Pepsi Ar

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Performance with Purpose
The Promise of PepsiCo

2010 Annual Report

Financials
Management’s Discussion and Analysis
Our Business Executive Overview Our Operations Our Customers Our Distribution Network Our Competition Other Relationships Our Business Risks Our Critical Accounting Policies Revenue Recognition Goodwill and Other Intangible Assets Income Tax Expense and Accruals Pension and Retiree Medical Plans Our Financial Results Items Affecting Comparability Results of Operations — Consolidated Review Results of Operations — Division Review Frito-Lay North America Quaker Foods North America Latin America Foods PepsiCo Americas Beverages Europe Asia, Middle East & Africa Our Liquidity and Capital Resources 48 49 50 51 51 51 51 58 58 59 60 61 63 65 65 66 66 67 67 68 69 71 72 74 75

Notes to Consolidated Financial Statements
Note 1 Basis of Presentation and Our Divisions Note 2 Our Significant Accounting Policies Note 3 Restructuring, Impairment and Integration Charges Note 4 Property, Plant and Equipment and Intangible Assets Note 5 Income Taxes Note 6 Stock-Based Compensation Note 7 Pension, Retiree Medical and Savings Plans Note 8 Noncontrolled Bottling Affiliates Note 9 Debt Obligations and Commitments Note 10 Financial Instruments Note 11 Net Income Attributable to PepsiCo per Common Share Note 12 Preferred Stock Note 13 Accumulated Other Comprehensive Loss Attributable to PepsiCo Note 14 Supplemental Financial Information Note 15 Acquisitions 77 80 81 82 84 85 86 91 92 94 97 97 98 98 99

Management’s Responsibility for Financial Reporting 102 Management’s Report on Internal Control Over Financial Reporting Report of Independent Registered Public Accounting Firm Selected Financial Data Reconciliation of GAAP and Non-GAAP Information Glossary 103 104 105 107 109

Consolidated Statement of Income Consolidated Statement of Cash Flows Consolidated Balance Sheet Consolidated Statement of Equity

47

Management’s Discussion and Analysis

Our discussion and analysis is an integral part of our consolidated financial statements and is provided as an addition to, and should be read in connection with, our consolidated financial statements and the accompanying notes. Definitions of key terms can be found in the glossary on page 109. Tabular dollars are presented in millions, except per share amounts. All per share amounts reflect common per share amounts, assume dilution unless noted, and are based on unrounded amounts. Percentage changes are based on unrounded amounts.

making global investments in key regions and targeted product categories to drive sustainable growth. We have identified six key challenges and related strategic business imperatives that we believe will enable us to drive growth into the future: Build and extend our macro snack portfolio Our first imperative is to build and extend our macro snack portfolio. Building and extending our profitable macro snack business is important to our future. PepsiCo is the largest player in the macro snack category, and we believe there is still room for growth. Our goal in the macro snack business is to grow our core salty snack brands that are loved and respected around the world, while expanding into adjacent categories like crackers, bread bites and baked snacks. We will work to continue to grow our portfolio from Fun-for-You to Better-for-You products — while adding many Good-for-You products that are designed to meet growing global demand for wholesome and convenient nutrition. We will also strive to create new flavors in tune with local tastes, which reflect local culture and traditions. We believe that by doing so, we will position ourselves to gain share, while continuing to grow the top and bottom line in our macro snack business. Sustainably and profitably grow our beverage business worldwide Our second imperative is to sustainably and profitably grow our beverage business worldwide. The U.S. liquid refreshment beverage category and...
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