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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
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☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 20, 2021 (12 weeks)
OR
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☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 1-1183
(Exact Name of Registrant as Specified in its Charter)
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North Carolina | | 13-1584302 |
(State or Other Jurisdiction of Incorporation or Organization) | | (I.R.S. Employer Identification No.) |
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700 Anderson Hill Road, Purchase, New York 10577
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(Address of principal executive offices and Zip Code) |
(914) 253-2000
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Registrant's telephone number, including area code |
N/A
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(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 |
Common Stock, par value 1-2/3 cents per share | | PEP | | The Nasdaq Stock Market LLC |
1.750% Senior Notes Due 2021 | | PEP21a | | The Nasdaq Stock Market LLC |
2.500% Senior Notes Due 2022 | | PEP22a | | The Nasdaq Stock Market LLC |
0.250% Senior Notes Due 2024 | | PEP24 | | The Nasdaq Stock Market LLC |
2.625% Senior Notes Due 2026 | | PEP26 | | The Nasdaq Stock Market LLC |
0.750% Senior Notes Due 2027 | | PEP27 | | The Nasdaq Stock Market LLC |
0.875% Senior Notes Due 2028 | | PEP28 | | The Nasdaq Stock Market LLC |
0.500% Senior Notes Due 2028 | | PEP28a | | The Nasdaq Stock Market LLC |
1.125% Senior Notes Due 2031 | | PEP31 | | The Nasdaq Stock Market LLC |
0.400% Senior Notes Due 2032 | | PEP32 | | The Nasdaq Stock Market LLC |
0.875% Senior Notes Due 2039 | | PEP39 | | The Nasdaq Stock Market LLC |
1.050% Senior Notes Due 2050 | | PEP50 | | The 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. Yes ☒ 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). Yes ☒ 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.
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Large accelerated filer | ☒ | Accelerated filer | ☐ |
Non-accelerated filer | ☐ | Smaller reporting company | ☐ |
| | Emerging growth company | ☐ |
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 ☐ No ☒
Number of shares of Common Stock outstanding as of April 8, 2021 was 1,381,631,264.
PepsiCo, Inc. and Subsidiaries
Table of Contents
| | | | | | | | |
| | Page No. |
Part I Financial Information | |
Item 1. | Condensed Consolidated Financial Statements | |
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Item 2. | | |
Report of Independent Registered Public Accounting Firm | |
Item 3. | | |
Item 4. | | |
Part II Other Information | |
Item 1. | | |
Item 1A. | | |
Item 2. | | |
Item 6. | | |
PART I FINANCIAL INFORMATION
ITEM 1. Condensed Consolidated Financial Statements.
Condensed Consolidated Statement of Income
PepsiCo, Inc. and Subsidiaries
(in millions except per share amounts, unaudited)
| | | | | | | | | | | | | | | |
| | | 12 Weeks Ended |
| | | | | 3/20/2021 | | 3/21/2020 |
Net Revenue | | | | | $ | 14,820 | | | $ | 13,881 | |
Cost of sales | | | | | 6,671 | | | 6,127 | |
Gross profit | | | | | 8,149 | | | 7,754 | |
Selling, general and administrative expenses | | | | | 5,837 | | | 5,830 | |
Operating Profit | | | | | 2,312 | | | 1,924 | |
Other pension and retiree medical benefits income | | | | | 120 | | | 77 | |
Net interest expense and other | | | | | (258) | | | (290) | |
Income before income taxes | | | | | 2,174 | | | 1,711 | |
Provision for income taxes | | | | | 451 | | | 360 | |
Net income | | | | | 1,723 | | | 1,351 | |
Less: Net income attributable to noncontrolling interests | | | | | 9 | | | 13 | |
Net Income Attributable to PepsiCo | | | | | $ | 1,714 | | | $ | 1,338 | |
Net Income Attributable to PepsiCo per Common Share | | | | | | | |
Basic | | | | | $ | 1.24 | | | $ | 0.96 | |
Diluted | | | | | $ | 1.24 | | | $ | 0.96 | |
Weighted-average common shares outstanding | | | | | | | |
Basic | | | | | 1,380 | | | 1,390 | |
Diluted | | | | | 1,387 | | | 1,396 | |
See accompanying notes to the condensed consolidated financial statements.
Condensed Consolidated Statement of Comprehensive Income
PepsiCo, Inc. and Subsidiaries
(in millions, unaudited)
| | | | | | | | | | | | | | | |
| | | 12 Weeks Ended |
| | | | | 3/20/2021 | | 3/21/2020 |
Net income | | | | | $ | 1,723 | | | $ | 1,351 | |
Other comprehensive income/(loss), net of taxes: | | | | | | | |
Net currency translation adjustment | | | | | 131 | | | (754) | |
Net change on cash flow hedges | | | | | 72 | | | (61) | |
Net pension and retiree medical adjustments | | | | | 27 | | | 57 | |
Other | | | | | — | | | 1 | |
| | | | | 230 | | | (757) | |
Comprehensive income | | | | | 1,953 | | | 594 | |
Less: Comprehensive income attributable to noncontrolling interests | | | | | 9 | | | 13 | |
Comprehensive Income Attributable to PepsiCo | | | | | $ | 1,944 | | | $ | 581 | |
See accompanying notes to the condensed consolidated financial statements.
Condensed Consolidated Statement of Cash Flows
PepsiCo, Inc. and Subsidiaries
(in millions, unaudited)
| | | | | | | | | | | |
| 12 Weeks Ended |
| 3/20/2021 | | 3/21/2020 |
Operating Activities | | | |
Net income | $ | 1,723 | | | $ | 1,351 | |
Depreciation and amortization | 560 | | | 533 | |
Share-based compensation expense | 79 | | | 61 | |
Restructuring and impairment charges | 43 | | | 38 | |
Cash payments for restructuring charges | (49) | | | (60) | |
Merger and integration (credits)/charges | (10) | | | 25 | |
Cash payments for merger and integration charges | (7) | | | (38) | |
Pension and retiree medical plan expenses | 21 | | | 40 | |
Pension and retiree medical plan contributions | (413) | | | (234) | |
Deferred income taxes and other tax charges and credits | 108 | | | 25 | |
| | | |
| | | |
Change in assets and liabilities: | | | |
Accounts and notes receivable | (455) | | | (784) | |
Inventories | (397) | | | (312) | |
Prepaid expenses and other current assets | (210) | | | (263) | |
Accounts payable and other current liabilities | (1,906) | | | (1,419) | |
Income taxes payable | 227 | | | 204 | |
Other, net | (33) | | | 84 | |
Net Cash Used for Operating Activities | (719) | | | (749) | |
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Investing Activities | | | |
Capital spending | (471) | | | (484) | |
Sales of property, plant and equipment | 5 | | | 5 | |
Acquisitions, net of cash acquired, and investments in noncontrolled affiliates | (13) | | | (454) | |
Divestitures | 35 | | | — | |
Short-term investments, by original maturity: | | | |
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More than three months - maturities | 535 | | | — | |
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Three months or less, net | 3 | | | 7 | |
Other investing, net | — | | | 1 | |
Net Cash Provided by/(Used for) Investing Activities | 94 | | | (925) | |
(Continued on following page)
Condensed Consolidated Statement of Cash Flows (continued)
PepsiCo, Inc. and Subsidiaries
(in millions, unaudited)
| | | | | | | | | | | |
| 12 Weeks Ended |
| 3/20/2021 | | 3/21/2020 |
Financing Activities | | | |
Proceeds from issuances of long-term debt | — | | | 6,429 | |
Payments of long-term debt | (1) | | | (1) | |
Short-term borrowings, by original maturity: | | | |
More than three months - proceeds | — | | | 164 | |
More than three months - payments | (396) | | | (2) | |
Three months or less, net | 53 | | | 2,794 | |
Cash dividends paid | (1,429) | | | (1,349) | |
Share repurchases - common | (106) | | | (573) | |
| | | |
Proceeds from exercises of stock options | 62 | | | 78 | |
Withholding tax payments on restricted stock units (RSUs) and performance stock units (PSUs) converted | (71) | | | (76) | |
Other financing | — | | | (2) | |
Net Cash (Used for)/Provided by Financing Activities | (1,888) | | | 7,462 | |
Effect of exchange rate changes on cash and cash equivalents and restricted cash | (10) | | | (66) | |
Net (Decrease)/Increase in Cash and Cash Equivalents and Restricted Cash | (2,523) | | | 5,722 | |
Cash and Cash Equivalents and Restricted Cash, Beginning of Year | 8,254 | | | 5,570 | |
Cash and Cash Equivalents and Restricted Cash, End of Period | $ | 5,731 | | | $ | 11,292 | |
| | | |
Supplemental Non-Cash Activity | | | |
Right-of-use assets obtained in exchange for lease obligations | $ | 167 | | | $ | 148 | |
See accompanying notes to the condensed consolidated financial statements.
Condensed Consolidated Balance Sheet
PepsiCo, Inc. and Subsidiaries
(in millions except per share amounts)
| | | | | | | | | | | |
| (Unaudited) | | |
| 3/20/2021 | | 12/26/2020 |
ASSETS | | | |
Current Assets | | | |
Cash and cash equivalents | $ | 5,661 | | | $ | 8,185 | |
Short-term investments | 964 | | | 1,366 | |
| | | |
Accounts and notes receivable, less allowance: 3/21 - $192 and 12/20 - $201 | 8,885 | | | 8,404 | |
Inventories: | | | |
Raw materials and packaging | 1,827 | | | 1,720 | |
Work-in-process | 308 | | | 205 | |
Finished goods | 2,421 | | | 2,247 | |
| 4,556 | | | 4,172 | |
Prepaid expenses and other current assets | 1,130 | | | 874 | |
Total Current Assets | 21,196 | | | 23,001 | |
Property, plant and equipment | 46,544 | | | 46,340 | |
Accumulated depreciation | (25,295) | | | (24,971) | |
Property, Plant and Equipment, net | 21,249 | | | 21,369 | |
Amortizable Intangible Assets, net | 1,690 | | | 1,703 | |
Goodwill | 18,779 | | | 18,757 | |
Other Indefinite-Lived Intangible Assets | 17,641 | | | 17,612 | |
| | | |
Investments in Noncontrolled Affiliates | 2,777 | | | 2,792 | |
Deferred Income Taxes | 4,370 | | | 4,372 | |
Other Assets | 3,522 | | | 3,312 | |
Total Assets | $ | 91,224 | | | $ | 92,918 | |
| | | |
LIABILITIES AND EQUITY | | | |
Current Liabilities | | | |
Short-term debt obligations | $ | 4,674 | | | $ | 3,780 | |
Accounts payable and other current liabilities | 18,019 | | | 19,592 | |
Total Current Liabilities | 22,693 | | | 23,372 | |
Long-Term Debt Obligations | 38,991 | | | 40,370 | |
Deferred Income Taxes | 4,491 | | | 4,284 | |
Other Liabilities | 10,996 | | | 11,340 | |
Total Liabilities | 77,171 | | | 79,366 | |
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: 1,382 and 1,380 shares, respectively) | 23 | | | 23 | |
Capital in excess of par value | 3,800 | | | 3,910 | |
Retained earnings | 63,740 | | | 63,443 | |
Accumulated other comprehensive loss | (15,246) | | | (15,476) | |
Repurchased common stock, in excess of par value (485 and 487 shares, respectively) | (38,370) | | | (38,446) | |
Total PepsiCo Common Shareholders’ Equity | 13,947 | | | 13,454 | |
Noncontrolling interests | 106 | | | 98 | |
Total Equity | 14,053 | | | 13,552 | |
Total Liabilities and Equity | $ | 91,224 | | | $ | 92,918 | |
See accompanying notes to the condensed consolidated financial statements.
Condensed Consolidated Statement of Equity
PepsiCo, Inc. and Subsidiaries
(in millions, except per share amounts, unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 12 Weeks Ended |
| | | | | 3/20/2021 | | 3/21/2020 |
| | | | | | | | | Shares | | Amount | | Shares | | Amount |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Common Stock | | | | | | | | | | | | | | | |
Balance, beginning of period | | | | | | | | | 1,380 | | | $ | 23 | | | 1,391 | | | $ | 23 | |
Change in repurchased common stock | | | | | | | | | 2 | | | — | | | (2) | | | — | |
Balance, end of period | | | | | | | | | 1,382 | | | 23 | | | 1,389 | | | 23 | |
Capital in Excess of Par Value | | | | | | | | | | | | | | | |
Balance, beginning of period | | | | | | | | | | | 3,910 | | | | | 3,886 | |
Share-based compensation expense | | | | | | | | | | | 80 | | | | | 62 | |
| | | | | | | | | | | | | | | |
Stock option exercises, RSUs and PSUs converted | | | | | | | | | | | (119) | | | | | (131) | |
Withholding tax on RSUs and PSUs converted | | | | | | | | | | | (71) | | | | | (76) | |
| | | | | | | | | | | | | | | |
Balance, end of period | | | | | | | | | | | 3,800 | | | | | 3,741 | |
Retained Earnings | | | | | | | | | | | | | | | |
Balance, beginning of period | | | | | | | | | | | 63,443 | | | | | 61,946 | |
Cumulative effect of accounting changes | | | | | | | | | | | — | | | | | (34) | |
Net income attributable to PepsiCo | | | | | | | | | | | 1,714 | | | | | 1,338 | |
Cash dividends declared – common (a) | | | | | | | | | | | (1,417) | | | | | (1,330) | |
| | | | | | | | | | | | | | | |
Balance, end of period | | | | | | | | | | | 63,740 | | | | | 61,920 | |
Accumulated Other Comprehensive Loss | | | | | | | | | | | | | | | |
Balance, beginning of period | | | | | | | | | | | (15,476) | | | | | (14,300) | |
Other comprehensive income/(loss) attributable to PepsiCo | | | | | | | | | | | 230 | | | | | (757) | |
Balance, end of period | | | | | | | | | | | (15,246) | | | | | (15,057) | |
Repurchased Common Stock | | | | | | | | | | | | | | | |
Balance, beginning of period | | | | | | | | | (487) | | | (38,446) | | | (476) | | | (36,769) | |
Share repurchases | | | | | | | | | (1) | | | (106) | | | (4) | | | (602) | |
Stock option exercises, RSUs and PSUs converted | | | | | | | | | 3 | | | 182 | | | 2 | | | 209 | |
| | | | | | | | | | | | | | | |
Balance, end of period | | | | | | | | | (485) | | | (38,370) | | | (478) | | | (37,162) | |
Total PepsiCo Common Shareholders’ Equity | | | | | | | | | | | 13,947 | | | | | 13,465 | |
Noncontrolling Interests | | | | | | | | | | | | | | | |
Balance, beginning of period | | | | | | | | | | | 98 | | | | | 82 | |
Net income attributable to noncontrolling interest | | | | | | | | | | | 9 | | | | | 13 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Other, net | | | | | | | | | | | (1) | | | | | (1) | |
Balance, end of period | | | | | | | | | | | 106 | | | | | 94 | |
Total Equity | | | | | | | | | | | $ | 14,053 | | | | | $ | 13,559 | |
(a)Cash dividends declared per common share were $1.0225 and $0.955 for the 12 weeks ended March 20, 2021 and March 21, 2020, respectively.
See accompanying notes to the condensed consolidated financial statements.
Notes to the Condensed Consolidated Financial Statements
Note 1 - Basis 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 26, 2020 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 26, 2020 (2020 Form 10-K). This report should be read in conjunction with our 2020 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 20, 2021 are not necessarily indicative of the results expected for any future period or the full year.
While our financial results in the United States and Canada (North America) are reported on a 12-week basis, substantially all of our international operations report on a monthly calendar basis for which the months of January and February are reflected in our results for the 12 weeks ended March 20, 2021.
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. The business and economic uncertainty resulting from the novel coronavirus (COVID-19) pandemic 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. 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.
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 seven reportable segments (also referred to as divisions), as follows:
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;
4)Latin America (LatAm), which includes all of our beverage, food and snack businesses in Latin America;
5)Europe, which includes all of our beverage, food and snack businesses in Europe;
6)Africa, Middle East and South Asia (AMESA), which includes all of our beverage, food and snack 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, food and snack businesses in Asia Pacific, Australia and New Zealand, and China region.
Net revenue of each division is as follows:
| | | | | | | | | | | | | | | |
| | | 12 Weeks Ended |
| | | | | 3/20/2021 | | 3/21/2020 |
FLNA | | | | | $ | 4,236 | | | $ | 4,074 | |
QFNA | | | | | 646 | | | 634 | |
PBNA | | | | | 5,074 | | | 4,838 | |
LatAm | | | | | 1,242 | | | 1,310 | |
Europe | | | | | 1,795 | | | 1,839 | |
AMESA (a) | | | | | 883 | | | 631 | |
APAC (b) | | | | | 944 | | | 555 | |
Total | | | | | $ | 14,820 | | | $ | 13,881 | |
(a)The increase primarily reflects our acquisition of Pioneer Food Group Ltd. (Pioneer Foods). See Note 12 for further information.
(b)The increase primarily reflects our acquisition of Hangzhou Haomusi Food Co., Ltd. (Be & Cheery). See Note 12 for further information.
Our primary performance obligation is the distribution and sales of beverage and food and snack products to our customers. The following tables reflect the approximate percentage of net revenue generated between our beverage business and our food and snack business for each of our international divisions, as well as our consolidated net revenue:
| | | | | | | | | | | | | | | | | | | | | | | |
| 12 Weeks Ended |
| 3/20/2021 | | 3/21/2020 |
| Beverage(a) | | Food/Snack | | Beverage(a) | | Food/Snack |
LatAm | 10 | % | | 90 | % | | 10 | % | | 90 | % |
Europe | 50 | % | | 50 | % | | 55 | % | | 45 | % |
AMESA | 30 | % | | 70 | % | | 35 | % | | 65 | % |
APAC | 15 | % | | 85 | % | | 20 | % | | 80 | % |
PepsiCo | 45 | % | | 55 | % | | 45 | % | | 55 | % |
| | | | | | | |
| | | | | | | |
(a)Beverage revenue from company-owned bottlers, which primarily includes our consolidated bottling operations in our PBNA and Europe segments, is approximately 40% of our consolidated net revenue in both the 12 weeks ended March 20, 2021 and March 21, 2020. Generally, our finished goods beverage operations produce higher net revenue but lower operating margins as compared to concentrate sold to authorized bottling partners for the manufacture of finished goods beverages.
Operating profit of each division is as follows:
| | | | | | | | | | | | | | | |
| | | 12 Weeks Ended |
| | | | | 3/20/2021 | | 3/21/2020 |
FLNA | | | | | $ | 1,240 | | | $ | 1,202 | |
QFNA | | | | | 150 | | | 150 | |
PBNA | | | | | 366 | | | 297 | |
LatAm | | | | | 218 | | | 231 | |
Europe | | | | | 131 | | | 146 | |
AMESA | | | | | 138 | | | 134 | |
APAC | | | | | 208 | | | 142 | |
Total divisions | | | | | $ | 2,451 | | | $ | 2,302 | |
Corporate unallocated expenses (a) | | | | | (139) | | | (378) | |
Total | | | | | $ | 2,312 | | | $ | 1,924 | |
(a)During the 12 weeks ended March 20, 2021, we recorded a pre-tax unrealized gain of $108 million ($82 million after-tax or $0.06 per share) on our short-term investment in a publicly traded company, based on the quoted active market price as of market close on March 19, 2021, the last trading day of our first quarter of 2021. The gain was recorded in selling, general and administrative expenses within corporate unallocated expenses. See Note 9 for further information. We subsequently sold all of these shares during the second quarter of 2021. We will record a related pre-tax loss of $39 million ($30 million after-tax), net of discounts, on the sale in our 12 weeks ending June 12, 2021 in selling, general and administrative expenses within corporate unallocated expenses.
Operating profit includes certain pre-tax charges taken as a result of the COVID-19 pandemic. These pre-tax charges by division are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 12 Weeks Ended 3/20/2021 |
| Allowances for Expected Credit Losses(a) | | Upfront Payments to Customers(b) | | Inventory Write-Downs and Product Returns | | Employee Compensation Expense(c) | | Employee Protection Costs(d) | | Other(e) | | Total |
FLNA (f) | $ | (4) | | | $ | — | | | $ | — | | | $ | 18 | | | $ | 9 | | | $ | 1 | | | $ | 24 | |
QFNA | — | | | — | | | — | | | 1 | | | 1 | | | — | | | 2 | |
PBNA (f) | (4) | | | 1 | | | — | | | 12 | | | 5 | | | (1) | | | 13 | |
LatAm | — | | | — | | | — | | | 12 | | | 2 | | | 1 | | | 15 | |
Europe | — | | | — | | | — | | | 3 | | | 3 | | | — | | | 6 | |
AMESA (f) | — | | | — | | | (2) | | | — | | | — | | | 1 | | | (1) | |
APAC | — | | | — | | | — | | | — | | | — | | | 2 | | | 2 | |
| | | | | | | | | | | | | |
Total | $ | (8) | | | $ | 1 | | | $ | (2) | | | $ | 46 | | | $ | 20 | | | $ | 4 | | | $ | 61 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 12 Weeks Ended 3/21/2020 |
| Allowances for Expected Credit Losses(a) | | Upfront Payments to Customers(b) | | Inventory Write-Downs and Product Returns(g) | | | | | | Other(e) | | Total |
FLNA | $ | 21 | | | $ | — | | | $ | 3 | | | | | | | $ | 3 | | | $ | 27 | |
QFNA | 2 | | | — | | | — | | | | | | | — | | | 2 | |
PBNA | 41 | | | 44 | | | 22 | | | | | | | 1 | | | 108 | |
| | | | | | | | | | | | | |
Europe | 4 | | | — | | | — | | | | | | | — | | | 4 | |
| | | | | | | | | | | | | |
APAC | — | | | — | | | 1 | | | | | | | 1 | | | 2 | |
| | | | | | | | | | | | | |
Total | $ | 68 | | | $ | 44 | | | $ | 26 | | | | | | | $ | 5 | | | $ | 143 | |
(a)Reflects the expected impact of the global economic uncertainty caused by COVID-19, leveraging estimates of creditworthiness and projections of default and recovery rates for certain of our customers, including foodservice and vending businesses.
(b)Relates to promotional spending for which benefit is not expected to be received.
(c)Includes incremental frontline incentive pay, crisis child care and other leave benefits and labor costs.
(d)Includes costs associated with personal protective equipment, temperature scans, cleaning and other sanitization services.
(e)Includes reserves for property, plant and equipment, donations of cash and product and other costs.
(f)Income amounts represent adjustments for changes in estimates of previously recorded amounts.
(g)Includes a reserve for product returns of $7 million.
Note 2 - Recently Issued Accounting Pronouncements
Adopted
In 2019, the Financial Accounting Standards Board issued guidance to simplify the accounting for income taxes. The guidance primarily addresses how to (1) recognize a deferred tax liability after we transition to or from the equity method of accounting, (2) evaluate if a step-up in the tax basis of goodwill is related to a business combination or is a separate transaction, (3) recognize all of the effects of a change in tax law in the period of enactment, including adjusting the estimated annual tax rate, and (4) include the amount of tax based on income in the income tax provision and any incremental amount as a tax not based on income for hybrid tax regimes. We adopted the guidance in the first quarter of 2021. The adoption did not have a material impact on our condensed consolidated financial statements or related disclosures.
Note 3 - Restructuring and Impairment Charges
2019 Multi-Year Productivity Plan
We publicly announced a multi-year productivity plan on February 15, 2019 (2019 Productivity Plan) that will leverage 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. In connection with this plan, we expect to incur pre-tax charges of approximately $2.5 billion, including cash expenditures of approximately $1.6 billion. These pre-tax charges are expected to consist of approximately 65% of severance and other employee-related costs, 15% for asset impairments (all non-cash) resulting from plant closures and related actions, and 20% for other costs associated with the implementation of our initiatives. We expect to complete this plan by 2023.
The total expected 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 | 15 | % | | 1 | % | | 30 | % | | 10 | % | | 25 | % | | 5 | % | | 3 | % | | 11 | % |
A summary of our 2019 Productivity Plan charges is as follows:
| | | | | | | | | | | | | | | |
| | | 12 Weeks Ended |
| | | | | 3/20/2021 | | 3/21/2020 |
Cost of sales | | | | | $ | 2 | | | $ | 2 | |
Selling, general and administrative expenses | | | | | 35 | | | 30 | |
Other pension and retiree medical benefits expense | | | | | 6 | | | 6 | |
Total restructuring and impairment charges | | | | | $ | 43 | | | $ | 38 | |
After-tax amount | | | | | $ | 35 | | | $ | 32 | |
Net income attributable to PepsiCo per common share | | | | | $ | (0.03) | | | $ | (0.02) | |
| | | | | | | | | | | | | | | | | | | | | |
| | | 12 Weeks Ended | | Plan to Date |
| | | | | 3/20/2021 | | 3/21/2020 | | through 3/20/2021 |
FLNA | | | | | $ | 15 | | | $ | 5 | | | $ | 151 | |
QFNA | | | | | — | | | 1 | | | 12 | |
PBNA | | | | | 4 | | | 3 | | | 142 | |
LatAm | | | | | 2 | | | 5 | | | 104 | |
Europe | | | | | 11 | | | 8 | | | 164 | |
AMESA | | | | | 1 | | | 2 | | | 56 | |
APAC | | | | | — | | | — | | | 54 | |
Corporate | | | | | 4 | | | 8 | | | 94 | |
| | | | | 37 | | | 32 | | | 777 | |
Other pension and retiree medical benefits expense | | | | | 6 | | | 6 | | | 63 | |
Total | | | | | $ | 43 | | | $ | 38 | | | $ | 840 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | 12 Weeks Ended | | Plan to Date |
| | | | | 3/20/2021 | | 3/21/2020 | | through 3/20/2021 |
Severance and other employee costs | | | | | $ | 34 | | | $ | 22 | | | $ | 478 | |
Asset impairments | | | | | — | | | 1 | | | 125 | |
Other costs | | | | | 9 | | | 15 | | | 237 | |
Total | | | | | $ | 43 | | | $ | 38 | | | $ | 840 | |
Severance and 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 20, 2021 is as follows:
| | | | | | | | | | | | | | | | | | | |
| Severance and Other Employee Costs | | | | Other Costs | | Total |
Liability as of December 26, 2020 | $ | 122 | | | | | $ | 5 | | | $ | 127 | |
2021 restructuring charges | 34 | | | | | 9 | | | 43 | |
Cash payments | (37) | | | | | (12) | | | (49) | |
Non-cash charges and translation | (6) | | | | | 1 | | | (5) | |
Liability as of March 20, 2021 | $ | 113 | | | | | $ | 3 | | | $ | 116 | |
Substantially all of the restructuring accrual at March 20, 2021 is expected to be paid by the end of 2021.
Other Productivity Initiatives
There were no charges related to other productivity and efficiency initiatives outside the scope of the 2019 Productivity Plan.
We regularly evaluate different productivity initiatives beyond the productivity plan and other initiatives described above.
Note 4 - Intangible Assets
A summary of our amortizable intangible assets is as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 3/20/2021 | | 12/26/2020 |
| | Gross | | Accumulated Amortization | | Net | | Gross | | Accumulated Amortization | | Net |
Acquired franchise rights | | $ | 982 | | | $ | (177) | | | $ | 805 | | | $ | 976 | | | $ | (173) | | | $ | 803 | |
Customer relationships | | 641 | | | (209) | | | 432 | | | 642 | | | (204) | | | 438 | |
Brands | | 1,348 | | | (1,104) | | | 244 | | | 1,348 | | | (1,099) | | | 249 | |
Other identifiable intangibles | | 473 | | | (264) | | | 209 | | | 474 | | | (261) | | | 213 | |
Total | | $ | 3,444 | | | $ | (1,754) | | | $ | 1,690 | | | $ | 3,440 | | | $ | (1,737) | | | $ | 1,703 | |
The change in the book value of indefinite-lived intangible assets is as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Balance 12/26/2020 | | Acquisitions | | Translation and Other | | Balance 3/20/2021 |
| | | |
FLNA (a) | | | | | | | |
Goodwill | $ | 465 | | | $ | (8) | | | $ | 4 | | | $ | 461 | |
Brands | 340 | | | — | | | 1 | | | 341 | |
Total | 805 | | | (8) | | | 5 | | | 802 | |
QFNA | | | | | | | |
Goodwill | 189 | | | — | | | — | | | |