Comparative Analysis Case The Coca-Cola Company and PepsiCo, Inc. The financial statements of Coca-Cola and PepsiCo are presented in Appendices C and D, respectively. The companies' complete annual reports, including the notes to the financial statements, are available online. Instructions Use the companies' financial information to answer the following questions. a. What kind of pension plans do Coca-Cola and PepsiCo provide their employees? b. What net periodic pension expense (cost) did Coca-Cola and PepsiCo report in 2017? c. What is the year-end 2017 funded status of Coca-Cola's and PepsiCo's plans (include international)? d. What relevant rates were used by Coca-Cola and PepsiCo in computing their pension amounts? e. Compare the expected benefit payments and contributions for Coca-Cola and PepsiCo. THE COCA-COLA COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME 2017 2016 2015 Year Ended December 31. (In millions except per share data) NET OPERATING REVENUES Cost of goods sold GROSS PROFIT Selling, general and administrative expenses Other operating charges OPERATING INCOME Interest income Interest expense Equity income (loss) - net Other income (loss) net INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES Income taxes from continuing operations NET INCOME FROM CONTINUING OPERATIONS Income from discontinued operations (net of income taxes of $47, $0 and $0, respectively) CONSOLIDATED NET INCOME Less: Net income attributable to noncontrolling interests NET INCOME ATTRIBUTABLE TO SHAREOWNERS OF THE COCA-COLA COMPANY $ 35,410 13,256 22,154 12,496 2,157 7,501 677 841 1,071 (1,666) 6,742 5,560 1,182 101 1,283 35 $ 41,863 16,465 25,398 15,262 1,510 8,626 642 733 835 (1.234) 8.136 1.586 6,550 $ 44.294 17,482 26,812 16,427 1.657 8.728 613 856 489 631 9.605 2.239 7.366 6,550 23 7.366 15 $ 1,248 $ 6,527 $ 7.351 S 1.51 S 1.69 S $ 1.51 1.49 S S 1.69 1.67 Basic net income per share from continuing operations! Basic net income per share from discontinued operations BASIC NET INCOME PER SHARE Diluted net income per share from continuing operations! Diluted net income per share from discontinued operations DILUTED NET INCOME PER SHARE AVERAGE SHARES OUTSTANDING - BASIC Effect of dilutive securities AVERAGE SHARES OUTSTANDING DILUTED $ 0.28 0.02 $ 0.299 $ 0.27 0.02 $ 0.29 4.272 52 4,324 $ S 1.49 4,317 50 4,367 1.67 4,352 53 4.405 Calculated based on net income from continuing operations less net income from continuing operations attributable to noncontrolling interests. Calculated based on net income from discontinued operations less net income from discontinued operations attributable to noncontrolling interests. Per share amounts do not add due to rounding. Refer to Notes to Consolidated Financial Statements. THE COCA-COLA COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 2017 2016 2015 $ 1.283 $ 6,550 $ 7,366 861 (626) (3.959) 142 (382) 188 Year Ended December 31. (In millions) CONSOLIDATED NET INCOME Other comprehensive income: Net foreign currency translation adjustment Net gain (loss) on derivatives Net unrealized gain (loss) on available-for-sale securities Net change in pension and other benefit liabilities TOTAL COMPREHENSIVE INCOME (LOSS) Less: Comprehensive income (loss) attributable to noncontrolling interests TOTAL COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO SHAREOWNERS OF THE COCA-COLA COMPANY (684) 86 322 2,221 73 17 (53) 5,506 10 2.951 (3) $ 2,148 $ 5.496 $ 2,954 MOOCOL COMPANY AND SUBSIDIARIES THE COCA-COLA COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS 2017 2016 $ 6,006 $ 8.355 9,352 9.595 15,358 18,150 5,317 4,051 3,667 3,856 2,655 2.675 2.000 2,481 2192,797 7.329 36,545 34,010 20,856 16,260 1,096 989 4,560 4.248 8,203 10,635 6,729 6,097 138 3,676 9,401 10.629 368 726 $ 87,896 $ 87.270 December 31, (In millions except par value) ASSETS CURRENT ASSETS Cash and cash equivalents Short-term investments TOTAL CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS Marketable securities Trade accounts receivable, less allowances of $477 and $466, respectively Inventories Prepaid expenses and other assets Assets held for sale Assets held for sale - discontinued operations TOTAL CURRENT ASSETS EQUITY METHOD INVESTMENTS OTHER INVESTMENTS OTHER ASSETS PROPERTY. PLANT AND EQUIPMENT - net TRADEMARKS WITH INDEFINITE LIVES BOTTLERS' FRANCHISE RIGHTS WITH INDEFINITE LIVES GOODWILL OTHER INTANGIBLE ASSETS TOTAL ASSETS LIABILITIES AND EQUITY CURRENT LIABILITIES Accounts payable and accrued expenses Loans and notes payable Current maturities of long-term debt Accrued income taxes Liabilities held for sale Liabilities held for sale - discontinued operations TOTAL CURRENT LIABILITIES LONG-TERM DEBT OTHER LIABILITIES DEFERRED INCOME TAXES THE COCA-COLA COMPANY SHAREOWNERS' EQUITY Common stock, 50.25 par value; Authorized - 11,200 shares; Issued - 7,040 and 7,040 shares, respectively Capital surplus Reinvested earnings Accumulated other comprehensive income (loss) Treasury stock, at cost-2.781 and 2.752 shares, respectively EQUITY ATTRIBUTABLE TO SHAREOWNERS OF THE COCA-COLA COMPANY EQUITY ATTRIBUTABLE TO NONCONTROLLING INTERESTS TOTAL EQUITY TOTAL LIABILITIES AND EQUITY $ 9,490 12.498 3.527 307 710 $ 8,748 13,205 3.298 410 37 1,496 27,194 31,182 8,021 2,522 26.532 29,584 4.08 3,753 1,760 15,864 60,430 (10,305) (50,677) 17,072 1,905 18,977 $ 87,896 1.760 14,993 65,502 (11.205) (47.988) 23,062 158 23.220 $ 87.270 Refer to Notes to Consolidated Financial Statements. THE COCA-COLA COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS 2017 2016 2015 $ 6,550 $ 7,366 $ 1,283 (101) 1,182 1.260 219 (1.256) (628) 281 1,459 1.218 (269) 3,529 6,995 6,550 1,787 258 (856) (449) 158 1.1-46 647 (224) (221) 8,796 7,366 1,970 236 73 (122) (137) (374) 929 744 (157) 10.528 (16,520) 15,911 (3,900) (15,499) 16.624 (838) (15.831) 14.079 (2.491) 3,821 Year Ended December 31. (In millions) OPERATING ACTIVITIES Consolidated net income (Income) loss from discontinued operations Net income from continuing operations Depreciation and amortization Stock-based compensation expense Deferred income taxes Equity (income) loss - net of dividends Foreign currency adjustments Significant (gains) losses on sales of assets-net Other operating charges Other items Nel change in operating assets and liabilities Net cash provided by operating activities INVESTING ACTIVITIES Purchases of investments Proceeds from disposals of investments Acquisitions of businesses, equity method investments and nonmarketable securities Proceeds from disposals of businesses, equity method investments and monmarketable securities Purchases of property, plant and equipment Proceeds from disposals of property, plant and equipment Other investing activities Net cash provided by (used in) investing activities FINANCING ACTIVITIES Issuances of debt Payments of debt Issuances of stock Purchases of stock for treasury Dividends Other financing activities Net cash provided by (used in) financing activities CASH FLOWS FROM DISCONTINUED OPERATIONS Net cash provided by (used in) operating activities from discontinued operations Net cash provided by (used in) investing activities from discontinued operations Net cash provided by (used in) financing activities from discontinued operations Net cash provided by (used in) discontinued operations EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS Net increase (decrease) during the year Balance at beginning of year Balance at end of year (1.675) 104 (126) (2,385) 1,035 (2.262) 150 (209) (999) 565 (2.553) 85 (40) (6.186 27.281 (25,615) 29,857 (28,768) 1,595 (3,682) (6,320) (3.681) (6,043) 79 (6.545) 40,434 (37.738) 1.245 (3.564) (5.741) 251 (5,113) (91) (7.409) 111 (65) (38) 8 242 (6) (878 1.246 (2,549) 8,555 $ 6,006 7,309 $ 8,555 (1.649) 8.958 $ 7,309 Refer to Notes to Consolidated Financial Statements. THE COCA-COLA COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREOWNERS' EQUITY 2017 2015 2016 4.366 44 4.288 53 (82) 4.259 $ 1,760 4.324 50 (86) 4.288 $ 1.760 (86) 4.324 $ 1,760 14,993 655 14,016 589 130 258 13,154 532 94 236 219 15,864 14,993 14.016 65,502 1,248 (6,320) 60,430 65,018 6.527 (6,043) 65,502 63,408 7,351 (5.741) 65,018 Year Ended December 31, (In millions except per share data) EQUITY ATTRIBUTABLE TO SHAREOWNERS OF THE COCA-COLA COMPANY NUMBER OF COMMON SHARES OUTSTANDING Balance at beginning of year Treasury stock issued to employees related to stock compensation plans Purchases of stock for treasury Balance at end of year COMMON STOCK CAPITAL SURPLUS Balance at beginning of year Stock issued to employees related to stock compensation plans Tax benefit (charge) from stock compensation plans Stock-based compensation expense Other activities Balance at end of year REINVESTED EARNINGS Balance at beginning of year Net income attributable to shareowners of The Coca-Cola Company Dividends (per share - $1.48. $1.40 and $1.32 in 2017, 2016 and 2015, respectively) Balance at end of year ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) Balance at beginning of year Net other comprehensive income (loss) Balance at end of year TREASURY STOCK Balance at beginning of year Treasury stock issued to employees related to stock compensation plans Purchases of stock for treasury Balance at end of year TOTAL EQUITY ATTRIBUTABLE TO SHAREOWNERS OF THE COCA-COLA COMPANY EQUITY ATTRIBUTABLE TO NONCONTROLLING INTERESTS Balance at beginning of year Net income attributable to noncontrolling interests Net foreign currency translation adjustment Dividends paid to noncontrolling interests Contributions by noncontrolling interests Business combinations Deconsolidation of certain entities Other activities TOTAL EQUITY ATTRIBUTABLE TO NONCONTROLLING INTERESTS (11,205) 900 (10,305) (10,174) (1.031) (11.205) (5.777 (4.397) (10,174) (42,225) 696 (47,988) (45,066) 909 811 (3,598) (3.733) (50,677) (47.988) $ 17,072 $ 23,062 (3.537 (45.066 $ 25.554 $ S 241 158 S 35 38 (15) 210 23 (13) (25) 1 15 (18) (31) (3) 1,805 (157) 41 $ 1,905 S 6 158 S 210 Refer to Notes to Consolidated Financial Statements. Consolidated Statement of Income PepsiCo. Inc. and Subsidiaries Fiscal years ended December 27, 2017, December 28, 2016 and December 29, 2015 (in millions except per share amounts) 2017 63,525 $ 28,785 34,740 24.231 2016 62,799 $ 28,209 34,590 24,805 Net Revenue Cost of sales Gross profit Selling, general and administrative expenses Venezuela impairment charges Operating Profit Interest expense Interest income and other Income before income taxes Provision for income taxes (See Note 5) Net income Less: Net income attributable to noncontrolling interests Net Income Attributable to PepsiCo Net Income Attributable to PepsiCo per Common Share Basic Diluted Weighted average common shares outstanding Basic Diluted Cash dividends declared per common share 10,509 (1,151) 244 9,602 4,694 4,908 51 4,857 $ 9,785 (1,342) 110 8,553 2.174 6,379 SO 6,329 $ 2015 63,056 28,731 34,325 24,613 1,359 8,353 (970) 59 7,442 1.941 5.501 49 5.452 $ $ $ 3.40 $ 3.38 $ 4.39 $ 4.36 $ 3.71 3.67 1.425 1,438 3.1675 $ 1,439 1,452 2.96 $ 1,469 1,485 2.7625 $ Consolidated Statement of Comprehensive Income PepsiCo, Inc. and Subsidiaries Fiscal years ended December 30, 2017 December 31, 2016 and December 26, 2015 (in millions) 2017 4,908 $ 2016 6.379 $ 2015 5,501 Net income Other comprehensive income/loss), net of taxes: Net currency translation adjustment Net change on cash flow hedges Net pension and retiree medical adjustments Net change on securities Other 1,109 (36) (159) (68) 16 862 (302) 46 (316) (24) (2,827) 3 171 1 Comprehensive income Comprehensive income attributable to noncontrolling interests Comprehensive Income Attributable to PepsiCo 5,770 (51) 5,719 $ (596) 5.783 (54) 5.729 $ (2.652) 2,849 (47) 2.802 $ See accompanying notes to the consolidated financial statements. Consolidated Statement of Cash Flows PepsiCo, Inc. and Subsidiaries Fiscal years ended December 30, 2017 December 31, 2016 and December 26, 2015 in millions) Jos 3015 SOU $ 205 230 Note 1 1.159 131 SO 619 Cash paymes for rest charges Cred to the act with Tinggi Vecruipament care and more medical plan expenses Pidemedial plan contos Delise taus and other charges and and Pusletas espered to the TO A 149 015) TO (451) (34) (14) Accounts and receive 55 106 Net Cash Presided by Operating Activities Beresting Acties Capa pending (212 Redactie of cash der Veranla desde Divas Shoeby original maturity More than three months - purchases More than three months 19 4,111 15344 1 15 5) 3.560 Three months or Other investing.net Net Cash Used for bevesting Activities 7318 3.105 14.095 anding Acties Proceeds from moes of long-term debe 39 (12) (1,016) 1.500 53 (4040 (7) Det redemptions Shen-temborrowings, by original maturity More than three months proceeds More than three months - payments There moaths or less.net Cash dividends paid Share repurchmes-common Share repurchmes-preferred Proceeds from exercises of stock options Withholding tax payments RSUS. PSUs and PEPts converted Other financing Net Cash Used for Financing Activities Effect of exchange rate changes en cash and cash equivalents Net Increase in Cash and Cash Equivalents Cash and Cash Equivalents, Beginning of Year Cash and Cash Equivalents, End of Year (5) 504 (151) 523 (ISO (5) 3210 (4112 2.962 9.096 9.158 10.610 90096 Specimen Financial Statements: PepsiCo, Inc. D- Consolidated Balance Sheet PepsiCo, Inc. and Subsidiaries December 30, 2017 and December 31, 2016 (in millions except per share amounts) 2017 2016 S ASSETS Current Assets Cash and cash equivalents Short-term investments Accounts and notes receivable, net Inventories Prepaid expenses and other current assets Total Current Assets Property. Plant and Equipment, net Amortizable Intangible Assets, net Goodwill Other nomamortizable intangible assets Nonamortizable Intangible Assets Investments in Noncontrolled Affiliates Other Assets Total Assets 10.610 8.900 7,024 2,947 1.346 31,027 17.240 1,268 14,744 12.570 27,314 2,042 913 9,158 6.967 6.694 2.723 908 26.450 16,591 237 12.196 26.626 1,950 636 73.490 79,804 $ $ 5.485 15,017 20,502 33,796 11,283 6.892 14.243 21.135 30.033 68,823 62,291 41 (197) 41 (192) LIABILITIES AND EQUITY Current Liabilities Short-term debt obligations Accounts payable and other current liabilities Total Current Liabilities Long-Term Debt Obligations Other Liabilities Deferred Income Taxes Total Liabilities Commitments and contingencies Preferred Stock, no par value Repurchased Preferred Stock PepsiCo Common Shareholders' Equity Common stock. par value 1/per share (authorized 3.500 shares, issued, net of repurchased common stock at par value: 1.420 and 1,428 shares, respectively) Capital in excess of par value Retained carings Accumulated other comprehensive loss Repurchased common stock, in excess of par value (446 and 438 shares, respectively) Total PepsiCo Common Shareholders' Equity Noncontrolling interests Total Equity Total Liabilities and Equity 24 3,996 52,839 (13,057 (32,757) 11,045 92 10,981 79,804 24 4,091 52,518 (13,919) 31.468) 11.246 104 11.199 73.490 $ See accompanying notes to the consolidated financial statements. APPENDIX D Specimen Financial Statements: PepsiCo, Inc. Consolidated Statement of Equity PepsiCo. Inc. and Subsidiaries Fiscal years ended December 30, 2017 December 31, 2016 and December 26, 2015 (in millions) 2016 Shares Amount 41 2015 Shares 0.8 S (07) Amount 41 $ 5 (5) 10. (0.7) (197) (1920 1.48% Preferred Stock Balance, beginning of year Redemptions Balance end of year Comunen Stock Relance, beginning of year Change in repurchased common ock Balance, end of year Capital in Excess of Par Value Balance beginning of year 1.4 25 1.425 (5) 1.420 (40) 1.448 14 4,091 115 299 (182) (151) (5) Sock optica ex RSUS, PSUs and PEP converted Withholding tax ca RSUS, PSUs and PEPts covered Other (130 (145) 4,076 3,996 5.452 52.518 4857 (4.536) 52.539 50,472 13,919) (13.319) (10,663 (13.057) (13.919) (31,468) 29.185) Balance, ead of year Retained Earnings Balance, beginning of your Net income attributable to PepsiCo Cash dividends declared common Cath dividends declared preferred Balance end of year Accumulated Other Comprehensive Law Balance, beginning of year Other comprehensive income low) attributable to Pep.co Balance, end of year Repurchased Common Stork Balance, beginning of year Share repurchases Stock option encies RSU PSUs and PE Punits converted Other Balance, end of year Total Pepe Common Shareholders' Equity Nencontrolling Interests Balance, beginning of year Net income attributable to no controlling interest Disations to controlling intereses Currency translation adjustment Othernet Balance end of year (373) (18) 64.999) 794 10 12 3 (415) (29.185) 11.045 11.246 12.065 107 110 104 $1 55 104 11,199 107 12.030 5 10,981 (a) Includes total ax benefits of $110 million in 2016 and $107 million in 2015. See accompanying notes to the consolidated financial statements