UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 12, 2021 (24 weeks)

OR

☐ 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

PepsiCo, Inc.

(Exact Name of Registrant as Specified in its Charter)

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 and Zip Code)

(914) 253-2000

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
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
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.

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 July 6, 2021 was 1,382,114,956.

PepsiCo, Inc. and Subsidiaries

Table of Contents

		Page No.
Part I Financial Information
Item 1.	Condensed Consolidated Financial Statements	3
	Condensed Consolidated Statement of Income – 12 and 24 Weeks Ended June 12, 2021 and June 13, 2020	3
	Condensed Consolidated Statement of Comprehensive Income – 12 and 24 Weeks Ended June 12, 2021 and June 13, 2020	4
	Condensed Consolidated Statement of Cash Flows – 24 Weeks Ended June 12, 2021 and June 13, 2020	5
	Condensed Consolidated Balance Sheet – June 12, 2021 and December 26, 2020	7
	Condensed Consolidated Statement of Equity – 12 and 24 Weeks Ended June 12, 2021 and June 13, 2020	8
	Notes to the Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Report of Independent Registered Public Accounting Firm		50
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	51
Item 4.	Controls and Procedures	51
Part II Other Information
Item 1.	Legal Proceedings	52
Item 1A.	Risk Factors	52
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	52
Item 6.	Exhibits	52

2

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				24 Weeks Ended
	6/12/2021		6/13/2020		6/12/2021		6/13/2020
Net Revenue	$	19,217	$	15,945	$	34,037	$	29,826
Cost of sales	8,880		7,088		15,551		13,215
Gross profit	10,337		8,857		18,486		16,611
Selling, general and administrative expenses	7,208		6,538		13,045		12,368
Operating Profit	3,129		2,319		5,441		4,243
Other pension and retiree medical benefits income	126		84		246		161
Net interest expense and other	(241)		(235)		(499)		(525)
Income before income taxes	3,014		2,168		5,188		3,879
Provision for income taxes	642		510		1,093		870
Net income	2,372		1,658		4,095		3,009
Less: Net income attributable to noncontrolling interests	14		12		23		25
Net Income Attributable to PepsiCo	$	2,358	$	1,646	$	4,072	$	2,984
Net Income Attributable to PepsiCo per Common Share
Basic	$	1.71	$	1.19	$	2.95	$	2.15
Diluted	$	1.70	$	1.18	$	2.94	$	2.14
Weighted-average common shares outstanding
Basic	1,382		1,387		1,381		1,389
Diluted	1,388		1,393		1,387		1,395

See accompanying notes to the condensed consolidated financial statements.

3

Condensed Consolidated Statement of Comprehensive Income

PepsiCo, Inc. and Subsidiaries

(in millions, unaudited) 

	12 Weeks Ended				24 Weeks Ended
	6/12/2021		6/13/2020		6/12/2021		6/13/2020
Net income	$	2,372	$	1,658	$	4,095	$	3,009
Other comprehensive income/(loss), net of taxes:
Net currency translation adjustment	268		(796)		399		(1,550)
Net change on cash flow hedges	93		13		165		(48)
Net pension and retiree medical adjustments	24		63		51		120
Other	2		(1)		2		—
	387		(721)		617		(1,478)
Comprehensive income	2,759		937		4,712		1,531
Less: Comprehensive income attributable to noncontrolling interests	14		12		23		25
Comprehensive Income Attributable to PepsiCo	$	2,745	$	925	$	4,689	$	1,506

See accompanying notes to the condensed consolidated financial statements.

4

Condensed Consolidated Statement of Cash Flows

PepsiCo, Inc. and Subsidiaries

(in millions, unaudited)

	24 Weeks Ended
	6/12/2021		6/13/2020
Operating Activities
Net income	$	4,095	$	3,009
Depreciation and amortization	1,213		1,122
Share-based compensation expense	144		101
Restructuring and impairment charges	77		63
Cash payments for restructuring charges	(104)		(109)
Inventory fair value adjustments and merger and integration charges	15		243
Cash payments for merger and integration charges	(14)		(89)
Pension and retiree medical plan expenses	48		80
Pension and retiree medical plan contributions	(461)		(293)
Deferred income taxes and other tax charges and credits	220		109
Tax payments related to the Tax Cuts and Jobs Act (TCJ Act)	(309)		—
Change in assets and liabilities:
Accounts and notes receivable	(1,214)		(1,101)
Inventories	(810)		(827)
Prepaid expenses and other current assets	(40)		(251)
Accounts payable and other current liabilities	(1,114)		(1,336)
Income taxes payable	516		448
Other, net	78		293
Net Cash Provided by Operating Activities	2,340		1,462
Investing Activities
Capital spending	(1,305)		(1,188)
Sales of property, plant and equipment	22		18
Acquisitions, net of cash acquired, and investments in noncontrolled affiliates	(22)		(5,649)
Divestitures and sales of investments in noncontrolled affiliates	120		4
Short-term investments, by original maturity:
More than three months - maturities	1,135		—
Three months or less, net	(67)		18
Other investing, net	1		35
Net Cash Used for Investing Activities	(116)		(6,762)

    

(Continued on following page)

5

Condensed Consolidated Statement of Cash Flows (continued)

PepsiCo, Inc. and Subsidiaries

(in millions, unaudited)

	24 Weeks Ended
	6/12/2021		6/13/2020
Financing Activities
Proceeds from issuances of long-term debt	—		10,564
Payments of long-term debt	(1,696)		(752)
Short-term borrowings, by original maturity:
More than three months - proceeds	—		3,663
More than three months - payments	(397)		(1,176)
Three months or less, net	89		461
Cash dividends paid	(2,842)		(2,677)
Share repurchases - common	(106)		(1,137)
Proceeds from exercises of stock options	100		120
Withholding tax payments on restricted stock units (RSUs) and performance stock units (PSUs) converted	(73)		(79)
Other financing	(19)		(16)
Net Cash (Used for)/Provided by Financing Activities	(4,944)		8,971
Effect of exchange rate changes on cash and cash equivalents and restricted cash	12		(252)
Net (Decrease)/Increase in Cash and Cash Equivalents and Restricted Cash	(2,708)		3,419
Cash and Cash Equivalents and Restricted Cash, Beginning of Year	8,254		5,570
Cash and Cash Equivalents and Restricted Cash, End of Period	$	5,546	$	8,989
Supplemental Non-Cash Activity
Right-of-use assets obtained in exchange for lease obligations	$	319	$	302

See accompanying notes to the condensed consolidated financial statements.

6

Condensed Consolidated Balance Sheet

PepsiCo, Inc. and Subsidiaries

(in millions except per share amounts)

	(Unaudited)
	6/12/2021		12/26/2020
ASSETS
Current Assets
Cash and cash equivalents	$	5,449	$	8,185
Short-term investments	328		1,366
Accounts and notes receivable, less allowance: 6/21 - $170 and 12/20 - $201	9,722		8,404
Inventories:
Raw materials and packaging	2,081		1,720
Work-in-process	381		205
Finished goods	2,544		2,247
	5,006		4,172
Prepaid expenses and other current assets	1,092		874
Total Current Assets	21,597		23,001
Property, plant and equipment	47,404		46,340
Accumulated depreciation	(25,785)		(24,971)
Property, Plant and Equipment, net	21,619		21,369
Amortizable Intangible Assets, net	1,686		1,703
Goodwill	18,893		18,757
Other Indefinite-Lived Intangible Assets	17,738		17,612
Investments in Noncontrolled Affiliates	2,774		2,792
Deferred Income Taxes	4,370		4,372
Other Assets	3,708		3,312
Total Assets	$	92,385	$	92,918
LIABILITIES AND EQUITY
Current Liabilities
Short-term debt obligations	$	4,264	$	3,780
Accounts payable and other current liabilities	19,359		19,592
Total Current Liabilities	23,623		23,372
Long-Term Debt Obligations	38,034		40,370
Deferred Income Taxes	4,625		4,284
Other Liabilities	10,705		11,340
Total Liabilities	76,987		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	3,863		3,910
Retained earnings	64,605		63,443
Accumulated other comprehensive loss	(14,859)		(15,476)
Repurchased common stock, in excess of par value (485 and 487 shares, respectively)	(38,333)		(38,446)
Total PepsiCo Common Shareholders’ Equity	15,299		13,454
Noncontrolling interests	99		98
Total Equity	15,398		13,552
Total Liabilities and Equity	$	92,385	$	92,918

See accompanying notes to the condensed consolidated financial statements.

7

Condensed Consolidated Statement of Equity

PepsiCo, Inc. and Subsidiaries

(in millions, except per share amounts, unaudited)

	12 Weeks Ended						24 Weeks Ended
	6/12/2021			6/13/2020			6/12/2021			6/13/2020
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount
Common Stock
Balance, beginning of period	1,382	$	23	1,389	$	23	1,380	$	23	1,391	$	23
Change in repurchased common stock	—	—		(4)	—		2	—		(6)	—
Balance, end of period	1,382	23		1,385	23		1,382	23		1,385	23
Capital in Excess of Par Value
Balance, beginning of period		3,800			3,741			3,910			3,886
Share-based compensation expense		65			39			145			101
Stock option exercises, RSUs and PSUs converted		—			(5)			(119)			(136)
Withholding tax on RSUs and PSUs converted		(2)			(3)			(73)			(79)
Balance, end of period		3,863			3,772			3,863			3,772
Retained Earnings
Balance, beginning of period		63,740			61,920			63,443			61,946
Cumulative effect of accounting changes		—			—			—			(34)
Net income attributable to PepsiCo		2,358			1,646			4,072			2,984
Cash dividends declared – common (a)		(1,493)			(1,421)			(2,910)			(2,751)
Balance, end of period		64,605			62,145			64,605			62,145
Accumulated Other Comprehensive Loss
Balance, beginning of period		(15,246)			(15,057)			(15,476)			(14,300)
Other comprehensive income/(loss) attributable to PepsiCo		387			(721)			617			(1,478)
Balance, end of period		(14,859)			(15,778)			(14,859)			(15,778)
Repurchased Common Stock
Balance, beginning of period	(485)	(38,370)		(478)	(37,162)		(487)	(38,446)		(476)	(36,769)
Share repurchases	—	—		(5)	(557)		(1)	(106)		(9)	(1,159)
Stock option exercises, RSUs and PSUs converted	—	37		1	48		3	219		3	257
Balance, end of period	(485)	(38,333)		(482)	(37,671)		(485)	(38,333)		(482)	(37,671)
Total PepsiCo Common Shareholders’ Equity		15,299			12,491			15,299			12,491
Noncontrolling Interests
Balance, beginning of period		106			94			98			82
Net income attributable to noncontrolling interest		14			12			23			25
Distributions to noncontrolling interests		(19)			(15)			(20)			(15)
Acquisitions		—			6			—			6
Other, net		(2)			(1)			(2)			(2)
Balance, end of period		99			96			99			96
Total Equity		$	15,398		$	12,587		$	15,398		$	12,587

(a)Cash dividends declared per common share were $1.075 and $1.0225 for the 12 weeks ended June 12, 2021 and June 13, 2020, respectively, and $2.0975 and $1.9775 for the 24 weeks ended June 12, 2021 and June 13, 2020, respectively.

See accompanying notes to the condensed consolidated financial statements.

8

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 and 24 weeks ended June 12, 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 March, April and May are reflected in our results for the 12 weeks ended June 12, 2021 and the months of January through May are reflected in our results for the 24 weeks ended June 12, 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;

9

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				24 Weeks Ended
	6/12/2021		6/13/2020		6/12/2021		6/13/2020
FLNA	$	4,552	$	4,273	$	8,788	$	8,347
QFNA	575		664		1,221		1,298
PBNA	6,156		4,970		11,230		9,808
LatAm	1,967		1,567		3,209		2,877
Europe	3,286		2,725		5,081		4,564
AMESA (a)	1,602		983		2,485		1,614
APAC (b)	1,079		763		2,023		1,318
Total	$	19,217	$	15,945	$	34,037	$	29,826

(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
	6/12/2021				6/13/2020
	Beverage(a)		Food/Snack		Beverage(a)		Food/Snack
LatAm	10	%	90	%	10	%	90	%
Europe	55	%	45	%	50	%	50	%
AMESA	35	%	65	%	40	%	60	%
APAC	25	%	75	%	25	%	75	%
PepsiCo	45	%	55	%	45	%	55	%

10

	24 Weeks Ended
	6/12/2021				6/13/2020
	Beverage(a)		Food/Snack		Beverage(a)		Food/Snack
LatAm	10	%	90	%	10	%	90	%
Europe	55	%	45	%	55	%	45	%
AMESA	30	%	70	%	35	%	65	%
APAC	20	%	80	%	25	%	75	%
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 each of the 12 and 24 weeks ended June 12, 2021 and June 13, 2020. 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 of each division is as follows:

	12 Weeks Ended				24 Weeks Ended
	6/12/2021		6/13/2020		6/12/2021		6/13/2020
FLNA	$	1,382	$	1,278	$	2,622	$	2,480
QFNA	128		196		278		346
PBNA	809		397		1,175		694
LatAm	356		219		574		450
Europe	405		351		536		497
AMESA	256		59		394		193
APAC	192		189		400		331
Total divisions	3,528		2,689		5,979		4,991
Corporate unallocated expenses (a)	(399)		(370)		(538)		(748)
Total	$	3,129	$	2,319	$	5,441	$	4,243

(a)In the 12 weeks ended June 12, 2021, we sold our short-term investment in a publicly traded company and recorded a pre-tax loss on the sale of $39 million ($30 million after-tax or $0.02 per share), net of discounts, in selling, general and administrative expenses. The 24 weeks ended June 12, 2021 include a pre-tax net gain of $69 million ($52 million after-tax or $0.04 per share) associated with this sale.

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 6/12/2021
	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	$	(4)	$	—	$	—	$	11	$	7	$	—	$	14
QFNA	—		—		—		1		—		—		1
PBNA	(9)		(6)		—		7		4		(7)		(11)
LatAm	—		—		1		12		3