Document
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
 
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 13, 2020
PepsiCo, Inc.
(Exact name of registrant as specified in its charter)
 
North Carolina
 
1-1183
 
13-1584302
(State or other jurisdiction
of incorporation)
 
(Commission
File Number)
 
(IRS Employer
Identification No.)

700 Anderson Hill Road, Purchase, New York 10577
(Address of principal executive offices and Zip Code)
Registrant’s telephone number, including area code: (914253-2000
N/A
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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
1.750% Senior Notes Due 2021
 
PEP21a
 
The Nasdaq Stock Market LLC
2.500% Senior Notes Due 2022
 
PEP22a
 
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
1.125% Senior Notes Due 2031
 
PEP31
 
The Nasdaq Stock Market LLC
0.875% Senior Notes Due 2039
 
PEP39
 
The Nasdaq Stock Market LLC





Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

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.





Item 2.02. Results of Operations and Financial Condition.
The information in this Item 2.02, including Exhibit 99.1 attached hereto, is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (“Exchange Act”), or otherwise subject to the liabilities of that Section and shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended, or the Exchange Act, except as otherwise expressly stated in such filing.
Attached as Exhibit 99.1 and incorporated by reference into this Item 2.02 is a copy of the press release issued by PepsiCo, Inc. (“PepsiCo”), dated July 13, 2020, reporting PepsiCo’s financial results for the 12 and 24 weeks ended June 13, 2020.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
Exhibit No.
 
Description
  
104
 
The cover page from this Current Report on Form 8-K, formatted in Inline XBRL.





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 hereunto duly authorized.
 
 
 
PEPSICO, INC.
 
 
 
 
Date:
July 13, 2020
By:
/s/ David Yawman
 
 
Name:
David Yawman
 
 
Title:
Executive Vice President, Government Affairs, General Counsel and Corporate Secretary



Exhibit


Exhibit 99.1
https://cdn.kscope.io/7a59e5a559a1e1d7e02b3c85edaca2d7-pepsicologo20185a04.jpg
PepsiCo Reports Second-Quarter 2020 Results; Provides 2020 Business Update
Reported (GAAP) Second-Quarter and Year-to-Date 2020 Results
 
Second-Quarter
Year-to-Date
Net revenue performance
(3.1)%
1.7%
Foreign exchange impact on net revenue
(4)%
(2)%
Earnings per share (EPS)
$1.18
$2.14
EPS change
(18)%
(12)%
Foreign exchange impact on EPS
(3)%
(2)%
Organic/Core (non-GAAP)1 Second-Quarter and Year-to-Date 2020 Results
 
Second-Quarter
Year-to-Date
Organic revenue performance
(0.3)%
3.3%
Core EPS
$1.32
$2.39
Core constant currency EPS change
(11)%
(3)%
PURCHASE, N.Y. - July 13, 2020 - PepsiCo, Inc. (NASDAQ: PEP) today reported results for the second quarter 2020.
“I’m very pleased with the way our organization has protected our associates and served the needs of our customers, consumers and communities throughout these incredibly difficult times,” said PepsiCo Chairman and CEO, Ramon Laguarta. “Despite being faced with significant challenges and complexities as a result of the COVID-19 pandemic, our businesses performed relatively well during the quarter, with a notable level of resiliency in our global snacks and foods business.
Encouragingly, as restrictions and closures eased and population mobility improved as the quarter progressed, we also saw an improvement in our business performance and channel mix dynamics. However, the environment has remained volatile and much uncertainty remains about the duration and long-term implications of the pandemic.


1





As a result, we are not providing a financial outlook for fiscal year 2020 at this time. However, we continue to believe we have ample liquidity and flexibility to meet the needs of our business and return cash to shareholders. We remain focused on winning in the marketplace with our strong portfolio of brands in attractive categories, agile supply chain and flexible go-to-market systems, while also building on our competitive advantages, to emerge an even stronger company in the future.”

























































1 Please refer to the Glossary for the definitions of non-GAAP financial measures, including “Organic,” “Core” and “Constant Currency,” and to “Guidance and Outlook” for additional information regarding PepsiCo’s 2020 business update. Please refer to PepsiCo’s Quarterly Report on Form 10-Q for the 12 and 24 weeks ended June 13, 2020 (Q2 2020 Form 10-Q) filed with the SEC on July 13, 2020 for additional information regarding PepsiCo’s financial results.

2





Summary Second-Quarter 2020 Performance

 
Revenue
 
Volume
 
GAAP Reported
% Change
Percentage Point Impact
Organic
% Change
 
Organic Volume % Change
 
Foreign Exchange Translation
Acquisitions, Divestitures, and Other Structural Changes
 
Food/Snack
Beverage
Frito-Lay North America
7
(0.5)
6
 
3
 
Quaker Foods North America
23
23
 
26
 
PepsiCo Beverages North America
(7)
(1)
(7)
 
 
(10)
Latin America
(17)
17
 
(9)
Europe
(9)
7
(2.5)
 
2
2
Africa, Middle East and South Asia
(1)
2
(7)
(7)
 
(6)
(26)
Asia Pacific, Australia and New Zealand and China Region
10
5
15
 
14
(8)
Total
(3)
4
(1)
 
4
(11)
 
Operating Profit and EPS
 
GAAP Reported % Change
Percentage Point Impact
Core Constant Currency
% Change
 
Items Affecting Comparability
Foreign Exchange Translation
Frito-Lay North America
2
2
Quaker Foods North America
55
55
PepsiCo Beverages North America
(42)
5
(37)
Latin America
(22)
(4)
18
(8)
Europe
3
(17)
6
(7)
Africa, Middle East and South Asia
(75)
66
(9)
Asia Pacific, Australia and New Zealand and China Region
63
(35)
4
31
Corporate unallocated expenses
21
24
45
Total
(15)
1
3
(11)
 
 
 
 
 
EPS
(18)
4
3
(11)

Note: Amounts may not sum due to rounding.
Organic revenue and core constant currency results are non-GAAP financial measures. Please refer to the reconciliation of GAAP and non-GAAP information in the attached exhibits and to the Glossary for definitions of “Organic,” “Core” and “Constant Currency.”


3





Summary Year-to-Date 2020 Performance

 
Revenue
 
Volume
 
GAAP Reported
% Change
Percentage Point Impact
Organic
% Change
 
Organic Volume % Change
 
Foreign Exchange Translation
Acquisitions, Divestitures, and Other Structural Changes
 
Food/Snack
Beverage
Frito-Lay North America
7
7
 
4
 
Quaker Foods North America
14
15
 
17
 
PepsiCo Beverages North America
(1)
(1)
 
 
(3)
Latin America
(8)
11
3
 
1
(3.5)
Europe
(1)
4
3
 
3
5
Africa, Middle East and South Asia
2
1
(2)
1
 
2
(15)
Asia Pacific, Australia and New Zealand and China Region
8
3
11
 
10
(5)
Total
2
2
(0.5)
3
 
5
(4)
 
Operating Profit and EPS
 
GAAP Reported
% Change
Percentage Point Impact
Core Constant Currency
% Change
 
Items Affecting Comparability
Foreign Exchange Translation
Frito-Lay North America
3
1
4
Quaker Foods North America
31
31
PepsiCo Beverages North America
(36)
3
(32)
Latin America
(12)
(2)
10
(3)
Europe
9
(16)
5
(2)
Africa, Middle East and South Asia
(43)
44
(0.5)
Asia Pacific, Australia and New Zealand and China Region
49
(20)
3
31
Corporate unallocated expenses
38
(27)
12
Total
(10)
5
2
(4)
 
 
 
 
 
EPS
(12)
8
2
(3)

Note: Rows may not sum due to rounding.
Organic revenue and core constant currency results are non-GAAP financial measures. Please refer to the reconciliation of GAAP and non-GAAP information in the attached exhibits and to the Glossary for definitions of “Organic,” “Core” and “Constant Currency.”





4





Guidance and Outlook
As previously disclosed, the Company’s financial outlook regarding fiscal year 2020 is no longer applicable given the continued uncertainties associated with the magnitude and duration of the COVID-19 pandemic on its business.
However, the Company continues to expect:
A core effective tax rate of approximately 21 percent; and
Total cash returns to shareholders of approximately $7.5 billion, comprised of dividends of $5.5 billion and share repurchases of $2 billion.
In addition, the Company now expects a 3 percentage-point foreign exchange translation headwind to negatively impact reported net revenue and core EPS performance based on current market consensus rates.

Earnings Discussion and Conference Call:
At approximately 6:30 a.m. (Eastern time) today, the Company will post a pre-recorded management discussion of its second quarter 2020 results and business update at www.pepsico.com/investors. At 8:15 a.m. (Eastern time) today, the Company will host a live question and answer session with investors and financial analysts. Further details will be accessible on the Company’s website at www.pepsico.com/investors.
Contacts:
Investor Relations
 
Communications
 
investor@pepsico.com
 
pepsicomediarelations@pepsico.com

5





PepsiCo, Inc. and Subsidiaries
Condensed Consolidated Statement of Income
(in millions except per share amounts, unaudited)
 
 
12 Weeks Ended
 
24 Weeks Ended
 
6/13/2020

 
6/15/2019

 
6/13/2020

 
6/15/2019

Net Revenue
$
15,945

 
$
16,449

 
$
29,826

 
$
29,333

Cost of sales
7,088

 
7,404

 
13,215

 
13,092

Gross profit
8,857

 
9,045

 
16,611

 
16,241

Selling, general and administrative expenses (a)
6,538

 
6,316

 
12,368

 
11,504

Operating Profit
2,319

 
2,729

 
4,243

 
4,737

Other pension and retiree medical benefits income
84

 
61

 
161

 
125

Net interest expense and other
(235
)
 
(223
)
 
(525
)
 
(427
)
Income before income taxes
2,168

 
2,567

 
3,879

 
4,435

Provision for income taxes
510

 
524

 
870

 
970

Net income
1,658

 
2,043

 
3,009

 
3,465

Less: Net income attributable to noncontrolling interests
12

 
8

 
25

 
17

Net Income Attributable to PepsiCo
$
1,646

 
$
2,035

 
$
2,984

 
$
3,448

 
 
 
 
 
 
 
 
Diluted
 
 
 
 
 
 
 
Net income attributable to PepsiCo per common share
$
1.18

 
$
1.44

 
$
2.14

 
$
2.44

Weighted-average common shares outstanding
1,393

 
1,409

 
1,395

 
1,411

(a)
The increase in selling, general and administrative expenses for the 12 weeks ended June 13, 2020 as compared to the 12 weeks ended June 15, 2019, primarily reflects certain charges taken as a result of the COVID-19 pandemic and higher merger and integration charges. The increase in selling, general and administrative expenses for the 24 weeks ended June 13, 2020 as compared to the 24 weeks ended June 15, 2019, primarily reflects the charges taken as a result of the COVID-19 pandemic and higher merger and integration charges.

A - 1





PepsiCo, Inc. and Subsidiaries
Supplemental Financial Information
(in millions and unaudited)
 
 
12 Weeks Ended
 
24 Weeks Ended
 
6/13/2020

 
6/15/2019

 
6/13/2020

 
6/15/2019

Net Revenue
 
 
 
 
 
 
 
Frito-Lay North America
$
4,273

 
$
4,010

 
$
8,347

 
$
7,825

Quaker Foods North America
664

 
540

 
1,298

 
1,134

PepsiCo Beverages North America
4,970

 
5,322

 
9,808

 
9,832

Latin America
1,567

 
1,886

 
2,877

 
3,127

Europe
2,725

 
3,000

 
4,564

 
4,620

Africa, Middle East and South Asia
983

 
997

 
1,614

 
1,576

Asia Pacific, Australia and New Zealand and China Region
763

 
694

 
1,318

 
1,219

Total
$
15,945

 
$
16,449

 
$
29,826

 
$
29,333

 
 
 
 
 
 
 
 
Operating Profit 
 
 
 
 
 
 
 
Frito-Lay North America
$
1,278

 
$
1,249

 
$
2,480

 
$
2,408

Quaker Foods North America
196

 
127

 
346

 
265

PepsiCo Beverages North America
397

 
690

 
694

 
1,079

Latin America
219

 
278

 
450

 
508

Europe
351

 
339

 
497

 
454

Africa, Middle East and South Asia
59

 
236

 
193

 
341

Asia Pacific, Australia and New Zealand and China Region
189

 
116

 
331

 
222

Corporate unallocated expenses
(370
)
 
(306
)
 
(748
)
 
(540
)
Total
$
2,319

 
$
2,729

 
$
4,243

 
$
4,737




A - 2





PepsiCo, Inc. and Subsidiaries
Condensed Consolidated Statement of Cash Flows
(in millions, unaudited)
 
24 Weeks Ended
 
6/13/2020

 
6/15/2019

Operating Activities
 
 
 
Net income
$
3,009

 
$
3,465

Depreciation and amortization
1,122

 
1,056

Share-based compensation expense
101

 
118

Restructuring and impairment charges
63

 
184

Cash payments for restructuring charges
(109
)
 
(153
)
Pension and retiree medical plan expenses
80

 
98

Pension and retiree medical plan contributions
(293
)
 
(317
)
Deferred income taxes and other tax charges and credits
109

 
221

Net tax related to the Tax Cuts and Jobs Act (TCJ Act)

 
(29
)
Tax payments related to the TCJ Act

 
(393
)
Change in assets and liabilities:
 
 
 
Accounts and notes receivable
(1,101
)
 
(1,372
)
Inventories
(827
)
 
(872
)
Prepaid expenses and other current assets
(251
)
 
(336
)
Accounts payable and other current liabilities
(1,336
)
 
(521
)
Income taxes payable
448

 
202

Other, net
447

 
37

Net Cash Provided by Operating Activities
1,462

 
1,388

 
 
 
 
Investing Activities
 
 
 
Capital spending
(1,188
)
 
(1,167
)
Sales of property, plant and equipment
18

 
42

Acquisitions, net of cash acquired, and investments in noncontrolled affiliates
(5,649
)
 
(2,424
)
Divestitures
4

 
270

Short-term investments, by original maturity:
 
 
 
More than three months - maturities

 
4

More than three months - sales

 
2

Three months or less, net
18

 
8

Other investing, net
35

 
(6
)
Net Cash Used for Investing Activities
(6,762
)
 
(3,271
)
 
 
 
 
Financing Activities
 
 
 
Proceeds from issuances of long-term debt
10,564

 
1,122

Payments of long-term debt
(752
)
 
(2,953
)
Short-term borrowings, by original maturity:
 
 
 
More than three months - proceeds
3,663

 
6

More than three months - payments
(1,176
)
 

Three months or less, net
461

 
652

Cash dividends paid
(2,677
)
 
(2,635
)
Share repurchases - common
(1,137
)
 
(1,726
)
Proceeds from exercises of stock options
120

 
210

Withholding tax payments on restricted stock units and performance stock units converted
(79
)
 
(100
)
Other financing
(16
)
 
(15
)
Net Cash Provided by/(Used for) Financing Activities
8,971

 
(5,439
)
Effect of exchange rate changes on cash and cash equivalents and restricted cash
(252
)
 
24

Net Increase/(Decrease) in Cash and Cash Equivalents and Restricted Cash
3,419

 
(7,298
)
Cash and Cash Equivalents and Restricted Cash, Beginning of Year
5,570

 
10,769

Cash and Cash Equivalents and Restricted Cash, End of Period
$
8,989

 
$
3,471

 
 
 
 
Supplemental Non-Cash Activity
 
 
 
Right-of-use assets obtained in exchange for lease obligations
$
302

 
$
170


A - 3





PepsiCo, Inc. and Subsidiaries
Condensed Consolidated Balance Sheet
(in millions except per share amounts)

 
(unaudited)

 
 
 
6/13/2020

 
12/28/2019

ASSETS
 
 
 
Current Assets
 
 
 
Cash and cash equivalents
$
8,927

 
$
5,509

Short-term investments
196

 
229

Accounts and notes receivable, net
8,780

 
7,822

Inventories:
 
 
 
Raw materials and packaging
1,869

 
1,395

Work-in-process
344

 
200

Finished goods
2,101

 
1,743

 
4,314

 
3,338

Prepaid expenses and other current assets
972

 
747

Total Current Assets
23,189

 
17,645

Property, Plant and Equipment, net
19,187

 
19,305

Amortizable Intangible Assets, net
1,465

 
1,433

Goodwill
17,845

 
15,501

Other indefinite-lived intangible assets
17,530

 
14,610

Indefinite-Lived Intangible Assets
35,375

 
30,111

Investments in Noncontrolled Affiliates
2,715

 
2,683

Deferred Income Taxes
4,351

 
4,359

Other Assets
3,243

 
3,011

Total Assets
$
89,525

 
$
78,547

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
Current Liabilities
 
 
 
Short-term debt obligations
$
6,607

 
$
2,920

Accounts payable and other current liabilities
17,220

 
17,541

Total Current Liabilities
23,827

 
20,461

Long-Term Debt Obligations
38,371

 
29,148

Deferred Income Taxes
4,203

 
4,091

Other Liabilities
10,537

 
9,979

Total Liabilities
76,938

 
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: 1,385 and 1,391 shares, respectively)
23

 
23

Capital in excess of par value
3,772

 
3,886

Retained earnings
62,145

 
61,946

Accumulated other comprehensive loss
(15,778
)
 
(14,300
)
Repurchased common stock, in excess of par value (482 and 476 shares, respectively)
(37,671
)
 
(36,769
)
Total PepsiCo Common Shareholders’ Equity
12,491

 
14,786

Noncontrolling interests
96

 
82

Total Equity
12,587

 
14,868

Total Liabilities and Equity
$
89,525

 
$
78,547

 

A - 4





Non-GAAP Measures
In discussing financial results, the Company refers to the following measures which are not in accordance with U.S. Generally Accepted Accounting Principles (GAAP): core results, core constant currency results and organic revenue growth. We use these 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 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 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; amounts associated with mergers, acquisitions, divestitures and other structural changes; pension and retiree medical related items; charges or adjustments related to the enactment of new laws, rules or regulations, such as significant 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; asset impairments (non-cash); and remeasurements of net monetary assets. See below for a description of adjustments to our U.S. GAAP financial measures included herein. 
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 U.S. 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.
Glossary
We use the following definitions when referring to our non-GAAP financial measures, which may not be the same as or comparable to similar measures presented by other companies:
Acquisitions and divestitures: All mergers and acquisitions activity, including the impact of acquisitions, divestitures and changes in ownership or control in consolidated subsidiaries and nonconsolidated equity investees.
Beverage volume: Volume shipped to retailers and independent distributors from both PepsiCo and our independent bottlers.
Bottler case sales (BCS): Measure of physical beverage volume shipped to retailers and independent distributors from both PepsiCo and our independent bottlers.
Concentrate shipments and equivalents (CSE): Measure of our physical beverage volume shipments to independent bottlers, retailers and independent distributors.
 
Constant currency: 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.
Core: Core results are non-GAAP financial measures which exclude certain items from our historical results. For further information regarding these excluded items for the 12 and 24 weeks ended June 13, 2020 and June 15, 2019, refer to “Items Affecting Comparability” in “Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Q2 2020 Form 10-Q. For the periods presented, core results exclude the following items:
Mark-to-market net impact
Mark-to-market net gains and losses on commodity derivatives in corporate unallocated expenses. These gains and losses are subsequently reflected in division results when the divisions recognize the cost of the underlying commodity in operating profit.
Restructuring and impairment charges
Expenses related to the multi-year productivity plan publicly announced in 2019.
Inventory fair value adjustments and merger and integration charges
In the 24 weeks ended June 13, 2020, charges related to our acquisitions of BFY Brands, Inc. (BFY Brands), Rockstar Energy Beverages (Rockstar) and Pioneer Food Group Ltd. (Pioneer Foods).
In the 24 weeks ended June 15, 2019, charges primarily related to our acquisition of SodaStream International Ltd.

A - 5





Net tax related to the Tax Cuts and Jobs Act
During the fourth quarter of 2017, the TCJ Act was enacted in the United States. In periods subsequent to the enactment of the TCJ Act, we recognized certain tax benefits and/or expenses associated therewith.
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.
Organic revenue growth: A measure that adjusts for impacts of acquisitions, divestitures and other structural changes, foreign exchange translation and, when applicable, the impact of the 53rd reporting week.
2020 core effective tax rate
Our 2020 core effective tax rate expectation excludes the mark-to-market net impact included in corporate unallocated expenses and restructuring and impairment charges. We are not able to reconcile our full year projected 2020 core effective tax rate to our full year projected 2020 reported effective tax rate because we are unable to predict the 2020 impact of foreign exchange or the mark-to-market net impact on commodity derivatives due to the unpredictability of future changes in foreign exchange rates and commodity prices. Therefore, we are unable to provide a reconciliation of this measure.


A - 6





PepsiCo, Inc. and Subsidiaries
Reconciliation of GAAP and Non-GAAP Information
Organic Revenue Growth Rates
12 and 24 Weeks Ended June 13, 2020
(unaudited)
 
12 Weeks Ended 6/13/2020
 
 
 
Impact of
 
 
Impact of
Net Revenue Year over Year % Change
Reported
% Change, GAAP Measure
 
Foreign exchange translation
 
Acquisitions and divestitures(a)
 
Organic
% Change, Non-GAAP Measure(b)
 
Volume(c)
 
Effective net pricing
Frito-Lay North America
7
 %
 
 
(0.5
)
 
6
 %
 
4

 
2

Quaker Foods North America
23
 %
 
 

 
23
 %
 
26

 
(3
)
PepsiCo Beverages North America
(7
)%
 
 
(1
)
 
(7
)%
 
(11
)
 
3

Latin America
(17
)%
 
17
 

 
 %
 
(1
)
 
1

Europe
(9
)%
 
7
 

 
(2.5
)%
 
(1
)
 
(2
)
Africa, the Middle East and South Asia
(1
)%
 
2
 
(7
)
 
(7
)%
 
(8
)
 
1.5

Asia Pacific, Australia and New Zealand and China Region
10
 %
 
5
 

 
15
 %
 
11

 
3

Total
(3
)%
 
4
 
(1
)
 
 %
 
(2
)
 
1.5

 
24 Weeks Ended 6/13/2020
 
 
 
Impact of
 
 
Impact of
Net Revenue Year over Year % Change
Reported
% Change, GAAP Measure
 
Foreign exchange translation
 
Acquisitions and divestitures(d)
 
Organic
% Change, Non-GAAP Measure(b)
 
Volume(c)
 
Effective net pricing
Frito-Lay North America
7
 %




7
 %
 
4.5

 
2

Quaker Foods North America
14
 %




15
 %
 
17

 
(2
)
PepsiCo Beverages North America
 %


(1
)

(1
)%
 
(3
)
 
2

Latin America
(8
)%

11



3
 %
 
1

 
2

Europe
(1
)%

4



3
 %
 
3

 

Africa, Middle East and South Asia
2
 %

1

(2
)

1
 %
 
(1
)
 
2

Asia Pacific, Australia and New Zealand and China Region
8
 %
 
3
 

 
11
 %
 
7

 
5

Total
2
 %
 
2
 
(0.5
)
 
3
 %
 
2

 
2

(a)
Adjustments primarily reflect Pioneer Foods (AMESA), as well as Rockstar (PBNA) and BFY Brands (FLNA). The contribution from the acquisition of Rockstar reflects the incremental consolidated net revenue reported for Rockstar in excess of the net revenue we reported under our previous distribution arrangement.
(b)
Organic revenue growth is a financial measure that is not in accordance with GAAP.
(c)
Excludes the impact of acquisitions and divestitures. In certain instances, volume growth varies from the amounts disclosed in the Summary Second-Quarter 2020 Performance and Summary Year-to-Date 2020 Performance tables on pages 3 and 4, respectively, due to nonconsolidated joint venture volume, and, for our beverage businesses, temporary timing differences between BCS and CSE, as well as the mix of beverage volume sold by our company-owned and franchise-owned bottlers. Our net revenue excludes nonconsolidated joint venture volume, and, for our franchise-owned beverage businesses, is based on CSE.
(d)
Adjustments primarily reflect Pioneer Foods (AMESA) and Rockstar (PBNA). The contribution from the acquisition of Rockstar reflects the incremental consolidated net revenue reported for Rockstar in excess of the net revenue we reported under our previous distribution arrangement.
Note – Amounts may not sum due to rounding.

A - 7





PepsiCo, Inc. and Subsidiaries
Reconciliation of GAAP and Non-GAAP Information (continued)
Year over Year Growth Rates
12 and 24 Weeks Ended June 13, 2020
(unaudited)
 
12 Weeks Ended 6/13/2020
 
 
 
Impact of Items Affecting Comparability
 
 
Impact of
 
 
Year over Year % Change
Reported
% Change,
GAAP Measure
 
Mark-to-market net impact
 
Restructuring and impairment charges
 
Inventory fair value adjustments and merger and integration charges
 
Core
% Change, Non-GAAP Measure
(a)
 
Foreign exchange
translation
 
Core Constant Currency
% Change,
Non-GAAP Measure
(a)
Frito-Lay North America
2
 %
 

 

 

 
2
 %
 

 
2
 %
Quaker Foods North America
55
 %
 

 

 

 
55
 %
 

 
55
 %
PepsiCo Beverages North America
(42
)%
 

 
(1.5
)
 
7

 
(37
)%
 

 
(37
)%
Latin America
(22
)%
 

 
(4
)
 

 
(25
)%
 
18

 
(8
)%
Europe
3
 %
 

 
(11
)
 
(6
)
 
(14
)%
 
6

 
(7
)%
Africa, Middle East and South Asia
(75
)%
 

 
(1
)
 
67

 
(9
)%
 

 
(9
)%
Asia Pacific, Australia and New Zealand and China Region
63
 %
 

 
(35
)
 

 
28
 %
 
4

 
31
 %
Corporate unallocated expenses
21
 %
 
20

 
10

 
(6
)
 
45
 %
 

 
45
 %
Total Operating Profit
(15
)%
 
(6
)
 
(17
)
 
25

 
(14
)%
 
3

 
(11
)%
Net Income Attributable to PepsiCo
(19
)%
 
(3
)
 
(7
)
 
13

 
(16
)%
 
3

 
(12
)%
Net Income Attributable to PepsiCo per common share – diluted
(18
)%
 
(3
)
 
(6
)
 
13

 
(15
)%
 
3

 
(11
)%
 
24 Weeks Ended 6/13/2020
 
 
 
Impact of Items Affecting Comparability
 
 
 
Impact of
 
 
Year over Year % Change
Reported
% Change,
GAAP Measure
 
Mark-to-market net impact
 
Restructuring and impairment charges
 
Inventory fair value adjustments and merger and integration charges
 
Net tax related to the TCJ Act
 
Core
% Change, Non-GAAP Measure
(a)
 
Foreign exchange
translation
 
Core Constant Currency
% Change,
Non-GAAP Measure
(a)
Frito-Lay North America
3
 %
 

 

 
1

 
 
4
 %
 

 
4
 %
Quaker Foods North America
31
 %
 

 

 

 
 
31
 %
 

 
31
 %
PepsiCo Beverages North America
(36
)%
 

 
(1
)
 
5

 
 
(32
)%
 

 
(32
)%
Latin America
(12
)%
 

 
(2
)
 

 
 
(13
)%
 
10

 
(3
)%
Europe
9
 %
 

 
(9
)
 
(8
)
 
 
(7
)%
 
5

 
(2
)%
Africa, Middle East and South Asia
(43
)%
 

 
(2
)
 
46

 
 
1
 %
 
(0.5
)
 
 %
Asia Pacific, Australia and New Zealand and China Region
49
 %
 

 
(20
)
 

 
 
29
 %
 
3

 
31
 %
Corporate unallocated expenses
38
 %
 
(28
)
 
5

 
(3
)
 
 
12
 %
 

 
12
 %
Total Operating Profit
(10
)%
 
3

 
(3
)
 
4.5

 
 
(5.5
)%
 
2

 
(4
)%
Net Income Attributable to PepsiCo
(13
)%
 
3

 
(3
)
 
6

 
1
 
(6
)%
 
2

 
(4
)%
Net Income Attributable to PepsiCo per common share – diluted
(12
)%
 
3

 
(2.5
)
 
6

 
1
 
(5
)%
 
2

 
(3
)%
(a)
Core results and core constant currency results are financial measures that are not in accordance with GAAP and exclude the impact of the above items affecting comparability. See A-5 through A-6 for a discussion of each of these adjustments.
Note – Amounts may not sum due to rounding.

A - 8





PepsiCo, Inc. and Subsidiaries
Reconciliation of GAAP and Non-GAAP Information (continued)
Certain Line Items
12 Weeks Ended June 13, 2020 and June 15, 2019
(in millions except per share amounts, unaudited)
 
12 Weeks Ended 6/13/2020
 
Cost of sales
 
Gross profit
 
Selling, general and administrative expenses
 
Operating profit
 
Other pension and retiree medical benefits income
 
Provision for income taxes(b)
 
Net income attributable to PepsiCo
 
Net income attributable to PepsiCo per common share - diluted
 
Effective tax rate(c)
Reported, GAAP Measure
$
7,088

 
$
8,857

 
$
6,538

 
$
2,319

 
$
84

 
$
510

 
$
1,646

 
$
1.18

 
23.5
 %
Items Affecting Comparability
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mark-to-market net impact
14

 
(14
)
 
31

 
(45
)
 

 
(11
)
 
(34
)
 
(0.02
)
 

Restructuring and impairment charges
(1
)
 
1

 
(23
)
 
24

 
1

 
4

 
21

 
0.02

 
(0.1
)
Inventory fair value adjustments and merger and integration charges
(19
)
 
19

 
(199
)
 
218

 

 
13

 
205

 
0.15

 
(1.6
)
Core, Non-GAAP Measure (a)
$
7,082

 
$
8,863

 
$
6,347

 
$
2,516

 
$
85

 
$
516

 
$
1,838

 
$
1.32

 
21.8
 %
 
12 Weeks Ended 6/15/2019
 
Cost of sales
 
Gross profit
 
Selling, general and administrative expenses
 
Operating profit
 
Provision for income taxes(b)
 
Net income attributable to noncontrolling interests
 
Net income attributable to PepsiCo
 
Net income attributable to PepsiCo per common share - diluted
 
Effective tax rate(c)
Reported, GAAP Measure
$
7,404

 
$
9,045

 
$
6,316

 
$
2,729

 
$
524

 
$
8

 
$
2,035

 
$
1.44

 
20.4
%
Items Affecting Comparability
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mark-to-market net impact
13

 
(13
)
 
(19
)
 
6

 
1

 

 
5

 

 

Restructuring and impairment charges
(82
)
 
82

 
(76
)
 
158

 
38

 
4

 
116

 
0.08

 
0.2

Inventory fair value adjustments and merger and integration charges
(20
)
 
20

 
(4
)
 
24

 
5

 

 
19

 
0.01

 

Core, Non-GAAP Measure (a)
$
7,315

 
$
9,134

 
$
6,217

 
$
2,917

 
$
568

 
$
12

 
$
2,175

 
$
1.54

 
20.6
%
(a)
Core results are financial measures that are not in accordance with GAAP and exclude the above items affecting comparability. See A-5 through A-6 for a discussion of each of these adjustments.
(b)
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.
(c)
The impact of items affecting comparability on our effective tax rate represents the difference in the effective tax rate resulting from a higher or lower tax rate applicable to the items affecting comparability.

Note – Amounts may not sum due to rounding.

A - 9





PepsiCo, Inc. and Subsidiaries
Reconciliation of GAAP and Non-GAAP Information (continued)
Certain Line Items
24 Weeks Ended June 13, 2020 and June 15, 2019
(in millions except per share amounts, unaudited)
 
24 Weeks Ended 6/13/2020
 
Cost of sales
 
Gross profit
 
Selling, general and administrative expenses
 
Operating profit
 
Other pension and retiree medical benefits income
 
Provision for income taxes(b)
 
Net income attributable to PepsiCo
 
Net income attributable to PepsiCo per common share - diluted
 
Effective tax rate(c)
Reported, GAAP Measure
$
13,215

 
$
16,611

 
$
12,368

 
$
4,243

 
$
161

 
$
870

 
$
2,984

 
$
2.14

 
22.4
 %
Items Affecting Comparability
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mark-to-market net impact
(24
)
 
24

 
(73
)
 
97

 

 
24

 
73

 
0.05

 
0.1

Restructuring and impairment charges
(3
)
 
3

 
(53
)
 
56

 
7

 
10

 
53

 
0.04

 
(0.1
)
Inventory fair value adjustments and merger and integration charges
(19
)
 
19

 
(224
)
 
243

 

 
16

 
227

 
0.16

 
(0.9
)
Core, Non-GAAP Measure (a)
$
13,169

 
$
16,657

 
$
12,018

 
$
4,639

 
$
168

 
$
920

 
$
3,337

 
$
2.39

 
21.5
 %
 
24 Weeks Ended 6/15/2019
 
Cost of sales
 
Gross profit
 
Selling, general and administrative expenses
 
Operating profit
 
Other pension and retiree medical benefits income
 
Provision for income taxes(b)
 
Net income attributable to noncontrolling interests
 
Net income attributable to PepsiCo
 
Net income attributable to PepsiCo per common share - diluted
 
Effective tax rate(c)
Reported, GAAP Measure
$
13,092

 
$
16,241

 
$
11,504

 
$
4,737

 
$
125

 
$
970

 
$
17

 
$
3,448

 
$
2.44

 
21.9
%
Items Affecting Comparability
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mark-to-market net impact
32

 
(32
)
 
22

 
(54
)
 

 
(13
)
 

 
(41
)
 
(0.03
)
 

Restructuring and impairment charges
(90
)
 
90

 
(99
)
 
189

 
(5
)
 
41

 
4

 
139

 
0.10

 

Inventory fair value adjustments and merger and integration charges
(34
)
 
34

 
(5
)
 
39

 

 
7

 

 
32

 
0.02

 

Net tax related to the TCJ Act

 

 

 

 

 
29

 

 
(29
)
 
(0.02
)
 
0.7

Core, Non-GAAP Measure (a)
$
13,000

 
$
16,333

 
$
11,422

 
$
4,911

 
$
120

 
$
1,034

 
$
21

 
$
3,549

 
$
2.52

 
22.5
%
(a)
Core results are financial measures that are not in accordance with GAAP and exclude the impact of the above items affecting comparability. See A-5 through A-6 for a discussion of each of these adjustments.
(b)
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.
(c)
The impact of items affecting comparability on our effective tax rate represents the difference in the effective tax rate resulting from a higher or lower tax rate applicable to the items affecting comparability.

Note – Certain amounts may not sum due to rounding.

A - 10





PepsiCo, Inc. and Subsidiaries
Reconciliation of GAAP and Non-GAAP Information (continued)
Operating Profit by Division
12 Weeks Ended June 13, 2020 and June 15, 2019
(in millions, unaudited)
 
12 Weeks Ended 6/13/2020
 
 
 
Items Affecting Comparability
 
 
Operating Profit
Reported, GAAP Measure
 
Mark-to-market net impact
 
Restructuring
and impairment charges
 
Inventory fair value adjustments and merger and integration charges
 
Core,
Non-GAAP Measure(a)
Frito-Lay North America
$
1,278

 
$

 
$
2

 
$
2

 
$
1,282

Quaker Foods North America
196

 

 

 

 
196

PepsiCo Beverages North America
397

 

 

 
43

 
440

Latin America
219

 

 
4

 

 
223

Europe
351

 

 
8

 

 
359

Africa, Middle East and South Asia
59

 

 
5

 
157

 
221

Asia Pacific, Australia and New Zealand and China Region
189

 

 
3

 

 
192

Corporate unallocated expenses
(370
)
 
(45
)
 
2

 
16

 
(397
)
Total
$
2,319

 
$
(45
)
 
$
24

 
$
218

 
$
2,516

 
12 Weeks Ended 6/15/2019
 
 
 
Items Affecting Comparability
 
 
 
 
Operating Profit
Reported, GAAP Measure
 
Mark-to-market net impact
 
Restructuring
and impairment charges
 
Inventory fair value adjustments and merger and integration charges
 
Core,
Non-GAAP Measure(a)
Frito-Lay North America
$
1,249

 
$

 
$
6

 
$

 
$
1,255

Quaker Foods North America
127

 

 

 

 
127

PepsiCo Beverages North America
690

 

 
10

 

 
700

Latin America
278

 

 
21

 

 
299

Europe
339

 

 
53

 
23

 
415

Africa, Middle East and South Asia
236

 

 
8

 

 
244

Asia Pacific, Australia and New Zealand and China Region
116

 

 
34

 

 
150

Corporate unallocated expenses
(306
)
 
6

 
26

 
1

 
(273
)
Total
$
2,729

 
$
6

 
$
158

 
$
24

 
$
2,917

(a)
Core results are financial measures that are not in accordance with GAAP and exclude the above items affecting comparability. See A-5 through A-6 for a discussion of each of these adjustments.


A - 11





PepsiCo, Inc. and Subsidiaries
Reconciliation of GAAP and Non-GAAP Information (continued)
Operating Profit by Division
24 Weeks Ended June 13, 2020 and June 15, 2019
(in millions, unaudited)
 
24 Weeks Ended 6/13/2020
 
 
 
Items Affecting Comparability
 
 
Operating Profit
Reported, GAAP Measure
 
Mark-to-market net impact
 
Restructuring and impairment charges
 
Inventory fair value adjustments
and merger and integration charges
 
Core,
Non-GAAP Measure(a)
Frito-Lay North America
$
2,480

 
$

 
$
7

 
$
25

 
$
2,512

Quaker Foods North America
346

 

 
1

 

 
347

PepsiCo Beverages North America
694

 

 
3

 
43

 
740

Latin America
450

 

 
9

 

 
459

Europe
497

 

 
16

 

 
513

Africa, Middle East and South Asia
193

 

 
7

 
159

 
359

Asia Pacific, Australia and New Zealand and China Region
331

 

 
3

 

 
334

Corporate unallocated expenses
(748
)
 
97

 
10

 
16

 
(625
)
Total
$
4,243

 
$
97

 
$
56

 
$
243

 
$
4,639

 
24 Weeks Ended 6/15/2019
 
 
 
Items Affecting Comparability
 
 
Operating Profit
Reported,
 GAAP Measure
 
Mark-to-market net impact
 
Restructuring and impairment charges
 
Inventory fair value adjustments
and merger and integration charges
 
Core,
Non-GAAP Measure(a)
Frito-Lay North America
$
2,408

 
$

 
$
6

 
$

 
$
2,414

Quaker Foods North America
265

 

 

 

 
265

PepsiCo Beverages North America
1,079

 

 
16

 

 
1,095

Latin America
508

 

 
21

 

 
529

Europe
454

 

 
59

 
38

 
551

Africa, Middle East and South Asia
341

 

 
16

 

 
357

Asia Pacific, Australia and New Zealand and China Region
222

 

 
37

 

 
259

Corporate unallocated expenses
(540
)
 
(54
)
 
34

 
1

 
(559
)
Total
$
4,737

 
$
(54
)
 
$
189

 
$
39

 
$
4,911

(a)
Core results are financial measures that are not in accordance with GAAP and exclude the impact of the above items affecting comparability. See A-5 through A-6 for a discussion of each of these adjustments.

A - 12




PepsiCo, Inc. and Subsidiaries
Reconciliation of GAAP and Non-GAAP Information (continued)
(unaudited)

Gross Margin Performance Reconciliation

12 Weeks Ended


24 Weeks Ended

 
6/13/2020


6/13/2020

Reported gross margin growth
56

bps

33

bps
Mark-to-market net impact



19


Restructuring and impairment charges
(49
)