Comparative Analysis Case The Coca-Cola Company and PepsiCo, Inc. The financial statements of Coca-Cola and PepsiCo are presented in Appendices Cand 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 are the primary lines of business of these two companies as shown in their notes to the finan- cial statements? b. Which company has the dominant position in beverage sales? c. How are inventories for these two companies valued? What cost allocation method is used to report in- ventory? How does their accounting for inventories affect comparability between the two companies? d. What future accounting policy changes do the companies discuss related to revenue recognition? Specimen Financial Statements: The Coca-Cola Company The Coca-Cola Company is the world's largest beverage company. It owns or licenses and markets more than 500 nonalcoholic beverage brands, primarily sparkling beverages, but also a variety of still beverages such as waters, enhanced waters, juices and juice drinks, ready- to-drink teas and coffees, and energy and sports drinks. Finished beverage products bearing Coca-Cola trademarks sold in the United States since 1886, are now available in more than 200 countries. THE COCA-COLA COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME 2017 2016 2015 541,863 16.465 25.398 $ 35,410 13.256 22,194 12.496 2.157 7,501 677 S 1.294 17,482 26,812 16.427 1.657 8.738 15.262 1.510 8.626 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. SO and Sorespectively CONSOLIDATED NET INCOME Less: Net income attributable to non controlling interests NET INCOME ATTRIBUTABLE TO SHAREOWNERS OF THE COCA-COLA COMPANY 1,071 733 835 (1.234) 8.136 1.586 6,550 856 489 631 9,603 2.239 7.366 5,560 1,182 101 6.550 23 7.366 15 35 $ 1.248 $6527 $ 7.351 0.28 S 1.51 $ 1.69 $ 1.51 $ 1.49 5 $ 1.69 1.67 Basic net income per share from continuing operations! Basie 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 $ 0.19 $ 0.27 0.02 $ 0.19 4.272 52 4.324 S 1.49 5 1.67 4,152 53 4.405 SO 4.367 Calculated based on net income from continuing operations les net income from continuing operations attributable to controlling interests. Calculated based on net income from downtinued operations low net income from discontinued operations attributable to controlling interests Per share amounts do not add due to rounding Refer to Notes to Consolidated Financial Statements THE COCA-COLA COMPANY AND SUSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 3016 2015 Year Ended December M 17 CONSOLIDATED NET INCOME Other comprehensive come Net foreign currency ratio adjustment Ne gainos) o derivatives Net realised and on available for a secure Net change in pension and other benefits TOTAL COMPREHENSIVE INCOME LOSS) Lew Comprehensive income loss tributable to none rolling interes TOTAL COMPREHENSIVE INCOME (LOSSI ATTRIBUTARILE TO SHAREOWNERS OF THE COCA-COLA COMPANY 6 32 12121 73 5.506 10 2.951 (3) THE COCA-COLA COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS 2016 $ 6,006 $ 8.555 9.595 15.15 5.317 2.455 2,000 219 3.356 2.695 2.41 2.797 34,010 16.10 989 MES 20.356 1.096 4,560 8.103 6,729 4243 10615 6.097 3,676 10,629 725 $ 87270 9,401 368 $ 87,96 December camises par vale) ASSETS CURRENT ASSETS Cash and cash equivalents Short-term investments TOTAL CASH CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS Marketable securities Trade counts receivable, les illowsces of 477 and 5456, respectively Inventories Prepaid expenses and other as 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 FOUITY 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 7,000 shares, respectively Capital surplus Reinvested earnings Accumulated other comprehensive income (los) Treasury stock, at cost-2.7 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 $ 8,748 13,205 3298 410 37 1,496 27.194 31,182 $9.490 12,498 3.527 307 710 26,532 2,522 4.081 3.753 1,760 15.254 (10,305) (50,677) 17,072 1,905 18,977 1.760 14.993 65.502 (11,205) (479) 23.062 158 23.220 $ 87.270 Refer to Notes to Consolidated Financial Statements Specimen Financial Statements. The Coca-Cola Com 2017 2008 $ 1.2 (101 1,182 1.260 219 6350 7,356 970 236 73 (122) 561 281 1.459 1,218 (269) 3,529 6,995 158 1.146 647 (224) (221) 8,796 (374) 929 744 (157) 10.528 (16.520) 15,911 (3,900) (15.4999 16,624 (838) (15831) 14,079 (2.491) THE COCA-COLA COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31 (In miss ) 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) lossnet of dividends Foreign currency adjustments Significant (gains) losses on sales of assets-net Other operating charges Other items Net 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 nonmarketable 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 activ 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 34821 (1,675) 104 (126) (2.385) 1,035 (2.262) 150 (209) 565 (2.553) 85 (40) (6.156) 27.281 (25,615) 29.857 (28,768) 1.595 (3.682) (6,320) (91) (3.681) (6,043) 79 (6.545) (37.738) 1.245 (3364) (5.741) 251 (5.113 (7.409) 111 (65) (38) 8 242 (6) (878) (2,549) 8.555 $ 6,006 1.246 7,309 $8.555 (1,649) 8.958 $ 7,309 Refer to Notes to Consolidated Financial Statements Statements: The Coca-Cola Company THE COCA-COLA COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREOWNERS' EQUITY 2016 2017 4.124 42 53 4.166 44 4309 $ 1.100 (6) 4.28 $ 1.760 424 51.760 14.993 14,016 SNO 13.154 512 94 236 25N 219 (3 15.64 14.993 14.016 65,018 65.502 1,248 (6,320) 60.430 63.408 7.351 (5.741 65,018 65.502 Year Ended December 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 Stockised 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 -51.48. $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 ATTRIBUTARLE TO NONCONTROLLING INTERESTS (11,205) 900 (10,105) (10,174) (1.031) (11.205) (5.777) (4.397) (10,174) (47,988) (45.066) 909 811 (3,598) (3.733) (50,677) (47,988) $ 17.072 S 23.062 696 (3.537) (45,066) 25,554 $ 1585 210 S 35 38 (15) 241 15 (18) (31) (13) (25) 1 1.NO (3) (157) 41 $ 1,905 S (34) (4) 158 6 210 S Refer to Notes to Consolidated Financial Statements Specimen Financial Statements: PepsiCo, Inc. Pepsico, Inc. is a leading global food and beverage company with a complementary portfolio of enjoyable brands, including Frito-Lay, Gatorade, Pepsi-Cola, Quaker, and Tropicana. Through its operations, authorized bottlers, contract manufacturers, and other third parties, PepsiCo makes, markets, distributes, and sells a wide variety of convenient and enjoyable beverages, foods, and snacks, serving customers and consumers in more than 200 countries and territories 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 5 28,7RS 34,740 24,231 2016 62.799 28.209 34.590 34.80S 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) 2:44 9,602 4,694 4,908 51 4.837 $ 9.785 (132) 110 8,553 2,174 6,379 SO 2015 63,056 28.731 34 325 24,613 1.359 8,353 (970) 59 7.442 1.911 5.S01 -19 5,452 $ $ 340 $ 3.38 4.39 $ 4.36 $ 3.71 3.67 1,425 1,438 3.16755 1.439 1,452 2.96 $ $ 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 incomo 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 46 (2.827) 3 171 1 (316) 1,109 (36) (159) (68) 16 862 5,770 (51) 5,719 $ (596) 5,783 (2.652) 2,849 Comprehensive income Comprehensive income attributable to noncontrolling interests Comprehensive Income Attributable to PepsiCo (54) $ 5.729 2.802 See accompanying notes to the consolidated financial statements. Consolidated Balance Sheet PepsiCo, Inc. and Subsidiaries December 30, 2017 and December 31, 2016 (in millions except per share amounts) and also 2017 2016 5 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 nonamortizable intangible assets Nonamortizable Intangible Assets Investments in Noncontrolled Affiliates Other Assets Total Assets 10,610 8.900 7,024 2,947 1,546 31.027 17,240 1,268 14,744 12.570 27,314 2.042 913 79,804 9.158 6,967 6,694 2,723 908 26,450 16,591 1.237 14.430 12.196 26,626 1,950 636 73.490 $ S 5,485 15,017 20,502 33,796 11,283 6,892 14.243 21,135 30.053 6.669 4,434 62.291 68.823 (197) (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 3.600 shares, issued, net of repurchased common stock at par value: 1,420 and 1428 shares, respectively) Capital in excess of par value Retained earings 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 52518 (13,919) (31.468) 11.246 104 11.199 73.490 S See accompanying notes to the consolidated financial statements. Consolidated Statement of Equity PepsiCo, Inc. and Subsidiaries Fiscal years ended December 30, 2017 December 31, 2016 and December 26, 2015 (in millions) 2015 2015 2017 Amount 41 Shares Amount Shares OR Shares OS (0.7) Amount 41 (156) S 0. $ 0.73 10.73 (186) (1921 (5) (197) (6) (192) 0.73 0.7) 10.71 25 24 1.428 (600 1.448 (203 24 1.420 4,091 290 (216) (145) 4,075 29 (138) (130) (6) 4091 4,115 299 (182) (151) (5) 4,076 3.996 49,092 5,452 52.518 4,857 (4.535) (4.071) 50.472 6,129 (4.282) (1) 52.518 50,472 Preferred Stock Balance, beginning of year Redemptions Balance, end of year Common Steck Balance, beginning of year Change in repurchased common stock Balance, end of year Capital in Excess of Par Value Balance, beginning of year Share-based compensation expense Stock option exercises. RSUS, PSUs and PEPuits converted Withholding tax on RSUS. PSUs and PE Punits converted Other Balance, end of year Retained Earnings Balance, beginning of year Net income attributable to PepsiCo Cash dividends declared.common Cash dividends declared - preferred Balance, end of year Accumulated Other Comprehensive Lost Balance, beginning of year Other comprehensive income los) attributable to PepsiCo Balance, end of year Repurchased Common Stock Balance, beginning of year Share repurchases Stock option exercises, RSUS. PSUs and PEPunits converted Other Balance, end of year Total PepsiCo Common Shareholders' Equity Noncontrolling Interests Balance, beginning of year Net income attributable to noncontrolling interest Distributions to noncontrolling interests Currency translation adjustment Othernet Balance, end of year Total Equity 52.839 (13,919) (13.319) (000) (13.919) (10,669) (2.650) (13.319) (13.057) (418) (29) (29.185) (3.000) 712 (378) (52) (24.985) (4.999) (31.468) (2.000) 70N (18) 9 12 10 794 5 5 (446) (438) (418) (29,185) (32,757) 11,045 (31.468) 11.246 12.068 104 107 110 51 49 50 (55) (62) (48) 4 (1) (2) 92 104 $ 10,981 $ 107 12.030 11.199 S (a) Includes total tax benefits of $110 million in 2016 and S107 million in 2015. See accompanying notes to the consolidated financial statements. The Coca-Cola Company is the world's largest beverage company. It owns or licenses and markets more than 500 nonalcoholic beverage brands, primarily sparkling beverages, but also a variety of still beverages such as waters, enhanced waters, juices and juice drinks, ready- to-drink teas and coffees, and energy and sports drinks. Finished beverage products bearing Coca-Cola trademarks, sold in the United States since 1886, are now available in more than 200 countries. 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 (los) 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 S47.50 and S. 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 35 541.863 16,465 25,398 15.262 1,510 8.626 642 733 835 (1.234 8.136 1.586 6,550 $ 44,194 17.482 26,812 16,427 1.657 8.728 613 856 489 631 9,505 2.239 7.366 6.550 23 7.366 15 $ 1.2.48 S 6,527 $ 7,351 Basic net income per share from continuing operations! $ 0.28 $ 1.51 $ 1.69 Basic net income per share from discontinued operations! 0.02 BASIC NET INCOME PER SHARE $ 0.29 $ 1.51 $ 1.69 Diluted net income per share from continuing operations! $ 0.27 $ 1.49 $ 1.67 Diluted net income per share from discontinued operations! 0.02 DILUTED NET INCOME PER SHARE $ 0.29 $ 1.49 $ 1.67 AVERAGE SHARES OUTSTANDING BASIC 4,272 4.317 4,352 Effect of dilutive securities 52 50 53 AVERAGE SHARES OUTSTANDING-DILUTED 4,324 4,367 4,405 Calculated based on et income from continuing operations les net income from continuing operations attributable to controlling interests Calculated based on net income from discontinued operations les escome from discontinued operations attributable to no controlling interests. Per share amounts do not add due to rounding Refer to Notes to Consolidated Financial Statements ALLE EADER TH KOUZES Specimen Financial Statements: The Coca-Cola Company THE COCA-COLA COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 2017 2016 2015 $1.03 6.50 7365 VOSGIEROS (433) (382) 861 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 (626) (3.959) 142 188 (684) 86 322 17 (53) 5,506 10 2,951 2,221 73 $ 2,148 S 5.496 $ 2.954 THE COCA-COLA COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS 2017 2016 December 31, (In millions except par value) For 2017 2016 Os he sy to $ 6,004 9,352 15.358 5,317 3.657 2,655 2.000 219 $ 8.555 9.595 18.150 4,051 3.56 2.675 2.41 2,797 using PLUS oard 36,345 20 356 1,06 8.303 6,729 THE COCA-COLA COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31 de millions except para 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 5466, respectively Inventories Prepaid expenses and other assets Assets held for sale Awets helt for sale -- discontinued operations TOTAL CURRENT ASSETS EQUITY METHOD INVESTMENTS OTHER INVESTMENTS OTHER ASSETS PROPERTY, PLANT AND EQUIPMENT 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 debe 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 (los) Treasury Mock, 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 34010 16.160 989 4.248 10,615 6,097 3.676 14639 726 5 87.220 S ST $ 3.745 LF $9.90 12.09 3.527 710 410 37 1,496 27,194 31,182 26.532 29,684 2,522 3.753 1,760 15,864 60.4 (10.305) (5067) 17,072 1,905 18977 $ 87. 1.760 14.990 65,502 (11.205) (47.985) 23.062 158 23.220 $ 87.270 Specimen Financial Statements: The Coca-Co 2017 2016 2015 $ 6,550 $ 7.366 6.550 1,787 258 (856) $ 1.283 (101) 1,182 1.260 219 (1.256) (628) 281 1.459 1,218 (269) 3,529 6,995 (449) 159 1.146 647 (234) (221) 8,796 7,366 1,970 236 73 (122) (137) (374) 929 744 (157) 10.528 (15.499) (16,520) 15,911 (3,900) 16,624 (15.831) 14,079 (2.491) (838) THE COCA-COLA COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31. Is 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 Net 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 nonmarketable 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 3,821 (1.675) 104 (126) (2.385) 1,035 (2.262) 150 (209) (9991 565 (2.553) RS (40) (6,186) 27.281 (25.615) 29,857 (28,768) 1,595 (3,682) (6,320) (91) 7,409) 40,434 (37,738) 1.245 (3.564) (5.741) 251 (5.113) (6.043) 79 (6.545) 111 (65) 8 (6) (878) (2.549) 8,555 $ 6,006 1.246 7,309 $8.555 (1.619) 8,955 $ 7.309 Refer to Notes to Consolidated Financial Statements Specimen Financial Statements: The Coca-Cola Company THE COCA-COLA COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREOWNERS' EQUITY 2017 2016 2015 4,288 4,324 53 50 (82) (86) 4,259 4,288 $ 1,760 $ 1,760 4.366 14 (86) 4,324 $ 1,760 14,993 655 14,016 589 130 13.154 532 94 236 219 (3) 15,864 14,993 14,016 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 $1.48.51.40 and 51.32 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 Mock 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 65,502 1,248 (6,320) 60.430 65,018 6.527 (6.043) 65,502 63.408 7.351 (5.741) 65.018 (11.205) 900 (10,305) (10,174) (1.031) (11.205) (5.777 (4.397 (10,174) (47,988) (45.006) 909 811 (3.598) (3.733) (50,677) (47,9881 $ 17,072 $ 23,062 (42.225) 696 (3,537) (45.066) S 25.554 $ 1585 210 S 35 241 15 (18) (31) (15) (25) 1 (3) 1,805 (157) 41 1,905 alalgi (4) 158 6 210 $ $ S Refer to Notes to Consolidated Financial Statements PepsiCo, Inc. Pepsico, Inc. is a leading global food and beverage company with a complementary portfolio of enjoyable brands, including Frito-Lay, Gatorade, Pepsi-Cola, Quaker, and Tropicana. Through its operations, authorized bottlers, contract manufacturers, and other third parties, PepsiCo makes, markets, distributes, and sells a wide variety of convenient and enjoyable beverages, foods, and snacks, serving customers and consumers in more than 200 countries and territories. 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 9,785 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 2015 63,056 28,731 34 325 24,613 1,359 8.353 1970) 59 7.442 1,941 5.501 49 5,452 110 8,553 2.174 6,379 SO 6.3295 51 $ 4,857 $ $ 3.40 S 3.18 S 4.39 $ 436 S 3.71 3.67 $ 1,425 1,438 3.1675$ 1,439 1,452 2.96 $ S 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) 2015 2017 4,9085 2016 6.379 $ $ 5.301 (302) 46 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) (2.827) 3 171 1 (316) (24) 16 862 5,770 (51) 5,719 $ (596) 5.783 (54) 5,7295 (2.652) 2.849 (47) 2.802 Comprehensive income Comprehensive income attributable to noncontrolling interests Comprehensive Income Attributable to PepsiCo $ 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) mer 28, 2018 2017 2016 2015 $ 49 5 5 5.501 2,416 295 230 184 295 Operating Activ Net income Depreciation and mortati Shared.comperen expense Restructuring and impairment charges Cash payments for entering charges Charges related to the action with Tinggi Venensel impairment charges Pension and retire medical plan experien Pension and retire medical plan contributions Defences and her charges and credits Provisional en expense read to the TCU AC Change in and abilities: Accounts receive IN (125) 373 221 SOI 695) 452 73 1.359 457 (205) 78 2.451 (461) 244) (50) (75) 10 997 Prepaid expenses and other current Accounts payable and other current 201 55 Othernet Nel Cash Provided by Operating Activities 39 6 10,678 9.94 10 2.) 180 03.0401 99 (212) (2.758 85 185) 76 Investing Activities Capital spending Sales of property, plant and equipment Acquisitions and investments in non.comwolled lates Raduction of dar so Vencla deconsolidation Divestres Short-erminvestments by original maturity More than three moda-purchases More than three months - mais More than the sales Three months or less Other investi, Net Cash Used for investing Activities (18_145) 15.744 (12,500) 8,199 (4/425) 16 (7.1-8) 157 3.560 7.500 4,105) 7.818 0.105) 91 $9 15 11.016) 1505 (4.227) (2.000) Financing Activities Proceeds from an of long-term deb Payments of long-term debe Debt redemptions Short-term borrowings, by original merly More than three months - proceeds More than three months payments Three months or less.net Cash dividends paid Share purchases.com Share purchases preferred Proceeds from exercles of stock options Withholding tax payments oa RSU,PSU and PEP units converted Other financing Net Cash Used for Financing Acties Effect of exchange rate changes ocash and cash equivalent Net Increase in Cash and Cash Equivalents Cash and Cash Equivalents, Beginning of Year Cash and Cash Equivalents. End of Year Se paying the consolidated fin 151 53 44.000 (5.000 (5) 304 (151) (145) (76) (4,156) (130) (531 211) (4,112) (221) 2.99 90% 9.158 10610 9.158 9,096 Specimen Financial Statements: PepsiCo, Inc. D-3 Consolidated Balance Sheet PepsiCo. Inc. and Subsidiaries December 30, 2017 and December 31, 2016 (in millions except per share amounts) 2017 2016 ASSETS Current Assets Cash and cash equivalents Short-term investments Accounts and notes receivable, et Inventories Prepaid expenses and other cuments Total Current Assets Property. Plant and Equipment, et Amortizable Intangible Assets, net Goodwill Other non omizable intangible assets Nona mortizable Intangible Assets Investments in Noncontrolled Amiliates Other Assets Total Assets 9,158 6,967 6,694 2.723 905 26,450 10.610 5 8.900 7,024 2.947 1.546 31,027 17,240 1.268 14.744 12,570 27,314 2,042 913 79,8045 16.591 1.237 14.40 12.196 26,626 1.950 636 73.490 5 5,4855 15.017 20.502 33,796 11.23 6,892 14,243 21.135 30.053 6.609 4,434 68,823 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 3.600 shares, issued, net of repurchased common stock par value: 1.420 and 1428 shares, respectively) Capital in exces of par value Retained earnings Accumulated other comprehensive loss Repurchased common stock, in excess of par value (446 and 438 shares, respectively) Total PepsiCo Common Stureholders' Equity Noncontrolling interests Total Equity Total Liabilities and Equity (197) (192) 3,996 52.839 13,057) 32.757) 11.045 52518 (13919) 01.463) 11.246 104 11.199 73.490 10,951 79,804 5 See accompanying notes to the consolidated financial statements Consolidated Statement of Equity PepsiCo, Inc. and Subsidiaries Fiscal years ended December 30, 2017 December 31, 2016 and December 26, 2015 in millions) 2017 2016 2015 Amount Shares ON 5 OR 5 5 10.7) 10.7) (186) (192) 15) 10.71 Amount 41 (181) 15) (186) 0.7 16) (192) (0.7) 40.7) 1,42N 24 1. 25 1.448 (203 (8) 1403 14 1.425 24 +076 +.115 289 (236) (145) 41 (130) (151) (0) 19 3.996 4,076 51.515 30,472 6,329 -9.092 5.452 4,857 14.536) Preferred Stock Balance beginning of yea Redemptions Balance, and of year Common Stock Balance beginning of you Change in purchased cosmoa shock Relance, end of year Capital is een of Par Value Balance beginning of year Share-based compensation expense Stockapoon series RSUS, PSUs and PEPtits converted Withholding tax on RSU, PSUs and PEPts converted Other Balance, end of year Hetled Earnings Ralance, beginning of your Net income attributable to pa Cash dividends declared-commes Cash dividends declared - preferred Balance, end of year accumulated Other Comprehee Low Balance, beginning of year Other comprehensive income table to Price Balance, and of year Repurchased Com Stock Balance, beginning of you Share repurchases Stock option exercises, RSUS PSUs and PEPunits converted Other Balance, and of year Total Pepe Common Shareholders' Equity oncentrolling Interests Balance, beginning of year Net income table to no controlling interest Distributions to controlling in Currency translation aliment Othere Balance, end of year 44.782) (4071 52.319 52.518 50.472 (13.919) 361 (13.319) 600) (13.919) (10.66 (2.650 (13.319) (13,057) (43 19.155) (418) (19) (378) (24.985) 1e 9 (31.468) (2.000 708 3 (32,757) 11.045 712 12 794 (31.46R) (418) 11.246 (29.185) 12,068 104 51 107 30 110 49 1 123 11 92 21 101 11.199 107 10,981 12.030 Includes total benefits of 110 million in 2016 and 5107 million in 2015 e accompanying eles to the consolidated financial statement Comparative Analysis Case The Coca-Cola Company and PepsiCo, Inc. The financial statements of Coca-Cola and PepsiCo are presented in Appendices Cand 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 are the primary lines of business of these two companies as shown in their notes to the finan- cial statements? b. Which company has the dominant position in beverage sales? c. How are inventories for these two companies valued? What cost allocation method is used to report in- ventory? How does their accounting for inventories affect comparability between the two companies? d. What future accounting policy changes do the companies discuss related to revenue recognition? Specimen Financial Statements: The Coca-Cola Company The Coca-Cola Company is the world's largest beverage company. It owns or licenses and markets more than 500 nonalcoholic beverage brands, primarily sparkling beverages, but also a variety of still beverages such as waters, enhanced waters, juices and juice drinks, ready- to-drink teas and coffees, and energy and sports drinks. Finished beverage products bearing Coca-Cola trademarks sold in the United States since 1886, are now available in more than 200 countries. THE COCA-COLA COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME 2017 2016 2015 541,863 16.465 25.398 $ 35,410 13.256 22,194 12.496 2.157 7,501 677 S 1.294 17,482 26,812 16.427 1.657 8.738 15.262 1.510 8.626 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. SO and Sorespectively CONSOLIDATED NET INCOME Less: Net income attributable to non controlling interests NET INCOME ATTRIBUTABLE TO SHAREOWNERS OF THE COCA-COLA COMPANY 1,071 733 835 (1.234) 8.136 1.586 6,550 856 489 631 9,603 2.239 7.366 5,560 1,182 101 6.550 23 7.366 15 35 $ 1.248 $6527 $ 7.351 0.28 S 1.51 $ 1.69 $ 1.51 $ 1.49 5 $ 1.69 1.67 Basic net income per share from continuing operations! Basie 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 $ 0.19 $ 0.27 0.02 $ 0.19 4.272 52 4.324 S 1.49 5 1.67 4,152 53 4.405 SO 4.367 Calculated based on net income from continuing operations les net income from continuing operations attributable to controlling interests. Calculated based on net income from downtinued operations low net income from discontinued operations attributable to controlling interests Per share amounts do not add due to rounding Refer to Notes to Consolidated Financial Statements THE COCA-COLA COMPANY AND SUSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 3016 2015 Year Ended December M 17 CONSOLIDATED NET INCOME Other comprehensive come Net foreign currency ratio adjustment Ne gainos) o derivatives Net realised and on available for a secure Net change in pension and other benefits TOTAL COMPREHENSIVE INCOME LOSS) Lew Comprehensive income loss tributable to none rolling interes TOTAL COMPREHENSIVE INCOME (LOSSI ATTRIBUTARILE TO SHAREOWNERS OF THE COCA-COLA COMPANY 6 32 12121 73 5.506 10 2.951 (3) THE COCA-COLA COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS 2016 $ 6,006 $ 8.555 9.595 15.15 5.317 2.455 2,000 219 3.356 2.695 2.41 2.797 34,010 16.10 989 MES 20.356 1.096 4,560 8.103 6,729 4243 10615 6.097 3,676 10,629 725 $ 87270 9,401 368 $ 87,96 December camises par vale) ASSETS CURRENT ASSETS Cash and cash equivalents Short-term investments TOTAL CASH CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS Marketable securities Trade counts receivable, les illowsces of 477 and 5456, respectively Inventories Prepaid expenses and other as 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 FOUITY 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 7,000 shares, respectively Capital surplus Reinvested earnings Accumulated other comprehensive income (los) Treasury stock, at cost-2.7 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 $ 8,748 13,205 3298 410 37 1,496 27.194 31,182 $9.490 12,498 3.527 307 710 26,532 2,522 4.081 3.753 1,760 15.254 (10,305) (50,677) 17,072 1,905 18,977 1.760 14.993 65.502 (11,205) (479) 23.062 158 23.220 $ 87.270 Refer to Notes to Consolidated Financial Statements Specimen Financial Statements. The Coca-Cola Com 2017 2008 $ 1.2 (101 1,182 1.260 219 6350 7,356 970 236 73 (122) 561 281 1.459 1,218 (269) 3,529 6,995 158 1.146 647 (224) (221) 8,796 (374) 929 744 (157) 10.528 (16.520) 15,911 (3,900) (15.4999 16,624 (838) (15831) 14,079 (2.491) THE COCA-COLA COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31 (In miss ) 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) lossnet of dividends Foreign currency adjustments Significant (gains) losses on sales of assets-net Other operating charges Other items Net 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 nonmarketable 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 activ 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 34821 (1,675) 104 (126) (2.385) 1,035 (2.262) 150 (209) 565 (2.553) 85 (40) (6.156) 27.281 (25,615) 29.857 (28,768) 1.595 (3.682) (6,320) (91) (3.681) (6,043) 79 (6.545) (37.738) 1.245 (3364) (5.741) 251 (5.113 (7.409) 111 (65) (38) 8 242 (6) (878) (2,549) 8.555 $ 6,006 1.246 7,309 $8.555 (1,649) 8.958 $ 7,309 Refer to Notes to Consolidated Financial Statements Statements: The Coca-Cola Company THE COCA-COLA COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREOWNERS' EQUITY 2016 2017 4.124 42 53 4.166 44 4309 $ 1.100 (6) 4.28 $ 1.760 424 51.760 14.993 14,016 SNO 13.154 512 94 236 25N 219 (3 15.64 14.993 14.016 65,018 65.502 1,248 (6,320) 60.430 63.408 7.351 (5.741 65,018 65.502 Year Ended December 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 Stockised 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 -51.48. $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 ATTRIBUTARLE TO NONCONTROLLING INTERESTS (11,205) 900 (10,105) (10,174) (1.031) (11.205) (5.777) (4.397) (10,174) (47,988) (45.066) 909 811 (3,598) (3.733) (50,677) (47,988) $ 17.072 S 23.062 696 (3.537) (45,066) 25,554 $ 1585 210 S 35 38 (15) 241 15 (18) (31) (13) (25) 1 1.NO (3) (157) 41 $ 1,905 S (34) (4) 158 6 210 S Refer to Notes to Consolidated Financial Statements Specimen Financial Statements: PepsiCo, Inc. Pepsico, Inc. is a leading global food and beverage company with a complementary portfolio of enjoyable brands, including Frito-Lay, Gatorade, Pepsi-Cola, Quaker, and Tropicana. Through its operations, authorized bottlers, contract manufacturers, and other third parties, PepsiCo makes, markets, distributes, and sells a wide variety of convenient and enjoyable beverages, foods, and snacks, serving customers and consumers in more than 200 countries and territories 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 5 28,7RS 34,740 24,231 2016 62.799 28.209 34.590 34.80S 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) 2:44 9,602 4,694 4,908 51 4.837 $ 9.785 (132) 110 8,553 2,174 6,379 SO 2015 63,056 28.731 34 325 24,613 1.359 8,353 (970) 59 7.442 1.911 5.S01 -19 5,452 $ $ 340 $ 3.38 4.39 $ 4.36 $ 3.71 3.67 1,425 1,438 3.16755 1.439 1,452 2.96 $ $ 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 incomo 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 46 (2.827) 3 171 1 (316) 1,109 (36) (159) (68) 16 862 5,770 (51) 5,719 $ (596) 5,783 (2.652) 2,849 Comprehensive income Comprehensive income attributable to noncontrolling interests Comprehensive Income Attributable to PepsiCo (54) $ 5.729 2.802 See accompanying notes to the consolidated financial statements. Consolidated Balance Sheet PepsiCo, Inc. and Subsidiaries December 30, 2017 and December 31, 2016 (in millions except per share amounts) and also 2017 2016 5 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 nonamortizable intangible assets Nonamortizable Intangible Assets Investments in Noncontrolled Affiliates Other Assets Total Assets 10,610 8.900 7,024 2,947 1,546 31.027 17,240 1,268 14,744 12.570 27,314 2.042 913 79,804 9.158 6,967 6,694 2,723 908 26,450 16,591 1.237 14.430 12.196 26,626 1,950 636 73.490 $ S 5,485 15,017 20,502 33,796 11,283 6,892 14.243 21,135 30.053 6.669 4,434 62.291 68.823 (197) (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 3.600 shares, issued, net of repurchased common stock at par value: 1,420 and 1428 shares, respectively) Capital in excess of par value Retained earings 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 52518 (13,919) (31.468) 11.246 104 11.199 73.490 S See accompanying notes to the consolidated financial statements. Consolidated Statement of Equity PepsiCo, Inc. and Subsidiaries Fiscal years ended December 30, 2017 December 31, 2016 and December 26, 2015 (in millions) 2015 2015 2017 Amount 41 Shares Amount Shares OR Shares OS (0.7) Amount 41 (156) S 0. $ 0.73 10.73 (186) (1921 (5) (197) (6) (192) 0.73 0.7) 10.71 25 24 1.428 (600 1.448 (203 24 1.420 4,091 290 (216) (145) 4,075 29 (138) (130) (6) 4091 4,115 299 (182) (151) (5) 4,076 3.996 49,092 5,452 52.518 4,857 (4.535) (4.071) 50.472 6,129 (4.282) (1) 52.518 50,472 Preferred Stock Balance, beginning of year Redemptions Balance, end of year Common Steck Balance, beginning of year Change in repurchased common stock Balance, end of year Capital in Excess of Par Value Balance, beginning of year Share-based compensation expense Stock option exercises. RSUS, PSUs and PEPuits converted Withholding tax on RSUS. PSUs and PE Punits converted Other Balance, end of year Retained Earnings Balance, beginning of year Net income attributable to PepsiCo Cash dividends declared.common Cash dividends declared - preferred Balance, end of year Accumulated Other Comprehensive Lost Balance, beginning of year Other comprehensive income los) attributable to PepsiCo Balance, end of year Repurchased Common Stock Balance, beginning of year Share repurchases Stock option exercises, RSUS. PSUs and PEPunits converted Other Balance, end of year Total PepsiCo Common Shareholders' Equity Noncontrolling Interests Balance, beginning of year Net income attributable to noncontrolling interest Distributions to noncontrolling interests Currency translation adjustment Othernet Balance, end of year Total Equity 52.839 (13,919) (13.319) (000) (13.919) (10,669) (2.650) (13.319) (13.057) (418) (29) (29.185) (3.000) 712 (378) (52) (24.985) (4.999) (31.468) (2.000) 70N (18) 9 12 10 794 5 5 (446) (438) (418) (29,185) (32,757) 11,045 (31.468) 11.246 12.068 104 107 110 51 49 50 (55) (62) (48) 4 (1) (2) 92 104 $ 10,981 $ 107 12.030 11.199 S (a) Includes total tax benefits of $110 million in 2016 and S107 million in 2015. See accompanying notes to the consolidated financial statements. The Coca-Cola Company is the world's largest beverage company. It owns or licenses and markets more than 500 nonalcoholic beverage brands, primarily sparkling beverages, but also a variety of still beverages such as waters, enhanced waters, juices and juice drinks, ready- to-drink teas and coffees, and energy and sports drinks. Finished beverage products bearing Coca-Cola trademarks, sold in the United States since 1886, are now available in more than 200 countries. 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 (los) 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 S47.50 and S. 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 35 541.863 16,465 25,398 15.262 1,510 8.626 642 733 835 (1.234 8.136 1.586 6,550 $ 44,194 17.482 26,812 16,427 1.657 8.728 613 856 489 631 9,505 2.239 7.366 6.550 23 7.366 15 $ 1.2.48 S 6,527 $ 7,351 Basic net income per share from continuing operations! $ 0.28 $ 1.51 $ 1.69 Basic net income per share from discontinued operations! 0.02 BASIC NET INCOME PER SHARE $ 0.29 $ 1.51 $ 1.69 Diluted net income per share from continuing operations! $ 0.27 $ 1.49 $ 1.67 Diluted net income per share from discontinued operations! 0.02 DILUTED NET INCOME PER SHARE $ 0.29 $ 1.49 $ 1.67 AVERAGE SHARES OUTSTANDING BASIC 4,272 4.317 4,352 Effect of dilutive securities 52 50 53 AVERAGE SHARES OUTSTANDING-DILUTED 4,324 4,367 4,405 Calculated based on et income from continuing operations les net income from continuing operations attributable to controlling interests Calculated based on net income from discontinued operations les escome from discontinued operations attributable to no controlling interests. Per share amounts do not add due to rounding Refer to Notes to Consolidated Financial Statements ALLE EADER TH KOUZES Specimen Financial Statements: The Coca-Cola Company THE COCA-COLA COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 2017 2016 2015 $1.03 6.50 7365 VOSGIEROS (433) (382) 861 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 (626) (3.959) 142 188 (684) 86 322 17 (53) 5,506 10 2,951 2,221 73 $ 2,148 S 5.496 $ 2.954 THE COCA-COLA COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS 2017 2016 December 31, (In millions except par value) For 2017 2016 Os he sy to $ 6,004 9,352 15.358 5,317 3.657 2,655 2.000 219 $ 8.555 9.595 18.150 4,051 3.56 2.675 2.41 2,797 using PLUS oard 36,345 20 356 1,06 8.303 6,729 THE COCA-COLA COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31 de millions except para 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 5466, respectively Inventories Prepaid expenses and other assets Assets held for sale Awets helt for sale -- discontinued operations TOTAL CURRENT ASSETS EQUITY METHOD INVESTMENTS OTHER INVESTMENTS OTHER ASSETS PROPERTY, PLANT AND EQUIPMENT 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 debe 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 (los) Treasury Mock, 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 34010 16.160 989 4.248 10,615 6,097 3.676 14639 726 5 87.220 S ST $ 3.745 LF $9.90 12.09 3.527 710 410 37 1,496 27,194 31,182 26.532 29,684 2,522 3.753 1,760 15,864 60.4 (10.305) (5067) 17,072 1,905 18977 $ 87. 1.760 14.990 65,502 (11.205) (47.985) 23.062 158 23.220 $ 87.270 Specimen Financial Statements: The Coca-Co 2017 2016 2015 $ 6,550 $ 7.366 6.550 1,787 258 (856) $ 1.283 (101) 1,182 1.260 219 (1.256) (628) 281 1.459 1,218 (269) 3,529 6,995 (449) 159 1.146 647 (234) (221) 8,796 7,366 1,970 236 73 (122) (137) (374) 929 744 (157) 10.528 (15.499) (16,520) 15,911 (3,900) 16,624 (15.831) 14,079 (2.491) (838) THE COCA-COLA COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31. Is 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 Net 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 nonmarketable 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 3,821 (1.675) 104 (126) (2.385) 1,035 (2.262) 150 (209) (9991 565 (2.553) RS (40) (6,186) 27.281 (25.615) 29,857 (28,768) 1,595 (3,682) (6,320) (91) 7,409) 40,434 (37,738) 1.245 (3.564) (5.741) 251 (5.113) (6.043) 79 (6.545) 111 (65) 8 (6) (878) (2.549) 8,555 $ 6,006 1.246 7,309 $8.555 (1.619) 8,955 $ 7.309 Refer to Notes to Consolidated Financial Statements Specimen Financial Statements: The Coca-Cola Company THE COCA-COLA COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREOWNERS' EQUITY 2017 2016 2015 4,288 4,324 53 50 (82) (86) 4,259 4,288 $ 1,760 $ 1,760 4.366 14 (86) 4,324 $ 1,760 14,993 655 14,016 589 130 13.154 532 94 236 219 (3) 15,864 14,993 14,016 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 $1.48.51.40 and 51.32 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 Mock 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 65,502 1,248 (6,320) 60.430 65,018 6.527 (6.043) 65,502 63.408 7.351 (5.741) 65.018 (11.205) 900 (10,305) (10,174) (1.031) (11.205) (5.777 (4.397 (10,174) (47,988) (45.006) 909 811 (3.598) (3.733) (50,677) (47,9881 $ 17,072 $ 23,062 (42.225) 696 (3,537) (45.066) S 25.554 $ 1585 210 S 35 241 15 (18) (31) (15) (25) 1 (3) 1,805 (157) 41 1,905 alalgi (4) 158 6 210 $ $ S Refer to Notes to Consolidated Financial Statements PepsiCo, Inc. Pepsico, Inc. is a leading global food and beverage company with a complementary portfolio of enjoyable brands, including Frito-Lay, Gatorade, Pepsi-Cola, Quaker, and Tropicana. Through its operations, authorized bottlers, contract manufacturers, and other third parties, PepsiCo makes, markets, distributes, and sells a wide variety of convenient and enjoyable beverages, foods, and snacks, serving customers and consumers in more than 200 countries and territories. 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 9,785 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 2015 63,056 28,731 34 325 24,613 1,359 8.353 1970) 59 7.442 1,941 5.501 49 5,452 110 8,553 2.174 6,379 SO 6.3295 51 $ 4,857 $ $ 3.40 S 3.18 S 4.39 $ 436 S 3.71 3.67 $ 1,425 1,438 3.1675$ 1,439 1,452 2.96 $ S 2.7625 Consolidated Statement of Comprehensive Income Pepsi
