pep-20220903

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 September 3, 2022 (36 weeks)


☐			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

3.200% Senior Notes Due 2029

PEP29

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

3.550% Senior Notes Due 2034

PEP34

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 October 5, 2022 was 1,377,709,209.

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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 36 Weeks Ended September 3 , 2022 and Sept ember 4 , 2021	3
	Condensed Consolidated Statement of Comprehensive Income – 12 and 36 Weeks Ended September 3 , 2022 and September 4 , 2021	4
	Condensed Consolidated Statement of Cash Flows – 36 Weeks Ended September 3 , 2022 and September 4 , 2021	5
	Condensed Consolidated Balance Sheet – September 3, 2022 and December 25, 2021	7
	Condensed Consolidated Statement of Equity – 12 and 36 Weeks Ended September 3 , 2022 and September 4 , 2021	8
	Notes to the Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Report of Independent Registered Public Accounting Firm		56
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	57
Item 4.	Controls and Procedures	57
Part II Other Information
Item 1.	Legal Proceedings	58
Item 1A.	Risk Factors	58
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	59
Item 6.	Exhibits	59

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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				36 Weeks Ended
	9/3/2022		9/4/2021		9/3/2022		9/4/2021
Net Revenue	$	21,971	$	20,189	$	58,396	$	54,226
Cost of sales	10,308		9,394		27,156		24,945
Gross profit	11,663		10,795		31,240		29,281
Selling, general and administrative expenses	8,295		7,636		22,262		20,681
Gain associated with the Juice Transaction (a)	14		—		(3,321)		—
Impairment of intangible assets (see Notes 1 and 3)	1		—		1,602		—
Operating Profit	3,353		3,159		10,697		8,600
Other pension and retiree medical benefits income	36		118		168		364
Net interest expense and other	(190)		(232)		(666)		(731)
Income before income taxes	3,199		3,045		10,199		8,233
Provision for income taxes	475		802		1,756		1,895
Net income	2,724		2,243		8,443		6,338
Less: Net income attributable to noncontrolling interests	22		19		51		42
Net Income Attributable to PepsiCo	$	2,702	$	2,224	$	8,392	$	6,296
Net Income Attributable to PepsiCo per Common Share
Basic	$	1.96	$	1.61	$	6.07	$	4.56
Diluted	$	1.95	$	1.60	$	6.04	$	4.54
Weighted-average common shares outstanding
Basic	1,380		1,382		1,382		1,381
Diluted	1,387		1,389		1,389		1,388

(a)In the 36 weeks ended September 3, 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.

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Condensed Consolidated Statement of Comprehensive Income

PepsiCo, Inc. and Subsidiaries

(in millions, unaudited)


	12 Weeks Ended				36 Weeks Ended
	9/3/2022		9/4/2021		9/3/2022		9/4/2021
Net income	$	2,724	$	2,243	$	8,443	$	6,338
Other comprehensive (loss)/income, net of taxes:
Net currency translation adjustment	(324)		(335)		390		64
Net change on cash flow hedges	(113)		(21)		(109)		144
Net pension and retiree medical adjustments	108		90		(129)		141

Other	2		—		3		2
	(327)		(266)		155		351
Comprehensive income	2,397		1,977		8,598		6,689
Less: Comprehensive income attributable to noncontrolling interests	22		19		51		42
Comprehensive Income Attributable to PepsiCo	$	2,375	$	1,958	$	8,547	$	6,647

See accompanying notes to the condensed consolidated financial statements.

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Condensed Consolidated Statement of Cash Flows

PepsiCo, Inc. and Subsidiaries

(in millions, unaudited)


	36 Weeks Ended
	9/3/2022		9/4/2021
Operating Activities
Net income	$	8,443	$	6,338
Depreciation and amortization	1,854		1,863
Gain associated with the Juice Transaction	(3,321)		—
Brand portfolio impairment charges	475		—
Russia-Ukraine conflict charges	1,402		—
Operating lease right-of-use asset amortization	346		340
Share-based compensation expense	233		215
Restructuring and impairment charges	126		129
Cash payments for restructuring charges	(134)		(165)
Acquisition and divestiture-related charges	69		12
Cash payments for acquisition and divestiture-related charges	(41)		(25)
Pension and retiree medical plan expenses	235		81
Pension and retiree medical plan contributions	(335)		(715)
Deferred income taxes and other tax charges and credits	(322)		261
Tax expense related to the Tax Cuts and Jobs Act (TCJ Act)	86		190
Tax payments related to the TCJ Act	(309)		(309)
Change in assets and liabilities:
Accounts and notes receivable	(2,258)		(1,416)
Inventories	(837)		(579)
Prepaid expenses and other current assets	(124)		(46)
Accounts payable and other current liabilities	426		99
Income taxes payable	718		645
Other, net	(426)		(284)
Net Cash Provided by Operating Activities	6,306		6,634

Investing Activities
Capital spending	(2,556)		(2,276)
Sales of property, plant and equipment	228		40
Acquisitions, net of cash acquired, investments in noncontrolled affiliates and purchases of intangible and other assets	(804)		(28)
Proceeds associated with the Juice Transaction	3,456		—
Other divestitures, sales of investments in noncontrolled affiliates and other assets	15		158
Short-term investments, by original maturity:
More than three months - purchases	(46)		—
More than three months - maturities	—		1,135

Three months or less, net	9		(65)
Other investing, net	7		6
Net Cash Provided by/(Used for) Investing Activities	309		(1,030)

(Continued on following page)

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Condensed Consolidated Statement of Cash Flows (continued)

PepsiCo, Inc. and Subsidiaries

(in millions, unaudited)


	36 Weeks Ended
	9/3/2022		9/4/2021
Financing Activities
Proceeds from issuances of long-term debt	3,377		—
Payments of long-term debt	(1,653)		(2,454)
Debt redemptions	(1,550)		—
Short-term borrowings, by original maturity:
More than three months - proceeds	1,947		—
More than three months - payments	(1,932)		(397)
Three months or less, net	(45)		19

Cash dividends paid	(4,586)		(4,328)
Share repurchases - common	(1,156)		(106)

Proceeds from exercises of stock options	113		146
Withholding tax payments on restricted stock units (RSUs) and performance stock units (PSUs) converted	(97)		(82)
Other financing	(25)		(19)
Net Cash Used for Financing Activities	(5,607)		(7,221)
Effect of exchange rate changes on cash and cash equivalents and restricted cash	(197)		(30)
Net Increase/(Decrease) in Cash and Cash Equivalents and Restricted Cash	811		(1,647)
Cash and Cash Equivalents and Restricted Cash, Beginning of Year	5,707		8,254
Cash and Cash Equivalents and Restricted Cash, End of Period	$	6,518	$	6,607

Supplemental Non-Cash Activity
Right-of-use assets obtained in exchange for lease obligations	$	560	$	494

See accompanying notes to the condensed consolidated financial statements.

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Condensed Consolidated Balance Sheet

PepsiCo, Inc. and Subsidiaries

(in millions except per share amounts)


	(Unaudited)
	9/3/2022		12/25/2021
ASSETS
Current Assets
Cash and cash equivalents	$	6,415	$	5,596
Short-term investments	327		392

Accounts and notes receivable, less allowance: 9/22 - $165 and 12/21 - $147	10,739		8,680
Inventories:
Raw materials and packaging	2,303		1,898
Work-in-process	150		151
Finished goods	2,566		2,298
	5,019		4,347
Prepaid expenses and other current assets	1,043		980
Assets held for sale	—		1,788
Total Current Assets	23,543		21,783
Property, plant and equipment	48,100		46,828
Accumulated depreciation	(25,300)		(24,421)
Property, Plant and Equipment, net	22,800		22,407
Amortizable Intangible Assets, net	1,314		1,538
Goodwill	18,388		18,381
Other Indefinite-Lived Intangible Assets	15,838		17,127

Investments in Noncontrolled Affiliates	3,224		2,350
Deferred Income Taxes	4,324		4,310
Other Assets	5,030		4,481
Total Assets	$	94,461	$	92,377

LIABILITIES AND EQUITY
Current Liabilities
Short-term debt obligations	$	3,109	$	4,308
Accounts payable and other current liabilities	22,544		21,159
Liabilities held for sale	—		753
Total Current Liabilities	25,653		26,220
Long-Term Debt Obligations	36,136		36,026
Deferred Income Taxes	4,724		4,826
Other Liabilities	8,813		9,154
Total Liabilities	75,326		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: 1,379 and 1,383 shares, respectively)	23		23
Capital in excess of par value	4,036		4,001
Retained earnings	68,872		65,165
Accumulated other comprehensive loss	(14,743)		(14,898)
Repurchased common stock, in excess of par value (488 and 484 shares, respectively)	(39,211)		(38,248)
Total PepsiCo Common Shareholders’ Equity	18,977		16,043
Noncontrolling interests	158		108
Total Equity	19,135		16,151
Total Liabilities and Equity	$	94,461	$	92,377

See accompanying notes to the condensed consolidated financial statements.

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Condensed Consolidated Statement of Equity

PepsiCo, Inc. and Subsidiaries

(in millions, except per share amounts, unaudited)


	12 Weeks Ended						36 Weeks Ended
	9/3/2022			9/4/2021			9/3/2022			9/4/2021
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount










Common Stock
Balance, beginning of period	1,381	$	23	1,382	$	23	1,383	$	23	1,380	$	23
Change in repurchased common stock	(2)	—		1	—		(4)	—		3	—
Balance, end of period	1,379	23		1,383	23		1,379	23		1,383	23
Capital in Excess of Par Value
Balance, beginning of period		3,970			3,863			4,001			3,910
Share-based compensation expense		77			70			236			215

Stock option exercises, RSUs and PSUs converted		1			—			(102)			(119)
Withholding tax on RSUs and PSUs converted		(10)			(9)			(97)			(82)
Other		(2)			—			(2)			—
Balance, end of period		4,036			3,924			4,036			3,924
Retained Earnings
Balance, beginning of period		67,763			64,605			65,165			63,443

Net income attributable to PepsiCo		2,702			2,224			8,392			6,296
Cash dividends declared – common (a)		(1,593)			(1,493)			(4,685)			(4,403)

Balance, end of period		68,872			65,336			68,872			65,336
Accumulated Other Comprehensive Loss
Balance, beginning of period		(14,416)			(14,859)			(14,898)			(15,476)
Other comprehensive (loss)/income attributable to PepsiCo		(327)			(266)			155			351
Balance, end of period		(14,743)			(15,125)			(14,743)			(15,125)
Repurchased Common Stock
Balance, beginning of period	(486)	(38,787)		(485)	(38,333)		(484)	(38,248)		(487)	(38,446)
Share repurchases	(3)	(448)		—	—		(7)	(1,179)		(1)	(106)
Stock option exercises, RSUs and PSUs converted	1	23		1	46		3	215		4	265
Other	—	1		—	1		—	1		—	1
Balance, end of period	(488)	(39,211)		(484)	(38,286)		(488)	(39,211)		(484)	(38,286)
Total PepsiCo Common Shareholders’ Equity		18,977			15,872			18,977			15,872
Noncontrolling Interests
Balance, beginning of period		121			99			108			98
Net income attributable to noncontrolling interest		22			19			51			42
Distributions to noncontrolling interests		(6)			—			(20)			(20)

Acquisitions		21			—			21			—
Other, net		—			—			(2)			(2)
Balance, end of period		158			118			158			118
Total Equity		$	19,135		$	15,990		$	19,135		$	15,990

(a)Cash dividends declared per common share were $1.15 and $1.075 for the 12 weeks ended September 3, 2022 and September 4, 2021, respectively and $3.375 and $3.1725 for the 36 weeks ended September 3, 2022 and September 4, 2021, respectively.

See accompanying notes to the condensed consolidated financial statements.

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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 36 weeks ended September 3, 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 June, July and August are reflected in our results for the 12 weeks ended September 3, 2022, and the months of January through August are reflected in our results for the 36 weeks ended September 3, 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.

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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				36 Weeks Ended
	9/3/2022		9/4/2021		9/3/2022		9/4/2021
FLNA	$	5,563	$	4,653	$	15,583	$	13,441
QFNA	713		618		2,101		1,839
PBNA	6,635		6,402		18,108		17,632
LatAm	2,517		2,100		6,406		5,309
Europe	3,646		3,612		8,466		8,693
AMESA	1,726		1,665		4,426		4,150
APAC	1,171		1,139		3,306		3,162
Total	$	21,971	$	20,189	$	58,396	$	54,226

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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
	9/3/2022				9/4/2021
	Beverages(a)		Convenient Foods		Beverages(a)		Convenient Foods
LatAm	10	%	90	%	10	%	90	%
Europe	55	%	45	%	55	%	45	%
AMESA	35	%	65	%	35	%	65	%
APAC	25	%	75	%	25	%	75	%
PepsiCo	45	%	55	%	45	%	55	%


	36 Weeks Ended
	9/3/2022				9/4/2021
	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	%

(a)Beverage revenue from company-owned bottlers, which primarily includes our consolidated bottling operations in our PBNA and Europe divisions, is approximately 40% of our consolidated net revenue in each of the 12 and 36 weeks ended September 3, 2022 and September 4, 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				36 Weeks Ended
	9/3/2022		9/4/2021		9/3/2022		9/4/2021
FLNA	$	1,588	$	1,357	$	4,332	$	3,979
QFNA	122		106		416		384
PBNA (a) (b)	784		773		4,869		1,948
LatAm (c)	463		393		1,206		967
Europe (a) (d)	564		439		(369)		975
AMESA	268		312		738		706
APAC	199		201		620		601
Total divisions	3,988