Document
false914--12-28Q22019truefalsePurchaseNY0000077476falseLarge Accelerated FilerNCPEPSICO INCfalsefalseNASDAQNASDAQNASDAQNASDAQNASDAQNASDAQNASDAQ0.500.503140000000.221010000001130000000.01670.01673600000000360000000014090000001399000000P84D144000000458000000468000000
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 15, 2019 (24 weeks)
OR
    
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from            to             
Commission file number 1-1183
pepsicologo20185a02.jpg 
PepsiCo, Inc.
(Exact Name of Registrant as Specified in its Charter)
 
 
 
North Carolina
 
13-1584302
(State or Other Jurisdiction of
Incorporation or Organization)
 
(I.R.S. Employer
Identification No.)
 
 
700 Anderson Hill Road, Purchase, New York
 
10577
(Address of Principal Executive Offices)
 
(Zip Code)
914-253-2000
(Registrant’s Telephone Number, Including Area Code)
N/A
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
Title of each class
 
Trading Symbols
 
Name of each exchange on which registered
Common Stock, par value 1-2/3 cents per share
 
PEP
 
The Nasdaq Stock Market LLC
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
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   x    No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes   x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer  x
 
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  x
Number of shares of Common Stock outstanding as of July 1, 2019 was 1,398,169,503.


Table of Contents    


PepsiCo, Inc. and Subsidiaries

Table of Contents
 
 
Page No.
Part I Financial Information
 
Item 1.
Condensed Consolidated Financial Statements
 
 
 
 
 
 
 
Item 2.
Report of Independent Registered Public Accounting Firm
Item 3.
Item 4.
Part II Other Information
 
Item 1.
Item 1A.
Item 2.
Item 6.


2

Table of Contents    


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
 
6/15/2019

 
6/16/2018

 
6/15/2019

 
6/16/2018

Net Revenue
$
16,449

 
$
16,090

 
$
29,333

 
$
28,652

Cost of sales
7,404

 
7,263

 
13,092

 
12,918

Gross profit
9,045

 
8,827

 
16,241

 
15,734

Selling, general and administrative expenses
6,316

 
5,799

 
11,504

 
10,899

Operating Profit
2,729

 
3,028

 
4,737

 
4,835

Other pension and retiree medical benefits income
61

 
82

 
125

 
157

Interest expense
(261
)
 
(308
)
 
(528
)
 
(602
)
Interest income and other
38

 
98

 
101

 
167

Income before income taxes
2,567

 
2,900

 
4,435

 
4,557

Provision for income taxes
524

 
1,070

 
970

 
1,374

Net income
2,043

 
1,830

 
3,465

 
3,183

Less: Net income attributable to noncontrolling interests
8

 
10

 
17

 
20

Net Income Attributable to PepsiCo
$
2,035

 
$
1,820

 
$
3,448

 
$
3,163

Net Income Attributable to PepsiCo per Common Share
 
 
 
 
 
 
 
Basic
$
1.45

 
$
1.28

 
$
2.46

 
$
2.23

Diluted
$
1.44

 
$
1.28

 
$
2.44

 
$
2.21

Weighted-average common shares outstanding
 
 
 
 
 
 
 
Basic
1,401

 
1,417

 
1,403

 
1,418

Diluted
1,409

 
1,426

 
1,411

 
1,428


See accompanying notes to the condensed consolidated financial statements.

3

Table of Contents    


Condensed Consolidated Statement of Comprehensive Income
PepsiCo, Inc. and Subsidiaries
(in millions, unaudited) 
 
12 Weeks Ended
 
24 Weeks Ended
 
6/15/2019

 
6/16/2018

 
6/15/2019

 
6/16/2018

Net income
$
2,043

 
$
1,830

 
$
3,465

 
$
3,183

Other comprehensive (loss)/income, net of taxes:
 
 
 
 
 
 
 
Net currency translation adjustment
(365
)
 
(971
)
 
108

 
(681
)
Net change on cash flow hedges
(6
)
 
48

 
(33
)
 
76

Net pension and retiree medical adjustments
42

 
56

 
59

 
80

Net change on available-for-sale securities
1

 
4

 
1

 
2

 
(328
)
 
(863
)
 
135

 
(523
)
Comprehensive income
1,715

 
967

 
3,600

 
2,660

Comprehensive income attributable to noncontrolling interests
(8
)
 
(10
)
 
(17
)
 
(20
)
Comprehensive Income Attributable to PepsiCo
$
1,707

 
$
957

 
$
3,583

 
$
2,640



See accompanying notes to the condensed consolidated financial statements.

4

Table of Contents    


Condensed Consolidated Statement of Cash Flows
PepsiCo, Inc. and Subsidiaries
(in millions, unaudited)
 
24 Weeks Ended
 
6/15/2019

 
6/16/2018

Operating Activities
 
 
 
Net income
$
3,465

 
$
3,183

Depreciation and amortization
1,056

 
1,070

Share-based compensation expense
118

 
146

Restructuring and impairment charges
184

 
44

Cash payments for restructuring charges
(153
)
 
(126
)
Pension and retiree medical plan expenses
98

 
93

Pension and retiree medical plan contributions
(317
)
 
(1,573
)
Deferred income taxes and other tax charges and credits
221

 
(167
)
Tax (benefits)/net tax expense related to the Tax Cuts and Jobs Act (TCJ Act)
(29
)
 
778

Tax payments related to the TCJ Act
(393
)
 
(38
)
Change in assets and liabilities:
 
 
 
Accounts and notes receivable
(1,372
)
 
(1,019
)
Inventories
(872
)
 
(637
)
Prepaid expenses and other current assets
(336
)
 
(224
)
Accounts payable and other current liabilities
(521
)
 
(560
)
Income taxes payable
202

 
410

Other, net
37

 
(293
)
Net Cash Provided by Operating Activities
1,388

 
1,087

 
 
 
 
Investing Activities
 
 
 
Capital spending
(1,167
)
 
(945
)
Sales of property, plant and equipment
42

 
43

Acquisition of SodaStream International Ltd. (SodaStream)
(1,880
)
 

Other acquisitions and investments in noncontrolled affiliates
(544
)
 
(188
)
Divestitures
270

 
280

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

 
(5,544
)
More than three months - maturities
4

 
9,416

More than three months - sales
2

 
760

Three months or less, net
8

 
5

Other investing, net
(6
)
 

Net Cash (Used for)/Provided by Investing Activities
(3,271
)
 
3,827

 
 
 
 
Financing Activities
 
 
 
Proceeds from issuances of long-term debt
1,122

 

Payments of long-term debt
(2,953
)
 
(2,502
)
Short-term borrowings, by original maturity:
 
 
 
More than three months - proceeds
6

 

More than three months - payments

 
(17
)
Three months or less, net
652

 
4,091

Cash dividends paid
(2,635
)
 
(2,305
)
Share repurchases - common
(1,726
)
 
(984
)
Share repurchases - preferred

 
(2
)
Proceeds from exercises of stock options
210

 
145

Withholding tax payments on restricted stock units (RSUs), performance stock units (PSUs) and PepsiCo
equity performance units (PEPunits) converted
(100
)
 
(82
)
Other financing
(15
)
 
(2
)
Net Cash Used for Financing Activities
(5,439
)
 
(1,658
)
Effect of exchange rate changes on cash and cash equivalents and restricted cash
24

 
(19
)
Net (Decrease)/Increase in Cash and Cash Equivalents and Restricted Cash
(7,298
)
 
3,237

Cash and Cash Equivalents and Restricted Cash, Beginning of Year
10,769

 
10,657

Cash and Cash Equivalents and Restricted Cash, End of Period
$
3,471

 
$
13,894


See accompanying notes to the condensed consolidated financial statements.

5

Table of Contents    


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

 
 
 
6/15/2019

 
12/29/2018

ASSETS
 
 
 
Current Assets
 
 
 
Cash and cash equivalents
$
3,293

 
$
8,721

Short-term investments
291

 
272

Restricted cash
150

 
1,997

Accounts and notes receivable, less allowance: 6/19 - $113 and 12/18 - $101
8,502

 
7,142

Inventories:
 
 
 
Raw materials and packaging
1,589

 
1,312

Work-in-process
384

 
178

Finished goods
2,015

 
1,638

 
3,988

 
3,128

Prepaid expenses and other current assets
988

 
633

Total Current Assets
17,212

 
21,893

Property, plant and equipment
40,264

 
40,164

Accumulated depreciation
(22,822
)
 
(22,575
)
 
17,442

 
17,589

Amortizable Intangible Assets, net
1,433

 
1,644

Goodwill
15,632

 
14,808

Other indefinite-lived intangible assets
14,148

 
14,181

Indefinite-Lived Intangible Assets
29,780

 
28,989

Investments in Noncontrolled Affiliates
2,510

 
2,409

Deferred Income Taxes
4,353

 
4,364

Other Assets
2,354

 
760

Total Assets
$
75,084

 
$
77,648

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
Current Liabilities
 
 
 
Short-term debt obligations
$
3,473

 
$
4,026

Accounts payable and other current liabilities
16,455

 
18,112

Total Current Liabilities
19,928

 
22,138

Long-Term Debt Obligations
27,712

 
28,295

Deferred Income Taxes
3,658

 
3,499

Other Liabilities
9,749

 
9,114

Total Liabilities
61,047

 
63,046

 
 
 
 
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: 1,399 and 1,409 shares, respectively)
23

 
23

Capital in excess of par value
3,796

 
3,953

Retained earnings
60,752

 
59,947

Accumulated other comprehensive loss
(14,984
)
 
(15,119
)
Repurchased common stock, in excess of par value (468 and 458 shares, respectively)
(35,635
)
 
(34,286
)
Total PepsiCo Common Shareholders’ Equity
13,952

 
14,518

Noncontrolling interests
85

 
84

Total Equity
14,037

 
14,602

Total Liabilities and Equity
$
75,084

 
$
77,648


See accompanying notes to the condensed consolidated financial statements.

6

Table of Contents    


Condensed Consolidated Statement of Equity
PepsiCo, Inc. and Subsidiaries
(in millions, unaudited)
 
12 Weeks Ended
 
24 Weeks Ended
 
6/15/2019
 
6/16/2018
 
6/15/2019
 
6/16/2018
 
Shares
 
Amount
 
Shares
 
Amount
 
Shares
 
Amount
 
Shares
 
Amount
Preferred Stock
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, beginning of period

 
$

 

 
$

 

 
$

 
0.8

 
$
41

Conversion to common stock

 

 

 

 

 

 
(0.1
)
 
(6
)
Retirement of preferred stock

 

 

 

 

 

 
(0.7
)
 
(35
)
Balance, end of period

 

 

 

 

 

 

 

Repurchased Preferred Stock
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, beginning of period

 

 

 

 

 

 
(0.7
)
 
(197
)
Redemptions

 

 

 

 

 

 

 
(2
)
Retirement of preferred stock

 

 

 

 

 

 
0.7

 
199

Balance, end of period

 

 

 

 

 

 

 

Common Stock
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, beginning of period
1,404

 
23

 
1,419

 
24

 
1,409

 
23

 
1,420

 
24

Shares issued in connection with preferred stock conversion to common stock

 

 

 

 

 

 
1

 

Change in repurchased common stock
(5
)
 

 
(4
)
 

 
(10
)
 

 
(6
)
 

Balance, end of period
1,399

 
23

 
1,415

 
24

 
1,399

 
23

 
1,415

 
24

Capital in Excess of Par Value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, beginning of period
 
 
3,753

 
 
 
3,866

 
 
 
3,953

 
 
 
3,996

Share-based compensation expense
 
 
62

 
 
 
65

 
 
 
119

 
 
 
148

Equity issued in connection with preferred stock conversion to common stock
 
 

 
 
 

 
 
 

 
 
 
6

Stock option exercises, RSUs, PSUs and PEPunits converted
 
 
(12
)
 
 
 
(8
)
 
 
 
(176
)
 
 
 
(150
)
Withholding tax on RSUs, PSUs and PEPunits converted
 
 
(7
)
 
 
 
(6
)
 
 
 
(100
)
 
 
 
(82
)
Other
 
 

 
 
 
(2
)
 
 
 

 
 
 
(3
)
Balance, end of period
 
 
3,796

 
 
 
3,915

 
 
 
3,796

 
 
 
3,915

Retained Earnings
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, beginning of period
 
 
60,060

 
 
 
52,726

 
 
 
59,947

 
 
 
52,839

Cumulative effect of accounting changes
 
 

 
 
 

 
 
 
8

 
 
 
(145
)
Net income attributable to PepsiCo
 
 
2,035

 
 
 
1,820

 
 
 
3,448

 
 
 
3,163

Cash dividends declared – common (a)
 
 
(1,343
)
 
 
 
(1,323
)
 
 
 
(2,651
)
 
 
 
(2,470
)
Retirement of preferred stock
 
 

 
 
 

 
 
 

 
 
 
(164
)
Balance, end of period
 
 
60,752

 
 
 
53,223

 
 
 
60,752

 
 
 
53,223

Accumulated Other Comprehensive Loss
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, beginning of period
 
 
(14,656
)
 
 
 
(12,717
)
 
 
 
(15,119
)
 
 
 
(13,057
)
Other comprehensive (loss)/income attributable to PepsiCo
 
 
(328
)
 
 
 
(863
)
 
 
 
135

 
 
 
(523
)
Balance, end of period
 
 
(14,984
)
 
 
 
(13,580
)
 
 
 
(14,984
)
 
 
 
(13,580
)
Repurchased Common Stock
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, beginning of period
(463
)
 
(34,978
)
 
(448
)
 
(33,016
)
 
(458
)
 
(34,286
)
 
(446
)
 
(32,757
)
Share repurchases
(6
)
 
(779
)
 
(5
)
 
(483
)
 
(15
)
 
(1,750
)
 
(10
)
 
(1,004
)
Stock option exercises, RSUs, PSUs and PEPunits converted
1

 
122

 
1

 
28

 
5

 
401

 
4

 
289

Other

 

 

 

 

 

 

 
1

Balance, end of period
(468
)
 
(35,635
)
 
(452
)
 
(33,471
)
 
(468
)
 
(35,635
)
 
(452
)
 
(33,471
)
Total PepsiCo Common Shareholders’ Equity
 
 
13,952

 
 
 
10,111

 
 
 
13,952

 
 
 
10,111

Noncontrolling Interests
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, beginning of period
 
 
94

 
 
 
102

 
 
 
84

 
 
 
92

Net income attributable to noncontrolling interests
 
 
8

 
 
 
10

 
 
 
17

 
 
 
20

Distributions to noncontrolling interests
 
 
(15
)
 
 
 

 
 
 
(15
)
 
 
 

Other, net
 
 
(2
)
 
 
 
(2
)
 
 
 
(1
)
 
 
 
(2
)
Balance, end of period
 
 
85

 
 
 
110

 
 
 
85

 
 
 
110

Total Equity
 
 
$
14,037

 
 
 
$
10,221

 
 
 
$
14,037

 
 
 
$
10,221


(a)
Cash dividends declared per common share were $0.955 and $0.9275 for the 12 weeks ended June 15, 2019 and June 16, 2018, respectively, and $1.8825 and $1.7325 for the 24 weeks ended June 15, 2019 and June 16, 2018, respectively.
See accompanying notes to the condensed consolidated financial statements.

7

Table of Contents    


Notes to the Condensed Consolidated Financial Statements
Note 1 - Basis of Presentation and Our Divisions
Basis of Presentation
When used in this report, the terms “we,” “us,” “our,” “PepsiCo” and the “Company” mean PepsiCo, Inc. and its consolidated subsidiaries, collectively.
Our Condensed Consolidated Balance Sheet as of June 15, 2019, Condensed Consolidated Statements of Income, Comprehensive Income and Equity for the 12 and 24 weeks ended June 15, 2019 and June 16, 2018 and the Condensed Consolidated Statement of Cash Flows for the 24 weeks ended June 15, 2019 and June 16, 2018 have not been audited. These 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 29, 2018 (2018 Form 10-K), as modified to reflect the adoption of those recently issued accounting pronouncements disclosed in Note 2 in this Form 10-Q. This report should be read in conjunction with our 2018 Form 10-K. In our opinion, these financial statements include all normal and recurring adjustments necessary for a fair presentation. The results for the 12 and 24 weeks ended June 15, 2019 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 report on a monthly calendar basis for which the months of March, April and May are reflected in our results for the 12 weeks ended June 15, 2019, and the months of January through May are reflected in our results for the 24 weeks ended June 15, 2019.
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.
The following information is unaudited. 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 six reportable segments (also referred to as divisions), as follows:
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. PBNA was formerly named North America Beverages; this change did not impact the results of PBNA or our other reportable segments;
4)
Latin America (LatAm), which includes all of our beverage, food and snack businesses in Latin America;
5)
Europe Sub-Saharan Africa (ESSA), which includes all of our beverage, food and snack businesses in Europe and Sub-Saharan Africa; and

8

Table of Contents    


6)
Asia, Middle East and North Africa (AMENA), which includes all of our beverage, food and snack businesses in Asia, the Middle East and North Africa.
Net revenue and operating profit of each division are as follows:
 
12 Weeks Ended
 
24 Weeks Ended
Net Revenue (a)
6/15/2019

 
6/16/2018

 
6/15/2019

 
6/16/2018

FLNA
$
4,010

 
$
3,837

 
$
7,825

 
$
7,454

QFNA
540

 
527

 
1,134

 
1,128

PBNA
5,322

 
5,193

 
9,832

 
9,608

LatAm
1,886

 
1,843

 
3,127

 
3,067

ESSA
3,133

 
3,116

 
4,826

 
4,784

AMENA
1,558

 
1,574

 
2,589

 
2,611

Total
$
16,449

 
$
16,090

 
$
29,333

 
$
28,652

(a)
Our primary performance obligation is the distribution and sales of beverage products and food and snack products to our customers, each comprising approximately 50% of our consolidated net revenue. Internationally, our LatAm segment is predominantly a food and snack business, ESSA’s beverage business and food and snack business are each approximately 50% of the segment’s net revenue and AMENA’s beverage business and food and snack business are approximately 35% and 65%, respectively, of the segment’s net revenue. Beverage revenue from company-owned bottlers, which primarily includes our consolidated bottling operations in our PBNA and ESSA segments, is approximately 40% of our consolidated net revenue. Generally, our finished goods beverage operations produce higher net revenue, but lower operating margins as compared to concentrate sold to authorized bottling partners for the manufacture of finished goods beverages.
 
12 Weeks Ended
 
24 Weeks Ended
Operating Profit
6/15/2019

 
6/16/2018

 
6/15/2019

 
6/16/2018

FLNA
$
1,249

 
$
1,200

 
$
2,408

 
$
2,250

QFNA
127

 
145

 
265

 
300

PBNA
690

 
747

 
1,079

 
1,135

LatAm
278

 
269

 
508

 
458

ESSA
366

 
438

 
491

 
556

AMENA (a)
325

 
496

 
526

 
683

Total division
$
3,035

 
$
3,295

 
$
5,277

 
$
5,382

Corporate unallocated expenses
(306
)
 
(267
)
 
(540
)
 
(547
)
Total
$
2,729

 
$
3,028

 
$
4,737

 
$
4,835


(a)
Operating profit for AMENA for the 12 and 24 weeks ended June 16, 2018 includes a gain of $144 million associated with refranchising a portion of our beverage business in Thailand.
Note 2 - Recently Issued Accounting Pronouncements
Adopted
In 2018, the Financial Accounting Standards Board (FASB) issued guidance related to the TCJ Act for the optional reclassification of the residual tax effects, arising from the change in corporate tax rate, in accumulated other comprehensive loss to retained earnings. The reclassification is the difference between the amount previously recorded in other comprehensive income at the historical U.S. federal tax rate that remains in accumulated other comprehensive loss at the time the TCJ Act was effective and the amount that would have been recorded using the newly enacted rate. This guidance became effective during the first quarter of 2019; however, we did not elect to make the optional reclassification.
In 2017, the FASB issued guidance to amend and simplify the application of hedge accounting guidance to better portray the economic results of risk management activities in the financial statements. The guidance expands the ability to hedge nonfinancial and financial risk components, reduces complexity in fair value hedges of interest rate risk, eliminates the requirement to separately measure and report hedge ineffectiveness, as well as eases certain hedge effectiveness assessment requirements. Under this guidance, certain of our

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derivatives used to hedge commodity price risk that did not previously qualify for hedge accounting treatment can now qualify prospectively. We adopted this guidance during the first quarter of 2019; the adoption did not have a material impact on our financial statements or disclosures. See Note 9 for further information.
In 2016, the FASB issued guidance on leases, with amendments issued in 2018. The guidance requires lessees to recognize most leases on the balance sheet but does not change the manner in which expenses are recorded in the income statement. For lessors, the guidance modifies the classification criteria and the accounting for sales-type and direct financing leases. The two permitted transition methods under the guidance are the modified retrospective transition approach, which requires application of the guidance for all comparative periods presented, and the cumulative effect adjustment approach, which requires prospective application at the adoption date.
We utilized a comprehensive approach to assess the impact of this guidance on our financial statements and related disclosures, including the increase in the assets and liabilities on our balance sheet and the impact on our current lease portfolio from both a lessor and lessee perspective. We completed our comprehensive review of our lease portfolio, including significant leases by geography and by asset type that were impacted by the new guidance, and enhanced our controls. In addition, we implemented a new software platform, and corresponding controls, for administering our leases and facilitating compliance with the new guidance.
We adopted the guidance prospectively during the first quarter of 2019. As part of our adoption, we elected not to reassess historical lease classification, recognize short-term leases on our balance sheet, nor separate lease and non-lease components for our real estate leases. In addition, we utilized the portfolio approach to group leases with similar characteristics and did not use hindsight to determine lease term. The adoption did not have a material impact on our financial statements, resulting in an increase of 2% to each of our total assets and total liabilities on our balance sheet, and had an immaterial increase to retained earnings as of the beginning of 2019. See Note 13 for further information.
Note 3 - Restructuring and Impairment Charges
2019 Multi-Year Productivity Plan
We publicly announced a multi-year productivity plan on February 15, 2019 (2019 Productivity Plan) that will leverage new technology and business models to further simplify, harmonize and automate processes; re-engineer our go-to-market and information systems, including deploying the right automation for each market; simplify our organization and optimize our manufacturing and supply chain footprint.
A summary of our 2019 Productivity Plan charges is as follows:
 
6/15/2019
 
12 Weeks Ended
 
24 Weeks Ended

Cost of sales
$
82

 
$
90

Selling, general and administrative expenses
76

 
99

Other pension and retiree medical benefits income (a)

 
(5
)
Total restructuring and impairment charges
$
158

 
$
184

After-tax amount
$
120

 
$
143

Net income attributable to PepsiCo per common share
$
0.08

 
$
0.10

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

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6/15/2019
 
 
 
12 Weeks Ended
 
24 Weeks Ended

 
Plan to Date
FLNA
$
6

 
$
6

 
$
37

QFNA

 

 
5

PBNA
10

 
16

 
56

LatAm
21

 
21

 
30

ESSA
53

 
59

 
67

AMENA
42

 
53

 
56

Corporate
26

 
34

 
41

 
158

 
189

 
292

Other pension and retiree medical benefits (income)/expense (a)

 
(5
)
 
30

 
$
158

 
$
184

 
$
322

(a)
Income amount represents adjustments for changes in estimates of previously recorded amounts.
 
6/15/2019
 
 
 
12 Weeks Ended
 
24 Weeks Ended
 
Plan to Date
Severance and other employee costs
$
43

 
$
40

 
$
177

Asset impairments
76

 
84

 
84

Other costs (a)
39

 
60

 
61

 
$
158

 
$
184

 
$
322

(a)
Includes other costs associated with the implementation of our initiatives, including contract termination costs, consulting and other professional fees.
A summary of our 2019 Productivity Plan activity for the 24 weeks ended June 15, 2019 is as follows:
 
Severance and Other Employee Costs
 
Asset
Impairments
 
Other Costs
 
Total
Liability as of December 29, 2018
$
105

 
$

 
$
1

 
$
106

2019 restructuring charges
40

 
84

 
60

 
184

Cash payments (a)
(44
)
 

 
(20
)
 
(64
)
Non-cash charges and translation
5

 
(84
)
 

 
(79
)
Liability as of June 15, 2019
$
106

 
$

 
$
41

 
$
147

(a)
Excludes cash expenditures of $2 million reported in the cash flow statement in pension and retiree medical contributions.
Substantially all of the restructuring accrual at June 15, 2019 is expected to be paid by the end of 2019.
2014 Multi-Year Productivity Plan
We publicly announced a multi-year productivity plan on February 13, 2014 (2014 Productivity Plan) that includes the next generation of productivity initiatives that we believe will strengthen our beverage, food and snack businesses by: accelerating our investment in manufacturing automation; further optimizing our global manufacturing footprint, including closing certain manufacturing facilities; re-engineering our go-to-market systems in developed markets; expanding shared services; and implementing simplified organization structures to drive efficiency. To build on the 2014 Productivity Plan, in the fourth quarter of 2017, we expanded and extended the program through the end of 2019 to take advantage of additional opportunities within the initiatives described above to further strengthen our beverage, food and snack businesses.
We have substantially completed our 2014 Productivity Plan and do not expect to incur material charges in 2019 associated with this program. We expect pre-tax charges and cash expenditures for the program to approximate the total program estimates of $1.3 billion and $960 million, respectively.

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For the 12 and 24 weeks ended June 15, 2019, there were no material charges related to this program. Cash payments for the 24 weeks ended June 15, 2019 were $89 million. The accrual related to this program as of June 15, 2019 is immaterial and is expected to be paid by the end of 2019.
For further information, refer to Note 3 to our consolidated financial statements in our 2018 Form 10-K.
A summary of our 2014 Productivity Plan charges is as follows:
 
6/16/2018
 
12 Weeks Ended
 
24 Weeks Ended
Selling, general and administrative expenses
$
32

 
$
40

Other pension and retiree medical benefits expense

 
4

Total restructuring and impairment charges
$
32

 
$
44

After-tax amount
$
24

 
$
35

Net income attributable to PepsiCo per common share
$
0.02

 
$
0.02

 
6/16/2018
 
12 Weeks Ended
 
24 Weeks Ended
FLNA
$
4

 
$
9

QFNA

 
1

PBNA
9

 
12

LatAm
3

 
12

ESSA
4

 
8

AMENA
2

 
4

Corporate (a)
10

 
(2
)
 
$
32

 
$
44

(a)
Income amount represents adjustments for changes in estimates of previously recorded amounts.
 
6/16/2018
 
12 Weeks Ended
 
24 Weeks Ended
Severance and other employee costs
$
21

 
$
24

Asset impairments
4

 
8

Other costs
7

 
12

 
$
32

 
$
44

Other Productivity Initiatives
There were no material charges related to other productivity and efficiency initiatives outside the scope of the 2019 and 2014 Productivity Plans.
We regularly evaluate different productivity initiatives beyond the productivity plans and other initiatives described above.

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Note 4 - Intangible Assets
A summary of our amortizable intangible assets is as follows:
 
 
6/15/2019
 
12/29/2018
 
 
Gross
 
Accumulated Amortization
 
Net
 
Gross
 
Accumulated Amortization
 
Net
Acquired franchise rights
 
$
842

 
$
(148
)
 
$
694

 
$
838

 
$
(140
)
 
$
698

Reacquired franchise rights
 
106

 
(105
)
 
1

 
106

 
(105
)
 
1

Brands
 
1,305

 
(1,043
)
 
262

 
1,306

 
(1,032
)
 
274

Other identifiable intangibles (a)
 
777

 
(301
)
 
476

 
959

 
(288
)
 
671

 
 
$
3,030

 
$
(1,597
)
 
$
1,433

 
$
3,209

 
$
(1,565
)
 
$
1,644


(a)
The change from December 29, 2018 to June 15, 2019 primarily reflects revisions to the purchase price allocation for our acquisition of SodaStream.




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The change in the book value of indefinite-lived intangible assets is as follows:
 
Balance
12/29/2018
 
Acquisitions/
(Divestitures)
 
Translation
and Other
 
Balance
6/15/2019

 
 
 
FLNA

 
 
 

 

Goodwill
$
297

 
$
(3
)
 
$
3

 
$
297

Brands
161

 

 

 
161


458

 
(3
)
 
3

 
458

QFNA
 
 
 
 
 
 
 
Goodwill
184

 
11

 

 
195

Brands
25

 
(14
)
 

 
11

 
209

 
(3
)
 

 
206

PBNA (a)
 
 
 
 
 
 
 
Goodwill
9,813

 
134

 
9

 
9,956

Reacquired franchise rights
7,058