WASHINGTON, D.C. 20549
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.
PepsiCo, Inc. and Subsidiaries
ITEM 1. Condensed Consolidated Financial Statements.
PepsiCo, Inc. and Subsidiaries
See accompanying notes to the condensed consolidated financial statements.
PepsiCo, Inc. and Subsidiaries
See accompanying notes to the condensed consolidated financial statements.
PepsiCo, Inc. and Subsidiaries
See accompanying notes to the condensed consolidated financial statements.
PepsiCo, Inc. and Subsidiaries
See accompanying notes to the condensed consolidated financial statements.
PepsiCo, Inc. and Subsidiaries
See accompanying notes to the condensed consolidated financial statements.
When used in this report, the terms “we,” “us,” “our,” “PepsiCo” and the “Company” mean PepsiCo, Inc. and its consolidated subsidiaries, collectively.
While our financial results in the United States and Canada (North America) are reported on a 12-week basis, mostsubstantially all of our international operations reportreported on a monthly calendar basis for whichprior 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, JulyJanuary and AugustFebruary are reflected in our third quarter results.results for the 12 weeks ended March 19, 2022.
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.
The following table summarizes share-based awards granted under the terms of the PepsiCo, Inc. Long-Term Incentive Plan:
We granted long-term cash awards to certain executive officers and other senior executives with an aggregate target value of $19$18 million and $17 million during the 3612 weeks ended September 9, 2017March 19, 2022 and September 3, 2016,March 20, 2021, respectively.
The notional amounts of our financial instruments used to hedge the above risks as of September 9, 2017March 19, 2022 and December 31, 201625, 2021 are as follows:
The computations of basic and diluted net income attributable to PepsiCo per common share are as follows:
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| | | | | | | |
| | 36 Weeks Ended |
| | 9/9/2017 |
| | 9/3/2016 |
|
Out-of-the-money options (a) | 0.5 |
| | 1.0 |
|
| Average exercise price per option | $ | 109.69 |
| | $ | 98.99 |
|
The reclassifications from accumulated other comprehensive loss to the income statement are summarized as follows:
| | | | | | | | | | | | | | | | | | | | | | |
| | | | 12 Weeks Ended | | |
| | | | | | 3/19/2022 | | 3/20/2021 | | Affected Line Item in the Income Statement |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| Currency translation: | | | | | | | | | | |
| Divestiture | | | | | | $ | — | | | $ | 18 | | | Selling, general and administrative expenses |
| | | | | | | | | | |
| Cash flow hedges: | | | | | | | | | | |
| Foreign exchange contracts | | | | | | $ | (2) | | | $ | 1 | | | Net revenue |
| Foreign exchange contracts | | | | | | (2) | | | 12 | | | Cost of sales |
| Interest rate derivatives | | | | | | 20 | | | (4) | | | Selling, general and administrative expenses |
| Commodity contracts | | | | | | (76) | | | (11) | | | Cost of sales |
| Commodity contracts | | | | | | (2) | | | 1 | | | Selling, general and administrative expenses |
| Net gains before tax | | | | | | (62) | | | (1) | | | |
| Tax amounts | | | | | | 10 | | | 1 | | | |
| Net gains after tax | | | | | | $ | (52) | | | $ | — | | | |
| | | | | | | | | | |
| Pension and retiree medical items: | | | | | | | | | | |
| Amortization of prior service credits | | | | | | $ | (8) | | | $ | (9) | | | Other pension and retiree medical benefits income |
| Amortization of net losses | | | | | | 35 | | | 61 | | | Other pension and retiree medical benefits income |
| Settlement/curtailment gains | | | | | | (2) | | | — | | | Other pension and retiree medical benefits income |
| Net losses before tax | | | | | | 25 | | | 52 | | | |
| Tax amounts | | | | | | (6) | | | (11) | | | |
| Net losses after tax | | | | | | $ | 19 | | | $ | 41 | | | |
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| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
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| | | | | | | | | | |
| Total net (gains)/losses reclassified, net of tax | | | | | | $ | (33) | | | $ | 59 | | | |
Note 11 - Acquisitions and Divestitures
2020 Acquisitions
In 2020, we acquired Pioneer Food Group Ltd. (Pioneer Foods), Rockstar Energy Beverages (Rockstar) and Hangzhou Haomusi Food Co., Ltd. The purchase price allocations for each of these acquisitions were finalized in the second quarter of 2021. See Note 13 to our consolidated financial statements in our 2021 Form 10-K for further information.
Juice Transaction
In the 12 weeks ended March 19, 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 the Tropicana JV, operating across North America and Europe. The North America portion of the transaction was completed on January 24, 2022 and the Europe portion of the transaction was completed on February 1, 2022. In the U.S., PepsiCo acts as the exclusive distributor for Tropicana JV’s portfolio of brands for small-format and foodservice customers with chilled direct-store-delivery. We have significant influence over our investment in the Tropicana JV and account for our investment under the equity method, recognizing our
proportionate share of Tropicana JV’s earnings within our income statement (recorded in selling, general and administrative expenses).
As a result of this transaction, in the 12 weeks ended March 19, 2022, we recorded a pre-tax gain of $3.3 billion ($2.9 billion after-tax or $2.06 per share) in our PBNA and Europe divisions, including $520 million related to the remeasurement of our 39% ownership in the Tropicana JV at fair value using a combination of the transaction price, discounted cash flows and an option pricing model related to our liquidation preference in the Tropicana JV. Subsequent to the transaction close date, the purchase price will be adjusted for net working capital and net debt amounts as of the transaction close date compared to targeted amounts set forth in the purchase agreement.
A summary of income statement activity related to the Juice Transaction in the 12 weeks ended March 19, 2022 is as follows:
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| PBNA | | Europe | | Corporate | | PepsiCo | | Provision for income taxes(a) | | Net income attributable to PepsiCo | | Impact on net income attributable to PepsiCo per common share |
| Gain associated with the Juice Transaction | $ | (3,024) | | | $ | (298) | | | $ | — | | | $ | (3,322) | | | $ | 452 | | | $ | (2,870) | | | $ | 2.06 | |
| Acquisition and divestiture-related charges | 37 | | | 10 | | | 3 | | | 50 | | | (8) | | | 42 | | | (0.03) | |
| Operating profit | $ | (2,987) | | | $ | (288) | | | $ | 3 | | | (3,272) | | | 444 | | | (2,828) | | | 2.03 | |
Other pension and retiree medical benefits income (b) | | | | | | | (10) | | | 3 | | | (7) | | | 0.01 | |
| Total Juice Transaction | | | | | | | $ | (3,282) | | | $ | 447 | | | $ | (2,835) | | | $ | 2.04 | |
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(a)Includes $194 million of deferred tax expense related to the recognition of our investment in the Tropicana JV.
(b)Includes $16 million curtailment gain, partially offset by $6 million special termination benefits.
In connection with the sale, we entered into a transition services agreement with PAI Partners, under which we will provide certain services to the Tropicana JV to help facilitate an orderly transition of the business following the sale. In return for these services, the Tropicana JV is required to pay certain agreed upon fees to reimburse us for our costs without markup.
Acquisition and Divestiture-Related Charges
Acquisition and divestiture-related charges primarily include merger and integration charges and costs associated with divestitures. Merger and integration charges include changes in fair value of contingent consideration, employee-related costs, contract termination costs and other integration costs. Divestiture-related charges reflect transaction expenses, including consulting, advisory and other professional fees.
A summary of our acquisition and divestiture-related charges is as follows:
| | | | | | | | | | | | | | | | | | | | | |
| | | 12 Weeks Ended | | |
| | | | | 3/19/2022 | | 3/20/2021 | | Transaction |
| FLNA | | | | | $ | — | | | $ | 2 | | | BFY Brands, Inc. |
| PBNA | | | | | 37 | | | 1 | | | Juice Transaction, Rockstar |
| Europe | | | | | 10 | | | — | | | Juice Transaction |
| AMESA | | | | | — | | | 1 | | | Pioneer Foods |
| | | | | | | | | |
Corporate (a) | | | | | 3 | | | (14) | | | Juice Transaction, Rockstar |
Total (b) | | | | | 50 | | | (10) | | | |
| Other pension and retiree medical benefits expense | | | | | 6 | | | — | | | Juice Transaction |
| Total acquisition and divestiture-related charges | | | | | $ | 56 | | | $ | (10) | | | |
| After-tax amount | | | | | $ | 47 | | | $ | (7) | | | |
| Impact on net income attributable to PepsiCo per common share | | | | | $ | (0.03) | | | $ | 0.01 | | | |
| | | | | | | | | |
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(a)Income amount primarily relates to changes in fair value of the contingent consideration in connection with our acquisition of Rockstar.
(b)Recorded in selling, general and administrative expenses.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
FINANCIAL REVIEW
Our discussion and analysis is intended to help the reader understand our results of operations and financial condition and is provided as an addition to, and should be read in connection with, our condensed consolidated financial statements and the accompanying notes. Also refer to Note 1 of our condensed consolidated financial statements. Unless otherwise noted, tabular dollars are presented in millions, except per share amounts. All per share amounts reflect common stock per share amounts, assume dilution unless otherwise noted, and are based on unrounded amounts. Percentage changes are based on unrounded amounts.
Our Critical Accounting Policies and Estimates
The critical accounting policies and estimates below should be read in conjunction with those outlined in our Annual Report on2021 Form 10-K for the fiscal year ended December 31, 2016.10-K.
Sales Incentives and Advertising and Marketing CostsTotal Marketplace Spending
We offer sales incentives and discounts through various programs to customers and consumers. TheseTotal marketplace spending includes sales incentives, discounts, advertising and other marketing activities. Sales incentives and discounts are primarily accounted for as a reduction of revenue. A number of our sales incentives, such as bottler funding to independent bottlers and customer volume rebates, are based on annual targets, and accruals are established during the year, as products are delivered, for the expected payout. payout, which may occur after year end once reconciled and settled.
These accruals are based on contract terms and our historical experience with similar programs and require management’smanagement judgment with respect to estimating customer and consumer participation and performance levels. Differences between estimated expense and actual incentive costs are normally insignificant and are recognized in earnings in the period such differences are determined. CertainIn addition, certain advertising and marketing costs are also based on annual targets.targets and recognized during the year as incurred.
For interim reporting, our policy is to allocate our forecasted full-year sales incentives for most of our programs to each of our interim reporting periods in the same year that benefits from the programs. The allocation methodology is based on our forecasted sales incentives for the full year and the proportion of each interim period’s actual gross revenue or volume, as applicable, to our forecasted annual gross revenue or volume, as applicable. Based on our review of the forecasts at each interim period, any changes
in estimates and the related allocation of sales incentives are recognized beginning in the interim period that they are identified. In addition, we apply a similar allocation methodology for interim reporting purposes for certain advertising and other marketing activities.
Income Taxes
In determining our quarterly provision for income taxes, we use an estimated annual effective tax rate which is based on our expected annual income, statutory tax rates and tax planning opportunitiesstructure and transactions, including transfer pricing arrangements, available to us in the various jurisdictions in which we operate. Significant judgment is required in determining our annual tax rate and in evaluating our tax positions. Subsequent recognition, derecognition and measurement of a tax position taken in a previous period are separately recognized in the quarter in which they occur.
Our Business Risks
This Quarterly Report on Form 10-Q (Form 10-Q) contains statements reflecting our views about our future performance that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (Reform Act). Statements that constitute forward-looking statements within the meaning of the Reform Act are generally identified through the inclusion of words such as “aim,” “anticipate,” “believe,” “drive,” “estimate,” “expect,” “expressed confidence,” “forecast,” “future,” “goal,” “guidance,” “intend,” “may,” “objective,” “outlook,” “plan,” “position,” “potential,” “project,” “seek,” “should,” “strategy,” “target,” “will” or similar statements or variations of such words and other similar expressions. All statements addressing our future operating performance, and statements addressing
events and developments that we expect or anticipate will occur in the future, are forward-looking statements within the meaning of the Reform Act. These forward-looking statements are based on currently available information, operating plans and projections about future events and trends. They inherently involve risks and uncertainties that could cause actual results to differ materially from those predicted in any such forward-looking statement. Such risks and uncertainties include, but are not limited to: changesthe risks associated with the deadly conflict in Ukraine; the impact of COVID-19; future demand for PepsiCo’s products, as a result of changes in consumer preferencesproducts; damage to PepsiCo’s reputation or otherwise; changes in,brand image; product recalls or failureother issues or concerns with respect to comply with, applicable lawsproduct quality and regulations; imposition or proposed imposition of new or increased taxes aimed at PepsiCo’s products; imposition of labeling or warning requirements on PepsiCo’s products; changes in laws related to packaging and disposal of PepsiCo’s products;safety; PepsiCo’s ability to compete effectively; PepsiCo’s ability to attract, develop and maintain a highly skilled and diverse workforce; water scarcity; changes in the retail landscape or in sales to any key customer; disruption of PepsiCo’s manufacturing operations or supply chain, including increased commodity, packaging, transportation, labor and other input costs; political conditions, civil unrest or other developments and riskssocial conditions in the markets where PepsiCo’s products are made, manufactured, distributed or sold; PepsiCo’s ability to grow its business in developing and emerging markets; unfavorablechanges in economic conditions in the countries in which PepsiCo operates; the ability to protect information systems against, or effectively respond to, a cybersecurity incident or other disruption; increased costs, disruption of supply or shortages of raw materialsfuture cyber incidents and other supplies; business disruptions; product contamination or tampering or issues or concerns with respect to product quality, safety and integrity; damage to PepsiCo’s reputation or brand image; failure to successfully complete or integrate acquisitionsmanage strategic transactions; PepsiCo’s reliance on third-party service providers and joint ventures intoenterprise-wide systems; climate change or measures to address climate change; strikes or work stoppages; failure to realize benefits from PepsiCo’s existing operations or to complete or manage divestitures or refranchisings; changesproductivity initiatives; deterioration in estimates and underlying assumptions regarding future performance that couldcan result in an impairment charge; fluctuations or other changes in exchange rates; any downgrade or potential downgrade of PepsiCo’s credit ratings; imposition or proposed imposition of new or increased taxes aimed at PepsiCo’s products; imposition of limitations on the marketing or sale of PepsiCo’s products; changes in laws and regulations related to the use or disposal of plastics or other packaging materials; failure to comply with personal data protection and privacy laws; increase in income tax rates, changes in income tax laws or disagreements with tax authorities; failure to realize anticipated benefits fromadequately protect PepsiCo’s productivity initiativesintellectual property rights or global operating model; PepsiCo’s ability to recruit, hire or retain key employees or a highly skilled and diverse workforce; lossinfringement on intellectual property rights of any key customer or changes to the retail landscape; any downgrade or potential downgrade of PepsiCo’s credit ratings; PepsiCo’s ability to implement shared services or utilize information technology systems and networks effectively; fluctuations or other changes in exchange rates; climate change or water scarcity, or legal, regulatory or market measures to address climate change or water scarcity;others; failure to successfully negotiate collective bargaining agreements, or strikes or work stoppages; infringement of intellectual property rights;comply with applicable laws and regulations; and potential liabilities and costs from litigation, claims, legal or legal proceedings;regulatory proceedings, inquiries or investigations; and other factors that may adversely affect the price of PepsiCo’s publicly traded securitiesrisks and financial performanceuncertainties including those described in “Item 1A. Risk Factors” and “Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations – Our Business Risks,” included in our Annual Report on2021 Form 10-K for the fiscal year ended December 31, 2016 and in “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Our Business Risks” of this Form 10-Q. Investors are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date they are made. We undertake no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise.
COVID-19
Our global operations continue to expose us to risks associated with the COVID-19 pandemic. Numerous measures have been implemented around the world to try to reduce the spread of the virus and these measures have impacted and will continue to impact us, our business partners and our customers. The COVID-19 pandemic, including these measures, may continue to result in changes in demand for our products, increases in employee and other operating costs or supply chain disruptions, any of which can impact our ability to operate our business. In addition, we may continue to experience business disruptions resulting from the temporary closures of our facilities or facilities of our business partners or the inability of a significant portion of our or our business partners’ workforce to work because of illness, absenteeism, quarantine, vaccine mandates, or travel or other governmental restrictions.
Even as governmental restrictions are relaxed and economies gradually, partially, or fully reopen in certain jurisdictions and markets, the ongoing economic impacts and health concerns associated with the pandemic may continue to affect consumer behavior, including changes in product and channel preferences that result in reduced sales or profit from the sale of our products. In addition, any reduced demand for our products or change in consumer purchasing and consumption patterns, as well as continued economic uncertainty, can adversely affect our customers’ and business partners’ financial condition, which has resulted and may continue to result in our recording additional charges for our inability to recover or collect any accounts receivable, owned or leased assets, including certain foodservice, vending and other equipment, or prepaid expenses.
While we have developed and implemented and continue to develop and implement health and safety protocols, business continuity plans and crisis management protocols in an effort to mitigate the negative impact of COVID-19 to our employees and our business, the extent of the impact of the pandemic on our business and financial results will continue to depend on numerous evolving factors that we are not able to accurately predict and which will vary by jurisdiction and market, including the duration and scope of the pandemic, the possible emergence and spread of new variants of the virus, the availability, administration and effectiveness of treatments and vaccines, global economic conditions during and after the pandemic, governmental actions that have been taken, or may be taken in the future, in response to the pandemic and changes in consumer behavior in response to the pandemic, some of which may be more than just temporary.
Risks Associated with Commodities and Our Supply Chain
Many of the commodities used in the production and transportation of our products are purchased in the open market. The prices we pay for such items are subject to fluctuation, and we manage this risk through the use of fixed-price contracts and purchase orders, pricing agreements and derivative instruments, including swaps and futures. During the 12 weeks ended March 19, 2022, we continued to experience inflationary pressures on transportation and commodity costs, which we expect to continue for the remainder of 2022. A number of external factors, including the deadly conflict in Ukraine, the COVID-19 pandemic, adverse weather conditions, supply chain disruptions (including raw material shortages) and labor shortages, have impacted and may continue to impact transportation and commodity costs. When prices increase, we may or may not pass on such increases to our customers without suffering reduced volume, revenue, margins and operating results.
See Note 8 to our condensed consolidated financial statements in this Form 10-Q and Note 9 to our consolidated financial statements in our 2021 Form 10-K for further information on how we manage our exposure to commodity prices.
Risks Associated with Climate Change
Certain jurisdictions in which our products are made, manufactured, distributed or sold have either imposed, or are considering imposing, new or increased legal and regulatory requirements to reduce or mitigate the potential effects of climate change, including regulation of greenhouse gas emissions and potential carbon pricing programs. These new or increased legal or regulatory requirements could result in significant increased costs of compliance and additional investments in facilities and equipment. However, we are unable to predict the scope, nature and timing of any new or increased environmental laws and regulations and therefore cannot predict the ultimate impact of such laws and regulations on our business or financial results. We continue to monitor existing and proposed laws and regulations in the jurisdictions in which our products are made, manufactured, distributed and sold and to consider actions we may take to potentially mitigate the unfavorable impact, if any, of such laws or regulations.
Risks Associated with International Operations
In the 3612 weeks ended September 9, 2017,March 19, 2022, our operationsfinancial results outside of North America reflect the months of January through August.and February. In the 3612 weeks ended September 9, 2017,March 19, 2022, our operations outside of the United States generated 41%37% of our consolidated net revenue, with Mexico, Canada, China, Russia, Canada, the United Kingdom and BrazilSouth Africa comprising approximately 19%20% of our consolidated net revenue. As a result, we are exposed to foreign exchange risksrisk in the international markets in whichwhich our products are made, manufactured, distributed or sold. In the 12 weeks ended September 9, 2017,March 19, 2022, unfavorable foreign exchange reduced net revenue growth by 1 percentage point, primarily due to declines in the Egyptian pound and Turkish lira, partially offset by appreciation in theeuro, Russian ruble and Mexican peso. In the 36 weeks ended September 9, 2017, unfavorable foreign exchange reduced net revenue growth by 1 percentage point due to declines in the Egyptian pound, Turkish lira, Pound sterling and the Mexican peso, partially offset by appreciation in the Russian ruble and Brazilian real. Currency declines against the U.S. dollar which are not offset could adversely impact our future financial results.
In addition, volatile economic, political and social conditions and civil unrest in certain markets in which our products are made, manufactured, distributed or sold, including in Argentina, Brazil, China, India, Mexico, the
Middle East, Russia, and Turkey and Ukraine, and natural disasters, debt and credit issues and currency controls or fluctuations in certain of these international markets, continue to, and the threat or imposition of new or increased tariffs or sanctions or other impositions in or related to these international markets may, result in challenging operating environments. We also continue to monitor the economic and political developments related to the United Kingdom’s pending withdrawal from the European Union, and the potential impact, if any, for the ESSA segment and our other businesses.
We continue to closely monitor the economic, operating and political environment in Russia. these markets closely, including risks of impairments or write offs, and to identify actions to potentially mitigate any unfavorable impacts on our future results.
See Note 8 to our condensed consolidated financial statements in this Form 10-Q for the fair values of our financial instruments as of March 19, 2022 and December 25, 2021 and Note 9 to our consolidated financial statements in our 2021 Form 10-K for a discussion of these items.
Risks Associated with the Deadly Conflict in Ukraine
In addition to the 36 weeks endedSeptember 9, 2017risks associated with international operations discussed above, we continue to face risks associated with the deadly conflict in Ukraine. The conflict has resulted in worldwide geopolitical and September 3, 2016, total net revenue generated bymacroeconomic uncertainty and led us to suspend the majority of our operations in Russia represented 5%Ukraine. We are in the process of suspending sales of Pepsi-Cola and 4%, respectively,certain of our net revenue. As of September 9, 2017, we have $4.6 billion of long-lived assetsother global beverage brands, our discretionary capital investments and advertising and promotional activities in Russia.
The hurricanesRussia, which has negatively impacted and earthquakes which occurred recently in North and Central America did not materiallycould continue to negatively impact our results for the third quarter of 2017.business. We continue to assessoffer our other products in Russia. Our operations in Russia and Ukraine, respectively, accounted for 4% and 0.5% of our consolidated net revenue for the year ended December 25, 2021 and 3% and 0.4% of our consolidated net revenue for both the 12 weeks ended March 19, 2022 and the 12 weeks ended March 20, 2021. Our assets
in Russia and Ukraine, respectively, were 5% and 0.3% of our consolidated assets as of December 25, 2021 and 4% and 0.1% of our consolidated assets as of March 19, 2022.
The conflict has resulted and could continue to result in volatile commodity markets, supply chain disruptions, increased risk of cyber incidents or other disruptions to our information systems, reputational risks, heightened risks to employee safety, significant volatility of the Russian ruble, limitations on access to credit markets, including working capital facilities, increased operating costs (including fuel and other input costs), environmental, health and safety risks related to securing and maintaining facilities, additional sanctions and other regulations (including restrictions on the transfer of funds to and from Russia). The ongoing conflict could result in loss of assets or result in additional impairment charges. We cannot predict how and the extent to which the conflict will affect our customers, operations or business partners or our ability to achieve certain of our sustainability goals. The conflict has adversely affected and could continue to adversely affect demand for our products and our global business.
The extent of the impact of these tragic events which occurred just beforeon our business remains uncertain and subsequentwill continue to depend on numerous evolving factors that we are not able to accurately predict, including the end of our third quarter of 2017.
Due to exchange restrictionsduration and other conditions, effective at the endscope of the third quarter of 2015, we deconsolidated our Venezuelan subsidiaries and began accounting for our investments in our Venezuelan subsidiaries and joint venture using the cost method of accounting.conflict. We reduced the value of the cost method investments to their estimated fair values, resulting in a full impairment. The factors that led to our conclusions at the end of the third quarter of 2015 continued to exist through the end of the third quarter of 2017.
We do not have any guarantees related to our Venezuelan entities, and our ongoing contractual commitments to our Venezuelan businesses are not material. We will recognize income from dividends and sales of inventory to our Venezuelan entities, which have not been and are not expected to be material, to the extent cash in U.S. dollars is received. We have not received any cash in U.S. dollars from our Venezuelan entities since our deconsolidation at the end of the third quarter of 2015. We continue to monitor and assess the conditions in Venezuelasituation as circumstances evolve and their impactto identify actions to potentially mitigate any unfavorable impacts on our accountingfuture results.
Imposition of Taxes and disclosures.Regulations on our Products
In addition, certainCertain jurisdictions in which our products are made, manufactured, distributed or sold have either imposed, or are considering imposing, new or increased taxes or regulations on the manufacture, saledistribution or distributionsale of our products or their packaging, ingredients or substances contained in, or attributes of, our products or their packaging, commodities used in the production of our products.products or their packaging or the recyclability or recoverability of our packaging. These taxes and regulations vary in scope and form:form. For example, some taxes apply to all beverages, including non-caloric beverages, while others apply only to beverages with a caloric sweetener (e.g., sugar). Similarly,In addition, COVID-19 has resulted in increased regulatory focus on labeling in certain jurisdictions, including in Mexico which enacted product labeling requirements and limitations on the marketing of certain of our products as a result of ingredients or substances contained in such products. Further, some measuresregulations apply a single tax rate per liquid ounceto all products using certain types of packaging (e.g., plastic), while others apply a graduated tax rate depending uponare designed to increase the amountsustainability of added sugarpackaging, encourage waste reduction and increased recycling rates or facilitate the waste management process or restrict the sale of products in the beverage.
certain packaging.
We sell a wide variety of beverages foods and snacksconvenient foods in more than 200 countries and territories and the profile of the products we sell, and the amount of revenue attributable to such products variesand the type of packaging used vary by jurisdiction. Because of this, we cannot predict the scope or form potential taxes, regulations or other potential limitations on our products or their packaging may take, and therefore cannot predict the impact of such taxes, regulations or limitations on our financial results. In addition, taxes, regulations and limitations may impact us and our competitors differently. We continue to monitor existing and proposed taxes and regulations in the jurisdictions in which our products are made, manufactured, distributed and sold and to consider actions we may take to potentially mitigate the unfavorable impact, if any, of such taxes, regulations or limitations, including advocating for alternative measures with respect to the imposition, form and scope of any such taxes, regulations or limitations.
See Note 10Retail Landscape
Our industry continues to be affected by disruption of the retail landscape, including the rapid growth in sales through e-commerce websites and mobile commerce applications, including through subscription services, the integration of physical and digital operations among retailers and the international expansion of hard discounters. We have seen and expect to continue to see a further shift to e-commerce, online-to-offline and other online purchasing by consumers, including as a result of the COVID-19 pandemic. We continue to monitor changes in the retail landscape and seek to identify actions we may take to build our
global e-commerce and digital capabilities, such as expanding our condensed consolidated financial statements for the fair valuesdirect-to-consumer business, and distribute our products effectively through all existing and emerging channels of trade and potentially mitigate any unfavorable impacts on our financial instruments as of September 9, 2017 and December 31, 2016 and Note 9 to our consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016 for a discussion of these items. future results.
Cautionary statements included above and in “Item 1A. Risk Factors” and in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Our Business Risks,” included
Risks” in our Annual Report on2021 Form 10-K for the fiscal year ended December 31, 2016, should be considered when evaluating our trends and future results.
Results of Operations – Consolidated Review
Consolidated Results
Volume
Since our divisions each use different measures of physicalPhysical or unit volume (i.e., kilos, gallons, poundsis one of the key metrics management uses internally to make operating and case sales), a common servings metric is necessary to reflect our consolidated physical unit volume. Our divisions’ physical volume measures are converted into servings based on U.S. Food and Drug Administration guidelines for single-serving sizesstrategic decisions, including the preparation of our products. For eachannual operating plan and the evaluation of our business performance. We believe volume provides additional information to facilitate the 12comparison of our historical operating performance and 36 weeks ended September 9, 2017, total servings was even withunderlying trends and provides additional transparency on how we evaluate our business because it measures demand for our products at the prior year. Forconsumer level. Refer to “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Our Financial Results – Volume” included in our 2021 Form 10-K for further information on volume. Beginning in the 12first quarter of 2022, unit volume growth adjusts for the impacts of acquisitions, divestitures and 36 weeks ended September 3, 2016, total servings increased 3% and 2.5%other structural changes. Further, unit volume growth will exclude the impact of an additional week of results every five or six years (53rd reporting week), respectively.where applicable, including in our fourth quarter 2022 financial results.
We discuss volume for our beverage businesses on a bottler case sales (BCS) basis in whichreported substantially all beverage volume is converted to an 8-ounce-case metric. Most of our beverage volume is sold by our Company-owned and franchise-owned bottlers, and that portion is based on our bottlers’ sales to retailers and independent distributors. The remainder of our volume is based on our direct shipments to retailers and independent distributors. We report the majority of our international beverage volume on a monthly calendar basis prior to the fourth quarter of 2021, and beginning in the fourth quarter of 2021, all of our international operations report on a monthly calendar basis. Our third quarter includes beverageThe 12 weeks ended March 19, 2022 include volume outside of North America for the months of June, JulyJanuary and August. Concentrate shipments and equivalents (CSE) represent our physical beverage volume shipments to independent bottlers, retailers and independent distributors, and is the measure upon which our revenue is based.February.
TotalConsolidated Net Revenue and Operating Profit
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| | | | 12 Weeks Ended |
| | | | | | | | 3/19/2022 | | 3/20/2021 | | Change |
| Net revenue | | | | | | | $ | 16,200 | | | $ | 14,820 | | | 9 | % |
| Operating profit | | | | | | | $ | 5,267 | | | $ | 2,312 | | | 128 | % |
| Operating margin | | | | | | | 32.5 | % | | 15.6 | % | | 16.9 | |
|
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| | 12 Weeks Ended | | 36 Weeks Ended |
| | 9/9/2017 |
| | 9/3/2016 |
| | Change | | 9/9/2017 |
| | 9/3/2016 |
| | Change |
| Total net revenue | $ | 16,240 |
| | $ | 16,027 |
| | 1 | % | | $ | 43,999 |
| | $ | 43,284 |
| | 2 | % |
| Operating profit | | | | | | | | | | | |
| FLNA | $ | 1,208 |
| | $ | 1,148 |
| | 5 | % | | $ | 3,421 |
| | $ | 3,249 |
| | 5 | % |
| QFNA | 146 |
| | 144 |
| | 2 | % | | 456 |
| | 456 |
| | — | % |
| NAB | 817 |
| | 904 |
| | (10 | )% | | 2,216 |
| | 2,270 |
| | (2 | )% |
| Latin America | 281 |
| | 247 |
| | 14 | % | | 641 |
| | 664 |
| | (3.5 | )% |
| ESSA | 436 |
| | 388 |
| | 12 | % | | 1,039 |
| | 792 |
| | 31 | % |
| AMENA | 267 |
| | 264 |
| | 1 | % | | 745 |
| | 499 |
| | 49 | % |
| Corporate Unallocated | (162 | ) | | (274 | ) | | (41 | )% | | (602 | ) | | (526 | ) | | 14 | % |
| Total operating profit | $ | 2,993 |
| | $ | 2,821 |
| | 6 | % | | $ | 7,916 |
| | $ | 7,404 |
| | 7 | % |
| | | | | | | | | | | | |
| Total operating profit margin | 18.4 | % | | 17.6 | % | | 0.8 |
| | 18.0 | % | | 17.1 | % | | 0.9 |
|
See “Results of Operations – Division Review” for a tabular presentation and discussion of key drivers of net revenue.
12 Weeks
Total operatingOperating profit increased 6%grew 128% and operating profit margin increased 0.8improved 16.9 percentage points. Operating profit growth was primarily driven by planneda 144-percentage-point impact of the gain associated with the Juice Transaction, partially offset by the charges associated with the Russia-Ukraine conflict and the Brand Portfolio Impairment Charges in Russia, each of which reduced operating profit growth by 10 percentage points.
Operating profit growth was also driven by net revenue growth and productivity savings, partially offset by certain operating cost reductionsincreases and a 29-percentage-point impact of higher commodity costs. A prior-year gain on an investment reduced operating profit growth by 5 percentage points. The operating margin improvement primarily reflects the impact of the gain associated with the Juice Transaction.
Juice Transaction
In the 12 weeks ended March 19, 2022, we sold our Tropicana, Naked and other select juice brands to PAI Partners, while retaining a 39% noncontrolling interest in the Tropicana JV, operating across North America and Europe. These juice businesses delivered approximately $3 billion in net revenue in 2021. In the U.S., PepsiCo acts as the exclusive distributor for Tropicana JV’s portfolio of brands for small-format and foodservice customers with chilled direct-store-delivery. See Note 11 to our condensed consolidated financial statements for further information.
Results of Operations – Division Review
While our financial results in North America are reported on a number12-week basis, substantially all of expense categories,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 January and February are reflected in our results for the 12 weeks ended March 19, 2022.
In the discussions of net revenue and operating profit below, “effective net pricing” reflects the year-over-year impact of discrete pricing actions, sales incentive activities and mix resulting from selling varying products in different package sizes and in different countries and “net pricing” reflects the year-over-year combined impact of list price changes, weight changes per package, discounts and allowances.
See “Our Business Risks,” “Non-GAAP Measures” and “Items Affecting Comparability” for a discussion of items to consider when evaluating our results and related information regarding measures not in accordance with GAAP.
Net Revenue and Organic Revenue Growth
Organic revenue growth is a non-GAAP financial measure. For further information on this measure see “Non-GAAP Measures.”
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| 12 Weeks Ended 3/19/2022 |
| | | Impact of | | | | | | | | Impact of |
| Reported
% Change, GAAP Measure | | Foreign exchange translation | | Acquisitions and divestitures | | | | Organic % Change, Non-GAAP Measure(a) | | | | | | Organic volume(b) | | Effective net pricing |
| FLNA | 14 | % | | — | | | — | | | | | 14 | % | | | | | | 2 | | | 12 | |
| QFNA | 11 | % | | — | | | — | | | | | 11 | % | | | | | | (1.5) | | | 12 | |
| PBNA | 5.5 | % | | — | | | 7 | | | | | 13 | % | | | | | | 4 | | | 8 | |
| LatAm | 19 | % | | 3 | | | 1 | | | | | 22 | % | | | | | | 6 | | | 16 | |
| Europe | — | % | | 8 | | | 2 | | | | | 11 | % | | | | | | — | | | 11 | |
| AMESA | 14 | % | | 2 | | | 2 | | | | | 18 | % | | | | | | 11 | | | 7 | |
| APAC | 8 | % | | 1 | | | 0.5 | | | | | 9 | % | | | | | | 2 | | | 8 | |
| Total | 9 | % | | 1 | | | 3 | | | | | 14 | % | | | | | | 3 | | | 10 | |
(a)Amounts may not sum due to rounding.
(b)Excludes the impact of acquisitions, divestitures and other structural changes. In certain instances, the impact of organic volume growth on net revenue growth differs from the unit volume growth disclosed in the following divisional discussions due to the impacts of product mix, nonconsolidated joint venture volume, and, for our franchise-owned beverage businesses, temporary timing differences between bottler case sales and concentrate shipments and equivalents (CSE). We report net revenue from our franchise-owned beverage businesses based on CSE. The volume sold by our nonconsolidated joint ventures has no direct impact on our net revenue.
Operating Profit, Operating Profit Adjusted for Items Affecting Comparability and Operating Profit Growth Adjusted for Items Affecting Comparability on a Constant Currency Basis
Operating profit adjusted for items affecting comparability and operating profit growth adjusted for items affecting comparability on a constant currency basis are both non-GAAP financial measures. For further information on these measures see “Non-GAAP Measures” and “Items Affecting Comparability.”
Operating Profit and Operating Profit Adjusted for Items Affecting Comparability
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| 12 Weeks Ended 3/19/2022 |
| | | Items Affecting Comparability(a) | | |
| Reported, GAAP Measure(b) | | Mark-to-market net impact | | Restructuring and impairment charges | | Acquisition and divestiture-related charges | | Gain associated with the Juice Transaction | | Russia-Ukraine conflict charges | | Brand Portfolio Impairment Charges | | Core, Non-GAAP Measure(b) |
| FLNA | $ | 1,296 | | | $ | — | | | $ | 3 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 1,299 | |
| QFNA | 159 | | | — | | | — | | | — | | | — | | | — | | | — | | | 159 | |
| PBNA | 3,434 | | | — | | | 3 | | | 37 | | | (3,024) | | | — | | | — | | | 450 | |
| LatAm | 323 | | | — | | | 6 | | | — | | | — | | | — | | | — | | | 329 | |
| Europe | (136) | | | — | | | 7 | | | 10 | | | (298) | | | 241 | | | 241 | | | 65 | |
| AMESA | 180 | | | — | | | 2 | | | — | | | — | | | — | | | — | | | 182 | |
| APAC | 215 | | | — | | | 1 | | | — | | | — | | | — | | | — | | | 216 | |
| Corporate unallocated expenses | (204) | | | (112) | | | 5 | | | 3 | | | — | | | — | | | — | | | (308) | |
| Total | $ | 5,267 | | | $ | (112) | | | $ | 27 | | | $ | 50 | | | $ | (3,322) | | | $ | 241 | | | $ | 241 | | | $ | 2,392 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 12 Weeks Ended 3/20/2021 |
| | | Items Affecting Comparability(a) | | |
| Reported, GAAP Measure(b) | | Mark-to-market net impact | | Restructuring
and impairment charges | | Acquisition and divestiture-related charges(c) | | Core, Non-GAAP Measure(b) |
| FLNA | $ | 1,240 | | | $ | — | | | $ | 15 | | | $ | 2 | | | $ | 1,257 | |
| QFNA | 150 | | | — | | | — | | | — | | | 150 | |
| PBNA | 366 | | | — | | | 4 | | | 1 | | | 371 | |
| LatAm | 218 | | | — | | | 2 | | | — | | | 220 | |
| Europe | 131 | | | — | | | 11 | | | — | | | 142 | |
| AMESA | 138 | | | — | | | 1 | | | 1 | | | 140 | |
| APAC | 208 | | | — | | | — | | | — | | | 208 | |
| Corporate unallocated expenses | (139) | | | (75) | | | 4 | | | (14) | | | (224) | |
| Total | $ | 2,312 | | | $ | (75) | | | $ | 37 | | | $ | (10) | | | $ | 2,264 | |
(a)See “Items Affecting Comparability.”
(b)Includes the charges taken as a result of the COVID-19 pandemic. See Note 1 to our condensed consolidated financial statements for further information.
(c)Income amount primarily relates to changes in fair value of the contingent consideration in connection with our acquisition of Rockstar.
Operating Profit Growth and Operating Profit Growth Adjusted for Items Affecting Comparability on a Constant Currency Basis
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| 12 Weeks Ended 3/19/2022 |
| | | Impact of Items Affecting Comparability(a) | | | | | | Impact of | | |
| Reported % Change, GAAP Measure | | Mark-to-market net impact | | Restructuring and impairment charges | | Acquisition and divestiture-related charges | | Gain associated with the Juice Transaction | | Russia-Ukraine conflict charges | | Brand Portfolio Impairment Charges | | | | Core % Change, Non-GAAP Measure(b) | | Foreign exchange
translation | | Core Constant Currency % Change, Non-GAAP Measure(b) |
| FLNA | 4.5 | % | | — | | | (1) | | | — | | | — | | | — | | | — | | | | | 3 | % | | — | | | 3 | % |
| QFNA | 6 | % | | — | | | — | | | — | | | — | | | — | | | — | | | | | 6 | % | | — | | | 6 | % |
| PBNA | 839 | % | | — | | | (1) | | | 10 | | | (827) | | | — | | | — | | | | | 21 | % | | — | | | 21 | % |
| LatAm | 48 | % | | — | | | 2 | | | — | | | — | | | — | | | — | | | | | 50 | % | | 3.5 | | | 53 | % |
| Europe | (204) | % | | — | | | (3) | | | 8 | | | (234) | | | 189 | | | 189 | | | | | (55) | % | | 5 | | | (50) | % |
| AMESA | 30 | % | | — | | | — | | | — | | | — | | | — | | | — | | | | | 30 | % | | 1.5 | | | 32 | % |
| APAC | 3 | % | | — | | | 1 | | | — | | | — | | | — | | | — | | | | | 4 | % | | 1 | | | 5 | % |
| Corporate unallocated expenses | 46 | % | | (15) | | | — | | | 7 | | | — | | | — | | | — | | | | | 37 | % | | — | | | 37 | % |
| Total | 128 | % | | (2) | | | — | | | 3 | | | (144) | | | 10 | | | 10 | | | | | 6 | % | | 1 | | | 6 | % |
(a)See “Items Affecting Comparability” for further information.
(b)Amounts may not sum due to rounding.
FLNA
Net revenue grew 14%, driven by effective net pricing as well asand organic volume growth. Unit volume grew 1%, primarily reflecting high-single-digit growth in variety packs and mid-single-digit growth in trademark Lay’s, partially offset by a double-digit decline in our Sabra joint venture products.
Operating profit increased 4.5%, primarily reflecting the impact of prior-year incremental investments into our business, which contributed 2 percentage points to operating profit growth. In addition, items affecting comparability (see “Items Affecting
Comparability”) contributed 3 percentage points to operating profitnet revenue growth and increased operating profit margin by 0.5 percentage points.productivity savings. These impacts were partially offset by certain operating cost increases, including strategic initiatives and incremental transportation costs, and a 13-percentage-point impact of higher commodity costs. Commodity inflationcosts, primarily cooking oil and packaging material.
QFNA
Net revenue grew 11%, driven by effective net pricing, partially offset by a decrease in organic volume. Unit volume declined 1.5%, primarily reflecting a double-digit decline in pancake syrups and mixes, a low-single-digit decline in oatmeal and a mid-single-digit decline in ready-to-eat cereals, partially offset by double-digit growth in rice/pasta sides and trademark Gamesa.
Operating profit grew 6%, primarily reflecting the effective net pricing and productivity savings. These impacts were partially offset by certain operating cost increases, including incremental transportation costs, a 13-percentage-point impact of higher commodity costs, primarily oats, and a 3-percentage-point impact of less favorable settlements of promotional spending accruals compared to the prior year.
PBNA
Net revenue increased 5.5%, primarily driven by effective net pricing and an increase in organic volume. The Juice Transaction reduced net revenue growth by 7 percentage points.
Unit volume increased 3%, driven by a 7% increase in non-carbonated beverage (NCB) volume while carbonated soft drink volume was even. The NCB volume increase primarily reflected double-digit increases in Gatorade sports drinks and in our overall water portfolio and a high-single-digit increase in our energy portfolio.
Operating profit increased 839%, primarily reflecting a gain of $3.0 billion associated with the Juice Transaction, partially offset by related transaction costs of $37 million. Operating profit also grew due to the net revenue growth and productivity savings. These impacts were partially offset by certain operating cost increases, including incremental transportation and information technology costs, and a 49-percentage-point impact of higher commodity costs, including aluminum and resin. The loss of net revenue due to the Juice Transaction reduced operating profit growth by 16 percentage points. Additionally, less favorable settlements of promotional spending accruals compared to the prior year and unfavorable insurance adjustments reduced operating profit growth by 6 percentage points attributable to inflation in the AMENA, Latin America, ESSA and FLNA segments. Corporate unallocated expenses decreased 41%4 percentage points, respectively.
LatAm
Net revenue increased 19%, primarily due to mark-to-market net impact associated with commodity derivatives which is also included in the items affecting comparability mentioned above.
36 Weeks
Total operating profit increased 7% and operating profit margin increased 0.9 percentage points. Operating profit growth was driven byreflecting effective net pricing and plannedorganic volume growth, partially offset by a 3-percentage-point impact of unfavorable foreign exchange.
Convenient foods unit volume grew 4%, primarily reflecting mid-single-digit growth in Mexico and low-single-digit growth in Brazil.
Beverage unit volume grew 7%, primarily reflecting double-digit growth in Argentina and Peru. Additionally, Mexico and Chile experienced mid-single-digit growth, Guatemala experienced low-single-digit growth and Brazil experienced high-single-digit growth.
Operating profit increased 48%, primarily reflecting the net revenue growth and productivity savings. These impacts were partially offset by a 41-percentage-point impact of higher commodity costs, primarily cooking oil and packaging material, certain operating cost reductions acrossincreases, a number3.5-percentage-point impact of expense categories,unfavorable foreign exchange and higher advertising and marketing expenses. The recognition of certain indirect tax credits in Brazil and lower charges taken as well as a result of the COVID-19 pandemic contributed 4.5 percentage points and 4 percentage points, respectively, to operating profit growth.
Europe
Net revenue was flat, reflecting effective net pricing, offset by an 8-percentage-point impact of unfavorable foreign exchange and a 2-percentage-point unfavorable impact of the Juice Transaction.
Convenient foods unit volume grew 1%, primarily reflecting mid-single-digit growth in Turkey, the Netherlands and France and low-single-digit growth in the United Kingdom, partially offset by a double-digit decline in Poland and a low-single-digit decline in Russia.
Beverage unit volume declined 1%, primarily reflecting double-digit declines in Germany and Turkey, partially offset by mid-single-digit growth in Russia and the United Kingdom and high-single-digit growth in France.
Operating profit decreased 204%, primarily reflecting the Brand Portfolio Impairment Charges in Russia and charges associated with the Russia-Ukraine conflict, each of which negatively impacted operating profit performance by 189 percentage points, partially offset by a 234-percentage-point impact of the gain associated with the sale of our minority stake in Britvic, which contributed 1 percentage point toJuice Transaction. Additionally, operating profit growth. In addition, items affecting comparability (see “Items Affecting Comparability”) contributed 4 percentage pointsperformance was negatively impacted by a 103-percentage-point impact of higher commodity costs, primarily packaging material, raw milk and cooking oil, certain operating cost increases and a 17-percentage-point impact of payments to operating profitemployees for a change in pension benefits. These impacts were partially offset by the effective net pricing, productivity savings and lower advertising and marketing expenses.
AMESA
Net revenue increased 14%, primarily reflecting organic volume growth and effective net pricing.
Convenient foods unit volume grew 10%, primarily reflecting double-digit growth in the Middle East and Pakistan. Additionally, South Africa experienced mid-single-digit growth and India experienced high-single-digit growth.
Beverage unit volume grew 7%, primarily reflecting double-digit growth in Pakistan and high-single-digit growth in the Middle East and India, partially offset by a high-single-digit decline in Nigeria.
Operating profit increased 30%, primarily reflecting the net revenue growth and productivity savings. These impacts were partially offset by a 38-percentage-point impact of higher commodity costs, primarily cooking oil and packaging material, and certain operating profit margin by 0.7 percentage points,cost increases.
APAC
Net revenue increased 8%, primarily reflecting effective net pricing and organic volume growth.
Convenient foods unit volume declined 1%, primarily reflecting a prior-year impairment charge to reducelow-single-digit decline in China, partially offset by double-digit growth in Thailand and mid-single-digit growth in Australia and Indonesia.
Beverage unit volume grew 15%, primarily reflecting double-digit growth in China and the value of our 5% indirect equity interest in TAB to its estimated fair value.Philippines. Additionally, Vietnam experienced low-single-digit growth and Thailand experienced double-digit growth.
Operating profit increased 3%, primarily reflecting the net revenue growth and productivity savings. These impacts were partially offset by certain operating cost increases, higher advertising and marketing expenses and an 8-percentage-point impact of higher commodity costs and unfavorable foreign exchange. Commodity inflation reduced operating profit growth by 6 percentage points, primarilycosts.
Other Consolidated Results
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| | | | 12 Weeks Ended | |
| | | | | | | | 3/19/2022 | | 3/20/2021 | | Change | |
| Other pension and retiree medical benefits income | | | | | | | $ | 134 | | | $ | 120 | | | $ | 14 | | |
| Net interest expense and other | | | | | | | $ | (240) | | | $ | (258) | | | $ | 18 | | |
| Tax rate | | | | | | | 17.2 | % | | 20.7 | % | | | |
Net income attributable to PepsiCo (a) | | | | | | | $ | 4,261 | | | $ | 1,714 | | | 149 | % | |
Net income attributable to PepsiCo per common share – diluted (a) | | | | | | | $ | 3.06 | | | $ | 1.24 | | | 148 | % | |
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(a)For the 12 weeks ended March 19, 2022, the gain associated with the Juice Transaction contributed to both net income attributable to inflation in the AMENA, Latin America, ESSAPepsiCo growth and FLNA segments, partially offset by deflation in the QFNA segment. Corporate unallocated expensesnet income attributable to PepsiCo per common share growth. See Note 11 to our condensed consolidated financial statements for further information.
Other pension and retiree medical benefits income increased 14%,$14 million, primarily due to mark-to-market net impact associated with commodity derivatives which is also included in the items affecting comparability mentioned above.
Other Consolidated Results
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| | | | | | | | | | | | | | | | | | | | | | | | |
| | 12 Weeks Ended | | 36 Weeks Ended | |
| | 9/9/2017 |
| | 9/3/2016 |
| | Change | | 9/9/2017 |
| | 9/3/2016 |
| | Change | |
| Interest expense, net | $ | (217 | ) | | $ | (217 | ) | | $ | — |
| | $ | (645 | ) | | $ | (682 | ) | | $ | (37 | ) | |
| Tax rate | 22.3 | % | | 23.0 | % | | | | 22.9 | % | | 26.2 | % | | | |
| Net income attributable to PepsiCo | $ | 2,144 |
| | $ | 1,992 |
| | 8 | % | | $ | 5,567 |
| | $ | 4,928 |
| | 13 | % | |
| Net income attributable to PepsiCo per common share – diluted | $ | 1.49 |
| | $ | 1.37 |
| | 9 | % | | $ | 3.87 |
| | $ | 3.39 |
| | 14 | % | |
| Mark-to-market net (gains)/losses | (0.01 | ) | | 0.02 |
| | | | 0.01 |
| | (0.05 | ) | | | |
| Restructuring and impairment charges | — |
| | 0.01 |
| | | | 0.05 |
| | 0.05 |
| | | |
| Charge related to the transaction with Tingyi | — |
| | — |
| | | | — |
| | 0.26 |
| | | |
Net income attributable to PepsiCo per common share – diluted, excluding above items (a) | $ | 1.48 |
| | $ | 1.40 |
| | 6 | % | | $ | 3.92 |
| (b) | $ | 3.65 |
| | 8 | % | |
| Impact of foreign exchange translation | | | | | 1 |
| | | | | | 1.5 |
| |
Growth in net income attributable to PepsiCo per common share – diluted, excluding above items, on a constant currency basis (a) | | | | | 7 | % | | | | | | 9 | % | (b) |
| |
(a) | See “Non-GAAP Measures.” |
| |
(b) | Does not sum due to rounding. |
12 Weeksreflecting curtailment gains.
Net interest expense was consistent with the prior year. This reflects higherand other decreased $18 million, primarily due to lower average debt balances, lower interest income due torates on average debt balances and higher interest rates andon average cash balances,balances. These impacts were partially offset by higher interest expense due to higher average debt balances, as well as lower gainslosses on the market value of investments used to economically hedge a portion of our deferred compensation liability.liability as well as lower average cash balances.
The reported tax rate decreased 0.73.5 percentage points, primarily reflecting the impact of recognizing excess tax benefits in the provision for income taxesJuice Transaction, partially offset by valuation allowances recorded as a result of the changes in accounting for certain aspects ofRussia-Ukraine conflict.
share-based payments to employees in the current year (see Note 2 to our condensed consolidated financial statements for further information).
Net income attributable to PepsiCo increased 8% and net income attributable to PepsiCo per common share increased 9%. Items affecting comparability (see “Items Affecting Comparability”) positively contributed to both net income attributable to PepsiCo and net income attributable to PepsiCo per common share by 3 percentage points.
36 Weeks
Net interest expense decreased $37 million reflecting higher interest income due to higher interest rates and average cash balances, as well as gains on the market value of investments used to economically hedge a portion of our deferred compensation liability. These impacts were partially offset by higher interest expense due to higher average debt balances.
The reported tax rate decreased 3.3 percentage points reflecting the impact of the prior-year impairment charge to reduce the value of our 5% indirect equity interest in TAB to its estimated fair value, which had no corresponding tax benefit, as well as the impact of recognizing excess tax benefits in the provision for income taxes as a result of the changes in accounting for certain aspects of share-based payments to employees in the current year (see Note 2 to our condensed consolidated financial statements for further information).
Net income attributable to PepsiCo increased 13% and net income attributable to PepsiCo per common share increased 14%. Items affecting comparability (see “Items Affecting Comparability”) positively contributed 7 percentage points to both net income attributable to PepsiCo and net income attributable to PepsiCo per common share, primarily reflecting the prior-year impairment charge to reduce the value of our 5% indirect equity interest in TAB to its estimated fair value.
Non-GAAP Measures
Certain financial measures contained in this Form 10-Q adjust for the impact of specified items and are not in accordance with U.S. Generally Accepted Accounting Principles (GAAP).GAAP. We use non-GAAP financial measures internally to make operating and strategic decisions, including the preparation of our annual operating plan, evaluation of our overall business performance and as a factor in determining compensation for certain employees. We believe presenting non-GAAP financial measures in this Form 10-Q provides additional information to facilitate comparison of our historical operating results and trends in our underlying operating results and provides
additional transparency on how we evaluate our business. We also believe presenting these measures in this Form 10-Q allows investors to view our performance using the same measures that we use in evaluating our financial and business performance and trends.
We consider quantitative and qualitative factors in assessing whether to adjust for the impact of items that may be significant or that could affect an understanding of our ongoing financial and business performance or trends. Examples of items for which we may make adjustments include: amounts related to mark-to-market gains or losses (non-cash); gains or lossescharges related to restructuring plans; costs associated with mergers, acquisitions, divestitures and other structural changes; gains associated with divestitures; asset impairment charges (non-cash); pension and retiree medical-related amounts (including all settlement and curtailment gains and losses); charges or adjustments related to restructuring programs; asset impairments (non-cash);the enactment of new laws, rules or regulations, such as tax law changes; amounts related to the resolution of tax positions; pension and retiree medicaltax benefits related items;to reorganizations of our operations; debt redemptions;redemptions, cash tender or exchange offers; and remeasurements of net monetary assets. Prior to the fourth quarter of 2021, certain immaterial pension and retiree medical-related settlement and curtailment gains and losses were not considered items affecting comparability. Pension and retiree medical-related service cost, interest cost, expected return on plan assets, and other net periodic pension costs will continue to be reflected in our core results. See below and “Items Affecting Comparability” for a description of adjustments to our U.S. GAAP financial measures in this Form 10-Q.
Non-GAAP information should be considered as supplemental in nature and is not meant to be considered in isolation or as a substitute for the related financial information prepared in accordance with U.S. GAAP. In addition, our non-GAAP financial measures may not be the same as or comparable to similar non-GAAP measures presented by other companies.
The following non-GAAP financial measures are contained in this Form 10-Q:10-Q are discussed below:
costCost of sales, gross profit, selling, general and administrative expenses, noncontrolling interestsgain associated with the Juice Transaction, other pension and retiree medical benefits income, provision for income taxes and net income attributable to PepsiCo, each adjusted for items affecting comparability;
comparability, operating profit/loss, adjusted for items affecting comparability,profit and net income attributable to PepsiCo per common share – diluted, each adjusted for items affecting comparability and the corresponding constant currency growth rates;
ratesorganic revenue; and
free cash flow.
Cost of Sales, Gross Profit, Selling, General and Administrative Expenses, Noncontrolling Interests and Provision for Income Taxes, Adjusted for Items Affecting Comparability; and Operating Profit/Loss, Adjusted for Items Affecting Comparability, and Net Income Attributable to PepsiCo per Common Share – Diluted, Adjusted for Items Affecting Comparability, and the Corresponding Constant Currency Growth Rates
Cost of sales, gross profit, selling, general and administrative expenses, noncontrolling interests and provision for income taxes, adjusted for items affecting comparability; and operating profit/loss, adjusted for items affecting comparability, and net income attributable to PepsiCo per common share – diluted, adjusted for items affecting comparability, each excludesThese measures exclude the net impact of mark-to-market gains and losses on centrally managed commoditiescommodity derivatives that do not qualify for hedge accounting, restructuring and impairment charges related to our 20142019 Productivity Plan, costs associated with our acquisitions and a chargedivestitures, the gain associated with the Juice Transaction, Russia-Ukraine conflict charges, Brand Portfolio Impairment Charges, and the impact of settlement and curtailment gains and losses related to the transaction with Tingyipension and retiree medical plans (see “Items Affecting Comparability” for a detailed description of each of these items). We also evaluate performance on operating profit/loss, adjusted for items affecting comparability,profit and net income attributable to PepsiCo per common share – diluted, each adjusted for items affecting comparability on a constant currency basis, which measuresmeasure our financial results assuming constant foreign currency exchange rates used for translation based on the rates in effect for the comparable prior-year period. In order to compute our constant currency results, we multiply or divide, as appropriate, our current yearcurrent-year U.S. dollar results by the current yearcurrent-year average foreign exchange rates and then multiply or divide, as appropriate, those amounts by the prior-year average foreign exchange rates. We believe these measures provide useful information in evaluating the results of our business because they exclude items that we believe are not indicative of our ongoing performance.performance or that we believe impact comparability with the prior year.
Organic Revenuerevenue growth
We define organic revenue growth as net revenue adjusteda measure that adjusts for the impactimpacts of foreign exchange translation, as well as the impact from acquisitions, divestitures and other structural changes. In addition, our fiscal 2016 reported results included an extra week of results (53rd reporting week). Organic revenue excludeschanges, and where applicable, the impact of the
53rdreporting week, including in theour fourth quarter of 2016.2022 financial results. We believe organic revenue growth provides useful information in evaluating the results of our business because it excludes items that we believe are not indicative of ongoing performance or that we believe impact comparability with the prior year.
See “Organic“Net Revenue and Organic Revenue Growth” in “Results of Operations – Division Review.”
Review” for further information.
Free Cash Flowcash flow
We define free cash flow as net cash provided byused for operating activities less capital spending, plus sales of property, plant and equipment. Since net capital spending is essential to our product innovation initiatives and maintaining our operational capabilities, we believe that it is a recurring and necessary use of cash. As such, we believe investors should also consider net capital spending when evaluating our cash from operating activities. Free cash flow is used by us primarily for acquisitions and financing activities, including debt repayments, dividends and share repurchases. Free cash flow is not a measure of cash available for discretionary expenditures since we have certain non-discretionary obligations such as debt service that are not deducted from the measure.
See “Free Cash Flow” in “Our Liquidity and Capital Resources.”Resources” for further information.
Items Affecting Comparability
Our reported financial results in this Form 10-Q are impacted by the following items in each of the following periods:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 12 Weeks Ended 3/19/2022 |
| Cost of sales | | Gross profit | | Selling, general and administrative expenses | | Gain associated with the Juice Transaction | | Operating profit | | Other pension and retiree medical benefits income | | | | Provision for income taxes(a) | | | | Net income attributable to PepsiCo |
| Reported, GAAP Measure | $ | 7,433 | | | $ | 8,767 | | | $ | 6,822 | | | $ | (3,322) | | | $ | 5,267 | | | $ | 134 | | | | | $ | 888 | | | | | $ | 4,261 | |
| Items Affecting Comparability | | | | | | | | | | | | | | | | |
| Mark-to-market net impact | 33 | | | (33) | | | 79 | | | — | | | (112) | | | — | | | | | (26) | | | | | (86) | |
| Restructuring and impairment charges | (5) | | | 5 | | | (22) | | | — | | | 27 | | | — | | | | | 6 | | | | | 21 | |
| Acquisition and divestiture-related charges | — | | | — | | | (50) | | | — | | | 50 | | | 6 | | | | | 9 | | | | | 47 | |
| Gain associated with the Juice Transaction | — | | | — | | | — | | | 3,322 | | | (3,322) | | | — | | | | | (452) | | | | | (2,870) | |
| Russia-Ukraine conflict charges | (140) | | | 140 | | | (101) | | | — | | | 241 | | | — | | | | | — | | | | | 241 | |
| Brand Portfolio Impairment Charges | — | | | — | | | (241) | | | — | | | 241 | | | — | | | | | 48 | | | | | 193 | |
| Pension and retiree medical-related impact | — | | | — | | | — | | | — | | | — | | | (16) | | | | | (4) | | | | | (12) | |
| | | | | | | | | | | | | | | | | | | |
| Core, Non-GAAP Measure | $ | 7,321 | | | $ | 8,879 | | | $ | 6,487 | | | $ | — | | | $ | 2,392 | | | $ | 124 | | | | | $ | 469 | | | | | $ | 1,795 | |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | 12 Weeks Ended 9/9/2017 |
| | Cost of sales | | Gross profit | | Selling, general and administrative expenses | | Operating profit | | Provision for income taxes(a) | | Net income attributable to PepsiCo |
| Reported, GAAP Measure | $ | 7,366 |
| | $ | 8,874 |
| | $ | 5,865 |
| | $ | 2,993 |
| | $ | 620 |
| | $ | 2,144 |
|
| Items Affecting Comparability | | | | | | | | | | | |
| Mark-to-market net impact | 1 |
| | (1 | ) | | 26 |
| | (27 | ) | | (10 | ) | | (17 | ) |
| Restructuring and impairment charges | — |
| | — |
| | (8 | ) | | 8 |
| | 1 |
| | 7 |
|
| Core, Non-GAAP Measure | $ | 7,367 |
| | $ | 8,873 |
| | $ | 5,883 |
| | $ | 2,974 |
| | $ | 611 |
| | $ | 2,134 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | 12 Weeks Ended 9/3/2016 |
| | Cost of sales | | Gross profit | | Selling, general and administrative expenses | | Operating profit | | Provision for income taxes(a) | | Net income attributable to PepsiCo |
| Reported, GAAP Measure | $ | 7,284 |
| | $ | 8,743 |
| | $ | 5,904 |
| | $ | 2,821 |
| | $ | 600 |
| | $ | 1,992 |
|
| Items Affecting Comparability | | | | | | | | | | | |
| Mark-to-market net impact | (33 | ) | | 33 |
| | (6 | ) | | 39 |
| | 15 |
| | 24 |
|
| Restructuring and impairment charges | — |
| | — |
| | (27 | ) | | 27 |
| | 7 |
| | 20 |
|
| Core, Non-GAAP Measure | $ | 7,251 |
| | $ | 8,776 |
| | $ | 5,871 |
| | $ | 2,887 |
| | $ | 622 |
| | $ | 2,036 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | 36 Weeks Ended 9/9/2017 |
| | Cost of sales | | Gross profit | | Selling, general and administrative expenses | | Operating profit | | Provision for income taxes(a) | | Net income attributable to PepsiCo |
| Reported, GAAP Measure | $ | 19,708 |
| | $ | 24,291 |
| | $ | 16,330 |
| | $ | 7,916 |
| | $ | 1,668 |
| | $ | 5,567 |
|
| Items Affecting Comparability | | | | | | | | | | | |
| Mark-to-market net impact | 7 |
| | (7 | ) | | (20 | ) | | 13 |
| | 2 |
| | 11 |
|
| Restructuring and impairment charges | — |
| | — |
| | (69 | ) | | 69 |
| | 4 |
| | 65 |
|
| Core, Non-GAAP Measure | $ | 19,715 |
| | $ | 24,284 |
| | $ | 16,241 |
| | $ | 7,998 |
| | $ | 1,674 |
| | $ | 5,643 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 36 Weeks Ended 9/3/2016 |
| | Cost of sales | | Gross profit | | Selling, general and administrative expenses | | Operating profit | | Provision for income taxes(a) | | Noncontrolling interests | | Net income attributable to PepsiCo |
| Reported, GAAP Measure | $ | 19,265 |
| | $ | 24,019 |
| | $ | 16,566 |
| | $ | 7,404 |
| | $ | 1,760 |
| | $ | 34 |
| | $ | 4,928 |
|
| Items Affecting Comparability | | | | | | | | | | | | | |
| Mark-to-market net impact | 48 |
| | (48 | ) | | 59 |
| | (107 | ) | | (37 | ) | | — |
| | (70 | ) |
| Restructuring and impairment charges | — |
| | — |
| | (106 | ) | | 106 |
| | 27 |
| | 3 |
| | 76 |
|
| Charge related to the transaction with Tingyi | — |
| | — |
| | (373 | ) | | 373 |
| | — |
| | — |
| | 373 |
|
| Core, Non-GAAP Measure | $ | 19,313 |
| | $ | 23,971 |
| | $ | 16,146 |
| | $ | 7,776 |
| | $ | 1,750 |
| | $ | 37 |
| | $ | 5,307 |
|
| |
(a) | Provision for income taxes is the expected tax benefit/charge on the underlying item based on the tax laws and income tax rates applicable to the underlying item in its corresponding tax jurisdiction. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 12 Weeks Ended 3/20/2021 |
| Cost of sales | | Gross profit | | Selling, general and administrative expenses | | Operating profit | | Other pension and retiree medical benefits income | | Provision for income taxes(a) | | | | Net income attributable to PepsiCo |
| Reported, GAAP Measure | $ | 6,671 | | | $ | 8,149 | | | $ | 5,837 | | | $ | 2,312 | | | $ | 120 | | | $ | 451 | | | | | $ | 1,714 | |
| Items Affecting Comparability | | | | | | | | | | | | | | | |
| Mark-to-market net impact | 36 | | | (36) | | | 39 | | | (75) | | | — | | | (17) | | | | | (58) | |
| Restructuring and impairment charges | (2) | | | 2 | | | (35) | | | 37 | | | 6 | | | 8 | | | | | 35 | |
| Acquisition and divestiture-related charges | — | | | — | | | 10 | | | (10) | | | — | | | (3) | | | | | (7) | |
| Core, Non-GAAP Measure | $ | 6,705 | | | $ | 8,115 | | | $ | 5,851 | | | $ | 2,264 | | | $ | 126 | | | $ | 439 | | | | | $ | 1,684 | |
(a)Provision for income taxes is the expected tax charge/benefit on the underlying item based on the tax laws and income tax rates applicable to the underlying item in its corresponding tax jurisdiction.
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | 12 Weeks Ended | |
| | | | | | | 3/19/2022 | | 3/20/2021 | | Change | |
| Net income attributable to PepsiCo per common share – diluted, GAAP measure | | | | | | | $ | 3.06 | | | $ | 1.24 | | | 148 | % | |
| Mark-to-market net impact | | | | | | | (0.06) | | | (0.04) | | | | |
| Restructuring and impairment charges | | | | | | | 0.02 | | | 0.03 | | | | |
| Acquisition and divestiture-related charges | | | | | | | 0.03 | | | (0.01) | | | | |
| Gain associated with the Juice Transaction | | | | | | | (2.06) | | | — | | | | |
| Russia-Ukraine conflict charges | | | | | | | 0.17 | | | — | | | | |
| Brand Portfolio Impairment Charges | | | | | | | 0.14 | | | — | | | | |
| Pension and retiree medical-related impact | | | | | | | (0.01) | | | — | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| Core net income attributable to PepsiCo per common share – diluted, non-GAAP measure | | | | | | | $ | 1.29 | |
| $ | 1.21 | | (a) | 6 | % | |
| Impact of foreign exchange translation | | | | | | | | | | | 1 | | |
| Growth in core net income attributable to PepsiCo per common share – diluted, on a constant currency basis, non-GAAP measure | | | | | | |
| | | | 7 | % | |
(a)Does not sum due to rounding.
Mark-to-Market Net Impact
We centrally manage commodity derivatives on behalf of our divisions. These commodity derivatives include agricultural products, metalsenergy and energy.metals. Commodity derivatives that do not qualify for hedge accounting treatment are marked to market each period with the resulting gains and losses recorded in corporate unallocated expenses as either cost of sales or selling, general and administrative expenses, depending on the underlying commodity. These gains and losses are subsequently reflected in division results when the divisions recognize the cost of the underlying commodity in operating profit. Therefore, the divisions realize the economic effects of the derivative without experiencing any resulting mark-to-market volatility, which remains in corporate unallocated expenses.
Restructuring and Impairment Charges
In connection with our 20142019 Multi-Year Productivity Plan
To build on the successful implementation of the 2019 Productivity Plan, in the second quarter of 2021, we expanded and extended the program through the end of 2026 to take advantage of additional opportunities within the initiatives of the 2019 Productivity Plan. As a result, we expect to incur pre-tax charges of approximately $990 million, of which approximately $705 million represents$3.15 billion, including cash expenditures summarized by periodof approximately $2.4 billion. Plan to date through March 19, 2022, we have incurred pre-tax charges of $1.1 billion, including cash expenditures of $808 million. For the remainder of 2022, we expect to incur pre-tax charges of approximately $325 million, and cash expenditures of approximately $275 million. These charges will be funded primarily through cash from operations. We expect to incur the majority of the remaining pre-tax
charges and cash expenditures in our 2022 and 2023 financial results, with the balance to be incurred through 2026. Charges include severance and other employee costs, asset impairments and other costs.
See Note 2 to our condensed consolidated financial statements in this Form 10-Q, as follows:well as Note 3 to our consolidated financial statements in our 2021 Form 10-K, for further information related to our 2019 Productivity Plan.
We regularly evaluate productivity initiatives beyond the productivity plan and other initiatives discussed above and in Note 2 to our condensed consolidated financial statements.
Acquisition and Divestiture-Related Charges
|
| | | | | | | | |
| | Charges | | Cash Expenditures | |
| 2013 | $ | 53 |
| | $ | — |
| |
| 2014 | 357 |
| | 175 |
| (b) |
| 2015 | 169 |
| | 165 |
| (b) |
| 2016 | 160 |
| | 95 |
| |
| First quarter 2017 | 27 |
| | 7 |
| |
| Second quarter 2017 | 34 |
| | 18 |
| |
| Third quarter 2017 | 8 |
| | 58 |
| |
| | 808 |
| | 518 |
| |
| Fourth quarter 2017 (expected) | 87 |
| | 54 |
| |
| 2018 (expected) | 95 |
| | 133 |
| |
| | $ | 990 |
| (a) | $ | 705 |
| |
| |
(a) | This total pre-tax charge is expected to consist of approximately $510 million of severance and other employee-related costs, approximately$160 million for asset impairments (all non-cash) resulting from plant closures and related actions, and approximately $320 million for other costs associated with the implementation of our initiatives, including contract termination costs. This charge is expected to impact reportable segments and Corporate approximately as follows: FLNA 12%, QFNA 2%, NAB 30%, Latin America 20%, ESSA 25%, AMENA 4% and Corporate 7%. |
| |
(b) | In 2015 and 2014, cash expenditures included $2 million and $10 million, respectively, reported on our cash flow statement in pension and retiree medical plan contributions. |
See Note 11 to our condensed consolidated financial statements for further information.
Gain Associated with the Juice Transaction
We recognized a gain associated with the Juice Transaction in our PBNA and Europe divisions.
See Note 11 to our condensed consolidated financial statements for further information.
Russia-Ukraine Conflict Charges
In connection with the deadly conflict in Ukraine, we recognized charges related to property, plant and equipment impairment, allowance for expected credit losses, inventory write-downs and other costs. See Note 1 to our condensed consolidated financial statements for further information.
Brand Portfolio Impairment Charges
We recognized asset impairment charges as a result of management’s decision to discontinue or reposition certain brands. See Note 3 to our condensed consolidated financial statements for further information relatedinformation.
Pension and Retiree Medical-Related Impact
Pension and retiree medical-related impact relates to our 2014 Productivity Plan.curtailment gains resulting from the Juice Transaction.
We regularly evaluate different productivity initiatives beyond the 2014 Productivity Plan discussed above and in Note 3 to our condensed consolidated financial statements.
Charge Related to the Transaction with Tingyi
During the first quarter of 2016, we recorded a pre- and after-tax impairment charge of $373 million ($0.26 per share) in the AMENA segment to reduce the value of our 5% indirect equity interest in TAB to its estimated fair value. See Note 106 and Note 11 to our condensed consolidated financial statements for further information.
Results of Operations – Division Review
The results and discussions below are based on how our Chief Executive Officer monitors the performance of our divisions. See “Non-GAAP Measures” and “Items Affecting Comparability” for a discussion of items to consider when evaluating our results and related information regarding non-GAAP measures.
In the discussions of net revenue and operating profit below, “effective net pricing” reflects the year-over-year impact of discrete pricing actions, sales incentive activities and mix resulting from selling varying products in different package sizes and in different countries, and “net pricing” reflects the year-over-year combined impact of list price changes, weight changes per package, discounts and allowances. Additionally, “acquisitions and divestitures,” except as otherwise noted, reflect all mergers and acquisitions activity, including the impact of acquisitions, divestitures and changes in ownership or control in consolidated subsidiaries and nonconsolidated equity investees.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Revenue |
| |
| |
| | | |
| |
| |
| |
| 12 Weeks Ended |
| FLNA |
| QFNA |
| NAB | | Latin America |
| ESSA |
| AMENA |
| Total |
| 9/9/2017 |
| $ | 3,792 |
| | $ | 578 |
| | $ | 5,332 |
| | $ | 1,873 |
| | $ | 3,098 |
| | $ | 1,567 |
| | $ | 16,240 |
|
| 9/3/2016 |
| $ | 3,676 |
| | $ | 571 |
| | $ | 5,518 |
| | $ | 1,762 |
| | $ | 2,864 |
| | $ | 1,636 |
| | $ | 16,027 |
|
| % Impact of: |
| | | | | | | | | | | | | |
Volume (a) |
| 1 | % | | 1 | % | | (6 | )% | | (2 | )% | | 4 | % | | 1 | % | | (1 | )% |
Effective net pricing (b) |
| 2 |
| | — |
| | 1 |
| | 7 |
| | 2 |
| | 7 |
| | 3 |
|
| Foreign exchange translation |
| — |
| | — |
| | — |
| | 2 |
| | 2 |
| | (13 | ) | | (1 | ) |
| Acquisitions and divestitures |
| — |
| | — |
| | 1 |
| | (1 | ) | | — |
| | — |
| | — |
|
Reported Growth (c) |
| 3 | % | | 1 | % | | (3 | )% | | 6 | % | | 8 | % | | (4 | )% | | 1 | % |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 36 Weeks Ended | | FLNA | | QFNA | | NAB | | Latin America | | ESSA | | AMENA | | Total |
| 9/9/2017 | | $ | 10,969 |
| | $ | 1,729 |
| | $ | 15,034 |
| | $ | 4,773 |
| | $ | 7,355 |
| | $ | 4,139 |
| | $ | 43,999 |
|
| 9/3/2016 | | $ | 10,658 |
| | $ | 1,749 |
| | $ | 15,024 |
| | $ | 4,521 |
| | $ | 6,883 |
| | $ | 4,449 |
| | $ | 43,284 |
|
| % Impact of: | | | | | | | | | | | | | | |
Volume (a) | | — | % | | — | % | | (2 | )% | | (1 | )% | | 3 | % | | — | % | | — | % |
Effective net pricing (b) | | 3 |
| | (1 | ) | | 1 |
| | 7 |
| | 3 |
| | 5 |
| | 3 |
|
| Foreign exchange translation | | — |
| | — |
| | — |
| | — |
| | 1 |
| | (11 | ) | | (1 | ) |
| Acquisitions and divestitures | | — |
| | — |
| | 1 |
| | (1 | ) | | — |
| | — |
| | — |
|
Reported Growth (c) | | 3 | % | | (1 | )% | | — | % | | 6 | % | | 7 | % | | (7 | )% | | 2 | % |
| |
(a) | Excludes the impact of acquisitions, divestitures and other structural changes. In certain instances, volume growth varies from the amounts disclosed in the following divisional discussions due to nonconsolidated joint venture volume, and, for our beverage businesses, temporary timing differences between BCS and CSE, as well as the mix of beverage volume sold by our Company-owned and franchise-owned bottlers. Our net revenue excludes nonconsolidated joint venture volume, and, for our beverage businesses, is based on CSE. |
| |
(b) | Includes the year-over-year impact of discrete pricing actions, sales incentive activities and mix resulting from selling varying products in different package sizes and in different countries. |
| |
(c) | Amounts may not sum due to rounding. |
Organic Revenue Growth
Organic revenue is a non-GAAP financial measure. For further information on organic revenue see “Non-GAAP Measures.”
|
| | | | | | | | | | | | | | | | | | | | | |
| 12 Weeks Ended 9/9/2017 |
| FLNA |
| QFNA |
| NAB | | Latin America |
| ESSA |
| AMENA |
| Total |
| Reported Growth |
| 3 | % | | 1 | % | | (3 | )% | | 6 | % | | 8 | % | | (4 | )% | | 1 | % |
| % Impact of: |
| | | | | | | | | | | | | |
| Foreign exchange translation |
| — |
| | — |
| | — |
| | (2 | ) | | (2 | ) | | 13 |
| | 1 |
|
| Acquisitions and divestitures |
| — |
| | — |
| | (1 | ) | | 1 |
| | — |
| | — |
| | — |
|
Organic Growth (a) |
| 3 | % | | 1 | % | | (5 | )% | | 5 | % | | 6 | % | | 9 | % | | 2 | % |
|
| | | | | | | | | | | | | | | | | | | | | |
| 36 Weeks Ended 9/9/2017 | | FLNA | | QFNA | | NAB | | Latin America | | ESSA | | AMENA | | Total |
| Reported Growth | | 3 | % | | (1 | )% | | — | % | | 6 | % | | 7 | % | | (7 | )% | | 2 | % |
| % Impact of: | | | | | | | | | | | | | | |
| Foreign exchange translation | | — |
| | — |
| | — |
| | — |
| | (1 | ) | | 11 |
| | 1 |
|
| Acquisitions and divestitures | | — |
| | — |
| | (1 | ) | | 1 |
| | — |
| | — |
| | — |
|
Organic Growth (a) | | 3 | % | | (1 | )% | | (1 | )% | | 6 | % | | 6 | % | | 4 | % | | 2 | % |
| |
(a) | Amounts may not sum due to rounding. |
|
| | | | | | | | | | | | | | | | | | | | | |
| | 12 Weeks Ended | |
| | 36 Weeks Ended | | |
| | 9/9/2017 |
| | 9/3/2016 |
| | % Change | | 9/9/2017 |
| | 9/3/2016 |
| | % Change |
| Net revenue | $ | 3,792 |
| | $ | 3,676 |
| | 3 |
| | $ | 10,969 |
| | $ | 10,658 |
| | 3 |
|
| Impact of foreign exchange translation | | | | | — |
| | | | | | — |
|
Organic revenue growth (a) | | | | | 3 |
| | | | | | 3 |
|
| | | | | | | | | | | | |
| Operating profit | $ | 1,208 |
| | $ | 1,148 |
| | 5 |
| | $ | 3,421 |
| | $ | 3,249 |
| | 5 |
|
| Restructuring and impairment charges | 2 |
| | 2 |
| | | | 6 |
| | 1 |
| | |
Operating profit excluding above item (a) | $ | 1,210 |
| | $ | 1,150 |
| | 5 |
| | $ | 3,427 |
| | $ | 3,250 |
| | 5 |
|
| Impact of foreign exchange translation | | | | | — |
| | | | | | — |
|
Operating profit growth excluding above item, on a constant currency basis (a) | | | | | 5 |
| | | | | | 5 |
|
| |
(a) | See “Non-GAAP Measures.” |
12 Weeks
Net revenue grew 3% and volume was even with the prior year. The net revenue growth was primarily driven by effective net pricing. The volume performance reflects high-single-digit growth in variety packs, mid-single-digit growth in trademark Ruffles and double-digit growth in trademark Sunchips. These volume gains were offset by a mid-single-digit decline in trademark Lay’s.
Operating profit grew 5%, primarily reflecting the net revenue growth and planned cost reductions across a number of expense categories, as well as the impact of prior-year incremental investments into our business, which increased operating profit by 1 percentage point. These impacts were partially offset by certain operating cost increases, including strategic initiatives, as well as higher commodity costs, primarily cooking oil, which reduced operating profit growth by 1 percentage point.
36 Weeks
Net revenue grew 3% and volume was even with the prior year. The net revenue growth was driven by effective net pricing. The volume performance reflects a mid-single-digit decline in trademark Lay’s, a double-digit decline in our Sabra joint venture products and a low-single-digit decline in trademark Doritos. These volume declines were offset by high-single-digit growth in variety packs and double-digit growth in trademark Ruffles.
Operating profit grew 5%, primarily reflecting the net revenue growth and planned cost reductions across a number of expense categories. These impacts were partially offset by certain operating cost increases, including strategic initiatives, as well as higher commodity costs, primarily cooking oil, which reduced operating profit growth by 1 percentage point.
Quaker Foods North America
|
| | | | | | | | | | | | | | | | | | | | | |
| | 12 Weeks Ended | |
| | 36 Weeks Ended | | |
| | 9/9/2017 |
| | 9/3/2016 |
| | % Change | | 9/9/2017 |
| | 9/3/2016 |
| | % Change |
| Net revenue | $ | 578 |
| | $ | 571 |
| | 1 |
| | $ | 1,729 |
| | $ | 1,749 |
| | (1 | ) |
| Impact of foreign exchange translation | | | | | — |
| | | | | | — |
|
Organic revenue growth (a) | | | | | 1 |
| | | | | | (1 | ) |
| | | | | | | | | | | | |
| Operating profit | $ | 146 |
| | $ | 144 |
| | 2 |
| | $ | 456 |
| | $ | 456 |
| | — |
|
| Restructuring and impairment charges | — |
| | — |
| | | | — |
| | 1 |
| | |
Operating profit excluding above item (a) | $ | 146 |
| | $ | 144 |
| | 2 |
| | $ | 456 |
| | $ | 457 |
| | — |
|
| Impact of foreign exchange translation | | | | | — |
| | | | | | — |
|
Operating profit growth excluding above item, on a constant currency basis (a) | | | | | 2 |
| | | | | | — |
|
| |
(a) | See “Non-GAAP Measures.” |
12 Weeks
Net revenue and volume each grew 1%. The net revenue growth reflects the volume growth, which was primarily driven by mid-single-digit growth in oatmeal and double-digit growth in bars, partially offset by a low-single-digit decline in ready-to-eat cereals and a high-single-digit decline in trademark Roni.
Operating profit grew 2%, reflecting planned cost reductions across a number of expense categories and the volume growth. In addition, the impact of prior-year incremental investments into our business contributed 2 percentage points to operating profit growth. These impacts were partially offset by certain operating cost increases and unfavorable net pricing.
36 Weeks
Net revenue declined 1% and volume declined slightly. The net revenue decline primarily reflects unfavorable mix. The volume decline was driven by a high-single-digit decline in trademark Roni, a mid-single-digit decline in regional grains and a low-single-digit decline in ready-to-eat cereals, mostly offset by low-single-digit growth in oatmeal.
Operating profit grew slightly, reflecting planned cost reductions across a number of expense categories. In addition, favorable settlements of promotional spending accruals and lower commodity costs contributed 2 percentage points and 1 percentage point, respectively, to operating profit growth. These impacts were partially offset by certain operating cost increases, unfavorable mix and net pricing.
North America Beverages
|
| | | | | | | | | | | | | | | | | | | | | |
| | 12 Weeks Ended | |
| | 36 Weeks Ended | | |
| | 9/9/2017 |
| | 9/3/2016 |
| | % Change | | 9/9/2017 |
| | 9/3/2016 |
| | % Change |
| Net revenue | $ | 5,332 |
| | $ | 5,518 |
| | (3 | ) | | $ | 15,034 |
| | $ | 15,024 |
| | — |
|
| Impact of foreign exchange translation | | | | | — |
| | | | | | — |
|
| Impact of acquisitions and divestitures | | | | | (1 | ) | | | | | | (1 | ) |
Organic revenue growth (a) | | | | | (5 | ) | (b) | | | | | (1 | ) |
| | | | | | | | | | | | |
| Operating profit | $ | 817 |
| | $ | 904 |
| | (10 | ) | | $ | 2,216 |
| | $ | 2,270 |
| | (2 | ) |
| Restructuring and impairment charges | (3 | ) | | 6 |
| | | | (1 | ) | | 19 |
| | |
Operating profit excluding above item (a) | $ | 814 |
| | $ | 910 |
| | (11 | ) | | $ | 2,215 |
| | $ | 2,289 |
| | (3 | ) |
| Impact of foreign exchange translation | | | | | — |
| | | | | | — |
|
Operating profit growth excluding above item, on a constant currency basis (a) | | | | | (11 | ) | | | | | | (3 | ) |
| |
(a) | See “Non-GAAP Measures.” |
| |
(b) | Does not sum due to rounding. |
12 Weeks
Net revenue decreased 3%, reflecting a decline in volume, partially offset by effective net pricing, as well as acquisitions, which positively contributed 1 percentage point to the net revenue performance.
Volume decreased 5.5%, driven by a 6% decline in non-carbonated beverage volume and a 5% decline in carbonated soft drink (CSD) volume. The non-carbonated beverage volume decrease primarily reflected a double-digit decrease in Gatorade sports drinks and a high-single-digit decrease in our juice and juice drinks portfolio, partially offset by a low-single-digit increase in our overall water portfolio.
Operating profit decreased 10%, primarily reflecting the net revenue decline and certain operating cost increases. These impacts were partially offset by planned cost reductions across a number of expense categories, as well as a gain associated with a sale of an asset, which positively contributed 2 percentage points to the operating profit performance.
36 Weeks
Net revenue increased slightly, reflecting a 1-percentage-point contribution from acquisitions and effective net pricing, offset by a decline in volume.
Volume decreased 2%, driven by a 4% decline in CSD volume, partially offset by a slight increase in non-carbonated beverage volume. The increase in non-carbonated beverage volume reflected a high-single-digit increase in our overall water portfolio and a low-single-digit increase in Lipton ready-to-drink teas, offset by a low-single-digit decrease in Gatorade sports drinks and a mid-single-digit decrease in our juice and juice drinks portfolio. Acquisitions had a nominal positive contribution to the volume performance.
Operating profit decreased 2%, primarily reflecting certain operating cost increases. These impacts were partially offset by planned cost reductions across a number of expense categories, as well as favorable settlements of promotional spending accruals compared to the prior year, which positively contributed 1.5 percentage points to the operating profit performance.
Latin America
|
| | | | | | | | | | | | | | | | | | | | | | |
| | 12 Weeks Ended | |
| | 36 Weeks Ended | | | |
| | 9/9/2017 |
| | 9/3/2016 |
| | % Change | | 9/9/2017 |
| | 9/3/2016 |
| | % Change | |
| Net revenue | $ | 1,873 |
| | $ | 1,762 |
| | 6 |
| | $ | 4,773 |
| | $ | 4,521 |
| | 6 |
| |
| Impact of foreign exchange translation | | | | | (2 | ) | | | | | | — |
| |
| Impact of acquisitions and divestitures | | | | | 1 |
| | | | | | 1 |
| |
Organic revenue growth (a) | | | | | 5 |
| | | | | | 6 |
| (b) |
| | | | | | | | | | | | | |
| Operating profit | $ | 281 |
| | $ | 247 |
| | 14 |
| | $ | 641 |
| | $ | 664 |
| | (3.5 | ) | |
| Restructuring and impairment charges | (2 | ) | | — |
| | | | 47 |
| | 28 |
| | | |
Operating profit excluding above item (a) | $ | 279 |
| | $ | 247 |
| | 13 |
| | $ | 688 |
| | $ | 692 |
| | (1 | ) | |
| Impact of foreign exchange translation | | | | | (4 | ) | | | | | | 3 |
| |
Operating profit growth excluding above item, on a constant currency basis (a) | | | | | 9 |
| | | | | | 3 |
| (b) |
| |
(a) | See “Non-GAAP Measures.” |
| |
(b) | Does not sum due to rounding. |
12 Weeks
Net revenue increased 6%, reflecting effective net pricing and favorable foreign exchange, partially offset by a volume decline, as well as the impact of refranchising a portion of our beverage business in Colombia, which reduced net revenue growth by 1 percentage point.
Snacks volume declined 1%, reflecting a low-single-digit decline in Brazil and a slight decline in Mexico.
Beverage volume declined slightly, reflecting a double-digit decline in Colombia and a mid-single-digit decline in Argentina, mostly offset by low-single-digit growth in Mexico and Brazil and high-single-digit growth in Guatemala.
Operating profit increased 14%, reflecting the effective net pricing and planned cost reductions across a number of expense categories. Additionally, a promotional spending accrual adjustment and the impact of prior-year incremental investments into our business contributed 4.5 percentage points and 4 percentage points, respectively, to operating profit growth. These impacts were partially offset by certain operating cost increases and the volume decline, as well as higher commodity costs, which reduced operating profit growth by 11 percentage points.
36 Weeks
Net revenue increased 6%, reflecting effective net pricing, partially offset by a volume decline, as well as the impact of refranchising a portion of our beverage business in Colombia, which reduced net revenue growth by 1 percentage point.
Snacks volume declined slightly, reflecting a low-single-digit decline in Brazil, partially offset by low-single-digit growth in Mexico.
Beverage volume declined 2%, reflecting a high-single-digit decline in Brazil and a low-single-digit decline in Argentina, partially offset by low-single-digit growth in Mexico and high-single-digit growth in Guatemala.
Operating profit decreased 3.5%, reflecting certain operating cost increases, higher advertising and marketing expenses, the volume decline, as well as higher commodity costs, which negatively impacted operating profit performance by 16 percentage points. In addition, unfavorable foreign exchange and restructuring and
impairment charges in the above table (see “Items Affecting Comparability”) each negatively impacted operating profit performance by 3 percentage points. These impacts were partially offset by the effective net pricing and planned cost reductions across a number of expense categories.
Europe Sub-Saharan Africa
|
| | | | | | | | | | | | | | | | | | | | | | |
| | 12 Weeks Ended | |
| | 36 Weeks Ended | | | |
| | 9/9/2017 |
| | 9/3/2016 |
| | % Change | | 9/9/2017 |
| | 9/3/2016 |
| | % Change | |
| Net revenue | $ | 3,098 |
| | $ | 2,864 |
| | 8 |
| | $ | 7,355 |
| | $ | 6,883 |
| | 7 |
| |
| Impact of foreign exchange translation | | | | | (2 | ) | | | | | | (1 | ) | |
Organic revenue growth (a) | | | | | 6 |
| | | | | | 6 |
| |
| | | | | | | | | | | | | |
| Operating profit | $ | 436 |
| | $ | 388 |
| | 12 |
| | $ | 1,039 |
| | $ | 792 |
| | 31 |
| |
| Restructuring and impairment charges | 12 |
| | 11 |
| | | | 19 |
| | 38 |
| | | |
Operating profit excluding above item (a) | $ | 448 |
| | $ | 399 |
| | 12 |
| | $ | 1,058 |
| | $ | 830 |
| | 27 |
| |
| Impact of foreign exchange translation | | | | | — |
| | | | | | 2 |
| |
Operating profit growth excluding above item, on a constant currency basis (a) | | | | | 12 |
| | | | | | 30 |
| (b) |
| |
(a) | See “Non-GAAP Measures.” |
| |
(b) | Does not sum due to rounding. |
12 Weeks
Net revenue increased 8%, reflecting volume growth and effective net pricing, as well as favorable foreign exchange, which contributed 2 percentage points to net revenue growth.
Snacks volume grew 6%, reflecting double-digit growth in France, high-single-digit growth in Turkey and mid-single-digit growth in Russia, partially offset by a low-single-digit decline in Spain. Additionally, the United Kingdom experienced low-single-digit growth and South Africa and the Netherlands experienced mid-single-digit growth.
Beverage volume grew 2%, reflecting high-single-digit growth in Poland and mid-single-digit growth in Turkey, partially offset by a mid-single-digit decline in Russia and low-single-digit declines in the United Kingdom, Germany and Nigeria. Additionally, France experienced low-single-digit growth.
Operating profit increased 12%, reflecting the net revenue growth and planned cost reductions across a number of expense categories. Additionally, the impact of prior-year incremental investments into our business contributed 5 percentage points to operating profit growth. These impacts were partially offset by certain operating cost increases and higher advertising and marketing expenses, as well as higher commodity costs, which reduced operating profit growth by 5.5 percentage points.
36 Weeks
Net revenue increased 7%, reflecting volume growth and effective net pricing.
Snacks volume grew 5%, reflecting high-single-digit growth in France and South Africa and mid-single-digit growth in the Netherlands, partially offset by a low-single-digit decline in Spain. Additionally, the United Kingdom and Turkey experienced low-single-digit growth and Russia experienced mid-single-digit growth.
Beverage volume grew 1%, reflecting mid-single-digit growth in Poland and low-single-digit growth in Nigeria, Turkey and France, partially offset by a high-single-digit decline in Russia, a mid-single-digit decline in Germany and a low-single-digit decline in the United Kingdom.
Operating profit increased 31%, reflecting the net revenue growth and planned cost reductions across a number of expense categories. Additionally, a gain associated with the sale of our minority stake in Britvic in the second quarter of 2017, the impact of restructuring and impairment charges in the above table (see “Items Affecting Comparability”) and prior-year incremental investments into our business contributed 11 percentage points, 4 percentage points and 2.5 percentage points to operating profit growth, respectively. These impacts were partially offset by certain operating cost increases and higher advertising and marketing expenses, as well as higher commodity costs, which reduced operating profit growth by 8 percentage points.
Asia, Middle East and North Africa
|
| | | | | | | | | | | | | | | | | | | | | | |
| | 12 Weeks Ended | |
| | 36 Weeks Ended | | | |
| | 9/9/2017 |
| | 9/3/2016 |
| | % Change | | 9/9/2017 |
| | 9/3/2016 |
| | % Change | |
| Net revenue | $ | 1,567 |
| | $ | 1,636 |
| | (4 | ) | | $ | 4,139 |
| | $ | 4,449 |
| | (7 | ) | |
| Impact of foreign exchange translation | | | | | 13 |
| | | | | | 11 |
| |
Organic revenue growth (a) | | | | | 9 |
| | | | | | 4 |
| |
| | | | | | | | | | | | | |
| Operating profit | $ | 267 |
| | $ | 264 |
| | 1 |
| | $ | 745 |
| | $ | 499 |
| | 49 |
| |
| Restructuring and impairment charges | (3 | ) | | 4 |
| | | | (7 | ) | | 11 |
| | | |
| Charge related to the transaction with Tingyi | — |
| | — |
| | | | — |
| | 373 |
| | | |
Operating profit excluding above items (a) | $ | 264 |
| | $ | 268 |
| | (1 | ) | | $ | 738 |
| | $ | 883 |
| | (16 | ) | |
| Impact of foreign exchange translation | | | | | 13 |
| | | | | | 7 |
| |
Operating profit growth excluding above items, on a constant currency basis (a) | | | | | 12 |
| | | | | | (10 | ) | (b) |
| |
(a) | See “Non-GAAP Measures.” |
| |
(b) | Does not sum due to rounding. |
12 Weeks
Net revenue decreased 4%, reflecting unfavorable foreign exchange, which negatively impacted net revenue performance by 13 percentage points. This impact was partially offset by effective net pricing and volume growth.
Snacks volume grew 2%, driven by high-single-digit growth in China and Pakistan, and mid-single-digit growth in India. These impacts were partially offset by low-single-digit declines in the Middle East and Australia.
Beverage volume grew 1%, driven by high-single-digit growth in China and Pakistan and mid-single-digit growth in the Philippines. These impacts were partially offset by a mid-single-digit decline in the Middle East and a double-digit decline in India.
Operating profit increased 1%, mainly driven by the effective net pricing, planned cost reductions across a number of expense categories, lower advertising and marketing expenses and the volume growth. These impacts were partially offset by higher commodity costs, which reduced operating profit growth by 41 percentage points, primarily due to transaction-related foreign exchange on purchases of raw materials driven by a weak Egyptian pound, and certain operating cost increases. Unfavorable foreign exchange translation reduced operating profit growth by 13 percentage points.
36 Weeks
Net revenue decreased 7%, reflecting unfavorable foreign exchange, which negatively impacted net revenue performance by 11 percentage points. This impact was partially offset by effective net pricing.
Snacks volume grew 5%, driven by double-digit growth in Pakistan and high-single-digit growth in China. Additionally, the Middle East, India and Australia experienced mid-single-digit growth.
Beverage volume declined 1%, reflecting a double-digit decline in India and a mid-single-digit decline in the Middle East, partially offset by high-single-digit growth in China and Pakistan. Additionally, the Philippines experienced a slight decline.
Operating profit improvement primarily reflected a prior-year impairment charge to reduce the value of our 5% indirect equity interest in TAB to its estimated fair value, included in items affecting comparability in the above table (see “Items Affecting Comparability”). The effective net pricing and planned cost reductions across a number of expense categories also contributed to operating profit growth. These impacts were partially offset by higher commodity costs, which reduced operating profit growth by 29 percentage points, primarily due to transaction-related foreign exchange on purchases of raw materials driven by a weak Egyptian pound, and certain operating cost increases. Unfavorable foreign exchange translation reduced operating profit growth by 7 percentage points.
Our Liquidity and Capital Resources
We believe that our cash generating capability and financial condition, together with our revolving credit facilities, working capital lines and other available methods of debt financing, such as commercial paper borrowings and long-term debt financing, will be adequate to meet our operating, investing and financing needs.needs, including with respect to our net capital spending plans. Our primary sources of cash available to fund cash outflows, such as our anticipated share repurchases, dividend payments and scheduled debt maturities,liquidity include cash from operations, and pre-tax cash proceeds of approximately $3.5 billion from the Juice Transaction,proceeds obtained from issuances of commercial paper and long-term debt. However, there can be no assurancedebt, and cash and cash equivalents. These sources of cash are available to fund cash outflows that volatilityhave both a short- and long-term component, including debt repayments and related interest payments; payments for acquisitions; operating leases; purchase, marketing, and other contractual commitments, including capital expenditures and the transition tax liability under the TCJ Act. In addition, these sources of cash fund other cash outflows including anticipated dividend payments and share repurchases. We do not have guarantees or off-balance sheet financing arrangements, including variable interest entities, that we believe could have a material impact on our liquidity. See “Our Business Risks” and Note 7 and Note 11 to our condensed consolidated
financial statements included in the global capitalthis Form 10-Q and credit markets will not impair our ability to access these markets on terms commercially acceptable to us, or at all. See “Item 2.1A. Risk Factors,” “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Our Business Risks” and Note 8 to our consolidated financial statements included in our 2021 Form 10-K for further information.
Our sources and uses of cash were not materially adversely impacted by the Russia-Ukraine conflict in the 12 weeks ended March 19, 2022 and, to date, we have not identified any material liquidity deficiencies as a result of the conflict. Based on the information currently available to us, we do not expect the impact of the Russia-Ukraine conflict to have a material impact on our future liquidity. We will continue to monitor and assess the impact the Russia-Ukraine conflict may have on our business and financial results. See “Our Business Risks,” Note 1 to our condensed consolidated financial statements and “Item 1A. Risk Factors” in this Form 10-Q for further information related to the impact of the Russia-Ukraine conflict on our business and financial results.
Our sources and uses of cash were not materially adversely impacted by COVID-19 in the 12 weeks ended March 19, 2022 and, to date, we have not identified any material liquidity deficiencies as a result of the COVID-19 pandemic. Based on the information currently available to us, we do not expect the impact of the COVID-19 pandemic to have a material impact on our future liquidity. We will continue to monitor and assess the impact the COVID-19 pandemic may have on our business and financial results. See “Our Business Risks” and Note 1 to our condensed consolidated financial statements in this Form 10-Q and “Item 1A. Risk Factors,” “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Our Business Risks” and Note 1 to our consolidated financial statements included in our 2021 Form 10-K for further information related to the impact of the COVID-19 pandemic on our business and financial results.
As of March 19, 2022, cash, cash equivalents and short-term investments in our consolidated subsidiaries subject to currency controls or currency exchange restrictions were not material.
The TCJ Act imposed a one-time mandatory transition tax on undistributed international earnings. As of March 19, 2022, our mandatory transition tax liability was $2.9 billion, which must be paid through 2026 under the provisions of the TCJ Act. See “Our Liquidity and Capital Resources,” “Our Critical Accounting Policies” and Note 5 to our consolidated financial statements included in our 2021 Form 10-K for further discussion of the TCJ Act.
As part of our evolving market practices, we work with our suppliers to optimize our terms and conditions, which include the extension of payment terms. Our current payment terms with a majority of our suppliers generally range from 60 to 90 days, which we deem to be commercially reasonable. We will continue to monitor economic conditions and market practice working with our suppliers to adjust as necessary. We also maintain voluntary supply chain finance agreements with several participating global financial institutions. Under these agreements, our suppliers, at their sole discretion, may elect to sell their accounts receivable with PepsiCo to these participating global financial institutions. Supplier participation in these financing arrangements is voluntary. Our suppliers negotiate their financing agreements directly with the respective global financial institutions and we are not a party to these agreements. These financing arrangements allow participating suppliers to leverage PepsiCo’s creditworthiness in establishing credit spreads and associated costs, which generally provides our suppliers with more favorable terms than they would be able to secure on their own. Neither PepsiCo nor any of its subsidiaries provide any guarantees to any third party in connection with these financing arrangements. We have no economic interest in our suppliers’ decision to participate in these agreements. Our obligations to our suppliers, including amounts due and scheduled payment terms, are not impacted. All outstanding amounts related to suppliers participating in such financing arrangements are recorded within accounts payable and other current liabilities in our condensed consolidated balance sheet. We were informed by the participating financial institutions that as of March 19, 2022 and December 25, 2021, $1.3 billion and $1.5 billion, respectively, of our accounts payable to suppliers who participate in these
financing arrangements are outstanding. These supply chain finance arrangements did not have a material impact on our liquidity or capital resources in the periods presented and we do not expect such arrangements to have a material impact on our liquidity or capital resources for the foreseeable future.
Operating Activities
During the 12 weeks ended March 19, 2022, net cash used for operating activities was $0.2 billion, compared to net cash used for operating activities of $0.7 billion in the prior-year period. The increase in operating cash flow primarily reflects lower pre-tax pension and retiree medical plan contributions, as well as favorable operating profit performance and working capital comparisons.
Investing Activities
During the 12 weeks ended March 19, 2022, net cash provided by investing activities was $3.0 billion, primarily reflecting proceeds associated with the Juice Transaction of $3.5 billion, partially offset by net capital spending of $0.5 billion.
We regularly review our plans with respect to net capital spending, including in light of the ongoing uncertainty caused by the Russia-Ukraine conflict and by the COVID-19 pandemic on our business, and believe that we have sufficient liquidity to meet our net capital spending needs.
Financing Activities
During the 12 weeks ended March 19, 2022, net cash used for financing activities was $1.8 billion, primarily reflecting the return of operating cash flow to our shareholders, through dividend payments of $1.5 billion and share repurchases of $0.2 billion, and payments of long-term debt borrowings of $1.3 billion, partially offset by net proceeds of short-term borrowings of $1.2 billion.
We annually review our capital structure with our Board of Directors, including our dividend policy and share repurchase activity. On February 10, 2022, we announced a share repurchase program providing for the repurchase of up to $10.0 billion of PepsiCo common stock which commenced on February 11, 2022 and will expire on February 28, 2026. In addition, on February 10, 2022, we announced a 7% increase in our annualized dividend to $4.60 per share from $4.30 per share, effective with the dividend expected to be paid in June 2022. We expect to return a total of approximately $7.7 billion to shareholders in 2022, comprising dividends of approximately $6.2 billion and share repurchases of approximately $1.5 billion.
Free Cash Flow
The table below reconciles net cash used for operating activities, as reflected on our cash flow statement, to our free cash flow. Free cash flow is a non-GAAP financial measure. For further information on free cash flow see “Non-GAAP Measures.”
| | | | | | | | | | | | | |
| | 12 Weeks Ended | | |
| | 3/19/2022 | | 3/20/2021 | | |
| Net cash used for operating activities, GAAP measure | $ | (174) | | | $ | (719) | | | |
| Capital spending | (522) | | | (471) | | | |
| Sales of property, plant and equipment | 3 | | | 5 | | | |
| Free cash flow, non-GAAP measure | $ | (693) | | | $ | (1,185) | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
We use free cash flow primarily for acquisitions and financing activities, including debt repayments, dividends and share repurchases. We expect to continue to return free cash flow to our shareholders primarily through dividends while maintaining Tier 1 commercial paper access, which we believe will facilitate appropriate financial flexibility and ready access to global capital and credit markets at favorable interest rates. See “Our Business Risks” included in this Form 10-Q and “Item 1A. Risk Factors” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Our Business Risks” included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016.
As of September 9, 2017, we had cash, cash equivalents and short-term investments of $17.5 billion in our consolidated subsidiaries outside of the United States. As of September 9, 2017, cash, cash equivalents and short-term investments in our consolidated subsidiaries subject to currency controls or currency exchange restrictions were not material. To the extent foreign earnings are repatriated, such amounts would be subject to certain tax liabilities, both in the United States and in various applicable foreign jurisdictions.
Operating Activities
During the 36 weeks ended September 9, 2017, net cash provided by operating activities was $6.1 billion compared to $6.8 billion in the prior-year period. The operating cash flow performance in part reflects unfavorable working capital (comprised of changes in accounts and notes receivable, inventories, prepaid expenses and other current assets, and accounts payable and other current liabilities, each adjusted for the effects of currency translation). This decrease is mainly due to higher current year payments to vendors, vendor term extensions in the prior year, earlier current year trade spend deduction settlements with customers, timing of advertising and marketing spend, as well as the impact of higher trade accruals as of December 31, 2016, as compared to the prior year-end. These decreases were partially offset by higher collections of receivables in the current year.
Investing Activities
During the 36 weeks ended September 9, 2017, net cash used for investing activities was $2.3 billion, primarily reflecting net capital spending of $1.4 billion and net purchases of debt securities greater than three months of $1.0 billion.
We expect 2017 net capital spending to be approximately $3 billion, within our long-term capital spending target of less than or equal to 5% of net revenue.
Financing Activities
During the 36 weeks ended September 9, 2017, net cash used for financing activities was $2.8 billion, primarily reflecting the return of operating cash flow to our shareholders through dividend payments and share repurchases of $4.8 billion, partially offset by net proceeds from short-term borrowings of $1.5 billion and proceeds from exercises of stock options of $0.4 billion.
We annually review our capital structure with our Board of Directors, including our dividend policy and share repurchase activity. On February 15, 2017, we announced a 7.0% increase in our annualized dividend to $3.22 per share from $3.01 per share, effective with the dividend paid in June 2017. We expect to return a total of approximately $6.5 billion to shareholders in 2017 through share repurchases of approximately
$2.0 billion and dividends of approximately $4.5 billion. See Part II, “Item 2. Unregistered Sales of Equity Securities and Use of Proceeds” for a description of our share repurchase program.
Free Cash Flow
Free cash flow is a non-GAAP financial measure. For further information on free cash flow see “Non-GAAP Measures.”
The table below reconciles net cash provided by operating activities, as reflected on our cash flow statement, to our free cash flow.
|
| | | | | | | | | | |
| | 36 Weeks Ended |
|
|
| | 9/9/2017 |
|
| 9/3/2016 |
|
| % Change |
| Net cash provided by operating activities | $ | 6,062 |
|
| $ | 6,824 |
|
| (11 | ) |
| Capital spending | (1,474 | ) |
| (1,566 | ) |
|
|
|
| Sales of property, plant and equipment | 82 |
|
| 59 |
|
|
|
|
Free cash flow (a) | $ | 4,670 |
|
| $ | 5,317 |
|
| (12 | ) |
| |
(a) | See “Non-GAAP Measures.” In addition, when evaluating free cash flow, we also consider the following items impacting comparability: $83 million and $90 million of payments related to restructuring charges in the 36 weeks ended September 9, 2017 and September 3, 2016, respectively, and associated net cash tax benefits related to restructuring charges of $23 million and $15 million in the 36 weeks ended September 9, 2017 and September 3, 2016, respectively; and $6 million and $7 million in discretionary pension contributions in the 36 weeks ended September 9, 2017 and September 3, 2016, respectively, and associated net cash tax benefits of $1 million in both the 36 weeks ended September 9, 2017 and September 3, 2016. |
We use free cash flow primarily for financing activities, including debt repayments, dividends and share repurchases. We expect to continue to return free cash flow to our shareholders through dividends and share repurchases while maintaining Tier 1 commercial paper access, which we believe will ensure appropriate financial flexibility and ready access to global capital and credit markets at favorable interest rates. See “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Our Business Risks” included in this Form 10-Q and “Item 1A. Risk Factors” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Our Business Risks,” included in our Annual Report on2021 Form 10-K, for the fiscal year ended December 31, 2016, for certain factors that may impact our credit ratings or our operating cash flows.
Any downgrade of our credit ratings by a credit rating agency, especially any downgrade to below investment grade, whether or not as a result of our actions or factors which are beyond our control, could increase our future borrowing costs and impair our ability to access capital and credit markets on terms commercially acceptable to us, or at all. In addition, any downgrade of our current short-term credit ratings could impair our ability to access the commercial paper market with the same flexibility that we have experienced historically, and therefore require us to rely more heavily on more expensive types of debt financing. See “Item 2. Management’s DiscussionNote 7 to our condensed consolidated financial statements and Analysis of Financial Condition and Results of Operations – Our“Our Business Risks” included in this Form 10-Q, andas well as “Item 1A. Risk Factors” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Our Business Risks,”Risks” included in our Annual Report on2021 Form 10-K for further information.
Material Changes in Line Items in Our Condensed Consolidated Financial Statements
Material changes in line items in our condensed consolidated statement of income are discussed in “Results of Operations – Division Review” and “Items Affecting Comparability.”
Material changes in line items in our condensed consolidated statement of cash flows are discussed in “Our Liquidity and Capital Resources.”
Material changes in line items in our condensed consolidated balance sheet are discussed below:
Total Assets
As of March 19, 2022, total assets were $93.0 billion, compared to $92.4 billion as of December 25, 2021. The increase in total assets is primarily driven by the fiscal year endedfollowing line items:
| | | | | | | | | | | |
| Change(a) | | Reference |
| Cash and cash equivalents | $ | 1.0 | | | Condensed Consolidated Statement of Cash Flows |
| Accounts and notes receivable, less allowance | $ | 0.7 | | | (b) |
| Assets held for sale | $ | (1.8) | | | (c) |
| Other indefinite-lived intangible assets | $ | (0.5) | | | Note 3 |
| Investments in noncontrolled affiliates | $ | 1.0 | | | Note 11 |
Total Liabilities
As of March 19, 2022, total liabilities were $74.6 billion, compared to $76.2 billion as of December 31, 2016,25, 2021. The decrease in total liabilities is primarily driven by the following line items:
| | | | | | | | | | | |
| Change(a) | | Reference |
| Short-term debt obligations | $ | 1.2 | | | (d) |
| Accounts payable and other current liabilities | $ | (0.8) | | | (e) |
| Liabilities held for sale | $ | (0.8) | | | (c) |
| Long-term debt obligations | $ | (1.4) | | | Note 7 |
(a)In billions.
(b)Reflects favorable operating performance.
(c)Reflects closing of the Juice Transaction. See Note 811 to our condensed consolidated financial statements included in this Form 10-Q.10-Q and Note 13 to our consolidated financial statements included in our 2021 Form 10-K for further information.
(d)Reflects issuance of commercial paper.
(e)Reflects payment of 2021 production payables across a number of our divisions.
Total Equity
Refer to our condensed consolidated statement of equity for material changes in equity line items.
Report of Independent Registered Public Accounting Firm
TheTo the Shareholders and Board of Directors and Shareholders
PepsiCo, Inc.:
Results of Review of Interim Financial Information
We have reviewed the accompanying Condensed Consolidated Balance Sheet of PepsiCo, Inc. and Subsidiariessubsidiaries (the Company) as of September 9, 2017,March 19, 2022, the related Condensed Consolidated Statements of Income, and Comprehensive Income, for the twelve and thirty-six weeks ended September 9, 2017 and September 3, 2016, and the related Condensed Consolidated Statements of Cash Flows and Equity for the thirty-sixtwelve weeks ended September 9, 2017March 19, 2022 and September 3, 2016. TheseMarch 20, 2021, and the related notes (collectively, the consolidated interim condensedfinancial information). Based on our reviews, we are not aware of any material modifications that should be made to the consolidated interim financial statements are the responsibility of PepsiCo, Inc.’s management.
information for it to be in conformity with U.S. generally accepted accounting principles.
We conducted our reviewhave previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States). (PCAOB), the Consolidated Balance Sheet of the Company as of December 25, 2021, and the related Consolidated Statements of Income, Comprehensive Income, Cash Flows and Equity for the year then ended (not presented herein); and in our report dated February 9, 2022, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying Condensed Consolidated Balance Sheet as of December 25, 2021, is fairly stated, in all material respects, in relation to the Consolidated Balance Sheet from which it has been derived.
Basis for Review Results
This consolidated interim financial information is the responsibility of the Company’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our reviews in accordance with the standards of the PCAOB. A review of consolidated interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States),PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should be made to the accompanying interim condensed consolidated financial statements referred to above for them to be in conformity with U.S. generally accepted accounting principles.
We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Consolidated Balance Sheet of PepsiCo, Inc. and Subsidiaries as of December 31, 2016, and the related Consolidated Statements of Income, Comprehensive Income, Cash Flows and Equity for the fiscal year then ended not presented herein; and in our report dated February 15, 2017, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying Condensed Consolidated Balance Sheet as of December 31, 2016, is fairly stated, in all material respects, in relation to the Consolidated Balance Sheet from which it has been derived.
/s/ KPMG LLP
New York, New York
October 4, 2017April 25, 2022
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.
See “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Our Business Risks.” In addition, see “Item 1A. Risk Factors,” “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Our Business Risks” and Note 9 to our consolidated financial statements in our Annual Report on2021 Form 10-K for the fiscal year ended December 31, 2016.10-K.
ITEM 4. Controls and Procedures.
As of the end of the period covered by this report, we carried out an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the Exchange Act). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of the end of the period covered by this report our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in reports we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported within the time periods specified in Securities and Exchange CommissionSEC rules and forms, and (2) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
There were no changes in our internal control over financial reporting during our third fiscal quarter of 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
During our third fiscal quarter of 2017,the 12 weeks ended March 19, 2022, we continued migrating certain of our financial processing systems to an enterprise-wide systems solution.Enterprise Resource Planning (ERP) system. These systems implementations are part of our ongoing global business transformation initiative, and we plan to continue implementing such systems throughout other parts of our businesses in phases over the course of the next fewseveral years. In connection with these ERP implementations, we are updating and will continue to update our internal control over financial reporting, as necessary, to accommodate modifications to our business processes and accounting procedures. During the 12 weeks ended March 19, 2022, we continued implementing these systems, resulting in changes that materially affected our internal control over financial reporting. These system implementations did not have an adverse effect, nor do we expect will have an adverse effect, on our internal control over financial reporting. In addition, in connection with our 2019 multi-year productivity plan, we continueto migrate to shared business models across our operations to further simplify, harmonize and automate processes. In connection with this multi-year productivity plan and resulting business process changes, we continue to enhance the design and documentation of our internal control over financial reporting processes, to maintain effective controls over our financial reporting. This transition hasThese business process changes have not materially affected, and we do not expect itthem to materially affect, our internal control over financial reporting.
Except with respect to the continued implementation of ERP systems, there have been no changes in our internal control over financial reporting during our 12 weeks ended March 19, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We will continue to assess the impact on our internal control over financial reporting as we continue to implement our ERP solution and our 2019 multi-year productivity plan.
PART II OTHER INFORMATION
ITEM 1. Legal Proceedings.
The following information should be read in conjunction with the discussion set forth under Part I, “Item 3. Legal Proceedings” in our Annual Report on2021 Form 10-K for the fiscal year ended December 31, 2016.10-K.
We and our subsidiaries are party to a variety of litigation, claims, legal administrative,or regulatory proceedings, inquiries and governmentinvestigations. While the results of such litigation, claims, legal or regulatory proceedings, claimsinquiries and inquiries arising in the normal course of business. Managementinvestigations cannot be predicted with certainty, management believes that the final outcome of the foregoing will not have a material adverse effect on our financial condition, results of operations or cash flows. See also “Item 1. Business – Regulatory Matters” and “Item 1A. Risk Factors” in our Annual Report on2021 Form 10-K for the fiscal year ended December 31, 2016.10-K.
ITEM 1A. Risk Factors.
There have been no material changesThe following additional risk factor should be read in conjunction with respect to the risk factors set forth under “Item 1A. Risk Factors” in our 2021 Form 10-K. The developments described below have heightened, or in some cases manifested, certain of the risks disclosed in the risk factor section of our Annual Report on2021 Form 10-K, and such risk factors are further qualified by the information relating to our operations in Russia and Ukraine as described in this Form 10-Q, including in the additional risk factor below.
You should carefully consider the risks described below and in our 2021 Form 10-K in addition to the other information set forth in this Form 10-Q and in our 2021 Form 10-K, including the Management’s Discussion and Analysis of Financial Condition and Results of Operations sections and the consolidated financial statements and related notes. These risks, some of which have occurred and any of which may occur in the future, can have a material adverse effect on our business or financial performance, which in turn can affect the price of our publicly traded securities. The risks described below and in our 2021 Form 10-K are not the only risks we face. There may be other risks we are not currently aware of or that we currently deem not to be material but that may become material in the future. Therefore, historical operating results, financial and business performance, events and trends are often not a reliable indicator of future operating results, financial and business performance, events or trends.
Risks associated with the deadly conflict in Ukraine
The deadly conflict in Ukraine has resulted in worldwide geopolitical and macroeconomic uncertainty and led us to suspend the majority of our operations in Ukraine. We are in the process of suspending sales of Pepsi-Cola and certain of our other global beverage brands, our discretionary capital investments and advertising and promotional activities in Russia. We plan to continue to offer our other products in Russia. The conflict has resulted and could continue to result in volatile commodity markets, supply chain disruptions, increased risk of cyber incidents or other disruptions to our information systems, reputational risk, heightened risks to employee safety, significant volatility of the Russian ruble, limitations on access to credit markets, including working capital facilities, increased operating costs (including fuel and other input costs), environmental, health and safety risks related to securing and maintaining facilities, additional sanctions and other regulations (including restrictions on the transfer of funds to and from Russia). The ongoing conflict could result in loss of assets or result in additional impairment charges. We cannot predict how and the extent to which the conflict will affect our operations, customers or business partners or our ability to achieve certain of our sustainability goals. The conflict has adversely affected and could continue to adversely affect demand for the fiscal year ended December 31, 2016.our products and our global business.
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.
A summary of our common stock repurchases (in millions, except average price per share) during the third quarter of 201712 weeks ended March 19, 2022 is set forth in the table below.
Issuer Purchases of Common Stock
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Period | | Total Number of Shares Repurchased(a) | | Average Price
Paid Per Share | | Total Number
of Shares
Purchased as
Part of Publicly
Announced
Plans or
Programs | | Maximum
Number (or
Approximate
Dollar Value) of
Shares That May Yet Be
Purchased
Under the Plans
or Programs |
| | | | | | | | |
| | | | | | | | |
| 12/26/2021 - 1/22/2022 | | — | | | $ | — | | | — | | | $ | — | |
| | | | | | | | 10,000 | |
| 1/23/2022 - 2/19/2022 | | — | | | $ | — | | | — | | | — | |
| | | | | | | | 10,000 | |
| 2/20/2022 - 3/19/2022 | | 1.3 | | | $ | 161.08 | | | 1.3 | | | (213) | |
| Total | | 1.3 | | | $ | 161.08 | | | 1.3 | | | $ | 9,787 | |
|
| | | | | | | | | | | | | | |
| Period | | Total Number of Shares Repurchased(a) | | Average Price Paid Per Share | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | Maximum Number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under the Plans or Programs |
| 6/17/2017 | |
|
|
|
|
|
|
|
|
| $ | 6,385 |
|
| | | | | | | | |
|
| 6/18/2017 - 7/15/2017 | | 1.3 |
|
| $ | 116.24 |
|
| 1.3 |
|
| (148 | ) |
| | | | | | | | | 6,237 |
|
| 7/16/2017 - 8/12/2017 | | 1.5 |
|
| $ | 116.40 |
|
| 1.5 |
|
| (170 | ) |
| | | | | | | | | 6,067 |
|
| 8/13/2017 - 9/9/2017 | | 1.8 |
|
| $ | 116.84 |
|
| 1.8 |
|
| (210 | ) |
| Total | | 4.6 |
|
| $ | 116.53 |
|
| 4.6 |
|
| $ | 5,857 |
|
| |
(a) | (a)All shares were repurchased in open market transactions pursuant to the $12 billion repurchase program authorized by our Board of Directors and publicly announced on February 11, 2015, which commenced on July 1, 2015 and expires on June 30, 2018. Such shares may be repurchased in open market transactions, in privately negotiated transactions, in accelerated stock repurchase transactions or otherwise. |
In connection with our merger with The Quaker Oats Company (Quaker) in 2001, shares of our convertible preferred stock were authorized and issued to an ESOP fund established by Quaker. The preferences, limitations and relative rights of the shares of convertible preferred stock are set forth in Exhibit A to our amended and restated articles of incorporation. Quaker made the final award to the ESOP$10 billion share repurchase program authorized by our Board of Directors and publicly announced on February 10, 2022, which commenced on February 11, 2022 and will expire on February 28, 2026. Shares repurchased under this program may be repurchased in June 2001. The Company does not have any authorized, but unissued, “blank check preferred stock.” PepsiCo repurchases shares of its convertible preferredopen market transactions, in privately negotiated transactions, in accelerated stock from the ESOP in connection with share redemptions by ESOP participants.repurchase transactions or otherwise.
The following table summarizes our convertible preferred share repurchases during the third quarter of 2017.
Issuer Purchases of Convertible Preferred Stock
|
| | | | | | | | | | | |
| Period | | Total Number of Shares Repurchased | | Average Price Paid per Share | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | Maximum Number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under the Plans or Programs |
| 6/18/2017 - 7/15/2017 | | 900 |
| | $ | 577.53 |
| | N/A | | N/A |
| | | | | | | | | |
| 7/16/2017 - 8/12/2017 | | 800 |
| | $ | 581.55 |
| | N/A | | N/A |
| | | | | | | | | |
| 8/13/2017 - 9/9/2017 | | 800 |
| | $ | 586.86 |
| | N/A | | N/A |
| Total | | 2,500 |
| | $ | 581.80 |
| | N/A | | N/A |
ITEM 6. Exhibits.
|
| |
See “Index to Exhibits” on page 5047. |
INDEX TO EXHIBITS
|
| | | | |
| EXHIBIT | |
| Amended and Restated Articles of Incorporation of PepsiCo, Inc., as amended and restated, effective as of May 9, 2011,1, 2019, which are incorporated herein by reference to Exhibit 3.1 to PepsiCo, Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 9, 2011.3, 2019. |
| By-Laws of PepsiCo, Inc., as amended and restated, effective as of January 11, 2016,April 15, 2020, which are incorporated herein by reference to Exhibit 3.2 to PepsiCo, Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 11, 2016.April 16, 2020. |
| |
| |
| |
| |
| Exhibit 101 | The following materials from PepsiCo, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 9, 2017March 19, 2022 formatted in XBRL (eXtensibleiXBRL (Inline eXtensible Business Reporting Language): (i) the Condensed Consolidated Statement of Income, (ii) the Condensed Consolidated Statement of Comprehensive Income, (iii) the Condensed Consolidated Statement of Cash Flows, (iv) the Condensed Consolidated Balance Sheet, (v) the Condensed Consolidated Statement of Equity, and (vi) Notes to the Condensed Consolidated Financial Statements. |
| Exhibit 104 | The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 19, 2022, formatted in iXBRL and contained in Exhibit 101. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | | | | | | | | | | |
| | | |
| | PepsiCo, Inc. | |
| | PepsiCo, Inc.
(Registrant) | |
| | (Registrant) | |
| Date: | April 25, 2022 | | |
Date: | October 4, 2017 | /s/ Marie T. Gallagher | |
| | Marie T. Gallagher | |
| | Senior Vice President and Controller | |
| | (Principal Accounting Officer) | |
| | | |
| Date: | October 4, 2017April 25, 2022 | /s/ Tony West David Flavell | |
| | Tony WestDavid Flavell | |
| | Executive Vice President, Government Affairs, General Counsel and Corporate Secretary | |
| | (Duly Authorized Officer) | |
