PEPSICO INC - Quarter Report: 2023 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended September 9, 2023 (36 weeks)


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

For the transition period from to

Commission file number 1-1183


PepsiCo, Inc.

(Exact Name of Registrant as Specified in its Charter)



North Carolina						13-1584302
(State or Other Jurisdiction of Incorporation or Organization)						(I.R.S. Employer Identification No.)

700 Anderson Hill Road, Purchase, New York 10577


(Address of principal executive offices and Zip Code)

(914) 253-2000


Registrant's telephone number, including area code

N/A


(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:

Title of each class

Trading Symbols

Name of each exchange on which registered

Common Stock, par value 1-2/3 cents per share

PEP

The Nasdaq Stock Market LLC

0.250% Senior Notes Due 2024

PEP24

The Nasdaq Stock Market LLC

2.625% Senior Notes Due 2026

PEP26

The Nasdaq Stock Market LLC

0.750% Senior Notes Due 2027

PEP27

The Nasdaq Stock Market LLC

0.875% Senior Notes Due 2028

PEP28

The Nasdaq Stock Market LLC

0.500% Senior Notes Due 2028

PEP28a

The Nasdaq Stock Market LLC

3.200% Senior Notes Due 2029

PEP29

The Nasdaq Stock Market LLC

1.125% Senior Notes Due 2031

PEP31

The Nasdaq Stock Market LLC

0.400% Senior Notes Due 2032

PEP32

The Nasdaq Stock Market LLC

0.750% Senior Notes Due 2033

PEP33

The Nasdaq Stock Market LLC

3.550% Senior Notes Due 2034

PEP34

The Nasdaq Stock Market LLC

0.875% Senior Notes Due 2039

PEP39

The Nasdaq Stock Market LLC

1.050% Senior Notes Due 2050

PEP50

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Number of shares of Common Stock outstanding as of October 3, 2023 was 1,374,863,961.

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PepsiCo, Inc. and Subsidiaries

Table of Contents


		Page No.
Part I Financial Information
Item 1.	Condensed Consolidated Financial Statements	2
	Condensed Consolidated Statement of Income – 12 and 36 Weeks Ended September 9 , 2023 and September 3 , 2022	2
	Condensed Consolidated Statement of Comprehensive Income – 12 and 36 Weeks Ended September 9 , 2023 and September 3 , 2022	3
	Condensed Consolidated Statement of Cash Flows – 36 Weeks Ended September 9 , 2023 and September 3 , 2022	4
	Condensed Consolidated Balance Sheet – September 9 , 2023 and December 31, 2022	6
	Condensed Consolidated Statement of Equity – 12 and 36 Weeks Ended September 9 , 2023 and September 3 , 2022	7
	Notes to the Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Report of Independent Registered Public Accounting Firm		49
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	50
Item 4.	Controls and Procedures	50
Part II Other Information
Item 1.	Legal Proceedings	51
Item 1A.	Risk Factors	51
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	51
Item 5.	Other Information	51
Item 6.	Exhibits	52

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PART I FINANCIAL INFORMATION

ITEM 1. Condensed Consolidated Financial Statements.

Condensed Consolidated Statement of Income

PepsiCo, Inc. and Subsidiaries

(in millions except per share amounts, unaudited)


	12 Weeks Ended				36 Weeks Ended
	9/9/2023		9/3/2022		9/9/2023		9/3/2022
Net Revenue	$	23,453	$	21,971	$	63,621	$	58,396
Cost of sales	10,675		10,308		28,784		27,156
Gross profit	12,778		11,663		34,837		31,240
Selling, general and administrative expenses	8,757		8,295		24,528		22,262
Gain associated with the Juice Transaction (a)	—		14		—		(3,321)
Impairment of intangible assets (see Notes 1 and 4)	6		1		6		1,602
Operating Profit	4,015		3,353		10,303		10,697
Other pension and retiree medical benefits income	62		36		183		168
Net interest expense and other	(201)		(190)		(602)		(666)
Income before income taxes	3,876		3,199		9,884		10,199
Provision for income taxes	760		475		2,053		1,756
Net income	3,116		2,724		7,831		8,443
Less: Net income attributable to noncontrolling interests	24		22		59		51
Net Income Attributable to PepsiCo	$	3,092	$	2,702	$	7,772	$	8,392
Net Income Attributable to PepsiCo per Common Share
Basic	$	2.25	$	1.96	$	5.64	$	6.07
Diluted	$	2.24	$	1.95	$	5.62	$	6.04
Weighted-average common shares outstanding
Basic	1,376		1,380		1,377		1,382
Diluted	1,383		1,387		1,384		1,389

(a)In the 36 weeks ended September 3, 2022, we sold our Tropicana, Naked and other select juice brands to PAI Partners for $3.5 billion in cash and a 39% noncontrolling interest in a joint venture, Tropicana Brands Group (TBG), operating across North America and Europe (Juice Transaction). See Note 12 for further information.

See accompanying notes to the condensed consolidated financial statements.

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Condensed Consolidated Statement of Comprehensive Income

PepsiCo, Inc. and Subsidiaries

(in millions, unaudited)


	12 Weeks Ended				36 Weeks Ended
	9/9/2023		9/3/2022		9/9/2023		9/3/2022
Net income	$	3,116	$	2,724	$	7,831	$	8,443
Other comprehensive (loss)/income, net of taxes:
Net currency translation adjustment	2		(324)		(431)		390
Net change on cash flow hedges	(11)		(113)		(46)		(109)
Net pension and retiree medical adjustments	(8)		108		(18)		(129)

Other	3		2		3		3
	(14)		(327)		(492)		155
Comprehensive income	3,102		2,397		7,339		8,598
Less: Comprehensive income attributable to noncontrolling interests	24		22		59		51
Comprehensive Income Attributable to PepsiCo	$	3,078	$	2,375	$	7,280	$	8,547

See accompanying notes to the condensed consolidated financial statements.

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Condensed Consolidated Statement of Cash Flows

PepsiCo, Inc. and Subsidiaries

(in millions, unaudited)


	36 Weeks Ended
	9/9/2023		9/3/2022
Operating Activities
Net income	$	7,831	$	8,443
Depreciation and amortization	1,973		1,854
Gain associated with the Juice Transaction	—		(3,321)
Impairment and other charges	102		1,877
Operating lease right-of-use asset amortization	384		346
Share-based compensation expense	267		233
Restructuring and impairment charges	287		126
Cash payments for restructuring charges	(283)		(134)
Acquisition and divestiture-related charges	20		69
Cash payments for acquisition and divestiture-related charges	(15)		(41)
Pension and retiree medical plan expenses	93		235
Pension and retiree medical plan contributions	(374)		(335)
Deferred income taxes and other tax charges and credits	343		(322)
Tax expense related to the Tax Cuts and Jobs Act (TCJ Act)	—		86
Tax payments related to the TCJ Act	(309)		(309)
Change in assets and liabilities:
Accounts and notes receivable	(1,699)		(2,258)
Inventories	(473)		(837)
Prepaid expenses and other current assets	(242)		(124)
Accounts payable and other current liabilities	(859)		426
Income taxes payable	512		718
Other, net	72		(426)
Net Cash Provided by Operating Activities	7,630		6,306

Investing Activities
Capital spending	(2,537)		(2,556)
Sales of property, plant and equipment	131		228
Acquisitions, net of cash acquired, investments in noncontrolled affiliates and purchases of intangible and other assets	(132)		(804)
Proceeds associated with the Juice Transaction	—		3,456
Other divestitures, sales of investments in noncontrolled affiliates and other assets	75		15
Short-term investments, by original maturity:
More than three months - purchases	(555)		(46)
More than three months - maturities	554		—
More than three months - sales	12		—
Three months or less, net	24		9
Other investing, net	49		7
Net Cash (Used for)/Provided by Investing Activities	(2,379)		309

(Continued on following page)

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Condensed Consolidated Statement of Cash Flows (continued)

PepsiCo, Inc. and Subsidiaries

(in millions, unaudited)


	36 Weeks Ended
	9/9/2023		9/3/2022
Financing Activities
Proceeds from issuances of long-term debt	$	2,986	$	3,377
Payments of long-term debt	(2,253)		(1,653)
Debt redemptions	—		(1,550)
Short-term borrowings, by original maturity:
More than three months - proceeds	4,688		1,947
More than three months - payments	(1,037)		(1,932)
Three months or less, net	1,395		(45)

Cash dividends paid	(4,941)		(4,586)
Share repurchases - common	(751)		(1,156)
Proceeds from exercises of stock options	100		113
Withholding tax payments on restricted stock units (RSUs) and performance stock units (PSUs) converted	(135)		(97)
Other financing	(18)		(25)
Net Cash Provided by/(Used for) Financing Activities	34		(5,607)
Effect of exchange rate changes on cash and cash equivalents and restricted cash	(254)		(197)
Net Increase in Cash and Cash Equivalents and Restricted Cash	5,031		811
Cash and Cash Equivalents and Restricted Cash, Beginning of Year	5,100		5,707
Cash and Cash Equivalents and Restricted Cash, End of Period	$	10,131	$	6,518

Supplemental Non-Cash Activity
Right-of-use assets obtained in exchange for lease obligations	$	705	$	560
Debt discharged via legal defeasance	$	94	$	—

See accompanying notes to the condensed consolidated financial statements.

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Condensed Consolidated Balance Sheet

PepsiCo, Inc. and Subsidiaries

(in millions except per share amounts)


	(Unaudited)
	9/9/2023		12/31/2022
ASSETS
Current Assets
Cash and cash equivalents	$	10,017	$	4,954
Short-term investments	266		394

Accounts and notes receivable, less allowance ($188 and $150, respectively)	11,782		10,163
Inventories:
Raw materials and packaging	2,456		2,366
Work-in-process	119		114
Finished goods	2,983		2,742
	5,558		5,222
Prepaid expenses and other current assets	1,026		806

Total Current Assets	28,649		21,539
Property, plant and equipment	51,585		49,784
Accumulated depreciation	(26,732)		(25,493)
Property, Plant and Equipment, net	24,853		24,291
Amortizable Intangible Assets, net	1,208		1,277
Goodwill	17,892		18,202
Other Indefinite-Lived Intangible Assets	14,293		14,309

Investments in Noncontrolled Affiliates	2,955		3,073
Deferred Income Taxes	4,165		4,204
Other Assets	5,938		5,292
Total Assets	$	99,953	$	92,187

LIABILITIES AND EQUITY
Current Liabilities
Short-term debt obligations	$	8,937	$	3,414
Accounts payable and other current liabilities	23,723		23,371

Total Current Liabilities	32,660		26,785
Long-Term Debt Obligations	35,837		35,657
Deferred Income Taxes	4,047		4,133
Other Liabilities	8,439		8,339
Total Liabilities	80,983		74,914
Commitments and contingencies
PepsiCo Common Shareholders’ Equity
Common stock, par value 12/3¢ per share (authorized 3,600 shares; issued, net of repurchased common stock at par value: 1,375 and 1,377 shares, respectively)	23		23
Capital in excess of par value	4,154		4,134
Retained earnings	70,479		67,800
Accumulated other comprehensive loss	(15,794)		(15,302)
Repurchased common stock, in excess of par value (492 and 490 shares, respectively)	(40,056)		(39,506)
Total PepsiCo Common Shareholders’ Equity	18,806		17,149
Noncontrolling interests	164		124
Total Equity	18,970		17,273
Total Liabilities and Equity	$	99,953	$	92,187

See accompanying notes to the condensed consolidated financial statements.

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Condensed Consolidated Statement of Equity

PepsiCo, Inc. and Subsidiaries

(in millions, except per share amounts, unaudited)


	12 Weeks Ended						36 Weeks Ended
	9/9/2023			9/3/2022			9/9/2023			9/3/2022
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount










Common Stock
Balance, beginning of period	1,377	$	23	1,381	$	23	1,377	$	23	1,383	$	23
Change in repurchased common stock	(2)	—		(2)	—		(2)	—		(4)	—
Balance, end of period	1,375	23		1,379	23		1,375	23		1,379	23
Capital in Excess of Par Value
Balance, beginning of period		4,082			3,970			4,134			4,001
Share-based compensation expense		88			77			267			236

Stock option exercises, RSUs and PSUs converted		3			1			(108)			(102)
Withholding tax on RSUs and PSUs converted		(16)			(10)			(135)			(97)
Other		(3)			(2)			(4)			(2)
Balance, end of period		4,154			4,036			4,154			4,036
Retained Earnings
Balance, beginning of period		69,135			67,763			67,800			65,165

Net income attributable to PepsiCo		3,092			2,702			7,772			8,392
Cash dividends declared – common (a)		(1,748)			(1,593)			(5,093)			(4,685)

Balance, end of period		70,479			68,872			70,479			68,872
Accumulated Other Comprehensive Loss
Balance, beginning of period		(15,780)			(14,416)			(15,302)			(14,898)
Other comprehensive (loss)/income attributable to PepsiCo		(14)			(327)			(492)			155
Balance, end of period		(15,794)			(14,743)			(15,794)			(14,743)
Repurchased Common Stock
Balance, beginning of period	(490)	(39,775)		(486)	(38,787)		(490)	(39,506)		(484)	(38,248)
Share repurchases	(2)	(293)		(3)	(448)		(5)	(759)		(7)	(1,179)
Stock option exercises, RSUs and PSUs converted	—	11		1	23		3	208		3	215
Other	—	1		—	1		—	1		—	1
Balance, end of period	(492)	(40,056)		(488)	(39,211)		(492)	(40,056)		(488)	(39,211)
Total PepsiCo Common Shareholders’ Equity		18,806			18,977			18,806			18,977
Noncontrolling Interests
Balance, beginning of period		140			121			124			108
Net income attributable to noncontrolling interest		24			22			59			51
Distributions to noncontrolling interests		—			(6)			(15)			(20)

Acquisitions		—			21			—			21
Other, net		—			—			(4)			(2)
Balance, end of period		164			158			164			158
Total Equity		$	18,970		$	19,135		$	18,970		$	19,135

(a)Cash dividends declared per common share were $1.265 and $1.15 for the 12 weeks ended September 9, 2023 and September 3, 2022, respectively, and $3.68 and $3.375 for the 36 weeks ended September 9, 2023 and September 3, 2022, respectively.

See accompanying notes to the condensed consolidated financial statements.

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Notes to the Condensed Consolidated Financial Statements

Note 1 - Basis of Presentation and Our Divisions

Basis of Presentation

When used in this report, the terms “we,” “us,” “our,” “PepsiCo” and the “Company” mean PepsiCo, Inc. and its consolidated subsidiaries, collectively.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP) for interim financial information and with the rules and regulations for reporting the Quarterly Report on Form 10-Q (Form 10-Q). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The condensed consolidated balance sheet at December 31, 2022 has been derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by GAAP for complete financial statements. These financial statements have been prepared on a basis that is substantially consistent with the accounting principles applied in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (2022 Form 10-K). This report should be read in conjunction with our 2022 Form 10-K. In our opinion, these financial statements include all normal and recurring adjustments necessary for a fair presentation. The results for the 12 and 36 weeks ended September 9, 2023 are not necessarily indicative of the results expected for any future period or the full year.

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.

While our financial results in the United States and Canada (North America) are reported on a 12-week basis, all of our international operations are reported on a monthly calendar basis for which the months of June, July and August are reflected in our results for the 12 weeks ended September 9, 2023 and September 3, 2022, and the months of January through August are reflected in our results for the 36 weeks ended September 9, 2023 and September 3, 2022.

The preparation of our condensed consolidated financial statements requires management to make estimates and assumptions that affect the amounts reported in our condensed consolidated financial statements and related disclosures. Additionally, the business and economic uncertainty resulting from the Russia-Ukraine conflict and the high interest rate and inflationary cost environment has made such estimates and assumptions more difficult to calculate. Accordingly, actual results and outcomes could differ from those estimates.

Our significant interim accounting policies include the recognition of a pro rata share of certain estimated annual sales incentives and certain advertising and marketing costs in proportion to revenue or volume, as applicable, and the recognition of income taxes using an estimated annual effective tax rate.

Unless otherwise noted, tabular dollars are in millions, except per share amounts. All per share amounts reflect common per share amounts, assume dilution unless otherwise noted, and are based on unrounded amounts. Certain reclassifications were made to the prior year’s financial statements to conform to the current year presentation.

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Our Divisions

We are organized into seven reportable segments (also referred to as divisions), as follows:

1)Frito-Lay North America (FLNA), which includes our branded convenient food businesses in the United States and Canada;

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

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

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

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

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

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

Net revenue of each division is as follows:


	12 Weeks Ended				36 Weeks Ended
	9/9/2023		9/3/2022		9/9/2023		9/3/2022
FLNA	$	5,954	$	5,563	$	17,441	$	15,583
QFNA	747		713		2,208		2,101
PBNA	7,161		6,635		19,714		18,108
LatAm	3,055		2,517		7,688		6,406
Europe	3,704		3,646		9,018		8,466
AMESA	1,615		1,726		4,202		4,426
APAC	1,217		1,171		3,350		3,306
Total	$	23,453	$	21,971	$	63,621	$	58,396

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


	12 Weeks Ended
	9/9/2023				9/3/2022
	Beverages(a)		Convenient Foods		Beverages(a)		Convenient Foods
LatAm	10	%	90	%	10	%	90	%
Europe	50	%	50	%	55	%	45	%
AMESA	30	%	70	%	35	%	65	%
APAC	25	%	75	%	25	%	75	%
PepsiCo	45	%	55	%	45	%	55	%

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	36 Weeks Ended
	9/9/2023				9/3/2022
	Beverages(a)		Convenient Foods		Beverages(a)		Convenient Foods
LatAm	10	%	90	%	10	%	90	%
Europe	50	%	50	%	50	%	50	%
AMESA	30	%	70	%	35	%	65	%
APAC	25	%	75	%	25	%	75	%
PepsiCo	40	%	60	%	45	%	55	%

(a)Beverage revenue from company-owned bottlers, which primarily includes our consolidated bottling operations in our PBNA and Europe divisions, is over 35% of our consolidated net revenue in the 12 weeks ended September 9, 2023, approximately 35% of our consolidated net revenue in the 36 weeks ended September 9, 2023, and approximately 40% of our consolidated net revenue in the 12 and 36 weeks ended September 3, 2022. Generally, our finished goods beverage operations produce higher net revenue but lower operating margin as compared to concentrate sold to authorized bottling partners for the manufacture of finished goods beverages.

Operating profit of each division is as follows:


	12 Weeks Ended				36 Weeks Ended
	9/9/2023		9/3/2022		9/9/2023		9/3/2022
FLNA	$	1,669	$	1,588	$	4,915	$	4,332
QFNA	135		122		452		416
PBNA (a) (b) (c)	970		784		2,176		4,869
LatAm (d)	593		463		1,549		1,206
Europe (a) (e) (f)	659		564		1,206		(369)
AMESA	238		268		656		738
APAC	239		199		689		620
Total divisions	4,503		3,988		11,643		11,812
Corporate unallocated expenses (g) (h)	(488)		(635)		(1,340)		(1,115)
Total	$	4,015	$	3,353	$	10,303	$	10,697

(a)In the 12 weeks ended September 3, 2022, we recorded a charge of $8 million and $6 million in our PBNA and Europe divisions, respectively, associated with the Juice Transaction. The total after-tax amount was $11 million or $0.01 per share. In the 36 weeks ended September 3, 2022, we recorded a gain of $3,029 million and $292 million in our PBNA and Europe divisions, respectively, associated with the Juice Transaction. The total after-tax amount was $2,869 million or $2.07 per share. See Note 12 for further information.

(b)In the 36 weeks ended September 3, 2022, we terminated our agreement with Vital Pharmaceuticals, Inc. (Vital) to distribute Bang Energy drinks in our PBNA division. As a result, in the 12 weeks ended September 3, 2022, we recognized pre-tax brand portfolio impairment charges of $9 million ($7 million after-tax or $0.01 per share) related to the write-down of inventory in cost of sales. In the 36 weeks ended September 3, 2022, we recognized pre-tax brand portfolio impairment charges of $150 million ($114 million after-tax or $0.08 per share) primarily related to the write-off of distribution rights, with $17 million recorded in cost of sales, $7 million recorded in selling, general and administrative expenses and $126 million recorded in impairment of intangible assets.

(c)In the 36 weeks ended September 9, 2023, we recorded our proportionate share of TBG’s earnings, which includes an impairment of TBG’s indefinite-lived intangible assets, and recorded an other-than-temporary impairment of our investment, both of which resulted in pre-tax impairment charges of $113 million ($86 million after-tax or $0.06 per share), recorded in selling, general and administrative expenses. See Note 9 for further information.

(d)In the 36 weeks ended September 3, 2022, we made the decision to sell or discontinue certain non-strategic brands in our LatAm division. As a result, we recognized pre-tax brand portfolio impairment charges of $83 million ($56 million after-tax or $0.04 per share) primarily related to property, plant and equipment and intangible assets, with $47 million recorded in selling, general and administrative expenses and $36 million recorded in impairment of intangible assets.

(e)In the 12 weeks ended September 3, 2022, we recognized net pre-tax income of $4 million ($5 million after-tax with a nominal amount per share) as a result of the Russia-Ukraine conflict, with $5 million of income recorded in selling, general and administrative expenses, partially offset by $1 million of expense recorded in cost of sales. The amounts recorded in selling, general and administrative expenses represent recovery of previously recorded amounts for allowance for expected credit losses of $9 million, partially offset by pre-tax impairment charges related to property, plant and equipment of $2 million and other costs of $2 million. The amount recorded in cost of sales represents allowance for inventory write-downs. In the 36 weeks ended September 3, 2022, we recognized pre-tax charges of $1,402 million ($1,163 million after-tax or $0.84 per share) as a result of the Russia-Ukraine conflict, with $134 million recorded in cost of sales, $70 million recorded in selling, general and administrative expenses and $1,198 million recorded in impairment of intangible assets. The amounts recorded in cost of sales and selling, general and administrative expenses include impairment charges related to property, plant and equipment of $125 million, allowance for expected credit losses of $17 million, allowance for inventory write-downs of $26 million and other costs of $36 million. See Note 4 for further information. For information on indefinite-lived intangible assets, see Notes 2 and 4 to our consolidated financial statements in our 2022 Form 10-K.

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(f)In the 36 weeks ended September 3, 2022, we recognized pre-tax brand portfolio impairment charges of $241 million ($193 million after-tax or $0.14 per share) in impairment of intangible assets, related to the repositioning or discontinuation of certain juice and dairy brands in Russia. See Note 4 for further information. For information on indefinite-lived intangible assets, see Notes 2 and 4 to our consolidated financial statements in our 2022 Form 10-K.

(g)In the 36 weeks ended September 9, 2023, we recorded a pre-tax gain of $85 million ($65 million after-tax or $0.05 per share) in selling, general and administrative expenses as a result of the sale of a corporate asset.

(h)In the 36 weeks ended September 3, 2022, we recorded a pre-tax loss on certain equity investments of $68 million ($51 million after-tax or $0.04 per share) in selling, general and administrative expenses.

A summary of pre-tax charges related to the impairment of intangible assets is as follows:


	12 Weeks Ended				36 Weeks Ended
	9/9/2023		9/3/2022		9/9/2023		9/3/2022

Russia-Ukraine conflict impairment charges	$	—	$	—	$	—	$	1,198
Brand portfolio impairment charges	—		1		—		404
Other impairment charges	6		—		6		—
Total	$	6	$	1	$	6	$	1,602

Note 2 - Recently Issued Accounting Pronouncements

Adopted

In September 2022, the Financial Accounting Standards Board issued guidance to enhance the transparency of supplier finance programs to allow financial statement users to understand the effect on working capital, liquidity and cash flows. The new guidance requires disclosure of key terms of the program, including a description of the payment terms, payment timing and assets pledged as security or other forms of guarantees provided to the finance provider or intermediary. Other requirements include the disclosure of the amount that remains unpaid as of the end of the reporting period, a description of where these obligations are presented in the balance sheet and a rollforward of the obligation during the annual period. We adopted the guidance in the first quarter of 2023, except for the rollforward, which is effective in fiscal year 2024 with early adoption permitted. We currently plan to adopt the rollforward guidance when effective. See Note 13 for disclosures currently required under this guidance.

Note 3 - Restructuring and Impairment Charges

2019 Multi-Year Productivity Plan

We publicly announced a multi-year productivity plan on February 15, 2019 (2019 Productivity Plan) that will leverage new technology and business models to further simplify, harmonize and automate processes; re-engineer our go-to-market and information systems, including deploying the right automation for each market; and simplify our organization and optimize our manufacturing and supply chain footprint. To build on the successful implementation of the 2019 Productivity Plan, in 2022, we expanded and extended the plan through the end of 2028 to take advantage of additional opportunities within the initiatives described above. As a result, we expect to incur pre-tax charges of approximately $3.65 billion, including cash expenditures of approximately $2.9 billion. These pre-tax charges are expected to consist of approximately 55% of severance and other employee-related costs, 10% for asset impairments (all non-cash) resulting from plant closures and related actions, and 35% for other costs associated with the implementation of our initiatives.

The total plan pre-tax charges are expected to be incurred by division approximately as follows:


	FLNA		QFNA		PBNA		LatAm		Europe		AMESA		APAC		Corporate
Expected pre-tax charges	15	%	1	%	25	%	10	%	25	%	5	%	4	%	15	%

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A summary of our 2019 Productivity Plan charges is as follows:


	12 Weeks Ended				36 Weeks Ended
	9/9/2023		9/3/2022		9/9/2023		9/3/2022
Cost of sales	$	4	$	1	$	10	$	6
Selling, general and administrative expenses	79		50		278		117
Other pension and retiree medical benefits (income)/expense (a)	—		—		(1)		3
Total restructuring and impairment charges	$	83	$	51	$	287	$	126
After-tax amount	$	67	$	40	$	228	$	101
Impact on net income attributable to PepsiCo per common share	$	(0.05)	$	(0.03)	$	(0.16)	$	(0.07)


	12 Weeks Ended				36 Weeks Ended				Plan to Date
	9/9/2023		9/3/2022		9/9/2023		9/3/2022		through 9/9/2023
FLNA	$	6	$	4	$	19	$	10	$	229
QFNA	—		1		—		1		19
PBNA	8		4		18		9		244
LatAm	8		3		19		17		190
Europe	44		21		185		40		528
AMESA	5		—		10		5		92
APAC	2		4		7		8		84
Corporate	10		14		30		33		259
	83		51		288		123		1,645
Other pension and retiree medical benefits (income)/expense (a)	—		—		(1)		3		97
Total	$	83	$	51	$	287	$	126	$	1,742

(a)Income amount represents adjustments for changes in estimates of previously recorded amounts.


	12 Weeks Ended				36 Weeks Ended				Plan to Date
	9/9/2023		9/3/2022		9/9/2023		9/3/2022		through 9/9/2023
Severance and other employee costs	$	39	$	10	$	181	$	41	$	988
Asset impairments	1		7		1		7		191
Other costs	43		34		105		78		563
Total	$	83	$	51	$	287	$	126	$	1,742

Severance and other employee costs primarily include severance and other termination benefits, as well as voluntary separation arrangements. Other costs primarily include costs associated with the implementation of our initiatives, including contract termination costs, consulting and other professional fees.

A summary of our 2019 Productivity Plan activity for the 36 weeks ended September 9, 2023 is as follows:


	Severance and Other Employee Costs		Asset Impairments		Other Costs		Total
Liability as of December 31, 2022	$	188	$	—	$	8	$	196
2023 restructuring charges	181		1		105		287
Cash payments	(174)		—		(109)		(283)
Non-cash charges and translation	(8)		(1)		1		(8)
Liability as of September 9, 2023	$	187	$	—	$	5	$	192

The majority of the restructuring accrual at September 9, 2023 is expected to be paid by the end of 2023.

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Other Productivity Initiatives

There were no charges related to other productivity and efficiency initiatives outside the scope of the 2019 Productivity Plan.

We regularly evaluate different productivity initiatives beyond the productivity plan and other initiatives described above.

See Notes 1, 4 and 9 for impairment and other charges/credits taken related to the Russia-Ukraine conflict, brand portfolio impairment charges and other impairment charges.

Note 4 - Intangible Assets

During the 36 weeks ended September 3, 2022, macroeconomic factors, sanctions and other regulations as a result of the Russia-Ukraine conflict indicated a material deterioration of the significant inputs used to determine the fair value of our indefinite-lived intangible assets in Russia, primarily assumptions underlying the weighted-average cost of capital. These factors required us to perform a quantitative assessment, despite the absence of a material adverse impact on these assets’ financial performance (e.g., sales, operating profit, cash flows).

The fair value of our indefinite-lived intangible assets in Russia was estimated using discounted cash flows under the income approach, which we consider to be a Level 3 measurement. We determined that the carrying value exceeded the fair value, with the decrease in the fair value primarily attributable to a significant increase in the weighted-average cost of capital, which reflects the macroeconomic uncertainty in Russia. As a result of the quantitative assessment, in the 36 weeks ended September 3, 2022, we recorded pre-tax impairment charges of $1.2 billion ($958 million after-tax or $0.69 per share) in impairment of intangible assets, related to our juice and dairy brands in Russia in our Europe division. See Note 1 for further information.

During the 36 weeks ended September 3, 2022, we repositioned or discontinued certain juice and dairy brands in Russia in our Europe division. As a result, we recognized pre-tax impairment charges (included in brand portfolio impairment charges) of $241 million ($193 million after-tax or $0.14 per share) in impairment of intangible assets, primarily related to indefinite-lived intangible assets. See Note 1 for further information.

For further information on indefinite-lived intangible assets, see Notes 2 and 4 to our consolidated financial statements in our 2022 Form 10-K.

A summary of our amortizable intangible assets is as follows:


	9/9/2023						12/31/2022
	Gross		Accumulated Amortization		Net		Gross		Accumulated Amortization		Net
Acquired franchise rights	$	833	$	(207)	$	626	$	837	$	(200)	$	637
Customer relationships	550		(249)		301		571		(237)		334
Brands	1,084		(978)		106		1,097		(973)		124
Other identifiable intangibles	444		(269)		175		447		(265)		182
Total	$	2,911	$	(1,703)	$	1,208	$	2,952	$	(1,675)	$	1,277

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The change in the book value of indefinite-lived intangible assets is as follows:


	Balance 12/31/2022		Acquisitions		Translation and Other		Balance 9/9/2023

FLNA
Goodwill	$	451	$	—	$	(1)	$	450
Brands	251		—		—		251
Total	702		—		(1)		701
QFNA
Goodwill	189		—		—		189
Total	189		—		—		189
PBNA
Goodwill	11,947		4		(4)		11,947
Reacquired franchise rights	7,061		36		(8)		7,089
Acquired franchise rights (a)	1,758		12		(40)		1,730
Brands	2,508		—		—		2,508
Total	23,274		52		(52)		23,274
LatAm
Goodwill	436		—		23		459
Brands	75		—		7		82
Total	511		—		30		541
Europe
Goodwill (b)	3,646		—		(277)		3,369
Reacquired franchise rights	421		—		(16)		405
Acquired franchise rights	148		—		3		151
Brands	1,664		—		23		1,687
Total	5,879		—		(267)		5,612
AMESA
Goodwill	1,015		34		(63)		986
Brands	156		—		(21)		135
Total	1,171		34		(84)		1,121
APAC
Goodwill	518		—		(26)		492
Brands	267		—		(12)		255
Total	785		—		(38)		747

Total goodwill	18,202		38		(348)		17,892
Total reacquired franchise rights	7,482		36		(24)		7,494
Total acquired franchise rights	1,906		12		(37)		1,881
Total brands	4,921		—		(3)		4,918
Total	$	32,511	$	86	$	(412)	$	32,185

(a)Translation and other primarily reflects adjustments to previously recorded amounts related to our agreement with Celsius Holdings, Inc. (Celsius) to distribute Celsius energy drinks in the United States.

(b)Translation and other primarily reflects the depreciation of the Russian ruble.

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Note 5 - Income Taxes

In 2021, we received a final assessment from the Internal Revenue Service (IRS) audit for the tax years 2014 through 2016. The assessment included both agreed and unagreed issues. On October 29, 2021, we filed a formal written protest of the assessment and requested an appeals conference. In 2022, we came to an agreement with the IRS to settle one of the issues assessed in the 2014 through 2016 tax audit. The agreement covers tax years 2014 through 2019. As a result, we adjusted our reserves for uncertain tax positions, including any correlating adjustments impacting the mandatory transition tax liability under the TCJ Act, resulting in a net non-cash tax benefit of $198 million ($0.14 per share) in the 12 and 36 weeks ended September 3, 2022. Tax years 2014 through 2019 remain under audit for other issues. See Note 5 to our consolidated financial statements in our 2022 Form 10-K for further information. There were no new tax amounts recognized in the 12 and 36 weeks ended September 9, 2023 associated with this agreement.

Note 6 - Share-Based Compensation

The following table summarizes our total share-based compensation expense, which is primarily recorded in selling, general and administrative expenses:


	12 Weeks Ended				36 Weeks Ended
	9/9/2023		9/3/2022		9/9/2023		9/3/2022
Share-based compensation expense – equity awards	$	88	$	77	$	267	$	233
Share-based compensation expense – liability awards	7		4		19		16
Acquisition and divestiture-related charges	—		—		—		3

Total	$	95	$	81	$	286	$	252

The following table summarizes share-based awards granted under the terms of the PepsiCo, Inc. Long-Term Incentive Plan:


	36 Weeks Ended
	9/9/2023			9/3/2022
	Granted(a)	Weighted-Average Grant Price		Granted(a)	Weighted-Average Grant Price
Stock options	2.1	$	171.83	2.3	$	163.46
RSUs and PSUs	2.1	$	171.11	2.3	$	163.01

(a)In millions. All grant activity is disclosed at target.

We granted long-term cash awards to certain executive officers and other senior executives with an aggregate target value of $20 million and $18 million during the 36 weeks ended September 9, 2023 and September 3, 2022, respectively.

For the 12 weeks ended September 9, 2023 and September 3, 2022, our grants of stock options, RSUs, PSUs and long-term cash awards were nominal.

Our weighted-average Black-Scholes fair value assumptions are as follows:


	36 Weeks Ended
	9/9/2023		9/3/2022
Expected life	7 years		7 years
Risk-free interest rate	4.2	%	1.8	%
Expected volatility	16	%	16	%
Expected dividend yield	2.7	%	2.5	%

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Note 7 - Pension and Retiree Medical Benefits

In the 12 and 36 weeks ended September 3, 2022, we recognized pre-tax settlement charges of $59 million ($46 million after-tax or $0.03 per share) and $190 million ($147 million after-tax or $0.11 per share), respectively, primarily related to a U.S. qualified defined benefit pension plan due to lump sum distributions to retired or terminated employees. The settlement charge was triggered when the cumulative lump sum distributions exceeded the total annual service and interest cost in 2022. Related plan assets and benefit obligations were remeasured using remeasurement date assumptions.

In the 36 weeks ended September 3, 2022, we transferred pension and retiree medical obligations of $145 million and related assets to TBG in connection with the Juice Transaction and, as a result, recognized a pre-tax curtailment gain of $16 million in a U.S. retiree medical plan.

The components of net periodic benefit cost/(income) for pension and retiree medical plans are as follows:


	12 Weeks Ended
	Pension								Retiree Medical
	U.S.				International
	9/9/2023		9/3/2022		9/9/2023		9/3/2022		9/9/2023		9/3/2022
Service cost	$	76	$	111	$	10	$	13	$	7	$	8
Other pension and retiree medical benefits income:
Interest cost	137		111		34		23		7		5
Expected return on plan assets	(197)		(206)		(45)		(55)		(3)		(4)
Amortization of prior service credits	(6)		(6)		(1)		(1)		(1)		(2)
Amortization of net losses/(gains)	16		35		3		8		(6)		(3)
Settlement/curtailment losses	—		59		—		—		—		—

Total other pension and retiree medical benefits income	(50)		(7)		(9)		(25)		(3)		(4)
Total	$	26	$	104	$	1	$	(12)	$	4	$	4


	36 Weeks Ended
	Pension								Retiree Medical
	U.S.				International
	9/9/2023		9/3/2022		9/9/2023		9/3/2022		9/9/2023		9/3/2022
Service cost	$	227	$	340	$	28	$	47	$	20	$	25
Other pension and retiree medical benefits income:
Interest cost	411		286		93		63		24		13
Expected return on plan assets	(590)		(637)		(126)		(153)		(9)		(11)
Amortization of prior service credits	(18)		(19)		(1)		(1)		(4)		(6)
Amortization of net losses/(gains)	48		103		8		20		(18)		(9)
Settlement/curtailment losses/(gains)	—		190		—		—		—		(16)
Special termination benefits	(1)		9		—		—		—		—
Total other pension and retiree medical benefits income	(150)		(68)		(26)		(71)		(7)		(29)
Total	$	77	$	272	$	2	$	(24)	$	13	$	(4)

We regularly evaluate opportunities to reduce risk and volatility associated with our pension and retiree medical plans.

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In the 36 weeks ended September 9, 2023 and September 3, 2022, we made discretionary contributions of $250 million and $150 million, respectively, to our U.S. qualified defined benefit plans, and $17 million and $10 million, respectively, to our international defined benefit plans.

Note 8 - Debt Obligations

In the 36 weeks ended September 9, 2023, we issued the following notes:


Interest Rate		Maturity Date	Principal Amount(a)
Floating rate		February 2026	$	350
4.550	%	February 2026	$	500
4.450	%	May 2028	$	650
4.450	%	February 2033	$	1,000
4.650	%	February 2053	$	500

(a)Excludes debt issuance costs, discounts and premiums.

The net proceeds from the issuances of the above notes were used for general corporate purposes, including the repayment of commercial paper.

In the 36 weeks ended September 9, 2023, $2.3 billion of U.S. dollar-denominated senior notes matured and were paid. In addition, in the 36 weeks ended September 9, 2023, we discharged via legal defeasance $94 million outstanding principal amount of certain notes originally issued by our subsidiary, The Quaker Oats Company, following the deposit of $102 million of U.S. government securities with the Bank of New York Mellon, as trustee, in the fourth quarter of 2022.

As of September 9, 2023, we had $5.1 billion of commercial paper outstanding, excluding discounts.

In the 36 weeks ended September 9, 2023, we entered into a new five-year unsecured revolving credit agreement (Five-Year Credit Agreement), which expires on May 26, 2028. The Five-Year Credit Agreement enables us and our borrowing subsidiaries to borrow up to $4.2 billion in U.S. dollars and/or euros, including a $0.75 billion swing line subfacility for euro-denominated borrowings permitted to be borrowed on a same-day basis, subject to customary terms and conditions. We may request that commitments under this agreement be increased up to $4.95 billion (or the equivalent amount in euros). Additionally, we may, once a year, request renewal of the agreement for an additional one-year period. The Five-Year Credit Agreement replaced our $3.8 billion five-year credit agreement, dated as of May 27, 2022.

Also in the 36 weeks ended September 9, 2023, we entered into a new 364-day unsecured revolving credit agreement (364-Day Credit Agreement), which expires on May 24, 2024. The 364-Day Credit Agreement enables us and our borrowing subsidiaries to borrow up to $4.2 billion in U.S. dollars and/or euros, subject to customary terms and conditions. We may request that commitments under this agreement be increased up to $4.95 billion (or the equivalent amount in euros). We may request renewal of this facility for an additional 364-day period or convert any amounts outstanding into a term loan for a period of up to one year, which term loan would mature no later than the anniversary of the then effective termination date. The 364-Day Credit Agreement replaced our $3.8 billion 364-day credit agreement, dated as of May 27, 2022.

Funds borrowed under the Five-Year Credit Agreement and the 364-Day Credit Agreement may be used for general corporate purposes. Subject to certain conditions, we may borrow, prepay and reborrow amounts under these agreements. As of September 9, 2023, there were no outstanding borrowings under the Five-Year Credit Agreement or the 364-Day Credit Agreement.

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Note 9 - Financial Instruments

We are exposed to market risks arising from adverse changes in:

•commodity prices, affecting the cost of our raw materials and energy;

•foreign exchange rates and currency restrictions; and

•interest rates.

There have been no material changes during the 36 weeks ended September 9, 2023 with respect to our risk management policies or strategies and valuation techniques used in measuring the fair value of the financial assets or liabilities disclosed in Note 9 to our consolidated financial statements in our 2022 Form 10-K.

Certain of our agreements with our counterparties require us to post full collateral on derivative instruments in a net liability position if our credit rating is at A2 (Moody’s Investors Service, Inc.) or A (S&P Global Ratings) and we have been placed on credit watch for possible downgrade or if our credit rating falls below either of these levels. The fair value of all derivative instruments with credit-risk-related contingent features that were in a net liability position as of September 9, 2023 was $219 million. We have posted no collateral under these contracts and no credit-risk-related contingent features were triggered as of September 9, 2023.

The notional amounts of our financial instruments used to hedge the above risks as of September 9, 2023 and December 31, 2022 are as follows:


	Notional Amounts(a)
	9/9/2023		12/31/2022
Commodity	$	1.6	$	1.8
Foreign exchange	$	2.9	$	3.0
Interest rate	$	1.3	$	1.3
Net investment (b)	$	2.9	$	2.9

(a)In billions.

(b)The total notional of our net investment hedge consists of non-derivative debt instruments.

As of September 9, 2023, approximately 13% of total debt, after the impact of the related interest rate derivative instruments, was subject to variable rates, compared to 1% as of December 31, 2022.

Debt Securities

Available-for-Sale

Investments in available-for-sale debt securities are reported at fair value. Changes in the fair value of available-for-sale debt securities are generally recognized in accumulated other comprehensive loss within common shareholders’ equity. Changes in the fair value of available-for-sale debt securities impact earnings only when such securities are sold, or an allowance for expected credit losses or impairment is recognized. We regularly evaluate our investment portfolio for expected credit losses and impairment. In making this judgment, we evaluate, among other things, the extent to which the fair value of a debt security is less than its amortized cost; the financial condition of the issuer, including the credit quality, and any changes thereto; and our intent to sell, or whether we will more likely than not be required to sell, the debt security before recovery of its amortized cost basis. Our assessment of whether a debt security has a credit loss or is impaired could change in the future due to new developments or changes in assumptions related to any particular debt security. There were no unrealized gains and losses on our investments as of September 9, 2023. Impairment charges related to our investments for the 36 weeks ended September 9, 2023 were not material.

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TBG Investment

In the first quarter of 2022, we sold our Tropicana, Naked and other select juice brands to PAI Partners, while retaining a 39% noncontrolling interest in TBG, operating across North America and Europe. We have significant influence over our investment in TBG and account for our investment under the equity method, recognizing our proportionate share of TBG’s earnings on our income statement (recorded in selling, general and administrative expenses). See Note 12 for further information.

In the 36 weeks ended September 9, 2023, we recorded our proportionate share of TBG’s earnings, which includes an impairment of TBG’s indefinite-lived intangible assets, and recorded an other-than-temporary impairment of our investment, both of which resulted in pre-tax impairment charges of $113 million ($86 million after-tax or $0.06 per share), recorded in selling, general and administrative expenses in our PBNA division. We estimated the fair value of our ownership in TBG using discounted cash flows and an option pricing model related to our liquidation preference in TBG, which we categorized as Level 3 (significant unobservable inputs) in the fair value hierarchy.

Fair Value Measurements

The fair values of our financial assets and liabilities as of September 9, 2023 and December 31, 2022 are categorized as follows:


		9/9/2023				12/31/2022
	Fair Value Hierarchy Levels(a)	Assets(a)		Liabilities(a)		Assets(a)		Liabilities(a)

Available-for-sale debt securities (b)	2	$	558	$	—	$	660	$	—
Index funds (c)	1	$	265	$	—	$	257	$	—
Prepaid forward contracts (d)	2	$	14	$	—	$	14	$	—
Deferred compensation (e)	2	$	—	$	439	$	—	$	434

Derivatives designated as cash flow hedging instruments:
Foreign exchange (f)	2	$	11	$	37	$	24	$	22
Interest rate (f)	2	—		161		—		164
Commodity (g)	2	—		49		2		60
		$	11	$	247	$	26	$	246
Derivatives not designated as hedging instruments:
Foreign exchange (f)	2	$	18	$	18	$	21	$	21
Commodity (g)	2	10		17		11		51
		$	28	$	35	$	32	$	72
Total derivatives at fair value (h)		$	39	$	282	$	58	$	318
Total		$	876	$	721	$	989	$	752

(a)Fair value hierarchy levels are categorized consistently by Level 1 (quoted prices in active markets for identical assets) and Level 2 (significant other observable inputs) in both years. Unless otherwise noted, financial assets are classified on our balance sheet within prepaid expenses and other current assets and other assets. Financial liabilities are classified on our balance sheet within accounts payable and other current liabilities and other liabilities.

(b)Primarily related to our investment in Celsius convertible preferred stock. The fair value of our investment approximates the transaction price and any accrued dividends, as well as the amortized cost. As of September 9, 2023, $558 million were classified as other assets. As of December 31, 2022, $3 million, $104 million and $553 million were classified as cash equivalents, short-term investments and other assets, respectively.

(c)Based on the price of index funds. These investments are classified as short-term investments and are used to manage a portion of market risk arising from our deferred compensation liability.

(d)Based primarily on the price of our common stock.

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(e)Based on the fair value of investments corresponding to employees’ investment elections.

(f)Based on recently reported market transactions of spot and forward rates.

(g)Primarily based on recently reported market transactions of swap arrangements.

(h)Derivative assets and liabilities are presented on a gross basis on our balance sheet. Amounts subject to enforceable master netting arrangements or similar agreements which are not offset on our balance sheet as of September 9, 2023 and December 31, 2022 were not material. Collateral received or posted against our asset or liability positions was not material. Exchange-traded commodity futures are cash-settled on a daily basis and, therefore, not included in the table.

The carrying amounts of our cash and cash equivalents and short-term investments recorded at amortized cost approximate fair value (classified as Level 2 in the fair value hierarchy) due to their short-term maturity. The fair value of our debt obligations as of September 9, 2023 and December 31, 2022 was $40 billion and $35 billion, respectively, based upon prices of identical or similar instruments in the marketplace, which are considered Level 2 inputs.

Losses/(gains) on our cash flow and net investment hedges are categorized as follows:


	12 Weeks Ended
	Losses/(Gains) Recognized in Accumulated Other Comprehensive Loss				Losses/(Gains) Reclassified from Accumulated Other Comprehensive Loss into Income Statement(a)
	9/9/2023		9/3/2022		9/9/2023		9/3/2022
Foreign exchange	$	15	$	(31)	$	26	$	1
Interest rate	23		81		31		94
Commodity	65		141		24		(51)
Net investment	(68)		(144)		—		—
Total	$	35	$	47	$	81	$	44


		36 Weeks Ended
	Losses/(Gains) Recognized in Accumulated Other Comprehensive Loss			Losses/(Gains) Reclassified from Accumulated Other Comprehensive Loss into Income Statement(a)
		9/9/2023		9/3/2022		9/9/2023		9/3/2022
Foreign exchange		$	74	$	(13)	$	41	$	(20)
Interest rate		(3)		160		4		175
Commodity		115		(49)		61		(203)
Net investment		40		(283)		—		—
Total		$	226	$	(185)	$	106	$	(48)

(a)Foreign exchange derivative losses/(gains) are included in net revenue and cost of sales. Interest rate derivative losses/(gains) are included in selling, general and administrative expenses. Commodity derivative losses/(gains) are included in either cost of sales or selling, general and administrative expenses, depending on the underlying commodity. See Note 11 for further information.

Based on current market conditions, we expect to reclassify net losses of $136 million related to our cash flow hedges from accumulated other comprehensive loss within common shareholders’ equity into net income during the next 12 months.

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Losses/(gains) recognized in the income statement related to our non-designated hedges are categorized as follows:


	12 Weeks Ended
	9/9/2023						9/3/2022
	Cost of sales		Selling, general and administrative expenses		Total		Cost of sales		Selling, general and administrative expenses		Total
Foreign exchange	$	—	$	(7)	$	(7)	$	—	$	(60)	$	(60)
Commodity	(9)		(65)		(74)		(2)		55		53
Total	$	(9)	$	(72)	$	(81)	$	(2)	$	(5)	$	(7)


	36 Weeks Ended
	9/9/2023						9/3/2022
	Cost of sales		Selling, general and administrative expenses		Total		Cost of sales		Selling, general and administrative expenses		Total
Foreign exchange	$	(1)	$	32	$	31	$	(3)	$	(52)	$	(55)
Commodity	27		(12)		15		(136)		(158)		(294)
Total	$	26	$	20	$	46	$	(139)	$	(210)	$	(349)

Note 10 - Net Income Attributable to PepsiCo per Common Share

The computations of basic and diluted net income attributable to PepsiCo per common share are as follows:


	12 Weeks Ended
	9/9/2023			9/3/2022
	Income		Shares(a)	Income		Shares(a)





Basic net income attributable to PepsiCo per common share	$	2.25		$	1.96
Net income available for PepsiCo common shareholders	$	3,092	1,376	$	2,702	1,380
Dilutive securities:
Stock options, RSUs, PSUs and other (b)	—		7	—		7
Diluted	$	3,092	1,383	$	2,702	1,387
Diluted net income attributable to PepsiCo per common share	$	2.24		$	1.95


	36 Weeks Ended
	9/9/2023			9/3/2022
	Income		Shares(a)	Income		Shares(a)





Basic net income attributable to PepsiCo per common share	$	5.64		$	6.07
Net income available for PepsiCo common shareholders	$	7,772	1,377	$	8,392	1,382
Dilutive securities:
Stock options, RSUs, PSUs and other (b)	—		7	—		7
Diluted	$	7,772	1,384	$	8,392	1,389
Diluted net income attributable to PepsiCo per common share	$	5.62		$	6.04

(a)Weighted-average common shares outstanding (in millions).

(b)The dilutive effect of these securities is calculated using the treasury stock method.

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The weighted-average amount of antidilutive securities excluded from the calculation of diluted earnings per common share was immaterial for both the 12 and 36 weeks ended September 9, 2023 and September 3, 2022.

Note 11 - Accumulated Other Comprehensive Loss Attributable to PepsiCo

The changes in the balances of each component of accumulated other comprehensive loss attributable to PepsiCo are as follows:


	Currency Translation Adjustment		Cash Flow Hedges		Pension and Retiree Medical		Other		Accumulated Other Comprehensive Loss Attributable to PepsiCo
Balance as of December 31, 2022 (a)	$	(12,948)	$	1	$	(2,361)	$	6	$	(15,302)
Other comprehensive (loss) before reclassifications (b)	(350)		(92)		(9)		(1)		(452)
Amounts reclassified from accumulated other comprehensive loss (c)	108		13		5		—		126
Net other comprehensive (loss)	(242)		(79)		(4)		(1)		(326)
Tax amounts	7		20		—		—		27
Balance as of March 25, 2023 (a)	(13,183)		(58)		(2,365)		5		(15,601)
Other comprehensive (loss)/income before reclassifications (d)	(215)		19		(14)		1		(209)
Amounts reclassified from accumulated other comprehensive loss	—		12		5		—		17
Net other comprehensive (loss)/income	(215)		31		(9)		1		(192)
Tax amounts	17		(7)		3		—		13
Balance as of June 17, 2023 (a)	(13,381)		(34)		(2,371)		6		(15,780)
Other comprehensive income/(loss) before reclassifications (e)	19		(96)		(15)		3		(89)
Amounts reclassified from accumulated other comprehensive loss	—		81		5		—		86
Net other comprehensive income/(loss)	19		(15)		(10)		3		(3)
Tax amounts	(17)		4		2		—		(11)
Balance as of September 9, 2023 (a)	$	(13,379)	$	(45)	$	(2,379)	$	9	$	(15,794)

(a)Pension and retiree medical amounts are net of taxes of $1,184 million as of both December 31, 2022 and March 25, 2023, $1,187 million as of June 17, 2023 and $1,189 million as of September 9, 2023.

(b)Currency translation adjustment primarily reflects depreciation of the Egyptian pound and Russian ruble.

(c)Release of currency translation adjustment is in relation to the sale of a non-strategic brand and an investment within our AMESA division.

(d)Currency translation adjustment primarily reflects depreciation of the Russian ruble.

(e)Currency translation adjustment primarily reflects appreciation of the euro, Mexican peso and South African rand, partially offset by the depreciation of the Russian ruble.

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	Currency Translation Adjustment		Cash Flow Hedges		Pension and Retiree Medical		Other		Accumulated Other Comprehensive Loss Attributable to PepsiCo
Balance as of December 25, 2021 (a)	$	(12,309)	$	159	$	(2,750)	$	2	$	(14,898)
Other comprehensive (loss)/income before reclassifications (b)	(549)		200		(8)		—		(357)
Amounts reclassified from accumulated other comprehensive loss	—		(62)		25		—		(37)
Net other comprehensive (loss)/income	(549)		138		17		—		(394)
Tax amounts	(11)		(32)		(4)		(4)		(51)
Balance as of March 19, 2022 (a)	(12,869)		265		(2,737)		(2)		(15,343)
Other comprehensive income/(loss) before reclassifications (c)	1,298		(107)		(484)		5		712
Amounts reclassified from accumulated other comprehensive loss	—		(30)		161		—		131
Net other comprehensive income/(loss)	1,298		(137)		(323)		5		843
Tax amounts	(24)		35		73		—		84
Balance as of June 11, 2022 (a)	(11,595)		163		(2,987)		3		(14,416)
Other comprehensive (loss)/income before reclassifications (d)	(292)		(191)		50		2		(431)
Amounts reclassified from accumulated other comprehensive loss	—		44		90		—		134
Net other comprehensive (loss)/income	(292)		(147)		140		2		(297)
Tax amounts	(32)		34		(32)		—		(30)
Balance as of September 3, 2022 (a)	$	(11,919)	$	50	$	(2,879)	$	5	$	(14,743)

(a)Pension and retiree medical amounts are net of taxes of $1,283 million as of December 25, 2021, $1,279 million as of March 19, 2022, $1,352 million as of June 11, 2022 and $1,320 million as of September 3, 2022.

(b)Currency translation adjustment primarily reflects depreciation of the Russian ruble, partially offset by the appreciation of the South African rand, Brazilian real and Canadian dollar.

(c)Currency translation adjustment primarily reflects appreciation of the Russian ruble.

(d)Currency translation adjustment primarily reflects depreciation of the South African rand, Mexican peso and British pound sterling.

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The reclassifications from accumulated other comprehensive loss to the income statement are summarized as follows:


	12 Weeks Ended				36 Weeks Ended
	9/9/2023		9/3/2022		9/9/2023		9/3/2022		Affected Line Item in the Income Statement



Currency translation:
Divestitures	$	—	$	—	$	108	$	—	Selling, general and administrative expenses

Cash flow hedges:
Foreign exchange contracts	$	—	$	(5)	$	(3)	$	(9)	Net revenue
Foreign exchange contracts	26		6		44		(11)		Cost of sales
Interest rate derivatives	31		94		4		175		Selling, general and administrative expenses
Commodity contracts	23		(45)		61		(191)		Cost of sales
Commodity contracts	1		(6)		—		(12)		Selling, general and administrative expenses
Net losses/(gains) before tax	81		44		106		(48)
Tax amounts	(20)		(12)		(27)		5
Net losses/(gains) after tax	$	61	$	32	$	79	$	(43)

Pension and retiree medical items:
Amortization of prior service credits	$	(8)	$	(9)	$	(23)	$	(26)	Other pension and retiree medical benefits income
Amortization of net losses	13		40		38		114		Other pension and retiree medical benefits income
Settlement/curtailment losses	—		59		—		188		Other pension and retiree medical benefits income
Net losses before tax	5		90		15		276
Tax amounts	(1)		(19)		(3)		(60)
Net losses after tax	$	4	$	71	$	12	$	216






Total net losses reclassified, net of tax	$	65	$	103	$	199	$	173

Note 12 - Acquisitions and Divestitures

Juice Transaction

In the 12 weeks ended March 19, 2022, we sold our Tropicana, Naked and other select juice brands to PAI Partners for $3.5 billion in cash and a 39% noncontrolling interest in TBG, operating across North America and Europe. In the United States, PepsiCo acts as the exclusive distributor for TBG’s portfolio of brands for small-format and foodservice customers with chilled direct-store-delivery. We have significant influence over our investment in TBG and account for our investment under the equity method, recognizing our proportionate share of TBG’s earnings on our income statement (recorded in selling, general and administrative expenses).

As a result of this transaction, in the year ended December 31, 2022, we recorded a pre-tax gain of $3.3 billion ($2.9 billion after-tax or $2.08 per share) in our PBNA and Europe divisions, including $520 million related to the remeasurement of our 39% ownership in TBG at fair value using a combination of the transaction price, discounted cash flows and an option pricing model related to our

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liquidation preference in TBG. See Note 13 to our consolidated financial statements in our 2022 Form 10-K for further information.

In the 36 weeks ended September 3, 2022, we recorded a pre-tax gain of $3.3 billion ($2.9 billion after-tax or $2.07 per share) in our PBNA and Europe divisions.

In the 36 weeks ended September 9, 2023, we recognized impairment charges related to our TBG investment. See Note 9 for further information.

Acquisition and Divestiture-Related Charges

Acquisition and divestiture-related charges include merger and integration charges and costs associated with divestitures, primarily consulting, advisory and other professional fees.

A summary of our acquisition and divestiture-related charges is as follows:


	12 Weeks Ended				36 Weeks Ended
	9/9/2023		9/3/2022		9/9/2023		9/3/2022

PBNA	$	2	$	3	$	12	$	42
Europe (a)	—		—		(2)		13
AMESA	—		2		1		2

Corporate	9		—		9		6

Total (b)	11		5		20		63
Other pension and retiree medical benefits expense	—		—		—		6
Total acquisition and divestiture-related charges	$	11	$	5	$	20	$	69
After-tax amount	$	9	$	3	$	16	$	57
Impact on net income attributable to PepsiCo per common share	$	(0.01)	$	—	$	(0.01)	$	(0.04)

(a)Income amount represents adjustments for changes in estimates of previously recorded amounts.

(b)Recorded in selling, general and administrative expenses.

Note 13 - Supply Chain Financing Arrangements

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. As of September 9, 2023 and December 31, 2022, $1.8 billion and $1.7 billion, respectively, of our accounts payable are to suppliers participating in these financing arrangements.

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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. 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 2022 Form 10-K.

Total Marketplace Spending

We offer sales incentives and discounts through various programs to customers and consumers. Total 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, 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 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. In addition, certain advertising and marketing costs are also based on annual 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 structure 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 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

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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: the risks associated with the deadly conflict in Ukraine; future demand for PepsiCo’s products; damage to PepsiCo’s reputation or brand image; product recalls or other issues or concerns with respect to product quality and safety; PepsiCo’s ability to compete effectively; PepsiCo’s ability to attract, develop and maintain a highly skilled and diverse workforce or effectively manage changes in our 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 continued increased commodity, packaging, transportation, labor and other input costs; political or social 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; changes in economic conditions in the countries in which PepsiCo operates; future cyber incidents and other disruptions to our information systems; failure to successfully complete or manage strategic transactions; PepsiCo’s reliance on third-party service providers and enterprise-wide systems; climate change or measures to address climate change; strikes or work stoppages; failure to realize benefits from PepsiCo’s productivity initiatives; deterioration in estimates and underlying assumptions regarding future performance that can 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 adequately protect PepsiCo’s intellectual property rights or infringement on intellectual property rights of others; failure to comply with applicable laws and regulations; potential liabilities and costs from litigation, claims, legal or regulatory proceedings, inquiries or investigations; and other risks and uncertainties 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 2022 Form 10-K 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.

Risks Associated with Commodities and Our Supply Chain

During the 12 and 36 weeks ended September 9, 2023, we continued to experience significantly higher operating costs, including on transportation, labor and commodity (including energy) costs, which we expect to continue for the remainder of 2023. 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. A number of external factors, including the deadly conflict in Ukraine, the inflationary cost environment, adverse weather conditions, supply chain disruptions (including raw material shortages) and labor shortages, have impacted

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and may continue to impact transportation, labor and commodity availability 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 9 to our condensed consolidated financial statements in this Form 10-Q and Note 9 to our consolidated financial statements in our 2022 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, along with initiatives to meet our sustainability goals, could result in significant increased costs 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 12 weeks ended September 9, 2023, our financial results outside of North America reflect the months of June, July and August. In the 36 weeks ended September 9, 2023, our financial results outside of North America reflect the months of January through August. In the 36 weeks ended September 9, 2023, our operations outside of the United States generated 42% of our consolidated net revenue, with Mexico, Canada, Russia, China, the United Kingdom, Brazil and South Africa comprising approximately 24% of our consolidated net revenue. As a result, we are exposed to foreign exchange risk in the international markets in which our products are made, manufactured, distributed or sold. In the 12 weeks ended September 9, 2023, unfavorable foreign exchange reduced net revenue growth by 2 percentage points primarily due to declines in the Russian ruble and Egyptian pound, partially offset by an appreciation of the Mexican peso. In the 36 weeks ended September 9, 2023, unfavorable foreign exchange reduced net revenue growth by 2 percentage points primarily due to declines in the Egyptian pound, Russian ruble, South African rand and Canadian dollar, partially offset by an appreciation of the Mexican peso. 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, Mexico, the Middle East, Pakistan, Russia, 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 continue to monitor the economic, operating and political environment in these markets closely, including risks of additional impairments or write-offs, and to identify actions to potentially mitigate any unfavorable impacts on our future results.

See Notes 1 and 4 to our consolidated financial statements in our 2022 Form 10-K for a discussion of the Russia-Ukraine conflict charges, including impairment charges. Also see Note 1 to our condensed consolidated financial statements in this Form 10-Q for charges taken as a result of the Russia-Ukraine conflict in the 12 and 36 weeks ended September 3, 2022.

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See Note 9 to our condensed consolidated financial statements in this Form 10-Q for the fair values of our financial instruments as of September 9, 2023 and December 31, 2022 and Note 9 to our consolidated financial statements in our 2022 Form 10-K for a discussion of these items.

Risks Associated with the Deadly Conflict in Ukraine

In addition to the risks associated with international operations discussed above, we continue to face risks associated with the deadly conflict in Ukraine. The conflict has continued to result in worldwide geopolitical and macroeconomic uncertainty and has impacted our operations in Ukraine. We have suspended sales to our customers of Pepsi-Cola and certain of our other global beverage brands, our discretionary capital investments and advertising and promotional activities in Russia, which has negatively impacted and could continue to negatively impact our business. We 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 risks, heightened risks to employee safety, business disruptions (including labor shortages), significant volatility of the Russian ruble, limitations on access to credit markets and other corporate banking services, including working capital facilities, reduced availability and increased costs for transportation, energy, packaging, raw materials and other input costs, environmental, health and safety risks related to securing and maintaining facilities, additional sanctions, export controls and other legislation or regulations (including restrictions on the transfer of funds to and from Russia). The ongoing conflict could result in the temporary or permanent loss of assets or additional impairment charges. We cannot predict how and the extent to which the conflict will continue to affect our employees, 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. See Notes 1 and 4 to our consolidated financial statements in our 2022 Form 10-K, for a discussion of the Russia-Ukraine conflict charges, including impairment charges. Also see Note 1 to our condensed consolidated financial statements in this Form 10-Q for charges taken as a result of the Russia-Ukraine conflict in the 12 and 36 weeks ended September 3, 2022.

The extent of the impact of these tragic events on our business remains uncertain and will continue to depend on numerous evolving factors that we are not able to accurately predict, including the duration and scope of the conflict, regional instability and ongoing and additional financial and economic sanctions, export controls and other legislation imposed by governments. We will continue to monitor and assess the situation as circumstances evolve and to identify actions to potentially mitigate any unfavorable impacts on our future results.

Imposition of Taxes and Regulations on our Products

Certain 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, distribution or sale 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 or their packaging or the recyclability or recoverability of our packaging. These taxes and regulations vary in scope and 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). Further, some regulations apply to all products using certain types of packaging (e.g., plastic), while others are designed to increase the sustainability of packaging, encourage waste reduction and increased recycling rates or facilitate the waste management process or restrict the sale of products in certain packaging.

We sell a wide variety of beverages and convenient foods in more than 200 countries and territories and the profile of the products we sell, the amount of revenue attributable to such products and the type of

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packaging used vary by jurisdiction. Because of this, we cannot predict the scope or form potential taxes, regulations or other 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 alternative measures with respect to the imposition, form and scope of any such taxes, regulations or limitations.

OECD Global Minimum Tax

Numerous countries have agreed to a statement in support of the Organization for Economic Co-operation and Development (OECD) model rules that propose a global minimum tax rate of 15% and European Union member states have agreed to implement the global minimum tax. Certain countries, including European Union member states, have enacted or are expected to enact legislation to be effective as early as 2024, with widespread implementation of a global minimum tax expected by 2025. As the legislation becomes effective in countries in which we do business, our taxes could increase and negatively impact our provision for income taxes. We will continue to monitor pending legislation and implementation by individual countries and evaluate the potential impact on our business in future periods.

Retail Landscape

Our industry continues to be affected by disruption of the retail landscape, including the continued 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. 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 direct-to-consumer business, and distribute our products effectively through all existing and emerging channels of trade and potentially mitigate any unfavorable impacts on our future results.

Cautionary statements included above and in “Item 1A. Risk Factors” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Our Business Risks” in our 2022 Form 10-K should be considered when evaluating our trends and future results.

Results of Operations – Consolidated Review

Consolidated Results

Volume

Physical or unit volume is one of the key metrics management uses internally to make operating and strategic decisions, including the preparation of our annual operating plan and the evaluation of our business performance. We believe volume provides additional information to facilitate the comparison of our historical operating performance and underlying trends and provides additional transparency on how we evaluate our business because it measures demand for our products at the consumer level. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Our Financial Results – Volume” included in our 2022 Form 10-K for further information on volume. Unit volume growth adjusts for the impacts of acquisitions and divestitures. Acquisitions and divestitures, when used in this report, reflect mergers and acquisitions activity, as well as divestitures and other structural changes, including changes in ownership or control in consolidated subsidiaries and nonconsolidated equity investees. Further, unit volume growth excludes the impact of an additional week of results every five or six years (53rd reporting week), where applicable, including in our fourth quarter 2022 financial results.

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We report all of our international operations on a monthly calendar basis. The 12 weeks ended September 9, 2023 and September 3, 2022 include volume outside of North America for the months of June, July and August. The 36 weeks ended September 9, 2023 and September 3, 2022 include volume outside of North America for the months of January through August.

Consolidated Net Revenue and Operating Profit


	12 Weeks Ended								36 Weeks Ended
	9/9/2023			9/3/2022			Change		9/9/2023			9/3/2022			Change
Net revenue	$	23,453		$	21,971		7	%	$	63,621		$	58,396		9	%
Operating profit	$	4,015		$	3,353		20	%	$	10,303		$	10,697		(4)	%
Operating margin	17.1		%	15.3		%	1.8		16.2		%	18.3		%	(2.1)

See “Results of Operations – Division Review” for a tabular presentation and discussion of key drivers of net revenue.

12 Weeks

Operating profit grew 20% and operating margin improved 1.8 percentage points. Operating profit growth was primarily driven by effective net pricing and productivity savings. These impacts were partially offset by certain operating cost increases, a 17-percentage-point impact of higher commodity costs, a decrease in organic volume and higher advertising and marketing expenses. Corporate unallocated expenses reflect an 8-percentage-point favorable impact of net mark-to-market gains on commodity derivatives, partially offset by an increase in expenses related to our ongoing business initiatives. The operating margin improvement primarily reflects the favorable impact of productivity savings and net mark-to-market gains on commodity derivatives.

36 Weeks

Operating profit decreased 4% and operating margin declined 2.1 percentage points. Operating profit performance was primarily driven by certain operating cost increases, a 34-percentage-point unfavorable impact of the prior-year gain associated with the Juice Transaction, a 23-percentage-point impact of higher commodity costs, a decrease in organic volume and higher advertising and marketing expenses. These impacts were partially offset by effective net pricing, productivity savings, a 15-percentage-point favorable impact of the charges associated with the Russia-Ukraine conflict compared to the prior year, and a 5-percentage-point favorable impact of the brand portfolio impairment charges compared to the prior year. Corporate unallocated expenses reflect an increase in expenses related to our ongoing business initiatives. The operating margin decline primarily reflects the unfavorable impact of the prior-year gain associated with the Juice Transaction, partially offset by the favorable impact of the charges associated with the Russia-Ukraine conflict and the brand portfolio impairment charges compared to the prior year.

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Other Consolidated Results


	12 Weeks Ended									36 Weeks Ended
	9/9/2023			9/3/2022			Change			9/9/2023			9/3/2022			Change
Other pension and retiree medical benefits income	$	62		$	36		$	26		$	183		$	168		$	15
Net interest expense and other	$	(201)		$	(190)		$	(11)		$	(602)		$	(666)		$	64
Tax rate	19.6		%	14.9		%				20.8		%	17.2		%
Net income attributable to PepsiCo (a)	$	3,092		$	2,702		14		%	$	7,772		$	8,392		(7)		%
Net income attributable to PepsiCo per common share – diluted (a)	$	2.24		$	1.95		15		%	$	5.62		$	6.04		(7)		%

(a)For the 36 weeks ended September 9, 2023, the gain associated with the Juice Transaction in the prior year negatively impacted both the net income attributable to PepsiCo performance and net income attributable to PepsiCo per common share performance, partially offset by the impairment of intangible assets recorded in the prior year. See Notes 4 and 12 to our condensed consolidated financial statements for further information.

12 Weeks

Other pension and retiree medical benefits income increased $26 million, primarily reflecting a prior-year settlement charge of $59 million. In addition, the increase in other pension and retiree medical benefits income reflects lower amortization of net losses on pension obligations and a higher rate of expected return on plan assets, partially offset by higher interest cost and recognition of fixed income losses on plan assets, all driven primarily by higher interest rates.

Net interest expense and other increased $11 million, primarily due to higher interest rates on debt and higher average debt balances, partially offset by higher interest rates on average cash balances and higher average cash balances.

The reported tax rate increased 4.7 percentage points, primarily reflecting the prior-year impact of an adjustment to reserves for uncertain tax positions as a result of our agreement with the IRS to settle one of the issues assessed in the 2014 to 2016 audit.

36 Weeks

Other pension and retiree medical benefits income increased $15 million, primarily due to a prior-year settlement charge of $190 million. In addition, the increase in other pension and retiree medical benefits income reflects lower amortization of net losses on pension obligations and a higher rate of expected return on plan assets, partially offset by higher interest cost and recognition of fixed income losses on plan assets, all driven primarily by higher interest rates.

Net interest expense and other decreased $64 million, primarily due to higher interest rates on average cash balances and gains on the market value of investments used to economically hedge a portion of our deferred compensation liability, partially offset by higher interest rates on debt and higher average debt balances.

The reported tax rate increased 3.6 percentage points, primarily reflecting the prior-year impact of the Juice Transaction as well as an adjustment to reserves for uncertain tax positions as a result of our agreement with the IRS to settle one of the issues assessed in the 2014 to 2016 audit.

Results of Operations – Division Review

While our financial results in North America are reported on a 12-week basis, all of our international operations are reported on a monthly calendar basis for which the months of June, July and August are reflected in our results for the 12 weeks ended September 9, 2023 and September 3, 2022, and the months January through August are reflected in our results for the 36 weeks ended September 9, 2023 and September 3, 2022.

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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.

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.”


	12 Weeks Ended 9/9/2023
			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	7	%	—	—	7	%	(0.5)	8
QFNA	5	%	—	—	5	%	1	4
PBNA	8	%	—	(2)	6	%	(6)	12
LatAm	21	%	(13)	1	9	%	(5)	14
Europe	2	%	10	1	13	%	—	13
AMESA	(6)	%	22	1	17	%	(2)	18
APAC	4	%	5	—	9	%	1	7
Total	7	%	2	—	9	%	(2.5)	11


	36 Weeks Ended 9/9/2023
			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	12	%	—	—	12	%		—	12
QFNA	5	%	1	—	6	%		(3)	9
PBNA	9	%	—	—	9	%		(4.5)	14
LatAm	20	%	(9)	1	12	%		(4)	17
Europe	7	%	7	2	15	%		(3)	18
AMESA	(5)	%	25	0.5	20	%		(3)	23
APAC	1	%	5	—	7	%		—	7
Total	9	%	2	—	12	%		(3)	14

(a)Amounts may not sum due to rounding.

(b)Excludes the impact of acquisitions and divestitures. In certain instances, the impact of organic volume on net revenue growth differs from the unit volume change 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.”

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Operating Profit and Operating Profit Adjusted for Items Affecting Comparability


	12 Weeks Ended 9/9/2023
			Items Affecting Comparability(a)
	Reported, GAAP Measure		Mark-to-market net impact		Restructuring and impairment charges		Acquisition and divestiture-related charges		Impairment and other charges/credits		Core, Non-GAAP Measure
FLNA	$	1,669	$	—	$	6	$	—	$	—	$	1,675
QFNA	135		—		—		—		—		135
PBNA	970		—		8		2		—		980
LatAm	593		—		8		—		—		601
Europe	659		—		44		—		(1)		702
AMESA	238		—		5		—		6		249
APAC	239		—		2		—		—		241
Corporate unallocated expenses	(488)		(85)		10		9		—		(554)
Total	$	4,015	$	(85)	$	83	$	11	$	5	$	4,029


	12 Weeks Ended 9/3/2022
			Items Affecting Comparability(a)
	Reported, GAAP Measure		Mark-to-market net impact		Restructuring and impairment charges		Acquisition and divestiture-related charges		Gain associated with the Juice Transaction		Impairment and other charges/credits(b)		Core, Non-GAAP Measure
FLNA	$	1,588	$	—	$	4	$	—	$	—	$	—	$	1,592
QFNA	122		—		1		—		—		—		123
PBNA	784		—		4		3		8		9		808
LatAm	463		—		3		—		—		—		466
Europe	564		—		21		—		6		(3)		588
AMESA	268		—		—		2		—		—		270
APAC	199		—		4		—		—		—		203
Corporate unallocated expenses	(635)		166		14		—		—		—		(455)
Total	$	3,353	$	166	$	51	$	5	$	14	$	6	$	3,595


	36 Weeks Ended 9/9/2023
			Items Affecting Comparability(a)
	Reported, GAAP Measure		Mark-to-market net impact		Restructuring and impairment charges		Acquisition and divestiture-related charges(b)		Impairment and other charges/credits(b)		Core, Non-GAAP Measure
FLNA	$	4,915	$	—	$	19	$	—	$	—	$	4,934
QFNA	452		—		—		—		—		452
PBNA	2,176		—		18		12		113		2,319
LatAm	1,549		—		19		—		2		1,570
Europe	1,206		—		185		(2)		(6)		1,383
AMESA	656		—		10		1		(7)		660
APAC	689		—		7		—		—		696
Corporate unallocated expenses	(1,340)		(23)		30		9				(1,324)
Total	$	10,303	$	(23)	$	288	$	20	$	102	$	10,690

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	36 Weeks Ended 9/3/2022
			Items Affecting Comparability(a)
	Reported, GAAP Measure		Mark-to-market net impact		Restructuring and impairment charges		Acquisition and divestiture-related charges		Gain associated with the Juice Transaction		Impairment and other charges/credits		Core, Non-GAAP Measure
FLNA	$	4,332	$	—	$	10	$	—	$	—	$	—	$	4,342
QFNA	416		—		1		—		—		—		417
PBNA	4,869		—		9		42		(3,029)		150		2,041
LatAm	1,206		—		17		—		—		83		1,306
Europe	(369)		—		40		13		(292)		1,644		1,036
AMESA	738		—		5		2		—		—		745
APAC	620		—		8		—		—		—		628
Corporate unallocated expenses	(1,115)		(44)		33		6		—		—		(1,120)
Total	$	10,697	$	(44)	$	123	$	63	$	(3,321)	$	1,877	$	9,395

(a)See “Items Affecting Comparability” for further information.

(b)Income amounts represent adjustments for changes in estimates of previously recorded amounts.

Operating Profit Growth and Operating Profit Growth Adjusted for Items Affecting Comparability on a Constant Currency Basis


	12 Weeks Ended 9/9/2023
			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	Impairment and other charges/credits	Core % Change, Non-GAAP Measure(b)		Foreign exchange translation	Core Constant Currency % Change, Non-GAAP Measure(b)
FLNA	5	%	—	—	—	—	—	5	%	—	5.5	%
QFNA	11	%	—	—	—	—	—	10	%	—	11	%
PBNA	24	%	—	1	—	(1.5)	(2)	21	%	—	22	%
LatAm	28	%	—	1	—	—	—	29	%	(17)	12	%
Europe	17	%	—	3	—	(1)	—	19	%	15	34	%
AMESA	(11)	%	—	1	—	—	2	(8)	%	22	13	%
APAC	20	%	—	(2)	—	—	—	18	%	4	23	%
Corporate unallocated expenses	(23)	%	46	1	(2)	—	—	22	%	—	22	%
Total	20	%	(8)	1	—	(0.5)	—	12	%	2	14	%


	36 Weeks Ended 9/9/2023
			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	Impairment and other charges/credits	Core % Change, Non-GAAP Measure(b)		Foreign exchange translation	Core Constant Currency % Change, Non-GAAP Measure(b)
FLNA	13	%	—	—	—	—	—	14	%	—	14	%
QFNA	9	%	—	—	—	—	—	8	%	—	9	%
PBNA	(55)	%	—	—	(1)	70	(1)	14	%	0.5	14	%
LatAm	28	%	—	—	—	—	(8)	20	%	(11)	9	%
Europe	n/m		—	n/m	n/m	n/m	n/m	33	%	13	46	%
AMESA	(11)	%	—	—	—	—	(1)	(11)	%	22	10	%
APAC	11	%	—	—	—	—	—	11	%	5	16	%
Corporate unallocated expenses	20	%	(2)	0.5	—	—	—	18	%	—	18	%
Total	(4)	%	—	2	—	34	(18)	14	%	2	16	%

(a)See “Items Affecting Comparability” for further information.

(b)Amounts may not sum due to rounding.

n/m - Not meaningful due to the impact of impairment and other charges in 2022.

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FLNA

12 Weeks

Net revenue grew 7%, primarily driven by effective net pricing.

Unit volume decreased slightly, primarily driven by a mid-single-digit decline in trademark Lay’s and a high-single-digit decline in dips, partially offset by mid-single-digit growth in trademark Doritos and trademark Cheetos.

Operating profit increased 5%, primarily reflecting the effective net pricing and productivity savings. These impacts were partially offset by certain operating cost increases, including strategic initiatives, and a 6-percentage-point impact of higher commodity costs, primarily seasoning ingredients, cooking oil, and potatoes.

36 Weeks

Net revenue grew 12%, primarily driven by effective net pricing.

Unit volume increased slightly, primarily driven by mid-single-digit growth in trademark Doritos and double-digit growth in Sunchips, partially offset by a high-single-digit decline in dips and a low-single-digit decline in trademark Lay’s.

Operating profit increased 13%, primarily reflecting the effective net pricing and productivity savings. These impacts were partially offset by certain operating cost increases, including strategic initiatives, an 11-percentage-point impact of higher commodity costs, primarily cooking oil, potatoes and seasoning ingredients, and higher advertising and marketing expenses.

QFNA

12 Weeks

Net revenue grew 5%, primarily driven by effective net pricing and an increase in organic volume.

Unit volume grew 1%, primarily reflecting high-single-digit growth in pancake syrup and mix and bars and low-single-digit growth in ready-to-eat cereals. This was partially offset by a low-single-digit decline in oatmeal and a mid-single-digit decline in rice/pasta sides.

Operating profit grew 11%, primarily reflecting the net revenue growth and productivity savings, partially offset by certain operating cost increases and a 9-percentage-point impact of higher commodity costs.

36 Weeks

Net revenue grew 5%, primarily driven by effective net pricing, partially offset by a decrease in organic volume.

Unit volume declined 3%, primarily reflecting a high-single-digit decline in oatmeal, a double-digit decline in rice/pasta sides and a low-single-digit decline in ready-to-eat cereals. This was partially offset by mid-single-digit growth in pancake syrup and mix.

Operating profit grew 9%, primarily reflecting the effective net pricing and productivity savings, partially offset by certain operating cost increases, a 13-percentage-point impact of higher commodity costs, primarily grains, packaging materials and other ingredients, higher advertising and marketing expenses and the decrease in organic volume.

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PBNA

12 Weeks

Net revenue increased 8%, primarily driven by effective net pricing, partially offset by a decrease in organic volume.

Unit volume decreased 6%, driven by an 8% decrease in non-carbonated beverage (NCB) volume and a 5% decrease in carbonated soft drink (CSD) volume. The NCB volume decrease primarily reflected a double-digit decrease in our overall water portfolio, a mid-single-digit decrease in Gatorade sports drinks and a high-single-digit decrease in our Lipton ready-to-drink tea portfolio.

Operating profit increased 24%, primarily driven by the effective net pricing, productivity savings and higher income from joint ventures. These impacts were partially offset by the decrease in organic volume, certain operating cost increases, a 13-percentage-point impact of higher commodity costs, primarily sweeteners and energy, and higher advertising and marketing expenses.

36 Weeks

Net revenue increased 9%, primarily driven by effective net pricing, partially offset by a decrease in organic volume.

Unit volume decreased 4.5%, driven by a 6% decrease in NCB volume and a 3% decrease in CSD volume. The NCB volume decrease primarily reflected high-single-digit decreases in Gatorade sports drinks, our overall water portfolio and our Lipton ready-to-drink tea portfolio.

Operating profit decreased 55%, primarily reflecting the unfavorable impact of a prior-year gain of $3.0 billion associated with the Juice Transaction and the current-year impairment charges of $113 million related to our TBG investment, partially offset by the prior-year impairment and other related charges of $150 million due to our decision to terminate the agreement with Vital to distribute Bang Energy drinks. Operating profit also decreased due to certain operating cost increases, the decrease in organic volume, a 17-percentage-point impact of higher commodity costs, primarily sweeteners and energy, and higher advertising and marketing expenses. Additionally, operating profit performance reflects a 7-percentage-point unfavorable impact of a prior-year gain on an asset sale and a 3-percentage-point impact of net unfavorable insurance adjustments. These impacts were partially offset by the effective net pricing, productivity savings and higher income from joint ventures.

LatAm

12 Weeks

Net revenue increased 21%, primarily reflecting effective net pricing and a 13-percentage-point impact of favorable foreign exchange, partially offset by a net organic volume decline.

Convenient foods unit volume declined 5%, primarily reflecting a double-digit decline in Colombia. Additionally, Brazil experienced a low-single-digit decline and Mexico experienced a mid-single-digit decline.

Beverage unit volume grew 5%, reflecting double-digit growth in Guatemala and Colombia, partially offset by a high-single-digit decline in Argentina. Additionally, Brazil experienced low-single-digit growth and Mexico experienced mid-single-digit growth.

Operating profit increased 28%, primarily reflecting the effective net pricing and productivity savings. These impacts were partially offset by certain operating cost increases, the net organic volume decline, an 11-percentage-point impact of higher commodity costs, primarily potatoes and other ingredients, and higher advertising and marketing expenses. Favorable foreign exchange contributed 17 percentage points to operating profit growth.

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36 Weeks

Net revenue increased 20%, primarily reflecting effective net pricing and a 9-percentage-point impact of favorable foreign exchange, partially offset by a net organic volume decline.

Convenient foods unit volume declined 3%, primarily reflecting a double-digit decline in Colombia. Additionally, Mexico and Brazil each experienced low-single-digit declines.

Beverage unit volume increased 4%, primarily reflecting double-digit growth in Peru, high-single-digit growth in Colombia and Guatemala and mid-single-digit growth in Mexico, partially offset by a mid-single-digit decline in Argentina. Additionally, Brazil and Chile each experienced low-single-digit growth.

Operating profit increased 28%, primarily reflecting the effective net pricing, productivity savings and an 8-percentage-point favorable impact of impairment and other charges associated with the sale of certain non-strategic brands compared to the prior year. These impacts were partially offset by certain operating cost increases, a 14-percentage-point impact of higher commodity costs, primarily potatoes, grains and other ingredients, the net organic volume decline, higher advertising and marketing expenses and a 4-percentage-point unfavorable impact of certain indirect tax credits in Brazil compared to the prior year. Favorable foreign exchange contributed 11 percentage points to operating profit growth.

Europe

12 Weeks

Net revenue increased 2%, primarily reflecting effective net pricing, partially offset by a 10-percentage-point impact of unfavorable foreign exchange.

Convenient foods unit volume grew 2%, primarily reflecting double-digit growth in Russia and high-single-digit growth in Turkey, partially offset by a mid-single-digit decline in the United Kingdom, a double-digit decline in Spain and a low-single-digit decline in the Netherlands. Additionally, France experienced low-single-digit growth.

Beverage unit volume was even, primarily reflecting double-digit growth in Turkey and high-single-digit growth in Russia, partially offset by a double-digit decline in Germany, a mid-single-digit decline in France and a low-single-digit decline in the United Kingdom.

Operating profit increased 17%, primarily reflecting the effective net pricing, productivity savings, an 8-percentage-point impact from an insurance recovery and a 6-percentage-point favorable impact from the write-down of certain inventory items and related charges in the prior year. These impacts were partially offset by certain operating cost increases, a 32-percentage-point impact of higher commodity costs, primarily sweeteners, potatoes and other ingredients, higher advertising and marketing expenses and a 5-percentage-point impact of adjustments of certain accruals in the United Kingdom in the prior year. Unfavorable foreign exchange reduced operating profit growth by 15 percentage points.

36 Weeks

Net revenue increased 7%, primarily reflecting effective net pricing, partially offset by a 7-percentage-point impact of unfavorable foreign exchange and a net organic volume decline.

Convenient foods unit volume grew slightly, primarily reflecting high-single-digit growth in Russia and double-digit growth in Turkey, partially offset by a high-single-digit decline in the United Kingdom, a double-digit decline in Spain and low-single-digit declines in France and the Netherlands.

Beverage unit volume declined 3%, primarily reflecting a double-digit decline in Germany, a mid-single-digit decline in Russia and a high-single-digit decline in France, partially offset by double-digit growth in Turkey. Additionally, the United Kingdom experienced a low-single-digit decline.

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Operating profit improvement primarily reflects the favorable impact of prior-year charges associated with the Russia-Ukraine conflict and impairment of intangible assets related to the repositioning or discontinuation of certain juice and dairy brands in Russia (brand portfolio impairment charges), the effective net pricing, productivity savings, a 5-percentage-point favorable impact from an insurance recovery and a 4-percentage-point favorable impact of higher payments to employees in the prior year for a change in pension benefits. These impacts were partially offset by the unfavorable impact of the prior-year gain associated with the Juice Transaction, certain operating cost increases, higher restructuring and impairment charges and a 52-percentage-point impact of higher commodity costs, primarily sweeteners, potatoes and other ingredients. Additionally, operating profit improvement was reduced by higher advertising and marketing expenses and the net organic volume decline. Unfavorable foreign exchange reduced operating profit improvement by 13 percentage points.

AMESA

12 Weeks

Net revenue decreased 6%, primarily reflecting a 22-percentage-point impact of unfavorable foreign exchange, driven primarily by the weakening of the Egyptian pound, and a net organic volume decline, partially offset by effective net pricing.

Convenient foods unit volume declined 3%, primarily reflecting mid-single-digit declines in South Africa and India, partially offset by low-single-digit growth in the Middle East and Pakistan.

Beverage unit volume grew 3%, primarily reflecting double-digit growth in India and mid-single-digit growth in the Middle East, partially offset by a high-single-digit decline in Pakistan and a low-single-digit decline in Nigeria.

Operating profit decreased 11%, primarily reflecting a 67-percentage-point impact of higher commodity costs, primarily packaging materials, sweeteners and grains, largely driven by transaction-related foreign exchange. Operating profit performance was also negatively impacted by certain operating cost increases, the net organic volume decline and higher advertising and marketing expenses. These impacts were partially offset by the effective net pricing, productivity savings and a 4-percentage-point favorable impact of a remeasurement gain on one of our investments. Unfavorable foreign exchange negatively impacted operating profit performance by 22 percentage points, primarily due to weakening of the Egyptian pound.

36 Weeks

Net revenue decreased 5%, primarily reflecting a 25-percentage-point impact of unfavorable foreign exchange, driven primarily by the weakening of the Egyptian pound, and a net organic volume decline, partially offset by effective net pricing.

Convenient foods unit volume declined 5%, primarily reflecting a double-digit decline in South Africa, partially offset by double-digit growth in the Middle East and low-single-digit growth in Pakistan. Additionally, India experienced a mid-single-digit decline.

Beverage unit volume grew 2%, primarily reflecting double-digit growth in India and mid-single-digit growth in the Middle East, partially offset by a double-digit decline in Pakistan and a low-single-digit decline in Nigeria.

Operating profit decreased 11%, primarily reflecting a 69-percentage-point impact of higher commodity costs, primarily packaging materials, grains and cooking oil, largely driven by transaction-related foreign exchange. Operating profit performance was also negatively impacted by certain operating cost increases and higher advertising and marketing expenses. These impacts were partially offset by the effective net pricing and productivity savings. Unfavorable foreign exchange negatively impacted operating profit performance by 22 percentage points, primarily due to weakening of the Egyptian pound.

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APAC

12 Weeks

Net revenue increased 4%, primarily reflecting effective net pricing and net organic volume growth. Unfavorable foreign exchange reduced net revenue growth by 5 percentage points.

Convenient foods unit volume declined 1%, primarily reflecting a high-single-digit decline in Thailand and a mid-single-digit decline in Australia, partially offset by low-single-digit growth in China.

Beverage unit volume grew 1%, primarily reflecting low-single-digit growth in China and mid-single-digit growth in Thailand, partially offset by a high-single-digit decline in the Philippines and a mid-single-digit decline in Vietnam.

Operating profit increased 20%, primarily reflecting the net revenue growth, productivity savings and a 3-percentage-point impact of lower commodity costs. These impacts were partially offset by certain operating cost increases and higher advertising and marketing expenses. Unfavorable foreign exchange reduced operating profit growth by 4 percentage points.

36 Weeks

Net revenue increased 1%, primarily reflecting effective net pricing. Unfavorable foreign exchange reduced net revenue growth by 5 percentage points.

Convenient foods unit volume declined slightly, primarily reflecting a double-digit decline in Thailand and a mid-single-digit decline in Australia, partially offset by mid-single-digit growth in China.

Beverage unit volume grew 3%, primarily reflecting mid-single-digit growth in China and Vietnam and high-single-digit growth in Thailand, partially offset by a high-single-digit decline in the Philippines.

Operating profit increased 11%, 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 a 6-percentage-point impact of higher commodity costs. Unfavorable foreign exchange reduced operating profit growth by 5 percentage points.

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 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); charges related to restructuring plans; charges associated with acquisitions and divestitures; 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 the enactment of new laws, rules or regulations, such as tax law changes; amounts related to the resolution of tax positions; tax benefits related to reorganizations of our operations; debt redemptions, cash tender or exchange offers; and remeasurements of net monetary assets. See below

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and “Items Affecting Comparability” for a description of adjustments to our 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 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 contained in this Form 10-Q are discussed below:

Cost of sales, gross profit, selling, general and administrative expenses, gain associated with the Juice Transaction, impairment of intangible assets, other pension and retiree medical benefits income, provision for income taxes, net income attributable to noncontrolling interests and net income attributable to PepsiCo, each adjusted for items affecting comparability, operating profit and net income attributable to PepsiCo per common share – diluted, each adjusted for items affecting comparability and the corresponding constant currency growth rates

These measures exclude the net impact of mark-to-market gains and losses on centrally managed commodity derivatives that do not qualify for hedge accounting, restructuring and impairment charges related to our 2019 Productivity Plan, charges associated with our acquisitions and divestitures, the gain associated with the Juice Transaction, impairment and other charges/credits comprised of Russia-Ukraine conflict charges, brand portfolio impairment charges and other impairment charges, and the impact of settlement and curtailment gains and losses related to pension and retiree medical plans (see “Items Affecting Comparability” for a detailed description of each of these items). We also evaluate performance on operating profit and net income attributable to PepsiCo per common share – diluted, each adjusted for items affecting comparability on a constant currency basis, which measure 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-year U.S. dollar results by the current-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 or that we believe impact comparability with the prior year.

Organic revenue growth

We define organic revenue growth as a measure that adjusts for the impacts of foreign exchange translation, acquisitions and divestitures and where applicable, the impact of the 53rd reporting week, including in our fourth quarter 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 “Net Revenue and Organic Revenue Growth” in “Results of Operations – Division Review” for further information.

Free cash flow

We define free cash flow as net cash from 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

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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” 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 9/9/2023
	Cost of sales		Gross profit		Selling, general and administrative expenses		Impairment of intangible assets		Operating profit		Provision for income taxes(a)		Net income attributable to PepsiCo
Reported, GAAP Measure	$	10,675	$	12,778	$	8,757	$	6	$	4,015	$	760	$	3,092
Items Affecting Comparability
Mark-to-market net impact	16		(16)		69		—		(85)		(21)		(64)
Restructuring and impairment charges	(4)		4		(79)		—		83		17		66
Acquisition and divestiture-related charges	—		—		(11)		—		11		2		9



Impairment and other charges/credits	—		—		1		(6)		5		1		4



Core, Non-GAAP Measure	$	10,687	$	12,766	$	8,737	$	—	$	4,029	$	759	$	3,107


	12 Weeks Ended 9/3/2022
	Cost of sales		Gross profit		Selling, general and administrative expenses		Gain associated with the Juice Transaction		Impairment of intangible assets		Operating profit		Other pension and retiree medical benefits income		Provision for income taxes(a)		Net income attributable to PepsiCo
Reported, GAAP Measure	$	10,308	$	11,663	$	8,295	$	14	$	1	$	3,353	$	36	$	475	$	2,702
Items Affecting Comparability
Mark-to-market net impact	(54)		54		(112)		—		—		166		—		40		126
Restructuring and impairment charges	(1)		1		(50)		—		—		51		—		11		40
Acquisition and divestiture-related charges	—		—		(5)		—		—		5		—		2		3
Gain associated with the Juice Transaction	—		—		—		(14)		—		14		—		3		11


Impairment and other charges/credits	(11)		11		6		—		(1)		6		—		3		3
Pension and retiree medical-related impact	—		—		—		—		—		—		59		13		46
Tax benefit related to the IRS audit	—		—		—		—		—		—		—		284		(284)
Tax expense related to the TCJ Act	—		—		—		—		—		—		—		(86)		86
Core, Non-GAAP Measure	$	10,242	$	11,729	$	8,134	$	—	$	—	$	3,595	$	95	$	745	$	2,733

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	36 Weeks Ended 9/9/2023
	Cost of sales		Gross profit		Selling, general and administrative expenses		Impairment of intangible assets		Operating profit		Other pension and retiree medical benefits income/(expense)		Provision for income taxes(a)		Net income attributable to noncontrolling interests		Net income attributable to PepsiCo
Reported, GAAP Measure	$	28,784	$	34,837	$	24,528	$	6	$	10,303	$	183	$	2,053	$	59	$	7,772
Items Affecting Comparability
Mark-to-market net impact	3		(3)		20		—		(23)		—		(6)		—		(17)
Restructuring and impairment charges	(10)		10		(278)		—		288		(1)		60		1		226
Acquisition and divestiture-related charges	—		—		(20)		—		20		—		4		—		16

Impairment and other charges/credits	5		(5)		(101)		(6)		102		—		29		—		73




Core, Non-GAAP Measure	$	28,782	$	34,839	$	24,149	$	—	$	10,690	$	182	$	2,140	$	60	$	8,070


	36 Weeks Ended 9/3/2022
	Cost of sales		Gross profit		Selling, general and administrative expenses		Gain associated with the Juice Transaction		Impairment of intangible assets		Operating profit		Other pension and retiree medical benefits income		Provision for income taxes(a)		Net income attributable to noncontrolling interests		Net income attributable to PepsiCo
Reported, GAAP Measure	$	27,156	$	31,240	$	22,262	$	(3,321)	$	1,602	$	10,697	$	168	$	1,756	$	51	$	8,392
Items Affecting Comparability
Mark-to-market net impact	1		(1)		43		—		—		(44)		—		(11)		—		(33)
Restructuring and impairment charges	(6)		6		(117)		—		—		123		3		25		1		100
Acquisition and divestiture-related charges	—		—		(63)		—		—		63		6		12		—		57
Gain associated with the Juice Transaction	—		—		—		3,321		—		(3,321)		—		(452)		—		(2,869)
Impairment and other charges/credits	(152)		152		(123)		—		(1,602)		1,877		—		350		—		1,527


Pension and retiree medical-related impact	—		—		—		—		—		—		174		39		—		135
Tax benefit related to the IRS audit	—		—		—		—		—		—		—		284		—		(284)
Tax expense related to the TCJ Act	—		—		—		—		—		—		—		(86)		—		86
Core, Non-GAAP Measure	$	26,999	$	31,397	$	22,002	$	—	$	—	$	9,395	$	351	$	1,917	$	52	$	7,111

(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.

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	12 Weeks Ended							36 Weeks Ended
	9/9/2023		9/3/2022			Change		9/9/2023		9/3/2022		Change
Net income attributable to PepsiCo per common share – diluted, GAAP measure	$	2.24	$	1.95		15	%	$	5.62	$	6.04	(7)	%
Mark-to-market net impact	(0.05)		0.09					(0.01)		(0.02)
Restructuring and impairment charges	0.05		0.03					0.16		0.07
Acquisition and divestiture-related charges	0.01		—					0.01		0.04
Gain associated with the Juice Transaction	—		0.01					—		(2.07)
Impairment and other charges/credits	—		0.01					0.05		1.10

Pension and retiree medical-related impact	—		0.03					—		0.10
Tax benefit related to the IRS audit	—		(0.20)					—		(0.20)
Tax expense related to the TCJ Act	—		0.06					—		0.06

Core net income attributable to PepsiCo per common share – diluted, non-GAAP measure	$	2.25	$	1.97	(a)	14	%	$	5.83	$	5.12	14	%
Impact of foreign exchange translation						2						2
Growth in core net income attributable to PepsiCo per common share – diluted, on a constant currency basis, non-GAAP measure						16	%					16	%

(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, energy and 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

2019 Multi-Year Productivity Plan

The 2019 Productivity Plan, publicly announced on February 15, 2019, will leverage new technology and business models to further simplify, harmonize and automate processes; re-engineer our go-to-market and information systems, including deploying the right automation for each market; and simplify our organization and optimize our manufacturing and supply chain footprint. To build on the successful implementation of the 2019 Productivity Plan, in 2022, we expanded and extended the plan through the end of 2028 to take advantage of additional opportunities within the initiatives described above. As a result, we expect to incur pre-tax charges of approximately $3.65 billion, including cash expenditures of approximately $2.9 billion. Plan to date through September 9, 2023, we have incurred pre-tax charges of $1.7 billion, including cash expenditures of $1.3 billion. For the remainder of 2023, we expect to incur pre-tax charges of approximately $200 million, and cash expenditures of approximately $200 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 through 2025, with the balance to be incurred through 2028. Charges include severance and other employee costs, asset impairments and other costs.

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See Note 3 to our condensed consolidated financial statements in this Form 10-Q, as well as Note 3 to our consolidated financial statements in our 2022 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 3 to our condensed consolidated financial statements.

Acquisition and Divestiture-Related Charges

Acquisition and divestiture-related charges include merger and integration charges and costs associated with divestitures, primarily consulting, advisory and other professional fees. See Note 12 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 12 to our condensed consolidated financial statements for further information.

Impairment and Other Charges/Credits

We recognized Russia-Ukraine conflict charges, brand portfolio impairment charges and other impairment charges as described below.

Russia-Ukraine Conflict Charges

In connection with the deadly conflict in Ukraine, we recognized charges related to indefinite-lived intangible assets and property, plant and equipment impairment, allowance for expected credit losses, inventory write-downs and other costs. We also recognized adjustments to the charges recorded in 2022. See Notes 1 and 4 to our condensed consolidated financial statements for further information.

Brand Portfolio Impairment Charges

We recognized intangible asset and property, plant and equipment impairments and other charges as a result of management’s decision to reposition or discontinue the sale/distribution of certain brands. We also recognized adjustments to the charges recorded in 2022. See Notes 1 and 4 to our condensed consolidated financial statements for further information.

Other Impairment Charges

We recognized impairment charges primarily related to our investment in TBG. See Notes 1 and 9 to our condensed consolidated financial statements for further information.

Pension and Retiree Medical-Related Impact

Pension and retiree medical-related impact includes settlement charges related to lump sum distributions exceeding the total of annual service and interest cost, partially offset by curtailment gains resulting from the Juice Transaction. See Note 7 to our condensed consolidated financial statements for further information.

Tax Benefit Related to the IRS Audit

We recognized a non-cash tax benefit resulting from our agreement with the IRS to settle one of the issues assessed in the 2014 through 2016 tax audit. The agreement covers tax years 2014 through 2019. See Note 5 to our condensed consolidated financial statements for further information.

Tax Expense Related to the TCJ Act

Tax expense related to the TCJ Act reflects adjustments to the mandatory transition tax liability under the TCJ Act. See Note 5 to our condensed consolidated financial statements for further information.

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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, including with respect to our net capital spending plans. Our primary sources of liquidity include cash from operations, proceeds obtained from issuances of commercial paper and long-term debt, and cash and cash equivalents. These sources of cash are available to fund cash outflows that have 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 Notes 8 and 12 to our condensed consolidated financial statements included 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 8 to our consolidated financial statements included in our 2022 Form 10-K for further information.

Our sources and uses of cash were not materially adversely impacted by the Russia-Ukraine conflict in the 36 weeks ended September 9, 2023 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” included in our 2022 Form 10-K for further information related to the impact of the Russia-Ukraine conflict on our business and financial results.

As of September 9, 2023, 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 September 9, 2023, our mandatory transition tax liability was $2.3 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 2022 Form 10-K for further discussion of the TCJ Act.

Supply chain financing 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. See Note 13 to our condensed consolidated financial statements for further discussion of supply chain financing arrangements.

Operating Activities

During the 36 weeks ended September 9, 2023, net cash provided by operating activities was $7.6 billion, compared to net cash provided by operating activities of $6.3 billion in the prior-year period. The increase in operating cash flow primarily reflects favorable operating profit performance, partially offset by unfavorable working capital comparisons.

Investing Activities

During the 36 weeks ended September 9, 2023, net cash used for investing activities was $2.4 billion, primarily reflecting net capital spending.

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We regularly review our plans with respect to net capital spending, including in light of the ongoing uncertainty caused by the Russia-Ukraine conflict on our business, and believe that we have sufficient liquidity to meet our net capital spending needs.

Financing Activities

During the 36 weeks ended September 9, 2023, net cash provided by financing activities was $34 million, primarily reflecting the net proceeds from short-term borrowings of $5.0 billion and the proceeds from issuances of long-term debt of $3.0 billion, partially offset by return of operating cash flow to our shareholders through dividend payments and share repurchases of $5.7 billion and payments of long-term debt borrowings of $2.3 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 9, 2023, we announced a 10% increase in our annualized dividend to $5.06 per share from $4.60 per share, effective with the dividend paid in June 2023. We expect to return a total of approximately $7.7 billion to shareholders in 2023, comprising dividends of approximately $6.7 billion and share repurchases of approximately $1.0 billion.

Free Cash Flow

The table below reconciles net cash provided by 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.”


	36 Weeks Ended
	9/9/2023		9/3/2022
Net cash provided by operating activities, GAAP measure	$	7,630	$	6,306
Capital spending	(2,537)		(2,556)
Sales of property, plant and equipment	131		228
Free cash flow, non-GAAP measure	$	5,224	$	3,978

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 2022 Form 10-K, 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 Note 8 to our condensed consolidated financial statements and “Our Business Risks” included in this Form 10-Q, as well as “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 2022 Form 10-K for further information.

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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 – Consolidated Review,” “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 September 9, 2023, total assets were $100.0 billion, compared to $92.2 billion as of December 31, 2022. The increase in total assets is primarily driven by the following line items:


	Change(a)		Reference

Cash and cash equivalents	$	5.1	Statement of Cash Flows
Accounts and notes receivable, less allowance	$	1.6	(b)
Property, Plant and Equipment, net	$	0.6	(c)
Other Assets	$	0.6	(d)

Total Liabilities

As of September 9, 2023, total liabilities were $81.0 billion, compared to $74.9 billion as of December 31, 2022. The increase in total liabilities is primarily driven by the following line items:


	Change(a)		Reference
Short-term debt obligations	$	5.5	(e)

(a)In billions.

(b)Primarily reflects favorable operating performance.

(c)Primarily reflects capital spending, partially offset by depreciation.

(d)Primarily reflects increases in operating leases, net of right-of-use asset amortization, as well as discretionary contributions to our U.S. qualified defined benefit plans. See Note 7 to our condensed consolidated financial statements for further information related to pension and retiree medical benefits.

(e)Primarily reflects issuances of commercial paper. See Note 8 to our condensed consolidated financial statements for further information.

Total Equity

See our condensed consolidated statement of equity and Notes 9 and 11 to our condensed consolidated financial statements.

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Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors

PepsiCo, Inc.:

Results of Review of Interim Financial Information

We have reviewed the Condensed Consolidated Balance Sheet of PepsiCo, Inc. and subsidiaries (the Company) as of September 9, 2023, the related Condensed Consolidated Statements of Income, Comprehensive Income, and Equity for the twelve and thirty-six weeks ended September 9, 2023 and September 3, 2022, the related Condensed Consolidated Statement of Cash Flows for the thirty-six weeks ended September 9, 2023 and September 3, 2022, and the related notes (collectively, the consolidated interim financial information). Based on our reviews, we are not aware of any material modifications that should be made to the consolidated interim financial information for it 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) (PCAOB), the Consolidated Balance Sheet of the Company as of December 31, 2022, 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 8, 2023, 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, 2022, 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 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.

/s/ KPMG LLP

New York, New York

October 10, 2023

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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 2022 Form 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 SEC 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.

During the 12 weeks ended September 9, 2023, we continued migrating certain of our financial processing systems to an 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 next several 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 September 9, 2023, 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 continue to 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. These business process changes have not materially affected, and we do not expect them 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 the 12 weeks ended September 9, 2023 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.

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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 2022 Form 10-K.

We and our subsidiaries are party to a variety of litigation, claims, legal or regulatory proceedings, inquiries and investigations. While the results of such litigation, claims, legal or regulatory proceedings, inquiries and investigations 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 2022 Form 10-K.

ITEM 1A. Risk Factors.

There have been no material changes with respect to the risk factors disclosed in our 2022 Form 10-K.

ITEM 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities.

A summary of our common stock repurchases (in millions, except average price per share) during the 12 weeks ended September 9, 2023 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
6/17/2023					$	8,034

6/18/2023 - 7/15/2023	0.5	$	184.93	0.5	(87)
					7,947
7/16/2023 - 8/12/2023	0.5	$	187.63	0.5	(100)
					7,847
8/13/2023 - 9/9/2023	0.6	$	178.49	0.6	(106)


Total	1.6	$	183.44	1.6	$	7,741

(a)All shares were repurchased in open market transactions pursuant to the $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 open market transactions, in privately negotiated transactions, in accelerated stock repurchase transactions or otherwise.

ITEM 5. Other Information.

During the 12 weeks ended September 9, 2023, none of our directors or executive officers adopted, modified or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement” as such terms are defined under Item 408 of Regulation S-K.

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ITEM 6. Exhibits.


See “Index to Exhibits” on page 53.

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INDEX TO EXHIBITS

ITEM 6


EXHIBIT
Exhibit 3.1			Amended and Restated Articles of Incorporation of PepsiCo, Inc., effective as of May 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 3, 2019.
Exhibit 3.2			By-Laws of PepsiCo, Inc., as amended and restated, effective as of 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 April 16, 2020.
Exhibit 15			Letter re: Unaudited Interim Financial Information.
Exhibit 31			Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 32			Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Exhibit 101			The following materials from PepsiCo, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 9, 2023 formatted in iXBRL (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 September 9, 2023, formatted in iXBRL and contained in Exhibit 101.

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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.
		(Registrant)

Date:	October 10, 2023	/s/ Marie T. Gallagher
		Marie T. Gallagher
		Senior Vice President and Controller
		(Principal Accounting Officer)

Date:	October 10, 2023	/s/ David Flavell
		David Flavell
		Executive Vice President, General Counsel and Corporate Secretary
		(Duly Authorized Officer)