value of a call option to increase our holding in Tingyi-Asahi Beverages Holding Co. Ltd.
(f) | Operating profit for AMENA for the 12 and 36 weeks ended September 5, 2015 includes a pre- and after-tax impairment charge of $29 million associated with a joint venture in the Middle East.
Total assets of each division are as follows:
| Total Assets
| 9/5/2015 |  |  | 12/27/2014 |
FLNA | $ | 5,430 |  |  | $ | 5,307 |
QFNA | 921 |  |  | 982 |
NAB | 29,223 |  |  | 28,665 |
Latin America (a) | 4,432 |  |  | 6,283 |
ESSA | 13,341 |  |  | 13,934 |
AMENA | 5,866 |  |  | 5,855 |
Total division | 59,213 |  |  | 61,026 |
Corporate (b) | 10,689 |  |  | 9,483 |
| $ | 69,902 |  |  | $ | 70,509 |
(a) | The change in total assets as of September 5, 2015 reflects a decrease of $1.7 billion related to the Venezuela impairment charges.
(b) | Corporate assets consist principally of certain cash and cash equivalents, short-term investments, derivative instruments, property, plant and equipment and pension and tax assets.
Venezuela Prior to the end of the third quarter of 2015, the financial position and results of operations of our Venezuelan businesses were reported under highly inflationary accounting since the beginning of our 2010 fiscal year, at which time the functional currency of our Venezuelan entities, which consist of our wholly-owned subsidiaries and our beverage joint venture, was changed from the bolivar to the U.S. dollar. The Venezuelan government has maintained currency controls and a fixed exchange rate since 2003. In the last two years, the Venezuelan government has created additional exchange mechanisms and issued several exchange agreements governing the scope and applicability of each, while continuing to maintain control over the exchange rates and, to an increasingly significant extent, over the distribution of U.S. dollars under each mechanism. As of the end of the third quarter of 2015, there was a three-tiered exchange rate mechanism in Venezuela for exchanging bolivars into U.S. dollars: (1) the government-operated National Center of Foreign Commerce (CENCOEX), which has a fixed exchange rate of 6.3 bolivars per U.S. dollar, mainly intended for the import of essential goods and services by designated industry sectors; (2) the government-operated auction-based Supplementary Foreign Currency Administration System (SICAD), which is intended for certain transactions, including foreign investments, for which the rate has ranged from 10 to 14 bolivars per U.S. dollar; and (3) an open market Marginal Foreign Exchange System (SIMADI), which was trading at a rate of approximately 200 bolivars per U.S. dollar as of the end of the third quarter of 2015. These three mechanisms have become increasingly illiquid over time. We believe that significant uncertainty continues to exist regarding the exchange mechanisms in Venezuela, including the nature of transactions that are eligible to flow through CENCOEX, SICAD or SIMADI, or any other new exchange mechanism that may emerge, how any such mechanisms will operate in the future, as well as the availability of U.S. dollars under each mechanism. The amount of U.S. dollars made available to our Venezuelan entities through CENCOEX has declined significantly since 2014 and has worsened during the third quarter of 2015. In addition, our Venezuelan entities were not able to participate in SICAD auctions during 2015, as the auctions that were held were not for our industry, and have had limited access to the SIMADI market since its inception. The evolving conditions in Venezuela, including the increasingly restrictive exchange control regulations and reduced access to dollars through official currency exchange markets, have resulted in an other-than-temporary lack of exchangeability between the Venezuelan bolivar and the U.S. dollar, which is significantly impacting our ability to effectively manage our Venezuelan businesses, including restrictions on the ability of our Venezuelan businesses to import certain raw materials to maintain normal production and to settle U.S. dollar-denominated obligations. The exchange restrictions, combined with other regulations that have limited our ability to import certain raw materials, have also increasingly constrained our ability to make and execute operational decisions regarding our businesses in Venezuela. In addition, the inability of our Venezuelan businesses to pay dividends, which remain subject to Venezuelan government approvals, has restricted our ability to realize the earnings generated out of our Venezuelan businesses. We expect these conditions will continue for the foreseeable future. As a result of these factors, we concluded that effective as of the end of the third quarter of 2015, we do not meet the accounting criteria for control over our wholly-owned Venezuelan subsidiaries, and therefore we deconsolidated our wholly-owned Venezuelan subsidiaries effective as of the end of the third quarter of 2015. We also concluded that, effective as of the end of the third quarter of 2015, due to the above mentioned factors and other matters impacting the operation of our joint venture and the distribution of its products, we no longer have significant influence over our beverage joint venture with our franchise bottler in Venezuela, which was previously accounted for under the equity method. As a result of these conclusions, effective at the end of the third quarter of 2015, we began accounting for our investments in our wholly-owned Venezuelan subsidiaries and our joint venture using the cost method of accounting and recorded pre- and after-tax charges of $1.4 billion on our Condensed Consolidated Statement of Income to reduce the value of the cost method investments to their estimated fair values, resulting in a full impairment. The impairment charges primarily include approximately $1.2 billion related to our investments in previously consolidated Venezuelan subsidiaries and our joint venture, and $111 million related to the reclassification of cumulative translation losses. The estimated fair value of the investments in our Venezuelan entities was derived using discounted cash flow analyses, including U.S. dollar exchange and discount rate assumptions that reflect the inflation and economic uncertainty in Venezuela, and are considered non-recurring Level 3 measurements within the fair value hierarchy. During 2015 and prior to the end of the third quarter of 2015, we used the SICAD exchange rate to remeasure our net monetary assets in Venezuela, except for certain other net monetary assets that we believed qualified for the fixed exchange rate (including requests for remittance of dividends submitted to CENCOEX in certain prior years at the fixed exchange rate and payables for imports of essential goods approved by CENCOEX). In the 36 weeks ended September 5, 2015, which reflect the months of January through August, the results of our operations in Venezuela were included in our Condensed Consolidated Statement of Income using a combination of the fixed exchange and SICAD rates, as appropriate. As of the end of the third quarter of 2015, we did not consolidate the assets and liabilities of our Venezuelan subsidiaries in our Condensed Consolidated Balance Sheet. Beginning in the fourth quarter of 2015, we will not include the results of our Venezuelan businesses in our Condensed Consolidated Statement of Income. For future reporting periods, our financial results will only include revenue relating to the sales of inventory to our Venezuelan entities to the extent cash is received for those sales. Any dividends from our Venezuelan entities will be recorded as income upon receipt of the cash. See further unaudited information in “Our Business Risks” and “Our Liquidity and Capital Resources” in Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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