Document



	12 Weeks Ended						24 Weeks Ended
	6/15/2019			6/16/2018			6/15/2019			6/16/2018
Net Revenue	$	16,449		$	16,090		$	29,333		$	28,652
Cost of sales	7,404			7,263			13,092			12,918
Gross profit	9,045			8,827			16,241			15,734
Selling, general and administrative expenses	6,316			5,799			11,504			10,899
Operating Profit	2,729			3,028			4,737			4,835
Other pension and retiree medical benefits income	61			82			125			157
Interest expense	(261		)	(308		)	(528		)	(602		)
Interest income and other	38			98			101			167
Income before income taxes	2,567			2,900			4,435			4,557
Provision for income taxes	524			1,070			970			1,374
Net income	2,043			1,830			3,465			3,183
Less: Net income attributable to noncontrolling interests	8			10			17			20
Net Income Attributable to PepsiCo	$	2,035		$	1,820		$	3,448		$	3,163
Net Income Attributable to PepsiCo per Common Share
Basic	$	1.45		$	1.28		$	2.46		$	2.23
Diluted	$	1.44		$	1.28		$	2.44		$	2.21
Weighted-average common shares outstanding
Basic	1,401			1,417			1,403			1,418
Diluted	1,409			1,426			1,411			1,428



	24 Weeks Ended
	6/15/2019			6/16/2018
Operating Activities
Net income	$	3,465		$	3,183
Depreciation and amortization	1,056			1,070
Share-based compensation expense	118			146
Restructuring and impairment charges	184			44
Cash payments for restructuring charges	(153		)	(126		)
Pension and retiree medical plan expenses	98			93
Pension and retiree medical plan contributions	(317		)	(1,573		)
Deferred income taxes and other tax charges and credits	221			(167		)
Tax (benefits)/net tax expense related to the Tax Cuts and Jobs Act (TCJ Act)	(29		)	778
Tax payments related to the TCJ Act	(393		)	(38		)
Change in assets and liabilities:
Accounts and notes receivable	(1,372		)	(1,019		)
Inventories	(872		)	(637		)
Prepaid expenses and other current assets	(336		)	(224		)
Accounts payable and other current liabilities	(521		)	(560		)
Income taxes payable	202			410
Other, net	37			(293		)
Net Cash Provided by Operating Activities	1,388			1,087

Investing Activities
Capital spending	(1,167		)	(945		)
Sales of property, plant and equipment	42			43
Acquisition of SodaStream International Ltd. (SodaStream)	(1,880		)	—
Other acquisitions and investments in noncontrolled affiliates	(544		)	(188		)
Divestitures	270			280
Short-term investments, by original maturity:
More than three months - purchases	—			(5,544		)
More than three months - maturities	4			9,416
More than three months - sales	2			760
Three months or less, net	8			5
Other investing, net	(6		)	—
Net Cash (Used for)/Provided by Investing Activities	(3,271		)	3,827

Financing Activities
Proceeds from issuances of long-term debt	1,122			—
Payments of long-term debt	(2,953		)	(2,502		)
Short-term borrowings, by original maturity:
More than three months - proceeds	6			—
More than three months - payments	—			(17		)
Three months or less, net	652			4,091
Cash dividends paid	(2,635		)	(2,305		)
Share repurchases - common	(1,726		)	(984		)
Share repurchases - preferred	—			(2		)
Proceeds from exercises of stock options	210			145
Withholding tax payments on restricted stock units (RSUs), performance stock units (PSUs) and PepsiCo equity performance units (PEPunits) converted	(100		)	(82		)
Other financing	(15		)	(2		)
Net Cash Used for Financing Activities	(5,439		)	(1,658		)
Effect of exchange rate changes on cash and cash equivalents and restricted cash	24			(19		)
Net (Decrease)/Increase in Cash and Cash Equivalents and Restricted Cash	(7,298		)	3,237
Cash and Cash Equivalents and Restricted Cash, Beginning of Year	10,769			10,657
Cash and Cash Equivalents and Restricted Cash, End of Period	$	3,471		$	13,894



	(Unaudited)
	6/15/2019			12/29/2018
ASSETS
Current Assets
Cash and cash equivalents	$	3,293		$	8,721
Short-term investments	291			272
Restricted cash	150			1,997
Accounts and notes receivable, less allowance: 6/19 - $113 and 12/18 - $101	8,502			7,142
Inventories:
Raw materials and packaging	1,589			1,312
Work-in-process	384			178
Finished goods	2,015			1,638
	3,988			3,128
Prepaid expenses and other current assets	988			633
Total Current Assets	17,212			21,893
Property, plant and equipment	40,264			40,164
Accumulated depreciation	(22,822		)	(22,575		)
	17,442			17,589
Amortizable Intangible Assets, net	1,433			1,644
Goodwill	15,632			14,808
Other indefinite-lived intangible assets	14,148			14,181
Indefinite-Lived Intangible Assets	29,780			28,989
Investments in Noncontrolled Affiliates	2,510			2,409
Deferred Income Taxes	4,353			4,364
Other Assets	2,354			760
Total Assets	$	75,084		$	77,648

LIABILITIES AND EQUITY
Current Liabilities
Short-term debt obligations	$	3,473		$	4,026
Accounts payable and other current liabilities	16,455			18,112
Total Current Liabilities	19,928			22,138
Long-Term Debt Obligations	27,712			28,295
Deferred Income Taxes	3,658			3,499
Other Liabilities	9,749			9,114
Total Liabilities	61,047			63,046

Commitments and contingencies

PepsiCo Common Shareholders’ Equity
Common stock, par value 1²/₃¢ per share (authorized 3,600 shares; issued, net of repurchased common stock at par value: 1,399 and 1,409 shares, respectively)	23			23
Capital in excess of par value	3,796			3,953
Retained earnings	60,752			59,947
Accumulated other comprehensive loss	(14,984		)	(15,119		)
Repurchased common stock, in excess of par value (468 and 458 shares, respectively)	(35,635		)	(34,286		)
Total PepsiCo Common Shareholders’ Equity	13,952			14,518
Noncontrolling interests	85			84
Total Equity	14,037			14,602
Total Liabilities and Equity	$	75,084		$	77,648



	12 Weeks Ended										24 Weeks Ended
	6/15/2019					6/16/2018					6/15/2019					6/16/2018
	Shares		Amount			Shares		Amount			Shares		Amount			Shares		Amount
Preferred Stock
Balance, beginning of period	—		$	—		—		$	—		—		$	—		0.8		$	41
Conversion to common stock	—		—			—		—			—		—			(0.1	)	(6		)
Retirement of preferred stock	—		—			—		—			—		—			(0.7	)	(35		)
Balance, end of period	—		—			—		—			—		—			—		—
Repurchased Preferred Stock
Balance, beginning of period	—		—			—		—			—		—			(0.7	)	(197		)
Redemptions	—		—			—		—			—		—			—		(2		)
Retirement of preferred stock	—		—			—		—			—		—			0.7		199
Balance, end of period	—		—			—		—			—		—			—		—
Common Stock
Balance, beginning of period	1,404		23			1,419		24			1,409		23			1,420		24
Shares issued in connection with preferred stock conversion to common stock	—		—			—		—			—		—			1		—
Change in repurchased common stock	(5	)	—			(4	)	—			(10	)	—			(6	)	—
Balance, end of period	1,399		23			1,415		24			1,399		23			1,415		24
Capital in Excess of Par Value
Balance, beginning of period			3,753					3,866					3,953					3,996
Share-based compensation expense			62					65					119					148
Equity issued in connection with preferred stock conversion to common stock			—					—					—					6
Stock option exercises, RSUs, PSUs and PEPunits converted			(12		)			(8		)			(176		)			(150		)
Withholding tax on RSUs, PSUs and PEPunits converted			(7		)			(6		)			(100		)			(82		)
Other			—					(2		)			—					(3		)
Balance, end of period			3,796					3,915					3,796					3,915
Retained Earnings
Balance, beginning of period			60,060					52,726					59,947					52,839
Cumulative effect of accounting changes			—					—					8					(145		)
Net income attributable to PepsiCo			2,035					1,820					3,448					3,163
Cash dividends declared – common ^(a)			(1,343		)			(1,323		)			(2,651		)			(2,470		)
Retirement of preferred stock			—					—					—					(164		)
Balance, end of period			60,752					53,223					60,752					53,223
Accumulated Other Comprehensive Loss
Balance, beginning of period			(14,656		)			(12,717		)			(15,119		)			(13,057		)
Other comprehensive (loss)/income attributable to PepsiCo			(328		)			(863		)			135					(523		)
Balance, end of period			(14,984		)			(13,580		)			(14,984		)			(13,580		)
Repurchased Common Stock
Balance, beginning of period	(463	)	(34,978		)	(448	)	(33,016		)	(458	)	(34,286		)	(446	)	(32,757		)
Share repurchases	(6	)	(779		)	(5	)	(483		)	(15	)	(1,750		)	(10	)	(1,004		)
Stock option exercises, RSUs, PSUs and PEPunits converted	1		122			1		28			5		401			4		289
Other	—		—			—		—			—		—			—		1
Balance, end of period	(468	)	(35,635		)	(452	)	(33,471		)	(468	)	(35,635		)	(452	)	(33,471		)
Total PepsiCo Common Shareholders’ Equity			13,952					10,111					13,952					10,111
Noncontrolling Interests
Balance, beginning of period			94					102					84					92
Net income attributable to noncontrolling interests			8					10					17					20
Distributions to noncontrolling interests			(15		)			—					(15		)			—
Other, net			(2		)			(2		)			(1		)			(2		)
Balance, end of period			85					110					85					110
Total Equity			$	14,037				$	10,221				$	14,037				$	10,221

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.

This Quarterly Report on Form 10-Q (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: changes in demand for PepsiCo’s products, as a result of changes in consumer preferences or otherwise; changes in laws related to the use or disposal of plastics or other packaging of PepsiCo’s products; changes in, or failure to comply with, applicable laws and regulations; imposition or proposed imposition of new or increased taxes aimed at PepsiCo’s products; imposition of labeling or warning requirements on PepsiCo’s products; PepsiCo’s ability to compete effectively; failure to realize anticipated benefits from PepsiCo’s productivity initiatives or operating model; political conditions, civil unrest or other developments and risks 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; uncertain or unfavorable economic conditions in the countries in which PepsiCo operates; the ability to protect information systems against, or effectively respond to, a cybersecurity incident or other disruption; increased costs, disruption of supply or shortages of raw materials and other supplies; business disruptions; product contamination or tampering or issues or concerns with respect to product quality, safety and integrity; damage to PepsiCo’s reputation or brand image; failure to successfully complete, integrate or manage acquisitions and joint ventures into PepsiCo’s existing operations or to complete or manage divestitures or refranchisings; changes in estimates and underlying assumptions regarding future performance that could result in an impairment charge; increase in income tax rates, changes in income tax laws, including as a result of enactment and implementation of the TRAF, or disagreements with tax authorities; PepsiCo’s ability to recruit, hire or retain key employees or a highly skilled and diverse workforce; loss of, or a significant reduction in sales to, any key customer; disruption to the retail landscape, including rapid growth in hard discounters and the e-commerce channel; any downgrade or potential downgrade of PepsiCo’s credit ratings; PepsiCo’s ability to implement shared services or utilize information technology systems and networks effectively; fluctuations or other changes in exchange rates; climate change

or water scarcity, or legal, regulatory or market measures to address climate change or water scarcity; failure to successfully negotiate collective bargaining agreements, or strikes or work stoppages; infringement of intellectual property rights; potential liabilities and costs from litigation, claims, legal or regulatory proceedings, inquiries or investigations; and other factors that may adversely affect the price of PepsiCo’s publicly traded securities and financial performance 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 2018 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.

In the 12 weeks ended June 15, 2019, substantially all of our financial results outside of North America reflect the months of March, April and May. In the 24 weeks ended June 15, 2019, substantially all of our financial results outside of North America reflect the months of January through May. In the 24 weeks ended June 15, 2019, our operations outside of the United States generated 40% of our consolidated net revenue, with Mexico, Russia, Canada, the United Kingdom and China comprising approximately 19% of our consolidated net revenue. As a result, we are exposed to foreign exchange risks in the international markets in which our products are made, manufactured, distributed or sold. In each of the 12 and 24 weeks ended June 15, 2019, unfavorable foreign exchange reduced net revenue growth by 3 percentage points, primarily due to declines in the Russian ruble, Turkish lira, euro, Argentine peso and Brazilian real. Currency declines against the U.S. dollar which are not offset could adversely impact our future financial results.

In addition, volatile economic, political and social conditions and civil unrest in certain markets in which our products are made, manufactured, distributed or sold, including in Argentina, Brazil, China, Mexico, the Middle East, Russia and Turkey, and currency fluctuations in certain of these international markets, continue to, and the threat or imposition of tariffs in or related to these international markets may, result in challenging operating environments. We also continue to monitor the economic and political developments related to the United Kingdom’s pending withdrawal from the European Union, including how the United Kingdom will interact with other European Union countries following its departure, as well as the economic, operating and political environment in Russia and the potential impact for the ESSA segment and our other businesses.

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). In addition, some regulations apply to all products using certain types of packaging (e.g., plastic), while others are designed to increase the sustainability of packaging and encourage waste reduction and increased recycling rates.

We sell a wide variety of beverages, foods and snacks 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 varies 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



	12 Weeks Ended											24 Weeks Ended
	6/15/2019				6/16/2018				Change			6/15/2019				6/16/2018				Change
Other pension and retiree medical benefits income	$	61			$	82			$	(21	)	$	125			$	157			$	(32	)
Net interest expense	$	(223	)		$	(210	)		$	(13	)	$	(427	)		$	(435	)		$	8
Tax rate ^(a)	20.4		%		36.9		%					21.9		%		30.2		%
Net income attributable to PepsiCo	$	2,035			$	1,820			12		%	$	3,448			$	3,163			9		%
Net income attributable to PepsiCo per common share – diluted	$	1.44			$	1.28			13		%	$	2.44			$	2.21			10		%
Mark-to-market net impact	—				—							(0.03		)		0.01
Restructuring and impairment charges	0.08				0.02							0.10				0.02
Inventory fair value adjustments and merger and integration charges	0.01				—							0.02				—
Tax benefit ^(a)	—				(0.22		)					—				(0.22		)
Tax (benefits)/net tax expense related to the TCJ Act ^(a)	—				0.54							(0.02		)		0.54
Net income attributable to PepsiCo per common share – diluted, excluding above items ^(b)	$	1.54		^(c)	$	1.61		^(c)	(4		)%	$	2.52		^(c)	$	2.58		^(c)	(2		)%
Impact of foreign exchange translation									2											2
Growth in net income attributable to PepsiCo per common share – diluted, excluding above items, on a constant currency basis ^(b)									(2		)%									—		%

Certain financial measures contained in this Form 10-Q adjust for the impact of specified items and are not in accordance with U.S. Generally Accepted Accounting Principles (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 programs; charges or adjustments related to the enactment of new laws, rules or regulations, such as significant tax law changes; amounts related to the resolution of tax positions; tax benefits related to reorganizations of our operations; amounts associated with mergers, acquisitions, divestitures and other structural changes; debt redemptions, cash tender or exchange offers; pension and retiree medical related items; asset impairments (non-cash); and remeasurements of net monetary assets. See below and “Items Affecting Comparability” for a description of adjustments to our U.S. GAAP financial measures.

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 and 2014 Productivity Plans, inventory fair value adjustments and merger and integration charges associated with our acquisition of SodaStream, tax benefits/net tax expense in connection with the TCJ Act and a tax benefit (see “Items Affecting Comparability” for a detailed description of each of these items). We also evaluate performance on operating profit, adjusted for items affecting comparability, and net income attributable to PepsiCo per common share – diluted, 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.

We define free cash flow as net cash provided by 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 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.



	24 Weeks Ended 6/15/2019
	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	$	13,092		$	16,241		$	11,504		$	4,737		$	125		$	970		$	17	$	3,448
Items Affecting Comparability
Mark-to-market net impact	32			(32		)	22			(54		)	—			(13		)	—		(41		)
Restructuring and impairment charges	(90		)	90			(99		)	189			(5		)	41			4		139
Inventory fair value adjustments and merger and integration charges	(34		)	34			(5		)	39			—			7			—		32
Tax benefits related to the TCJ Act	—			—			—			—			—			29			—		(29		)
Core, Non-GAAP Measure	$	13,000		$	16,333		$	11,422		$	4,911		$	120		$	1,034		$	21	$	3,549

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.

In connection with our 2019 Productivity Plan, we expect to incur pre-tax charges of approximately $2.5 billion, of which we have incurred $322 million to date. We expect to incur pre-tax charges of approximately $450 million for the remainder of 2019, with the balance to be reflected in our fiscal 2020 through 2023 results. These total pre-tax charges are expected to consist of approximately 70% of severance and other employee-related costs, 15% for asset impairments (all non-cash) resulting from plant closures and related actions, and 15% for other costs associated with the implementation of our initiatives. We expect to incur cash expenditures of approximately $1.6 billion, of which we have incurred $66 million to date. We expect cash expenditures of approximately $300 million for the remainder of 2019, with the balance to be reflected in our fiscal 2020 through 2023 cash flows. We expect to incur the majority of the pre-tax charges and cash expenditures in our fiscal 2019, 2020 and 2021 results.

Operating profit decreased 5%, reflecting certain operating cost increases, a 9-percentage-point-impact of higher commodity costs, higher advertising and marketing expenses and the volume decline. These impacts were partially offset by the effective net pricing and productivity savings. Less-favorable insurance adjustments compared to the prior year negatively impacted operating profit performance by 2.5 percentage points. A current-year gain associated with a sale of an asset positively contributed 3 percentage points to operating profit performance and was partially offset by a gain associated with the sale of an asset in the prior year, which negatively impacted operating profit performance by 1.5 percentage points. Additionally, a prior-year bonus extended to certain U.S. employees in connection with the TCJ Act positively contributed 4 percentage points to operating profit performance.

Operating profit decreased 16%, reflecting certain operating cost increases, a 14-percentage-point impact of higher commodity costs largely due to transaction-related foreign exchange, an 11-percentage-point impact of restructuring and impairment charges, and higher advertising and marketing expenses. These impacts were partially offset by the net revenue growth and productivity savings. The SodaStream acquisition positively contributed 7 percentage points to operating profit performance and was partially offset by inventory fair value adjustments and merger and integration charges which negatively impacted operating profit performance by 5 percentage points. Unfavorable foreign exchange negatively impacted operating profit performance by 9 percentage points.

We believe that our cash generating capability and financial condition, together with our revolving credit facilities 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. Our primary sources of cash available to fund cash outflows, such as our anticipated share repurchases, dividend payments, debt repayments and transition tax liability under the TCJ Act, include cash from operations, proceeds obtained from issuances of commercial paper and long-term debt, and cash and cash equivalents. However, there can be no assurance that volatility in the global capital and credit markets will not impair our ability to access these markets on terms commercially acceptable to us, or at all. 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 2018 Form 10-K for further information.

We use free cash flow primarily for financing activities, including debt repayments, dividends and share repurchases. We expect to continue to return free cash flow to our shareholders through dividends and share repurchases 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 2018 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 Note 8 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 2018 Form 10-K for further information.

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 Securities and Exchange Commission 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 our second fiscal quarter of 2019, we continued migrating certain of our financial processing systems to an enterprise-wide systems solution. 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 addition, in connection with our 2019 multi-year productivity program, we continue to migrate to shared business models across our operations to further simplify, harmonize and automate processes. In connection with these implementations 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 transitions have not materially affected, and we do not expect them to materially affect, our internal control over financial reporting.




North Carolina		13-1584302
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

700 Anderson Hill Road, Purchase, New York		10577
(Address of Principal Executive Offices)		(Zip Code)



Title of each class	Trading Symbols	Name of each exchange on which registered
Common Stock, par value 1-2/3 cents per share	PEP	The Nasdaq Stock Market LLC
2.500% Senior Notes Due 2022	PEP22a	The Nasdaq Stock Market LLC
1.750% Senior Notes Due 2021	PEP21a	The Nasdaq Stock Market LLC
2.625% Senior Notes Due 2026	PEP26	The Nasdaq Stock Market LLC
0.875% Senior Notes Due 2028	PEP28	The Nasdaq Stock Market LLC
0.750% Senior Notes Due 2027	PEP27	The Nasdaq Stock Market LLC
1.125% Senior Notes Due 2031	PEP31	The Nasdaq Stock Market LLC



Large accelerated filer x				Accelerated filer ¨
Non-accelerated filer ¨				Smaller reporting company ¨
				Emerging growth company ¨



		Page No.
Part I Financial Information
Item 1.	Condensed Consolidated Financial Statements	3
	Condensed Consolidated Statement of Income – 12 and 24 Weeks Ended June 15, 2019 and June 16, 2018	3
	Condensed Consolidated Statement of Comprehensive Income – 12 and 24 Weeks Ended June 15, 2019 and June 16, 2018	4
	Condensed Consolidated Statement of Cash Flows – 24 Weeks Ended June 15, 2019 and June 16, 2018	5
	Condensed Consolidated Balance Sheet – June 15, 2019 and December 29, 2018	6
	Condensed Consolidated Statement of Equity – 12 and 24 Weeks Ended June 15, 2019 and June 16, 2018	7
	Notes to the Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Report of Independent Registered Public Accounting Firm		46
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	47
Item 4.	Controls and Procedures	47
Part II Other Information
Item 1.	Legal Proceedings	48
Item 1A.	Risk Factors	48
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	48
Item 6.	Exhibits	48



	12 Weeks Ended				24 Weeks Ended
Net Revenue ^(a)	6/15/2019		6/16/2018		6/15/2019		6/16/2018
FLNA	$	4,010	$	3,837	$	7,825	$	7,454
QFNA	540		527		1,134		1,128
PBNA	5,322		5,193		9,832		9,608
LatAm	1,886		1,843		3,127		3,067
ESSA	3,133		3,116		4,826		4,784
AMENA	1,558		1,574		2,589		2,611
Total	$	16,449	$	16,090	$	29,333	$	28,652



X	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



914-253-2000
(Registrant’s Telephone Number, Including Area Code)


(a)	Cash dividends declared per common share were $0.955 and $0.9275 for the 12 weeks ended June 15, 2019 and June 16, 2018, respectively, and $1.8825 and $1.7325 for the 24 weeks ended June 15, 2019 and June 16, 2018, respectively.


1)	Frito-Lay North America (FLNA), which includes our branded food and snack businesses in the United States and Canada;


2)	Quaker Foods North America (QFNA), which includes our cereal, rice, pasta and other branded food businesses in the United States and Canada;


3)	PepsiCo Beverages North America (PBNA), which includes our beverage businesses in the United States and Canada. PBNA was formerly named North America Beverages; this change did not impact the results of PBNA or our other reportable segments;


4)	Latin America (LatAm), which includes all of our beverage, food and snack businesses in Latin America;


5)	Europe Sub-Saharan Africa (ESSA), which includes all of our beverage, food and snack businesses in Europe and Sub-Saharan Africa; and


6)	Asia, Middle East and North Africa (AMENA), which includes all of our beverage, food and snack businesses in Asia, the Middle East and North Africa.



	12 Weeks Ended						24 Weeks Ended
Operating Profit	6/15/2019			6/16/2018			6/15/2019			6/16/2018
FLNA	$	1,249		$	1,200		$	2,408		$	2,250
QFNA	127			145			265			300
PBNA	690			747			1,079			1,135
LatAm	278			269			508			458
ESSA	366			438			491			556
AMENA ^(a)	325			496			526			683
Total division	$	3,035		$	3,295		$	5,277		$	5,382
Corporate unallocated expenses	(306		)	(267		)	(540		)	(547		)
Total	$	2,729		$	3,028		$	4,737		$	4,835



	6/15/2019							12/29/2018
	Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net
Acquired franchise rights	$	842	$	(148	)	$	694	$	838	$	(140	)	$	698
Reacquired franchise rights	106		(105		)	1		106		(105		)	1
Brands	1,305		(1,043		)	262		1,306		(1,032		)	274
Other identifiable intangibles ^(a)	777		(301		)	476		959		(288		)	671
	$	3,030	$	(1,597	)	$	1,433	$	3,209	$	(1,565	)	$	1,644



	Balance 12/29/2018		Acquisitions/ (Divestitures)			Translation and Other			Balance 6/15/2019

FLNA
Goodwill	$	297	$	(3	)	$	3		$	297
Brands	161		—			—			161
	458		(3		)	3			458
QFNA
Goodwill	184		11			—			195
Brands	25		(14		)	—			11
	209		(3		)	—			206
PBNA ^(a)
Goodwill	9,813		134			9			9,956
Reacquired franchise rights	7,058		—			16			7,074
Acquired franchise rights	1,510		—			4			1,514
Brands	353		322			—			675
	18,734		456			29			19,219
LatAm
Goodwill	509		—			(7		)	502
Brands	127		—			(2		)	125
	636		—			(9		)	627
ESSA ^(b)
Goodwill	3,611		630			60			4,301
Reacquired franchise rights	497		—			(3		)	494
Acquired franchise rights	161		—			(5		)	156
Brands	4,188		(378		)	29			3,839
	8,457		252			81			8,790
AMENA
Goodwill	394		(4		)	(9		)	381
Brands	101		—			(2		)	99
	495		(4		)	(11		)	480

Total goodwill	14,808		768			56			15,632
Total reacquired franchise rights	7,555		—			13			7,568
Total acquired franchise rights	1,671		—			(1		)	1,670
Total brands	4,955		(70		)	25			4,910
	$	28,989	$	698		$	93		$	29,780


(a)	Operating profit for AMENA for the 12 and 24 weeks ended June 16, 2018 includes a gain of $144 million associated with refranchising a portion of our beverage business in Thailand.


(a)	Income amount represents adjustments for changes in estimates of previously recorded amounts.


(a)	Includes other costs associated with the implementation of our initiatives, including contract termination costs, consulting and other professional fees.



	Severance and Other Employee Costs			Asset Impairments			Other Costs			Total
Liability as of December 29, 2018	$	105		$	—		$	1		$	106
2019 restructuring charges	40			84			60			184
Cash payments ^(a)	(44		)	—			(20		)	(64		)
Non-cash charges and translation	5			(84		)	—			(79		)
Liability as of June 15, 2019	$	106		$	—		$	41		$	147


(a)	Excludes cash expenditures of $2 million reported in the cash flow statement in pension and retiree medical contributions.


(a)	The change from December 29, 2018 to June 15, 2019 primarily reflects revisions to the purchase price allocation for our acquisition of SodaStream.



	12 Weeks Ended
	Pension												Retiree Medical
	6/15/2019			6/16/2018			6/15/2019			6/16/2018			6/15/2019			6/16/2018
	U.S.						International
Service cost	$	88		$	99		$	18		$	22		$	6		$	8
Interest cost	126			111			23			23			8			8
Expected return on plan assets	(206		)	(217		)	(45		)	(48		)	(4		)	(5		)
Amortization of prior service cost/(credits)	3			—			—			—			(5		)	(4		)
Amortization of net losses/(gains)	37			42			8			11			(6		)	(3		)
Total	$	48		$	35		$	4		$	8		$	(1	)	$	4



Interest Rate		Maturity Date	Amount^(a)
0.750	%	March 2027	€	500	^(b)
1.125	%	March 2031	€	500	^(b)


(a)	Represents gross proceeds from issuances of long-term debt excluding debt issuance costs, discounts and premiums.


(b)	These notes, issued in euros, were designated as net investment hedges to partially offset the effects of foreign currency on our investments in certain of our foreign subsidiaries.


•	commodity prices, affecting the cost of our raw materials and energy;



	Notional Amounts^(a)
	6/15/2019		12/29/2018
Commodity	$	1.1	$	1.1
Foreign exchange	$	2.1	$	2.0
Interest rate ^(b)	$	5.7	$	10.5
Net investment ^(c)	$	2.0	$	0.9


(b)	The decrease is due to interest rate swap terminations and maturities.


(c)	The total notional of our net investment hedge consists of non-derivative debt instruments.



		6/15/2019				12/29/2018
	Fair Value Hierarchy Levels	Assets^(a)		Liabilities^(a)		Assets^(a)		Liabilities^(a)
Available-for-sale debt securities ^(b)	2	$	71	$	—	$	3,658	$	—
Short-term investments ^(c)	1	$	220	$	—	$	196	$	—
Prepaid forward contracts ^(d)	2	$	16	$	—	$	22	$	—
Deferred compensation ^(e)	2	$	—	$	458	$	—	$	450
Derivatives designated as fair value hedging instruments:
Interest rate ^(f)	2	$	—	$	18	$	1	$	108
Derivatives designated as cash flow hedging instruments:
Foreign exchange ^(g)	2	$	25	$	15	$	44	$	14
Interest rate ^(g)	2	—		375		—		323
Commodity ^(h)	1	17		1		—		1
Commodity ⁽ⁱ⁾	2	—		6		—		3
		$	42	$	397	$	44	$	341
Derivatives not designated as hedging instruments:
Foreign exchange ^(g)	2	$	1	$	7	$	3	$	10
Commodity ^(h)	1	21		14		2		17
Commodity ⁽ⁱ⁾	2	1		61		5		92
		$	23	$	82	$	10	$	119
Total derivatives at fair value ^(j)		$	65	$	497	$	55	$	568
Total		$	372	$	955	$	3,931	$	1,018


(a)	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.


(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.


(e)	Based on the fair value of investments corresponding to employees’ investment elections.


(g)	Based on recently reported market transactions of spot and forward rates.


(h)	Based on quoted contract prices on futures exchange markets.