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Basis of Presentation and Our Divisions Basis of Presentation and Our Divisions (Notes) | 3 Months Ended
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Mar. 19, 2022
Organization, Consolidation and Presentation of Financial Statements [Abstract] |
Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block] | 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 25, 2021 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 25, 2021 (2021 Form 10-K). This report should be read in conjunction with our 2021 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 weeks ended March 19, 2022 are not necessarily indicative of the results expected for any future period or the full year. While our financial results in the United States and Canada (North America) are reported on a 12-week basis, substantially all of our international operations reported on a monthly calendar basis prior to the fourth quarter of 2021. Beginning in the fourth quarter of 2021, all of our international operations reported on a monthly calendar basis. This change did not have a material impact on our condensed consolidated financial statements. For our international operations, the months of January and February are reflected in our results for the 12 weeks ended March 19, 2022. 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 novel coronavirus (COVID-19) pandemic and the deadly conflict in Ukraine 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. 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. 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. 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
|  |  |  |  | 3/19/2022 |  | 3/20/2021
FLNA |  |  |  |  | $ | 4,839 |  |  | $ | 4,236 |
QFNA |  |  |  |  | 713 |  |  | 646 |
PBNA |  |  |  |  | 5,353 |  |  | 5,074 |
LatAm |  |  |  |  | 1,474 |  |  | 1,242 |
Europe |  |  |  |  | 1,797 |  |  | 1,795 |
AMESA |  |  |  |  | 1,004 |  |  | 883 |
APAC |  |  |  |  | 1,020 |  |  | 944 |
Total |  |  |  |  | $ | 16,200 |  |  | $ | 14,820 |
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
| 3/19/2022 |  | 3/20/2021
| Beverages(a) |  | Convenient Foods |  | Beverages(a) |  | Convenient Foods
LatAm | 10 | % |  | 90 | % |  | 10 | % |  | 90 | %
Europe | 50 | % |  | 50 | % |  | 50 | % |  | 50 | %
AMESA | 30 | % |  | 70 | % |  | 30 | % |  | 70 | %
APAC | 15 | % |  | 85 | % |  | 15 | % |  | 85 | %
PepsiCo (b) | 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 approximately 35% and 40% of our consolidated net revenue in the 12 weeks ended March 19, 2022 and March 20, 2021, respectively. 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. (b)The decrease in the percentage of net revenue generated by our beverage business in the 12 weeks ended March 19, 2022 primarily reflects the Juice Transaction. See Note 11 for further information. Operating profit of each division is as follows:
|  |  | 12 Weeks Ended
|  |  |  |  | 3/19/2022 |  | 3/20/2021
FLNA |  |  |  |  | $ | 1,296 |  |  | $ | 1,240 |
QFNA |  |  |  |  | 159 |  |  | 150 |
PBNA (a) |  |  |  |  | 3,434 |  |  | 366 |
LatAm |  |  |  |  | 323 |  |  | 218 |
Europe (a) (b) |  |  |  |  | (136) |  |  | 131 |
AMESA |  |  |  |  | 180 |  |  | 138 |
APAC |  |  |  |  | 215 |  |  | 208 |
Total divisions |  |  |  |  | 5,471 |  |  | 2,451 |
Corporate unallocated expenses (c) |  |  |  |  | (204) |  |  | (139) |
Total |  |  |  |  | $ | 5,267 |  |  | $ | 2,312 |
(a)In the 12 weeks ended March 19, 2022, we recorded a gain of $3.0 billion and $298 million in our PBNA and Europe divisions, respectively, associated with the Juice Transaction. The total after-tax amount was $2.9 billion or $2.06 per share. See Note 11 for further information. (b)In the 12 weeks ended March 19, 2022, we recorded pre-tax impairment charges (Brand Portfolio Impairment Charges) of $241 million ($193 million after-tax or $0.14 per share) in selling, general and administrative expenses related to the discontinuation or repositioning of certain juice and dairy brands in Russia. See Note 3 for further information. Also see below for charges taken as a result of the Russia-Ukraine conflict. (c)In the 12 weeks ended March 20, 2021, we recorded a pre-tax unrealized gain of $108 million ($82 million after-tax or $0.06 per share) on our short-term investment in a publicly traded company, based on the quoted active market price as of market close on March 19, 2021, the last trading day of our first quarter of 2021. The gain was recorded in selling, general and administrative expenses within corporate unallocated expenses. We sold all of these shares during the second quarter of 2021. Operating profit includes certain pre-tax charges in our Europe division, taken as a result of the Russia-Ukraine conflict. These pre-tax charges are as follows:
|  |  |  |  | 12 Weeks Ended 3/19/2022 |  |  |  |
Impairment charges related to property, plant and equipment |  |  |  |  | $ | 123 |  |  |  |  |
Allowance for expected credit losses |  |  |  |  | 37 |  |  |  |  |
Inventory write-downs |  |  |  |  | 33 |  |  |  |  |
Other |  |  |  |  | 48 |  |  |  |  |
Total (a) |  |  |  |  | $ | 241 |  |  |  |  |
After-tax amount |  |  |  |  | $ | 241 |  |  |  |  |
Impact on net income attributable to PepsiCo per common share |  |  |  |  | $ | (0.17) |  |  |  |  |
(a)Includes $140 million recorded in cost of sales and $101 million recorded in selling, general and administrative expenses. Operating profit includes certain pre-tax charges taken as a result of the COVID-19 pandemic, primarily related to incremental employee compensation costs, such as certain leave benefits and labor costs, and employee protection costs. These pre-tax charges by division are as follows:
|  |  | 12 Weeks Ended
|  |  |  |  | 3/19/2022 |  | 3/20/2021
FLNA |  |  |  |  | $ | 14 |  |  | $ | 24 |
QFNA |  |  |  |  | 1 |  |  | 2 |
PBNA |  |  |  |  | 10 |  |  | 13 |
LatAm |  |  |  |  | 6 |  |  | 15 |
Europe |  |  |  |  | 1 |  |  | 6 |
AMESA (a) |  |  |  |  | 2 |  |  | (1) |
APAC |  |  |  |  | 2 |  |  | 2 |
Total |  |  |  |  | $ | 36 |  |  | $ | 61 |
(a)Income amount primarily relates to a true-up of inventory write-downs.

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