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 11, 2022 (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
0.750% Senior Notes Due 2033	PEP33	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 5, 2022 was 1,380,084,844.

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 11, 2022 and June 12, 2021	3
	Condensed Consolidated Statement of Comprehensive Income – 12 and 24 Weeks Ended June 11, 2022 and June 12, 2021	4
	Condensed Consolidated Statement of Cash Flows – 24 Weeks Ended June 11, 2022 and June 12, 2021	5
	Condensed Consolidated Balance Sheet – June 11, 2022 and December 25, 2021	7
	Condensed Consolidated Statement of Equity – 12 and 24 Weeks Ended June 11, 2022 and June 12, 2021	8
	Notes to the Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Report of Independent Registered Public Accounting Firm		54
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	55
Item 4.	Controls and Procedures	55
Part II Other Information
Item 1.	Legal Proceedings	56
Item 1A.	Risk Factors	56
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	57
Item 6.	Exhibits	57

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
	6/11/2022		6/12/2021		6/11/2022		6/12/2021
Net Revenue	$	20,225	$	19,217	$	36,425	$	34,037
Cost of sales	9,415		8,880		16,848		15,551
Gross profit	10,810		10,337		19,577		18,486
Selling, general and administrative expenses	7,387		7,208		13,967		13,045
Gain associated with the Juice Transaction (a)	(13)		—		(3,335)		—
Impairment of intangible assets (see Notes 1 and 3)	1,359		—		1,601		—
Operating Profit	2,077		3,129		7,344		5,441
Other pension and retiree medical benefits (expense)/income	(2)		126		132		246
Net interest expense and other	(236)		(241)		(476)		(499)
Income before income taxes	1,839		3,014		7,000		5,188
Provision for income taxes	393		642		1,281		1,093
Net income	1,446		2,372		5,719		4,095
Less: Net income attributable to noncontrolling interests	17		14		29		23
Net Income Attributable to PepsiCo	$	1,429	$	2,358	$	5,690	$	4,072
Net Income Attributable to PepsiCo per Common Share
Basic	$	1.03	$	1.71	$	4.11	$	2.95
Diluted	$	1.03	$	1.70	$	4.09	$	2.94
Weighted-average common shares outstanding
Basic	1,382		1,382		1,383		1,381
Diluted	1,389		1,388		1,390		1,387

(a)In the 24 weeks ended June 11, 2022, we sold our Tropicana, Naked and other select juice brands to PAI Partners for approximately $3.5 billion in cash and a 39% noncontrolling interest in a newly formed joint venture (Tropicana JV) operating across North America and Europe (Juice Transaction). See Note 11 for further information.

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
	6/11/2022		6/12/2021		6/11/2022		6/12/2021
Net income	$	1,446	$	2,372	$	5,719	$	4,095
Other comprehensive income, net of taxes:
Net currency translation adjustment	1,274		268		714		399
Net change on cash flow hedges	(102)		93		4		165
Net pension and retiree medical adjustments	(250)		24		(237)		51
Other	5		2		1		2
	927		387		482		617
Comprehensive income	2,373		2,759		6,201		4,712
Less: Comprehensive income attributable to noncontrolling interests	17		14		29		23
Comprehensive Income Attributable to PepsiCo	$	2,356	$	2,745	$	6,172	$	4,689

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
	6/11/2022		6/12/2021
Operating Activities
Net income	$	5,719	$	4,095
Depreciation and amortization	1,195		1,213
Gain associated with the Juice Transaction	(3,335)		—
Brand portfolio impairment charges	465		—
Russia-Ukraine conflict charges	1,406		—
Operating lease right-of-use asset amortization	223		220
Share-based compensation expense	156		144
Restructuring and impairment charges	75		77
Cash payments for restructuring charges	(82)		(104)
Acquisition and divestiture-related charges	64		15
Cash payments for acquisition and divestiture-related charges	(34)		(14)
Pension and retiree medical plan expenses	139		48
Pension and retiree medical plan contributions	(214)		(461)
Deferred income taxes and other tax charges and credits	49		220
Tax payments related to the Tax Cuts and Jobs Act (TCJ Act)	(309)		(309)
Change in assets and liabilities:
Accounts and notes receivable	(1,753)		(1,214)
Inventories	(990)		(810)
Prepaid expenses and other current assets	(186)		(40)
Accounts payable and other current liabilities	(990)		(1,114)
Income taxes payable	608		516
Other, net	(325)		(142)
Net Cash Provided by Operating Activities	1,881		2,340
Investing Activities
Capital spending	(1,499)		(1,305)
Sales of property, plant and equipment	222		22
Acquisitions, net of cash acquired, and investments in noncontrolled affiliates	(29)		(22)
Proceeds associated with the Juice Transaction	3,456		—
Other divestitures and sales of investments in noncontrolled affiliates	15		120
Short-term investments, by original maturity:
More than three months - maturities	—		1,135
Three months or less, net	8		(67)
Other investing, net	(1)		1
Net Cash Provided by/(Used for) Investing Activities	2,172		(116)

    

(Continued on following page)

5

Condensed Consolidated Statement of Cash Flows (continued)

PepsiCo, Inc. and Subsidiaries

(in millions, unaudited)

	24 Weeks Ended
	6/11/2022		6/12/2021
Financing Activities
Payments of long-term debt	(1,652)		(1,696)
Debt redemptions	(1,550)		—
Short-term borrowings, by original maturity:
More than three months - proceeds	1,935		—
More than three months - payments	—		(397)
Three months or less, net	844		89
Cash dividends paid	(2,997)		(2,842)
Share repurchases - common	(699)		(106)
Proceeds from exercises of stock options	89		100
Withholding tax payments on restricted stock units (RSUs) and performance stock units (PSUs) converted	(87)		(73)
Other financing	(15)		(19)
Net Cash Used for Financing Activities	(4,132)		(4,944)
Effect of exchange rate changes on cash and cash equivalents and restricted cash	(83)		12
Net Decrease in Cash and Cash Equivalents and Restricted Cash	(162)		(2,708)
Cash and Cash Equivalents and Restricted Cash, Beginning of Year	5,707		8,254
Cash and Cash Equivalents and Restricted Cash, End of Period	$	5,545	$	5,546
Supplemental Non-Cash Activity
Right-of-use assets obtained in exchange for lease obligations	$	428	$	319

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)
	6/11/2022		12/25/2021
ASSETS
Current Assets
Cash and cash equivalents	$	5,405	$	5,596
Short-term investments	287		392
Accounts and notes receivable, less allowance: 6/22 - $185 and 12/21 - $147	10,498		8,680
Inventories:
Raw materials and packaging	2,403		1,898
Work-in-process	158		151
Finished goods	2,726		2,298
	5,287		4,347
Prepaid expenses and other current assets	1,156		980
Assets held for sale	—		1,788
Total Current Assets	22,633		21,783
Property, plant and equipment	47,902		46,828
Accumulated depreciation	(25,208)		(24,421)
Property, Plant and Equipment, net	22,694		22,407
Amortizable Intangible Assets, net	1,348		1,538
Goodwill	18,547		18,381
Other Indefinite-Lived Intangible Assets	15,743		17,127
Investments in Noncontrolled Affiliates	3,519		2,627
Deferred Income Taxes	4,345		4,310
Other Assets	4,274		4,204
Total Assets	$	93,103	$	92,377
LIABILITIES AND EQUITY
Current Liabilities
Short-term debt obligations	$	6,032	$	4,308
Accounts payable and other current liabilities	21,191		21,159
Liabilities held for sale	—		753
Total Current Liabilities	27,223		26,220
Long-Term Debt Obligations	33,247		36,026
Deferred Income Taxes	4,838		4,826
Other Liabilities	9,121		9,154
Total Liabilities	74,429		76,226
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: 1,381 and 1,383 shares, respectively)	23		23
Capital in excess of par value	3,970		4,001
Retained earnings	67,763		65,165
Accumulated other comprehensive loss	(14,416)		(14,898)
Repurchased common stock, in excess of par value (486 and 484 shares, respectively)	(38,787)		(38,248)
Total PepsiCo Common Shareholders’ Equity	18,553		16,043
Noncontrolling interests	121		108
Total Equity	18,674		16,151
Total Liabilities and Equity	$	93,103	$	92,377

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
	6/11/2022			6/12/2021			6/11/2022			6/12/2021
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount
Common Stock
Balance, beginning of period	1,384	$	23	1,382	$	23	1,383	$	23	1,380	$	23
Change in repurchased common stock	(3)	—		—	—		(2)	—		2	—
Balance, end of period	1,381	23		1,382	23		1,381	23		1,382	23
Capital in Excess of Par Value
Balance, beginning of period		3,893			3,800			4,001			3,910
Share-based compensation expense		76			65			159			145
Stock option exercises, RSUs and PSUs converted		3			—			(103)			(119)
Withholding tax on RSUs and PSUs converted		(2)			(2)			(87)			(73)
Balance, end of period		3,970			3,863			3,970			3,863
Retained Earnings
Balance, beginning of period		67,934			63,740			65,165			63,443
Net income attributable to PepsiCo		1,429			2,358			5,690			4,072
Cash dividends declared – common (a)		(1,600)			(1,493)			(3,092)			(2,910)
Balance, end of period		67,763			64,605			67,763			64,605
Accumulated Other Comprehensive Loss
Balance, beginning of period		(15,343)			(15,246)			(14,898)			(15,476)
Other comprehensive income attributable to PepsiCo		927			387			482			617
Balance, end of period		(14,416)			(14,859)			(14,416)			(14,859)
Repurchased Common Stock
Balance, beginning of period	(483)	(38,305)		(485)	(38,370)		(484)	(38,248)		(487)	(38,446)
Share repurchases	(3)	(518)		—	—		(4)	(731)		(1)	(106)
Stock option exercises, RSUs and PSUs converted	—	36		—	37		2	192		3	219
Balance, end of period	(486)	(38,787)		(485)	(38,333)		(486)	(38,787)		(485)	(38,333)
Total PepsiCo Common Shareholders’ Equity		18,553			15,299			18,553			15,299
Noncontrolling Interests
Balance, beginning of period		118			106			108			98
Net income attributable to noncontrolling interest		17			14			29			23
Distributions to noncontrolling interests		(14)			(19)			(14)			(20)
Other, net		—			(2)			(2)			(2)
Balance, end of period		121			99			121			99
Total Equity		$	18,674		$	15,398		$	18,674		$	15,398

(a)Cash dividends declared per common share were $1.15 and $1.075 for the 12 weeks ended June 11, 2022 and June 12, 2021, respectively and $2.225 and $2.0975 for the 24 weeks ended June 11, 2022 and June 12, 2021, 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 25, 2021 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 25, 2021 (2021 Form 10-K). This report should be read in conjunction with our 2021 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 11, 2022 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 reported on a monthly calendar basis prior to the fourth quarter of 2021. Beginning in the fourth quarter of 2021, all of our international operations reported on a monthly calendar basis. This change did not have a material impact on our condensed consolidated financial statements. For our international operations, the months of March, April and May are reflected in our results for the 12 weeks ended June 11, 2022, and the months of January through May are reflected in our results for the 24 weeks ended June 11, 2022.

The preparation of our condensed consolidated financial statements requires management to make estimates and assumptions that affect the amounts reported in our condensed consolidated financial statements and related disclosures. Additionally, the business and economic uncertainty resulting from the novel coronavirus (COVID-19) pandemic and the Russia-Ukraine conflict 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.

9

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 convenient food businesses in the United States and Canada;

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

3)PepsiCo Beverages North America (PBNA), which includes our beverage businesses in the United States and Canada;

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

5)Europe, which includes all of our beverage and convenient food businesses in Europe;

6)Africa, Middle East and South Asia (AMESA), which includes all of our beverage and convenient food businesses in Africa, the Middle East and South Asia; and

7)Asia Pacific, Australia and New Zealand and China region (APAC), which includes all of our beverage and convenient food businesses in Asia Pacific, Australia and New Zealand, and China region.

Net revenue of each division is as follows:

	12 Weeks Ended				24 Weeks Ended
	6/11/2022		6/12/2021		6/11/2022		6/12/2021
FLNA	$	5,181	$	4,552	$	10,020	$	8,788
QFNA	675		575		1,388		1,221
PBNA	6,120		6,156		11,473		11,230
LatAm	2,415		1,967		3,889		3,209
Europe	3,023		3,286		4,820		5,081
AMESA	1,696		1,602		2,700		2,485
APAC	1,115		1,079		2,135		2,023
Total	$	20,225	$	19,217	$	36,425	$	34,037

10

Our primary performance obligation is the distribution and sales of beverage and convenient food products to our customers. The following tables reflect the approximate percentage of net revenue generated between our beverage business and our convenient food business for each of our international divisions, as well as our consolidated net revenue:

	12 Weeks Ended
	6/11/2022				6/12/2021
	Beverages(a)		Convenient Foods		Beverages(a)		Convenient Foods
LatAm	10	%	90	%	10	%	90	%
Europe	50	%	50	%	55	%	45	%
AMESA	35	%	65	%	35	%	65	%
APAC	25	%	75	%	25	%	75	%
PepsiCo	45	%	55	%	45	%	55	%

	24 Weeks Ended
	6/11/2022				6/12/2021
	Beverages(a)		Convenient Foods		Beverages(a)		Convenient Foods
LatAm	10	%	90	%	10	%	90	%
Europe	50	%	50	%	55	%	45	%
AMESA	30	%	70	%	30	%	70	%
APAC	20	%	80	%	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 divisions, is over 35% of our consolidated net revenue in the 12 and 24 weeks ended June 11, 2022, and approximately 40% of our consolidated net revenue in the 12 and 24 weeks ended June 12, 2021. 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
	6/11/2022		6/12/2021		6/11/2022		6/12/2021
FLNA	$	1,448	$	1,382	$	2,744	$	2,622
QFNA	135		128		294		278
PBNA (a) (b)	651		809		4,085		1,175
LatAm (c)	420		356		743		574
Europe (a) (d)	(797)		405		(933)		536
AMESA	290		256		470		394
APAC	206		192		421		400
Total divisions	2,353		3,528		7,824		5,979
Corporate unallocated expenses (e) (f)	(276)		(399)		(480)		(538)
Total	$	2,077	$	3,129	$	7,344	$	5,441

(a)In the 24 weeks ended June 11, 2022, we recorded a gain of $3.0 billion and $298 million in our PBNA and Europe divisions, respectively, associated with the Juice Transaction. The total after-tax amount was $2.9 billion or $2.07 per share. See Note 11 for further information.

(b)In the 12 and 24 weeks ended June 11, 2022, we decided to terminate our agreement with Vital Pharmaceuticals, Inc. (Vital) to distribute Bang Energy drinks in our PBNA division. As a result, we recognized pre-tax impairment and other charges (Brand Portfolio Impairment Charges) of $141 million ($107 million after-tax or $0.08 per share) primarily related to the write-off of distribution rights, with $8 million recorded in cost of sales, $7 million recorded in selling, general and administrative expenses and $126 million recorded in impairment of intangible assets. See Note 3 for further information.

11

(c)In the 12 and 24 weeks ended June 11, 2022, we made the decision to sell or discontinue certain non-strategic brands in our LatAm division. As a result, we recognized pre-tax impairment and other charges (Brand Portfolio Impairment Charges) of $83 million ($56 million after-tax or $0.04 per share) primarily related to property, plant and equipment and intangible assets, with $47 million recorded in selling, general and administrative expenses and $36 million recorded in impairment of intangible assets. See Note 3 for further information.

(d)In the 24 weeks ended June 11, 2022, we recorded pre-tax impairment charges (Brand Portfolio Impairment Charges) of $241 million ($193 million after-tax or $0.14 per share) in impairment of intangible assets related to the discontinuation or repositioning of certain juice and dairy brands in Russia. See Note 3 for further information. Also see below for charges taken as a result of the Russia-Ukraine conflict.

(e)In the 12 weeks ended June 11, 2022, we recorded a pre-tax loss on certain equity investments of $56 million ($42 million after-tax or $0.03 per share) in selling, general and administrative expenses. In the 24 weeks ended June 11, 2022, we recorded a pre-tax loss on certain equity investments of $64 million ($48 million after-tax or $0.03 per share) in selling, general and administrative expenses.