Pepsico Inc 10-Q for FY2020 Q1

Pepsico Inc (PEP)

10-Q 2020-04-28 For: 2020-03-21

Added on April 08, 2026

About this 10-Q

Pepsico Inc filed this 10-Q on April 28, 2020, covering the quarter ended March 21, 2020 (FY2020 Q1).

Headline figures

Quarter ended March 21, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $13.88B; up 7.7% from $12.88B a year earlier
Net income: $1.34B; down 5.3% from net income of $1.41B a year earlier
Diluted EPS: $0.96; down 4.0% from $1.00 a year earlier

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



Title of each class	Trading Symbols	Name of each exchange on which registered
Common Stock, par value 1-2/3 cents per share	PEP	The Nasdaq Stock Market LLC
2.500% Senior Notes Due 2022	PEP22a	The Nasdaq Stock Market LLC
1.750% Senior Notes Due 2021	PEP21a	The Nasdaq Stock Market LLC
2.625% Senior Notes Due 2026	PEP26	The Nasdaq Stock Market LLC
0.875% Senior Notes Due 2028	PEP28	The Nasdaq Stock Market LLC
0.750% Senior Notes Due 2027	PEP27	The Nasdaq Stock Market LLC
1.125% Senior Notes Due 2031	PEP31	The Nasdaq Stock Market LLC
0.875% Senior Notes Due 2039	PEP39	The Nasdaq Stock Market LLC



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



		Page No.
Part I Financial Information
Item 1.	Condensed Consolidated Financial Statements	3
	Condensed Consolidated Statement of Income – 12 Weeks Ended March 21, 2020 and March 23, 2019	3
	Condensed Consolidated Statement of Comprehensive Income – 12 Weeks Ended March 21, 2020 and March 23, 2019	4
	Condensed Consolidated Statement of Cash Flows – 12 Weeks Ended March 21, 2020 and March 23, 2019	5
	Condensed Consolidated Balance Sheet – March 21, 2020 and December 28, 2019	6
	Condensed Consolidated Statement of Equity – 12 Weeks Ended March 21, 2020 and March 23, 2019	7
	Notes to the Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Report of Independent Registered Public Accounting Firm		38
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39
Item 4.	Controls and Procedures	39
Part II Other Information
Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	42
Item 6.	Exhibits	42



	12 Weeks Ended
	3/21/2020			3/23/2019
Net Revenue	$	13,881		$	12,884
Cost of sales	6,127			5,688
Gross profit	7,754			7,196
Selling, general and administrative expenses	5,830			5,188
Operating Profit	1,924			2,008
Other pension and retiree medical benefits income	77			64
Net interest expense and other	(290		)	(204		)
Income before income taxes	1,711			1,868
Provision for income taxes	360			446
Net income	1,351			1,422
Less: Net income attributable to noncontrolling interests	13			9
Net Income Attributable to PepsiCo	$	1,338		$	1,413
Net Income Attributable to PepsiCo per Common Share
Basic	$	0.96		$	1.01
Diluted	$	0.96		$	1.00
Weighted-average common shares outstanding
Basic	1,390			1,406
Diluted	1,396			1,413



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



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



	(Unaudited)
	3/21/2020			12/28/2019
ASSETS
Current Assets
Cash and cash equivalents	$	11,089		$	5,509
Short-term investments	158			229
Accounts and notes receivable, less allowance: 3/20 - $228 and 12/19 - $105	8,477			7,822
Inventories:
Raw materials and packaging	1,502			1,395
Work-in-process	277			200
Finished goods	1,821			1,743
	3,600			3,338
Prepaid expenses and other current assets	944			747
Total Current Assets	24,268			17,645
Property, plant and equipment	42,696			43,003
Accumulated depreciation	(23,716		)	(23,698		)
Property, Plant and Equipment, net	18,980			19,305
Amortizable Intangible Assets, net	1,443			1,433
Goodwill	15,465			15,501
Other indefinite-lived intangible assets	14,536			14,610
Indefinite-Lived Intangible Assets	30,001			30,111
Investments in Noncontrolled Affiliates	2,719			2,683
Deferred Income Taxes	4,357			4,359
Other Assets	3,294			3,011
Total Assets	$	85,062		$	78,547

LIABILITIES AND EQUITY
Current Liabilities
Short-term debt obligations	$	5,882		$	2,920
Accounts payable and other current liabilities	16,196			17,541
Total Current Liabilities	22,078			20,461
Long-Term Debt Obligations	35,361			29,148
Deferred Income Taxes	4,060			4,091
Other Liabilities	10,004			9,979
Total Liabilities	71,503			63,679
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: 1,389 and 1,391 shares, respectively)	23			23
Capital in excess of par value	3,741			3,886
Retained earnings	61,920			61,946
Accumulated other comprehensive loss	(15,057		)	(14,300		)
Repurchased common stock, in excess of par value (478 and 476 shares, respectively)	(37,162		)	(36,769		)
Total PepsiCo Common Shareholders’ Equity	13,465			14,786
Noncontrolling interests	94			82
Total Equity	13,559			14,868
Total Liabilities and Equity	$	85,062		$	78,547


(a)	Cash dividends declared per common share were $0.955 and $0.9275 for the 12 weeks ended March 21, 2020 and March 23, 2019, respectively.


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


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


3)	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, food and snack businesses in Latin America;


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


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



	12 Weeks Ended
	3/21/2020			3/23/2019
Operating Activities
Net income	$	1,351		$	1,422
Depreciation and amortization	533			498
Share-based compensation expense	61			57
Restructuring and impairment charges	38			26
Cash payments for restructuring charges	(60		)	(52		)
Pension and retiree medical plan expenses	40			47
Pension and retiree medical plan contributions	(234		)	(260		)
Deferred income taxes and other tax charges and credits	25			216
Net tax related to the Tax Cuts and Jobs Act (TCJ Act)	—			(29		)
Change in assets and liabilities:
Accounts and notes receivable	(784		)	(406		)
Inventories	(312		)	(435		)
Prepaid expenses and other current assets	(263		)	(382		)
Accounts payable and other current liabilities	(1,419		)	(1,207		)
Income taxes payable	204			120
Other, net	71			40
Net Cash Used for Operating Activities	(749		)	(345		)

Investing Activities
Capital spending	(484		)	(442		)
Sales of property, plant and equipment	5			2
Acquisition of SodaStream International Ltd. (SodaStream)	(9		)	(1,807		)
Other acquisitions and investments in noncontrolled affiliates	(445		)	(56		)
Short-term investments, by original maturity - three months or less, net	7			9
Other investing, net	1			(6		)
Net Cash Used for Investing Activities	(925		)	(2,300		)

Financing Activities
Proceeds from issuances of long-term debt	6,429			1,122
Payments of long-term debt	(1		)	(1,851		)
Short-term borrowings, by original maturity:
More than three months - proceeds	164			2
More than three months - payments	(2		)	—
Three months or less, net	2,794			115
Cash dividends paid	(1,349		)	(1,332		)



	12 Weeks Ended
	3/21/2020					3/23/2019
	Shares		Amount			Shares		Amount
Common Stock
Balance, beginning of period	1,391		$	23		1,409		$	23
Change in repurchased common stock	(2	)	—			(5	)	—
Balance, end of period	1,389		23			1,404		23
Capital in Excess of Par Value
Balance, beginning of period			3,886					3,953
Share-based compensation expense			62					57
Stock option exercises, RSUs and PSUs converted			(131		)			(164		)
Withholding tax on RSUs and PSUs converted			(76		)			(93		)
Balance, end of period			3,741					3,753
Retained Earnings
Balance, beginning of period			61,946					59,947
Cumulative effect of accounting changes			(34		)			8
Net income attributable to PepsiCo			1,338					1,413
Cash dividends declared – common ^(a)			(1,330		)			(1,308		)
Balance, end of period			61,920					60,060
Accumulated Other Comprehensive Loss
Balance, beginning of period			(14,300		)			(15,119		)
Other comprehensive (loss)/income attributable to PepsiCo			(757		)			463
Balance, end of period			(15,057		)			(14,656		)
Repurchased Common Stock
Balance, beginning of period	(476	)	(36,769		)	(458	)	(34,286		)
Share repurchases	(4	)	(602		)	(9	)	(971		)
Stock option exercises, RSUs and PSUs converted	2		209			4		279
Balance, end of period	(478	)	(37,162		)	(463	)	(34,978		)
Total PepsiCo Common Shareholders’ Equity			13,465					14,202
Noncontrolling Interests
Balance, beginning of period			82					84
Net income attributable to noncontrolling interests			13					9
Other, net			(1		)			1
Balance, end of period			94					94
Total Equity			$	13,559				$	14,296



	12 Weeks Ended
Net Revenue ^(a)	3/21/2020		3/23/2019
FLNA	$	4,074	$	3,815
QFNA	634		594
PBNA	4,838		4,510
LatAm	1,310		1,241
Europe	1,839		1,620
AMESA	631		579
APAC	555		525
Total	$	13,881	$	12,884



	12 Weeks Ended
Operating Profit	3/21/2020			3/23/2019
FLNA ^(a)	$	1,202		$	1,159
QFNA ^(a)	150			138
PBNA ^(a)	297			389
LatAm	231			230
Europe ^(a)	146			115
AMESA	134			105
APAC ^(a)	142			106
Total division	$	2,302		$	2,242
Corporate unallocated expenses	(378		)	(234		)
Total	$	1,924		$	2,008


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



	12 Weeks Ended					Plan to Date
	3/21/2020		3/23/2019			through 3/21/2020
FLNA	$	5	$	—		$	58
QFNA	1		—			8
PBNA	3		6			94
LatAm	5		—			76
Europe	8		6			113
AMESA	2		8			43
APAC	—		3			49
Corporate	8		8			62
	32		31			503
Other pension and retiree medical benefits expense/ (income) ^(a)	6		(5		)	43
Total	$	38	$	26		$	546


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


(b)	Includes other costs associated with the implementation of our initiatives, including contract termination costs, consulting and other professional fees.



	Severance and Other Employee Costs			Asset Impairments			Other Costs			Total
Liability as of December 28, 2019	$	128		$	—		$	21		$	149
2020 restructuring charges	22			1			15			38
Cash payments	(31		)	—			(29		)	(60		)
Non-cash charges and translation	(9		)	(1		)	4			(6		)
Liability as of March 21, 2020	$	110		$	—		$	11		$	121



	3/21/2020							12/28/2019
	Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net
Acquired franchise rights	$	829	$	(157	)	$	672	$	846	$	(158	)	$	688
Reacquired franchise rights	105		(105		)	—		106		(105		)	1
Brands	1,307		(1,058		)	249		1,326		(1,066		)	260
Other identifiable intangibles	850		(328		)	522		810		(326		)	484
Total	$	3,091	$	(1,648	)	$	1,443	$	3,088	$	(1,655	)	$	1,433



	Balance 12/28/2019		Acquisitions/ (Divestitures)			Translation and Other			Balance 3/21/2020

FLNA ^(a)
Goodwill	$	299	$	162		$	(11	)	$	450
Brands	162		176			(2		)	336
Total	461		338			(13		)	786
QFNA
Goodwill	189		—			—			189
Brands	11		—			—			11
Total	200		—			—			200
PBNA ^(b)
Goodwill	9,898		21			(39		)	9,880
Reacquired franchise rights	7,089		—			(66		)	7,023
Acquired franchise rights	1,517		—			(13		)	1,504
Brands	763		—			—			763
Total	19,267		21			(118		)	19,170
LatAm
Goodwill	501		—			(26		)	475
Brands	125		—			(8		)	117
Total	626		—			(34		)	592
Europe ^(c)
Goodwill	3,961		(3		)	(131		)	3,827
Reacquired franchise rights	505		—			(20		)	485
Acquired franchise rights	157		—			(3		)	154
Brands	4,181		—			(131		)	4,050
Total	8,804		(3		)	(285		)	8,516
AMESA
Goodwill	446		—			1			447
Total	446		—			1			447
APAC
Goodwill	207		—			(10		)	197
Brands	100		—			(7		)	93
Total	307		—			(17		)	290

Total goodwill	15,501		180			(216		)	15,465
Total reacquired franchise rights	7,594		—			(86		)	7,508
Total acquired franchise rights	1,674		—			(16		)	1,658
Total brands	5,342		176			(148		)	5,370
Total	$	30,111	$	356		$	(466	)	$	30,001


(a)	The change from December 28, 2019 to March 21, 2020 primarily reflects our acquisition of BFY Brands, Inc. (BFY Brands).


(b)	The change in translation and other primarily reflects the depreciation of the Canadian dollar.


(a)	Primarily recorded in selling, general and administrative expenses.



	12 Weeks Ended
	Pension												Retiree Medical
	U.S.						International
	3/21/2020			3/23/2019			3/21/2020			3/23/2019			3/21/2020			3/23/2019
Service cost	$	100		$	88		$	17		$	13		$	6		$	5
Other pension and retiree medical benefits expense/(income):
Interest cost	100			125			16			17			6			8
Expected return on plan assets	(214		)	(206		)	(37		)	(33		)	(4		)	(4		)
Amortization of prior service cost/(credits)	3			2			—			—			(3		)	(4		)
Amortization of net losses/(gains)	45			37			10			5			(5		)	(6		)
Special termination benefits ^(a)	6			(5		)	—			—			—			—
Total other pension and retiree medical benefits income	(60		)	(47		)	(11		)	(11		)	(6		)	(6		)
Total	$	40		$	41		$	6		$	2		$	—		$	(1	)



Interest Rate		Maturity Date	Amount^(a)
2.250	%	March 2025	$	1,500
2.625	%	March 2027	$	500
2.750	%	March 2030	$	1,500
3.500	%	March 2040	$	750
3.625	%	March 2050	$	1,500
3.875	%	March 2060	$	750


(a)	Represents gross proceeds from issuances of long-term debt excluding debt issuance costs, discounts and premiums.


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



	Notional Amounts^(a)
	3/21/2020		12/28/2019
Commodity	$	1.2	$	1.1
Foreign exchange	$	1.8	$	1.9
Interest rate	$	5.0	$	5.0
Net investment ^(b)	$	2.4	$	2.5


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



		3/21/2020				12/28/2019
	Fair Value Hierarchy Levels	Assets^(a)		Liabilities^(a)		Assets^(a)		Liabilities^(a)
Short-term investments ^(b)	1	$	158	$	—	$	229	$	—
Prepaid forward contracts ^(c)	2	$	13	$	—	$	17	$	—
Deferred compensation ^(d)	2	$	—	$	379	$	—	$	468
Derivatives designated as fair value hedging instruments:
Interest rate ^(e)	2	$	7	$	1	$	—	$	5
Derivatives designated as cash flow hedging instruments:
Foreign exchange ^(f)	2	$	53	$	13	$	5	$	32
Interest rate ^(f)	2	—		613		—		390
Commodity ^(g)	1	—		31		2		5
Commodity ^(h)	2	—		30		2		5
		$	53	$	687	$	9	$	432
Derivatives not designated as hedging instruments:
Foreign exchange ^(f)	2	$	8	$	1	$	3	$	2
Commodity ^(g)	1	1		111		23		7
Commodity ^(h)	2	5		40		6		24
		$	14	$	152	$	32	$	33
Total derivatives at fair value ⁽ⁱ⁾		$	74	$	840	$	41	$	470
Total		$	245	$	1,219	$	287	$	938


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