Item 1. Condensed Consolidated Financial Statements.

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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
		3/19/2022		3/20/2021
Net Revenue		$	16,200	$	14,820
Cost of sales		7,433		6,671
Gross profit		8,767		8,149
Selling, general and administrative expenses		6,822		5,837
Gain associated with the Juice Transaction (a)		(3,322)		—
Operating Profit		5,267		2,312
Other pension and retiree medical benefits income		134		120
Net interest expense and other		(240)		(258)
Income before income taxes		5,161		2,174
Provision for income taxes		888		451
Net income		4,273		1,723
Less: Net income attributable to noncontrolling interests		12		9
Net Income Attributable to PepsiCo		$	4,261	$	1,714
Net Income Attributable to PepsiCo per Common Share
Basic		$	3.08	$	1.24
Diluted		$	3.06	$	1.24
Weighted-average common shares outstanding
Basic		1,383		1,380
Diluted		1,391		1,387

(a)In the 12 weeks ended March 19, 2022, we sold our Tropicana, Naked and other select juice brands to PAI Partners for approximately $3.5 billion in cash and a 39% noncontrolling interest in a newly formed joint venture (Tropicana JV) operating across North America and Europe (Juice Transaction). See Note 11 for further information.

See accompanying notes to the condensed consolidated financial statements.

Condensed Consolidated Statement of Comprehensive Income

PepsiCo, Inc. and Subsidiaries

(in millions, unaudited)


	12 Weeks Ended
		3/19/2022		3/20/2021
Net income		$	4,273	$	1,723
Other comprehensive (loss)/income, net of taxes:
Net currency translation adjustment		(560)		131
Net change on cash flow hedges		106		72
Net pension and retiree medical adjustments		13		27
Other		(4)		—
		(445)		230
Comprehensive income		3,828		1,953
Less: Comprehensive income attributable to noncontrolling interests		12		9
Comprehensive Income Attributable to PepsiCo		$	3,816	$	1,944

See accompanying notes to the condensed consolidated financial statements.

Condensed Consolidated Statement of Cash Flows

PepsiCo, Inc. and Subsidiaries

(in millions, unaudited)


	12 Weeks Ended
	3/19/2022		3/20/2021
Operating Activities
Net income	$	4,273	$	1,723
Depreciation and amortization	555		560
Gain associated with the Juice Transaction	(3,322)		—
Brand portfolio impairment charges	241		—
Russia-Ukraine conflict charges	241		—
Operating lease right-of-use asset amortization	103		99
Share-based compensation expense	81		79
Restructuring and impairment charges	27		43
Cash payments for restructuring charges	(32)		(49)
Acquisition and divestiture-related charges	56		(10)
Cash payments for acquisition and divestiture-related charges	(17)		(7)
Pension and retiree medical plan (income)/expense	(1)		21
Pension and retiree medical plan contributions	(178)		(413)
Deferred income taxes and other tax charges and credits	257		108


Change in assets and liabilities:
Accounts and notes receivable	(837)		(455)
Inventories	(549)		(397)
Prepaid expenses and other current assets	(190)		(210)
Accounts payable and other current liabilities	(1,238)		(1,906)
Income taxes payable	489		227
Other, net	(133)		(132)
Net Cash Used for Operating Activities	(174)		(719)

Investing Activities
Capital spending	(522)		(471)
Sales of property, plant and equipment	3		5
Acquisitions, net of cash acquired, and investments in noncontrolled affiliates	(13)		(13)
Proceeds associated with the Juice Transaction	3,456		—
Other divestitures and sales of investments in noncontrolled affiliates	5		35
Short-term investments, by original maturity:

More than three months - maturities	—		535

Three months or less, net	22		3
Other investing, net	4		—
Net Cash Provided by Investing Activities	2,955		94

(Continued on following page)

Condensed Consolidated Statement of Cash Flows (continued)

PepsiCo, Inc. and Subsidiaries

(in millions, unaudited)


	12 Weeks Ended
	3/19/2022		3/20/2021
Financing Activities

Payments of long-term debt	(1,251)		(1)

Short-term borrowings, by original maturity:
More than three months - proceeds	559		—
More than three months - payments	—		(396)
Three months or less, net	647		53

Cash dividends paid	(1,505)		(1,429)
Share repurchases - common	(193)		(106)

Proceeds from exercises of stock options	49		62
Withholding tax payments on restricted stock units (RSUs) and performance stock units (PSUs) converted	(85)		(71)
Other financing	(1)		—
Net Cash Used for Financing Activities	(1,780)		(1,888)
Effect of exchange rate changes on cash and cash equivalents and restricted cash	(17)		(10)
Net Increase/(Decrease) in Cash and Cash Equivalents and Restricted Cash	984		(2,523)
Cash and Cash Equivalents and Restricted Cash, Beginning of Year	5,707		8,254
Cash and Cash Equivalents and Restricted Cash, End of Period	$	6,691	$	5,731

Supplemental Non-Cash Activity
Right-of-use assets obtained in exchange for lease obligations	$	100	$	167

See accompanying notes to the condensed consolidated financial statements.

Condensed Consolidated Balance Sheet

PepsiCo, Inc. and Subsidiaries

(in millions except per share amounts)


	(Unaudited)
	3/19/2022		12/25/2021
ASSETS
Current Assets
Cash and cash equivalents	$	6,561	$	5,596
Short-term investments	343		392

Accounts and notes receivable, less allowance: 3/22 - $192 and 12/21 - $147	9,424		8,680
Inventories:
Raw materials and packaging	2,017		1,898
Work-in-process	154		151
Finished goods	2,591		2,298
	4,762		4,347
Prepaid expenses and other current assets	1,252		980
Assets held for sale	—		1,788
Total Current Assets	22,342		21,783
Property, plant and equipment	46,533		46,828
Accumulated depreciation	(24,516)		(24,421)
Property, Plant and Equipment, net	22,017		22,407
Amortizable Intangible Assets, net	1,497		1,538
Goodwill	18,112		18,381
Other Indefinite-Lived Intangible Assets	16,603		17,127

Investments in Noncontrolled Affiliates	3,595		2,627
Deferred Income Taxes	4,301		4,310
Other Assets	4,495		4,204
Total Assets	$	92,962	$	92,377

LIABILITIES AND EQUITY
Current Liabilities
Short-term debt obligations	$	5,459	$	4,308
Accounts payable and other current liabilities	20,365		21,159
Liabilities held for sale	—		753
Total Current Liabilities	25,824		26,220
Long-Term Debt Obligations	34,590		36,026
Deferred Income Taxes	5,072		4,826
Other Liabilities	9,156		9,154
Total Liabilities	74,642		76,226
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: 1,384 and 1,383 shares, respectively)	23		23
Capital in excess of par value	3,893		4,001
Retained earnings	67,934		65,165
Accumulated other comprehensive loss	(15,343)		(14,898)
Repurchased common stock, in excess of par value (483 and 484 shares, respectively)	(38,305)		(38,248)
Total PepsiCo Common Shareholders’ Equity	18,202		16,043
Noncontrolling interests	118		108
Total Equity	18,320		16,151
Total Liabilities and Equity	$	92,962	$	92,377

See accompanying notes to the condensed consolidated financial statements.

Condensed Consolidated Statement of Equity

PepsiCo, Inc. and Subsidiaries

(in millions, except per share amounts, unaudited)


	12 Weeks Ended
		3/19/2022	3/20/2021
			Shares	Amount		Shares	Amount










Common Stock
Balance, beginning of period			1,383	$	23	1,380	$	23
Change in repurchased common stock			1	—		2	—
Balance, end of period			1,384	23		1,382	23
Capital in Excess of Par Value
Balance, beginning of period				4,001			3,910
Share-based compensation expense				83			80

Stock option exercises, RSUs and PSUs converted				(106)			(119)
Withholding tax on RSUs and PSUs converted				(85)			(71)

Balance, end of period				3,893			3,800
Retained Earnings
Balance, beginning of period				65,165			63,443

Net income attributable to PepsiCo				4,261			1,714
Cash dividends declared – common (a)				(1,492)			(1,417)

Balance, end of period				67,934			63,740
Accumulated Other Comprehensive Loss
Balance, beginning of period				(14,898)			(15,476)
Other comprehensive (loss)/income attributable to PepsiCo				(445)			230
Balance, end of period				(15,343)			(15,246)
Repurchased Common Stock
Balance, beginning of period			(484)	(38,248)		(487)	(38,446)
Share repurchases			(1)	(213)		(1)	(106)
Stock option exercises, RSUs and PSUs converted			2	156		3	182

Balance, end of period			(483)	(38,305)		(485)	(38,370)
Total PepsiCo Common Shareholders’ Equity				18,202			13,947
Noncontrolling Interests
Balance, beginning of period				108			98
Net income attributable to noncontrolling interest				12			9



Other, net				(2)			(1)
Balance, end of period				118			106
Total Equity				$	18,320		$	14,053

(a)Cash dividends declared per common share were $1.075 and $1.0225 for the 12 weeks ended March 19, 2022 and March 20, 2021, respectively.

See accompanying notes to the condensed consolidated financial statements.

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.

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.

Note 2 - 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; and simplify our organization and optimize our manufacturing and supply chain footprint. To build on the successful implementation of the 2019 Productivity Plan, in 2021, we expanded and extended the plan through the end of 2026 to take advantage of additional opportunities within the initiatives described above. As a result, we expect to incur pre-tax charges of approximately $3.15 billion, including cash expenditures of approximately $2.4 billion. These pre-tax charges are expected to consist of approximately 55% of severance and other employee-related costs, 10% for asset impairments (all non-cash) resulting from plant closures and related actions, and 35% for other costs associated with the implementation of our initiatives.

The total expected plan pre-tax charges are expected to be incurred by division approximately as follows:


			FLNA						QFNA						PBNA						LatAm						Europe						AMESA						APAC						Corporate
Expected pre-tax charges			15		%				1		%				25		%				10		%				25		%				5		%				4		%				15		%

A summary of our 2019 Productivity Plan charges is as follows:


	12 Weeks Ended
		3/19/2022		3/20/2021
Cost of sales		$	5	$	2
Selling, general and administrative expenses		22		35
Other pension and retiree medical benefits expense		—		6
Total restructuring and impairment charges		$	27	$	43
After-tax amount		$	21	$	35
Impact on net income attributable to PepsiCo per common share		$	(0.02)	$	(0.03)


	12 Weeks Ended			Plan to Date
		3/19/2022		3/20/2021		through 3/19/2022
FLNA		$	3	$	15	$	167
QFNA		—		—		12
PBNA		3		4		161
LatAm		6		2		145
Europe		7		11		241
AMESA		2		1		72
APAC		1		—		62
Corporate		5		4		144
		27		37		1,004
Other pension and retiree medical benefits expense		—		6		67
Total		$	27	$	43	$	1,071


	12 Weeks Ended			Plan to Date
		3/19/2022		3/20/2021		through 3/19/2022
Severance and other employee costs		$	11	$	34	$	575
Asset impairments		—		—		157
Other costs		16		9		339
Total		$	27	$	43	$	1,071

Severance and other employee costs primarily include severance and other termination benefits, as well as voluntary separation arrangements. Other costs primarily include 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 12 weeks ended March 19, 2022 is as follows:


	Severance and Other Employee Costs		Other Costs		Total
Liability as of December 25, 2021	$	64	$	7	$	71
2022 restructuring charges	11		16		27
Cash payments	(16)		(16)		(32)

Liability as of March 19, 2022	$	59	$	7	$	66

Substantially all of the restructuring accrual at March 19, 2022 is expected to be paid by the end of 2022.

Other Productivity Initiatives

There were no charges related to other productivity and efficiency initiatives outside the scope of the 2019 Productivity Plan.

We regularly evaluate different productivity initiatives beyond the productivity plan and other initiatives described above.

For information on other impairment charges, see Notes 1 and 3 for Brand Portfolio Impairment Charges and Note 1 for Russia-Ukraine Conflict Charges.

Note 3 - Intangible Assets

During the 12 weeks ended March 19, 2022, we discontinued or repositioned certain juice and dairy brands in Russia in our Europe division. As a result, we recognized 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, primarily related to indefinite-lived intangible assets. In light of the current political and economic environment, we will continue to review and analyze our brand portfolio worldwide.

For further information on our policies for indefinite-lived intangible assets, refer to Note 2 to our consolidated financial statements in our 2021 Form 10-K.

A summary of our amortizable intangible assets is as follows:


	3/19/2022						12/25/2021
	Gross		Accumulated Amortization		Net		Gross		Accumulated Amortization		Net
Acquired franchise rights (a)	$	975	$	(189)	$	786	$	976	$	(187)	$	789
Customer relationships	608		(222)		386		623		(227)		396
Brands	1,120		(984)		136		1,151		(989)		162
Other identifiable intangibles	450		(261)		189		451		(260)		191
Total	$	3,153	$	(1,656)	$	1,497	$	3,201	$	(1,663)	$	1,538

(a)Acquired franchise rights includes our distribution agreement with Vital Pharmaceuticals, Inc., with an expected residual value higher than our carrying value. In the fourth quarter of 2020, we received notice of termination without cause, which would end our distribution rights, effective in the fourth quarter of 2023. The distribution agreement’s useful life is three years, in accordance with the three-year termination notice issued.

The change in the book value of indefinite-lived intangible assets is as follows:


	Balance 12/25/2021		Translation and Other		Balance 3/19/2022

FLNA
Goodwill	$	458	$	2	$	460
Brands	340		—		340
Total	798		2		800
QFNA
Goodwill	189		—		189
Total	189		—		189
PBNA
Goodwill	11,974		6		11,980
Reacquired franchise rights	7,107		13		7,120
Acquired franchise rights	1,538		2		1,540
Brands	2,508		—		2,508
Total	23,127		21		23,148
LatAm
Goodwill	433		15		448
Brands	100		5		105
Total	533		20		553
Europe (a)
Goodwill	3,700		(308)		3,392
Reacquired franchise rights	441		(36)		405
Acquired franchise rights	158		(2)		156
Brands	4,254		(513)		3,741
Total	8,553		(859)		7,694
AMESA
Goodwill	1,063		16		1,079
Brands	205		6		211
Total	1,268		22		1,290
APAC
Goodwill	564		—		564
Brands	476		1		477
Total	1,040		1		1,041

Total goodwill	18,381		(269)		18,112
Total reacquired franchise rights	7,548		(23)		7,525
Total acquired franchise rights	1,696		—		1,696
Total brands	7,883		(501)		7,382
Total	$	35,508	$	(793)	$	34,715

(a)The change in translation and other primarily represents the depreciation of the Russian ruble and the Brand Portfolio Impairment Charges.

Note 4 - Income Taxes

In 2021, we received a final assessment from the Internal Revenue Service audit for the tax years 2014 through 2016. The assessment included both agreed and unagreed issues. On October 29, 2021, we filed a formal written protest of the assessment and requested an appeals conference. As a result of the analysis of the 2014 through 2016 final assessment, we remeasured all applicable reserves for uncertain tax positions for all years open under the statute of limitations, including any correlating adjustments impacting the mandatory transition tax liability under the Tax Cuts and Jobs Act (TCJ Act), resulting in a net non-cash tax expense of $112 million in 2021. There were no tax amounts recognized in the 12 weeks ended March 19, 2022 and March 20, 2021 from this assessment.

Note 5 - Share-Based Compensation

The following table summarizes our total share-based compensation expense, which is primarily recorded in selling, general and administrative expenses:


	12 Weeks Ended
		3/19/2022		3/20/2021
Share-based compensation expense – equity awards		$	81	$	79
Share-based compensation expense – liability awards		5		4
Acquisition and divestiture-related charges		3		—
Restructuring charges		(1)		1
Total		$	88	$	84

The following table summarizes share-based awards granted under the terms of the PepsiCo, Inc. Long-Term Incentive Plan:


	12 Weeks Ended
	3/19/2022			3/20/2021
	Granted(a)	Weighted-Average Grant Price		Granted(a)	Weighted-Average Grant Price
Stock options	2.1	$	163.00	1.8	$	131.25
RSUs and PSUs	2.3	$	163.00	2.6	$	131.25

(a)In millions. All grant activity is disclosed at target.

We granted long-term cash awards to certain executive officers and other senior executives with an aggregate target value of $18 million and $17 million during the 12 weeks ended March 19, 2022 and March 20, 2021, respectively.

Our weighted-average Black-Scholes fair value assumptions are as follows:


	12 Weeks Ended
	3/19/2022		3/20/2021
Expected life	7 years		7 years
Risk-free interest rate	1.7	%	1.1	%
Expected volatility	16	%	14	%
Expected dividend yield	2.5	%	3.1	%

Note 6 - Pension and Retiree Medical Benefits

In the 12 weeks ended March 19, 2022, we transferred pension and retiree medical obligations of approximately $145 million and related assets to the Tropicana JV in connection with the Juice Transaction. See Note 11 for further information.

The components of net periodic benefit cost/(income) for pension and retiree medical plans are as follows:


	12 Weeks Ended
	Pension								Retiree Medical
	U.S.				International
	3/19/2022		3/20/2021		3/19/2022		3/20/2021		3/19/2022		3/20/2021
Service cost	$	114	$	120	$	17	$	19	$	8	$	8
Other pension and retiree medical benefits income:
Interest cost	88		75		17		13		4		3
Expected return on plan assets	(215)		(224)		(42)		(41)		(3)		(4)
Amortization of prior service credits	(6)		(7)		—		—		(2)		(2)
Amortization of net losses/(gains)	33		51		5		13		(3)		(3)
Settlement/curtailment gains	—		—		—		—		(16)		—
Special termination benefits	6		6		—		—		—		—
Total other pension and retiree medical benefits income	(94)		(99)		(20)		(15)		(20)		(6)
Total	$	20	$	21	$	(3)	$	4	$	(12)	$	2

We regularly evaluate opportunities to reduce risk and volatility associated with our pension and retiree medical plans.

During the 12 weeks ended March 19, 2022 and March 20, 2021, we made discretionary contributions of $75 million and $300 million, respectively, to our U.S. qualified defined benefit plans, and $10 million and $25 million, respectively, to our international defined benefit plans. We expect to make an additional discretionary contribution of $75 million to our U.S. qualified defined benefit plans in the third quarter of 2022.

Note 7 - Debt Obligations

In the 12 weeks ended March 19, 2022, $1.3 billion of USD-denominated senior notes matured and were paid. Subsequent to March 19, 2022, we paid $750 million to redeem all $750 million outstanding principal amount of our 2.25% senior notes due May 2022, and we gave notice to early redeem all $800 million outstanding principal amount of our 3.10% senior notes due July 2022.

As of March 19, 2022, we had $1.4 billion of commercial paper outstanding.

Note 8 - Financial Instruments

We are exposed to market risks arising from adverse changes in:

commodity prices, affecting the cost of our raw materials and energy;
foreign exchange rates and currency restrictions; and
interest rates.

There have been no material changes during the 12 weeks ended March 19, 2022 with respect to our risk management policies or strategies and valuation techniques used in measuring the fair value of the financial assets or liabilities disclosed in Note 9 to our consolidated financial statements in our 2021 Form

10-K. We continue to evaluate our hedging strategies related to our Russian business based on the impact of the Russia-Ukraine conflict on financial markets.

Certain of our agreements with our counterparties require us to post full collateral on derivative instruments in a net liability position if our credit rating is at A2 (Moody’s Investors Service, Inc.) or A (S&P Global Ratings) and we have been placed on credit watch for possible downgrade or if our credit rating falls below either of these levels. The fair value of all derivative instruments with credit-risk-related contingent features that were in a net liability position as of March 19, 2022 was $219 million. We have posted no collateral under these contracts and no credit-risk-related contingent features were triggered as of March 19, 2022.

The notional amounts of our financial instruments used to hedge the above risks as of March 19, 2022 and December 25, 2021 are as follows:


	Notional Amounts(a)
	3/19/2022		12/25/2021
Commodity	$	1.6	$	1.6
Foreign exchange	$	2.6	$	2.8
Interest rate	$	2.1	$	2.1
Net investment (b)	$	2.1	$	2.1

(a)In billions.

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

As of March 19, 2022, approximately 5% of total debt, after the impact of the related interest rate derivative instruments, was subject to variable rates, compared to 2% as of December 25, 2021.

Held-to-Maturity Debt Securities

Investments in debt securities that we have the positive intent and ability to hold until maturity are classified as held-to-maturity. Highly liquid debt securities with original maturities of three months or less are recorded as cash equivalents. Our held-to-maturity debt securities consist of commercial paper. As of March 19, 2022 and December 25, 2021, we had $244 million and $130 million of investments in commercial paper recorded in cash and cash equivalents, respectively. Held-to-maturity debt securities are recorded at amortized cost, which approximates fair value, and realized gains or losses are reported in earnings. Our investments mature in less than one year. As of March 19, 2022 and December 25, 2021, gross unrecognized gains and losses and the allowance for expected credit losses were not material.

Fair Value Measurements

The fair values of our financial assets and liabilities as of March 19, 2022 and December 25, 2021 are categorized as follows:


		3/19/2022				12/25/2021
	Fair Value Hierarchy Levels(a)	Assets(a)		Liabilities(a)		Assets(a)		Liabilities(a)

Index funds (b)	1	$	297	$	—	$	337	$	—
Prepaid forward contracts (c)	2	$	20	$	—	$	21	$	—
Deferred compensation (d)	2	$	—	$	480	$	—	$	505

Derivatives designated as cash flow hedging instruments:
Foreign exchange (e)	2	$	43	$	16	$	29	$	14
Interest rate (e)	2	28		275		14		264
Commodity (f)	2	119		1		70		5
		$	190	$	292	$	113	$	283
Derivatives not designated as hedging instruments:
Foreign exchange (e)	2	$	39	$	22	$	19	$	7
Commodity (f)	2	56		12		35		22
		$	95	$	34	$	54	$	29
Total derivatives at fair value (g)		$	285	$	326	$	167	$	312
Total		$	602	$	806	$	525	$	817

(a)Fair value hierarchy levels are categorized consistently by Level 1 (quoted prices in active markets for identical assets) and Level 2 (significant other observable inputs) in both years. 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.

(c)Based primarily on the price of our common stock.

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

(e)Based on recently reported market transactions of spot and forward rates.

(f)Primarily based on recently reported market transactions of swap arrangements.

(g)Derivative assets and liabilities are presented on a gross basis on our balance sheet. Amounts subject to enforceable master netting arrangements or similar agreements which are not offset on the balance sheet as of March 19, 2022 and December 25, 2021 were not material. Collateral received or posted against our asset or liability positions was not material. Exchange-traded commodity futures are cash-settled on a daily basis and, therefore, not included in the table.

The carrying amounts of our cash and cash equivalents and short-term investments recorded at amortized cost approximate fair value (classified as Level 2 in the fair value hierarchy) due to their short-term maturity. The fair value of our debt obligations as of March 19, 2022 and December 25, 2021 was $38 billion and $43 billion, respectively, based upon prices of similar instruments in the marketplace, which are considered Level 2 inputs.

Losses/(gains) on our hedging instruments are categorized as follows:


	12 Weeks Ended
	Non- designated Hedges				Cash Flow and Net Investment Hedges
	Losses/(Gains) Recognized in Income Statement(a)				Losses/(Gains) Recognized in Accumulated Other Comprehensive Loss				Losses/(Gains) Reclassified from Accumulated Other Comprehensive Loss into Income Statement(b)
	3/19/2022		3/20/2021		3/19/2022		3/20/2021		3/19/2022		3/20/2021
Foreign exchange	$	(16)	$	4	$	(8)	$	11	$	(4)	$	13
Interest rate	—		1		(3)		(18)		20		(4)
Commodity	(166)		(81)		(189)		(90)		(78)		(10)
Net investment	—		—		(51)		(63)		—		—
Total	$	(182)	$	(76)	$	(251)	$	(160)	$	(62)	$	(1)

(a)Foreign exchange derivative losses/gains are primarily included in selling, general and administrative expenses. Commodity derivative losses/gains are included in either cost of sales or selling, general and administrative expenses, depending on the underlying commodity.

(b)Foreign exchange derivative losses/gains are primarily included in cost of sales. Interest rate derivative losses/gains on cross-currency interest rate swaps are included in selling, general and administrative expenses. Commodity derivative losses/gains are included in either cost of sales or selling, general and administrative expenses, depending on the underlying commodity.

Based on current market conditions, we expect to reclassify net gains of $275 million related to our cash flow hedges from accumulated other comprehensive loss into net income during the next 12 months.

Note 9 - Net Income Attributable to PepsiCo per Common Share

The computations of basic and diluted net income attributable to PepsiCo per common share are as follows:


	12 Weeks Ended
	3/19/2022			3/20/2021
	Income		Shares(a)	Income		Shares(a)





Basic net income attributable to PepsiCo per common share	$	3.08		$	1.24
Net income available for PepsiCo common shareholders	$	4,261	1,383	$	1,714	1,380
Dilutive securities:
Stock options, RSUs, PSUs and other (b)	—		8	—		7
Diluted	$	4,261	1,391	$	1,714	1,387
Diluted net income attributable to PepsiCo per common share	$	3.06		$	1.24

(a)Weighted-average common shares outstanding (in millions).

(b)The dilutive effect of these securities is calculated using the treasury stock method.

The weighted-average amount of antidilutive securities excluded from the calculation of diluted earnings per common share was immaterial for both the 12 weeks ended March 19, 2022 and March 20, 2021.

Note 10 - Accumulated Other Comprehensive Loss Attributable to PepsiCo

The changes in the balances of each component of accumulated other comprehensive loss attributable to PepsiCo are as follows:


	Currency Translation Adjustment		Cash Flow Hedges		Pension and Retiree Medical		Other		Accumulated Other Comprehensive Loss Attributable to PepsiCo
Balance as of December 25, 2021 (a)	$	(12,309)	$	159	$	(2,750)	$	2	$	(14,898)
Other comprehensive (loss)/income before reclassifications (b)	(549)		200		(8)		—		(357)
Amounts reclassified from accumulated other comprehensive loss	—		(62)		25		—		(37)
Net other comprehensive (loss)/income	(549)		138		17		—		(394)
Tax amounts	(11)		(32)		(4)		(4)		(51)
Balance as of March 19, 2022 (a)	$	(12,869)	$	265	$	(2,737)	$	(2)	$	(15,343)

(a)Pension and retiree medical amounts are net of taxes of $1,283 million as of December 25, 2021 and $1,279 million as of March 19, 2022.

(b)Currency translation adjustment primarily reflects depreciation of the Russian ruble, partially offset by the appreciation of the South African rand, Brazilian real and Canadian dollar.


	Currency Translation Adjustment		Cash Flow Hedges		Pension and Retiree Medical		Other		Accumulated Other Comprehensive Loss Attributable to PepsiCo
Balance as of December 26, 2020 (a)	$	(11,940)	$	4	$	(3,520)	$	(20)	$	(15,476)
Other comprehensive income/(loss) before reclassifications (b)	128		97		(20)		—		205
Amounts reclassified from accumulated other comprehensive loss	18		(1)		52		—		69
Net other comprehensive income	146		96		32		—		274
Tax amounts	(15)		(24)		(5)		—		(44)
Balance as of March 20, 2021 (a)	$	(11,809)	$	76	$	(3,493)	$	(20)	$	(15,246)

(a)Pension and retiree medical amounts are net of taxes of $1,514 million as of December 26, 2020 and $1,509 million as of March 20, 2021.

(b)Currency translation adjustment primarily reflects appreciation of the Canadian dollar, British pound sterling and Russian ruble.

The reclassifications from accumulated other comprehensive loss to the income statement are summarized as follows:


	12 Weeks Ended
		3/19/2022		3/20/2021		Affected Line Item in the Income Statement



Currency translation:
Divestiture		$	—	$	18	Selling, general and administrative expenses

Cash flow hedges:
Foreign exchange contracts		$	(2)	$	1	Net revenue
Foreign exchange contracts		(2)		12		Cost of sales
Interest rate derivatives		20		(4)		Selling, general and administrative expenses
Commodity contracts		(76)		(11)		Cost of sales
Commodity contracts		(2)		1		Selling, general and administrative expenses
Net gains before tax		(62)		(1)
Tax amounts		10		1
Net gains after tax		$	(52)	$	—

Pension and retiree medical items:
Amortization of prior service credits		$	(8)	$	(9)	Other pension and retiree medical benefits income
Amortization of net losses		35		61		Other pension and retiree medical benefits income
Settlement/curtailment gains		(2)		—		Other pension and retiree medical benefits income
Net losses before tax		25		52
Tax amounts		(6)		(11)
Net losses after tax		$	19	$	41






Total net (gains)/losses reclassified, net of tax		$	(33)	$	59

Note 11 - Acquisitions and Divestitures

2020 Acquisitions

In 2020, we acquired Pioneer Food Group Ltd. (Pioneer Foods), Rockstar Energy Beverages (Rockstar) and Hangzhou Haomusi Food Co., Ltd. The purchase price allocations for each of these acquisitions were finalized in the second quarter of 2021. See Note 13 to our consolidated financial statements in our 2021 Form 10-K for further information.

Juice Transaction

In the 12 weeks ended March 19, 2022, we sold our Tropicana, Naked and other select juice brands to PAI Partners for approximately $3.5 billion in cash and a 39% noncontrolling interest in the Tropicana JV, operating across North America and Europe. The North America portion of the transaction was completed on January 24, 2022 and the Europe portion of the transaction was completed on February 1, 2022. In the U.S., PepsiCo acts as the exclusive distributor for Tropicana JV’s portfolio of brands for small-format and foodservice customers with chilled direct-store-delivery. We have significant influence over our investment in the Tropicana JV and account for our investment under the equity method, recognizing our

proportionate share of Tropicana JV’s earnings within our income statement (recorded in selling, general and administrative expenses).

As a result of this transaction, in the 12 weeks ended March 19, 2022, we recorded a pre-tax gain of $3.3 billion ($2.9 billion after-tax or $2.06 per share) in our PBNA and Europe divisions, including $520 million related to the remeasurement of our 39% ownership in the Tropicana JV at fair value using a combination of the transaction price, discounted cash flows and an option pricing model related to our liquidation preference in the Tropicana JV. Subsequent to the transaction close date, the purchase price will be adjusted for net working capital and net debt amounts as of the transaction close date compared to targeted amounts set forth in the purchase agreement.

A summary of income statement activity related to the Juice Transaction in the 12 weeks ended March 19, 2022 is as follows:


	PBNA		Europe		Corporate		PepsiCo		Provision for income taxes(a)		Net income attributable to PepsiCo		Impact on net income attributable to PepsiCo per common share
Gain associated with the Juice Transaction	$	(3,024)	$	(298)	$	—	$	(3,322)	$	452	$	(2,870)	$	2.06
Acquisition and divestiture-related charges	37		10		3		50		(8)		42		(0.03)
Operating profit	$	(2,987)	$	(288)	$	3	(3,272)		444		(2,828)		2.03
Other pension and retiree medical benefits income (b)							(10)		3		(7)		0.01
Total Juice Transaction							$	(3,282)	$	447	$	(2,835)	$	2.04

(a)Includes $194 million of deferred tax expense related to the recognition of our investment in the Tropicana JV.

(b)Includes $16 million curtailment gain, partially offset by $6 million special termination benefits.

In connection with the sale, we entered into a transition services agreement with PAI Partners, under which we will provide certain services to the Tropicana JV to help facilitate an orderly transition of the business following the sale. In return for these services, the Tropicana JV is required to pay certain agreed upon fees to reimburse us for our costs without markup.

Acquisition and Divestiture-Related Charges

Acquisition and divestiture-related charges primarily include merger and integration charges and costs associated with divestitures. Merger and integration charges include changes in fair value of contingent consideration, employee-related costs, contract termination costs and other integration costs. Divestiture-related charges reflect transaction expenses, including consulting, advisory and other professional fees.

A summary of our acquisition and divestiture-related charges is as follows:


	12 Weeks Ended
		3/19/2022		3/20/2021		Transaction
FLNA		$	—	$	2	BFY Brands, Inc.
PBNA		37		1		Juice Transaction, Rockstar
Europe		10		—		Juice Transaction
AMESA		—		1		Pioneer Foods

Corporate (a)		3		(14)		Juice Transaction, Rockstar
Total (b)		50		(10)
Other pension and retiree medical benefits expense		6		—		Juice Transaction
Total acquisition and divestiture-related charges		$	56	$	(10)
After-tax amount		$	47	$	(7)
Impact on net income attributable to PepsiCo per common share		$	(0.03)	$	0.01

(a)Income amount primarily relates to changes in fair value of the contingent consideration in connection with our acquisition of Rockstar.

(b)Recorded in selling, general and administrative expenses.

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