ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
North Carolina
(State or Other Jurisdiction of Incorporation or Organization)
|
|
13-1584302
(I.R.S. Employer Identification No.)
|
700 Anderson Hill Road, Purchase, New York
(Address of Principal Executive Offices)
|
|
10577
(Zip Code)
|
Title of each class
|
|
Name of each exchange on which registered
|
Common Stock, par value 1-2/3 cents per share
|
|
The Nasdaq Stock Market LLC
|
2.500% Senior Notes Due 2022
|
|
The Nasdaq Stock Market LLC
|
1.750% Senior Notes Due 2021
|
|
The Nasdaq Stock Market LLC
|
2.625% Senior Notes Due 2026
|
|
The Nasdaq Stock Market LLC
|
0.875% Senior Notes Due 2028
|
|
The Nasdaq Stock Market LLC
|
Large accelerated filer
x
|
|
Accelerated filer
¨
|
||
Non-accelerated filer
¨
|
|
Smaller reporting company
¨
|
||
|
|
Emerging growth company
¨
|
PART I
|
|
|
Item 1.
|
||
Item 1A.
|
||
Item 1B.
|
||
Item 2.
|
||
Item 3.
|
||
Item 4.
|
||
|
|
|
PART II
|
|
|
Item 5.
|
||
Item 6.
|
||
Item 7.
|
||
Item 7A.
|
||
Item 8.
|
||
Item 9.
|
||
Item 9A.
|
||
Item 9B.
|
||
|
|
|
PART III
|
|
|
Item 10.
|
||
Item 11.
|
||
Item 12.
|
||
Item 13.
|
||
Item 14.
|
||
|
|
|
PART IV
|
|
|
Item 15.
|
||
Item 16.
|
1)
|
Frito-Lay North America (FLNA), which includes our branded food and snack businesses in the United States and Canada;
|
2)
|
Quaker Foods North America (QFNA), which includes our cereal, rice, pasta and other branded food businesses in the United States and Canada;
|
3)
|
North America Beverages (NAB), which includes our beverage businesses in the United States and Canada;
|
4)
|
Latin America, which includes all of our beverage, food and snack businesses in Latin America;
|
5)
|
Europe Sub-Saharan Africa (ESSA), which includes all of our beverage, food and snack businesses in Europe and Sub-Saharan Africa; and
|
6)
|
Asia, Middle East and North Africa (AMENA), which includes all of our beverage, food and snack
|
|
FLNA
|
|
QFNA
|
|
NAB
|
|
Latin America
|
|
ESSA
|
|
AMENA
|
|
Shared
(a)
|
Plants
(b)
|
35
|
|
5
|
|
65
|
|
45
|
|
85
|
|
45
|
|
5
|
Other Facilities
(c)
|
1,660
|
|
4
|
|
440
|
|
575
|
|
350
|
|
335
|
|
45
|
(a)
|
Shared properties are in addition to the other properties reported by our six divisions identified in this table.
|
(b)
|
Includes manufacturing and processing plants as well as bottling and production plants.
|
(c)
|
Includes warehouses, distribution centers, storage facilities, offices, including division headquarters, research and development facilities and other facilities.
|
•
|
FLNA’s research and development facility in Plano, Texas, which is owned.
|
•
|
QFNA’s food plant in Cedar Rapids, Iowa, which is owned.
|
•
|
NAB’s research and development facility in Valhalla, New York, and a Tropicana plant in Bradenton, Florida, both of which are owned.
|
•
|
Latin America’s three snack plants in Mexico (one in Vallejo, one in Celaya and one in Obregón) and one in Brazil (Sorocaba), all of which are owned.
|
•
|
ESSA’s snack plant in Leicester, United Kingdom, which is leased; its snack plant in Kashira, Russia, its fruit juice plant in Zeebrugge, Belgium, its beverage plant in Lebedyan, Russia and its dairy plant in Moscow, Russia, all of which are owned.
|
•
|
AMENA’s two beverage plants in Egypt (one in Tanta City and one in Sixth of October City) and its snack plant in Wuhan, China, all of which are owned; and its snack plant in Riyadh, Saudi Arabia, which is leased.
|
•
|
Two concentrate plants in Cork, Ireland, which are shared by our NAB, ESSA and AMENA segments, both of which are owned; and one in Singapore, which is shared by our NAB and AMENA segments, which is leased.
|
•
|
Shared service centers in Winston-Salem, North Carolina, and Plano, Texas, which are primarily shared by our FLNA, QFNA and NAB segments, both of which are leased.
|
Name
|
Age
|
Title
|
Marie T. Gallagher
|
59
|
Senior Vice President and Controller, PepsiCo
|
Hugh F. Johnston
|
57
|
Vice Chairman, PepsiCo; Executive Vice President and Chief Financial Officer, PepsiCo
|
Dr. Mehmood Khan
|
60
|
Vice Chairman, PepsiCo; Executive Vice President, PepsiCo Chief Scientific Officer, Global Research and Development
|
Ramon Laguarta
|
55
|
Chairman of the Board of Directors and Chief Executive Officer, PepsiCo
|
Laxman Narasimhan
|
51
|
Chief Executive Officer, Latin America, Europe and Sub-Saharan Africa
|
Silviu Popovici
|
51
|
President, Europe Sub-Saharan Africa
|
Vivek Sankaran
|
56
|
Chief Executive Officer, Frito-Lay North America
|
Ronald Schellekens
|
54
|
Executive Vice President and Chief Human Resources Officer, PepsiCo
|
Mike Spanos
|
54
|
Chief Executive Officer, Asia, Middle East and North Africa
|
Kirk Tanner
|
50
|
Chief Executive Officer, North America Beverages
|
David Yawman
|
50
|
Executive Vice President, Government Affairs, General Counsel and Corporate Secretary, PepsiCo
|
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
(b)
|
||||||
9/8/2018
|
|
|
|
|
|
|
$
|
14,631
|
|
||||
|
|
|
|
|
|
|
|
||||||
9/9/2018 - 10/6/2018
|
1.3
|
|
|
$
|
112.64
|
|
|
1.3
|
|
|
(147
|
)
|
|
|
|
|
|
|
|
|
14,484
|
|
|||||
10/7/2018 - 11/3/2018
|
1.3
|
|
|
$
|
110.39
|
|
|
1.3
|
|
|
(145
|
)
|
|
|
|
|
|
|
|
|
14,339
|
|
|||||
11/4/2018 - 12/1/2018
|
1.4
|
|
|
$
|
116.68
|
|
|
1.4
|
|
|
(163
|
)
|
|
|
|
|
|
|
|
|
14,176
|
|
|||||
12/2/2018 - 12/29/2018
|
0.8
|
|
|
$
|
116.99
|
|
|
0.8
|
|
|
(92
|
)
|
|
Total
|
4.8
|
|
|
$
|
113.91
|
|
|
4.8
|
|
|
$
|
14,084
|
|
(a)
|
All shares were repurchased in open market transactions pursuant to publicly announced repurchase programs.
|
(b)
|
Represents shares authorized for repurchase under the $
15 billion
repurchase program authorized by our Board of Directors and publicly announced on February 13, 2018, which commenced on July 1, 2018 and will expire on June 30, 2021. Such shares may be repurchased in open market transactions, in privately negotiated transactions, in accelerated stock repurchase transactions or otherwise.
|
|
2018
|
|
2017
|
|
2016
|
|
2015
|
|
2014
|
||||||||||
Net revenue
(a)
|
$
|
64,661
|
|
|
$
|
63,525
|
|
|
$
|
62,799
|
|
|
$
|
63,056
|
|
|
$
|
66,683
|
|
Operating profit
(b)
|
$
|
10,110
|
|
|
$
|
10,276
|
|
|
$
|
9,804
|
|
|
$
|
8,274
|
|
|
$
|
9,755
|
|
(Benefit from)/provision for income taxes
(c)
|
$
|
(3,370
|
)
|
|
$
|
4,694
|
|
|
$
|
2,174
|
|
|
$
|
1,941
|
|
|
$
|
2,199
|
|
Net income attributable to PepsiCo
(c)
|
$
|
12,515
|
|
|
$
|
4,857
|
|
|
$
|
6,329
|
|
|
$
|
5,452
|
|
|
$
|
6,513
|
|
Net income attributable to PepsiCo per common share – basic
(c)
|
$
|
8.84
|
|
|
$
|
3.40
|
|
|
$
|
4.39
|
|
|
$
|
3.71
|
|
|
$
|
4.31
|
|
Net income attributable to PepsiCo per common share – diluted
(c)
|
$
|
8.78
|
|
|
$
|
3.38
|
|
|
$
|
4.36
|
|
|
$
|
3.67
|
|
|
$
|
4.27
|
|
Cash dividends declared per common share
|
$
|
3.5875
|
|
|
$
|
3.1675
|
|
|
$
|
2.96
|
|
|
$
|
2.7625
|
|
|
$
|
2.5325
|
|
Total assets
|
$
|
77,648
|
|
|
$
|
79,804
|
|
|
$
|
73,490
|
|
|
$
|
68,976
|
|
|
$
|
69,634
|
|
Long-term debt
|
$
|
28,295
|
|
|
$
|
33,796
|
|
|
$
|
30,053
|
|
|
$
|
29,213
|
|
|
$
|
23,821
|
|
(a)
|
Our fiscal 2016 results included an extra week of results (53
rd
reporting week). The 53
rd
reporting week
increased 2016 net revenue by $657 million, including $294 million in our FLNA segment, $43 million in our QFNA segment, $300 million in our NAB segment and $20 million in our ESSA segment.
|
(b)
|
Our fiscal
results prior to 2018 reflect the retrospective adoption of guidance requiring the presentation of non-service cost components of net periodic benefit cost below operating profit. See Note 2 to our consolidated financial statements.
|
(c)
|
Our fiscal 2018 results include other net tax benefits related to the reorganization of our international operations. Our fiscal 2018 and 2017 results include the impact of the TCJ Act. See Note 5 to our consolidated financial statements.
|
|
2018
|
||||||||||||||||||||||||||
|
Operating profit
|
|
Other pension and retiree medical benefits income
|
|
Interest expense
|
|
Benefit from income taxes
(d)
|
|
Net income attributable to noncontrolling interests
|
|
Net income attributable to PepsiCo
|
|
Net income attributable to PepsiCo per common share
–
diluted
|
||||||||||||||
Mark-to-market net impact
(e)
|
$
|
(163
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
38
|
|
|
$
|
—
|
|
|
$
|
(125
|
)
|
|
$
|
(0.09
|
)
|
Restructuring and impairment charges
(f)
|
$
|
(272
|
)
|
|
$
|
(36
|
)
|
|
$
|
—
|
|
|
$
|
56
|
|
|
$
|
1
|
|
|
$
|
(251
|
)
|
|
$
|
(0.18
|
)
|
Merger and integration charges
(g)
|
$
|
(75
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(75
|
)
|
|
$
|
(0.05
|
)
|
Net tax benefit related to the TCJ Act
(h)
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
28
|
|
|
$
|
—
|
|
|
$
|
28
|
|
|
$
|
0.02
|
|
Other net tax benefits
(i)
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,064
|
|
|
$
|
—
|
|
|
$
|
5,064
|
|
|
$
|
3.55
|
|
Charges related to cash tender and exchange offers
(j)
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(253
|
)
|
|
$
|
62
|
|
|
$
|
—
|
|
|
$
|
(191
|
)
|
|
$
|
(0.13
|
)
|
Tax reform bonus
(k)
|
$
|
(87
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
21
|
|
|
$
|
—
|
|
|
$
|
(66
|
)
|
|
$
|
(0.05
|
)
|
Gains on beverage refranchising
(l)
|
$
|
202
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(30
|
)
|
|
$
|
—
|
|
|
$
|
172
|
|
|
$
|
0.12
|
|
Gains on sale of assets
(m)
|
$
|
76
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(19
|
)
|
|
$
|
—
|
|
|
$
|
57
|
|
|
$
|
0.04
|
|
|
2017
|
||||||||||||||||||
|
Operating profit
(b)
|
|
Other pension and retiree medical benefits income
(b)
|
|
Provision for income
taxes
(d)
|
|
Net income attributable to PepsiCo
|
|
Net income attributable to PepsiCo per common share – diluted
|
||||||||||
Mark-to-market net impact
(e)
|
$
|
15
|
|
|
$
|
—
|
|
|
$
|
(7
|
)
|
|
$
|
8
|
|
|
$
|
0.01
|
|
Restructuring and impairment charges
(f)
|
$
|
(229
|
)
|
|
$
|
(66
|
)
|
|
$
|
71
|
|
|
$
|
(224
|
)
|
|
$
|
(0.16
|
)
|
Provisional net tax expense related to the TCJ Act
(h)
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(2,451
|
)
|
|
$
|
(2,451
|
)
|
|
$
|
(1.70
|
)
|
Gain on sale of Britvic plc (Britvic) securities
(n)
|
$
|
95
|
|
|
$
|
—
|
|
|
$
|
(10
|
)
|
|
$
|
85
|
|
|
$
|
0.06
|
|
Gain on beverage refranchising
(l)
|
$
|
140
|
|
|
$
|
—
|
|
|
$
|
(33
|
)
|
|
$
|
107
|
|
|
$
|
0.07
|
|
Gain on sale of assets
(m)
|
$
|
87
|
|
|
$
|
—
|
|
|
$
|
(25
|
)
|
|
$
|
62
|
|
|
$
|
0.04
|
|
|
2016
|
||||||||||||||||||||||||||
|
Operating profit
(b)
|
|
Other pension and retiree medical benefits expense
(b)
|
|
Interest expense
|
|
Provision for income taxes
(d)
|
|
Net income attributable to noncontrolling interests
|
|
Net income attributable to PepsiCo
|
|
Net income attributable to PepsiCo per common share – diluted
|
||||||||||||||
Mark-to-market net impact
(e)
|
$
|
167
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(56
|
)
|
|
$
|
—
|
|
|
$
|
111
|
|
|
$
|
0.08
|
|
Restructuring and impairment charges
(f)
|
$
|
(155
|
)
|
|
$
|
(5
|
)
|
|
$
|
—
|
|
|
$
|
26
|
|
|
$
|
3
|
|
|
$
|
(131
|
)
|
|
$
|
(0.09
|
)
|
Charge related to the transaction with Tingyi
(o)
|
$
|
(373
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(373
|
)
|
|
$
|
(0.26
|
)
|
Charge related to debt redemption
(j)
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(233
|
)
|
|
$
|
77
|
|
|
$
|
—
|
|
|
$
|
(156
|
)
|
|
$
|
(0.11
|
)
|
Pension-related settlement charge
(p)
|
$
|
—
|
|
|
$
|
(242
|
)
|
|
$
|
—
|
|
|
$
|
80
|
|
|
$
|
—
|
|
|
$
|
(162
|
)
|
|
$
|
(0.11
|
)
|
53
rd
reporting week
(q)
|
$
|
126
|
|
|
$
|
—
|
|
|
$
|
(19
|
)
|
|
$
|
(44
|
)
|
|
$
|
(1
|
)
|
|
$
|
62
|
|
|
$
|
0.04
|
|
|
2015
|
||||||||||||||||||
|
Operating profit
(b)
|
|
Other pension and retiree medical benefits income
(b)
|
|
Provision for income
taxes
(d)
|
|
Net income attributable to PepsiCo
|
|
Net income attributable to PepsiCo per common share
–
diluted
|
||||||||||
Mark-to-market net impact
(e)
|
$
|
11
|
|
|
$
|
—
|
|
|
$
|
(3
|
)
|
|
$
|
8
|
|
|
$
|
—
|
|
Restructuring and impairment charges
(f)
|
$
|
(207
|
)
|
|
$
|
(23
|
)
|
|
$
|
46
|
|
|
$
|
(184
|
)
|
|
$
|
(0.12
|
)
|
Charge related to the transaction with Tingyi
(o)
|
$
|
(73
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(73
|
)
|
|
$
|
(0.05
|
)
|
Pension-related settlement benefits
(p)
|
$
|
67
|
|
|
$
|
—
|
|
|
$
|
(25
|
)
|
|
$
|
42
|
|
|
$
|
0.03
|
|
Venezuela impairment charges
(r)
|
$
|
(1,359
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(1,359
|
)
|
|
$
|
(0.91
|
)
|
Tax benefit
(i)
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
230
|
|
|
$
|
230
|
|
|
$
|
0.15
|
|
Müller Quaker Dairy (MQD) impairment
(s)
|
$
|
(76
|
)
|
|
$
|
—
|
|
|
$
|
28
|
|
|
$
|
(48
|
)
|
|
$
|
(0.03
|
)
|
Gain on beverage refranchising
(l)
|
$
|
39
|
|
|
$
|
—
|
|
|
$
|
(11
|
)
|
|
$
|
28
|
|
|
$
|
0.02
|
|
Other productivity initiatives
(t)
|
$
|
(90
|
)
|
|
$
|
—
|
|
|
$
|
24
|
|
|
$
|
(66
|
)
|
|
$
|
(0.04
|
)
|
Joint venture impairment charge
(u)
|
$
|
(29
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(29
|
)
|
|
$
|
(0.02
|
)
|
|
2014
|
||||||||||||||||||||||
|
Operating profit
(b)
|
|
Other pension and retiree medical benefits expense
(b)
|
|
Provision for income taxes
(d)
|
|
Net income attributable to noncontrolling interests
|
|
Net income attributable to PepsiCo
|
|
Net income attributable to PepsiCo per common share
–
diluted
|
||||||||||||
Mark-to-market net impact
(e)
|
$
|
(68
|
)
|
|
$
|
—
|
|
|
$
|
24
|
|
|
$
|
—
|
|
|
$
|
(44
|
)
|
|
$
|
(0.03
|
)
|
Restructuring and impairment charges
(f)
|
$
|
(384
|
)
|
|
$
|
(34
|
)
|
|
$
|
99
|
|
|
$
|
3
|
|
|
$
|
(316
|
)
|
|
$
|
(0.21
|
)
|
Pension-related settlement charge
(p)
|
$
|
—
|
|
|
$
|
(141
|
)
|
|
$
|
53
|
|
|
$
|
—
|
|
|
$
|
(88
|
)
|
|
$
|
(0.06
|
)
|
Venezuela remeasurement charge
(v)
|
$
|
(105
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(105
|
)
|
|
$
|
(0.07
|
)
|
Gain on sale of assets
(m)
|
$
|
31
|
|
|
$
|
—
|
|
|
$
|
3
|
|
|
$
|
—
|
|
|
$
|
34
|
|
|
$
|
0.02
|
|
Other productivity initiatives
(t)
|
$
|
(67
|
)
|
|
$
|
—
|
|
|
$
|
13
|
|
|
$
|
—
|
|
|
$
|
(54
|
)
|
|
$
|
(0.04
|
)
|
(d)
|
Benefit from/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 and tax year.
|
(e)
|
Mark-to-market net gains and losses on commodity derivatives in corporate unallocated expenses.
|
(f)
|
Expenses related to the 2019 Multi-Year Productivity Plan (2019 Productivity Plan), 2014 Multi-Year Productivity Plan (2014 Productivity Plan) and 2012 Multi-Year Productivity Plan (2012 Productivity Plan). See Note 3 to our consolidated financial statements for further discussion of our 2019 and 2014 Productivity Plans.
|
(g)
|
In 2018, merger and integration charges related to our acquisition of SodaStream. $57 million of this charge was recorded in the ESSA segment, with the balance recorded in corporate unallocated expenses. See Note 14 to our consolidated financial statements.
|
(h)
|
In 2018, a net tax benefit and, in 2017, a provisional net tax expense, each associated with the enactment of the TCJ Act. See Note 5 to our consolidated financial statements.
|
(i)
|
In 2018, other net tax benefits of $4.3 billion resulting from the reorganization of our international operations, including the intercompany transfer of certain intangible assets. Also in 2018, non-cash tax benefits of $717 million associated with both the conclusion of certain international tax audits and our agreement with the IRS resolving all open matters related to the audits of taxable years 2012 and 2013. See Note 5 to our consolidated financial statements.
In 2015, non-cash tax benefit associated with our agreement with the IRS resolving substantially all open matters related to the audits for taxable years 2010 through 2011, which reduced our reserve for uncertain tax positions for the tax years 2010 through 2011.
|
(j)
|
In 2018, interest expense in connection with our cash tender and exchange offers, primarily representing the tender price paid over the carrying value of the tendered notes.
In 2016, interest expense primarily representing the premium paid in accordance with the “make-whole” redemption provisions to redeem all of our outstanding 7.900% senior notes due 2018 and 5.125% senior notes due 2019 for the principal amounts of $1.5 billion and $750 million, respectively. See Note 8 to our consolidated financial statements.
|
(k)
|
In 2018, bonus extended to certain U.S. employees in connection with the TCJ Act in the following segments: $44 million in FLNA, $2 million in QFNA and $41 million in NAB.
|
(l)
|
In 2018, gains of $58 million and $144 million associated with refranchising our entire beverage bottling operations and snack distribution operations in
Czech Republic, Hungary and Slovakia (CHS)
in the ESSA segment and refranchising a portion of our beverage business in Thailand in the AMENA segment, respectively. In 2017, gain in the AMENA segment associated with refranchising a portion of our beverage business in Jordan. See Note 14 to our consolidated financial statements.
In 2015, gain in the AMENA segment associated with refranchising a portion of our beverage businesses in India.
|
(m)
|
In 2018, gains associated with the sale of assets in the following segments: $64 million in NAB and $12 million in AMENA. In 2017, gains associated with the sale of assets in the following segments: $17 million in FLNA, $21 million in NAB, $21 million in AMENA and $28 million in corporate unallocated expenses
. In 2014, gain in the ESSA segment associated with the sale of agricultural assets in Russia.
|
(n)
|
In 2017, gain in the ESSA segment associated with the sale of our minority stake in Britvic.
|
(o)
|
In 2016, impairment charge in the AMENA segment to reduce the value of our 5% indirect equity interest in KSF Beverage Holding Co., Ltd. (KSFB), formerly known as Tingyi-Asahi Beverages Holding Co. Ltd., to its estimated fair value. See Note 9 to our consolidated financial statements. In 2015, write-off in the AMENA segment of the value of a call option to increase our holding in KSFB to 20%.
|
(p)
|
In 2016, pension settlement charge related to the purchase of a group annuity contract. In 2015, benefits in the NAB segment associated with the settlement of pension-related liabilities from previous acquisitions. In 2014, lump sum settlement charge related to payments for pension liabilities to certain former employees who had vested benefits.
|
(q)
|
Our fiscal 2016 results included the 53
rd
reporting week, the impact of which was fully offset by incremental investments in our business.
|
(r)
|
In 2015, charges in the Latin America segment related to the impairment of investments in our wholly-owned Venezuelan subsidiaries and beverage joint venture. Beginning in the fourth quarter of 2015, our financial results have not included the results of our Venezuelan businesses.
|
(s)
|
In 2015, impairment charges in the QFNA segment associated with our MQD joint venture investment, including a charge related to ceasing its operations.
|
(t)
|
In 2015 and 2014, expenses related to other productivity initiatives outside the scope of the 2014 and 2012 Productivity Plans.
|
(u)
|
In 2015, impairment charge in the AMENA segment associated with a joint venture in the Middle East.
|
(v)
|
In 2014, net charge related to our remeasurement of the bolivar for certain net monetary assets of our Venezuelan businesses. $126 million of this charge was in corporate unallocated expenses, with the balance (equity income of $21 million) in our Latin America segment.
|
|
2018
|
|
2017
|
||||||||||||||||||||||||||||
|
First
Quarter
|
|
|
Second
Quarter
|
|
|
Third
Quarter
|
|
|
Fourth
Quarter
|
|
|
First
Quarter
|
|
|
Second
Quarter
|
|
|
Third
Quarter
|
|
|
Fourth
Quarter
|
|
||||||||
Net revenue
|
$
|
12,562
|
|
|
$
|
16,090
|
|
|
$
|
16,485
|
|
|
$
|
19,524
|
|
|
$
|
12,049
|
|
|
$
|
15,710
|
|
|
$
|
16,240
|
|
|
$
|
19,526
|
|
Gross profit
(a)
|
$
|
6,907
|
|
|
$
|
8,827
|
|
|
$
|
8,958
|
|
|
$
|
10,588
|
|
|
$
|
6,759
|
|
|
$
|
8,651
|
|
|
$
|
8,872
|
|
|
$
|
10,447
|
|
Operating profit
(a)
|
$
|
1,807
|
|
|
$
|
3,028
|
|
|
$
|
2,844
|
|
|
$
|
2,431
|
|
|
$
|
1,863
|
|
|
$
|
2,919
|
|
|
$
|
2,924
|
|
|
$
|
2,570
|
|
Mark-to-market net impact
(b)
|
$
|
(31
|
)
|
|
$
|
3
|
|
|
$
|
(29
|
)
|
|
$
|
(106
|
)
|
|
$
|
(14
|
)
|
|
$
|
(26
|
)
|
|
$
|
27
|
|
|
$
|
28
|
|
Restructuring and impairment charges
(c)
|
$
|
(12
|
)
|
|
$
|
(32
|
)
|
|
$
|
(35
|
)
|
|
$
|
(229
|
)
|
|
$
|
(27
|
)
|
|
$
|
(34
|
)
|
|
$
|
(8
|
)
|
|
$
|
(226
|
)
|
Merger and integration charges
(d)
|
—
|
|
|
—
|
|
|
—
|
|
|
$
|
(75
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Net tax (expense)/benefit related to the TCJ Act
(e)
|
$
|
(1
|
)
|
|
$
|
(777
|
)
|
|
$
|
(76
|
)
|
|
$
|
882
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
$
|
(2,451
|
)
|
|||
Other net tax benefits
(f)
|
—
|
|
|
$
|
314
|
|
|
$
|
364
|
|
|
$
|
4,386
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Charges related to cash tender and exchange offers
(g)
|
—
|
|
|
—
|
|
|
—
|
|
|
$
|
(253
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Tax reform bonus
(h)
|
$
|
(87
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Gains on beverage refranchising
(i)
|
—
|
|
|
$
|
144
|
|
|
—
|
|
|
$
|
58
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
$
|
140
|
|
|||||
Gains on sale of assets
(j)
|
$
|
18
|
|
|
$
|
9
|
|
|
$
|
37
|
|
|
$
|
12
|
|
|
—
|
|
|
—
|
|
|
$
|
21
|
|
|
$
|
66
|
|
||
Gain on sale of Britvic securities
(k)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
$
|
95
|
|
|
—
|
|
|
—
|
|
|||||||
Provision for/(benefit from) income taxes
(l)
|
$
|
304
|
|
|
$
|
1,070
|
|
|
$
|
188
|
|
|
$
|
(4,932
|
)
|
|
$
|
392
|
|
|
$
|
656
|
|
|
$
|
620
|
|
|
$
|
3,026
|
|
Net income/(loss) attributable to PepsiCo
(l)
|
$
|
1,343
|
|
|
$
|
1,820
|
|
|
$
|
2,498
|
|
|
$
|
6,854
|
|
|
$
|
1,318
|
|
|
$
|
2,105
|
|
|
$
|
2,144
|
|
|
$
|
(710
|
)
|
Net income/(loss) attributable to PepsiCo per common share
(l)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Basic
|
$
|
0.94
|
|
|
$
|
1.28
|
|
|
$
|
1.77
|
|
|
$
|
4.86
|
|
|
$
|
0.92
|
|
|
$
|
1.47
|
|
|
$
|
1.50
|
|
|
$
|
(0.50
|
)
|
Diluted
|
$
|
0.94
|
|
|
$
|
1.28
|
|
|
$
|
1.75
|
|
|
$
|
4.83
|
|
|
$
|
0.91
|
|
|
$
|
1.46
|
|
|
$
|
1.49
|
|
|
$
|
(0.50
|
)
|
Cash dividends declared per common share
|
$
|
0.805
|
|
|
$
|
0.9275
|
|
|
$
|
0.9275
|
|
|
$
|
0.9275
|
|
|
$
|
0.7525
|
|
|
$
|
0.805
|
|
|
$
|
0.805
|
|
|
$
|
0.805
|
|
(a)
|
In 2017, reflect the retrospective adoption of guidance requiring the presentation of non-service cost components of net periodic benefit cost below operating profit. See Note 2 to our consolidated financial statements.
|
(b)
|
Mark-to-market net gains and losses on commodity derivatives in corporate unallocated expenses.
|
(c)
|
Expenses related to the 2019 and 2014 Productivity Plans. See Note 3 to our consolidated financial statements.
|
(d)
|
In 2018, merger and integration charges related to our acquisition of SodaStream. $57 million of this charge was recorded in the ESSA segment, with the balance recorded in corporate unallocated expenses. See Note 14 to our consolidated financial statements.
|
(e)
|
In 2018, a net tax benefit and, in 2017, a provisional net tax expense, each associated with the enactment of the TCJ Act. See Note 5 to our consolidated financial statements.
|
(f)
|
In 2018, other net tax benefits of $4.3 billion resulting from the reorganization of our international operations. Also in 2018, non-cash tax benefits of $717 million associated with both the conclusion of certain international tax audits and our agreement with the IRS resolving all open matters related to the audits of taxable years 2012 and 2013. See Note 5 to our consolidated financial statements.
|
(g)
|
In 2018, interest expense in connection with our cash tender and exchange offers. See Note 8 to our consolidated financial statements.
|
(h)
|
In 2018, bonus extended to certain U.S. employees in connection with the TCJ Act in the following segments: $44 million in FLNA, $2 million in QFNA and $41 million in NAB.
|
(i)
|
In 2018, gains of $58 million and $144 million associated with refranchising our entire beverage bottling operations and snack distribution operations in
CHS
in the ESSA segment and refranchising a portion of our beverage business in Thailand in the AMENA segment, respectively. In 2017, gain in the AMENA segment associated with refranchising a portion of our beverage business in Jordan. See Note 14 to our consolidated financial statements.
|
(j)
|
In 2018, gains associated with the sale of assets in the following segments: $64 million in NAB and $12 million in AMENA. In 2017, gains associated with the sale of assets in the following segments: $17 million in FLNA, $21 million in NAB, $21 million in AMENA and $28 million in corporate unallocated expenses
.
|
(k)
|
In 2017, gain in the ESSA segment associated with the sale of our minority stake in Britvic. See Note 9 to our consolidated financial statements.
|
(l)
|
Our fiscal 2018 results include other net tax benefits related to the reorganization of our international operations. Our fiscal 2018 and 2017 results include the impact of the TCJ Act. See Note 5 to our consolidated financial statements.
|
•
|
Winning in the marketplace and accelerating growth by strengthening and broadening our portfolio, while focusing on locally meeting the needs of our consumers and customers;
|
•
|
Continuing to implement our productivity initiatives to improve our operational efficiency and enhance our competitive advantage while continuing to transform our core capabilities with technology and building and retaining a talented workforce to drive cost savings; and
|
•
|
Continuing to lead with purpose by focusing on our impact on the planet and our people, assisting in establishing a more sustainable food system, minimizing our impact on the environment, protecting human rights and securing supply while positioning our Company for sustainable growth.
|
•
|
PepsiCo’s Board of Directors has oversight responsibility for PepsiCo’s integrated risk management framework. One of the Board’s primary responsibilities is overseeing and interacting with senior management with respect to key aspects of the Company’s business, including risk assessment and risk mitigation of the Company’s top risks. The Board receives updates on key risks throughout the year, including risks related to cybersecurity. In addition, the Board has tasked designated Committees of the Board with oversight of certain categories of risk management, and the Committees report to the Board regularly on these matters.
|
◦
|
The Audit Committee of the Board reviews and assesses the guidelines and policies governing PepsiCo’s risk management and oversight processes, and assists the Board’s oversight of financial, compliance and employee safety risks facing PepsiCo;
|
◦
|
The Compensation Committee of the Board reviews PepsiCo’s employee compensation policies and practices to assess whether such policies and practices could lead to unnecessary risk-taking behavior;
|
◦
|
The Nominating and Corporate Governance Committee assists the Board in its oversight of the Company’s governance structure and other corporate governance matters, including succession planning; and
|
◦
|
The Public Policy and Sustainability Committee of the Board assists the Board in its oversight of PepsiCo’s policies, programs and related risks that concern key public policy and sustainability matters.
|
•
|
The PepsiCo Risk Committee (PRC), which is comprised of a cross-functional, geographically diverse, senior management group, including PepsiCo’s Chairman of the Board and Chief Executive Officer, meets regularly to identify, assess, prioritize and address top strategic, financial, operating, compliance, safety, reputational and other risks. The PRC is also responsible for reporting progress on our risk mitigation efforts to the Board;
|
•
|
Division and key country risk committees, comprised of cross-functional senior management teams, meet regularly to identify, assess, prioritize and address division and country-specific business risks;
|
•
|
PepsiCo’s Risk Management Office, which manages the overall risk management process, provides ongoing guidance, tools and analytical support to the PRC and the division and key country risk committees, identifies and assesses potential risks and facilitates ongoing communication between the parties, as well as with PepsiCo’s Board of Directors and the Audit Committee of the Board;
|
•
|
PepsiCo’s Corporate Audit Department evaluates the ongoing effectiveness of our key internal controls through periodic audit and review procedures; and
|
•
|
PepsiCo’s Compliance & Ethics and Law Departments lead and coordinate our compliance policies and practices.
|
•
|
commodity prices, affecting the cost of our raw materials and energy;
|
•
|
foreign exchange rates and currency restrictions; and
|
•
|
interest rates.
|
|
|
|
|
|
|
|
Change
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
|
2018
|
|
2017
|
||||||||
Net revenue
|
$
|
64,661
|
|
|
$
|
63,525
|
|
|
$
|
62,799
|
|
|
2
|
%
|
|
1
|
%
|
Operating profit
(a)
|
$
|
10,110
|
|
|
$
|
10,276
|
|
|
$
|
9,804
|
|
|
(2
|
)%
|
|
5
|
%
|
Operating profit margin
(a)
|
15.6
|
%
|
|
16.2
|
%
|
|
15.6
|
%
|
|
(0.5
|
)
|
|
0.6
|
|
(a)
|
In 2017 and 2016, operating profit and operating profit margin reflect the retrospective adoption of guidance requiring the presentation of non-service cost components of net periodic benefit cost below operating profit. See Note 2 to our consolidated financial statements.
|
|
|
|
|
|
|
|
Change
|
||||||||||||
|
2018
|
|
2017
|
|
2016
|
|
2018
|
|
2017
|
||||||||||
Other pension and retiree medical benefits income/(expense)
(a)
|
$
|
298
|
|
|
$
|
233
|
|
|
$
|
(19
|
)
|
|
$
|
65
|
|
|
$
|
252
|
|
Net interest expense
|
$
|
(1,219
|
)
|
|
$
|
(907
|
)
|
|
$
|
(1,232
|
)
|
|
$
|
(312
|
)
|
|
$
|
325
|
|
Annual tax rate
(b)
|
(36.7
|
)%
|
|
48.9
|
%
|
|
25.4
|
%
|
|
|
|
|
|||||||
Net income attributable to PepsiCo
|
$
|
12,515
|
|
|
$
|
4,857
|
|
|
$
|
6,329
|
|
|
158
|
%
|
|
(23
|
)%
|
||
Net income attributable to PepsiCo per common share – diluted
|
$
|
8.78
|
|
|
$
|
3.38
|
|
|
$
|
4.36
|
|
|
160
|
%
|
|
(23
|
)%
|
||
Mark-to-market net impact
|
0.09
|
|
|
(0.01
|
)
|
|
(0.08
|
)
|
|
|
|
|
|||||||
Restructuring and impairment charges
|
0.18
|
|
|
0.16
|
|
|
0.09
|
|
|
|
|
|
|||||||
Merger and integration charges
|
0.05
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|||||||
Net tax (benefit)/expense related to the TCJ Act
(b)
|
(0.02
|
)
|
|
1.70
|
|
|
—
|
|
|
|
|
|
|||||||
Other net tax benefits
(b)
|
(3.55
|
)
|
|
—
|
|
|
—
|
|
|
|
|
|
|||||||
Charges related to cash tender and exchange offers
|
0.13
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|||||||
Charge related to the transaction with Tingyi
|
—
|
|
|
—
|
|
|
0.26
|
|
|
|
|
|
|||||||
Charge related to debt redemption
|
—
|
|
|
—
|
|
|
0.11
|
|
|
|
|
|
|||||||
Pension-related settlement charge
|
—
|
|
|
—
|
|
|
0.11
|
|
|
|
|
|
|||||||
Net income attributable to PepsiCo per common
share – diluted, excluding above items
(c)
|
$
|
5.66
|
|
|
$
|
5.23
|
|
|
$
|
4.85
|
|
|
8
|
%
|
|
8
|
%
|
||
Impact of foreign exchange translation
|
|
|
|
|
|
|
1
|
|
|
1
|
|
||||||||
Growth in net income attributable to PepsiCo per
common share – diluted, excluding above items, on
a constant currency basis
(c)
|
|
|
|
|
|
|
9
|
%
|
|
9
|
%
|
(a)
|
In 2017 and 2016, reflect the retrospective adoption of guidance requiring the presentation of non-service cost components of net periodic benefit cost below operating profit. See Note 2 to our consolidated financial statements.
|
(b)
|
See Note 5 to our consolidated financial statements.
|
(c)
|
See “Non-GAAP Measures.”
|
•
|
cost of sales, gross profit, selling, general and administrative expenses, other pension and retiree medical benefits income/expense, interest expense, benefit from/provision for income taxes and noncontrolling interests, each adjusted for items affecting comparability;
|
•
|
operating profit, 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;
|
•
|
organic revenue growth;
|
•
|
free cash flow; and
|
•
|
return on invested capital (ROIC) and net ROIC, excluding items affecting comparability.
|
|
2018
|
||||||||||||||||||||||||||||||||||
|
Cost of sales
|
|
Gross profit
|
|
Selling, general and administrative expenses
|
|
Operating profit
|
|
Other pension and retiree medical benefits income
|
|
Interest expense
|
|
(Benefit from)/provision for income taxes
(a)
|
|
Net income attributable to noncontrolling interests
|
|
Net income attributable to PepsiCo
|
||||||||||||||||||
Reported, GAAP Measure
|
$
|
29,381
|
|
|
$
|
35,280
|
|
|
$
|
25,170
|
|
|
$
|
10,110
|
|
|
$
|
298
|
|
|
$
|
1,525
|
|
|
$
|
(3,370
|
)
|
|
$
|
44
|
|
|
$
|
12,515
|
|
Items Affecting Comparability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Mark-to-market net impact
|
(83
|
)
|
|
83
|
|
|
(80
|
)
|
|
163
|
|
|
—
|
|
|
—
|
|
|
38
|
|
|
—
|
|
|
125
|
|
|||||||||
Restructuring and impairment charges
|
(3
|
)
|
|
3
|
|
|
(269
|
)
|
|
272
|
|
|
36
|
|
|
—
|
|
|
56
|
|
|
1
|
|
|
251
|
|
|||||||||
Merger and integration charges
|
—
|
|
|
—
|
|
|
(75
|
)
|
|
75
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
75
|
|
|||||||||
Net tax benefit related to the TCJ Act
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
28
|
|
|
—
|
|
|
(28
|
)
|
|||||||||
Other net tax benefits
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,064
|
|
|
—
|
|
|
(5,064
|
)
|
|||||||||
Charges related to cash tender and exchange offers
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(253
|
)
|
|
62
|
|
|
—
|
|
|
191
|
|
|||||||||
Core, Non-GAAP Measure
|
$
|
29,295
|
|
|
$
|
35,366
|
|
|
$
|
24,746
|
|
|
$
|
10,620
|
|
|
$
|
334
|
|
|
$
|
1,272
|
|
|