2017(a) | 2016(a) | ||||||
Short-term debt obligations (b) | |||||||
Current maturities of long-term debt | $ | 4,020 | $ | 4,401 | |||
Commercial paper (1.3% and 0.6%) | 1,385 | 2,257 | |||||
Other borrowings (4.7% and 4.4%) | 80 | 234 | |||||
$ | 5,485 | $ | 6,892 | ||||
Long-term debt obligations (b) | |||||||
Notes due 2017 (1.4%) | $ | — | $ | 4,398 | |||
Notes due 2018 (2.4% and 2.3%) | 4,016 | 2,561 | |||||
Notes due 2019 (2.1% and 1.7%) | 3,933 | 2,837 | |||||
Notes due 2020 (3.1% and 2.6%) | 3,792 | 3,816 | |||||
Notes due 2021 (2.4% and 2.4%) | 3,300 | 2,249 | |||||
Notes due 2022 (2.6% and 2.8%) | 3,853 | 2,655 | |||||
Notes due 2023-2047 (3.7% and 3.8%) | 18,891 | 15,903 | |||||
Other, due 2017-2026 (1.3% and 1.4%) | 31 | 35 | |||||
37,816 | 34,454 | ||||||
Less: current maturities of long-term debt obligations | (4,020 | ) | (4,401 | ) | |||
Total | $ | 33,796 | $ | 30,053 |
(a) | Amounts are shown net of unamortized net discounts of $155 million and $142 million for 2017 and 2016, respectively. |
(b) | The interest rates presented reflect weighted-average rates at year-end. Certain of our fixed rate indebtedness have been swapped to floating rates through the use of interest rate derivative instruments. See Note 9 for additional information regarding our interest rate derivative instruments. |
Interest Rate | Maturity Date | Amount(a) | ||||||
Floating rate | May 2019 | $ | 350 | |||||
Floating rate | May 2022 | $ | 400 | |||||
1.550 | % | May 2019 | $ | 750 | ||||
2.250 | % | May 2022 | $ | 750 | ||||
4.000 | % | May 2047 | $ | 750 | ||||
2.150 | % | May 2024 | C$ | 750 | (b) | |||
Floating rate | October 2018 | $ | 1,500 | |||||
2.000 | % | April 2021 | $ | 1,000 | ||||
3.000 | % | October 2027 | $ | 1,500 |
(a) | Represents gross proceeds from issuances of long-term debt excluding debt issuance costs, discounts and premiums. |
(b) | These notes, issued in Canadian dollars, were designated as a net investment hedge to partially offset the effects of foreign currency on our investments in certain of our foreign subsidiaries. |
• | Basis of Presentation – Note 1 - Basis of Presentation for a description of our policies regarding use of estimates, basis of presentation and consolidation. |
• | Property, Plant and Equipment – Note 4. |
• | Income Taxes – Note 5, and for additional unaudited information, see “Our Critical Accounting Policies” in Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
• | Share-Based Compensation – Note 6. |
• | Pension, Retiree Medical and Savings Plans – Note 7, and for additional unaudited information, see “Our Critical Accounting Policies” in Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
• | Financial Instruments – Note 9, and for additional unaudited information, see “Our Business Risks” in Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
• | Inventories – Note 13. Inventories are valued at the lower of cost or net realizable value. Cost is determined using the average; first-in, first-out (FIFO) or last-in, first-out (LIFO) methods. |
• | Translation of Financial Statements of Foreign Subsidiaries – Financial statements of foreign subsidiaries are translated into U.S. dollars using period-end exchange rates for assets and liabilities and weighted-average exchange rates for revenues and expenses. Adjustments resulting from translating net assets are reported as a separate component of accumulated other comprehensive loss within common shareholders’ equity as currency translation adjustment. |
2017 | 2016 | ||||||
Balance, beginning of year | $ | 1,885 | $ | 1,547 | |||
Additions for tax positions related to the current year | 309 | 349 | |||||
Additions for tax positions from prior years | 86 | 139 | |||||
Reductions for tax positions from prior years | (51 | ) | (70 | ) | |||
Settlement payments | (4 | ) | (26 | ) | |||
Statutes of limitations expiration | (33 | ) | (27 | ) | |||
Translation and other | 20 | (27 | ) | ||||
Balance, end of year | $ | 2,212 | $ | 1,885 |
• | media and personal service prepayments; |
• | promotional materials in inventory; and |
• | production costs of future media advertising. |
Balance, Beginning 2016 | Translation and Other | Balance, End of 2016 | Translation and Other | Balance, End of 2017 | |||||||||||||||
FLNA | |||||||||||||||||||
Goodwill | $ | 267 | $ | 3 | $ | 270 | $ | 10 | $ | 280 | |||||||||
Brands | 22 | 1 | 23 | 2 | 25 | ||||||||||||||
289 | 4 | 293 | 12 | 305 | |||||||||||||||
QFNA | |||||||||||||||||||
Goodwill | 175 | — | 175 | — | 175 | ||||||||||||||
NAB | |||||||||||||||||||
Goodwill (a) | 9,754 | 89 | 9,843 | 11 | 9,854 | ||||||||||||||
Reacquired franchise rights | 7,042 | 22 | 7,064 | 62 | 7,126 | ||||||||||||||
Acquired franchise rights | 1,507 | 5 | 1,512 | 13 | 1,525 | ||||||||||||||
Brands (a) | 108 | 206 | 314 | 39 | 353 | ||||||||||||||
18,411 | 322 | 18,733 | 125 | 18,858 | |||||||||||||||
Latin America | |||||||||||||||||||
Goodwill | 521 | 32 | 553 | 2 | 555 | ||||||||||||||
Brands | 137 | 13 | 150 | (9 | ) | 141 | |||||||||||||
658 | 45 | 703 | (7 | ) | 696 | ||||||||||||||
ESSA (b) | |||||||||||||||||||
Goodwill | 3,042 | 135 | 3,177 | 275 | 3,452 | ||||||||||||||
Reacquired franchise rights | 488 | — | 488 | 61 | 549 | ||||||||||||||
Acquired franchise rights | 190 | (6 | ) | 184 | 11 | 195 | |||||||||||||
Brands | 2,212 | 146 | 2,358 | 187 | 2,545 | ||||||||||||||
5,932 | 275 | 6,207 | 534 | 6,741 | |||||||||||||||
AMENA | |||||||||||||||||||
Goodwill | 418 | (6 | ) | 412 | 16 | 428 | |||||||||||||
Brands | 105 | (2 | ) | 103 | 8 | 111 | |||||||||||||
523 | (8 | ) | 515 | 24 | 539 | ||||||||||||||
Total goodwill | 14,177 | 253 | 14,430 | 314 | 14,744 | ||||||||||||||
Total reacquired franchise rights | 7,530 | 22 | 7,552 | 123 | 7,675 | ||||||||||||||
Total acquired franchise rights | 1,697 | (1 | ) | 1,696 | 24 | 1,720 | |||||||||||||
Total brands | 2,584 | 364 | 2,948 | 227 | 3,175 | ||||||||||||||
$ | 25,988 | $ | 638 | $ | 26,626 | $ | 688 | $ | 27,314 |
(a) | The change in 2016 is primarily related to our acquisition of KeVita, Inc. |
(b) | The change in 2017 primarily reflects the currency appreciation of the Russian ruble and euro. The change in 2016 primarily reflects the currency appreciation of the Russian ruble. |
2017 | 2016 | 2015 | ||||||||||
United States | $ | 3,452 | $ | 2,630 | $ | 2,879 | ||||||
Foreign | 6,150 | 5,923 | 4,563 | |||||||||
$ | 9,602 | $ | 8,553 | $ | 7,442 | |||||||
The provision for income taxes consisted of the following: | ||||||||||||
2017 | 2016 | 2015 | ||||||||||
Current: | U.S. Federal | $ | 4,925 | $ | 1,219 | $ | 1,143 | |||||
Foreign | 724 | 824 | 773 | |||||||||
State | 136 | 77 | 65 | |||||||||
5,785 | 2,120 | 1,981 | ||||||||||
Deferred: | U.S. Federal | (1,159 | ) | 109 | (14 | ) | ||||||
Foreign | (9 | ) | (33 | ) | (32 | ) | ||||||
State | 77 | (22 | ) | 6 | ||||||||
(1,091 | ) | 54 | (40 | ) | ||||||||
$ | 4,694 | $ | 2,174 | $ | 1,941 |
2017 | 2016 | 2015 | |||||||
U.S. Federal statutory tax rate | 35.0 | % | 35.0 | % | 35.0 | % | |||
State income tax, net of U.S. Federal tax benefit | 0.9 | 0.4 | 0.6 | ||||||
Lower taxes on foreign results | (9.4 | ) | (8.0 | ) | (10.5 | ) | |||
Impact of Venezuela impairment charges | — | — | 6.4 | ||||||
Provisional one-time mandatory transition tax - TCJ Act | 41.4 | — | — | ||||||
Provisional remeasurement of deferred taxes - TCJ Act | (15.9 | ) | — | — | |||||
Tax settlements | — | — | (3.1 | ) | |||||
Other, net | (3.1 | ) | (2.0 | ) | (2.3 | ) | |||
Annual tax rate | 48.9 | % | 25.4 | % | 26.1 | % |
2017 | 2016 | ||||||
Debt guarantee of wholly-owned subsidiary | $ | 578 | $ | 839 | |||
Property, plant and equipment | 1,397 | 1,967 | |||||
Intangible assets other than nondeductible goodwill | 3,169 | 4,124 | |||||
Other | 50 | 245 | |||||
Gross deferred tax liabilities | 5,194 | 7,175 | |||||
Deferred tax assets | |||||||
Net carryforwards | 1,400 | 1,255 | |||||
Share-based compensation | 107 | 219 | |||||
Retiree medical benefits | 198 | 316 | |||||
Other employee-related benefits | 338 | 614 | |||||
Pension benefits | 22 | 419 | |||||
Deductible state tax and interest benefits | 157 | 189 | |||||
Other | 893 | 839 | |||||
Gross deferred tax assets | 3,115 | 3,851 | |||||
Valuation allowances | (1,163 | ) | (1,110 | ) | |||
Deferred tax assets, net | 1,952 | 2,741 | |||||
Net deferred tax liabilities | $ | 3,242 | $ | 4,434 |
2017 | 2016 | 2015 | |||||||||
Balance, beginning of year | $ | 1,110 | $ | 1,136 | $ | 1,230 | |||||
Provision/(benefit) | 33 | 13 | (26 | ) | |||||||
Other additions/(deductions) | 20 | (39 | ) | (68 | ) | ||||||
Balance, end of year | $ | 1,163 | $ | 1,110 | $ | 1,136 |
2017 | 2016 | ||||||||||||||||||
Total | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | |||||||||||||||
U.S. plan assets (a) | |||||||||||||||||||
Equity securities, including preferred stock (b) | $ | 6,904 | $ | 6,896 | $ | 8 | $ | — | $ | 6,489 | |||||||||
Government securities (c) | 1,365 | — | 1,365 | — | 1,173 | ||||||||||||||
Corporate bonds (c) | 3,429 | — | 3,429 | — | 3,012 | ||||||||||||||
Mortgage-backed securities (c) | 217 | — | 217 | — | 187 | ||||||||||||||
Contracts with insurance companies (d) | 8 | — | — | 8 | 7 | ||||||||||||||
Cash and cash equivalents | 236 | 236 | — | — | 196 | ||||||||||||||
Sub-total U.S. plan assets | 12,159 | $ | 7,132 | $ | 5,019 | $ | 8 | 11,064 | |||||||||||
Real estate commingled funds measured at net asset value (e) | 675 | 651 | |||||||||||||||||
Dividends and interest receivable, net of payables | 69 | 63 | |||||||||||||||||
Total U.S. plan assets | $ | 12,903 | $ | 11,778 | |||||||||||||||
International plan assets | |||||||||||||||||||
Equity securities (b) | $ | 1,928 | $ | 1,895 | $ | 33 | $ | — | $ | 1,556 | |||||||||
Government securities (c) | 492 | — | 492 | — | 432 | ||||||||||||||
Corporate bonds (c) | 493 | — | 493 | — | 453 | ||||||||||||||
Fixed income commingled funds (f) | 383 | 383 | — | — | 316 | ||||||||||||||
Contracts with insurance companies (d) | 36 | — | — | 36 | 35 | ||||||||||||||
Cash and cash equivalents | 19 | 19 | — | — | 12 | ||||||||||||||
Sub-total international plan assets | 3,351 | $ | 2,297 | $ | 1,018 | $ | 36 | 2,804 | |||||||||||
Real estate commingled funds measured at net asset value (e) | 102 | 84 | |||||||||||||||||
Dividends and interest receivable | 7 | 6 | |||||||||||||||||
Total international plan assets | $ | 3,460 | $ | 2,894 |
(a) | 2017 and 2016 amounts include $321 million and $320 million, respectively, of retiree medical plan assets that are restricted for purposes of providing health benefits for U.S. retirees and their beneficiaries. |
(b) | The equity securities portfolio was invested in U.S. and international common stock and commingled funds, and the preferred stock portfolio in the U.S. was invested in domestic and international corporate preferred stock investments. The common stock is based on quoted prices in active markets. The U.S. commingled funds are based on fair values of the investments owned by these funds that are benchmarked against various U.S. large, mid-cap and small company indices, and includes one large-cap fund that represents 19% of total U.S. plan assets for 2017 and 2016. The international commingled funds are based on the fair values of the investments owned by these funds that track various non-U.S. equity indices. The preferred stock investments are based on quoted bid prices for comparable securities in the marketplace and broker/dealer quotes in active markets. |
(c) | These investments are based on quoted bid prices for comparable securities in the marketplace and broker/dealer quotes in active markets. Corporate bonds of U.S.-based companies represent 23% and 22% of total U.S. plan assets for 2017 and 2016, respectively. |
(d) | Based on the fair value of the contracts as determined by the insurance companies using inputs that are not observable. The changes in Level 3 amounts were not significant in the years ended December 30, 2017 and December 31, 2016. |
(e) | The real estate commingled funds include investments in limited partnerships. These funds are based on the net asset value of the appraised value of investments owned by these funds as determined by independent third parties using inputs that are not observable. The majority of the funds are redeemable quarterly subject to availability of cash and have notice periods ranging from 45 to 90 days. |
(f) | Based on the fair value of the investments owned by these funds that track various government and corporate bond indices. |
Amortization of Intangible Assets | Depreciation and Other Amortization | ||||||||||||||||||||||
2017 | 2016 | 2015 | 2017 | 2016 | 2015 | ||||||||||||||||||
FLNA | $ | 7 | $ | 7 | $ | 7 | $ | 449 | $ | 435 | $ | 427 | |||||||||||
QFNA | — | — | — | 47 | 50 | 51 | |||||||||||||||||
NAB | 31 | 37 | 38 | 780 | 809 | 813 | |||||||||||||||||
Latin America | 5 | 5 | 7 | 245 | 211 | 238 | |||||||||||||||||
ESSA | 22 | 18 | 20 | 329 | 321 | 353 | |||||||||||||||||
AMENA | 3 | 3 | 3 | 257 | 294 | 293 | |||||||||||||||||
Total division | 68 | 70 | 75 | 2,107 | 2,120 | 2,175 | |||||||||||||||||
Corporate | — | — | — | 194 | 178 | 166 | |||||||||||||||||
$ | 68 | $ | 70 | $ | 75 | $ | 2,301 | $ | 2,298 | $ | 2,341 |
Net Revenue | Long-Lived Assets(a) | ||||||||||||||||||
2017 | 2016 | 2015 | 2017 | 2016 | |||||||||||||||
United States | $ | 36,546 | $ | 36,732 | $ | 35,266 | $ | 28,418 | $ | 28,382 | |||||||||
Mexico | 3,650 | 3,431 | 3,687 | 1,205 | 998 | ||||||||||||||
Russia (b) | 3,232 | 2,648 | 2,797 | 4,708 | 4,373 | ||||||||||||||
Canada | 2,691 | 2,692 | 2,677 | 2,739 | 2,499 | ||||||||||||||
United Kingdom | 1,650 | 1,737 | 1,966 | 817 | 852 | ||||||||||||||
Brazil | 1,427 | 1,305 | 1,289 | 777 | 796 | ||||||||||||||
All other countries | 14,329 | 14,254 | 15,374 | 9,200 | 8,504 | ||||||||||||||
$ | 63,525 | $ | 62,799 | $ | 63,056 | $ | 47,864 | $ | 46,404 |
(a) | Long-lived assets represent property, plant and equipment, nonamortizable intangible assets, amortizable intangible assets and investments in noncontrolled affiliates. These assets are reported in the country where they are primarily used. |
(b) | Change in net revenue and long-lived assets in 2017 primarily reflects appreciation of the Russian ruble |
Total Assets | Capital Spending | ||||||||||||||||||
2017 | 2016 | 2017 | 2016 | 2015 | |||||||||||||||
FLNA | $ | 5,979 | $ | 5,731 | $ | 665 | $ | 801 | $ | 608 | |||||||||
QFNA | 804 | 811 | 44 | 41 | 40 | ||||||||||||||
NAB | 28,592 | 28,172 | 904 | 769 | 695 | ||||||||||||||
Latin America | 4,976 | 4,568 | 481 | 507 | 368 | ||||||||||||||
ESSA | 13,556 | 12,302 | 481 | 439 | 404 | ||||||||||||||
AMENA | 5,668 | 5,261 | 308 | 381 | 441 | ||||||||||||||
Total division | 59,575 | 56,845 | 2,883 | 2,938 | 2,556 | ||||||||||||||
Corporate (a) | 20,229 | 16,645 | 86 | 102 | 202 | ||||||||||||||
$ | 79,804 | $ | 73,490 | $ | 2,969 | $ | 3,040 | $ | 2,758 |
(a) | Corporate assets consist principally of certain cash and cash equivalents, short-term investments, derivative instruments, property, plant and equipment and tax assets. In 2017, the change in total Corporate assets was primarily due to an increase in short-term investments and cash and cash equivalents. |
Long-Term Cash Award(a) | Balance Sheet Date Fair Value(a) | Contractual Life Remaining (years) | |||||||
Outstanding at December 31, 2016 | $ | 15,670 | |||||||
Granted (b) | 19,060 | ||||||||
Forfeited | (1,530 | ) | |||||||
Outstanding at December 30, 2017 (c) | $ | 33,200 | $ | 32,592 | 1.73 | ||||
Expected to vest as of December 30, 2017 | $ | 29,590 | $ | 29,092 | 1.71 |
(a) | In thousands. |
(b) | Grant activity for all long-term cash awards are disclosed at target. |
(c) | The outstanding long-term cash awards for which the performance period has not ended as of December 30, 2017, at the threshold, target and maximum award levels were zero, $33.2 million and $66.4 million, respectively |
2017 | 2016 | 2015 | |||||||||||||||||||||||||||||||||||||||||||||
Severance and Other Employee Costs | Asset Impairments | Other Costs | Total | Severance and Other Employee Costs | Asset Impairments | Other Costs | Total | Severance and Other Employee Costs | Asset Impairments | Other Costs | Total | ||||||||||||||||||||||||||||||||||||
FLNA (a) | $ | 67 | $ | — | $ | — | $ | 67 | $ | 10 | $ | — | $ | 3 | $ | 13 | $ | 18 | $ | (1 | ) | $ | 9 | $ | 26 | ||||||||||||||||||||||
QFNA | 11 | — | — | 11 | — | — | 1 | 1 | — | — | 3 | 3 | |||||||||||||||||||||||||||||||||||
NAB | 52 | 1 | 1 | 54 | 18 | 8 | 9 | 35 | 10 | 4 | 17 | 31 | |||||||||||||||||||||||||||||||||||
Latin America (a) | 57 | 16 | (10 | ) | 63 | 29 | — | (2 | ) | 27 | 2 | 10 | 16 | 28 | |||||||||||||||||||||||||||||||||
ESSA | 46 | 4 | 3 | 53 | 21 | 22 | 17 | 60 | 26 | 11 | 25 | 62 | |||||||||||||||||||||||||||||||||||
AMENA (b) | 2 | — | (5 | ) | (3 | ) | 4 | 6 | 4 | 14 | 2 | — | 8 | 10 | |||||||||||||||||||||||||||||||||
Corporate | 45 | — | 5 | 50 | 6 | — | 4 | 10 | 1 | — | 8 | 9 | |||||||||||||||||||||||||||||||||||
$ | 280 | $ | 21 | $ | (6 | ) | $ | 295 | $ | 88 | $ | 36 | $ | 36 | $ | 160 | $ | 59 | $ | 24 | $ | 86 | $ | 169 |
(a) | Income amounts represent adjustments for changes in estimates. |
(b) | Income amount primarily reflects a gain on the sale of property, plant and equipment. |
2014 Productivity Plan Costs to Date | |||||||||||||||
Severance and Other Employee Costs | Asset Impairments | Other Costs | Total | ||||||||||||
FLNA | $ | 131 | $ | 9 | $ | 23 | $ | 163 | |||||||
QFNA | 26 | — | 6 | 32 | |||||||||||
NAB | 149 | 69 | 83 | 301 | |||||||||||
Latin America | 109 | 29 | 14 | 152 | |||||||||||
ESSA | 127 | 41 | 59 | 227 | |||||||||||
AMENA | 23 | 6 | 15 | 44 | |||||||||||
Corporate | 62 | — | 53 | 115 | |||||||||||
$ | 627 | $ | 154 | $ | 253 | $ | 1,034 |
Severance and Other Employee Costs | Asset Impairments | Other Costs | Total | ||||||||||||
Liability as of December 27, 2014 | $ | 89 | $ | — | $ | 24 | $ | 113 | |||||||
2015 restructuring charges | 59 | 24 | 86 | 169 | |||||||||||
Cash payments | (76 | ) | — | (87 | ) | (163 | ) | ||||||||
Non-cash charges and translation | (11 | ) | (24 | ) | (3 | ) | (38 | ) | |||||||
Liability as of December 26, 2015 | 61 | — | 20 | 81 | |||||||||||
2016 restructuring charges | 88 | 36 | 36 | 160 | |||||||||||
Cash payments | (46 | ) | — | (49 | ) | (95 | ) | ||||||||
Non-cash charges and translation | (15 | ) | (36 | ) | 1 | (50 | ) | ||||||||
Liability as of December 31, 2016 | 88 | — | 8 | 96 | |||||||||||
2017 restructuring charges | 280 | 21 | (6 | ) | 295 | ||||||||||
Cash payments | (91 | ) | — | (22 | ) | (113 | ) | ||||||||
Non-cash charges and translation | (65 | ) | (21 | ) | 34 | (52 | ) | ||||||||
Liability as of December 30, 2017 | $ | 212 | $ | — | $ | 14 | $ | 226 |
Severance and Other Employee Costs | Asset Impairments | Other Costs | Total | |||||||||||||
FLNA | $ | — | $ | — | $ | — | $ | — | ||||||||
QFNA | — | — | — | — | ||||||||||||
NAB | — | — | 2 | 2 | ||||||||||||
Latin America | 6 | 1 | 1 | 8 | ||||||||||||
ESSA | 15 | — | 12 | 27 | ||||||||||||
AMENA | 15 | 3 | 2 | 20 | ||||||||||||
Corporate | 3 | — | 1 | 4 | ||||||||||||
$ | 39 | $ | 4 | $ | 18 | $ | 61 |
2012 Productivity Plan Costs to Date | |||||||||||||||
Severance and Other Employee Costs | Asset Impairments | Other Costs | Total | ||||||||||||
FLNA | $ | 91 | $ | 8 | $ | 25 | $ | 124 | |||||||
QFNA | 18 | — | 10 | 28 | |||||||||||
NAB | 107 | 44 | 48 | 199 | |||||||||||
Latin America | 98 | 11 | 18 | 127 | |||||||||||
ESSA | 136 | 23 | 66 | 225 | |||||||||||
AMENA | 75 | 5 | 17 | 97 | |||||||||||
Corporate | 35 | — | 59 | 94 | |||||||||||
$ | 560 | $ | 91 | $ | 243 | $ | 894 |
Severance and Other Employee Costs | Asset Impairments | Other Costs | Total | ||||||||||||
Liability as of December 27, 2014 | $ | 28 | $ | — | $ | 5 | $ | 33 | |||||||
2015 restructuring charges | 39 | 4 | 18 | 61 | |||||||||||
Cash payments | (24 | ) | — | (21 | ) | (45 | ) | ||||||||
Non-cash charges and translation | (8 | ) | (4 | ) | 1 | (11 | ) | ||||||||
Liability as of December 26, 2015 | 35 | — | 3 | 38 | |||||||||||
Cash payments | (28 | ) | — | (2 | ) | (30 | ) | ||||||||
Non-cash charges and translation | (7 | ) | — | (1 | ) | (8 | ) | ||||||||
Liability as of December 31, 2016 | $ | — | $ | — | $ | — | $ | — |
2017 | 2016 | 2015 | |||||||||
Accounts and notes receivable | |||||||||||
Trade receivables | $ | 5,956 | $ | 5,709 | |||||||
Other receivables | 1,197 | 1,119 | |||||||||
7,153 | 6,828 | ||||||||||
Allowance, beginning of year | 134 | 130 | $ | 137 | |||||||
Net amounts charged to expense | 26 | 37 | 43 | ||||||||
Deductions (a) | (35 | ) | (30 | ) | (27 | ) | |||||
Other (b) | 4 | (3 | ) | (23 | ) | ||||||
Allowance, end of year | 129 | 134 | $ | 130 | |||||||
Net receivables | $ | 7,024 | $ | 6,694 | |||||||
Inventories (c) | |||||||||||
Raw materials and packaging | $ | 1,344 | $ | 1,315 | |||||||
Work-in-process | 167 | 150 | |||||||||
Finished goods | 1,436 | 1,258 | |||||||||
$ | 2,947 | $ | 2,723 | ||||||||
Other assets | |||||||||||
Noncurrent notes and accounts receivable | $ | 59 | $ | 105 | |||||||
Deferred marketplace spending | 134 | 140 | |||||||||
Pension plans (d) | 374 | 53 | |||||||||
Other | 346 | 338 | |||||||||
$ | 913 | $ | 636 | ||||||||
Accounts payable and other current liabilities | |||||||||||
Accounts payable | $ | 6,727 | $ | 6,158 | |||||||
Accrued marketplace spending | 2,390 | 2,444 | |||||||||
Accrued compensation and benefits | 1,785 | 1,770 | |||||||||
Dividends payable | 1,161 | 1,097 | |||||||||
Other current liabilities | 2,954 | 2,774 | |||||||||
$ | 15,017 | $ | 14,243 |
(a) | Includes accounts written off. |
(b) | Includes adjustments related primarily to currency translation and other adjustments. |
(c) | Approximately 5% of the inventory cost in 2017 and 2016 were computed using the LIFO method. The differences between LIFO and FIFO methods of valuing these inventories were not material. |
(d) | See Note 7 for additional information regarding our pension plans. |
2017 | 2016 | 2015 | |||||||||
Interest paid (a) | $ | 1,123 | $ | 1,102 | $ | 952 | |||||
Income taxes paid, net of refunds | $ | 1,962 | $ | 1,393 | $ | 1,808 |
(a) | In 2016, interest paid excludes the premium paid in accordance with the “make-whole” provisions of the debt redemption discussed in |
2017 | 2016 | 2015 | |||||||||
Rent expense | $ | 742 | $ | 701 | $ | 696 |
Operating Lease Payments | ||||
2018 | $ | 452 | ||
2019 | 403 | |||
2020 | 297 | |||
2021 | 215 | |||
2022 | 160 | |||
2023 and beyond | 367 | |||
Total minimum operating lease payments | $ | 1,894 |
Currency Translation Adjustment | Cash Flow Hedges | Pension and Retiree Medical | Available-For-Sale Securities | Other | Accumulated Other Comprehensive Loss Attributable to PepsiCo | ||||||||||||||||||
Balance as of December 27, 2014 (a) | $ | (8,255 | ) | $ | 34 | $ | (2,500 | ) | $ | 87 | $ | (35 | ) | $ | (10,669 | ) | |||||||
Other comprehensive (loss)/income before reclassifications (b) | (2,936 | ) | (95 | ) | (88 | ) | 3 | — | (3,116 | ) | |||||||||||||
Amounts reclassified from accumulated other comprehensive loss | 111 | 97 | 266 | — | — | 474 | |||||||||||||||||
Net current year other comprehensive (loss)/income | (2,825 | ) | 2 | 178 | 3 | — | (2,642 | ) | |||||||||||||||
Tax amounts | — | 1 | (7 | ) | (2 | ) | — | (8 | ) | ||||||||||||||
Balance as of December 26, 2015 (a) | (11,080 | ) | 37 | (2,329 | ) | 88 | (35 | ) | (13,319 | ) | |||||||||||||
Other comprehensive (loss)/income before reclassifications | (313 | ) | (74 | ) | (750 | ) | (43 | ) | — | (1,180 | ) | ||||||||||||
Amounts reclassified from accumulated other comprehensive loss | — | 150 | 407 | — | — | 557 | |||||||||||||||||
Net current year other comprehensive (loss)/income | (313 | ) | 76 | (343 | ) | (43 | ) | — | (623 | ) | |||||||||||||
Tax amounts | 7 | (30 | ) | 27 | 19 | — | 23 | ||||||||||||||||
Balance as of December 31, 2016 (a) | (11,386 | ) | 83 | (2,645 | ) | 64 | (35 | ) | (13,919 | ) | |||||||||||||
Other comprehensive (loss)/income before reclassifications (c) | 1,049 | 130 | (375 | ) | 25 | — | 829 | ||||||||||||||||
Amounts reclassified from accumulated other comprehensive loss | — | (171 | ) | 158 | (99 | ) | — | (112 | ) | ||||||||||||||
Net current year other comprehensive (loss)/income | 1,049 | (41 | ) | (217 | ) | (74 | ) | — | 717 | ||||||||||||||
Tax amounts | 60 | 5 | 58 | 6 | 16 | 145 | |||||||||||||||||
Balance as of December 30, 2017 (a) | $ | (10,277 | ) | $ | 47 | $ | (2,804 | ) | $ | (4 | ) | $ | (19 | ) | $ | (13,057 | ) |
(a) | Pension and retiree medical amounts are net of taxes of $1,260 million in 2014, $1,253 million in 2015, $1,280 million in 2016 and $1,338 million in 2017. |
(b) | Currency translation adjustment primarily reflects the depreciation of the Russian ruble, Brazilian real and Canadian dollar. |
(c) | Currency translation adjustment primarily reflects the appreciation of the euro, Russian ruble, Pound sterling and Canadian dollar. |
Amount Reclassified from Accumulated Other Comprehensive Loss | Affected Line Item in the Income Statement | ||||||||||||
2017 | 2016 | 2015 | |||||||||||
Currency translation: | |||||||||||||
Venezuelan entities | $ | — | $ | — | $ | 111 | Venezuela impairment charges | ||||||
Cash flow hedges: | |||||||||||||
Foreign exchange contracts | $ | — | $ | 2 | $ | (3 | ) | Net revenue | |||||
Foreign exchange contracts | 10 | (46 | ) | (94 | ) | Cost of sales | |||||||
Interest rate derivatives | (184 | ) | 187 | 174 | Interest expense | ||||||||
Commodity contracts | 4 | 3 | 9 | Cost of sales | |||||||||
Commodity contracts | (1 | ) | 4 | 11 | Selling, general and administrative expenses | ||||||||
Net (gains)/losses before tax | (171 | ) | 150 | 97 | |||||||||
Tax amounts | 64 | (63 | ) | (47 | ) | ||||||||
Net (gains)/losses after tax | $ | (107 | ) | $ | 87 | $ | 50 | ||||||
Pension and retiree medical items: | |||||||||||||
Amortization of net prior service credit (a) | $ | (24 | ) | $ | (39 | ) | $ | (41 | ) | ||||
Amortization of net losses (a) | 167 | 209 | 281 | ||||||||||
Settlement/curtailment (a) | 15 | 237 | 6 | ||||||||||
Net losses before tax | 158 | 407 | 246 | ||||||||||
Tax amounts | (44 | ) | (144 | ) | (74 | ) | |||||||
Net losses after tax | $ | 114 | $ | 263 | $ | 172 | |||||||
Venezuelan entities | $ | — | $ | — | $ | 20 | Venezuela impairment charges | ||||||
Tax amount | — | — | (4 | ) | |||||||||
Net losses after tax | $ | — | $ | — | $ | 16 | |||||||
Available-for-sale securities: | |||||||||||||
Sale of Britvic securities | $ | (99 | ) | $ | — | $ | — | Selling, general and administrative expenses | |||||
Tax amount | 10 | — | — | ||||||||||
Net gain after tax | $ | (89 | ) | $ | — | $ | — | ||||||
Total net (gains)/losses reclassified for the year, net of tax | $ | (82 | ) | $ | 350 | $ | 349 |
(a) | These items are included in the components of net periodic benefit cost for pension and retiree medical plans (see Note 7 for additional details). |
• | commodity prices, affecting the cost of our raw materials and energy; |
• | foreign exchange rates and currency restrictions; and |
• | interest rates. |
2017 | 2016 | ||||||||||||||||
Fair Value Hierarchy Levels(a) | Assets(a) | Liabilities(a) | Assets(a) | Liabilities(a) | |||||||||||||
Available-for-sale securities: | |||||||||||||||||
Equity securities (b) | 1 | $ | — | $ | — | $ | 82 | $ | — | ||||||||
Debt securities (c) | 2 | 14,510 | — | 11,369 | — | ||||||||||||
$ | 14,510 | $ | — | $ | 11,451 | $ | — | ||||||||||
Short-term investments (d) | 1 | $ | 228 | $ | — | $ | 193 | $ | — | ||||||||
Prepaid forward contracts (e) | 2 | $ | 27 | $ | — | $ | 25 | $ | — | ||||||||
Deferred compensation (f) | 2 | $ | — | $ | 503 | $ | — | $ | 472 | ||||||||
Derivatives designated as fair value hedging instruments: | |||||||||||||||||
Interest rate (g) | 2 | $ | 24 | $ | 130 | $ | 66 | $ | 71 | ||||||||
Derivatives designated as cash flow hedging instruments: | |||||||||||||||||
Foreign exchange (h) | 2 | $ | 15 | $ | 31 | $ | 51 | $ | 8 | ||||||||
Interest rate (h) | 2 | — | 213 | — | 408 | ||||||||||||
Commodity (i) | 1 | — | 2 | — | 1 | ||||||||||||
Commodity (j) | 2 | 2 | — | 2 | — | ||||||||||||
$ | 17 | $ | 246 | $ | 53 | $ | 417 | ||||||||||
Derivatives not designated as hedging instruments: | |||||||||||||||||
Foreign exchange (h) | 2 | $ | 10 | $ | 3 | $ | 2 | $ | 15 | ||||||||
Commodity (i) | 1 | — | 19 | 1 | 1 | ||||||||||||
Commodity (j) | 2 | 85 | 12 | 60 | 25 | ||||||||||||
$ | 95 | $ | 34 | $ | 63 | $ | 41 | ||||||||||
Total derivatives at fair value (k) | $ | 136 | $ | 410 | $ | 182 | $ | 529 | |||||||||
Total | $ | 14,901 | $ | 913 | $ | 11,851 | $ | 1,001 |
(a) | Fair value hierarchy levels are defined in Note 7. 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 common stock. These equity securities were classified as investments in noncontrolled affiliates. |
(c) | Based on quoted broker prices or other significant inputs derived from or corroborated by observable market data. As of December 30, 2017, $5.8 billion and $8.7 billion of debt securities were classified as cash equivalents and short-term investments, respectively. As of December 31, 2016, $4.6 billion and $6.8 billion of debt securities were classified as cash equivalents and short-term investments, respectively. All of our available-for-sale debt securities have maturities of one year or less. |
(d) | 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. |
(e) | Based primarily on the price of our common stock. |
(f) | Based on the fair value of investments corresponding to employees’ investment elections. |
(g) | Based on LIBOR forward rates. |
(h) | Based on recently reported market transactions of spot and forward rates. |
(i) | Based on quoted contract prices on futures exchange markets. |
(j) | Based on recently reported market transactions of swap arrangements. |
(k) | Unless otherwise noted, 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 December 30, 2017 and December 31, 2016 were not material. Collateral received against any of our asset positions was not material. |
Fair Value/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) | |||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||
Foreign exchange | $ | (15 | ) | $ | 74 | $ | 62 | $ | (24 | ) | $ | 10 | $ | (44 | ) | ||||||||
Interest rate | 101 | 105 | (195 | ) | 97 | (184 | ) | 187 | |||||||||||||||
Commodity | (48 | ) | (52 | ) | 3 | 1 | 3 | 7 | |||||||||||||||
Net investment | — | — | 157 | (39 | ) | — | — | ||||||||||||||||
Total | $ | 38 | $ | 127 | $ | 27 | $ | 35 | $ | (171 | ) | $ | 150 |
(a) | Foreign exchange derivative losses/gains are primarily included in selling, general and administrative expenses. Interest rate derivative losses/gains are primarily from fair value hedges and are included in interest expense. These losses/gains are substantially offset by decreases/increases in the value of the underlying debt, which are also included in interest expense. 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 are included in interest expense. Commodity derivative losses/gains are included in either cost of sales or selling, general and administrative expenses, depending on the underlying commodity. |
2017 | 2016 | 2015 | |||||||||
Share-based compensation expense - equity awards | $ | 292 | $ | 284 | $ | 295 | |||||
Share-based compensation expense - liability awards | 13 | 5 | — | ||||||||
Restructuring and impairment (credits)/charges | (2 | ) | 5 | 4 | |||||||
Total | $ | 303 | $ | 294 | $ | 299 | |||||
Income tax benefits recognized in earnings related to share-based compensation | $ | 89 | (a) | $ | 91 | $ | 77 |
(a) | Reflects tax rates effective for the 2017 tax year. |
2017 | 2016 | 2015 | ||||||
Expected life | 5 years | 6 years | 7 years | |||||
Risk-free interest rate | 2.0 | % | 1.4 | % | 1.8 | % | ||
Expected volatility | 11 | % | 12 | % | 15 | % | ||
Expected dividend yield | 2.7 | % | 2.7 | % | 2.7 | % |
Options(a) | Weighted-Average Exercise Price | Weighted-Average Contractual Life Remaining (years) | Aggregate Intrinsic Value(b) | |||||||||
Outstanding at December 31, 2016 | 25,190 | $ | 69.88 | |||||||||
Granted | 1,481 | $ | 110.15 | |||||||||
Exercised | (7,136 | ) | $ | 65.31 | ||||||||
Forfeited/expired | (522 | ) | $ | 88.36 | ||||||||
Outstanding at December 30, 2017 | 19,013 | $ | 74.23 | 4.22 | $ | 868,750 | ||||||
Exercisable at December 30, 2017 | 14,589 | $ | 65.60 | 3.02 | $ | 792,560 | ||||||
Expected to vest as of December 30, 2017 | 3,994 | $ | 102.50 | 8.15 | $ | 69,578 |
(a) | Options are in thousands and include options previously granted under the PBG plan. No additional options or shares were granted under the PBG plan after 2009. |
(b) | In thousands. |
RSUs/PSUs(a) | Weighted-Average Grant-Date Fair Value | Weighted-Average Contractual Life Remaining (years) | Aggregate Intrinsic Value(a) | |||||||||
Outstanding at December 31, 2016 | 8,237 | $ | 91.81 | |||||||||
Granted (b) | 2,824 | $ | 109.92 | |||||||||
Converted | (3,226 | ) | $ | 82.56 | ||||||||
Forfeited | (608 | ) | $ | 100.17 | ||||||||
Actual performance change (c) | 66 | $ | 100.33 | |||||||||
Outstanding at December 30, 2017 (d) | 7,293 | $ | 102.30 | 1.33 | $ | 874,517 | ||||||
Expected to vest as of December 30, 2017 | 6,695 | $ | 102.00 | 1.26 | $ | 802,826 |
(a) | In thousands. |
(b) | Grant activity for all PSUs are disclosed at target. |
(c) | Reflects the net number of PSUs above and below target levels based on actual performance measured at the end of the performance period. |
(d) | The outstanding PSUs for which the performance period has not ended as of December 30, 2017, at the threshold, target and maximum award levels were zero, 0.9 million and 1.5 million, respectively. |
PEPunits(a) | Weighted-Average Grant-Date Fair Value | Weighted-Average Contractual Life Remaining (years) | Aggregate Intrinsic Value(a) | |||||||||
Outstanding at December 31, 2016 | 533 | $ | 59.86 | |||||||||
Converted | (363 | ) | $ | 49.11 | ||||||||
Forfeited | (13 | ) | $ | 68.94 | ||||||||
Actual performance change (b) | 91 | $ | 50.74 | |||||||||
Outstanding at December 30, 2017 (c) | 248 | $ | 68.94 | 0.17 | $ | 29,734 | ||||||
Expected to vest as of December 30, 2017 | 234 | $ | 68.94 | 0.17 | $ | 28,034 |
(a) | In thousands. |
(b) | Reflects the net number of PEPunits above and below target levels based on actual performance measured at the end of the performance period. |
(c) | The outstanding PEPunits for which the performance period has not ended as of December 30, 2017, at the threshold, target and maximum award levels were zero, 0.2 million and 0.4 million, respectively. |
Long-Term Cash Award(a) | Balance Sheet Date Fair Value(a) | Contractual Life Remaining (years) | |||||||
Outstanding at December 31, 2016 | $ | 15,670 | |||||||
Granted (b) | 19,060 | ||||||||
Forfeited | (1,530 | ) | |||||||
Outstanding at December 30, 2017 (c) | $ | 33,200 | $ | 32,592 | 1.73 | ||||
Expected to vest as of December 30, 2017 | $ | 29,590 | $ | 29,092 | 1.71 |
(a) | In thousands. |
(b) | Grant activity for all long-term cash awards are disclosed at target. |
(c) | The outstanding long-term cash awards for which the performance period has not ended as of December 30, 2017, at the threshold, target and maximum award levels were zero, $33.2 million and $66.4 million, respectively. |
2017 | 2016 | 2015 | |||||||||
Stock Options | |||||||||||
Total number of options granted (a) | 1,481 | 1,743 | 1,884 | ||||||||
Weighted-average grant-date fair value of options granted | $ | 8.25 | $ | 6.94 | $ | 10.80 | |||||
Total intrinsic value of options exercised (a) | $ | 327,860 | $ | 290,131 | $ | 366,188 | |||||
Total grant-date fair value of options vested (a) | $ | 23,122 | $ | 18,840 | $ | 21,837 | |||||
RSUs/PSUs | |||||||||||
Total number of RSUs/PSUs granted (a) | 2,824 | 3,054 | 2,759 | ||||||||
Weighted-average grant-date fair value of RSUs/PSUs granted | $ | 109.92 | $ | 99.06 | $ | 99.17 | |||||
Total intrinsic value of RSUs/PSUs converted (a) | $ | 380,269 | $ | 359,401 | $ | 375,510 | |||||
Total grant-date fair value of RSUs/PSUs vested (a) | $ | 264,923 | $ | 257,648 | $ | 257,831 | |||||
PEPunits | |||||||||||
Total number of PEPunits granted (a) | — | — | 300 | ||||||||
Weighted-average grant-date fair value of PEPunits granted | $ | — | $ | — | $ | 68.94 | |||||
Total intrinsic value of PEPunits converted (a) | $ | 39,782 | $ | 38,558 | $ | 37,705 | |||||
Total grant-date fair value of PEPunits vested (a) | $ | 18,833 | $ | 16,572 | $ | 22,286 |
(a) | In thousands. |
2017 | 2016 | 2015 | |||||||||
Stock Options | |||||||||||
Total number of options granted (a) | 1,481 | 1,743 | 1,884 | ||||||||
Weighted-average grant-date fair value of options granted | $ | 8.25 | $ | 6.94 | $ | 10.80 | |||||
Total intrinsic value of options exercised (a) | $ | 327,860 | $ | 290,131 | $ | 366,188 | |||||
Total grant-date fair value of options vested (a) | $ | 23,122 | $ | 18,840 | $ | 21,837 | |||||
RSUs/PSUs | |||||||||||
Total number of RSUs/PSUs granted (a) | 2,824 | 3,054 | 2,759 | ||||||||
Weighted-average grant-date fair value of RSUs/PSUs granted | $ | 109.92 | $ | 99.06 | $ | 99.17 | |||||
Total intrinsic value of RSUs/PSUs converted (a) | $ | 380,269 | $ | 359,401 | $ | 375,510 | |||||
Total grant-date fair value of RSUs/PSUs vested (a) | $ | 264,923 | $ | 257,648 | $ | 257,831 | |||||
PEPunits | |||||||||||
Total number of PEPunits granted (a) | — | — | 300 | ||||||||
Weighted-average grant-date fair value of PEPunits granted | $ | — | $ | — | $ | 68.94 | |||||
Total intrinsic value of PEPunits converted (a) | $ | 39,782 | $ | 38,558 | $ | 37,705 | |||||
Total grant-date fair value of PEPunits vested (a) | $ | 18,833 | $ | 16,572 | $ | 22,286 |
(a) | In thousands. |
2017 | 2016 | 2015 | ||||||||||||||||||
Income | Shares(a) | Income | Shares(a) | Income | Shares(a) | |||||||||||||||
Net income attributable to PepsiCo | $ | 4,857 | $ | 6,329 | $ | 5,452 | ||||||||||||||
Preferred shares: | ||||||||||||||||||||
Dividends | — | (1 | ) | (1 | ) | |||||||||||||||
Redemption premium | (4 | ) | (5 | ) | (5 | ) | ||||||||||||||
Net income available for PepsiCo common shareholders | $ | 4,853 | 1,425 | $ | 6,323 | 1,439 | $ | 5,446 | 1,469 | |||||||||||
Basic net income attributable to PepsiCo per common share | $ | 3.40 | $ | 4.39 | $ | 3.71 | ||||||||||||||
Net income available for PepsiCo common shareholders | $ | 4,853 | 1,425 | $ | 6,323 | 1,439 | $ | 5,446 | 1,469 | |||||||||||
Dilutive securities: | ||||||||||||||||||||
Stock options, RSUs, PSUs, PEPunits and Other | — | 12 | 1 | 12 | — | 15 | ||||||||||||||
ESOP convertible preferred stock | 4 | 1 | 5 | 1 | 6 | 1 | ||||||||||||||
Diluted | $ | 4,857 | 1,438 | $ | 6,329 | 1,452 | $ | 5,452 | 1,485 | |||||||||||
Diluted net income attributable to PepsiCo per common share | $ | 3.38 | $ | 4.36 | $ | 3.67 |
(a) | Weighted-average common shares outstanding (in millions). |
2017 | 2016 | 2015 | |||||||||
Out-of-the-money options (a) | 0.4 | 0.7 | 1.5 | ||||||||
Average exercise price per option | $ | 110.12 | $ | 99.98 | $ | 99.25 |
(a) | In millions. |
Quarter | United States and Canada | International | ||
First Quarter | 12 weeks | January, February | ||
Second Quarter | 12 weeks | March, April and May | ||
Third Quarter | 12 weeks | June, July and August | ||
Fourth Quarter | 16 weeks (17 weeks for 2016) | September, October, November and December |
2017 | 2016 | 2015 | ||||||||||
United States | $ | 3,452 | $ | 2,630 | $ | 2,879 | ||||||
Foreign | 6,150 | 5,923 | 4,563 | |||||||||
$ | 9,602 | $ | 8,553 | $ | 7,442 | |||||||
The provision for income taxes consisted of the following: | ||||||||||||
2017 | 2016 | 2015 | ||||||||||
Current: | U.S. Federal | $ | 4,925 | $ | 1,219 | $ | 1,143 | |||||
Foreign | 724 | 824 | 773 | |||||||||
State | 136 | 77 | 65 | |||||||||
5,785 | 2,120 | 1,981 | ||||||||||
Deferred: | U.S. Federal | (1,159 | ) | 109 | (14 | ) | ||||||
Foreign | (9 | ) | (33 | ) | (32 | ) | ||||||
State | 77 | (22 | ) | 6 | ||||||||
(1,091 | ) | 54 | (40 | ) | ||||||||
$ | 4,694 | $ | 2,174 | $ | 1,941 |
2017 | 2016 | 2015 | |||||||
U.S. Federal statutory tax rate | 35.0 | % | 35.0 | % | 35.0 | % | |||
State income tax, net of U.S. Federal tax benefit | 0.9 | 0.4 | 0.6 | ||||||
Lower taxes on foreign results | (9.4 | ) | (8.0 | ) | (10.5 | ) | |||
Impact of Venezuela impairment charges | — | — | 6.4 | ||||||
Provisional one-time mandatory transition tax - TCJ Act | 41.4 | — | — | ||||||
Provisional remeasurement of deferred taxes - TCJ Act | (15.9 | ) | — | — | |||||
Tax settlements | — | — | (3.1 | ) | |||||
Other, net | (3.1 | ) | (2.0 | ) | (2.3 | ) | |||
Annual tax rate | 48.9 | % | 25.4 | % | 26.1 | % |
2017 | 2016 | ||||||
Debt guarantee of wholly-owned subsidiary | $ | 578 | $ | 839 | |||
Property, plant and equipment | 1,397 | 1,967 | |||||
Intangible assets other than nondeductible goodwill | 3,169 | 4,124 | |||||
Other | 50 | 245 | |||||
Gross deferred tax liabilities | 5,194 | 7,175 | |||||
Deferred tax assets | |||||||
Net carryforwards | 1,400 | 1,255 | |||||
Share-based compensation | 107 | 219 | |||||
Retiree medical benefits | 198 | 316 | |||||
Other employee-related benefits | 338 | 614 | |||||
Pension benefits | 22 | 419 | |||||
Deductible state tax and interest benefits | 157 | 189 | |||||
Other | 893 | 839 | |||||
Gross deferred tax assets | 3,115 | 3,851 | |||||
Valuation allowances | (1,163 | ) | (1,110 | ) | |||
Deferred tax assets, net | 1,952 | 2,741 | |||||
Net deferred tax liabilities | $ | 3,242 | $ | 4,434 |
2017 | 2016 | 2015 | |||||||||
Balance, beginning of year | $ | 1,110 | $ | 1,136 | $ | 1,230 | |||||
Provision/(benefit) | 33 | 13 | (26 | ) | |||||||
Other additions/(deductions) | 20 | (39 | ) | (68 | ) | ||||||
Balance, end of year | $ | 1,163 | $ | 1,110 | $ | 1,136 |
Jurisdiction | Years Open to Audit | Years Currently Under Audit | ||
United States | 2012-2016 | 2012-2013 | ||
Mexico | 2014-2016 | 2014 | ||
United Kingdom | 2014-2016 | None | ||
Canada (Domestic) | 2013-2016 | 2013-2014 | ||
Canada (International) | 2010-2016 | 2010-2014 | ||
Russia | 2012-2016 | 2012-2016 |
2017 | 2016 | ||||||
Balance, beginning of year | $ | 1,885 | $ | 1,547 | |||
Additions for tax positions related to the current year | 309 | 349 | |||||
Additions for tax positions from prior years | 86 | 139 | |||||
Reductions for tax positions from prior years | (51 | ) | (70 | ) | |||
Settlement payments | (4 | ) | (26 | ) | |||
Statutes of limitations expiration | (33 | ) | (27 | ) | |||
Translation and other | 20 | (27 | ) | ||||
Balance, end of year | $ | 2,212 | $ | 1,885 |
• | Income tax effects of vested or settled awards were recognized in the provision for income taxes on our income statement on a prospective basis. Previously, these tax effects were recorded on our equity statement in capital in excess of par value. For the year ended December 30, 2017, our excess tax benefits were $115 million, resulting in a $0.08 increase to diluted net income attributable to PepsiCo per common share. For the years ended December 31, 2016 and December 26, 2015, our excess tax benefits recognized were $110 million and $107 million, respectively. If we had applied this standard in 2016 and 2015, there would have been a $0.07 increase to diluted net income attributable to PepsiCo per common share for both years. The ongoing impact on our financial statements is dependent on the timing of when awards vest or are exercised, our tax rate and the intrinsic value when awards vest or are exercised. |
• | Excess tax benefits are retrospectively presented within operating activities and withholding tax payments upon vesting of RSUs, PSUs and PEPunits are retrospectively presented within financing activities in the cash flow statement. The adoption resulted in an increase of $295 million, $269 million and $284 million in our operating cash flow with a corresponding decrease in our financing cash flow for the years ended December 30, 2017, December 31, 2016 and December 26, 2015, respectively. |
Quarter | United States and Canada | International | ||
First Quarter | 12 weeks | January, February | ||
Second Quarter | 12 weeks | March, April and May | ||
Third Quarter | 12 weeks | June, July and August | ||
Fourth Quarter | 16 weeks (17 weeks for 2016) | September, October, November and December |
• | share-based compensation expense; |
• | pension and retiree medical expense; and |
• | derivatives. |
Net Revenue | Operating Profit/(Loss)(a) | ||||||||||||||||||||||
2017 | 2016 | 2015 | 2017 | 2016 | 2015 | ||||||||||||||||||
FLNA | $ | 15,798 | $ | 15,549 | $ | 14,782 | $ | 4,823 | $ | 4,659 | $ | 4,304 | |||||||||||
QFNA | 2,503 | 2,564 | 2,543 | 642 | 653 | 560 | |||||||||||||||||
NAB | 20,936 | 21,312 | 20,618 | 2,707 | 2,959 | 2,785 | |||||||||||||||||
Latin America | 7,208 | 6,820 | 8,228 | 908 | 887 | (206 | ) | ||||||||||||||||
ESSA | 11,050 | 10,216 | 10,510 | 1,354 | 1,108 | 1,081 | |||||||||||||||||
AMENA | 6,030 | 6,338 | 6,375 | 1,073 | 619 | 941 | |||||||||||||||||
Total division | 63,525 | 62,799 | 63,056 | 11,507 | 10,885 | 9,465 | |||||||||||||||||
Corporate unallocated | — | — | — | (998 | ) | (1,100 | ) | (1,112 | ) | ||||||||||||||
$ | 63,525 | $ | 62,799 | $ | 63,056 | $ | 10,509 | $ | 9,785 | $ | 8,353 |
(a) | For further unaudited information on certain items that impacted our financial performance, see “Item 6. Selected Financial Data.” |
Total Assets | Capital Spending | ||||||||||||||||||
2017 | 2016 | 2017 | 2016 | 2015 | |||||||||||||||
FLNA | $ | 5,979 | $ | 5,731 | $ | 665 | $ | 801 | $ | 608 | |||||||||
QFNA | 804 | 811 | 44 | 41 | 40 | ||||||||||||||
NAB | 28,592 | 28,172 | 904 | 769 | 695 | ||||||||||||||
Latin America | 4,976 | 4,568 | 481 | 507 | 368 | ||||||||||||||
ESSA | 13,556 | 12,302 | 481 | 439 | 404 | ||||||||||||||
AMENA | 5,668 | 5,261 | 308 | 381 | 441 | ||||||||||||||
Total division | 59,575 | 56,845 | 2,883 | 2,938 | 2,556 | ||||||||||||||
Corporate (a) | 20,229 | 16,645 | 86 | 102 | 202 | ||||||||||||||
$ | 79,804 | $ | 73,490 | $ | 2,969 | $ | 3,040 | $ | 2,758 |
(a) | Corporate assets consist principally of certain cash and cash equivalents, short-term investments, derivative instruments, property, plant and equipment and tax assets. In 2017, the change in total Corporate assets was primarily due to an increase in short-term investments and cash and cash equivalents. |
Amortization of Intangible Assets | Depreciation and Other Amortization | ||||||||||||||||||||||
2017 | 2016 | 2015 | 2017 | 2016 | 2015 | ||||||||||||||||||
FLNA | $ | 7 | $ | 7 | $ | 7 | $ | 449 | $ | 435 | $ | 427 | |||||||||||
QFNA | — | — | — | 47 | 50 | 51 | |||||||||||||||||
NAB | 31 | 37 | 38 | 780 | 809 | 813 | |||||||||||||||||
Latin America | 5 | 5 | 7 | 245 | 211 | 238 | |||||||||||||||||
ESSA | 22 | 18 | 20 | 329 | 321 | 353 | |||||||||||||||||
AMENA | 3 | 3 | 3 | 257 | 294 | 293 | |||||||||||||||||
Total division | 68 | 70 | 75 | 2,107 | 2,120 | 2,175 | |||||||||||||||||
Corporate | — | — | — | 194 | 178 | 166 | |||||||||||||||||
$ | 68 | $ | 70 | $ | 75 | $ | 2,301 | $ | 2,298 | $ | 2,341 |
Net Revenue | Long-Lived Assets(a) | ||||||||||||||||||
2017 | 2016 | 2015 | 2017 | 2016 | |||||||||||||||
United States | $ | 36,546 | $ | 36,732 | $ | 35,266 | $ | 28,418 | $ | 28,382 | |||||||||
Mexico | 3,650 | 3,431 | 3,687 | 1,205 | 998 | ||||||||||||||
Russia (b) | 3,232 | 2,648 | 2,797 | 4,708 | 4,373 | ||||||||||||||
Canada | 2,691 | 2,692 | 2,677 | 2,739 | 2,499 | ||||||||||||||
United Kingdom | 1,650 | 1,737 | 1,966 | 817 | 852 | ||||||||||||||
Brazil | 1,427 | 1,305 | 1,289 | 777 | 796 | ||||||||||||||
All other countries | 14,329 | 14,254 | 15,374 | 9,200 | 8,504 | ||||||||||||||
$ | 63,525 | $ | 62,799 | $ | 63,056 | $ | 47,864 | $ | 46,404 |
(a) | Long-lived assets represent property, plant and equipment, nonamortizable intangible assets, amortizable intangible assets and investments in noncontrolled affiliates. These assets are reported in the country where they are primarily used. |
(b) | Change in net revenue and long-lived assets in 2017 primarily reflects appreciation of the Russian ruble. |
Pension | Retiree Medical | ||||||||||||||||||||||
U.S. | International | ||||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||
Change in projected benefit liability | |||||||||||||||||||||||
Liability at beginning of year | $ | 13,192 | $ | 13,033 | $ | 3,124 | $ | 2,872 | $ | 1,208 | $ | 1,300 | |||||||||||
Service cost | 401 | 393 | 91 | 80 | 28 | 31 | |||||||||||||||||
Interest cost | 468 | 484 | 89 | 94 | 36 | 41 | |||||||||||||||||
Plan amendments | 10 | 18 | 2 | — | (5 | ) | (15 | ) | |||||||||||||||
Participant contributions | — | — | 2 | 2 | — | — | |||||||||||||||||
Experience loss/(gain) | 1,529 | 614 | 5 | 560 | 21 | (51 | ) | ||||||||||||||||
Benefit payments | (825 | ) | (347 | ) | (104 | ) | (83 | ) | (107 | ) | (100 | ) | |||||||||||
Settlement/curtailment | (58 | ) | (1,014 | ) | (22 | ) | (19 | ) | — | — | |||||||||||||
Special termination benefits | 60 | 11 | — | 1 | 2 | 1 | |||||||||||||||||
Other, including foreign currency adjustment | — | — | 303 | (383 | ) | 4 | 1 | ||||||||||||||||
Liability at end of year | $ | 14,777 | $ | 13,192 | $ | 3,490 | $ | 3,124 | $ | 1,187 | $ | 1,208 | |||||||||||
Change in fair value of plan assets | |||||||||||||||||||||||
Fair value at beginning of year | $ | 11,458 | $ | 11,397 | $ | 2,894 | $ | 2,823 | $ | 320 | $ | 354 | |||||||||||
Actual return on plan assets | 1,935 | 880 | 288 | 409 | 52 | 30 | |||||||||||||||||
Employer contributions/funding | 60 | 541 | 104 | 118 | 56 | 36 | |||||||||||||||||
Participant contributions | — | — | 2 | 2 | — | — | |||||||||||||||||
Benefit payments | (825 | ) | (347 | ) | (104 | ) | (83 | ) | (107 | ) | (100 | ) | |||||||||||
Settlement | (46 | ) | (1,013 | ) | (18 | ) | (22 | ) | — | — | |||||||||||||
Other, including foreign currency adjustment | — | — | 294 | (353 | ) | — | — | ||||||||||||||||
Fair value at end of year | $ | 12,582 | $ | 11,458 | $ | 3,460 | $ | 2,894 | $ | 321 | $ | 320 | |||||||||||
Funded status | $ | (2,195 | ) | $ | (1,734 | ) | $ | (30 | ) | $ | (230 | ) | $ | (866 | ) | $ | (888 | ) |
Amounts recognized | |||||||||||||||||||||||
Other assets | $ | 286 | $ | — | $ | 85 | $ | 51 | $ | — | $ | — | |||||||||||
Other current liabilities | (74 | ) | (42 | ) | (1 | ) | (1 | ) | (75 | ) | (54 | ) | |||||||||||
Other liabilities | (2,407 | ) | (1,692 | ) | (114 | ) | (280 | ) | (791 | ) | (834 | ) | |||||||||||
Net amount recognized | $ | (2,195 | ) | $ | (1,734 | ) | $ | (30 | ) | $ | (230 | ) | $ | (866 | ) | $ | (888 | ) | |||||
Amounts included in accumulated other comprehensive loss (pre-tax) | |||||||||||||||||||||||
Net loss/(gain) | $ | 3,520 | $ | 3,220 | $ | 782 | $ | 884 | $ | (189 | ) | $ | (193 | ) | |||||||||
Prior service cost/(credit) | 29 | 20 | (3 | ) | (5 | ) | (71 | ) | (91 | ) | |||||||||||||
Total | $ | 3,549 | $ | 3,240 | $ | 779 | $ | 879 | $ | (260 | ) | $ | (284 | ) | |||||||||
Changes recognized in net loss/(gain) included in other comprehensive loss | |||||||||||||||||||||||
Net loss/(gain) arising in current year | $ | 431 | $ | 568 | $ | (115 | ) | $ | 314 | $ | (9 | ) | $ | (57 | ) | ||||||||
Amortization and settlement recognition | (131 | ) | (413 | ) | (60 | ) | (46 | ) | 12 | 1 | |||||||||||||
Foreign currency translation loss/(gain) | — | — | 73 | (117 | ) | 1 | 1 | ||||||||||||||||
Total | $ | 300 | $ | 155 | $ | (102 | ) | $ | 151 | $ | 4 | $ | (55 | ) | |||||||||
Accumulated benefit obligation at end of year | $ | 13,732 | $ | 12,211 | $ | 2,985 | $ | 2,642 |
• | Service cost is the value of benefits earned by employees for working during the year. |
• | Interest cost is the accrued interest on the projected benefit obligation due to the passage of time. |
• | Expected return on plan assets is the long-term return we expect to earn on plan investments for our funded plans that will be used to settle future benefit obligations. |
• | Amortization of prior service cost/(credit) represents the recognition in the income statement of benefit changes resulting from plan amendments. |
• | Amortization of net loss/(gain) represents the recognition in the income statement of changes in the amount of plan assets and the projected benefit obligation based on changes in assumptions and actual experience. |
• | Settlement/curtailment loss/(gain) represents the result of actions that effectively eliminate all or a portion of related projected benefit obligations. Settlements are triggered when payouts to settle the projected benefit obligation of a plan due to lump sums or other events exceed the annual service and interest cost. Settlements are recognized when actions are irrevocable and we are relieved of the primary responsibility and risk for projected benefit obligations. Curtailments are due to events such as plant closures or the sale of a business resulting in a reduction of future service or benefits. Curtailment losses are recognized when an event is probable and estimable, while curtailment gains are recognized when an event has occurred (when the related employees terminate or an amendment is adopted). |
• | Special termination benefits are the additional benefits offered to employees upon departure due to actions such as restructuring. |
Pension | Retiree Medical | ||||||||||||||||||||||||||||||||||
U.S. | International | ||||||||||||||||||||||||||||||||||
2017 | 2016 | 2015 | 2017 | 2016 | 2015 | 2017 | 2016 | 2015 | |||||||||||||||||||||||||||
Components of benefit expense | |||||||||||||||||||||||||||||||||||
Service cost | $ | 401 | $ | 393 | $ | 435 | $ | 91 | $ | 80 | $ | 99 | $ | 28 | $ | 31 | $ | 35 | |||||||||||||||||
Interest cost | 468 | 484 | 546 | 89 | 94 | 115 | 36 | 41 | 52 | ||||||||||||||||||||||||||
Expected return on plan assets | (849 | ) | (834 | ) | (850 | ) | (176 | ) | (163 | ) | (174 | ) | (22 | ) | (24 | ) | (27 | ) | |||||||||||||||||
Amortization of prior service cost/(credit) | 1 | (1 | ) | (3 | ) | — | — | — | (25 | ) | (38 | ) | (39 | ) | |||||||||||||||||||||
Amortization of net loss/(gain) | 123 | 168 | 205 | 53 | 40 | 71 | (12 | ) | (1 | ) | 2 | ||||||||||||||||||||||||
144 | 210 | 333 | 57 | 51 | 111 | 5 | 9 | 23 | |||||||||||||||||||||||||||
Settlement/curtailment loss/(gain) (a) | 8 | 245 | — | 11 | 9 | 3 | — | (14 | ) | — | |||||||||||||||||||||||||
Special termination benefits | 60 | 11 | 18 | — | 1 | 1 | 2 | 1 | 1 | ||||||||||||||||||||||||||
Total | $ | 212 | $ | 466 | $ | 351 | $ | 68 | $ | 61 | $ | 115 | $ | 7 | $ | (4 | ) | $ | 24 |
(a) | U.S. includes a settlement charge of $242 million related to the group annuity contract purchase in 2016. See additional unaudited information in “Items Affecting Comparability” in Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
Pension | Retiree Medical | ||||||||||
U.S. | International | ||||||||||
Net loss/(gain) | $ | 179 | $ | 46 | $ | (10 | ) | ||||
Prior service cost/(credit) | 3 | — | (20 | ) | |||||||
Total | $ | 182 | $ | 46 | $ | (30 | ) |
Pension | Retiree Medical | |||||||||||||||||||||||||
U.S. | International | |||||||||||||||||||||||||
2017 | 2016 | 2015 | 2017 | 2016 | 2015 | 2017 | 2016 | 2015 | ||||||||||||||||||
Weighted-average assumptions | ||||||||||||||||||||||||||
Liability discount rate | 3.7 | % | 4.4 | % | 4.5 | % | 3.0 | % | 3.1 | % | 4.0 | % | 3.5 | % | 4.0 | % | 4.2 | % | ||||||||
Expense discount rate (a) | n/a | n/a | 4.2 | % | n/a | n/a | 3.8 | % | n/a | n/a | 3.8 | % | ||||||||||||||
Service cost discount rate (a) | 4.5 | % | 4.6 | % | n/a | 3.6 | % | 4.1 | % | n/a | 4.0 | % | 4.3 | % | n/a | |||||||||||
Interest cost discount rate (a) | 3.7 | % | 3.8 | % | n/a | 2.8 | % | 3.5 | % | n/a | 3.2 | % | 3.3 | % | n/a | |||||||||||
Expected return on plan assets | 7.5 | % | 7.5 | % | 7.5 | % | 6.0 | % | 6.2 | % | 6.5 | % | 7.5 | % | 7.5 | % | 7.5 | % | ||||||||
Liability rate of salary increases | 3.1 | % | 3.1 | % | 3.1 | % | 3.7 | % | 3.6 | % | 3.6 | % | ||||||||||||||
Expense rate of salary increases | 3.1 | % | 3.1 | % | 3.5 | % | 3.6 | % | 3.6 | % | 3.6 | % |
(a) | Effective as of the beginning of 2016, we prospectively changed the method we use to estimate the service and interest cost components of pension and retiree medical expense. See additional unaudited information in “Our Critical Accounting Policies” in Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
Pension | Retiree Medical | ||||||||||||||||||||||
U.S. | International | ||||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||
Selected information for plans with accumulated benefit obligation in excess of plan assets | |||||||||||||||||||||||
Liability for service to date | $ | (8,355 | ) | $ | (12,211 | ) | $ | (161 | ) | $ | (134 | ) | |||||||||||
Fair value of plan assets | $ | 6,919 | $ | 11,458 | $ | 119 | $ | 110 | |||||||||||||||
Selected information for plans with projected benefit liability in excess of plan assets | |||||||||||||||||||||||
Benefit liability | $ | (9,400 | ) | $ | (13,192 | ) | $ | (1,273 | ) | $ | (2,773 | ) | $ | (1,187 | ) | $ | (1,208 | ) | |||||
Fair value of plan assets | $ | 6,919 | $ | 11,458 | $ | 1,158 | $ | 2,492 | $ | 321 | $ | 320 |
2018 | 2019 | 2020 | 2021 | 2022 | 2023 - 27 | ||||||||||||||||||
Pension | $ | 890 | $ | 985 | $ | 825 | $ | 875 | $ | 925 | $ | 5,210 | |||||||||||
Retiree medical (a) | $ | 120 | $ | 120 | $ | 110 | $ | 110 | $ | 105 | $ | 455 |
(a) | Expected future benefit payments for our retiree medical plans do not reflect any estimated subsidies expected to be received under the 2003 Medicare Act. Subsidies are expected to be approximately $2 million for each of the years from 2018 through 2022 and approximately $6 million in total for 2023 through 2027. |
Pension | Retiree Medical | ||||||||||||||||||||||
2017 | 2016 | 2015 | 2017 | 2016 | 2015 | ||||||||||||||||||
Discretionary (a) | $ | 6 | $ | 459 | $ | — | $ | — | $ | — | $ | — | |||||||||||
Non-discretionary | 158 | 200 | 162 | 56 | 36 | 43 | |||||||||||||||||
Total | $ | 164 | $ | 659 | $ | 162 | $ | 56 | $ | 36 | $ | 43 |
(a) | Includes $452 million in 2016 relating to the funding of the group annuity contract purchase from an unrelated insurance company. |
2018 | 2017 | ||||
Fixed income | 47 | % | 40 | % | |
U.S. equity | 29 | % | 33 | % | |
International equity | 20 | % | 22 | % | |
Real estate | 4 | % | 5 | % |
2017 | 2016 | ||||||||||||||||||
Total | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | |||||||||||||||
U.S. plan assets (a) | |||||||||||||||||||
Equity securities, including preferred stock (b) | $ | 6,904 | $ | 6,896 | $ | 8 | $ | — | $ | 6,489 | |||||||||
Government securities (c) | 1,365 | — | 1,365 | — | 1,173 | ||||||||||||||
Corporate bonds (c) | 3,429 | — | 3,429 | — | 3,012 | ||||||||||||||
Mortgage-backed securities (c) | 217 | — | 217 | — | 187 | ||||||||||||||
Contracts with insurance companies (d) | 8 | — | — | 8 | 7 | ||||||||||||||
Cash and cash equivalents | 236 | 236 | — | — | 196 | ||||||||||||||
Sub-total U.S. plan assets | 12,159 | $ | 7,132 | $ | 5,019 | $ | 8 | 11,064 | |||||||||||
Real estate commingled funds measured at net asset value (e) | 675 | 651 | |||||||||||||||||
Dividends and interest receivable, net of payables | 69 | 63 | |||||||||||||||||
Total U.S. plan assets | $ | 12,903 | $ | 11,778 | |||||||||||||||
International plan assets | |||||||||||||||||||
Equity securities (b) | $ | 1,928 | $ | 1,895 | $ | 33 | $ | — | $ | 1,556 | |||||||||
Government securities (c) | 492 | — | 492 | — | 432 | ||||||||||||||
Corporate bonds (c) | 493 | — | 493 | — | 453 | ||||||||||||||
Fixed income commingled funds (f) | 383 | 383 | — | — | 316 | ||||||||||||||
Contracts with insurance companies (d) | 36 | — | — | 36 | 35 | ||||||||||||||
Cash and cash equivalents | 19 | 19 | — | — | 12 | ||||||||||||||
Sub-total international plan assets | 3,351 | $ | 2,297 | $ | 1,018 | $ | 36 | 2,804 | |||||||||||
Real estate commingled funds measured at net asset value (e) | 102 | 84 | |||||||||||||||||
Dividends and interest receivable | 7 | 6 | |||||||||||||||||
Total international plan assets | $ | 3,460 | $ | 2,894 |
(a) | 2017 and 2016 amounts include $321 million and $320 million, respectively, of retiree medical plan assets that are restricted for purposes of providing health benefits for U.S. retirees and their beneficiaries. |
(b) | The equity securities portfolio was invested in U.S. and international common stock and commingled funds, and the preferred stock portfolio in the U.S. was invested in domestic and international corporate preferred stock investments. The common stock is based on quoted prices in active markets. The U.S. commingled funds are based on fair values of the investments owned by these funds that are benchmarked against various U.S. large, mid-cap and small company indices, and includes one large-cap fund that represents 19% of total U.S. plan assets for 2017 and 2016. The international commingled funds are based on the fair values of the investments owned by these funds that track various non-U.S. equity indices. The preferred stock investments are based on quoted bid prices for comparable securities in the marketplace and broker/dealer quotes in active markets. |
(c) | These investments are based on quoted bid prices for comparable securities in the marketplace and broker/dealer quotes in active markets. Corporate bonds of U.S.-based companies represent 23% and 22% of total U.S. plan assets for 2017 and 2016, respectively. |
(d) | Based on the fair value of the contracts as determined by the insurance companies using inputs that are not observable. The changes in Level 3 amounts were not significant in the years ended December 30, 2017 and December 31, 2016. |
(e) | The real estate commingled funds include investments in limited partnerships. These funds are based on the net asset value of the appraised value of investments owned by these funds as determined by independent third parties using inputs that are not observable. The majority of the funds are redeemable quarterly subject to availability of cash and have notice periods ranging from 45 to 90 days. |
(f) | Based on the fair value of the investments owned by these funds that track various government and corporate bond indices. |
2018 | 2017 | ||||
Average increase assumed | 6 | % | 6 | % | |
Ultimate projected increase | 5 | % | 5 | % | |
Year of ultimate projected increase | 2039 | 2039 |
1% Increase | 1% Decrease | ||||||
2017 service and interest cost components | $ | 3 | $ | (3 | ) | ||
2017 benefit liability | $ | 39 | $ | (34 | ) |
Average Useful Life (Years) | 2017 | 2016 | 2015 | ||||||||||
Property, plant and equipment, net | |||||||||||||
Land | $ | 1,148 | $ | 1,153 | |||||||||
Buildings and improvements | 15 - 44 | 8,796 | 8,306 | ||||||||||
Machinery and equipment, including fleet and software | 5 - 15 | 27,018 | 25,277 | ||||||||||
Construction in progress | 2,144 | 2,082 | |||||||||||
39,106 | 36,818 | ||||||||||||
Accumulated depreciation | (21,866 | ) | (20,227 | ) | |||||||||
$ | 17,240 | $ | 16,591 | ||||||||||
Depreciation expense | $ | 2,227 | $ | 2,217 | $ | 2,248 |
2017 | 2016 | 2015 | |||||||||||||||||||||||||||
Amortizable intangible assets, net | Average Useful Life (Years) | Gross | Accumulated Amortization | Net | Gross | Accumulated Amortization | Net | ||||||||||||||||||||||
Acquired franchise rights | 56 – 60 | $ | 858 | $ | (128 | ) | $ | 730 | $ | 827 | $ | (108 | ) | $ | 719 | ||||||||||||||
Reacquired franchise rights | 5 – 14 | 106 | (104 | ) | 2 | 106 | (102 | ) | 4 | ||||||||||||||||||||
Brands | 20 – 40 | 1,322 | (1,026 | ) | 296 | 1,277 | (977 | ) | 300 | ||||||||||||||||||||
Other identifiable intangibles | 10 – 24 | 521 | (281 | ) | 240 | 522 | (308 | ) | 214 | ||||||||||||||||||||
$ | 2,807 | $ | (1,539 | ) | $ | 1,268 | $ | 2,732 | $ | (1,495 | ) | $ | 1,237 | ||||||||||||||||
Amortization expense | $ | 68 | $ | 70 | $ | 75 |
2018 | 2019 | 2020 | 2021 | 2022 | ||||||||||||||||
Five-year projected amortization | $ | 69 | $ | 64 | $ | 64 | $ | 62 | $ | 60 |
Balance, Beginning 2016 | Translation and Other | Balance, End of 2016 | Translation and Other | Balance, End of 2017 | |||||||||||||||
FLNA | |||||||||||||||||||
Goodwill | $ | 267 | $ | 3 | $ | 270 | $ | 10 | $ | 280 | |||||||||
Brands | 22 | 1 | 23 | 2 | 25 | ||||||||||||||
289 | 4 | 293 | 12 | 305 | |||||||||||||||
QFNA | |||||||||||||||||||
Goodwill | 175 | — | 175 | — | 175 | ||||||||||||||
NAB | |||||||||||||||||||
Goodwill (a) | 9,754 | 89 | 9,843 | 11 | 9,854 | ||||||||||||||
Reacquired franchise rights | 7,042 | 22 | 7,064 | 62 | 7,126 | ||||||||||||||
Acquired franchise rights | 1,507 | 5 | 1,512 | 13 | 1,525 | ||||||||||||||
Brands (a) | 108 | 206 | 314 | 39 | 353 | ||||||||||||||
18,411 | 322 | 18,733 | 125 | 18,858 | |||||||||||||||
Latin America | |||||||||||||||||||
Goodwill | 521 | 32 | 553 | 2 | 555 | ||||||||||||||
Brands | 137 | 13 | 150 | (9 | ) | 141 | |||||||||||||
658 | 45 | 703 | (7 | ) | 696 | ||||||||||||||
ESSA (b) | |||||||||||||||||||
Goodwill | 3,042 | 135 | 3,177 | 275 | 3,452 | ||||||||||||||
Reacquired franchise rights | 488 | — | 488 | 61 | 549 | ||||||||||||||
Acquired franchise rights | 190 | (6 | ) | 184 | 11 | 195 | |||||||||||||
Brands | 2,212 | 146 | 2,358 | 187 | 2,545 | ||||||||||||||
5,932 | 275 | 6,207 | 534 | 6,741 | |||||||||||||||
AMENA | |||||||||||||||||||
Goodwill | 418 | (6 | ) | 412 | 16 | 428 | |||||||||||||
Brands | 105 | (2 | ) | 103 | 8 | 111 | |||||||||||||
523 | (8 | ) | 515 | 24 | 539 | ||||||||||||||
Total goodwill | 14,177 | 253 | 14,430 | 314 | 14,744 | ||||||||||||||
Total reacquired franchise rights | 7,530 | 22 | 7,552 | 123 | 7,675 | ||||||||||||||
Total acquired franchise rights | 1,697 | (1 | ) | 1,696 | 24 | 1,720 | |||||||||||||
Total brands | 2,584 | 364 | 2,948 | 227 | 3,175 | ||||||||||||||
$ | 25,988 | $ | 638 | $ | 26,626 | $ | 688 | $ | 27,314 |
(a) | The change in 2016 is primarily related to our acquisition of KeVita, Inc. |
(b) | The change in 2017 primarily reflects the currency appreciation of the Russian ruble and euro. The change in 2016 primarily reflects the currency appreciation of the Russian ruble. |
Average Useful Life (Years) | 2017 | 2016 | 2015 | ||||||||||
Property, plant and equipment, net | |||||||||||||
Land | $ | 1,148 | $ | 1,153 | |||||||||
Buildings and improvements | 15 - 44 | 8,796 | 8,306 | ||||||||||
Machinery and equipment, including fleet and software | 5 - 15 | 27,018 | 25,277 | ||||||||||
Construction in progress | 2,144 | 2,082 | |||||||||||
39,106 | 36,818 | ||||||||||||
Accumulated depreciation | (21,866 | ) | (20,227 | ) | |||||||||
$ | 17,240 | $ | 16,591 | ||||||||||
Depreciation expense | $ | 2,227 | $ | 2,217 | $ | 2,248 |
Amount Reclassified from Accumulated Other Comprehensive Loss | Affected Line Item in the Income Statement | ||||||||||||
2017 | 2016 | 2015 | |||||||||||
Currency translation: | |||||||||||||
Venezuelan entities | $ | — | $ | — | $ | 111 | Venezuela impairment charges | ||||||
Cash flow hedges: | |||||||||||||
Foreign exchange contracts | $ | — | $ | 2 | $ | (3 | ) | Net revenue | |||||
Foreign exchange contracts | 10 | (46 | ) | (94 | ) | Cost of sales | |||||||
Interest rate derivatives | (184 | ) | 187 | 174 | Interest expense | ||||||||
Commodity contracts | 4 | 3 | 9 | Cost of sales | |||||||||
Commodity contracts | (1 | ) | 4 | 11 | Selling, general and administrative expenses | ||||||||
Net (gains)/losses before tax | (171 | ) | 150 | 97 | |||||||||
Tax amounts | 64 | (63 | ) | (47 | ) | ||||||||
Net (gains)/losses after tax | $ | (107 | ) | $ | 87 | $ | 50 | ||||||
Pension and retiree medical items: | |||||||||||||
Amortization of net prior service credit (a) | $ | (24 | ) | $ | (39 | ) | $ | (41 | ) | ||||
Amortization of net losses (a) | 167 | 209 | 281 | ||||||||||
Settlement/curtailment (a) | 15 | 237 | 6 | ||||||||||
Net losses before tax | 158 | 407 | 246 | ||||||||||
Tax amounts | (44 | ) | (144 | ) | (74 | ) | |||||||
Net losses after tax | $ | 114 | $ | 263 | $ | 172 | |||||||
Venezuelan entities | $ | — | $ | — | $ | 20 | Venezuela impairment charges | ||||||
Tax amount | — | — | (4 | ) | |||||||||
Net losses after tax | $ | — | $ | — | $ | 16 | |||||||
Available-for-sale securities: | |||||||||||||
Sale of Britvic securities | $ | (99 | ) | $ | — | $ | — | Selling, general and administrative expenses | |||||
Tax amount | 10 | — | — | ||||||||||
Net gain after tax | $ | (89 | ) | $ | — | $ | — | ||||||
Total net (gains)/losses reclassified for the year, net of tax | $ | (82 | ) | $ | 350 | $ | 349 |
(a) | These items are included in the components of net periodic benefit cost for pension and retiree medical plans (see Note 7 for additional details). |
2017 | 2016 | 2015 | |||||||||
2014 Productivity Plan | $ | 295 | $ | 160 | $ | 169 | |||||
2012 Productivity Plan | — | — | 61 | ||||||||
Total restructuring and impairment charges | 295 | 160 | 230 | ||||||||
Other productivity initiatives | 16 | 12 | 90 | ||||||||
Total restructuring and impairment charges and other productivity initiatives | $ | 311 | $ | 172 | $ | 320 |
2017 | 2016 | 2015 | |||||||||||||||||||||||||||||||||||||||||||||
Severance and Other Employee Costs | Asset Impairments | Other Costs | Total | Severance and Other Employee Costs | Asset Impairments | Other Costs | Total | Severance and Other Employee Costs | Asset Impairments | Other Costs | Total | ||||||||||||||||||||||||||||||||||||
FLNA (a) | $ | 67 | $ | — | $ | — | $ | 67 | $ | 10 | $ | — | $ | 3 | $ | 13 | $ | 18 | $ | (1 | ) | $ | 9 | $ | 26 | ||||||||||||||||||||||
QFNA | 11 | — | — | 11 | — | — | 1 | 1 | — | — | 3 | 3 | |||||||||||||||||||||||||||||||||||
NAB | 52 | 1 | 1 | 54 | 18 | 8 | 9 | 35 | 10 | 4 | 17 | 31 | |||||||||||||||||||||||||||||||||||
Latin America (a) | 57 | 16 | (10 | ) | 63 | 29 | — | (2 | ) | 27 | 2 | 10 | 16 | 28 | |||||||||||||||||||||||||||||||||
ESSA | 46 | 4 | 3 | 53 | 21 | 22 | 17 | 60 | 26 | 11 | 25 | 62 | |||||||||||||||||||||||||||||||||||
AMENA (b) | 2 | — | (5 | ) | (3 | ) | 4 | 6 | 4 | 14 | 2 | — | 8 | 10 | |||||||||||||||||||||||||||||||||
Corporate | 45 | — | 5 | 50 | 6 | — | 4 | 10 | 1 | — | 8 | 9 | |||||||||||||||||||||||||||||||||||
$ | 280 | $ | 21 | $ | (6 | ) | $ | 295 | $ | 88 | $ | 36 | $ | 36 | $ | 160 | $ | 59 | $ | 24 | $ | 86 | $ | 169 |
(a) | Income amounts represent adjustments for changes in estimates. |
(b) | Income amount primarily reflects a gain on the sale of property, plant and equipment. |
2014 Productivity Plan Costs to Date | |||||||||||||||
Severance and Other Employee Costs | Asset Impairments | Other Costs | Total | ||||||||||||
FLNA | $ | 131 | $ | 9 | $ | 23 | $ | 163 | |||||||
QFNA | 26 | — | 6 | 32 | |||||||||||
NAB | 149 | 69 | 83 | 301 | |||||||||||
Latin America | 109 | 29 | 14 | 152 | |||||||||||
ESSA | 127 | 41 | 59 | 227 | |||||||||||
AMENA | 23 | 6 | 15 | 44 | |||||||||||
Corporate | 62 | — | 53 | 115 | |||||||||||
$ | 627 | $ | 154 | $ | 253 | $ | 1,034 |
Severance and Other Employee Costs | Asset Impairments | Other Costs | Total | ||||||||||||
Liability as of December 27, 2014 | $ | 89 | $ | — | $ | 24 | $ | 113 | |||||||
2015 restructuring charges | 59 | 24 | 86 | 169 | |||||||||||
Cash payments | (76 | ) | — | (87 | ) | (163 | ) | ||||||||
Non-cash charges and translation | (11 | ) | (24 | ) | (3 | ) | (38 | ) | |||||||
Liability as of December 26, 2015 | 61 | — | 20 | 81 | |||||||||||
2016 restructuring charges | 88 | 36 | 36 | 160 | |||||||||||
Cash payments | (46 | ) | — | (49 | ) | (95 | ) | ||||||||
Non-cash charges and translation | (15 | ) | (36 | ) | 1 | (50 | ) | ||||||||
Liability as of December 31, 2016 | 88 | — | 8 | 96 | |||||||||||
2017 restructuring charges | 280 | 21 | (6 | ) | 295 | ||||||||||
Cash payments | (91 | ) | — | (22 | ) | (113 | ) | ||||||||
Non-cash charges and translation | (65 | ) | (21 | ) | 34 | (52 | ) | ||||||||
Liability as of December 30, 2017 | $ | 212 | $ | — | $ | 14 | $ | 226 |
Severance and Other Employee Costs | Asset Impairments | Other Costs | Total | |||||||||||||
FLNA | $ | — | $ | — | $ | — | $ | — | ||||||||
QFNA | — | — | — | — | ||||||||||||
NAB | — | — | 2 | 2 | ||||||||||||
Latin America | 6 | 1 | 1 | 8 | ||||||||||||
ESSA | 15 | — | 12 | 27 | ||||||||||||
AMENA | 15 | 3 | 2 | 20 | ||||||||||||
Corporate | 3 | — | 1 | 4 | ||||||||||||
$ | 39 | $ | 4 | $ | 18 | $ | 61 |
2012 Productivity Plan Costs to Date | |||||||||||||||
Severance and Other Employee Costs | Asset Impairments | Other Costs | Total | ||||||||||||
FLNA | $ | 91 | $ | 8 | $ | 25 | $ | 124 | |||||||
QFNA | 18 | — | 10 | 28 | |||||||||||
NAB | 107 | 44 | 48 | 199 | |||||||||||
Latin America | 98 | 11 | 18 | 127 | |||||||||||
ESSA | 136 | 23 | 66 | 225 | |||||||||||
AMENA | 75 | 5 | 17 | 97 | |||||||||||
Corporate | 35 | — | 59 | 94 | |||||||||||
$ | 560 | $ | 91 | $ | 243 | $ | 894 |
Severance and Other Employee Costs | Asset Impairments | Other Costs | Total | ||||||||||||
Liability as of December 27, 2014 | $ | 28 | $ | — | $ | 5 | $ | 33 | |||||||
2015 restructuring charges | 39 | 4 | 18 | 61 | |||||||||||
Cash payments | (24 | ) | — | (21 | ) | (45 | ) | ||||||||
Non-cash charges and translation | (8 | ) | (4 | ) | 1 | (11 | ) | ||||||||
Liability as of December 26, 2015 | 35 | — | 3 | 38 | |||||||||||
Cash payments | (28 | ) | — | (2 | ) | (30 | ) | ||||||||
Non-cash charges and translation | (7 | ) | — | (1 | ) | (8 | ) | ||||||||
Liability as of December 31, 2016 | $ | — | $ | — | $ | — | $ | — |
Currency Translation Adjustment | Cash Flow Hedges | Pension and Retiree Medical | Available-For-Sale Securities | Other | Accumulated Other Comprehensive Loss Attributable to PepsiCo | ||||||||||||||||||
Balance as of December 27, 2014 (a) | $ | (8,255 | ) | $ | 34 | $ | (2,500 | ) | $ | 87 | $ | (35 | ) | $ | (10,669 | ) | |||||||
Other comprehensive (loss)/income before reclassifications (b) | (2,936 | ) | (95 | ) | (88 | ) | 3 | — | (3,116 | ) | |||||||||||||
Amounts reclassified from accumulated other comprehensive loss | 111 | 97 | 266 | — | — | 474 | |||||||||||||||||
Net current year other comprehensive (loss)/income | (2,825 | ) | 2 | 178 | 3 | — | (2,642 | ) | |||||||||||||||
Tax amounts | — | 1 | (7 | ) | (2 | ) | — | (8 | ) | ||||||||||||||
Balance as of December 26, 2015 (a) | (11,080 | ) | 37 | (2,329 | ) | 88 | (35 | ) | (13,319 | ) | |||||||||||||
Other comprehensive (loss)/income before reclassifications | (313 | ) | (74 | ) | (750 | ) | (43 | ) | — | (1,180 | ) | ||||||||||||
Amounts reclassified from accumulated other comprehensive loss | — | 150 | 407 | — | — | 557 | |||||||||||||||||
Net current year other comprehensive (loss)/income | (313 | ) | 76 | (343 | ) | (43 | ) | — | (623 | ) | |||||||||||||
Tax amounts | 7 | (30 | ) | 27 | 19 | — | 23 | ||||||||||||||||
Balance as of December 31, 2016 (a) | (11,386 | ) | 83 | (2,645 | ) | 64 | (35 | ) | (13,919 | ) | |||||||||||||
Other comprehensive (loss)/income before reclassifications (c) | 1,049 | 130 | (375 | ) | 25 | — | 829 | ||||||||||||||||
Amounts reclassified from accumulated other comprehensive loss | — | (171 | ) | 158 | (99 | ) | — | (112 | ) | ||||||||||||||
Net current year other comprehensive (loss)/income | 1,049 | (41 | ) | (217 | ) | (74 | ) | — | 717 | ||||||||||||||
Tax amounts | 60 | 5 | 58 | 6 | 16 | 145 | |||||||||||||||||
Balance as of December 30, 2017 (a) | $ | (10,277 | ) | $ | 47 | $ | (2,804 | ) | $ | (4 | ) | $ | (19 | ) | $ | (13,057 | ) |
(a) | Pension and retiree medical amounts are net of taxes of $1,260 million in 2014, $1,253 million in 2015, $1,280 million in 2016 and $1,338 million in 2017. |
(b) | Currency translation adjustment primarily reflects the depreciation of the Russian ruble, Brazilian real and Canadian dollar. |
(c) | Currency translation adjustment primarily reflects the appreciation of the euro, Russian ruble, Pound sterling and Canadian dollar. |
2018 | 2017 | ||||
Fixed income | 47 | % | 40 | % | |
U.S. equity | 29 | % | 33 | % | |
International equity | 20 | % | 22 | % | |
Real estate | 4 | % | 5 | % |
Pension | Retiree Medical | ||||||||||
U.S. | International | ||||||||||
Net loss/(gain) | $ | 179 | $ | 46 | $ | (10 | ) | ||||
Prior service cost/(credit) | 3 | — | (20 | ) | |||||||
Total | $ | 182 | $ | 46 | $ | (30 | ) |
Pension | Retiree Medical | |||||||||||||||||||||||||
U.S. | International | |||||||||||||||||||||||||
2017 | 2016 | 2015 | 2017 | 2016 | 2015 | 2017 | 2016 | 2015 | ||||||||||||||||||
Weighted-average assumptions | ||||||||||||||||||||||||||
Liability discount rate | 3.7 | % | 4.4 | % | 4.5 | % | 3.0 | % | 3.1 | % | 4.0 | % | 3.5 | % | 4.0 | % | 4.2 | % | ||||||||
Expense discount rate (a) | n/a | n/a | 4.2 | % | n/a | n/a | 3.8 | % | n/a | n/a | 3.8 | % | ||||||||||||||
Service cost discount rate (a) | 4.5 | % | 4.6 | % | n/a | 3.6 | % | 4.1 | % | n/a | 4.0 | % | 4.3 | % | n/a | |||||||||||
Interest cost discount rate (a) | 3.7 | % | 3.8 | % | n/a | 2.8 | % | 3.5 | % | n/a | 3.2 | % | 3.3 | % | n/a | |||||||||||
Expected return on plan assets | 7.5 | % | 7.5 | % | 7.5 | % | 6.0 | % | 6.2 | % | 6.5 | % | 7.5 | % | 7.5 | % | 7.5 | % | ||||||||
Liability rate of salary increases | 3.1 | % | 3.1 | % | 3.1 | % | 3.7 | % | 3.6 | % | 3.6 | % | ||||||||||||||
Expense rate of salary increases | 3.1 | % | 3.1 | % | 3.5 | % | 3.6 | % | 3.6 | % | 3.6 | % |
2017 | 2016 | 2015 | |||||||||
Share-based compensation expense - equity awards | $ | 292 | $ | 284 | $ | 295 | |||||
Share-based compensation expense - liability awards | 13 | 5 | — | ||||||||
Restructuring and impairment (credits)/charges | (2 | ) | 5 | 4 | |||||||
Total | $ | 303 | $ | 294 | $ | 299 | |||||
Income tax benefits recognized in earnings related to share-based compensation | $ | 89 | (a) | $ | 91 | $ | 77 |
2017(a) | 2016(a) | ||||||
Short-term debt obligations (b) | |||||||
Current maturities of long-term debt | $ | 4,020 | $ | 4,401 | |||
Commercial paper (1.3% and 0.6%) | 1,385 | 2,257 | |||||
Other borrowings (4.7% and 4.4%) | 80 | 234 | |||||
$ | 5,485 | $ | 6,892 | ||||
Long-term debt obligations (b) | |||||||
Notes due 2017 (1.4%) | $ | — | $ | 4,398 | |||
Notes due 2018 (2.4% and 2.3%) | 4,016 | 2,561 | |||||
Notes due 2019 (2.1% and 1.7%) | 3,933 | 2,837 | |||||
Notes due 2020 (3.1% and 2.6%) | 3,792 | 3,816 | |||||
Notes due 2021 (2.4% and 2.4%) | 3,300 | 2,249 | |||||
Notes due 2022 (2.6% and 2.8%) | 3,853 | 2,655 | |||||
Notes due 2023-2047 (3.7% and 3.8%) | 18,891 | 15,903 | |||||
Other, due 2017-2026 (1.3% and 1.4%) | 31 | 35 | |||||
37,816 | 34,454 | ||||||
Less: current maturities of long-term debt obligations | (4,020 | ) | (4,401 | ) | |||
Total | $ | 33,796 | $ | 30,053 |
(a) | Amounts are shown net of unamortized net discounts of $155 million and $142 million for 2017 and 2016, respectively. |
(b) | The interest rates presented reflect weighted-average rates at year-end. Certain of our fixed rate indebtedness have been swapped to floating rates through the use of interest rate derivative instruments. See Note 9 for additional information regarding our interest rate derivative instruments. |
Interest Rate | Maturity Date | Amount(a) | ||||||
Floating rate | May 2019 | $ | 350 | |||||
Floating rate | May 2022 | $ | 400 | |||||
1.550 | % | May 2019 | $ | 750 | ||||
2.250 | % | May 2022 | $ | 750 | ||||
4.000 | % | May 2047 | $ | 750 | ||||
2.150 | % | May 2024 | C$ | 750 | (b) | |||
Floating rate | October 2018 | $ | 1,500 | |||||
2.000 | % | April 2021 | $ | 1,000 | ||||
3.000 | % | October 2027 | $ | 1,500 |
Pension | Retiree Medical | ||||||||||||||||||||||
U.S. | International | ||||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||
Change in projected benefit liability | |||||||||||||||||||||||
Liability at beginning of year | $ | 13,192 | $ | 13,033 | $ | 3,124 | $ | 2,872 | $ | 1,208 | $ | 1,300 | |||||||||||
Service cost | 401 | 393 | 91 | 80 | 28 | 31 | |||||||||||||||||
Interest cost | 468 | 484 | 89 | 94 | 36 | 41 | |||||||||||||||||
Plan amendments | 10 | 18 | 2 | — | (5 | ) | (15 | ) | |||||||||||||||
Participant contributions | — | — | 2 | 2 | — | — | |||||||||||||||||
Experience loss/(gain) | 1,529 | 614 | 5 | 560 | 21 | (51 | ) | ||||||||||||||||
Benefit payments | (825 | ) | (347 | ) | (104 | ) | (83 | ) | (107 | ) | (100 | ) | |||||||||||
Settlement/curtailment | (58 | ) | (1,014 | ) | (22 | ) | (19 | ) | — | — | |||||||||||||
Special termination benefits | 60 | 11 | — | 1 | 2 | 1 | |||||||||||||||||
Other, including foreign currency adjustment | — | — | 303 | (383 | ) | 4 | 1 | ||||||||||||||||
Liability at end of year | $ | 14,777 | $ | 13,192 | $ | 3,490 | $ | 3,124 | $ | 1,187 | $ | 1,208 | |||||||||||
Change in fair value of plan assets | |||||||||||||||||||||||
Fair value at beginning of year | $ | 11,458 | $ | 11,397 | $ | 2,894 | $ | 2,823 | $ | 320 | $ | 354 | |||||||||||
Actual return on plan assets | 1,935 | 880 | 288 | 409 | 52 | 30 | |||||||||||||||||
Employer contributions/funding | 60 | 541 | 104 | 118 | 56 | 36 | |||||||||||||||||
Participant contributions | — | — | 2 | 2 | — | — | |||||||||||||||||
Benefit payments | (825 | ) | (347 | ) | (104 | ) | (83 | ) | (107 | ) | (100 | ) | |||||||||||
Settlement | (46 | ) | (1,013 | ) | (18 | ) | (22 | ) | — | — | |||||||||||||
Other, including foreign currency adjustment | — | — | 294 | (353 | ) | — | — | ||||||||||||||||
Fair value at end of year | $ | 12,582 | $ | 11,458 | $ | 3,460 | $ | 2,894 | $ | 321 | $ | 320 | |||||||||||
Funded status | $ | (2,195 | ) | $ | (1,734 | ) | $ | (30 | ) | $ | (230 | ) | $ | (866 | ) | $ | (888 | ) |
Amounts recognized | |||||||||||||||||||||||
Other assets | $ | 286 | $ | — | $ | 85 | $ | 51 | $ | — | $ | — | |||||||||||
Other current liabilities | (74 | ) | (42 | ) | (1 | ) | (1 | ) | (75 | ) | (54 | ) | |||||||||||
Other liabilities | (2,407 | ) | (1,692 | ) | (114 | ) | (280 | ) | (791 | ) | (834 | ) | |||||||||||
Net amount recognized | $ | (2,195 | ) | $ | (1,734 | ) | $ | (30 | ) | $ | (230 | ) | $ | (866 | ) | $ | (888 | ) | |||||
Amounts included in accumulated other comprehensive loss (pre-tax) | |||||||||||||||||||||||
Net loss/(gain) | $ | 3,520 | $ | 3,220 | $ | 782 | $ | 884 | $ | (189 | ) | $ | (193 | ) | |||||||||
Prior service cost/(credit) | 29 | 20 | (3 | ) | (5 | ) | (71 | ) | (91 | ) | |||||||||||||
Total | $ | 3,549 | $ | 3,240 | $ | 779 | $ | 879 | $ | (260 | ) | $ | (284 | ) | |||||||||
Changes recognized in net loss/(gain) included in other comprehensive loss | |||||||||||||||||||||||
Net loss/(gain) arising in current year | $ | 431 | $ | 568 | $ | (115 | ) | $ | 314 | $ | (9 | ) | $ | (57 | ) | ||||||||
Amortization and settlement recognition | (131 | ) | (413 | ) | (60 | ) | (46 | ) | 12 | 1 | |||||||||||||
Foreign currency translation loss/(gain) | — | — | 73 | (117 | ) | 1 | 1 | ||||||||||||||||
Total | $ | 300 | $ | 155 | $ | (102 | ) | $ | 151 | $ | 4 | $ | (55 | ) | |||||||||
Accumulated benefit obligation at end of year | $ | 13,732 | $ | 12,211 | $ | 2,985 | $ | 2,642 |
Fair Value/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) | |||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||
Foreign exchange | $ | (15 | ) | $ | 74 | $ | 62 | $ | (24 | ) | $ | 10 | $ | (44 | ) | ||||||||
Interest rate | 101 | 105 | (195 | ) | 97 | (184 | ) | 187 | |||||||||||||||
Commodity | (48 | ) | (52 | ) | 3 | 1 | 3 | 7 | |||||||||||||||
Net investment | — | — | 157 | (39 | ) | — | — | ||||||||||||||||
Total | $ | 38 | $ | 127 | $ | 27 | $ | 35 | $ | (171 | ) | $ | 150 |
(a) | Foreign exchange derivative losses/gains are primarily included in selling, general and administrative expenses. Interest rate derivative losses/gains are primarily from fair value hedges and are included in interest expense. These losses/gains are substantially offset by decreases/increases in the value of the underlying debt, which are also included in interest expense. 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 are included in interest expense. Commodity derivative losses/gains are included in either cost of sales or selling, general and administrative expenses, depending on the underlying commodity. |
2017 | 2016 | 2015 | ||||||||||||||||||
Income | Shares(a) | Income | Shares(a) | Income | Shares(a) | |||||||||||||||
Net income attributable to PepsiCo | $ | 4,857 | $ | 6,329 | $ | 5,452 | ||||||||||||||
Preferred shares: | ||||||||||||||||||||
Dividends | — | (1 | ) | (1 | ) | |||||||||||||||
Redemption premium | (4 | ) | (5 | ) | (5 | ) | ||||||||||||||
Net income available for PepsiCo common shareholders | $ | 4,853 | 1,425 | $ | 6,323 | 1,439 | $ | 5,446 | 1,469 | |||||||||||
Basic net income attributable to PepsiCo per common share | $ | 3.40 | $ | 4.39 | $ | 3.71 | ||||||||||||||
Net income available for PepsiCo common shareholders | $ | 4,853 | 1,425 | $ | 6,323 | 1,439 | $ | 5,446 | 1,469 | |||||||||||
Dilutive securities: | ||||||||||||||||||||
Stock options, RSUs, PSUs, PEPunits and Other | — | 12 | 1 | 12 | — | 15 | ||||||||||||||
ESOP convertible preferred stock | 4 | 1 | 5 | 1 | 6 | 1 | ||||||||||||||
Diluted | $ | 4,857 | 1,438 | $ | 6,329 | 1,452 | $ | 5,452 | 1,485 | |||||||||||
Diluted net income attributable to PepsiCo per common share | $ | 3.38 | $ | 4.36 | $ | 3.67 |
(a) | Weighted-average common shares outstanding (in millions). |
2017 | 2016 | 2015 | |||||||||
Out-of-the-money options (a) | 0.4 | 0.7 | 1.5 | ||||||||
Average exercise price per option | $ | 110.12 | $ | 99.98 | $ | 99.25 |
(a) | In millions. |
2018 | 2017 | ||||
Average increase assumed | 6 | % | 6 | % | |
Ultimate projected increase | 5 | % | 5 | % | |
Year of ultimate projected increase | 2039 | 2039 |
1% Increase | 1% Decrease | ||||||
2017 service and interest cost components | $ | 3 | $ | (3 | ) | ||
2017 benefit liability | $ | 39 | $ | (34 | ) |
2017 | 2016 | 2015 | |||||||||
Share-based compensation expense - equity awards | $ | 292 | $ | 284 | $ | 295 | |||||
Share-based compensation expense - liability awards | 13 | 5 | — | ||||||||
Restructuring and impairment (credits)/charges | (2 | ) | 5 | 4 | |||||||
Total | $ | 303 | $ | 294 | $ | 299 | |||||
Income tax benefits recognized in earnings related to share-based compensation | $ | 89 | (a) | $ | 91 | $ | 77 |
(a) | Reflects tax rates effective for the 2017 tax year. |
2018 | 2019 | 2020 | 2021 | 2022 | 2023 - 27 | ||||||||||||||||||
Pension | $ | 890 | $ | 985 | $ | 825 | $ | 875 | $ | 925 | $ | 5,210 | |||||||||||
Retiree medical (a) | $ | 120 | $ | 120 | $ | 110 | $ | 110 | $ | 105 | $ | 455 |
(a) | Expected future benefit payments for our retiree medical plans do not reflect any estimated subsidies expected to be received under the 2003 Medicare Act. Subsidies are expected to be approximately $2 million for each of the years from 2018 through 2022 and approximately $6 million in total for 2023 through 2027. |
2017 | 2016 | ||||||||||||||||
Fair Value Hierarchy Levels(a) | Assets(a) | Liabilities(a) | Assets(a) | Liabilities(a) | |||||||||||||
Available-for-sale securities: | |||||||||||||||||
Equity securities (b) | 1 | $ | — | $ | — | $ | 82 | $ | — | ||||||||
Debt securities (c) | 2 | 14,510 | — | 11,369 | — | ||||||||||||
$ | 14,510 | $ | — | $ | 11,451 | $ | — | ||||||||||
Short-term investments (d) | 1 | $ | 228 | $ | — | $ | 193 | $ | — | ||||||||
Prepaid forward contracts (e) | 2 | $ | 27 | $ | — | $ | 25 | $ | — | ||||||||
Deferred compensation (f) | 2 | $ | — | $ | 503 | $ | — | $ | 472 | ||||||||
Derivatives designated as fair value hedging instruments: | |||||||||||||||||
Interest rate (g) | 2 | $ | 24 | $ | 130 | $ | 66 | $ | 71 | ||||||||
Derivatives designated as cash flow hedging instruments: | |||||||||||||||||
Foreign exchange (h) | 2 | $ | 15 | $ | 31 | $ | 51 | $ | 8 | ||||||||
Interest rate (h) | 2 | — | 213 | — | 408 | ||||||||||||
Commodity (i) | 1 | — | 2 | — | 1 | ||||||||||||
Commodity (j) | 2 | 2 | — | 2 | — | ||||||||||||
$ | 17 | $ | 246 | $ | 53 | $ | 417 | ||||||||||
Derivatives not designated as hedging instruments: | |||||||||||||||||
Foreign exchange (h) | 2 | $ | 10 | $ | 3 | $ | 2 | $ | 15 | ||||||||
Commodity (i) | 1 | — | 19 | 1 | 1 | ||||||||||||
Commodity (j) | 2 | 85 | 12 | 60 | 25 | ||||||||||||
$ | 95 | $ | 34 | $ | 63 | $ | 41 | ||||||||||
Total derivatives at fair value (k) | $ | 136 | $ | 410 | $ | 182 | $ | 529 | |||||||||
Total | $ | 14,901 | $ | 913 | $ | 11,851 | $ | 1,001 |
(a) | Fair value hierarchy levels are defined in Note 7. 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 common stock. These equity securities were classified as investments in noncontrolled affiliates. |
(c) | Based on quoted broker prices or other significant inputs derived from or corroborated by observable market data. As of December 30, 2017, $5.8 billion and $8.7 billion of debt securities were classified as cash equivalents and short-term investments, respectively. As of December 31, 2016, $4.6 billion and $6.8 billion of debt securities were classified as cash equivalents and short-term investments, respectively. All of our available-for-sale debt securities have maturities of one year or less. |
(d) | 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. |
(e) | Based primarily on the price of our common stock. |
(f) | Based on the fair value of investments corresponding to employees’ investment elections. |
(g) | Based on LIBOR forward rates. |
(h) | Based on recently reported market transactions of spot and forward rates. |
(i) | Based on quoted contract prices on futures exchange markets. |
(j) | Based on recently reported market transactions of swap arrangements. |
(k) | Unless otherwise noted, 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 December 30, 2017 and December 31, 2016 were not material. Collateral received against any of our asset positions was not material. |
2017 | 2016 | 2015 | |||||||||||||||||||||||||||
Amortizable intangible assets, net | Average Useful Life (Years) | Gross | Accumulated Amortization | Net | Gross | Accumulated Amortization | Net | ||||||||||||||||||||||
Acquired franchise rights | 56 – 60 | $ | 858 | $ | (128 | ) | $ | 730 | $ | 827 | $ | (108 | ) | $ | 719 | ||||||||||||||
Reacquired franchise rights | 5 – 14 | 106 | (104 | ) | 2 | 106 | (102 | ) | 4 | ||||||||||||||||||||
Brands | 20 – 40 | 1,322 | (1,026 | ) | 296 | 1,277 | (977 | ) | 300 | ||||||||||||||||||||
Other identifiable intangibles | 10 – 24 | 521 | (281 | ) | 240 | 522 | (308 | ) | 214 | ||||||||||||||||||||
$ | 2,807 | $ | (1,539 | ) | $ | 1,268 | $ | 2,732 | $ | (1,495 | ) | $ | 1,237 | ||||||||||||||||
Amortization expense | $ | 68 | $ | 70 | $ | 75 |
Pension | Retiree Medical | ||||||||||||||||||||||||||||||||||
U.S. | International | ||||||||||||||||||||||||||||||||||
2017 | 2016 | 2015 | 2017 | 2016 | 2015 | 2017 | 2016 | 2015 | |||||||||||||||||||||||||||
Components of benefit expense | |||||||||||||||||||||||||||||||||||
Service cost | $ | 401 | $ | 393 | $ | 435 | $ | 91 | $ | 80 | $ | 99 | $ | 28 | $ | 31 | $ | 35 | |||||||||||||||||
Interest cost | 468 | 484 | 546 | 89 | 94 | 115 | 36 | 41 | 52 | ||||||||||||||||||||||||||
Expected return on plan assets | (849 | ) | (834 | ) | (850 | ) | (176 | ) | (163 | ) | (174 | ) | (22 | ) | (24 | ) | (27 | ) | |||||||||||||||||
Amortization of prior service cost/(credit) | 1 | (1 | ) | (3 | ) | — | — | — | (25 | ) | (38 | ) | (39 | ) | |||||||||||||||||||||
Amortization of net loss/(gain) | 123 | 168 | 205 | 53 | 40 | 71 | (12 | ) | (1 | ) | 2 | ||||||||||||||||||||||||
144 | 210 | 333 | 57 | 51 | 111 | 5 | 9 | 23 | |||||||||||||||||||||||||||
Settlement/curtailment loss/(gain) (a) | 8 | 245 | — | 11 | 9 | 3 | — | (14 | ) | — | |||||||||||||||||||||||||
Special termination benefits | 60 | 11 | 18 | — | 1 | 1 | 2 | 1 | 1 | ||||||||||||||||||||||||||
Total | $ | 212 | $ | 466 | $ | 351 | $ | 68 | $ | 61 | $ | 115 | $ | 7 | $ | (4 | ) | $ | 24 |
2017 | 2016 | 2015 | |||||||||
2014 Productivity Plan | $ | 295 | $ | 160 | $ | 169 | |||||
2012 Productivity Plan | — | — | 61 | ||||||||
Total restructuring and impairment charges | 295 | 160 | 230 | ||||||||
Other productivity initiatives | 16 | 12 | 90 | ||||||||
Total restructuring and impairment charges and other productivity initiatives | $ | 311 | $ | 172 | $ | 320 |
Net Revenue | Operating Profit/(Loss)(a) | ||||||||||||||||||||||
2017 | 2016 | 2015 | 2017 | 2016 | 2015 | ||||||||||||||||||
FLNA | $ | 15,798 | $ | 15,549 | $ | 14,782 | $ | 4,823 | $ | 4,659 | $ | 4,304 | |||||||||||
QFNA | 2,503 | 2,564 | 2,543 | 642 | 653 | 560 | |||||||||||||||||
NAB | 20,936 | 21,312 | 20,618 | 2,707 | 2,959 | 2,785 | |||||||||||||||||
Latin America | 7,208 | 6,820 | 8,228 | 908 | 887 | (206 | ) | ||||||||||||||||
ESSA | 11,050 | 10,216 | 10,510 | 1,354 | 1,108 | 1,081 | |||||||||||||||||
AMENA | 6,030 | 6,338 | 6,375 | 1,073 | 619 | 941 | |||||||||||||||||
Total division | 63,525 | 62,799 | 63,056 | 11,507 | 10,885 | 9,465 | |||||||||||||||||
Corporate unallocated | — | — | — | (998 | ) | (1,100 | ) | (1,112 | ) | ||||||||||||||
$ | 63,525 | $ | 62,799 | $ | 63,056 | $ | 10,509 | $ | 9,785 | $ | 8,353 |
(a) | For further unaudited information on certain items that impacted our financial performance, see “Item 6. Selected Financial Data.” |
PEPunits(a) | Weighted-Average Grant-Date Fair Value | Weighted-Average Contractual Life Remaining (years) | Aggregate Intrinsic Value(a) | |||||||||
Outstanding at December 31, 2016 | 533 | $ | 59.86 | |||||||||
Converted | (363 | ) | $ | 49.11 | ||||||||
Forfeited | (13 | ) | $ | 68.94 | ||||||||
Actual performance change (b) | 91 | $ | 50.74 | |||||||||
Outstanding at December 30, 2017 (c) | 248 | $ | 68.94 | 0.17 | $ | 29,734 | ||||||
Expected to vest as of December 30, 2017 | 234 | $ | 68.94 | 0.17 | $ | 28,034 |
(a) | In thousands. |
(b) | Reflects the net number of PEPunits above and below target levels based on actual performance measured at the end of the performance period. |
(c) | The outstanding PEPunits for which the performance period has not ended as of December 30, 2017, at the threshold, target and maximum award levels were zero, 0.2 million and 0.4 million, respectively. |
RSUs/PSUs(a) | Weighted-Average Grant-Date Fair Value | Weighted-Average Contractual Life Remaining (years) | Aggregate Intrinsic Value(a) | |||||||||
Outstanding at December 31, 2016 | 8,237 | $ | 91.81 | |||||||||
Granted (b) | 2,824 | $ | 109.92 | |||||||||
Converted | (3,226 | ) | $ | 82.56 | ||||||||
Forfeited | (608 | ) | $ | 100.17 | ||||||||
Actual performance change (c) | 66 | $ | 100.33 | |||||||||
Outstanding at December 30, 2017 (d) | 7,293 | $ | 102.30 | 1.33 | $ | 874,517 | ||||||
Expected to vest as of December 30, 2017 | 6,695 | $ | 102.00 | 1.26 | $ | 802,826 |
(a) | In thousands. |
(b) | Grant activity for all PSUs are disclosed at target. |
(c) | Reflects the net number of PSUs above and below target levels based on actual performance measured at the end of the performance period. |
(d) | The outstanding PSUs for which the performance period has not ended as of December 30, 2017, at the threshold, target and maximum award levels were zero, 0.9 million and 1.5 million, respectively. |
Options(a) | Weighted-Average Exercise Price | Weighted-Average Contractual Life Remaining (years) | Aggregate Intrinsic Value(b) | |||||||||
Outstanding at December 31, 2016 | 25,190 | $ | 69.88 | |||||||||
Granted | 1,481 | $ | 110.15 | |||||||||
Exercised | (7,136 | ) | $ | 65.31 | ||||||||
Forfeited/expired | (522 | ) | $ | 88.36 | ||||||||
Outstanding at December 30, 2017 | 19,013 | $ | 74.23 | 4.22 | $ | 868,750 | ||||||
Exercisable at December 30, 2017 | 14,589 | $ | 65.60 | 3.02 | $ | 792,560 | ||||||
Expected to vest as of December 30, 2017 | 3,994 | $ | 102.50 | 8.15 | $ | 69,578 |
(a) | Options are in thousands and include options previously granted under the PBG plan. No additional options or shares were granted under the PBG plan after 2009. |
(b) | In thousands. |
2017 | 2016 | 2015 | ||||||
Expected life | 5 years | 6 years | 7 years | |||||
Risk-free interest rate | 2.0 | % | 1.4 | % | 1.8 | % | ||
Expected volatility | 11 | % | 12 | % | 15 | % | ||
Expected dividend yield | 2.7 | % | 2.7 | % | 2.7 | % |
2018 | 2019 | 2020 | 2021 | 2022 | ||||||||||||||||
Five-year projected amortization | $ | 69 | $ | 64 | $ | 64 | $ | 62 | $ | 60 |
• | media and personal service prepayments; |
• | promotional materials in inventory; and |
• | production costs of future media advertising. |
• | Basis of Presentation – Note 1 - Basis of Presentation for a description of our policies regarding use of estimates, basis of presentation and consolidation. |
• | Property, Plant and Equipment – Note 4. |
• | Income Taxes – Note 5, and for additional unaudited information, see “Our Critical Accounting Policies” in Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
• | Share-Based Compensation – Note 6. |
• | Pension, Retiree Medical and Savings Plans – Note 7, and for additional unaudited information, see “Our Critical Accounting Policies” in Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
• | Financial Instruments – Note 9, and for additional unaudited information, see “Our Business Risks” in Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
• | Inventories – Note 13. Inventories are valued at the lower of cost or net realizable value. Cost is determined using the average; first-in, first-out (FIFO) or last-in, first-out (LIFO) methods. |
• | Translation of Financial Statements of Foreign Subsidiaries – Financial statements of foreign subsidiaries are translated into U.S. dollars using period-end exchange rates for assets and liabilities and weighted-average exchange rates for revenues and expenses. Adjustments resulting from translating net assets are reported as a separate component of accumulated other comprehensive loss within common shareholders’ equity as currency translation adjustment. |
Jurisdiction | Years Open to Audit | Years Currently Under Audit | ||
United States | 2012-2016 | 2012-2013 | ||
Mexico | 2014-2016 | 2014 | ||
United Kingdom | 2014-2016 | None | ||
Canada (Domestic) | 2013-2016 | 2013-2014 | ||
Canada (International) | 2010-2016 | 2010-2014 | ||
Russia | 2012-2016 | 2012-2016 |