Document/ExhibitDescriptionPagesSize 1: 10-Q Quarterly Report HTML 1.58M
2: EX-10.1 2024 Pepsico Annual Long-Term Incentive Award HTML 120K
4: EX-22 Subsidiary Issuer of Guaranteed Securities HTML 21K
3: EX-15 Letter Re: Unaudited Interim Financial Information HTML 27K
5: EX-31 Certifications of CEO and CFO Pursuant to Section HTML 31K
302
6: EX-32 Certifications of CEO and CFO Pursuant to Section HTML 25K
906
12: R1 Document and Entity Information HTML 109K
13: R2 Condensed Consolidated Statement of Income HTML 108K
14: R3 Condensed Consolidated Statement of Comprehensive HTML 61K
Income
15: R4 Condensed Consolidated Statement of Cash Flows HTML 138K
16: R5 Condensed Consolidated Balance Sheet HTML 161K
17: R6 Condensed Consolidated Balance Sheet HTML 32K
(Parenthetical)
18: R7 Condensed Consolidated Statement of Equity HTML 114K
19: R8 Basis of Presentation and Our Divisions HTML 79K
20: R9 Recently Issued Accounting Pronouncements (Notes) HTML 38K
21: R10 Restructuring and Impairment Charges HTML 95K
22: R11 Intangible Assets HTML 100K
23: R12 Income Taxes HTML 26K
24: R13 Share-Based Compensation HTML 49K
25: R14 Pension and Retiree Medical Benefits (Notes) HTML 60K
26: R15 Debt Obligations HTML 37K
27: R16 Financial Instruments HTML 126K
28: R17 Net Income Attributable to PepsiCo per Common HTML 43K
Share
29: R18 Accumulated Other Comprehensive Loss Attributable HTML 123K
to PepsiCo
30: R19 Supply Chain Financing HTML 23K
31: R20 Pay vs Performance Disclosure HTML 34K
32: R21 Insider Trading Arrangements HTML 23K
33: R22 Basis of Presentation and Our Divisions (Policies) HTML 24K
34: R23 Accounting Policies (Policies) HTML 28K
35: R24 Basis of Presentation and Our Divisions (Tables) HTML 74K
36: R25 Restructuring and Impairment Charges (Tables) HTML 97K
37: R26 Intangible Assets (Tables) HTML 103K
38: R27 Share-Based Compensation (Tables) HTML 52K
39: R28 Pension and Retiree Medical Benefits - Periodic HTML 57K
Benefit Cost (Tables)
40: R29 Debt Obligations (Tables) HTML 31K
41: R30 Financial Instruments (Tables) HTML 125K
42: R31 Net Income Attributable to PepsiCo per Common HTML 42K
Share (Tables)
43: R32 Accumulated Other Comprehensive Loss Attributable HTML 160K
to PepsiCo (Tables)
44: R33 Basis of Presentation and Our Divisions HTML 41K
(Narrative) (Details)
45: R34 Basis of Presentation and Our Divisions - Segment HTML 45K
Reporting Information by Net Revenue (Details)
46: R35 Basis of Presentation and Our Divisions - Segment HTML 39K
Reporting Information by % of Disaggregated Net
Revenue (Details)
47: R36 Basis of Presentation and Our Divisions - Segment HTML 50K
Reporting Information by Operating Profit
(Details)
48: R37 Restructuring and Impairment Charges - (Expected HTML 53K
Pre-Tax Charges for 2019 Productivity Plan)
(Details)
49: R38 Restructuring and Impairment Charges - (Summary of HTML 86K
2019 Productivity Plan Charges) (Details)
50: R39 Intangible Assets - Schedule of Finite-Lived HTML 40K
Intangible Assets (Detail)
51: R40 Intangible Assets - Schedule of Change in Book HTML 94K
Value of Indefinite-Lived Intangible Assets
(Detail)
52: R41 Income Taxes Narrative (Details) HTML 23K
53: R42 Share-Based Compensation - Weighted Average Black HTML 32K
Scholes Fair Value Assumptions (Detail)
54: R43 Share-Based Compensation - Additional Information HTML 55K
(Detail)
55: R44 Pension and Retiree Medical Benefits - Net HTML 57K
Periodic Benefit Cost (Details)
56: R45 Pension and Retiree Medical Benefits - Narrative HTML 35K
(Details)
57: R46 Debt Obligations - Summary of Senior Notes HTML 45K
(Detail)
58: R47 Debt Obligations - (Narrative) (Details) HTML 33K
59: R48 Financial Instruments - Celsius (Detail) HTML 32K
60: R49 Financial Instruments - Additional Information HTML 46K
(Detail)
61: R50 Financial Instruments - Notional Amounts of HTML 32K
Financial Instruments (Detail)
62: R51 Financial Instruments - Fair Values of Financial HTML 114K
Assets and Liabilities (Detail)
63: R52 Financial Instruments - Losses (Gains) On HTML 44K
Derivative Instruments - Cash-flow and Net
Investment Hedges (Detail)
64: R53 Financial Instruments - Losses (Gains) Recognized HTML 45K
in the Income Statement - Non-designated Hedges
(Detail)
65: R54 Net Income Attributable to PepsiCo per Common HTML 58K
Share - Basic And Diluted Net Income Per Common
Share (Detail)
66: R55 Accumulated Other Comprehensive Loss Attributable HTML 113K
to PepsiCo - Schedule of Accumulated Other
Comprehensive Loss (Detail)
67: R56 Accumulated Other Comprehensive Loss Attributable HTML 79K
to PepsiCo - Additional Information (Details)
68: R57 Supply Chain Financing (Details) HTML 23K
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(Exact Name of Registrant as Specified in its Charter)
iNorth Carolina
i13-1584302
(State
or Other Jurisdiction of Incorporation or Organization)
(I.R.S. Employer Identification No.)
i700 Anderson Hill Road, iPurchase,
iNew Yorki10577
(Address of principal executive offices and Zip Code)
(i914)
i253-2000
Registrant's telephone number, including area code
N/A
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
Title
of each class
Trading Symbols
Name of each exchange on which registered
iCommon Stock, par value 1-2/3 cents per share
iPEP
iThe
Nasdaq Stock Market LLC
i0.250% Senior Notes Due 2024
iPEP24
iThe
Nasdaq Stock Market LLC
i2.625% Senior Notes Due 2026
iPEP26
iThe
Nasdaq Stock Market LLC
i0.750% Senior Notes Due 2027
iPEP27
iThe
Nasdaq Stock Market LLC
i0.875% Senior Notes Due 2028
iPEP28
iThe
Nasdaq Stock Market LLC
i0.500% Senior Notes Due 2028
iPEP28A
iThe
Nasdaq Stock Market LLC
i3.200% Senior Notes Due 2029
iPEP29
iThe
Nasdaq Stock Market LLC
i1.125% Senior Notes Due 2031
iPEP31
iThe
Nasdaq Stock Market LLC
i0.400% Senior Notes Due 2032
iPEP32
iThe
Nasdaq Stock Market LLC
i0.750% Senior Notes Due 2033
iPEP33
iThe
Nasdaq Stock Market LLC
i3.550% Senior Notes Due 2034
iPEP34
iThe
Nasdaq Stock Market LLC
i0.875% Senior Notes Due 2039
iPEP39
iThe
Nasdaq Stock Market LLC
i1.050% Senior Notes Due 2050
iPEP50
iThe
Nasdaq Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. iYes ☒ No ¨
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). iYes ☒ No ¨
Indicate by check mark whether the registrant is a
large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,”“accelerated filer,”“smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
iLarge accelerated filer
☒
Accelerated
filer
☐
Non-accelerated filer
☐
Smaller reporting company
i☐
Emerging growth company
i☐
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes i☐ No ☒
Number
of shares of Common Stock outstanding as of April 16, 2024 was i1,374,785,980.
Accounts
and notes receivable, less allowance ($i180 and $i175, respectively)
i10,938
i10,815
Inventories:
Raw
materials and packaging
i2,465
i2,388
Work-in-process
i97
i104
Finished
goods
i3,007
i2,842
i5,569
i5,334
Prepaid
expenses and other current assets
i1,148
i798
Total
Current Assets
i26,005
i26,950
Property, plant and equipment
i54,510
i54,439
Accumulated
depreciation
(i27,718)
(i27,400)
Property,
Plant and Equipment, net
i26,792
i27,039
Amortizable
Intangible Assets, net
i1,173
i1,199
Goodwill
i17,646
i17,728
Other
Indefinite-Lived Intangible Assets
i13,680
i13,730
Investments
in Noncontrolled Affiliates
i2,734
i2,714
Deferred
Income Taxes
i4,444
i4,474
Other
Assets
i7,566
i6,661
Total Assets
$
i100,040
$
i100,495
LIABILITIES
AND EQUITY
Current Liabilities
Short-term debt obligations
$
i8,161
$
i6,510
Accounts
payable and other current liabilities
i22,073
i25,137
Total
Current Liabilities
i30,234
i31,647
Long-Term
Debt Obligations
i37,707
i37,595
Deferred
Income Taxes
i4,087
i3,895
Other
Liabilities
i8,822
i8,721
Total
Liabilities
i80,850
i81,858
Commitments and contingencies
PepsiCo
Common Shareholders’ Equity
Common stock, par value 12/3¢ per share (authorized i3,600 shares; issued, net of repurchased common stock at par value: i1,375
and i1,374 shares, respectively)
i23
i23
Capital
in excess of par value
i4,132
i4,261
Retained
earnings
i70,331
i70,035
Accumulated
other comprehensive loss
(i15,179)
(i15,534)
Repurchased
common stock, in excess of par value (i492 and i493 shares, respectively)
(i40,260)
(i40,282)
Total
PepsiCo Common Shareholders’ Equity
i19,047
i18,503
Noncontrolling
interests
i143
i134
Total Equity
i19,190
i18,637
Total
Liabilities and Equity
$
i100,040
$
i100,495
See
accompanying notes to the condensed consolidated financial statements.
Notes to the Condensed Consolidated Financial Statements
Note 1 - iBasis
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.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP) for interim financial information and with the rules and regulations for reporting the Quarterly Report on Form 10-Q (Form 10-Q). Accordingly, they do not include all of the information and footnotes required by GAAP for complete
financial statements. The condensed consolidated balance sheet at December 30, 2023 has been derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by GAAP for complete financial statements. These financial 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 30, 2023 (2023 Form 10-K). This report should be read in conjunction with our 2023 Form 10-K. In our opinion, these financial statements include all normal and recurring adjustments necessary for a fair presentation. The results for the 12 weeks ended March 23, 2024 are not necessarily indicative of the results expected for any future period or the full year.
Raw
materials, direct labor and plant overhead, as well as purchasing and receiving costs, costs directly related to production planning, inspection costs and raw materials handling facilities, are included in cost of sales. The costs of moving, storing and delivering finished product, including merchandising activities, are included in selling, general and administrative expenses.
iWhile our financial results in the United States and Canada (North America) are reported on a 12-week basis, all of our international operations are reported on a monthly calendar basis for which the months of January and February are reflected in our results for the 12 weeks endedMarch 23, 2024 and March 25, 2023.
The preparation of our condensed consolidated financial statements requires management to make estimates and assumptions that affect the amounts reported in our condensed consolidated financial statements and related disclosures. Additionally, the business and economic uncertainty resulting from volatile geopolitical conditions and the high interest rate and inflationary cost environment has made such estimates and assumptions more difficult to calculate. Accordingly, actual results and outcomes could differ from those estimates.
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.
Unless otherwise noted, 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. Certain reclassifications were made to the prior year’s financial statements to conform to the current year presentation.
Our Divisions
We are organized into iseven
reportable segments (also referred to as divisions), as follows:
1)Frito-Lay North America (FLNA), which includes our branded convenient food businesses in the United States and Canada;
2)Quaker Foods North America (QFNA), which includes our branded convenient food businesses, such as cereal, rice, pasta and other branded food, in the United States and Canada;
3)PepsiCo Beverages North America (PBNA), which includes our beverage businesses in
the United States and Canada;
4)Latin America (LatAm), which includes all of our beverage and convenient food businesses in Latin America;
5)Europe, which includes all of our beverage and convenient food businesses in Europe;
6)Africa, Middle East and South Asia (AMESA), which includes all of our beverage and convenient food businesses in Africa, the Middle East and South Asia; and
7)Asia Pacific, Australia and New Zealand and China region (APAC), which includes all of our beverage and convenient food businesses in Asia Pacific, Australia and New Zealand, and China region.
i
Net
revenue of each division is as follows:
12 Weeks Ended
3/23/2024
3/25/2023
FLNA
$
i5,676
$
i5,583
QFNA
i593
i777
PBNA
i5,874
i5,798
LatAm
i2,067
i1,777
Europe
i1,936
i1,886
AMESA
i1,040
i1,019
APAC
i1,064
i1,006
Total
$
i18,250
$
i17,846
/i
Our
primary performance obligation is the distribution and sales of beverage and convenient food products to our customers. The following table reflects the percentage of net revenue generated between our beverage business and our convenient food business for each of our international divisions, as well as our consolidated net revenue:
12 Weeks Ended
3/23/2024
3/25/2023
Beverages(a)
Convenient
Foods
Beverages(a)
Convenient Foods
LatAm
i9
%
i91
%
i9
%
i91
%
Europe
i45
%
i55
%
i46
%
i54
%
AMESA
i32
%
i68
%
i31
%
i69
%
APAC
i15
%
i85
%
i15
%
i85
%
PepsiCo
i41
%
i59
%
i41
%
i59
%
(a)Beverage
revenue from company-owned bottlers, which primarily includes our consolidated bottling operations in our PBNA and Europe divisions, was ii35/%
and ii36/% of our consolidated net revenue in the 12 weeks ended March 23,
2024 and March 25, 2023, respectively. Generally, our finished goods beverage operations produce higher net revenue but lower operating margin as compared to concentrate sold to authorized bottling partners for the manufacture of finished goods beverages.
Operating
profit/(loss) of each division is as follows:
12 Weeks Ended
3/23/2024
3/25/2023
FLNA
$
i1,554
$
i1,599
QFNA
(a)
(i49)
i188
PBNA
i510
i483
LatAm
i485
i364
Europe
i202
i71
AMESA
i152
i168
APAC
i233
i227
Total
divisions
i3,087
i3,100
Corporate
unallocated expenses
(i370)
(i471)
Total
$
i2,717
$
i2,629
(a)In
the 12 weeks ended March 23, 2024, operating loss included a pre-tax charge of $i167 million ($i128 million after-tax or $i0.09
per share) in cost of sales for property, plant and equipment write-offs, employee severance costs and other costs associated with a previously announced voluntary recall of certain bars and cereals in our QFNA division (Quaker Recall).
In September 2022, the Financial Accounting Standards Board (FASB) issued guidance to enhance the transparency of supplier finance programs to allow financial statement users to understand the effect on working capital, liquidity and cash flows. The new guidance requires disclosure of key terms of the program, including a description of the payment terms, payment timing and assets pledged as security or other forms of guarantees provided to the finance provider or intermediary. Other requirements include the disclosure of the amount that remains unpaid as of the end of the reporting period, a description of where these obligations are presented in the balance sheet and a rollforward
of the obligation during the annual period. We adopted the guidance in the first quarter of 2023, except for the rollforward, which is effective for the current fiscal year 2024. We will adopt the rollforward guidance when it becomes effective in our 2024 annual reporting, on a prospective basis. See Note 12 for disclosures currently required under this guidance.
Not Yet Adopted
In December 2023, the FASB issued guidance to enhance transparency of income tax disclosures. On an annual basis, the new guidance requires a public entity to disclose: (1) specific categories in the rate reconciliation, (2) additional information for reconciling items that are equal to or greater than 5% of the amount computed by multiplying income (or loss) from continuing operations before income tax expense (or benefit) by the applicable
statutory income tax rate, (3) income taxes paid (net of refunds received) disaggregated by federal (national), state, and foreign taxes, with foreign taxes disaggregated by individual jurisdictions in which income taxes paid is equal to or greater than 5% of total income taxes paid, (4) income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign, and (5) income tax expense (or benefit) from continuing operations disaggregated between federal (national), state and foreign. The guidance is effective for fiscal year 2025 annual reporting, with early adoption permitted, to be applied on a prospective basis, with retrospective application permitted. We will adopt the guidance when it becomes effective, in our 2025 annual reporting, on a prospective basis.
In November 2023, the FASB issued guidance to enhance disclosure of expenses of a public entity’s reportable segments. The new guidance requires a public entity to disclose: (1) on an annual and interim basis, significant segment expenses that are regularly provided to the chief operating decision maker (CODM) and included within each reported measure of segment profit or loss, (2) on an annual and interim basis, an amount for other segment items (the difference between segment revenue less the significant expenses disclosed under the significant expense principle and each reported measure of segment profit or loss), including a description of its composition, (3) on an annual and interim basis, information about a reportable segment’s profit or loss and assets previously required to be disclosed only on an annual basis, and (4) the title and position
of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and how to allocate resources. The new guidance also clarifies that if the CODM uses more than one measure of a segment’s profit or loss, one or more of those measures may be reported and requires that a public entity that has a single reportable segment provide all the disclosures required by the amendments in this update and all existing segment disclosures. The guidance is effective for the current fiscal year 2024 annual reporting, and in the first quarter of 2025 for interim period reporting, with early adoption permitted. Upon adoption, this guidance should be applied retrospectively to all prior periods presented. We will adopt the guidance when it becomes effective in our 2024 annual reporting.
Note
3 - iiRestructuring and Impairment Charges/
2019
Multi-Year Productivity Plan
We publicly announced a multi-year productivity plan on February 15, 2019 (2019 Productivity Plan) that leverages new technology and business models to further simplify, harmonize and automate processes; re-engineer our go-to-market and information systems, including deploying the right automation for each market; and simplify our organization and optimize our manufacturing and supply chain footprint. To build on the successful implementation of the 2019 Productivity Plan, in 2022, we expanded and extended the plan through the end of 2028 to take advantage of additional opportunities within the initiatives described above. As a result, we expect to incur pre-tax charges of approximately $i3.65 billion,
including cash expenditures of approximately $i2.9 billion. These pre-tax charges are expected to consist of approximately i55% of severance and other employee-related costs, i10%
for asset impairments (all non-cash) resulting from plant closures and related actions, and i35% for other costs associated with the implementation of our initiatives.
The total plan pre-tax charges are expected to be incurred by division approximately as follows:
FLNA
QFNA
PBNA
LatAm
Europe
AMESA
APAC
Corporate
Expected
pre-tax charges
i10
%
i1
%
i30
%
i10
%
i25
%
i5
%
i4
%
i15
%
A
summary of our 2019 Productivity Plan charges is as follows:
12 Weeks Ended
3/23/2024
3/25/2023
Cost of sales
$
i6
$
i3
Selling,
general and administrative expenses
i83
i110
Other
pension and retiree medical benefits expense/(income) (a)
i7
(i1)
Total
restructuring and impairment charges
$
i96
$
i112
After-tax
amount
$
i76
$
i98
Impact
on net income attributable to PepsiCo per common share
Other
pension and retiree medical benefits expense/(income) (a)
i7
(i1)
i104
Total
$
i96
$
i112
$
i1,996
(a)Income
amount represents adjustments for changes in estimates of previously recorded amounts.
12 Weeks Ended
Plan to Date
3/23/2024
3/25/2023
through
3/23/2024
Severance and other employee costs
$
i72
$
i92
$
i1,122
Asset
impairments
i1
i—
i193
Other costs
i23
i20
i681
Total
$
i96
$
i112
$
i1,996
Severanceand other employee costs primarily include severance and other termination benefits, as well as voluntary separation arrangements. Other costs primarily include costs associated with the implementation of our initiatives, including contract termination costs, consulting and other professional fees.
A summary of our 2019 Productivity Plan activity for the 12 weeks ended March 23, 2024 is as follows:
Numerous countries have agreed to a statement in support of the Organization for Economic Co-operation and Development (OECD) model rules that propose a global minimum tax rate of i15%.
Certain countries have enacted legislation incorporating the agreed global minimum tax effective in 2024. Legislation enacted as of March 23, 2024 did not have a material impact on our financial statements for the 12 weeks ended March 23, 2024 and is not expected to have a material impact on our 2024 financial statements.
Note 6 - iShare-Based
Compensation
i
The following table summarizes our total share-based compensation expense, which is primarily recorded in selling, general and administrative expenses:
The
following table summarizes share-based awards granted under the terms of the PepsiCo, Inc. Long-Term Incentive Plan:
12 Weeks Ended
3/23/2024
3/25/2023
Granted(a)
Weighted-Average
Grant Price
Granted(a)
Weighted-Average Grant Price
Stock options
i1.8
$
i164.25
i2.0
$
i171.00
RSUs
and PSUs
i2.3
$
i164.25
i2.1
$
i171.00
/
(a)In
millions. All grant activity is disclosed at target.
We granted long-term cash awards to certain executive officers and other senior executives with an aggregate target value of $ii19/
million for both the 12 weeks ended March 23, 2024 and March 25, 2023.
i
Our weighted-average Black-Scholes fair value assumptions are as follows:
The components of net periodic benefit cost/(income) for pension and retiree
medical plans are as follows:
12 Weeks Ended
Pension
Retiree
Medical
U.S.
International
3/23/2024
3/25/2023
3/23/2024
3/25/2023
3/23/2024
3/25/2023
Service cost
$
i80
$
i76
$
i9
$
i8
$
i7
$
i6
Other
pension and retiree medical benefits income:
Interest cost
i135
i137
i27
i25
i7
i8
Expected
return on plan assets
(i201)
(i197)
(i39)
(i35)
(i3)
(i3)
Amortization
of prior service credits
(i6)
(i6)
i—
i—
(i1)
(i1)
Amortization
of net losses/(gains)
i18
i16
i4
i2
(i6)
(i6)
Special
termination benefits
i7
(i1)
i—
i—
i—
i—
Total
other pension and retiree medical benefits income
(i47)
(i51)
(i8)
(i8)
(i3)
(i2)
Total
$
i33
$
i25
$
i1
$
i—
$
i4
$
i4
/
We
regularly evaluate opportunities to reduce risk and volatility associated with our pension and retiree medical plans.
In the 12 weeks ended March 23, 2024 and March 25, 2023, we made discretionary contributions of $i150 million and $i125
million, respectively, to our U.S. qualified defined benefit plans, and $i27 million and $i17 million, respectively, to our international defined benefit plans.
Note
8 - iDebt Obligations
i
In the 12 weeks ended March 23, 2024, we issued, through our wholly-owned consolidated finance subsidiary, PepsiCo Singapore Financing I Pte. Ltd., the following notes:(a)
Interest
Rate
Maturity Date
Principal Amount(b)
Floating rate
February 2027
$
i300
i4.650
%
February
2027
$
i550
i4.550
%
February
2029
$
i450
i4.700
%
February
2034
$
i450
(a)PepsiCo Singapore Financing I Pte. Ltd. is a finance subsidiary and has no assets, operations, revenues or cash flows other than those related to the issuance, administration and repayment of the notes and any other notes that may be issued in the future. The notes are fully and unconditionally guaranteed by PepsiCo, Inc. on a senior unsecured basis and may be assumed at any time by PepsiCo, Inc. as
the primary and sole obligor.
(b)Excludes debt issuance costs, discounts and premiums.
/
The net proceeds from the issuances of the above notes were used for general corporate purposes, including the repayment of commercial paper.
In the 12 weeks ended March 23, 2024, $i1.3 billion
of U.S. dollar-denominated senior notes matured and were paid.
As of March 23, 2024, we had $i3.6 billion of commercial paper outstanding, excluding discounts.
We are exposed to market risks arising from adverse changes in:
•commodity prices, affecting the cost of our raw materials and energy;
•foreign exchange rates and currency restrictions; and
•interest rates.
There have been no material changes during the 12 weeks ended March 23, 2024 with
respect to our risk management policies or strategies and valuation techniques used in measuring the fair value of the financial assets or liabilities disclosed in Note 9 to our consolidated financial statements in our 2023 Form 10-K.
Certain of our agreements with our counterparties require us to post full collateral on derivative instruments in a net liability position if our credit rating is at A2 (Moody’s Investors Service, Inc.) or A (S&P Global Ratings) and we have been placed on credit watch for possible downgrade or if our credit rating falls below either of these levels. The fair value of all derivative instruments with credit-risk-related contingent features that were in a net liability position as of March 23, 2024 was $i178
million. We have posted ino collateral under these contracts and ino credit-risk-related contingent features were triggered
as of March 23, 2024.
i
The notional amounts of our financial instruments used to hedge the above risks as of March 23, 2024 and December 30, 2023 are as follows:
Notional
Amounts(a)
3/23/2024
12/30/2023
Commodity
$
i1.5
$
i1.7
Foreign
exchange
$
i3.9
$
i3.8
Interest
rate
$
i1.3
$
i1.3
Net
investment (b)
$
i3.0
$
i3.0
(a)In
billions.
(b)The total notional amount of our net investment hedges consists of non-derivative debt instruments.
/
As of March 23, 2024, approximately i12% of total debt, after the impact of the related interest rate derivative instruments, was subject to variable
rates, compared to i9% as of December 30, 2023.
Debt Securities
Held-to-Maturity
As of March 23, 2024, we had ino
investments in held-to-maturity debt securities. As of December 30, 2023, we had $i309 million of investments in commercial paper held-to-maturity debt securities recorded in cash and cash equivalents. Held-to-maturity debt securities are recorded at amortized cost, which approximates fair value, and realized gains or losses are reported in earnings. As of December 30, 2023, gross unrecognized gains and losses and the allowance for expected credit losses were iinot
material/.
Available-for-Sale
There were iino/
impairment charges related to investments in available-for-sale debt securities in both the 12 weeks ended March 23, 2024 and March 25, 2023. Related to our Level 3 (significant unobservable inputs) investment in Celsius Holdings, Inc. (Celsius), we recorded an unrealized gain of $i691 million in other comprehensive income during the 12 weeks ended March 23,
2024. There were ino Level 3 investments during the 12 weeks ended March 25, 2023.
Derivatives
designated as cash flow hedging instruments:
Foreign exchange (f)
2
$
i9
$
i16
$
i3
$
i31
Interest
rate (f)
2
i—
i155
i5
i135
Commodity
(g)
2
i4
i26
i10
i24
$
i13
$
i197
$
i18
$
i190
Derivatives
not designated as hedging instruments:
Foreign exchange (f)
2
$
i8
$
i17
$
i33
$
i38
Commodity
(g)
2
i7
i7
i5
i13
$
i15
$
i24
$
i38
$
i51
Total
derivatives at fair value (h)
$
i28
$
i221
$
i56
$
i241
Total
$
i2,371
$
i712
$
i1,695
$
i718
(a)Fair
value hierarchy levels are categorized consistently by Level 1 (quoted prices in active markets for identical assets), Level 2 (significant other observable inputs) and Level 3 in both years. Unless otherwise noted, financial assets are classified on our balance sheet within prepaid expenses and other current assets and other assets. Financial liabilities are classified on our balance sheet within accounts payable and other current liabilities and other liabilities.
(b)Includes Level 2 assets of $i180 million
and Level 3 assets of $i1,847 million as of March 23, 2024, and Level 2 assets of $i178 million and Level 3 assets
of $i1,156 million as of December 30, 2023. As of March 23, 2024 and December 30, 2023, $i2,027 million
and $i1,334 million were classified as other assets, respectively. The fair values of our Level 2 investments approximate the transaction price and any accrued returns, as well as the amortized cost. The fair value of our Level 3 investment in Celsius is estimated using probability-weighted discounted future cash flows based on a Monte Carlo simulation using significant unobservable inputs such as an i80%
probability that a certain market-based condition will be met and an average estimated discount rate of i8.1% based on Celsius’ estimated synthetic credit rating. An increase in the probability that certain market-based conditions will be met or a decrease in the discount rate would result in a higher fair value measurement, while a decrease in the probability that certain market-based conditions will be met or an increase in the discount rate would result in a lower fair value measurement.
(c)Based
on the price of index funds. These investments are classified as short-term investments and are used to manage a portion of market risk arising from our deferred compensation liability.
(d)Based primarily on the price of our common stock.
(e)Based on the fair value of investments corresponding to employees’ investment elections.
(f)Based on recently reported market transactions of spot and forward rates.
(g)Primarily based on recently reported market transactions of swap arrangements.
(h)Derivative assets and liabilities are presented on a gross basis on our balance sheet. Amounts subject to enforceable master netting arrangements
or similar agreements which are not offset on our balance sheet as of March 23, 2024 and December 30, 2023 were iinot
material/. Collateral received or posted against our asset or liability positions was inot material. Exchange-traded commodity futures are cash-settled on a daily basis and, therefore, not included in the table.
/
The
carrying amounts of our cash and cash equivalents and short-term investments recorded at amortized cost approximate fair value (classified as Level 2 in the fair value hierarchy) due to their short-term maturity. The fair value of our debt obligations as of March 23, 2024and December 30, 2023 was $i42 billion and $i41
billion, respectively, based upon prices of identical or similar instruments in the marketplace, which are considered Level 2 inputs.
Losses/(gains) on our cash flow and net investment
hedges are categorized as follows:
12 Weeks Ended
Losses/(Gains) Recognized
in Accumulated Other Comprehensive Loss
Losses/(Gains)
Reclassified from
Accumulated Other
Comprehensive Loss
into Income Statement(a)
3/23/2024
3/25/2023
3/23/2024
3/25/2023
Foreign
exchange
$
(i14)
$
i16
$
i9
$
i1
Interest
rate
i25
i11
i24
i3
Commodity
i39
i65
i21
i9
Net
investment
(i52)
i37
i—
i—
Total
$
(i2)
$
i129
$
i54
$
i13
(a)Foreign
exchange derivative losses/(gains) are included in net revenue and cost of sales. Interest rate derivative losses/(gains) are included in selling, general and administrative expenses. Commodity derivative losses/(gains) are included in either cost of sales or selling, general and administrative expenses, depending on the underlying commodity. See Note 11 for further information.
/
Based on current market conditions, we expect to reclassify net losses of $i107
million related to our cash flow hedges from accumulated other comprehensive loss within common shareholders’ equity into net income during the next 12 months.
Losses/(gains) recognized in the income statement related to our non-designated hedges are categorized as follows:
12
Weeks Ended
3/23/2024
3/25/2023
Cost of sales
Selling, general and administrative expenses
Total
Cost of sales
Selling, general and administrative expenses
Total
Foreign exchange
$
i—
$
i18
$
i18
$
(i1)
$
(i5)
$
(i6)
Commodity
(i1)
(i25)
(i26)
i31
i50
i81
Total
$
(i1)
$
(i7)
$
(i8)
$
i30
$
i45
$
i75
Note
10 - iNet Income Attributable to PepsiCo per Common Share
i
The computations of basic and diluted net income attributable to PepsiCo per common share are as follows:
12
Weeks Ended
3/23/2024
3/25/2023
Income
Shares(a)
Income
Shares(a)
Basic
net income attributable to PepsiCo per common share
$
i1.49
$
i1.40
Net
income available for PepsiCo common shareholders
$
i2,042
i1,375
$
i1,932
i1,378
Dilutive
securities:
Stock options, RSUs, PSUs and other (b)
i—
i5
i—
i6
Diluted
$
i2,042
i1,380
$
i1,932
i1,384
Diluted
net income attributable to PepsiCo per common share
$
i1.48
$
i1.40
(a)Weighted-average
common shares outstanding (in millions).
(b)The dilutive effect of these securities is calculated using the treasury stock method.
The weighted-average amount of antidilutive securities excluded from the calculation of diluted earnings per common share was i5 million
and i3 million for the 12 weeks ended March 23, 2024 and March 25, 2023, respectively.
Note 11 - iiAccumulated
Other Comprehensive Loss Attributable to PepsiCo/
The changes in the balances of each component of accumulated other comprehensive loss attributable to PepsiCo are as follows:
Currency
Translation Adjustment
Cash Flow Hedges
Pension and Retiree Medical
Available-for-sale debt securities and other(a)
Accumulated Other Comprehensive Loss Attributable to PepsiCo
(a)The
changes primarily represent fair value increases in available-for-sale debt securities, including our investment in Celsius convertible preferred stock. See Note 9 for further information.
(b)Pension and retiree medical amounts are net of taxes of $i1,282 million as of December 30, 2023 and $i1,280 million
as of March 23, 2024.
(c)Currency translation adjustment primarily reflects depreciation of the South African rand, Canadian dollar and Russian ruble.
Currency
Translation Adjustment
Cash Flow Hedges
Pension and Retiree Medical
Available-for-sale debt securities and other
Accumulated Other Comprehensive Loss Attributable to PepsiCo
We maintain voluntary supply chain finance agreements with several participating global financial institutions. Under these agreements, our suppliers, at their sole discretion, may elect to sell their accounts receivable with PepsiCo to these participating global financial institutions. As of March 23, 2024 and December 30, 2023, $i1.6 billion
and $i1.7 billion, respectively, of our accounts payable are to suppliers participating in these financing arrangements. For further information on the key terms of these supply chain financing programs, see Note 14 to our consolidated financial statements in our 2023 Form 10-K.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
FINANCIAL
REVIEW
Our discussion and analysis is intended to help the reader understand our results of operations and financial condition and is provided as an addition to, and should be read in connection with, our condensed consolidated financial statements and the accompanying notes. Unless otherwise noted, tabular dollars are presented in millions, except per share amounts. All per share amounts reflect common stock per share amounts, assume dilution unless otherwise noted, and are based on unrounded amounts. Percentage changes are based on unrounded amounts.
The critical accounting policies and estimates below should be read in conjunction with those outlined in our 2023 Form 10-K.
Total Marketplace Spending
We offer sales incentives and discounts through various programs to customers and consumers. Total marketplace spending includes sales incentives, discounts, advertising and other marketing activities. Sales incentives and discounts are primarily accounted for as a reduction of revenue. A number of our sales incentives, such as bottler funding to independent bottlers and customer volume rebates, are based on annual targets, and accruals are established during the year, as products are delivered, for the expected payout, which may occur after year end once reconciled and settled.
These accruals are
based on contract terms and our historical experience with similar programs and require management judgment with respect to estimating customer and consumer participation and performance levels. Differences between estimated expense and actual incentive costs are normally insignificant and are recognized in earnings in the period such differences are determined. In addition, certain advertising and marketing costs are also based on annual targets and recognized during the year as incurred.
For interim reporting, our policy is to allocate our forecasted full-year sales incentives for most of our programs to each of our interim reporting periods in the same year that benefits from the programs. The allocation methodology is based on our forecasted sales incentives for the full year and the proportion of each interim period’s actual gross
revenue or volume, as applicable, to our forecasted annual gross revenue or volume, as applicable. Based on our review of the forecasts at each interim period, any changes in estimates and the related allocation of sales incentives are recognized beginning in the interim period that they are identified. In addition, we apply a similar allocation methodology for interim reporting purposes for certain advertising and other marketing activities.
Income Taxes
In determining our quarterly provision for income taxes, we use an estimated annual effective tax rate which is based on our expected annual income, statutory tax rates and tax structure and transactions, including transfer pricing arrangements, available to us in the various jurisdictions in which we operate. Significant judgment is required in determining our annual tax rate and in evaluating our tax positions. Subsequent recognition,
derecognition and measurement of a tax position taken in a previous period are separately recognized in the quarter in which they occur.
Our Business Risks
This Form 10-Q contains statements reflecting our views about our future performance that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (Reform Act). Statements that constitute forward-looking statements within the meaning of the Reform Act are generally identified through the inclusion of words such as “aim,”“anticipate,”“believe,”“drive,”“estimate,”“expect,”“expressed confidence,”“forecast,”“future,”“goal,”“guidance,”“intend,”“may,”“objective,”“outlook,”“plan,”“position,”“potential,”“project,”“seek,”“should,”“strategy,”“target,”“will” or similar statements or variations of such words and other similar expressions. All statements addressing our future operating performance, and statements addressing events and developments that we expect or anticipate will occur in the future, are forward-looking statements within the meaning of the Reform Act. These forward-looking statements are based on currently available information, operating plans and projections about future events and trends. They inherently involve risks and uncertainties that could cause actual results to differ materially from those predicted in any such forward-looking statement. Such risks and uncertainties include, but are not limited
to: the risks associated with the deadly conflict in Ukraine; future demand for PepsiCo’s products; damage to PepsiCo’s reputation or brand image; product recalls or other issues or concerns with respect to product quality and safety; PepsiCo’s ability to compete effectively; PepsiCo’s ability to attract, develop and maintain a highly skilled and diverse workforce or effectively manage changes in our workforce; water scarcity; changes in the retail landscape or in sales to any key customer; disruption of PepsiCo’s manufacturing operations or supply chain, including continued increased commodity, packaging, transportation, labor and other input costs; political, social or geopolitical conditions in the markets where PepsiCo’s products are made, manufactured, distributed or sold; PepsiCo’s ability to grow its business in developing and emerging markets;
changes in economic conditions in the countries in which PepsiCo operates; future cyber incidents and other disruptions to our information systems; failure to successfully complete or manage strategic transactions; PepsiCo’s reliance on third-party service providers and enterprise-wide systems; climate change or measures to address climate change and other sustainability matters; strikes or work stoppages; failure to realize benefits from PepsiCo’s productivity initiatives; deterioration in estimates and underlying assumptions regarding future performance of our business or investments that can result in impairment charges; fluctuations or other changes in exchange rates; any downgrade or potential downgrade of PepsiCo’s credit ratings; imposition or proposed imposition of new or increased taxes aimed at PepsiCo’s products; imposition of limitations on the marketing or sale of PepsiCo’s products; changes in laws and regulations related to the use or disposal of plastics
or other packaging materials; failure to comply with personal data protection and privacy laws; increase in income tax rates, changes in income tax laws or disagreements with tax authorities; failure to adequately protect PepsiCo’s intellectual property rights or infringement on intellectual property rights of others; failure to comply with applicable laws and regulations; potential liabilities and costs from litigation, claims, legal or regulatory proceedings, inquiries or investigations; and other risks and uncertainties including those described in “Item 1A. Risk Factors” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Our Business Risks,” included in our 2023 Form 10-K and in “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Our Business Risks” of this
Form 10-Q. Investors are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date they are made. We undertake no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise.
Risks Associated with Commodities and Our Supply Chain
During the 12 weeks ended March 23, 2024, we continued to experience higher operating costs, including on transportation and labor costs, which may continue for the remainder of 2024. Many of the commodities used in the production and transportation of our products are purchased in the open market. The prices we pay for such items are subject to fluctuation, and we manage this risk through the use of
fixed-price contracts and purchase orders, pricing agreements and derivative instruments, including swaps and futures. A number of external factors, including the ongoing conflict in Ukraine, the inflationary cost environment, adverse weather conditions, supply chain disruptions and labor shortages, have impacted and may continue to impact transportation and labor costs. When prices increase, we may or may not pass on such increases to our customers without suffering reduced volume, revenue, margins and operating results.
See Note9 to our condensed consolidated financial statements in this Form 10-Q and Note 9 to our consolidated financial statements in our 2023 Form 10-K for further information on how we manage our exposure to commodity prices.
Risks
Associated with Climate Change
Certain jurisdictions in which our products are made, manufactured, distributed or sold have either imposed, or are considering imposing, new or increased legal and regulatory requirements to reduce or mitigate the potential effects of climate change, including regulation of greenhouse gas emissions and
potential carbon pricing programs. These new or increased legal or regulatory requirements, along with initiatives to meet our sustainability goals, could result in significant increased costs and additional investments in facilities
and equipment. However, we are unable to predict the scope, nature and timing of any new or increased environmental laws and regulations and therefore cannot predict the ultimate impact of such laws and regulations on our business or financial results. We continue to monitor existing and proposed laws and regulations in the jurisdictions in which our products are made, manufactured, distributed and sold and to consider actions we may take to potentially mitigate the unfavorable impact, if any, of such laws or regulations.
Risks Associated with International Operations
In the 12 weeks ended March 23, 2024, our financial results outside of North America reflect the months of January and February. In the 12 weeks ended March 23, 2024, our operations outside of the United States generated
38% of our consolidated net revenue, with Mexico, Canada, China, Russia, Brazil, the United Kingdom and South Africa comprising approximately 23% of our consolidated net revenue. As a result, we are exposed to foreign exchange risk in the international markets in which our products are made, manufactured, distributed or sold. In the 12 weeks endedMarch 23, 2024, unfavorable foreign exchange reduced net revenue growth by 0.5 percentage points primarily due to declines in the Russian ruble and Chinese yuan, partially offset by an appreciation of the Mexican peso. Currency declines against the U.S. dollar which are not offset could adversely impact our future financial results.
In addition, volatile economic, political, social and geopolitical conditions, civil unrest and wars and other military conflicts,
acts of terrorism and natural disasters and other catastrophic events in certain markets in which our products are made, manufactured, distributed or sold, including in Argentina, Brazil, China, Mexico, the Middle East, Pakistan, Russia, Turkey and Ukraine, continue to result in challenging operating environments and have resulted in and could continue to result in changes in how we operate in certain of these markets. Debt and credit issues, currency controls or fluctuations in certain of these international markets (including restrictions on the transfer of funds to and from certain markets), as well as the threat or imposition of new or expanded tariffs, sanctions or export controls have also continued to impact our operations in certain of these international markets. We continue to closely monitor the economic, operating and political environment in the markets in which we operate, including risks of additional impairments or write-offs and currency devaluation,
and to identify actions to potentially mitigate any unfavorable impacts on our future results.
See Note9 to our condensed consolidated financial statements in this Form 10-Q for the fair values of our financial instruments as of March 23, 2024 and December 30, 2023 and Note 9 to our consolidated financial statements in our 2023 Form 10-K for a discussion of these items.
Imposition of Taxes and Regulations on our Products
Certain jurisdictions in which our products are made, manufactured, distributed or sold have either imposed, or are considering imposing, new or increased taxes or regulations on the manufacture, distribution or sale of our products or their packaging, ingredients or substances
contained in, or attributes of, our products or their packaging, commodities used in the production of our products or their packaging or the recyclability or recoverability of our packaging. These taxes and regulations vary in scope and form. For example, some taxes apply to all beverages, including non-caloric beverages, while others apply only to beverages with a caloric sweetener (e.g., sugar). Further, some regulations apply to all products using certain types of packaging (e.g., plastic), while others are designed to increase the sustainability of packaging, encourage waste reduction and increased recycling rates or facilitate the waste management process or restrict the sale of products in certain packaging.
We sell a wide variety of beverages and convenient foods in more than 200 countries and territories and the profile of the products we sell, the amount of revenue attributable to such products and the type of
packaging used vary by jurisdiction. Because of this, we cannot predict the scope or form potential taxes, regulations or other limitations on our products or their packaging may take, and therefore cannot predict the impact of such taxes, regulations or limitations on our financial results. In addition, taxes, regulations and limitations may impact us and our competitors differently. We continue to monitor existing and proposed taxes and regulations in the jurisdictions in which our products are made, manufactured, distributed and sold and to consider actions we may take to potentially mitigate the unfavorable impact, if any, of such taxes, regulations or limitations, including advocating alternative measures with respect to the imposition, form and scope of any such taxes, regulations or limitations.
OECD
Global Minimum Tax
Numerous countries have agreed to a statement in support of the OECD model rules that propose a global minimum tax rate of 15%. Certain countries have enacted legislation incorporating the agreed global minimum tax effective in 2024. Legislation enacted as of March 23, 2024 is not expected to have a material impact on our 2024 financial statements. More countries are expected to enact similar legislation, with widespread implementation of a global minimum tax by 2025. As legislation becomes effective in more countries in which we do business, our taxes could increase and negatively impact our provision for income taxes. We will continue to monitor pending legislation and implementation by countries and evaluate the potential impact on our business in future periods.
Retail
Landscape
Our industry continues to be affected by disruption of the retail landscape, including the continued growth in sales through e-commerce websites and mobile commerce applications, including through subscription services, the integration of physical and digital operations among retailers and the international expansion of hard discounters. We have seen and expect to continue to see a further shift to e-commerce, online-to-offline and other online purchasing by consumers. We continue to monitor changes in the retail landscape and seek to identify actions we may take to build our global e-commerce and digital capabilities, such as expanding our direct-to-consumer business, and distribute our products effectively through all existing and emerging channels of trade and potentially mitigate any unfavorable
impacts on our future results.
The retail industry also continues to be impacted by the actions and increasing power of retailers, including as a result consolidation of ownership resulting in large retailers or buying groups with increased purchasing power, particularly in North America, Europe and Latin America. We have seen and expect to continue to see retailers and buying groups impact our ability to compete in these jurisdictions. We continue to monitor our relationships with retailers and buying groups and seek to identify actions we may take to maintain mutually beneficial relationships and resolve any significant disputes and potentially mitigate any unfavorable impacts on our future results.
Cautionary statements included above and in “Item 1A. Risk Factors” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Our
Business Risks” in our 2023 Form 10-K should be considered when evaluating our trends and future results.
Results of Operations – Consolidated Review
Consolidated Results
Volume
Physical or unit volume is one of the key metrics management uses internally to make operating and strategic decisions, including the preparation of our annual operating plan and the evaluation of our business performance. We believe volume provides additional information to facilitate the comparison of our historical operating performance and underlying trends and provides additional transparency on how we evaluate our business because it measures demand for our products at the consumer level.
See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Our Financial
Results – Volume” included in our 2023 Form 10-K for further information on volume. Unit volume growth adjusts for the impacts of acquisitions and divestitures. Acquisitions and divestitures, when used in this report, reflect mergers and acquisitions activity, as well as divestitures and other structural changes, including changes in ownership or control in consolidated subsidiaries and nonconsolidated
equity investees. Further, unit volume growth excludes the impact of an additional week of results every five or six years (53rd reporting week), where applicable.
We report all of our international operations on a monthly calendar basis. The 12 weeks ended March 23, 2024 and March 25, 2023 include volume outside of North America for the months of January and February.
Consolidated Net Revenue and Operating Profit
12
Weeks Ended
3/23/2024
3/25/2023
Change
Net revenue
$
18,250
$
17,846
2
%
Operating
profit
$
2,717
$
2,629
3
%
Operating margin
14.9
%
14.7
%
0.2
See
“Results of Operations – Division Review” for a tabular presentation and discussion of key drivers of net revenue.
Operating profit grew 3% and operating margin improved 0.2 percentage points. Operating profit growth was primarily driven by effective net pricing and productivity savings. These impacts were partially offset by certain operating cost increases, a decline in organic volume and a 5-percentage-point impact of charges associated with the Quaker Recall. Corporate unallocated expenses reflect a 3-percentage-point favorable impact of net mark-to-market gains on commodity derivatives.
Other Consolidated Results
12
Weeks Ended
3/23/2024
3/25/2023
Change
Other pension and retiree medical benefits income
$
58
$
61
$
(3)
Net
interest expense and other
$
202
$
200
$
2
Tax rate
20.2
%
21.9
%
Net
income attributable to PepsiCo
$
2,042
$
1,932
6
%
Net income attributable to PepsiCo per common share – diluted
$
1.48
$
1.40
6
%
Other
pension and retiree medical benefits income decreased $3 million, primarily reflecting the recognition of special termination benefits due to restructuring actions as part of our 2019 Productivity Plan, partially offset by the recognition of gains on plan assets and impact of discretionary plan contributions.
Net interest expense and other increased $2 million, primarily due to higher interest rates on debt and higher average debt balances, partially offset by higher average cash balances, higher gains on the market value of investments used to economically hedge a portion of our deferred compensation liability and higher interest rates on average cash balances.
The reported tax rate decreased 1.7 percentage points, primarily reflecting the favorable impact of reserves for international unrecognized tax benefits recorded in the prior year.
While our financial results in North America are reported on a 12-week basis, all of our international operations are reported on a monthly calendar basis for which the months of January and February are reflected in our results for the 12 weeks ended March 23, 2024 and March 25, 2023.
In the discussions of net revenue and operating profit below, “effective net pricing” reflects the year-over-year impact of discrete pricing actions, sales incentive activities and mix resulting from selling varying products in different package sizes and in different countries.
See “Our
Business Risks,”“Non-GAAP Measures” and “Items Affecting Comparability” for a discussion of items to consider when evaluating our results and related information regarding measures not in accordance with GAAP.
Net Revenue and Organic Revenue Growth
Organic revenue growth is a non-GAAP financial measure. For further information on this measure, see “Non-GAAP Measures.”
12
Weeks Ended 3/23/2024
Impact of
Impact of
Reported % Change, GAAP Measure
Foreign exchange translation
Acquisitions and divestitures
Organic
% Change, Non-GAAP
Measure(a)
Organic volume(b)
Effective net pricing
FLNA
2
%
—
—
2
%
(2)
3
QFNA
(c)
(24)
%
—
—
(24)
%
(22)
(2)
PBNA
1
%
—
—
1
%
(5)
6
LatAm
16
%
(8)
—
8
%
(1)
9
Europe
3
%
7
—
10
%
3
7
AMESA
2
%
4
—
7
%
5
2
APAC
6
%
5
—
11
%
12
(1)
Total
2
%
0.5
—
3
%
(2)
5
(a)Amounts
may not sum due to rounding.
(b)Excludes the impact of acquisitions and divestitures. In certain instances, the impact of organic volume on net revenue growth differs from the unit volume change disclosed in the following divisional discussions due to the impacts of product mix, nonconsolidated joint venture volume, and, for our franchise-owned beverage businesses, temporary timing differences between bottler case sales and concentrate shipments and equivalents (CSE). We report net revenue from our franchise-owned beverage businesses based on CSE. The volume sold by our nonconsolidated joint ventures has no direct impact on our net revenue.
(c)Net revenue decline was impacted by the Quaker Recall.
Operating
Profit/(Loss), Operating Profit/(Loss) Adjusted for Items Affecting Comparability and Operating Profit Performance Adjusted for Items Affecting Comparability on a Constant Currency Basis
Operating profit/(loss) adjusted for items affecting comparability and operating profit growth adjusted for items affecting comparability on a constant currency basis are both non-GAAP financial measures. For further information on these measures, see “Non-GAAP Measures” and “Items Affecting Comparability.”
Net revenue grew 2%, primarily driven by effective net pricing, partially offset by a decrease in organic volume.
Unit volume decreased 2%, primarily driven by mid-single-digit declines in trademark Lay’s and trademark
Tostitos, partially offset by mid-single-digit growth in trademark Doritos.
Operating profit decreased 3%, primarily reflecting certain operating cost increases, including strategic initiatives, and the decrease in organic volume. These impacts were partially offset by the effective net pricing and productivity savings.
PBNA
Net revenue increased 1%, primarily driven by effective net pricing, partially offset by a decrease in organic volume.
Unit volume decreased 5%, driven by a 7% decrease in non-carbonated beverage (NCB) volume and a 3% decrease in carbonated soft drink (CSD) volume. The NCB volume decrease primarily reflected a double-digit decrease in Gatorade sports
drinks, a high-single-digit decrease in our overall water portfolio and a mid-single-digit decrease in Lipton ready-to-drink teas, partially offset by a double-digit increase in our energy portfolio.
Operating profit increased 5.5%, primarily driven by the effective net pricing, productivity savings and a 10-percentage-point impact of unfavorable insurance adjustments in the prior year. These impacts were partially offset by certain operating cost increases, the decrease in organic volume and a 7-percentage-point impact of higher commodity costs.
QFNA
Net revenue declined 24%, driven by a decrease in organic volume and unfavorable net pricing, both of which were negatively impacted by the loss of sales from products
included in the Quaker Recall.
Unit volume declined 22%, primarily driven by double-digit declines in bars, ready-to-eat cereals, pancake syrup and mix and oatmeal. The unit volume decline in bars and ready-to-eat cereals was negatively impacted by the loss of sales from products included in the Quaker Recall.
Operating profit declined 126%, primarily reflecting an 89-percentage-point impact of charges associated with the Quaker Recall, the net revenue performance and certain operating cost increases, partially offset by productivity savings and lower advertising and marketing expenses.
LatAm
Net revenue increased 16%, primarily reflecting effective net pricing and an 8-percentage-point
impact of favorable foreign exchange.
Convenient foods unit volume declined 0.5%, primarily reflecting double-digit declines in Peru and Argentina and a mid-single-digit decline in Colombia, partially offset by mid-single-digit growth in Brazil and low-single-digit growth in Mexico.
Beverage unit volume grew 2%, primarily reflecting high-single-digit growth in Brazil and Guatemala and low-single-digit growth in Mexico and Chile, partially offset by a double-digit decline in Colombia and a mid-single-digit decline in Argentina. Additionally, Peru experienced low-single-digit growth.
Operating profit increased 33%, primarily reflecting the effective net pricing, productivity savings, an 11-percentage-point impact of favorable foreign exchange translation and a 4-percentage-point favorable impact of lower commodity costs, largely driven
by transaction-related foreign exchange. These impacts were partially offset by certain operating cost increases and higher advertising and marketing expenses.
Net revenue increased 3%, primarily reflecting effective net pricing and organic volume growth, partially offset by a 7-percentage-point impact of unfavorable foreign exchange.
Convenient foods unit volume increased 2%, primarily
reflecting double-digit growth in Russia, mid-single-digit growth in the United Kingdom and high-single-digit growth in Turkey, partially offset by a double-digit decline in France and a slight decline in the Netherlands.
Beverage unit volume grew 7%, primarily reflecting double-digit growth in Russia, Turkey and Germany and high-single-digit growth in the United Kingdom, partially offset by a double-digit decline in France.
Operating profit increased 184%, primarily reflecting a 147-percentage-point favorable impact of lower restructuring charges, the net revenue growth and productivity savings. These impacts were partially offset by certain operating cost increases, a 17-percentage-point impact of higher commodity costs, primarily packaging materials, juices and potatoes, largely driven by transaction-related foreign exchange, a 13-percentage-point impact of unfavorable foreign
exchange translation, primarily due to weakening of the Russian ruble, and higher advertising and marketing expenses.
AMESA
Net revenue grew 2%, primarily reflecting organic volume growth and effective net pricing, partially offset by a 4-percentage-point impact of unfavorable foreign exchange.
Convenient foods unit volume grew 4.5%, primarily reflecting high-single-digit growth in South Africa, double-digit growth in India and mid-single-digit growth in Pakistan, partially offset by a double-digit decline in the Middle East.
Beverage unit volume grew 2%, primarily reflecting mid-single-digit growth in the Middle East and high-single-digit growth in India and Nigeria, partially
offset by a double-digit decline in Pakistan.
Operating profit declined 10%, primarily reflecting certain operating cost increases, a 17-percentage-point impact of higher commodity costs, primarily packaging materials, sweeteners and potatoes, largely driven by transaction-related foreign exchange, and a 7-percentage-point unfavorable impact of adjustments recorded in the prior year related to the sale of a non-strategic brand. These impacts were partially offset by the net revenue growth and productivity savings.
APAC
Net revenue grew 6%, primarily reflecting net organic volume growth, partially offset by a 5-percentage-point impact of unfavorable foreign exchange and unfavorable net pricing.
Convenient
foods unit volume grew 12%, primarily reflecting double-digit growth in China. Additionally, Thailand experienced low-single-digit growth and Australia experienced high-single-digit growth.
Beverage unit volume declined slightly, primarily reflecting a mid-single-digit decline in China, partially offset by high-single-digit growth in Vietnam and double-digit growth in Thailand and the Philippines.
Operating profit grew 3%, primarily reflecting the net organic volume growth, productivity savings and a 4-percentage-point favorable impact of lower commodity costs. These impacts were partially offset by certain operating cost increases, higher advertising and marketing expenses and a 5-percentage-point impact of unfavorable foreign exchange.
Non-GAAP
Measures
Certain financial measures contained in this Form 10-Q adjust for the impact of specified items and are not in accordance with GAAP. We use non-GAAP financial measures internally to make operating and
strategic decisions, including the preparation of our annual operating plan, evaluation of our overall business performance and as a factor in determining compensation for certain employees. We believe presenting non-GAAP financial measures in this Form 10-Q provides additional information to facilitate comparison of our historical operating results
and trends in our underlying operating results and provides additional transparency on how we evaluate our business. We also believe presenting these measures in this Form 10-Q allows investors to view our performance using the same measures that we use in evaluating our financial and business performance and trends.
We consider quantitative and qualitative factors in assessing whether to adjust for the impact of items that may be significant or that could affect an understanding of our ongoing financial and business performance or trends. Examples of items for which we may make adjustments include: amounts related to mark-to-market gains or losses (non-cash); charges related to restructuring plans; charges associated with acquisitions and divestitures; gains associated with divestitures; asset impairment charges (non-cash); product recall-related impact; pension and retiree medical-related amounts, including all settlement
and curtailment gains and losses; charges or adjustments related to the enactment of new laws, rules or regulations, such as tax law changes; amounts related to the resolution of tax positions; tax benefits related to reorganizations of our operations; debt redemptions, cash tender or exchange offers; and remeasurements of net monetary assets. See below and “Items Affecting Comparability” for a description of adjustments to our GAAP financial measures in this Form 10-Q.
Non-GAAP information should be considered as supplemental in nature and is not meant to be considered in isolation or as a substitute for the related financial information prepared in accordance with GAAP. In addition, our non-GAAP financial measures may not be the same as or comparable to similar non-GAAP measures presented by other companies.
The following non-GAAP financial measures contained in this Form
10-Q are discussed below:
Cost of sales, gross profit, selling, general and administrative expenses, other pension and retiree medical benefits income, provision for income taxes, net income attributable to noncontrolling interests and net income attributable to PepsiCo, each adjusted for items affecting comparability, operating profit and net income attributable to PepsiCo per common share – diluted, each adjusted for items affecting comparability and the corresponding constant currency growth rates
These measures exclude the net impact of mark-to-market gains and losses on centrally managed commodity derivatives that do not qualify for hedge accounting, restructuring and impairment charges related to our 2019 Productivity Plan, charges associated with our acquisitions and divestitures, impairment and other charges/credits and product recall-related impact (see “Items Affecting
Comparability” for a detailed description of each of these items). We also evaluate performance on operating profit and net income attributable to PepsiCo per common share – diluted, each adjusted for items affecting comparability on a constant currency basis, which measure our financial results assuming constant foreign currency exchange rates used for translation based on the rates in effect for the comparable prior-year period. In order to compute our constant currency results, we multiply or divide, as appropriate, our current-year U.S. dollar results by the current-year average foreign exchange rates and then multiply or divide, as appropriate, those amounts by the prior-year average foreign exchange rates. We believe these measures provide useful information in evaluating the results of our business because they exclude items that we believe are not indicative of our ongoing performance or that we believe impact
comparability with the prior year.
Organic revenue growth
We define organic revenue growth as a measure that adjusts for the impacts of foreign exchange translation, acquisitions and divestitures and where applicable, the impact of the 53rd reporting week. We believe organic revenue growth provides useful information in evaluating the results of our business
because it excludes items that we believe are not indicative of ongoing performance or that we believe impact
comparability with the prior year.
See “Net Revenue and Organic Revenue Growth” in “Results of Operations – Division Review” for further information.
Free cash flow
We define free cash flow as net cash from operating activities less capital spending, plus sales of property, plant and equipment. Since net capital spending is essential to our product innovation initiatives and maintaining our operational capabilities, we believe that it is a recurring and necessary use of cash. As such, we believe investors should also consider net capital spending when evaluating our cash from operating activities. Free cash flow is used by us primarily for acquisitions and financing activities, including debt repayments, dividends and share repurchases. Free cash flow is not a measure of cash available for discretionary expenditures since
we have certain non-discretionary obligations such as debt service that are not deducted from the measure.
See “Free Cash Flow” in “Our Liquidity and Capital Resources” for further information.
Our reported financial results in this Form 10-Q are impacted by the following items in each of the following periods:
12
Weeks Ended 3/23/2024
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating profit
Other pension and retiree medical benefits income
Provision for income taxes(a)
Net income attributable
to PepsiCo
Reported, GAAP Measure
$
8,248
$
10,002
$
7,285
$
2,717
$
58
$
520
$
2,042
Items
Affecting Comparability
Mark-to-market net impact
13
(13)
23
(36)
—
(9)
(27)
Restructuring
and impairment charges
(6)
6
(83)
89
7
20
76
Acquisition and divestiture-related charges
—
—
(2)
2
—
1
1
Product
recall-related impact
(167)
167
—
167
—
39
128
Core,
Non-GAAP Measure
$
8,088
$
10,162
$
7,223
$
2,939
$
65
$
571
$
2,220
12
Weeks Ended 3/25/2023
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating profit
Other pension and retiree medical benefits income
Provision for income taxes(a)
Net income attributable to noncontrolling interests
Net
income attributable to PepsiCo
Reported, GAAP Measure
$
7,988
$
9,858
$
7,229
$
2,629
$
61
$
546
$
12
$
1,932
Items
Affecting Comparability
Mark-to-market net impact
(14)
14
(57)
71
—
17
—
54
Restructuring
and impairment charges
(3)
3
(110)
113
(1)
14
1
97
Acquisition
and divestiture-related charges
—
—
(2)
2
—
1
—
1
Impairment
and other charges/credits
4
(4)
9
(13)
—
—
—
(13)
Core,
Non-GAAP Measure
$
7,975
$
9,871
$
7,069
$
2,802
$
60
$
578
$
13
$
2,071
(a)Provision
for income taxes is the expected tax charge/benefit on the underlying item based on the tax laws and income tax rates applicable to the underlying item in its corresponding tax jurisdiction.
12 Weeks Ended
3/23/2024
3/25/2023
Change
Net
income attributable to PepsiCo per common share – diluted, GAAP measure
$
1.48
$
1.40
6
%
Mark-to-market net impact
(0.02)
0.04
Restructuring
and impairment charges
0.05
0.07
Acquisition and divestiture-related charges
—
—
Impairment
and other charges/credits
—
(0.01)
Product recall-related impact
0.09
—
Core
net income attributable to PepsiCo per common share – diluted, non-GAAP measure
$
1.61
(a)
$
1.50
7
%
Impact of foreign exchange translation
—
Growth
in core net income attributable to PepsiCo per common share – diluted, on a constant currency basis, non-GAAP measure
We centrally manage commodity derivatives on behalf of our divisions. These commodity derivatives include agricultural products, energy and metals. Commodity derivatives that do not qualify for hedge accounting treatment are marked to market each period with the resulting gains and losses recorded in corporate unallocated expenses as either cost of sales or selling, general and administrative expenses, depending on the underlying commodity. These gains and losses are subsequently reflected in division results when the divisions recognize the cost of the underlying commodity in operating profit. Therefore, the divisions realize the economic effects of the derivative without experiencing any resulting mark-to-market volatility, which remains in corporate unallocated expenses.
Restructuring
and Impairment Charges
2019 Multi-Year Productivity Plan
The 2019 Productivity Plan, publicly announced on February 15, 2019, leverages new technology and business models to further simplify, harmonize and automate processes; re-engineer our go-to-market and information systems, including deploying the right automation for each market; and simplify our organization and optimize our manufacturing and supply chain footprint. To build on the successful implementation of the 2019 Productivity Plan, in 2022, we expanded and extended the plan through the end of 2028 to take advantage of additional opportunities within the initiatives described above. As a result, we expect to incur pre-tax charges of approximately $3.65 billion, including cash expenditures of approximately $2.9 billion. Plan to date through March 23,
2024, we have incurred pre-tax charges of $2.0 billion, including cash expenditures of $1.5 billion. For the remainder of 2024, we expect to incur pre-tax charges of approximately $400 million, and cash expenditures of approximately $400 million. These charges will be funded primarily through cash from operations. We expect to incur the majority of the remaining pre-tax charges and cash expenditures through 2025, with the balance to be incurred through 2028. Charges include severance and other employee costs, asset impairments and other costs.
See Note 3 to our condensed consolidated financial statements in this Form 10-Q, as well as Note 3 to our consolidated financial statements in our 2023 Form 10-K, for further information related to our 2019 Productivity Plan.
We regularly evaluate productivity initiatives beyond the productivity plan and other initiatives discussed above
and in Note 3 to our condensed consolidated financial statements.
Acquisition and Divestiture-Related Charges
Acquisition and divestiture-related charges primarily include costs associated with divestitures, primarily consulting, advisory and other professional fees.
Impairment and Other Charges/Credits
We recognized adjustments to the charges recorded in prior years from changes in estimates of previously recorded amounts.
Product
Recall-Related Impact
We recognized property, plant and equipment write-offs, employee severance costs and other costs in our QFNA division associated with a previously announced voluntary recall of certain bars and cereals.
See Note 1 to our condensed consolidated financial statements for further information.
Our Liquidity and Capital Resources
We believe that our cash generating capability and financial condition, together with our revolving credit facilities, working capital lines and other available methods of debt financing, such as commercial paper
borrowings and long-term debt financing, will be adequate to meet our operating, investing and financing needs, including with respect to our net capital spending plans. Our primary sources of liquidity include cash from operations, proceeds obtained from issuances of commercial paper and long-term debt, and cash and cash equivalents. These sources of cash are available to fund cash outflows that have both a short- and long-term component, including debt repayments and related interest payments; payments for acquisitions; operating leases; purchase, marketing, and other contractual commitments, including capital expenditures and the transition tax liability under the Tax Cuts and Jobs Act (TCJ Act). In addition, these sources of cash fund other cash outflows including anticipated dividend payments and
share repurchases. We do not have guarantees or off-balance sheet financing arrangements, including variable interest entities, that we believe could have a material impact on our liquidity. See “Our Business Risks” and Note 8 to our condensed consolidated financial statements included in this Form 10-Q and “Item 1A. Risk Factors,”“Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Our Business Risks” and Note 8 to our consolidated financial statements included in our 2023 Form 10-K for further information.
As of March 23, 2024, cash, cash equivalents and short-term investments in our consolidated subsidiaries subject to currency controls or currency exchange restrictions were not material.
The
TCJ Act imposed a one-time mandatory transition tax on undistributed international earnings. As of March 23, 2024, our mandatory transition tax liability was $2.3 billion, which must be paid through 2026 under the provisions of the TCJ Act. See “Our Liquidity and Capital Resources” and Note 5 to our consolidated financial statements included in our 2023 Form 10-K for further discussion of the TCJ Act.
Supply chain financing arrangements did not have a material impact on our liquidity or capital resources in the periods presented and we do not expect such arrangements to have a material impact on our liquidity or capital resources for the foreseeable future. See Note 12 to our condensed consolidated financial statements for further discussion of supply chain financing arrangements.
Operating
Activities
During the 12 weeks ended March 23, 2024, net cash used for operating activities was $1.0 billion, compared to net cash used for operating activities of $0.4 billion in the prior-year period. The decrease in operating cash flow primarily reflects unfavorable working capital comparisons, partially offset by favorable operating profit performance.
Investing Activities
During the 12 weeks ended March 23, 2024, net cash used for investing activities was $0.6 billion, primarily reflecting net capital spending.
We regularly review our plans with
respect to net capital spending and believe that we have sufficient liquidity to meet our net capital spending needs.
Financing Activities
During the 12 weeks ended March 23, 2024, net cash provided by financing activities was $10 million, primarily reflecting the proceeds from issuances of long-term debt of $1.8 billion and net proceeds of short-term borrowings of $1.5 billion, partially offset by the return of operating cash flow to our shareholders through dividend payments of $1.8 billion and share repurchases of $0.1 billion, as well as payments of long-term debt borrowings of $1.3 billion.
We annually review our capital structure with our
Board of Directors, including our dividend policy and share repurchase activity. On February 10, 2022, we announced a share repurchase program providing for the repurchase of up to $10.0 billion of PepsiCo common stock which commenced on February 11, 2022 and will expire on February 28, 2026. In addition, on February 9, 2024, we announced a 7% increase in
our annualized dividend to $5.42 per share from
$5.06 per share, effective with the dividend expected to be paid in June 2024. We expect to return a total of approximately $8.2 billion to shareholders in 2024, comprising dividends of approximately $7.2 billion and share repurchases of approximately $1.0 billion.
Free Cash Flow
The table below reconciles net cash used for operating activities, as reflected on our cash flow statement, to our free cash flow. Free cash flow is a non-GAAP financial measure. For further information on free cash flow, see “Non-GAAP Measures.”
12
Weeks Ended
3/23/2024
3/25/2023
Net cash used for operating activities, GAAP measure
$
(1,041)
$
(392)
Capital spending
(614)
(581)
Sales
of property, plant and equipment
7
19
Free cash flow, non-GAAP measure
$
(1,648)
$
(954)
We
use free cash flow primarily for acquisitions and financing activities, including debt repayments, dividends and share repurchases. We expect to continue to return free cash flow to our shareholders primarily through dividends while maintaining Tier 1 commercial paper access, which we believe will facilitate appropriate financial flexibility and ready access to global capital and credit markets at favorable interest rates. See “Our Business Risks” included in this Form 10-Q and “Item 1A. Risk Factors” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Our Business Risks,” included in our 2023 Form 10-K, for certain factors that may impact our credit ratings or our operating cash flows.
Any downgrade of our credit ratings by a credit rating agency, especially any downgrade to below investment grade, whether or not as a result of our actions or factors which
are beyond our control, could increase our future borrowing costs and impair our ability to access capital and credit markets on terms commercially acceptable to us, or at all. In addition, any downgrade of our current short-term credit ratings could impair our ability to access the commercial paper market with the same flexibility that we have experienced historically, and therefore require us to rely more heavily on more expensive types of debt financing. See Note8 to our condensed consolidated financial statements and “Our Business Risks” included in this Form 10-Q, as well as “Item 1A. Risk Factors” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Our Business Risks” included in our 2023 Form 10-K for further information.
Changes in Line Items in Our Condensed Consolidated Financial Statements
Changes in line items in the income statement are discussed in “Results of Operations – Consolidated Review,”“Results of Operations – Division Review” and “Items Affecting Comparability.”
Changes in line items in the cash flow statement are discussed in “Our Liquidity and Capital Resources.”
Changes in line items in the balance sheet are discussed below:
Total Assets
As of March 23, 2024, total assets were $100.0 billion, compared to $100.5 billion as of December 30,
2023. The decrease in total assets is primarily driven by the following line item:
Change(a)
Cash and cash equivalents (b)
$
(1.7)
Total Liabilities
As of March 23, 2024, total liabilities were $80.9 billion, compared to $81.9 billion as of December 30,
2023. The decrease in total liabilities is primarily driven by the following line items:
Change(a)
Short-term debt obligations (c)
$
1.7
Accounts payable and other current liabilities (d)
$
(3.1)
(a)In
billions.
(b)Refer to the cash flow statement for further information.
(c)See Note 8 to our condensed consolidated financial statements for further information.
(d)Primarily reflects timing of payments, combined with a decrease in production and capital expenditure payables across our divisions.
Total Equity
See the equity statement and Notes 9 and 11 to our condensed consolidated financial statements.
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
PepsiCo, Inc.:
Results of Review of Interim Financial Information
We have reviewed the Condensed Consolidated Balance Sheet of PepsiCo, Inc. and subsidiaries (the Company) as of March 23, 2024, the related Condensed Consolidated Statements of Income, Comprehensive Income, Cash Flows and Equity for the twelve weeks ended March 23,
2024 and March 25, 2023, and the related notes (collectively, the consolidated interim financial information). Based on our reviews, we are not aware of any material modifications that should be made to the consolidated interim financial information for it to be in conformity with U.S. generally accepted accounting principles.
We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Consolidated Balance Sheet of the Company as of December 30, 2023, and the related Consolidated Statements of Income, Comprehensive Income, Cash Flows and Equity for the fiscal year then ended (not presented herein); and in our report dated February
8, 2024, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying Condensed Consolidated Balance Sheet as of December 30, 2023, is fairly stated, in all material respects, in relation to the Consolidated Balance Sheet from which it has been derived.
Basis for Review Results
This consolidated interim financial information is the responsibility of the Company’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations
of the Securities and Exchange Commission and the PCAOB.
We conducted our reviews in accordance with the standards of the PCAOB. A review of consolidated interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.
See “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Our Business Risks.” In addition, see “Item 1A. Risk Factors,”“Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Our Business Risks” and Note 9 to our consolidated financial statements in our 2023
Form 10-K.
ITEM 4. Controls and Procedures.
As of the end of the period covered by this report, we carried out an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the Exchange Act). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of the end of the period covered by this report our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in reports we file or submit
under the Exchange Act is (1) recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (2) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
During the 12 weeks ended March 23, 2024, we continued migrating certain of our financial processing systems to an Enterprise Resource Planning (ERP) system. These systems implementations are part of our ongoing global business transformation initiative, and we plan to continue implementing such systems throughout other parts of our businesses in phases over the next several years. In connection with these ERP implementations, we are updating and will continue to update our internal control over financial reporting, as necessary, to accommodate modifications
to our business processes and accounting procedures. During the 12 weeks ended March 23, 2024, we continued implementing these systems, resulting in changes that materially affected our internal control over financial reporting. These system implementations did not have an adverse effect, nor do we expect will have an adverse effect, on our internal control over financial reporting. In addition, in connection with our 2019 multi-year productivity plan, we continueto migrate to shared business models across our operations to further simplify, harmonize and automate processes. In connection with this multi-year productivity plan and resulting business process changes, we continue to enhance the design and documentation of our internal control over financial reporting processes, to maintain effective controls over our financial reporting. These business process changes have
not materially affected, and we do not expect them to materially affect, our internal control over financial reporting.
Except with respect to the continued implementation of ERP systems, there have been no changes in our internal control over financial reporting during the 12 weeks ended March 23, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We will continue to assess the impact on our internal control over financial reporting as we continue to implement our ERP solution and our 2019 multi-year productivity plan.
The following information should be read in conjunction with the discussion set forth under Part I, “Item 3. Legal Proceedings” in our 2023 Form 10-K.
We and our subsidiaries are party to a variety of litigation, claims, legal or regulatory proceedings, inquiries and investigations. While the results of such litigation, claims, legal or regulatory proceedings, inquiries and investigations cannot be predicted with certainty, management believes that
the final outcome of the foregoing will not have a material adverse effect on our financial condition, results of operations or cash flows. See also “Item 1. Business – Regulatory Matters” and “Item 1A. Risk Factors” in our 2023 Form 10-K.
ITEM 1A. Risk Factors.
There have been no material changes with respect to the risk factors disclosed in our 2023 Form 10-K.
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.
A summary of our common stock repurchases (in millions, except average price per share) during the 12 weeks ended
March 23, 2024 is set forth in the table below.
Issuer Purchases of Common Stock
Period
Total
Number of
Shares
Repurchased(a)
Average Price Paid Per Share
Total Number of
Shares Purchased as Part of Publicly Announced Plans or Programs
Maximum Number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under the Plans or Programs
12/30/2023
$
7,500
12/31/2023 - 1/27/2024
—
$
—
—
—
7,500
1/28/2024
- 2/24/2024
0.1
$
168.36
0.1
(16)
7,484
2/25/2024 - 3/23/2024
0.9
$
166.53
0.9
(142)
Total
1.0
$
166.71
1.0
$
7,342
(a)All
shares were repurchased in open market transactions pursuant to the $10 billion share repurchase program authorized by our Board of Directors and publicly announced on February 10, 2022, which commenced on February 11, 2022 and will expire on February 28, 2026. Shares repurchased under this program may be repurchased in open market transactions, in privately negotiated transactions, in accelerated stock repurchase transactions or otherwise.
ITEM 5. Other Information.
During the 12 weeks ended March 23, 2024, inone
of our directors or executive officers adopted, modified or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement” as such terms are defined under Item 408 of Regulation S-K.
The following materials from PepsiCo, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 23, 2024 formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) the Condensed Consolidated Statement of Income, (ii) the Condensed Consolidated Statement of Comprehensive Income, (iii) the Condensed Consolidated Statement of Cash Flows, (iv) the Condensed Consolidated Balance Sheet, (v) the Condensed Consolidated Statement of Equity, and (vi) Notes to the Condensed Consolidated Financial Statements.
Exhibit 104
The cover page from the
Company’s Quarterly Report on Form 10-Q for the quarter ended March 23, 2024, formatted in iXBRL and contained in Exhibit 101.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.