PEPSICO INC - Quarter Report: 2024 June (Form 10-Q)

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

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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. ☒ 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). ☒ 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.


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

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

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

Number of shares of Common Stock outstanding as of July 5, 2024 was .

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PepsiCo, Inc. and Subsidiaries

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		Page No.
Part I Financial Information
Item 1.	Condensed Consolidated Financial Statements	2
	Condensed Consolidated Statement of Income – 12 and 24 Weeks Ended June 15 , 2024 and June 17 , 2023	2
	Condensed Consolidated Statement of Comprehensive Income – 12 and 24 Weeks Ended June 15 , 2024 and June 17 , 2023	3
	Condensed Consolidated Statement of Cash Flows – 2 4 Weeks Ended June 15 , 2024 and June 17 , 2023	4
	Condensed Consolidated Balance Sheet – June 15 , 2024 and December 30, 2023	6
	Condensed Consolidated Statement of Equity – 12 and 24 Weeks Ended June 15 , 2024 and June 17 , 2023	7
	Notes to the Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Report of Independent Registered Public Accounting Firm		44
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	45
Item 4.	Controls and Procedures	45
Part II Other Information
Item 1.	Legal Proceedings	46
Item 1A.	Risk Factors	46
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	46
Item 5.	Other Information	47
Item 6.	Exhibits	47

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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

24 Weeks Ended

6/15/2024

6/17/2023

6/15/2024

6/17/2023

Net Revenue

Cost of sales

Gross profit

Selling, general and administrative expenses

Operating Profit

Other pension and retiree medical benefits income

Net interest expense and other

()

Income before income taxes

Provision for income taxes

Net income

Less: Net income attributable to noncontrolling interests

Net Income Attributable to PepsiCo

Net Income Attributable to PepsiCo per Common Share

Basic

Diluted

Weighted-average common shares outstanding

Basic

Diluted

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

24 Weeks Ended

6/15/2024

6/17/2023

6/15/2024

6/17/2023

Net income

Other comprehensive loss, net of taxes:

Net currency translation adjustment

()

Net change on cash flow hedges

()

Net pension and retiree medical adjustments

()

Net change on available-for-sale debt securities and other

()

Comprehensive income

Less: Comprehensive income attributable to

noncontrolling interests

Comprehensive Income Attributable to PepsiCo

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)


	24 Weeks Ended
	6/15/2024	6/17/2023
Operating Activities
Net income	$	$
Depreciation and amortization
Impairment and other charges
Product recall-related impact
Cash payments for product recall-related impact	()
Operating lease right-of-use asset amortization
Share-based compensation expense
Restructuring and impairment charges
Cash payments for restructuring charges	()	()


Pension and retiree medical plan expenses
Pension and retiree medical plan contributions	()	()
Deferred income taxes and other tax charges and credits

Tax payments related to the Tax Cuts and Jobs Act (TCJ Act)	()	()
Change in assets and liabilities:
Accounts and notes receivable	()	()
Inventories	()	()
Prepaid expenses and other current assets	()	()
Accounts payable and other current liabilities	()	()
Income taxes payable
Other, net	()	()
Net Cash Provided by Operating Activities

Investing Activities
Capital spending	()	()
Sales of property, plant and equipment
Acquisitions, net of cash acquired, investments in noncontrolled affiliates and purchases of intangible and other assets	()	()
Other divestitures, sales of investments in noncontrolled affiliates and other assets
Short-term investments, by original maturity:
More than three months - purchases		()
More than three months - maturities

Three months or less, net
Other investing, net
Net Cash Used for Investing Activities	()	()

(Continued on following page)

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Condensed Consolidated Statement of Cash Flows (continued)

PepsiCo, Inc. and Subsidiaries

(in millions, unaudited)


	24 Weeks Ended
	6/15/2024	6/17/2023
Financing Activities
Proceeds from issuances of long-term debt	$	$
Payments of long-term debt	()	()

Short-term borrowings, by original maturity:
More than three months - proceeds
More than three months - payments	()	()
Three months or less, net
Cash dividends paid	()	()
Share repurchases	()	()
Proceeds from exercises of stock options
Withholding tax payments on restricted stock units (RSUs) and performance stock units (PSUs) converted	()	()
Other financing	()	()
Net Cash (Used for)/Provided by Financing Activities	()
Effect of exchange rate changes on cash and cash equivalents and restricted cash	()	()
Net (Decrease)/Increase in Cash and Cash Equivalents and Restricted Cash	()
Cash and Cash Equivalents and Restricted Cash, Beginning of Year
Cash and Cash Equivalents and Restricted Cash, End of Period	$	$

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

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)
	6/15/2024	12/30/2023
ASSETS
Current Assets
Cash and cash equivalents	$	$
Short-term investments
Accounts and notes receivable, less allowance ($ and $, respectively)
Inventories:
Raw materials and packaging
Work-in-process
Finished goods

Prepaid expenses and other current assets
Total Current Assets
Property, plant and equipment
Accumulated depreciation	()	()
Property, Plant and Equipment, net
Amortizable Intangible Assets, net
Goodwill
Other Indefinite-Lived Intangible Assets

Investments in Noncontrolled Affiliates
Deferred Income Taxes
Other Assets
Total Assets	$	$

LIABILITIES AND EQUITY
Current Liabilities
Short-term debt obligations	$	$
Accounts payable and other current liabilities
Total Current Liabilities
Long-Term Debt Obligations
Deferred Income Taxes
Other Liabilities
Total Liabilities
Commitments and contingencies
PepsiCo Common Shareholders’ Equity
Common stock, par value 12/3¢ per share (authorized shares; issued, net of repurchased common stock at par value: shares)
Capital in excess of par value
Retained earnings
Accumulated other comprehensive loss	()	()
Repurchased common stock, in excess of par value ( shares)	()	()
Total PepsiCo Common Shareholders’ Equity
Noncontrolling interests
Total Equity
Total Liabilities and Equity	$	$

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)

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12 Weeks Ended

24 Weeks Ended

6/15/2024

6/17/2023

6/15/2024

6/17/2023

Amount

Common Stock

Balance, beginning of period

Change in repurchased common stock

()

Balance, end of period

Capital in Excess of Par Value

Balance, beginning of period

Share-based compensation expense

Stock option exercises, RSUs and PSUs converted

()

Withholding tax on RSUs and PSUs converted

()

Other

()

Balance, end of period

Retained Earnings

Balance, beginning of period

Net income attributable to PepsiCo

Cash dividends declared (a)

()

Balance, end of period

Accumulated Other Comprehensive Loss

Balance, beginning of period

()

Other comprehensive loss attributable to PepsiCo

()

Balance, end of period

()

Repurchased Common Stock

Balance, beginning of period

()

Share repurchases

()

Stock option exercises, RSUs and PSUs converted

Other

Balance, end of period

()

Total PepsiCo Common Shareholders’ Equity

Noncontrolling Interests

Balance, beginning of period

Net income attributable to noncontrolling interest

Distributions to noncontrolling interests

()

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Note 5 -

%. Certain countries have enacted legislation incorporating the agreed global minimum tax effective in 2024. Legislation enacted as of June 15, 2024 did not have a material impact on our financial statements for the 12 and 24 weeks ended June 15, 2024 and is not expected to have a material impact on our 2024 financial statements.

Note 6 -

$ $ $ Share-based compensation expense – liability awards

(a)PepsiCo Singapore Financing I Pte. Ltd. is a finance subsidiary and has no assets, operations, revenues or cash flows other than those related to the issuance, administration and repayment of the notes and any other notes that may be issued in the future. The notes are fully and unconditionally guaranteed by PepsiCo, Inc. on a senior unsecured basis and may be assumed at any time by PepsiCo, Inc. as the primary and sole obligor.

(b)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 24 weeks ended June 15, 2024, $ billion of U.S. dollar-denominated senior notes, € billion of euro-denominated senior notes and C$ billion of Canadian dollar-denominated senior notes matured and were paid.

As of June 15, 2024, we had $ billion of commercial paper outstanding, excluding discounts.

In the 12 and 24 weeks ended June 15, 2024, we entered into a new five-year unsecured revolving credit agreement (Five-Year Credit Agreement), which expires on May 24, 2029. The Five-Year Credit Agreement enables us and our borrowing subsidiaries to borrow up to $ billion in U.S. dollars and/or euros, including a $ 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 $ billion (or the equivalent amount in euros). Additionally, we may, up to two times during the term of the 2024 Five-Year Credit Agreement, request renewal of the agreement for an additional one-year period. The Five-Year Credit Agreement replaced our $ billion five-year credit agreement, dated as of May 26, 2023.

Also in the 12 and 24 weeks ended June 15, 2024, we entered into a new 364-day unsecured revolving credit agreement (364-Day Credit Agreement), which expires on May 23, 2025. The 364-Day Credit Agreement enables us and our borrowing subsidiaries to borrow up to $ 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 $ 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 $ billion 364-day credit agreement, dated as of May 26, 2023.

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 June 15, 2024, there were outstanding borrowings under the Five-Year Credit Agreement or the 364-Day Credit Agreement.

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Note 9 -

million. We have posted collateral under these contracts and credit-risk-related contingent features were triggered as of June 15, 2024. $ Foreign exchange $ $ Interest rate$ $

Net investment (b)

$ $

(a)In billions.

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

As of June 15, 2024, approximately % of total debt was subject to variable rates, compared to % as of December 30, 2023.

Debt Securities

Held-to-Maturity

As of June 15, 2024, we had investments in held-to-maturity debt securities. As of December 30, 2023, we had $ million of investments in commercial paper held-to-maturity debt securities recorded in cash and cash equivalents. Held-to-maturity debt securities are recorded at amortized cost, which approximates fair value, and realized gains or losses are reported in earnings. As of December 30, 2023, gross unrecognized gains and losses and the allowance for expected credit losses were

Available-for-Sale

There were material impairment charges related to investments in available-for-sale debt securities in both the 24 weeks ended June 15, 2024 and June 17, 2023. There were unrealized gains of $ million as of June 15, 2024 and unrealized gains or losses as of June 17, 2023 related to investments in available-for-sale debt securities. Related to our Level 3 (significant unobservable inputs) investment in Celsius Holdings, Inc. (Celsius), we recorded an unrealized loss of $ million and an unrealized gain of $ million in other comprehensive income during the 12 and 24 weeks ended June 15, 2024, respectively. Additionally, we recorded a decrease in the investment of $ million due to cash dividends

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Level 3 investments in available-for-sale debt securities during the 24 weeks ended June 17, 2023.

TBG Investment

In the 12 and 24 weeks ended June 17, 2023, we recorded our proportionate % share of TBG’s impairment of indefinite-lived intangible assets, and recorded an other-than-temporary impairment of our equity method investment, both of which resulted in pre-tax impairment charges of $ million ($ million after-tax or $ 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 in the fair value hierarchy. There were impairment charges recorded in the 24 weeks ended June 15, 2024.

Recurring Fair Value Measurements

$ $ $

Index funds (c)

1$ $ $ $

Prepaid forward contracts (d)

2$ $ $ $

Deferred compensation (e)

2$ $ $ $ )()$ $ $

(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 $ 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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$ $ $ $ $ Commodity() () Total$()$ $ $ $ $

24 Weeks Ended

6/15/2024

6/17/2023

Cost of sales

Selling, general and administrative expenses

Total

Cost of sales

Selling, general and administrative expenses

Total

Foreign exchange

()

Commodity

()

Total

()

Note 10 -

Net income available for PepsiCo common shareholders

$ $ Dilutive securities:

Stock options, RSUs, PSUs and other (b)

Diluted$ $

Diluted net income attributable to PepsiCo per common share

$ $

) ) )

24 Weeks Ended

6/15/2024

6/17/2023

Income

Shares(a)

Income

Shares(a)

()

) ) $()

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

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$ $ $

Selling, general and administrative expenses

Cash flow hedges:Foreign exchange contracts$ $()$ $()Net revenue

Foreign exchange contracts

Cost of sales

Interest rate derivatives

() ()

Selling, general and administrative expenses

Commodity contracts

Cost of salesCommodity contracts ()

Selling, general and administrative expenses

Net losses before tax

Tax amounts

()()()()Net losses after tax$ $ $ $ Pension and retiree medical items:Amortization of prior service credits$()$()$()$()Other pension and retiree medical benefits incomeAmortization of net losses Other pension and retiree medical benefits incomeSettlement losses Other pension and retiree medical benefits incomeNet losses before tax

Tax amounts

()()()()Net losses after tax$ $ $ $ %— 6 %

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

(b)Amounts may not sum due to rounding.

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FLNA

12 Weeks

Net revenue decreased 0.5%, primarily driven by a decrease in organic volume, partially offset by effective net pricing.

Unit volume declined 4%, primarily driven by mid-single-digit declines in trademark Cheetos, trademark Doritos and trademark Lay’s, partially offset by double-digit growth in trademark Chester’s.

Operating profit decreased 3%, primarily reflecting certain operating cost increases, including strategic initiatives, and the decrease in organic volume. These impacts were partially offset by the effective net pricing, productivity savings, and a 2-percentage-point favorable impact of lower commodity costs, primarily driven by cooking oil.

24 Weeks

Net revenue increased 0.5%, primarily driven by effective net pricing, partially offset by a decrease in organic volume.

Unit volume declined 3%, primarily driven by mid-single-digit declines in trademark Lay’s, trademark Cheetos and trademark Tostitos, partially offset by double-digit growth in trademark Chester’s.

QFNA

12 Weeks

Net revenue decreased 18%, primarily driven by a decrease in organic volume, which was negatively impacted by the loss of sales from products included in the Quaker Recall.

Unit volume declined 17%, primarily driven by double-digit declines in bars, pancake syrup and mix, oatmeal and ready-to-eat cereals. The unit volume decline in bars and ready-to-eat cereals was negatively impacted by the loss of sales from products included in the Quaker Recall.

Operating profit decreased 34%, primarily reflecting the net revenue performance, certain operating cost increases, a 12-percentage-point impact of charges associated with the Quaker Recall and a 6-percentage-point unfavorable impact of commodity costs, partially offset by productivity savings and lower advertising and marketing expenses.

24 Weeks

Net revenue decreased 21%, primarily driven by a decrease in organic volume, which was negatively impacted by the loss of sales from products included in the Quaker Recall.

Unit volume declined 20%, primarily driven by double-digit declines in bars, ready-to-eat cereals, pancake syrup and mix and oatmeal. The unit volume decline in bars and ready-to-eat cereals was negatively impacted by the loss of sales from products included in the Quaker Recall.

Operating profit decreased 89%, reflecting a 58-percentage-point impact of charges associated with the Quaker Recall, the net revenue performance, certain operating cost increases and a 4-percentage-point unfavorable impact of commodity costs, partially offset by productivity savings and lower advertising and marketing expenses.

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PBNA

12 Weeks

Net revenue increased 1%, primarily driven by effective net pricing, partially offset by a decrease in organic volume.

Unit volume declined 3%, driven by a 5% decline in non-carbonated beverage (NCB) volume and a 2% decline in carbonated soft drink (CSD) volume. The NCB volume decline primarily reflected mid-single-digit declines in our overall water portfolio and our juice and juice drinks portfolio, a low-single-digit decline in Gatorade sports drinks and a high-single-digit decline in our Lipton ready-to-drink tea portfolio, partially offset by double-digit growth in our energy portfolio.

Operating profit increased 37%, primarily driven by productivity savings, the effective net pricing and an 18-percentage-point impact of prior-year impairment charges related to our TBG investment. These impacts were partially offset by certain operating cost increases and the decrease in organic volume.

24 Weeks

Net revenue increased 1%, primarily driven by effective net pricing, partially offset by a decrease in organic volume.

Unit volume declined 4%, driven by a 6% decline in NCB volume and a 2% decline in CSD volume. The NCB volume decline primarily reflected mid-single-digit declines in Gatorade sports drinks and our overall water portfolio and a high-single-digit decline in our Lipton ready-to-drink tea portfolio, partially offset by double-digit growth in our energy portfolio.

Operating profit increased 24%, primarily driven by the effective net pricing and productivity savings. Additionally, impairment charges related to our TBG investment and net unfavorable insurance adjustments in the prior year contributed 11 percentage points and 4 percentage points, respectively, to operating profit growth. These impacts were partially offset by certain operating cost increases, the decrease in organic volume and a 4-percentage-point impact of higher commodity costs.

LatAm

12 Weeks

Net revenue increased 7%, primarily reflecting effective net pricing and a 5-percentage-point impact of favorable foreign exchange, partially offset by a net decline in organic volume.

Convenient foods unit volume declined 6%, primarily reflecting double-digit declines in Peru and Argentina, partially offset by low-single-digit growth in Brazil. Additionally, Mexico experienced a mid-single-digit decline.

Beverage unit volume grew 2%, primarily reflecting mid-single-digit growth in Mexico and Brazil and high-single-digit growth in Guatemala, partially offset by double-digit declines in Colombia, Argentina and Peru and a mid-single-digit decline in Chile.

Operating profit increased 8%, primarily reflecting the effective net pricing, productivity savings and a 7-percentage-point impact of favorable foreign exchange. These impacts were partially offset by certain operating cost increases, the net decline in organic volume and higher advertising and marketing expenses.

24 Weeks

Net revenue increased 10%, primarily reflecting effective net pricing and a 6-percentage-point impact of favorable foreign exchange, partially offset by a net decline in organic volume.

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Convenient foods unit volume declined 4%, primarily reflecting double-digit declines in Peru and Argentina, partially offset by low-single-digit growth in Brazil. Additionally, Mexico experienced a low-single-digit decline.

Beverage unit volume grew 2%, primarily reflecting mid-single-digit growth in Mexico and Brazil and high-single-digit growth in Guatemala, partially offset by a double-digit decline in Colombia, a high-single-digit decline in Argentina, a mid-single-digit decline in Peru and a low-single-digit decline in Chile.

Operating profit increased 17%, primarily reflecting the effective net pricing, productivity savings, an 8-percentage-point impact of favorable foreign exchange and a 3-percentage-point favorable impact of lower commodity costs. These impacts were partially offset by certain operating cost increases, the net decline in organic volume and higher advertising and marketing expenses.

Europe

12 Weeks

Net revenue increased 2.5%, primarily reflecting effective net pricing and organic volume growth, partially offset by a 5-percentage-point impact of unfavorable foreign exchange.

Convenient foods unit volume grew 5%, primarily reflecting double-digit growth in Russia and high-single-digit growth in Turkey, partially offset by a low-single-digit decline in the Netherlands. Additionally, the United Kingdom experienced low-single-digit growth and France experienced mid-single-digit growth.

Beverage unit volume grew 1%, primarily reflecting mid-single-digit growth in Russia and low-single-digit growth in the United Kingdom, partially offset by mid-single-digit declines in Germany and France and a low-single-digit decline in Turkey.

Operating profit increased 30%, primarily reflecting the net revenue growth, productivity savings and a 9-percentage-point favorable impact of lower restructuring charges. These impacts were partially offset by certain operating cost increases, a 6-percentage-point impact of unfavorable foreign exchange and a 6-percentage-point impact of higher commodity costs.

24 Weeks

Net revenue increased 3%, primarily reflecting effective net pricing and organic volume growth, partially offset by a 5.5-percentage-point impact of unfavorable foreign exchange.

Convenient foods unit volume grew 4%, primarily reflecting double-digit growth in Russia and high-single-digit growth in Turkey, partially offset by a high-single-digit decline in France and a low-single-digit decline in the Netherlands. Additionally, the United Kingdom experienced low-single-digit growth.

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

Operating profit increased 50%, primarily reflecting the net revenue growth, a 26-percentage-point favorable impact of lower restructuring charges and productivity savings. These impacts were partially offset by certain operating cost increases, a 9-percentage-point impact of higher commodity costs and an 8-percentage-point impact of unfavorable foreign exchange.

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AMESA

12 Weeks

Net revenue increased 2%, primarily reflecting effective net pricing and organic volume growth, partially offset by an 11-percentage-point impact of unfavorable foreign exchange, driven primarily by the weakening of the Egyptian pound.

Convenient foods unit volume grew 1%, primarily reflecting double-digit growth in India and low-single-digit growth in South Africa, partially offset by a double-digit decline in the Middle East and a low-single-digit decline in Pakistan.

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

Operating profit decreased 4%, primarily reflecting certain operating cost increases, a 28-percentage-point impact of higher commodity costs, primarily packaging materials, potatoes and sweeteners, largely driven by transaction-related foreign exchange, and a 6-percentage-point impact of unfavorable foreign exchange translation. These impacts were partially offset by the net revenue growth and productivity savings.

24 Weeks

Net revenue increased 2%, primarily reflecting effective net pricing and organic volume growth, partially offset by an 8-percentage-point impact of unfavorable foreign exchange.

Convenient foods unit volume grew 2%, primarily reflecting double-digit growth in India and low-single-digit growth in South Africa, partially offset by a double-digit decline in the Middle East. Additionally, Pakistan experienced slight growth.

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

Operating profit decreased 6%, primarily reflecting certain operating cost increases, a 24-percentage-point impact of higher commodity costs, primarily packaging materials, potatoes and sweeteners, largely driven by transaction-related foreign exchange, and a 5-percentage-point impact of unfavorable foreign exchange translation. These impacts were partially offset by the net revenue growth and productivity savings.

APAC

12 Weeks

Net revenue decreased 2%, primarily reflecting a 3-percentage-point impact of unfavorable foreign exchange, partially offset by effective net pricing.

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

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

Operating profit decreased slightly, primarily reflecting certain operating cost increases, partially offset by productivity savings.

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24 Weeks

Net revenue increased 2%, primarily reflecting organic volume growth and effective net pricing, partially offset by a 4-percentage-point impact of unfavorable foreign exchange.

Convenient foods unit volume grew 6%, primarily reflecting high-single-digit growth in China and mid-single-digit growth in Australia. Additionally, Thailand experienced mid-single-digit growth.

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

Operating profit increased 1%, primarily reflecting the net revenue growth, productivity savings and a 3-percentage-point favorable impact of lower commodity costs. These impacts were partially offset by certain operating cost increases, higher advertising and marketing expenses and a 4-percentage-point impact of unfavorable foreign exchange.

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); product recall-related impact; 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 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, 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

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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, impairment and other charges/credits, product recall-related impact and the impact of settlement 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. 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 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 6/15/2024
	Cost of sales		Gross profit		Selling, general and administrative expenses		Operating profit		Other pension and retiree medical benefits income		Provision for income taxes(a)		Net income attributable to noncontrolling interests		Net income attributable to PepsiCo
Reported, GAAP Measure	$	9,919	$	12,582	$	8,534	$	4,048	$	56	$	776	$	11	$	3,083
Items Affecting Comparability
Mark-to-market net impact	19		(19)		(11)		(8)		—		(1)		—		(7)
Restructuring and impairment charges	—		—		(66)		66		8		20		(1)		55

		—		1		—		1


		—		43		—		139

		2		—		—		2


		—		2		—		7

		—		28		—		69

(a)In billions.

(b)Refer to the cash flow statement for further information.

(c)Primarily reflects favorable operating performance.

(d)See Note 8 to our condensed consolidated financial statements for further information.

(e)Primarily reflects timing of payments, combined with a decrease in production and capital expenditure payables across our divisions.

Total Equity

See the equity statement 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 June 15, 2024, the related Condensed Consolidated Statements of Income, Comprehensive Income, and Equity for the twelve and twenty-four weeks ended June 15, 2024 and June 17, 2023, the related Condensed Consolidated Statement of Cash Flows for the twenty-four weeks ended June 15, 2024 and June 17, 2023, 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 30, 2023, 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, 2024, 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 30, 2023, 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

July 10, 2024

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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 2023 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 June 15, 2024, 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 June 15, 2024, 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 June 15, 2024 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 2023 Form 10-K.

On June 20, 2024, the Mayor and City Council of Baltimore, Maryland filed a lawsuit against PepsiCo, Inc., Frito-Lay, Inc. and Frito-Lay North America, Inc., and several other unrelated parties, (the Baltimore Matter) asserting claims for littering and improper disposal of our packaging, public nuisance, deceptive acts or practices in the conduct of business, design defects rendering our packaging unsafe for the environment and failure to warn that our packaging was a potential source of plastic pollution, allegedly resulting in plastic pollution in Baltimore City. This matter is pending in the Circuit Court for Baltimore City, Maryland. The lawsuit does not specify the amount of damages sought and we believe we have strong defenses to each of these claims. In addition, we and our subsidiaries are party to a variety of litigation, claims, legal or regulatory proceedings, inquiries and investigations. While the results of the Baltimore Matter, the NYS Matter (as defined in our 2023 Form 10-K) and each such other litigation, claim, legal or regulatory proceeding, inquiry and investigation 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 2023 Form 10-K.

ITEM 1A. Risk Factors.

There have been no material changes with respect to the risk factors disclosed in our 2023 Form 10-K.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.

A summary of our common stock repurchases (in millions, except average price per share) during the 12 weeks ended June 15, 2024 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
3/23/2024					$	7,342
3/24/2024 - 4/20/2024	0.7	$	170.23	0.7	(124)
					7,218
4/21/2024 - 5/18/2024	0.4	$	178.80	0.4	(71)
					7,147
5/19/2024 - 6/15/2024	0.7	$	172.20	0.7	(115)


Total	1.8	$	172.87	1.8	$	7,032

(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.

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ITEM 5. Other Information.

During the 12 weeks ended June 15, 2024, 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.

ITEM 6. Exhibits.


See “Index to Exhibits” on page 48.

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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 22			Subsidiary Issuer of Guaranteed Securities.
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 99.1			364-Day Credit Agreement, dated as of May 24, 2024, among PepsiCo, as borrower, the lenders named therein, and Citibank, N.A., as administrative agent, which is incorporated by reference to Exhibit 99.1 to PepsiCo, Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 24, 2024.
Exhibit 99.2			Five-Year Credit Agreement, dated as of May 24, 2024, among PepsiCo, as borrower, the lenders named therein, and Citibank, N.A., as administrative agent, which is incorporated by reference to Exhibit 99.2 to PepsiCo, Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 24, 2024.
Exhibit 101			The following materials from PepsiCo, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 15, 2024 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 June 15, 2024, 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:	July 10, 2024	/s/ Marie T. Gallagher
		Marie T. Gallagher
		Senior Vice President and Controller
		(Principal Accounting Officer)

Date:	July 10, 2024	/s/ David Flavell
		David Flavell
		Executive Vice President, General Counsel and Corporate Secretary
		(Duly Authorized Officer)

PEPSICO INC - Quarter Report: 2024 June (Form 10-Q)

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