2018(a) | 2017(a) | ||||||
Short-term debt obligations (b) | |||||||
Current maturities of long-term debt | $ | 3,953 | $ | 4,020 | |||
Commercial paper (1.3%) | — | 1,385 | |||||
Other borrowings (6.0% and 4.7%) | 73 | 80 | |||||
$ | 4,026 | $ | 5,485 | ||||
Long-term debt obligations (b) | |||||||
Notes due 2018 (2.4%) | $ | — | $ | 4,016 | |||
Notes due 2019 (3.1% and 2.1%) | 3,948 | 3,933 | |||||
Notes due 2020 (3.9% and 3.1%) | 3,784 | 3,792 | |||||
Notes due 2021 (3.1% and 2.4%) | 3,257 | 3,300 | |||||
Notes due 2022 (2.8% and 2.6%) | 3,802 | 3,853 | |||||
Notes due 2023 (2.9% and 2.4%) | 1,270 | 1,257 | |||||
Notes due 2024-2047 (3.7% and 3.8%) | 16,161 | 17,634 | |||||
Other, due 2018-2026 (1.3% and 1.3%) | 26 | 31 | |||||
32,248 | 37,816 | ||||||
Less: current maturities of long-term debt obligations | (3,953 | ) | (4,020 | ) | |||
Total | $ | 28,295 | $ | 33,796 |
(a) | Amounts are shown net of unamortized net discounts of $119 million and $155 million for 2018 and 2017, respectively. |
(b) | The interest rates presented reflect weighted-average effective interest 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 Tendered | |||||
7.290 | % | September 2026 | $ | 11 | |||
7.440 | % | September 2026 | $ | 4 | |||
7.000 | % | March 2029 | $ | 357 | |||
5.500 | % | May 2035 | $ | 138 | |||
4.875 | % | November 2040 | $ | 410 | |||
5.500 | % | January 2040 | $ | 408 |
Interest Rate | Maturity Date | Amount | |||||
7.290 | % | September 2026 | $ | 88 | |||
7.440 | % | September 2026 | $ | 21 | |||
7.000 | % | March 2029 | $ | 516 | |||
5.500 | % | May 2035 | $ | 107 |
• | Basis of Presentation – Note 1 includes 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 15. Inventories are valued at the lower of cost or net realizable value. Cost is determined using the average; first-in, first-out (FIFO) or, in limited instances, 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. |
2018 | 2017 | ||||||
Balance, beginning of year | $ | 2,212 | $ | 1,885 | |||
Additions for tax positions related to the current year | 142 | 309 | |||||
Additions for tax positions from prior years | 197 | 86 | |||||
Reductions for tax positions from prior years | (822 | ) | (51 | ) | |||
Settlement payments | (233 | ) | (4 | ) | |||
Statutes of limitations expiration | (42 | ) | (33 | ) | |||
Translation and other | (14 | ) | 20 | ||||
Balance, end of year | $ | 1,440 | $ | 2,212 |
2018 | 2017 | ||||||
Cash and cash equivalents | $ | 8,721 | $ | 10,610 | |||
Restricted cash (a) | 1,997 | — | |||||
Restricted cash included in other assets (b) | 51 | 47 | |||||
Total cash and cash equivalents and restricted cash | $ | 10,769 | $ | 10,657 |
2018 | 2017 | ||||||
Cash and cash equivalents | $ | 8,721 | $ | 10,610 | |||
Restricted cash (a) | 1,997 | — | |||||
Restricted cash included in other assets (b) | 51 | 47 | |||||
Total cash and cash equivalents and restricted cash | $ | 10,769 | $ | 10,657 |
(a) | Represents consideration held by our paying agent in connection with our acquisition of SodaStream. |
(b) | Restricted cash included in other assets primarily relates to collateral posted against our derivative asset or liability positions. |
• | media and personal service prepayments; |
• | promotional materials in inventory; and |
• | production costs of future media advertising. |
Balance, Beginning 2017 | Translation and Other | Balance, End of 2017 | Acquisitions/ (Divestitures) | Translation and Other | Balance, End of 2018 | ||||||||||||||||||
FLNA | |||||||||||||||||||||||
Goodwill | $ | 270 | $ | 10 | $ | 280 | $ | 28 | $ | (11 | ) | $ | 297 | ||||||||||
Brands | 23 | 2 | 25 | 138 | (2 | ) | 161 | ||||||||||||||||
293 | 12 | 305 | 166 | (13 | ) | 458 | |||||||||||||||||
QFNA | |||||||||||||||||||||||
Goodwill | 175 | — | 175 | 9 | — | 184 | |||||||||||||||||
Brands | — | — | — | 25 | — | 25 | |||||||||||||||||
175 | — | 175 | 34 | — | 209 | ||||||||||||||||||
NAB (a) | |||||||||||||||||||||||
Goodwill | 9,843 | 11 | 9,854 | — | (41 | ) | 9,813 | ||||||||||||||||
Reacquired franchise rights | 7,064 | 62 | 7,126 | — | (68 | ) | 7,058 | ||||||||||||||||
Acquired franchise rights | 1,512 | 13 | 1,525 | — | (15 | ) | 1,510 | ||||||||||||||||
Brands | 314 | 39 | 353 | — | — | 353 | |||||||||||||||||
18,733 | 125 | 18,858 | — | (124 | ) | 18,734 | |||||||||||||||||
Latin America | |||||||||||||||||||||||
Goodwill | 553 | 2 | 555 | — | (46 | ) | 509 | ||||||||||||||||
Brands | 150 | (9 | ) | 141 | — | (14 | ) | 127 | |||||||||||||||
703 | (7 | ) | 696 | — | (60 | ) | 636 | ||||||||||||||||
ESSA (b) | |||||||||||||||||||||||
Goodwill | 3,177 | 275 | 3,452 | 526 | (367 | ) | 3,611 | ||||||||||||||||
Reacquired franchise rights | 488 | 61 | 549 | (1 | ) | (51 | ) | 497 | |||||||||||||||
Acquired franchise rights | 184 | 11 | 195 | (25 | ) | (9 | ) | 161 | |||||||||||||||
Brands | 2,358 | 187 | 2,545 | 1,993 | (350 | ) | 4,188 | ||||||||||||||||
6,207 | 534 | 6,741 | 2,493 | (777 | ) | 8,457 | |||||||||||||||||
AMENA | |||||||||||||||||||||||
Goodwill | 412 | 16 | 428 | — | (34 | ) | 394 | ||||||||||||||||
Brands | 103 | 8 | 111 | — | (10 | ) | 101 | ||||||||||||||||
515 | 24 | 539 | — | (44 | ) | 495 | |||||||||||||||||
Total goodwill | 14,430 | 314 | 14,744 | 563 | (499 | ) | 14,808 | ||||||||||||||||
Total reacquired franchise rights | 7,552 | 123 | 7,675 | (1 | ) | (119 | ) | 7,555 | |||||||||||||||
Total acquired franchise rights | 1,696 | 24 | 1,720 | (25 | ) | (24 | ) | 1,671 | |||||||||||||||
Total brands | 2,948 | 227 | 3,175 | 2,156 | (376 | ) | 4,955 | ||||||||||||||||
$ | 26,626 | $ | 688 | $ | 27,314 | $ | 2,693 | $ | (1,018 | ) | $ | 28,989 |
(a) | The change in translation and other in 2018 primarily reflects the depreciation of the Canadian dollar. |
(b) | The change in acquisitions/(divestitures) in 2018 is primarily related to the preliminary allocation of the purchase price for our acquisition of SodaStream. See Note 14 for further information. The change in translation and other in 2018 primarily reflects the depreciation of the Russian ruble, euro and Pound sterling. The change in translation and other in 2017 primarily reflects the appreciation of the Russian ruble and euro. |
2018 | 2017 | 2016 | ||||||||||
United States | $ | 3,864 | $ | 3,452 | $ | 2,630 | ||||||
Foreign | 5,325 | 6,150 | 5,923 | |||||||||
$ | 9,189 | $ | 9,602 | $ | 8,553 | |||||||
The (benefit from)/provision for income taxes consisted of the following: | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Current: | U.S. Federal | $ | 437 | $ | 4,925 | $ | 1,219 | |||||
Foreign | 378 | 724 | 824 | |||||||||
State | 63 | 136 | 77 | |||||||||
878 | 5,785 | 2,120 | ||||||||||
Deferred: | U.S. Federal | 140 | (1,159 | ) | 109 | |||||||
Foreign | (4,379 | ) | (9 | ) | (33 | ) | ||||||
State | (9 | ) | 77 | (22 | ) | |||||||
(4,248 | ) | (1,091 | ) | 54 | ||||||||
$ | (3,370 | ) | $ | 4,694 | $ | 2,174 |
2018 | 2017 | 2016 | |||||||
U.S. Federal statutory tax rate | 21.0 | % | 35.0 | % | 35.0 | % | |||
State income tax, net of U.S. Federal tax benefit | 0.5 | 0.9 | 0.4 | ||||||
Lower taxes on foreign results | (2.2 | ) | (9.4 | ) | (8.0 | ) | |||
One-time mandatory transition tax - TCJ Act | 0.1 | 41.4 | — | ||||||
Remeasurement of deferred taxes - TCJ Act | (0.4 | ) | (15.9 | ) | — | ||||
International reorganizations | (47.3 | ) | — | — | |||||
Tax settlements | (7.8 | ) | — | — | |||||
Other, net | (0.6 | ) | (3.1 | ) | (2.0 | ) | |||
Annual tax rate | (36.7 | )% | 48.9 | % | 25.4 | % |
2018 | 2017 | ||||||
Debt guarantee of wholly-owned subsidiary | $ | 578 | $ | 578 | |||
Property, plant and equipment | 1,303 | 1,397 | |||||
Intangible assets other than nondeductible goodwill | — | 3,169 | |||||
Recapture of net operating losses | 414 | — | |||||
Other | 71 | 50 | |||||
Gross deferred tax liabilities | 2,366 | 5,194 | |||||
Deferred tax assets | |||||||
Net carryforwards | 4,353 | 1,400 | |||||
Intangible assets other than nondeductible goodwill | 985 | — | |||||
Share-based compensation | 106 | 107 | |||||
Retiree medical benefits | 167 | 198 | |||||
Other employee-related benefits | 303 | 338 | |||||
Pension benefits | 221 | 22 | |||||
Deductible state tax and interest benefits | 110 | 157 | |||||
Other | 739 | 893 | |||||
Gross deferred tax assets | 6,984 | 3,115 | |||||
Valuation allowances | (3,753 | ) | (1,163 | ) | |||
Deferred tax assets, net | 3,231 | 1,952 | |||||
Net deferred tax (assets)/liabilities | $ | (865 | ) | $ | 3,242 |
2018 | 2017 | 2016 | |||||||||
Balance, beginning of year | $ | 1,163 | $ | 1,110 | $ | 1,136 | |||||
Provision | 2,639 | 33 | 13 | ||||||||
Other (deductions)/additions | (49 | ) | 20 | (39 | ) | ||||||
Balance, end of year | $ | 3,753 | $ | 1,163 | $ | 1,110 |
2018 | 2017 | ||||||||||||||||||
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) | $ | 5,605 | $ | 5,595 | $ | 10 | $ | — | $ | 6,904 | |||||||||
Government securities (c) | 1,674 | — | 1,674 | — | 1,365 | ||||||||||||||
Corporate bonds (c) | 4,145 | — | 4,145 | — | 3,429 | ||||||||||||||
Mortgage-backed securities (c) | 212 | — | 212 | — | 217 | ||||||||||||||
Contracts with insurance companies (d) | 9 | — | — | 9 | 8 | ||||||||||||||
Cash and cash equivalents | 215 | 215 | — | — | 236 | ||||||||||||||
Sub-total U.S. plan assets | 11,860 | $ | 5,810 | $ | 6,041 | $ | 9 | 12,159 | |||||||||||
Real estate commingled funds measured at net asset value (e) | 618 | 675 | |||||||||||||||||
Dividends and interest receivable, net of payables | 65 | 69 | |||||||||||||||||
Total U.S. plan assets | $ | 12,543 | $ | 12,903 | |||||||||||||||
International plan assets | |||||||||||||||||||
Equity securities (b) | $ | 1,651 | $ | 1,621 | $ | 30 | $ | — | $ | 1,928 | |||||||||
Government securities (c) | 433 | — | 433 | — | 492 | ||||||||||||||
Corporate bonds (c) | 478 | — | 478 | — | 493 | ||||||||||||||
Fixed income commingled funds (f) | 356 | 356 | — | — | 383 | ||||||||||||||
Contracts with insurance companies (d) | 36 | — | — | 36 | 36 | ||||||||||||||
Cash and cash equivalents | 27 | 27 | — | — | 19 | ||||||||||||||
Sub-total international plan assets | 2,981 | $ | 2,004 | $ | 941 | $ | 36 | 3,351 | |||||||||||
Real estate commingled funds measured at net asset value (e) | 102 | 102 | |||||||||||||||||
Dividends and interest receivable | 7 | 7 | |||||||||||||||||
Total international plan assets | $ | 3,090 | $ | 3,460 |
(a) | 2018 and 2017 amounts include $285 million and $321 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 15% and 19% of total U.S. plan assets for 2018 and 2017, respectively. 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 28% and 23% of total U.S. plan assets for 2018 and 2017, 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 29, 2018 and December 30, 2017. |
(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 | ||||||||||||||||||||||
2018 | 2017 | 2016 | 2018 | 2017 | 2016 | ||||||||||||||||||
FLNA | $ | 7 | $ | 7 | $ | 7 | $ | 457 | $ | 449 | $ | 435 | |||||||||||
QFNA | — | — | — | 45 | 47 | 50 | |||||||||||||||||
NAB | 31 | 31 | 37 | 821 | 780 | 809 | |||||||||||||||||
Latin America | 5 | 5 | 5 | 253 | 245 | 211 | |||||||||||||||||
ESSA | 23 | 22 | 18 | 331 | 329 | 321 | |||||||||||||||||
AMENA | 3 | 3 | 3 | 237 | 257 | 294 | |||||||||||||||||
Total division | 69 | 68 | 70 | 2,144 | 2,107 | 2,120 | |||||||||||||||||
Corporate | — | — | — | 186 | 194 | 178 | |||||||||||||||||
$ | 69 | $ | 68 | $ | 70 | $ | 2,330 | $ | 2,301 | $ | 2,298 |
Net Revenue | Long-Lived Assets(a) | ||||||||||||||||||
2018 | 2017 | 2016 | 2018 | 2017 | |||||||||||||||
United States | $ | 37,148 | $ | 36,546 | $ | 36,732 | $ | 29,169 | $ | 28,418 | |||||||||
Mexico | 3,878 | 3,650 | 3,431 | 1,404 | 1,205 | ||||||||||||||
Russia (b) | 3,191 | 3,232 | 2,648 | 3,926 | 4,708 | ||||||||||||||
Canada | 2,736 | 2,691 | 2,692 | 2,565 | 2,739 | ||||||||||||||
United Kingdom | 1,743 | 1,650 | 1,737 | 759 | 817 | ||||||||||||||
Brazil | 1,335 | 1,427 | 1,305 | 639 | 777 | ||||||||||||||
All other countries (c) | 14,630 | 14,329 | 14,254 | 12,169 | 9,200 | ||||||||||||||
$ | 64,661 | $ | 63,525 | $ | 62,799 | $ | 50,631 | $ | 47,864 |
(a) | Long-lived assets represent property, plant and equipment, indefinite-lived 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 in 2017 primarily reflects appreciation of the Russian ruble. Change in long-lived assets in 2018 primarily reflects depreciation of the Russian ruble. |
(c) | Change in long-lived assets in 2018 primarily related to our acquisition of SodaStream. |
Total Assets | Capital Spending | ||||||||||||||||||
2018 | 2017 | 2018 | 2017 | 2016 | |||||||||||||||
FLNA | $ | 6,577 | $ | 5,979 | $ | 840 | $ | 665 | $ | 801 | |||||||||
QFNA | 870 | 804 | 53 | 44 | 41 | ||||||||||||||
NAB | 29,878 | 28,592 | 945 | 904 | 769 | ||||||||||||||
Latin America | 6,458 | 4,976 | 492 | 481 | 507 | ||||||||||||||
ESSA (a) | 17,410 | 13,556 | 479 | 481 | 439 | ||||||||||||||
AMENA | 6,433 | 5,668 | 323 | 308 | 381 | ||||||||||||||
Total division | 67,626 | 59,575 | 3,132 | 2,883 | 2,938 | ||||||||||||||
Corporate (b) | 10,022 | 20,229 | 150 | 86 | 102 | ||||||||||||||
$ | 77,648 | $ | 79,804 | $ | 3,282 | $ | 2,969 | $ | 3,040 |
(a) | In 2018, the change in assets was primarily related to our acquisition of SodaStream. |
(b) | Corporate assets consist principally of certain cash and cash equivalents, restricted cash, short-term investments, derivative instruments, property, plant and equipment and tax assets. In 2018, the change in assets was primarily due to a decrease in short-term investments and cash and cash equivalents. Refer to the cash flow statement for additional information. |
Long-Term Cash Award(a) | Balance Sheet Date Fair Value(a) | Contractual Life Remaining (years) | |||||||
Outstanding at December 30, 2017 | $ | 33,200 | |||||||
Granted (b) | 20,926 | ||||||||
Forfeited | (2,292 | ) | |||||||
Actual performance change (c) | 2,876 | ||||||||
Outstanding at December 29, 2018 (d) | $ | 54,710 | $ | 55,809 | 1.22 | ||||
Expected to vest as of December 29, 2018 | $ | 51,159 | $ | 52,148 | 1.17 |
(a) | In thousands. |
(b) | Grant activity for all long-term cash awards are disclosed at target. |
(c) | Reflects the net number of long-term cash awards above and below target levels based on actual performance measured at the end of the performance period. |
(d) | The outstanding long-term cash awards for which the performance period has not ended as of December 29, 2018, at the threshold, target and maximum award levels were zero, 37.3 million and 74.5 million, respectively |
2018 | 2017 | 2016 | ||||||
FLNA | 13 | % | 13 | % | 14 | % | ||
QFNA | 1 | % | 1 | % | 2 | % | ||
NAB | 18 | % | 18 | % | 22 | % | ||
Latin America | 8 | % | 7 | % | 7 | % | ||
ESSA | 9 | % | 9 | % | 11 | % | ||
AMENA | 8 | % | 9 | % | 10 | % | ||
Corporate unallocated expenses | 43 | % | 43 | % | 34 | % |
2018 | 2017 | 2016 | |||||||||
Selling, general and administrative expenses | $ | 169 | $ | 229 | $ | 155 | |||||
Other pension and retiree medical benefits expense | 1 | 66 | 5 | ||||||||
Total restructuring and impairment charges | $ | 170 | $ | 295 | $ | 160 | |||||
After-tax amount | $ | 143 | $ | 224 | $ | 134 | |||||
Net income attributable to PepsiCo per common share | $ | 0.10 | $ | 0.16 | $ | 0.09 |
2018 | 2017 | 2016 | Plan to Date | ||||||||||||
FLNA | $ | 8 | $ | 67 | $ | 13 | $ | 171 | |||||||
QFNA | 2 | 11 | 1 | 34 | |||||||||||
NAB | 51 | 54 | 35 | 352 | |||||||||||
Latin America | 30 | 63 | 27 | 182 | |||||||||||
ESSA | 55 | 53 | 60 | 282 | |||||||||||
AMENA (a) | 25 | (3 | ) | 14 | 69 | ||||||||||
Corporate (b) | (1 | ) | 50 | 10 | 114 | ||||||||||
$ | 170 | $ | 295 | $ | 160 | $ | 1,204 |
(a) | In 2017, income amount primarily reflects a gain on the sale of property, plant and equipment. |
(b) | In 2018, income amount primarily relates to other pension and retiree medical benefits. |
Severance and Other Employee Costs | Asset Impairments | Other Costs(a) | Total | ||||||||||||
Plan to Date | $ | 713 | $ | 182 | $ | 309 | $ | 1,204 |
(a) | Includes other costs associated with the implementation of our initiatives, including certain consulting and contract termination costs. |
Severance and Other Employee Costs | Asset Impairments | Other Costs | Total | ||||||||||||
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 | ) | (a) | 295 | |||||||||
Cash payments | (91 | ) | — | (22 | ) | (113 | ) | ||||||||
Non-cash charges and translation | (65 | ) | (21 | ) | 34 | (52 | ) | ||||||||
Liability as of December 30, 2017 | 212 | — | 14 | 226 | |||||||||||
2018 restructuring charges | 86 | 28 | 56 | 170 | |||||||||||
Cash payments (b) | (203 | ) | — | (52 | ) | (255 | ) | ||||||||
Non-cash charges and translation | (4 | ) | (28 | ) | 5 | (27 | ) | ||||||||
Liability as of December 29, 2018 | $ | 91 | $ | — | $ | 23 | $ | 114 |
(a) | Income amount represents adjustments for changes in estimates and a gain on the sale of property, plant, and equipment. |
(b) | Excludes cash expenditures of $11 million reported in the cash flow statement in pension and retiree medical plan contributions. |
2018 | |||
Costs of sales | $ | 3 | |
Selling, general and administrative expenses | 100 | ||
Other pension and retiree medical benefits expense | 35 | ||
Total restructuring and impairment charges | $ | 138 | |
After-tax amount | $ | 109 | |
Net income attributable to PepsiCo per common share | $ | 0.08 |
2018 | |||
FLNA | $ | 31 | |
QFNA | 5 | ||
NAB | 40 | ||
Latin America | 9 | ||
ESSA | 8 | ||
AMENA | 3 | ||
Corporate | 7 | ||
103 | |||
Other pension and retiree medical benefits expense | 35 | ||
$ | 138 |
Severance and Other Employee Costs | Asset Impairments | Other Costs(a) | Total | ||||||||||||
2018 restructuring charges | $ | 137 | $ | — | $ | 1 | $ | 138 | |||||||
Non-cash charges and translation | (32 | ) | — | — | (32 | ) | |||||||||
Liability as of December 29, 2018 | $ | 105 | $ | — | $ | 1 | $ | 106 |
(a) | Includes other costs associated with the implementation of our initiatives, including consulting and other professional fees. |
2018 | 2017 | 2016 | |||||||||
Accounts and notes receivable | |||||||||||
Trade receivables | $ | 6,079 | $ | 5,956 | |||||||
Other receivables | 1,164 | 1,197 | |||||||||
7,243 | 7,153 | ||||||||||
Allowance, beginning of year | 129 | 134 | $ | 130 | |||||||
Net amounts charged to expense | 16 | 26 | 37 | ||||||||
Deductions (a) | (33 | ) | (35 | ) | (30 | ) | |||||
Other (b) | (11 | ) | 4 | (3 | ) | ||||||
Allowance, end of year | 101 | 129 | $ | 134 | |||||||
Net receivables | $ | 7,142 | $ | 7,024 | |||||||
Inventories (c) | |||||||||||
Raw materials and packaging | $ | 1,312 | $ | 1,344 | |||||||
Work-in-process | 178 | 167 | |||||||||
Finished goods | 1,638 | 1,436 | |||||||||
$ | 3,128 | $ | 2,947 | ||||||||
Other assets | |||||||||||
Noncurrent notes and accounts receivable | $ | 86 | $ | 59 | |||||||
Deferred marketplace spending | 112 | 134 | |||||||||
Pension plans (d) | 269 | 374 | |||||||||
Other | 293 | 346 | |||||||||
$ | 760 | $ | 913 | ||||||||
Accounts payable and other current liabilities | |||||||||||
Accounts payable | $ | 7,213 | $ | 6,727 | |||||||
Accrued marketplace spending | 2,541 | 2,390 | |||||||||
Accrued compensation and benefits | 1,755 | 1,785 | |||||||||
Dividends payable | 1,329 | 1,161 | |||||||||
SodaStream consideration payable | 1,997 | — | |||||||||
Other current liabilities | 3,277 | 2,954 | |||||||||
$ | 18,112 | $ | 15,017 |
(a) | Includes accounts written off. |
(b) | Includes adjustments related primarily to currency translation and other adjustments. |
(c) | Approximately 5% of the inventory cost in 2018 and 2017 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. |
2018 | 2017 | 2016 | |||||||||
Interest paid (a) | $ | 1,388 | $ | 1,123 | $ | 1,102 | |||||
Income taxes paid, net of refunds (b) | $ | 1,203 | $ | 1,962 | $ | 1,393 |
(a) | In 2018 and 2016, excludes the premiums paid in accordance with the debt transactions discussed in Note 8. |
(b) | In 2018, includes tax payments of $115 million related to the TCJ Act. |
2018 | 2017 | 2016 | |||||||||
Rent expense | $ | 771 | $ | 742 | $ | 701 |
Operating Lease Payments | |||
2019 | $ | 459 | |
2020 | 406 | ||
2021 | 294 | ||
2022 | 210 | ||
2023 | 161 | ||
2024 and beyond | 310 | ||
Total minimum operating lease payments | $ | 1,840 |
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 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 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 (b) | 1,049 | 130 | (375 | ) | 25 | — | 829 | ||||||||||||||||
Amounts reclassified from accumulated other comprehensive loss | — | (171 | ) | 158 | (99 | ) | — | (112 | ) | ||||||||||||||
Net 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 | ) | ||||||||||||
Other comprehensive (loss)/income before reclassifications (c) | (1,664 | ) | (61 | ) | (813 | ) | 6 | — | (2,532 | ) | |||||||||||||
Amounts reclassified from accumulated other comprehensive loss | 44 | 111 | 218 | — | — | 373 | |||||||||||||||||
Net other comprehensive (loss)/income | (1,620 | ) | 50 | (595 | ) | 6 | — | (2,159 | ) | ||||||||||||||
Tax amounts | (21 | ) | (10 | ) | 128 | — | — | 97 | |||||||||||||||
Balance as of December 29, 2018 (a) | $ | (11,918 | ) | $ | 87 | $ | (3,271 | ) | $ | 2 | $ | (19 | ) | $ | (15,119 | ) |
(a) | Pension and retiree medical amounts are net of taxes of $1,253 million as of December 26, 2015, $1,280 million as of December 31, 2016, $1,338 million as of December 30, 2017 and $1,466 million as of December 29, 2018. |
(b) | Currency translation adjustment primarily reflects the appreciation of the euro, Russian ruble, Pound sterling and Canadian dollar. |
(c) | Currency translation adjustment primarily reflects the depreciation of the Russian ruble, Canadian dollar, Pound sterling and Brazilian real. |
Amount Reclassified from Accumulated Other Comprehensive Loss | Affected Line Item in the Income Statement | ||||||||||||
2018 | 2017 | 2016 | |||||||||||
Currency translation: | |||||||||||||
Divestitures | $ | 44 | $ | — | $ | — | Selling, general and administrative expenses | ||||||
Cash flow hedges: | |||||||||||||
Foreign exchange contracts | $ | (1 | ) | $ | — | $ | 2 | Net revenue | |||||
Foreign exchange contracts | (7 | ) | 10 | (46 | ) | Cost of sales | |||||||
Interest rate derivatives | 119 | (184 | ) | 187 | Interest expense | ||||||||
Commodity contracts | 3 | 4 | 3 | Cost of sales | |||||||||
Commodity contracts | (3 | ) | (1 | ) | 4 | Selling, general and administrative expenses | |||||||
Net losses/(gains) before tax | 111 | (171 | ) | 150 | |||||||||
Tax amounts | (27 | ) | 64 | (63 | ) | ||||||||
Net losses/(gains) after tax | $ | 84 | $ | (107 | ) | $ | 87 | ||||||
Pension and retiree medical items: | |||||||||||||
Amortization of net prior service credit | $ | (17 | ) | $ | (24 | ) | $ | (39 | ) | Other pension and retiree medical benefits income/(expense) | |||
Amortization of net losses | 216 | 167 | 209 | Other pension and retiree medical benefits income/(expense) | |||||||||
Settlement/curtailment | 19 | 15 | 237 | Other pension and retiree medical benefits income/(expense) | |||||||||
Net losses before tax | 218 | 158 | 407 | ||||||||||
Tax amounts | (45 | ) | (44 | ) | (144 | ) | |||||||
Net losses after tax | $ | 173 | $ | 114 | $ | 263 | |||||||
Available-for-sale securities: | |||||||||||||
Sale of Britvic securities | $ | — | $ | (99 | ) | $ | — | Selling, general and administrative expenses | |||||
Tax amount | — | 10 | — | ||||||||||
Net gain after tax | $ | — | $ | (89 | ) | $ | — | ||||||
Total net losses/(gains) reclassified for the year, net of tax | $ | 301 | $ | (82 | ) | $ | 350 |
• | commodity prices, affecting the cost of our raw materials and energy; |
• | foreign exchange rates and currency restrictions; and |
• | interest rates. |
2018 | 2017 | ||||||||||||||||
Fair Value Hierarchy Levels(a) | Assets(a) | Liabilities(a) | Assets(a) | Liabilities(a) | |||||||||||||
Available-for-sale debt securities (b) | 2 | $ | 3,658 | $ | — | $ | 14,510 | $ | — | ||||||||
Short-term investments (c) | 1 | $ | 196 | $ | — | $ | 228 | $ | — | ||||||||
Prepaid forward contracts (d) | 2 | $ | 22 | $ | — | $ | 27 | $ | — | ||||||||
Deferred compensation (e) | 2 | $ | — | $ | 450 | $ | — | $ | 503 | ||||||||
Derivatives designated as fair value hedging instruments: | |||||||||||||||||
Interest rate (f) | 2 | $ | 1 | $ | 108 | $ | 24 | $ | 130 | ||||||||
Derivatives designated as cash flow hedging instruments: | |||||||||||||||||
Foreign exchange (g) | 2 | $ | 44 | $ | 14 | $ | 15 | $ | 31 | ||||||||
Interest rate (g) | 2 | — | 323 | — | 213 | ||||||||||||
Commodity (h) | 1 | — | 1 | — | 2 | ||||||||||||
Commodity (i) | 2 | — | 3 | 2 | — | ||||||||||||
$ | 44 | $ | 341 | $ | 17 | $ | 246 | ||||||||||
Derivatives not designated as hedging instruments: | |||||||||||||||||
Foreign exchange (g) | 2 | $ | 3 | $ | 10 | $ | 10 | $ | 3 | ||||||||
Commodity (h) | 1 | 2 | 17 | — | 19 | ||||||||||||
Commodity (i) | 2 | 5 | 92 | 85 | 12 | ||||||||||||
$ | 10 | $ | 119 | $ | 95 | $ | 34 | ||||||||||
Total derivatives at fair value (j) | $ | 55 | $ | 568 | $ | 136 | $ | 410 | |||||||||
Total | $ | 3,931 | $ | 1,018 | $ | 14,901 | $ | 913 |
(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 quoted broker prices or other significant inputs derived from or corroborated by observable market data. As of December 29, 2018, these debt securities were primarily classified as cash equivalents. 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. The decrease primarily reflects net maturities and sales of debt securities with maturities greater than three months. Refer to the cash flow statement and “Our Liquidity and Capital Resources” in Management’s Discussion and Analysis of Financial Condition and Results of Operations for further discussion on use of these proceeds. |
(c) | 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. |
(d) | Based primarily on the price of our common stock. |
(e) | Based on the fair value of investments corresponding to employees’ investment elections. |
(f) | Based on LIBOR forward rates. |
(g) | Based on recently reported market transactions of spot and forward rates. |
(h) | Based on quoted contract prices on futures exchange markets. |
(i) | Based on recently reported market transactions of swap arrangements. |
(j) | 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 29, 2018 and December 30, 2017 were not material. Collateral received or posted against any of our asset or liability positions were not material. Collateral posted is classified as restricted cash. See Note 13 for further information. |
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) | |||||||||||||||||||||
2018 | 2017 | 2018 | 2017 | 2018 | 2017 | ||||||||||||||||||
Foreign exchange | $ | 9 | $ | (15 | ) | $ | (52 | ) | $ | 62 | $ | (8 | ) | $ | 10 | ||||||||
Interest rate | 53 | 101 | 110 | (195 | ) | 119 | (184 | ) | |||||||||||||||
Commodity | 117 | (48 | ) | 3 | 3 | — | 3 | ||||||||||||||||
Net investment | — | — | (77 | ) | 157 | — | — | ||||||||||||||||
Total | $ | 179 | $ | 38 | $ | (16 | ) | $ | 27 | $ | 111 | $ | (171 | ) |
(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. |
2018 | 2017 | 2016 | |||||||||
Share-based compensation expense - equity awards | $ | 256 | $ | 292 | $ | 284 | |||||
Share-based compensation expense - liability awards | 20 | 13 | 5 | ||||||||
Restructuring and impairment charges | (6 | ) | (2 | ) | 5 | ||||||
Total | $ | 270 | $ | 303 | $ | 294 | |||||
Income tax benefits recognized in earnings related to share-based compensation | $ | 45 | $ | 89 | (a) | $ | 91 | ||||
Excess tax benefits related to share-based compensation (b) | $ | 48 | $ | 115 | $ | 110 |
(a) | Reflects tax rates effective for the 2017 tax year. |
(b) | Included in provision for income taxes in the income statement in 2018 and 2017; included in capital in excess of par value in the equity statement in 2016. |
2018 | 2017 | 2016 | ||||||
Expected life | 5 years | 5 years | 6 years | |||||
Risk-free interest rate | 2.6 | % | 2.0 | % | 1.4 | % | ||
Expected volatility | 12 | % | 11 | % | 12 | % | ||
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 30, 2017 | 19,013 | $ | 74.23 | |||||||||
Granted | 1,429 | $ | 108.88 | |||||||||
Exercised | (4,377 | ) | $ | 62.95 | ||||||||
Forfeited/expired | (476 | ) | $ | 94.85 | ||||||||
Outstanding at December 29, 2018 | 15,589 | $ | 79.94 | 4.29 | $ | 474,746 | ||||||
Exercisable at December 29, 2018 | 11,547 | $ | 70.74 | 2.92 | $ | 457,529 | ||||||
Expected to vest as of December 29, 2018 | 3,713 | $ | 106.02 | 8.17 | $ | 16,606 |
(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 30, 2017 | 7,293 | $ | 102.30 | |||||||||
Granted (b) | 2,634 | $ | 108.75 | |||||||||
Converted | (2,362 | ) | $ | 99.73 | ||||||||
Forfeited | (647 | ) | $ | 105.21 | ||||||||
Actual performance change (c) | 257 | $ | 98.92 | |||||||||
Outstanding at December 29, 2018 (d) | 7,175 | $ | 105.13 | 1.22 | $ | 791,878 | ||||||
Expected to vest as of December 29, 2018 | 6,667 | $ | 104.90 | 1.15 | $ | 735,813 |
(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 29, 2018, at the threshold, target and maximum award levels were zero, 0.9 million and 1.6 million, respectively. |
Long-Term Cash Award(a) | Balance Sheet Date Fair Value(a) | Contractual Life Remaining (years) | |||||||
Outstanding at December 30, 2017 | $ | 33,200 | |||||||
Granted (b) | 20,926 | ||||||||
Forfeited | (2,292 | ) | |||||||
Actual performance change (c) | 2,876 | ||||||||
Outstanding at December 29, 2018 (d) | $ | 54,710 | $ | 55,809 | 1.22 | ||||
Expected to vest as of December 29, 2018 | $ | 51,159 | $ | 52,148 | 1.17 |
(a) | In thousands. |
(b) | Grant activity for all long-term cash awards are disclosed at target. |
(c) | Reflects the net number of long-term cash awards above and below target levels based on actual performance measured at the end of the performance period. |
(d) | The outstanding long-term cash awards for which the performance period has not ended as of December 29, 2018, at the threshold, target and maximum award levels were zero, 37.3 million and 74.5 million, respectively. |
2018 | 2017 | 2016 | |||||||||
Stock Options | |||||||||||
Total number of options granted (a) | 1,429 | 1,481 | 1,743 | ||||||||
Weighted-average grant-date fair value of options granted | $ | 9.80 | $ | 8.25 | $ | 6.94 | |||||
Total intrinsic value of options exercised (a) | $ | 224,663 | $ | 327,860 | $ | 290,131 | |||||
Total grant-date fair value of options vested (a) | $ | 15,506 | $ | 23,122 | $ | 18,840 | |||||
RSUs/PSUs | |||||||||||
Total number of RSUs/PSUs granted (a) | 2,634 | 2,824 | 3,054 | ||||||||
Weighted-average grant-date fair value of RSUs/PSUs granted | $ | 108.75 | $ | 109.92 | $ | 99.06 | |||||
Total intrinsic value of RSUs/PSUs converted (a) | $ | 260,287 | $ | 380,269 | $ | 359,401 | |||||
Total grant-date fair value of RSUs/PSUs vested (a) | $ | 232,141 | $ | 264,923 | $ | 257,648 | |||||
PEPunits | |||||||||||
Total intrinsic value of PEPunits converted (a) | $ | 30,147 | $ | 39,782 | $ | 38,558 | |||||
Total grant-date fair value of PEPunits vested (a) | $ | 9,430 | $ | 18,833 | $ | 16,572 |
(a) | In thousands. |
2018 | 2017 | 2016 | |||||||||
Stock Options | |||||||||||
Total number of options granted (a) | 1,429 | 1,481 | 1,743 | ||||||||
Weighted-average grant-date fair value of options granted | $ | 9.80 | $ | 8.25 | $ | 6.94 | |||||
Total intrinsic value of options exercised (a) | $ | 224,663 | $ | 327,860 | $ | 290,131 | |||||
Total grant-date fair value of options vested (a) | $ | 15,506 | $ | 23,122 | $ | 18,840 | |||||
RSUs/PSUs | |||||||||||
Total number of RSUs/PSUs granted (a) | 2,634 | 2,824 | 3,054 | ||||||||
Weighted-average grant-date fair value of RSUs/PSUs granted | $ | 108.75 | $ | 109.92 | $ | 99.06 | |||||
Total intrinsic value of RSUs/PSUs converted (a) | $ | 260,287 | $ | 380,269 | $ | 359,401 | |||||
Total grant-date fair value of RSUs/PSUs vested (a) | $ | 232,141 | $ | 264,923 | $ | 257,648 | |||||
PEPunits | |||||||||||
Total intrinsic value of PEPunits converted (a) | $ | 30,147 | $ | 39,782 | $ | 38,558 | |||||
Total grant-date fair value of PEPunits vested (a) | $ | 9,430 | $ | 18,833 | $ | 16,572 |
(a) | In thousands. |
2018 | 2017 | 2016 | ||||||||||||||||||
Income | Shares(a) | Income | Shares(a) | Income | Shares(a) | |||||||||||||||
Net income attributable to PepsiCo | $ | 12,515 | $ | 4,857 | $ | 6,329 | ||||||||||||||
Preferred shares: | ||||||||||||||||||||
Dividends | — | — | (1 | ) | ||||||||||||||||
Redemption premium | (2 | ) | (4 | ) | (5 | ) | ||||||||||||||
Net income available for PepsiCo common shareholders | $ | 12,513 | 1,415 | $ | 4,853 | 1,425 | $ | 6,323 | 1,439 | |||||||||||
Basic net income attributable to PepsiCo per common share | $ | 8.84 | $ | 3.40 | $ | 4.39 | ||||||||||||||
Net income available for PepsiCo common shareholders | $ | 12,513 | 1,415 | $ | 4,853 | 1,425 | $ | 6,323 | 1,439 | |||||||||||
Dilutive securities: | ||||||||||||||||||||
Stock options, RSUs, PSUs, PEPunits and Other | — | 10 | — | 12 | 1 | 12 | ||||||||||||||
Employee stock ownership plan (ESOP) convertible preferred stock | 2 | — | 4 | 1 | 5 | 1 | ||||||||||||||
Diluted | $ | 12,515 | 1,425 | $ | 4,857 | 1,438 | $ | 6,329 | 1,452 | |||||||||||
Diluted net income attributable to PepsiCo per common share | $ | 8.78 | $ | 3.38 | $ | 4.36 |
(a) | Weighted-average common shares outstanding (in millions). |
2018 | 2017 | 2016 | |||||||||
Out-of-the-money options (a) | 0.7 | 0.4 | 0.7 | ||||||||
Average exercise price per option | $ | 109.83 | $ | 110.12 | $ | 99.98 |
(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 |
2018 | 2017 | 2016 | ||||||||||
United States | $ | 3,864 | $ | 3,452 | $ | 2,630 | ||||||
Foreign | 5,325 | 6,150 | 5,923 | |||||||||
$ | 9,189 | $ | 9,602 | $ | 8,553 | |||||||
The (benefit from)/provision for income taxes consisted of the following: | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Current: | U.S. Federal | $ | 437 | $ | 4,925 | $ | 1,219 | |||||
Foreign | 378 | 724 | 824 | |||||||||
State | 63 | 136 | 77 | |||||||||
878 | 5,785 | 2,120 | ||||||||||
Deferred: | U.S. Federal | 140 | (1,159 | ) | 109 | |||||||
Foreign | (4,379 | ) | (9 | ) | (33 | ) | ||||||
State | (9 | ) | 77 | (22 | ) | |||||||
(4,248 | ) | (1,091 | ) | 54 | ||||||||
$ | (3,370 | ) | $ | 4,694 | $ | 2,174 |
2018 | 2017 | 2016 | |||||||
U.S. Federal statutory tax rate | 21.0 | % | 35.0 | % | 35.0 | % | |||
State income tax, net of U.S. Federal tax benefit | 0.5 | 0.9 | 0.4 | ||||||
Lower taxes on foreign results | (2.2 | ) | (9.4 | ) | (8.0 | ) | |||
One-time mandatory transition tax - TCJ Act | 0.1 | 41.4 | — | ||||||
Remeasurement of deferred taxes - TCJ Act | (0.4 | ) | (15.9 | ) | — | ||||
International reorganizations | (47.3 | ) | — | — | |||||
Tax settlements | (7.8 | ) | — | — | |||||
Other, net | (0.6 | ) | (3.1 | ) | (2.0 | ) | |||
Annual tax rate | (36.7 | )% | 48.9 | % | 25.4 | % |
2018 | 2017 | ||||||
Debt guarantee of wholly-owned subsidiary | $ | 578 | $ | 578 | |||
Property, plant and equipment | 1,303 | 1,397 | |||||
Intangible assets other than nondeductible goodwill | — | 3,169 | |||||
Recapture of net operating losses | 414 | — | |||||
Other | 71 | 50 | |||||
Gross deferred tax liabilities | 2,366 | 5,194 | |||||
Deferred tax assets | |||||||
Net carryforwards | 4,353 | 1,400 | |||||
Intangible assets other than nondeductible goodwill | 985 | — | |||||
Share-based compensation | 106 | 107 | |||||
Retiree medical benefits | 167 | 198 | |||||
Other employee-related benefits | 303 | 338 | |||||
Pension benefits | 221 | 22 | |||||
Deductible state tax and interest benefits | 110 | 157 | |||||
Other | 739 | 893 | |||||
Gross deferred tax assets | 6,984 | 3,115 | |||||
Valuation allowances | (3,753 | ) | (1,163 | ) | |||
Deferred tax assets, net | 3,231 | 1,952 | |||||
Net deferred tax (assets)/liabilities | $ | (865 | ) | $ | 3,242 |
2018 | 2017 | 2016 | |||||||||
Balance, beginning of year | $ | 1,163 | $ | 1,110 | $ | 1,136 | |||||
Provision | 2,639 | 33 | 13 | ||||||||
Other (deductions)/additions | (49 | ) | 20 | (39 | ) | ||||||
Balance, end of year | $ | 3,753 | $ | 1,163 | $ | 1,110 |
Jurisdiction | Years Open to Audit | Years Currently Under Audit | ||
United States | 2014-2017 | 2014-2016 | ||
Mexico | 2017 | None | ||
United Kingdom | 2016-2017 | None | ||
Canada (Domestic) | 2014-2017 | 2014-2015 | ||
Canada (International) | 2010-2017 | 2010-2015 | ||
Russia | 2014-2017 | 2014-2017 |
2018 | 2017 | ||||||
Balance, beginning of year | $ | 2,212 | $ | 1,885 | |||
Additions for tax positions related to the current year | 142 | 309 | |||||
Additions for tax positions from prior years | 197 | 86 | |||||
Reductions for tax positions from prior years | (822 | ) | (51 | ) | |||
Settlement payments | (233 | ) | (4 | ) | |||
Statutes of limitations expiration | (42 | ) | (33 | ) | |||
Translation and other | (14 | ) | 20 | ||||
Balance, end of year | $ | 1,440 | $ | 2,212 |
2017(a) | 2016(b) | |||||||
FLNA | $ | (30 | ) | $ | (47 | ) | ||
QFNA | (2 | ) | (4 | ) | ||||
NAB | (7 | ) | (12 | ) | ||||
Latin America | 16 | 17 | ||||||
ESSA | (38 | ) | (47 | ) | ||||
AMENA | — | — | ||||||
Corporate unallocated expenses | (172 | ) | 112 | (c) | ||||
Total | $ | (233 | ) | $ | 19 |
(a) | Includes restructuring charges of $66 million, including $13 million in our FLNA segment, $2 million in our QFNA segment, $11 million in our NAB segment, $7 million in our Latin America segment and $33 million in corporate unallocated expenses. See “Items Affecting Comparability” in Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
(b) | Includes restructuring charges of $5 million, including $1 million in our FLNA segment, $2 million in our NAB segment and $2 million in corporate unallocated expenses. See “Items Affecting Comparability” in Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
(c) | Reflects a settlement charge of $242 million related to a group annuity contract purchase. See “Items Affecting Comparability” in Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
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. |
2018 | 2017 | 2016 | ||||||
FLNA | 13 | % | 13 | % | 14 | % | ||
QFNA | 1 | % | 1 | % | 2 | % | ||
NAB | 18 | % | 18 | % | 22 | % | ||
Latin America | 8 | % | 7 | % | 7 | % | ||
ESSA | 9 | % | 9 | % | 11 | % | ||
AMENA | 8 | % | 9 | % | 10 | % | ||
Corporate unallocated expenses | 43 | % | 43 | % | 34 | % |
Net Revenue | Operating Profit(b) | ||||||||||||||||||||||
2018(a) | 2017 | 2016 | 2018 | 2017(c) | 2016(c) | ||||||||||||||||||
FLNA | $ | 16,346 | $ | 15,798 | $ | 15,549 | $ | 5,008 | $ | 4,793 | $ | 4,612 | |||||||||||
QFNA | 2,465 | 2,503 | 2,564 | 637 | 640 | 649 | |||||||||||||||||
NAB | 21,072 | 20,936 | 21,312 | 2,276 | 2,700 | 2,947 | |||||||||||||||||
Latin America | 7,354 | 7,208 | 6,820 | 1,049 | 924 | 904 | |||||||||||||||||
ESSA | 11,523 | 11,050 | 10,216 | 1,364 | 1,316 | 1,061 | |||||||||||||||||
AMENA | 5,901 | 6,030 | 6,338 | 1,172 | 1,073 | 619 | |||||||||||||||||
Total division | 64,661 | 63,525 | 62,799 | 11,506 | 11,446 | 10,792 | |||||||||||||||||
Corporate unallocated expenses | — | — | — | (1,396 | ) | (1,170 | ) | (988 | ) | ||||||||||||||
$ | 64,661 | $ | 63,525 | $ | 62,799 | $ | 10,110 | $ | 10,276 | $ | 9,804 |
(a) | Our primary performance obligation is the distribution and sales of beverage products and food and snack products to our customers, each comprising approximately 50% of our consolidated net revenue. Internationally, our Latin America segment is predominantly a food and snack business, ESSA’s beverage business and food and snack business are each approximately 50% of the segment’s net revenue and AMENA’s beverage business and food and snack business are approximately 35% and 65%, respectively, of the segment’s net revenue. Beverage revenue from company-owned bottlers, which primarily includes our consolidated bottling operations in our NAB and ESSA segments, is approximately 40% of our consolidated net revenue. Generally, our finished goods beverage operations produce higher net revenue, but lower operating margins as compared to concentrate sold to authorized bottling partners for the manufacture of finished goods beverages. See Note 2 for additional information. |
(b) | For further unaudited information on certain items that impacted our financial performance, see “Item 6. Selected Financial Data.” |
(c) | Reflects the retrospective adoption of guidance requiring the presentation of non-service cost components of net periodic benefit cost below operating profit. See Note 2 for additional information. |
Total Assets | Capital Spending | ||||||||||||||||||
2018 | 2017 | 2018 | 2017 | 2016 | |||||||||||||||
FLNA | $ | 6,577 | $ | 5,979 | $ | 840 | $ | 665 | $ | 801 | |||||||||
QFNA | 870 | 804 | 53 | 44 | 41 | ||||||||||||||
NAB | 29,878 | 28,592 | 945 | 904 | 769 | ||||||||||||||
Latin America | 6,458 | 4,976 | 492 | 481 | 507 | ||||||||||||||
ESSA (a) | 17,410 | 13,556 | 479 | 481 | 439 | ||||||||||||||
AMENA | 6,433 | 5,668 | 323 | 308 | 381 | ||||||||||||||
Total division | 67,626 | 59,575 | 3,132 | 2,883 | 2,938 | ||||||||||||||
Corporate (b) | 10,022 | 20,229 | 150 | 86 | 102 | ||||||||||||||
$ | 77,648 | $ | 79,804 | $ | 3,282 | $ | 2,969 | $ | 3,040 |
(a) | In 2018, the change in assets was primarily related to our acquisition of SodaStream. |
(b) | Corporate assets consist principally of certain cash and cash equivalents, restricted cash, short-term investments, derivative instruments, property, plant and equipment and tax assets. In 2018, the change in assets was primarily due to a decrease in short-term investments and cash and cash equivalents. Refer to the cash flow statement for additional information. |
Amortization of Intangible Assets | Depreciation and Other Amortization | ||||||||||||||||||||||
2018 | 2017 | 2016 | 2018 | 2017 | 2016 | ||||||||||||||||||
FLNA | $ | 7 | $ | 7 | $ | 7 | $ | 457 | $ | 449 | $ | 435 | |||||||||||
QFNA | — | — | — | 45 | 47 | 50 | |||||||||||||||||
NAB | 31 | 31 | 37 | 821 | 780 | 809 | |||||||||||||||||
Latin America | 5 | 5 | 5 | 253 | 245 | 211 | |||||||||||||||||
ESSA | 23 | 22 | 18 | 331 | 329 | 321 | |||||||||||||||||
AMENA | 3 | 3 | 3 | 237 | 257 | 294 | |||||||||||||||||
Total division | 69 | 68 | 70 | 2,144 | 2,107 | 2,120 | |||||||||||||||||
Corporate | — | — | — | 186 | 194 | 178 | |||||||||||||||||
$ | 69 | $ | 68 | $ | 70 | $ | 2,330 | $ | 2,301 | $ | 2,298 |
Net Revenue | Long-Lived Assets(a) | ||||||||||||||||||
2018 | 2017 | 2016 | 2018 | 2017 | |||||||||||||||
United States | $ | 37,148 | $ | 36,546 | $ | 36,732 | $ | 29,169 | $ | 28,418 | |||||||||
Mexico | 3,878 | 3,650 | 3,431 | 1,404 | 1,205 | ||||||||||||||
Russia (b) | 3,191 | 3,232 | 2,648 | 3,926 | 4,708 | ||||||||||||||
Canada | 2,736 | 2,691 | 2,692 | 2,565 | 2,739 | ||||||||||||||
United Kingdom | 1,743 | 1,650 | 1,737 | 759 | 817 | ||||||||||||||
Brazil | 1,335 | 1,427 | 1,305 | 639 | 777 | ||||||||||||||
All other countries (c) | 14,630 | 14,329 | 14,254 | 12,169 | 9,200 | ||||||||||||||
$ | 64,661 | $ | 63,525 | $ | 62,799 | $ | 50,631 | $ | 47,864 |
(a) | Long-lived assets represent property, plant and equipment, indefinite-lived 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 in 2017 primarily reflects appreciation of the Russian ruble. Change in long-lived assets in 2018 primarily reflects depreciation of the Russian ruble. |
(c) | Change in long-lived assets in 2018 primarily related to our acquisition of SodaStream. |
Pension | Retiree Medical | ||||||||||||||||||||||
U.S. | International | ||||||||||||||||||||||
2018 | 2017 | 2018 | 2017 | 2018 | 2017 | ||||||||||||||||||
Change in projected benefit liability | |||||||||||||||||||||||
Liability at beginning of year | $ | 14,777 | $ | 13,192 | $ | 3,490 | $ | 3,124 | $ | 1,187 | $ | 1,208 | |||||||||||
Service cost | 431 | 401 | 92 | 91 | 32 | 28 | |||||||||||||||||
Interest cost | 482 | 468 | 93 | 89 | 34 | 36 | |||||||||||||||||
Plan amendments | 83 | 10 | 2 | 2 | — | (5 | ) | ||||||||||||||||
Participant contributions | — | — | 2 | 2 | — | — | |||||||||||||||||
Experience (gain)/loss | (972 | ) | 1,529 | (230 | ) | 5 | (147 | ) | 21 | ||||||||||||||
Benefit payments | (956 | ) | (825 | ) | (114 | ) | (104 | ) | (108 | ) | (107 | ) | |||||||||||
Settlement/curtailment | (74 | ) | (58 | ) | (35 | ) | (22 | ) | — | — | |||||||||||||
Special termination benefits | 36 | 60 | 2 | — | 1 | 2 | |||||||||||||||||
Other, including foreign currency adjustment | — | — | (204 | ) | 303 | (3 | ) | 4 | |||||||||||||||
Liability at end of year | $ | 13,807 | $ | 14,777 | $ | 3,098 | $ | 3,490 | $ | 996 | $ | 1,187 | |||||||||||
Change in fair value of plan assets | |||||||||||||||||||||||
Fair value at beginning of year | $ | 12,582 | $ | 11,458 | $ | 3,460 | $ | 2,894 | $ | 321 | $ | 320 | |||||||||||
Actual return on plan assets | (789 | ) | 1,935 | (136 | ) | 288 | (21 | ) | 52 | ||||||||||||||
Employer contributions/funding | 1,495 | 60 | 120 | 104 | 93 | 56 | |||||||||||||||||
Participant contributions | — | — | 2 | 2 | — | — | |||||||||||||||||
Benefit payments | (956 | ) | (825 | ) | (114 | ) | (104 | ) | (108 | ) | (107 | ) | |||||||||||
Settlement | (74 | ) | (46 | ) | (32 | ) | (18 | ) | — | — | |||||||||||||
Other, including foreign currency adjustment | — | — | (210 | ) | 294 | — | — | ||||||||||||||||
Fair value at end of year | $ | 12,258 | $ | 12,582 | $ | 3,090 | $ | 3,460 | $ | 285 | $ | 321 | |||||||||||
Funded status | $ | (1,549 | ) | $ | (2,195 | ) | $ | (8 | ) | $ | (30 | ) | $ | (711 | ) | $ | (866 | ) |
Amounts recognized | |||||||||||||||||||||||
Other assets | $ | 185 | $ | 286 | $ | 81 | $ | 85 | $ | — | $ | — | |||||||||||
Other current liabilities | (107 | ) | (74 | ) | (1 | ) | (1 | ) | (41 | ) | (75 | ) | |||||||||||
Other liabilities | (1,627 | ) | (2,407 | ) | (88 | ) | (114 | ) | (670 | ) | (791 | ) | |||||||||||
Net amount recognized | $ | (1,549 | ) | $ | (2,195 | ) | $ | (8 | ) | $ | (30 | ) | $ | (711 | ) | $ | (866 | ) | |||||
Amounts included in accumulated other comprehensive loss (pre-tax) | |||||||||||||||||||||||
Net loss/(gain) | $ | 4,093 | $ | 3,520 | $ | 780 | $ | 782 | $ | (287 | ) | $ | (189 | ) | |||||||||
Prior service cost/(credit) | 109 | 29 | (1 | ) | (3 | ) | (51 | ) | (71 | ) | |||||||||||||
Total | $ | 4,202 | $ | 3,549 | $ | 779 | $ | 779 | $ | (338 | ) | $ | (260 | ) | |||||||||
Changes recognized in net loss/(gain) included in other comprehensive loss | |||||||||||||||||||||||
Net loss/(gain) arising in current year | $ | 760 | $ | 431 | $ | 103 | $ | (115 | ) | $ | (107 | ) | $ | (9 | ) | ||||||||
Amortization and settlement recognition | (187 | ) | (131 | ) | (56 | ) | (60 | ) | 8 | 12 | |||||||||||||
Foreign currency translation (gain)/loss | — | — | (49 | ) | 73 | 1 | 1 | ||||||||||||||||
Total | $ | 573 | $ | 300 | $ | (2 | ) | $ | (102 | ) | $ | (98 | ) | $ | 4 | ||||||||
Accumulated benefit obligation at end of year | $ | 12,890 | $ | 13,732 | $ | 2,806 | $ | 2,985 |
• | 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 | ||||||||||||||||||||||||||||||||||
2018 | 2017 | 2016 | 2018 | 2017 | 2016 | 2018 | 2017 | 2016 | |||||||||||||||||||||||||||
Service cost | $ | 431 | $ | 401 | $ | 393 | $ | 92 | $ | 91 | $ | 80 | $ | 32 | $ | 28 | $ | 31 | |||||||||||||||||
Interest cost | 482 | 468 | 484 | 93 | 89 | 94 | 34 | 36 | 41 | ||||||||||||||||||||||||||
Expected return on plan assets | (943 | ) | (849 | ) | (834 | ) | (197 | ) | (176 | ) | (163 | ) | (19 | ) | (22 | ) | (24 | ) | |||||||||||||||||
Amortization of prior service cost/(credits) | 3 | 1 | (1 | ) | — | — | — | (20 | ) | (25 | ) | (38 | ) | ||||||||||||||||||||||
Amortization of net losses/(gains) | 179 | 123 | 168 | 45 | 53 | 40 | (8 | ) | (12 | ) | (1 | ) | |||||||||||||||||||||||
152 | 144 | 210 | 33 | 57 | 51 | 19 | 5 | 9 | |||||||||||||||||||||||||||
Settlement/curtailment losses/(gain) (a) | 8 | 8 | 245 | 6 | 11 | 9 | — | — | (14 | ) | |||||||||||||||||||||||||
Special termination benefits | 36 | 60 | 11 | 2 | — | 1 | 1 | 2 | 1 | ||||||||||||||||||||||||||
Total | $ | 196 | $ | 212 | $ | 466 | $ | 41 | $ | 68 | $ | 61 | $ | 20 | $ | 7 | $ | (4 | ) |
(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 | |||||||||||||||||||||||||
2018 | 2017 | 2016 | 2018 | 2017 | 2016 | 2018 | 2017 | 2016 | ||||||||||||||||||
Liability discount rate | 4.4 | % | 3.7 | % | 4.4 | % | 3.4 | % | 3.0 | % | 3.1 | % | 4.2 | % | 3.5 | % | 4.0 | % | ||||||||
Service cost discount rate | 3.8 | % | 4.5 | % | 4.6 | % | 3.5 | % | 3.6 | % | 4.1 | % | 3.6 | % | 4.0 | % | 4.3 | % | ||||||||
Interest cost discount rate | 3.4 | % | 3.7 | % | 3.8 | % | 2.8 | % | 2.8 | % | 3.5 | % | 3.0 | % | 3.2 | % | 3.3 | % | ||||||||
Expected return on plan assets | 7.2 | % | 7.5 | % | 7.5 | % | 6.0 | % | 6.0 | % | 6.2 | % | 6.5 | % | 7.5 | % | 7.5 | % | ||||||||
Liability rate of salary increases | 3.1 | % | 3.1 | % | 3.1 | % | 3.7 | % | 3.7 | % | 3.6 | % | ||||||||||||||
Expense rate of salary increases | 3.1 | % | 3.1 | % | 3.1 | % | 3.7 | % | 3.6 | % | 3.6 | % |
Pension | Retiree Medical | ||||||||||||||||||||||
U.S. | International | ||||||||||||||||||||||
2018 | 2017 | 2018 | 2017 | 2018 | 2017 | ||||||||||||||||||
Selected information for plans with accumulated benefit obligation in excess of plan assets | |||||||||||||||||||||||
Liability for service to date | $ | (8,040 | ) | $ | (8,355 | ) | $ | (155 | ) | $ | (161 | ) | |||||||||||
Fair value of plan assets | $ | 7,223 | $ | 6,919 | $ | 121 | $ | 119 | |||||||||||||||
Selected information for plans with projected benefit liability in excess of plan assets | |||||||||||||||||||||||
Benefit liability | $ | (8,957 | ) | $ | (9,400 | ) | $ | (514 | ) | $ | (1,273 | ) | $ | (996 | ) | $ | (1,187 | ) | |||||
Fair value of plan assets | $ | 7,223 | $ | 6,919 | $ | 426 | $ | 1,158 | $ | 285 | $ | 321 |
2019 | 2020 | 2021 | 2022 | 2023 | 2024 - 2028 | ||||||||||||||||||
Pension | $ | 1,060 | $ | 960 | $ | 875 | $ | 915 | $ | 950 | $ | 5,265 | |||||||||||
Retiree medical (a) | $ | 115 | $ | 105 | $ | 100 | $ | 100 | $ | 95 | $ | 395 |
(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 2019 through 2023 and approximately $6 million in total for 2024 through 2028. |
Pension | Retiree Medical | ||||||||||||||||||||||
2018 | 2017 | 2016 | 2018 | 2017 | 2016 | ||||||||||||||||||
Discretionary (a) | $ | 1,417 | $ | 6 | $ | 459 | $ | 37 | $ | — | $ | — | |||||||||||
Non-discretionary | 198 | 158 | 200 | 56 | 56 | 36 | |||||||||||||||||
Total | $ | 1,615 | $ | 164 | $ | 659 | $ | 93 | $ | 56 | $ | 36 |
(a) | Includes $1.4 billion contribution in 2018 to fund Plan A in the United States. Includes $452 million in 2016 relating to the funding of the group annuity contract purchase from an unrelated insurance company. |
2019 | 2018 | ||||
Fixed income | 47 | % | 47 | % | |
U.S. equity | 29 | % | 29 | % | |
International equity | 20 | % | 20 | % | |
Real estate | 4 | % | 4 | % |
2018 | 2017 | ||||||||||||||||||
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) | $ | 5,605 | $ | 5,595 | $ | 10 | $ | — | $ | 6,904 | |||||||||
Government securities (c) | 1,674 | — | 1,674 | — | 1,365 | ||||||||||||||
Corporate bonds (c) | 4,145 | — | 4,145 | — | 3,429 | ||||||||||||||
Mortgage-backed securities (c) | 212 | — | 212 | — | 217 | ||||||||||||||
Contracts with insurance companies (d) | 9 | — | — | 9 | 8 | ||||||||||||||
Cash and cash equivalents | 215 | 215 | — | — | 236 | ||||||||||||||
Sub-total U.S. plan assets | 11,860 | $ | 5,810 | $ | 6,041 | $ | 9 | 12,159 | |||||||||||
Real estate commingled funds measured at net asset value (e) | 618 | 675 | |||||||||||||||||
Dividends and interest receivable, net of payables | 65 | 69 | |||||||||||||||||
Total U.S. plan assets | $ | 12,543 | $ | 12,903 | |||||||||||||||
International plan assets | |||||||||||||||||||
Equity securities (b) | $ | 1,651 | $ | 1,621 | $ | 30 | $ | — | $ | 1,928 | |||||||||
Government securities (c) | 433 | — | 433 | — | 492 | ||||||||||||||
Corporate bonds (c) | 478 | — | 478 | — | 493 | ||||||||||||||
Fixed income commingled funds (f) | 356 | 356 | — | — | 383 | ||||||||||||||
Contracts with insurance companies (d) | 36 | — | — | 36 | 36 | ||||||||||||||
Cash and cash equivalents | 27 | 27 | — | — | 19 | ||||||||||||||
Sub-total international plan assets | 2,981 | $ | 2,004 | $ | 941 | $ | 36 | 3,351 | |||||||||||
Real estate commingled funds measured at net asset value (e) | 102 | 102 | |||||||||||||||||
Dividends and interest receivable | 7 | 7 | |||||||||||||||||
Total international plan assets | $ | 3,090 | $ | 3,460 |
(a) | 2018 and 2017 amounts include $285 million and $321 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 15% and 19% of total U.S. plan assets for 2018 and 2017, respectively. 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 28% and 23% of total U.S. plan assets for 2018 and 2017, 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 29, 2018 and December 30, 2017. |
(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. |
2019 | 2018 | ||||
Average increase assumed | 6 | % | 6 | % | |
Ultimate projected increase | 5 | % | 5 | % | |
Year of ultimate projected increase | 2039 | 2039 |
Average Useful Life (Years) | 2018 | 2017 | 2016 | ||||||||||
Property, plant and equipment, net | |||||||||||||
Land | $ | 1,078 | $ | 1,148 | |||||||||
Buildings and improvements | 15 - 44 | 8,941 | 8,796 | ||||||||||
Machinery and equipment, including fleet and software | 5 - 15 | 27,715 | 27,018 | ||||||||||
Construction in progress | 2,430 | 2,144 | |||||||||||
40,164 | 39,106 | ||||||||||||
Accumulated depreciation | (22,575 | ) | (21,866 | ) | |||||||||
$ | 17,589 | $ | 17,240 | ||||||||||
Depreciation expense | $ | 2,241 | $ | 2,227 | $ | 2,217 |
2018 | 2017 | 2016 | |||||||||||||||||||||||||||
Amortizable intangible assets, net | Average Useful Life (Years) | Gross | Accumulated Amortization | Net | Gross | Accumulated Amortization | Net | ||||||||||||||||||||||
Acquired franchise rights | 56 – 60 | $ | 838 | $ | (140 | ) | $ | 698 | $ | 858 | $ | (128 | ) | $ | 730 | ||||||||||||||
Reacquired franchise rights | 5 – 14 | 106 | (105 | ) | 1 | 106 | (104 | ) | 2 | ||||||||||||||||||||
Brands | 20 – 40 | 1,306 | (1,032 | ) | 274 | 1,322 | (1,026 | ) | 296 | ||||||||||||||||||||
Other identifiable intangibles (a) | 10 – 24 | 959 | (288 | ) | 671 | 521 | (281 | ) | 240 | ||||||||||||||||||||
$ | 3,209 | $ | (1,565 | ) | $ | 1,644 | $ | 2,807 | $ | (1,539 | ) | $ | 1,268 | ||||||||||||||||
Amortization expense | $ | 69 | $ | 68 | $ | 70 |
(a) | The change in 2018 is primarily related to our acquisition of SodaStream. |
2019 | 2020 | 2021 | 2022 | 2023 | |||||||||||||||
Five-year projected amortization | $ | 89 | $ | 89 | $ | 87 | $ | 85 | $ | 83 |
Balance, Beginning 2017 | Translation and Other | Balance, End of 2017 | Acquisitions/ (Divestitures) | Translation and Other | Balance, End of 2018 | ||||||||||||||||||
FLNA | |||||||||||||||||||||||
Goodwill | $ | 270 | $ | 10 | $ | 280 | $ | 28 | $ | (11 | ) | $ | 297 | ||||||||||
Brands | 23 | 2 | 25 | 138 | (2 | ) | 161 | ||||||||||||||||
293 | 12 | 305 | 166 | (13 | ) | 458 | |||||||||||||||||
QFNA | |||||||||||||||||||||||
Goodwill | 175 | — | 175 | 9 | — | 184 | |||||||||||||||||
Brands | — | — | — | 25 | — | 25 | |||||||||||||||||
175 | — | 175 | 34 | — | 209 | ||||||||||||||||||
NAB (a) | |||||||||||||||||||||||
Goodwill | 9,843 | 11 | 9,854 | — | (41 | ) | 9,813 | ||||||||||||||||
Reacquired franchise rights | 7,064 | 62 | 7,126 | — | (68 | ) | 7,058 | ||||||||||||||||
Acquired franchise rights | 1,512 | 13 | 1,525 | — | (15 | ) | 1,510 | ||||||||||||||||
Brands | 314 | 39 | 353 | — | — | 353 | |||||||||||||||||
18,733 | 125 | 18,858 | — | (124 | ) | 18,734 | |||||||||||||||||
Latin America | |||||||||||||||||||||||
Goodwill | 553 | 2 | 555 | — | (46 | ) | 509 | ||||||||||||||||
Brands | 150 | (9 | ) | 141 | — | (14 | ) | 127 | |||||||||||||||
703 | (7 | ) | 696 | — | (60 | ) | 636 | ||||||||||||||||
ESSA (b) | |||||||||||||||||||||||
Goodwill | 3,177 | 275 | 3,452 | 526 | (367 | ) | 3,611 | ||||||||||||||||
Reacquired franchise rights | 488 | 61 | 549 | (1 | ) | (51 | ) | 497 | |||||||||||||||
Acquired franchise rights | 184 | 11 | 195 | (25 | ) | (9 | ) | 161 | |||||||||||||||
Brands | 2,358 | 187 | 2,545 | 1,993 | (350 | ) | 4,188 | ||||||||||||||||
6,207 | 534 | 6,741 | 2,493 | (777 | ) | 8,457 | |||||||||||||||||
AMENA | |||||||||||||||||||||||
Goodwill | 412 | 16 | 428 | — | (34 | ) | 394 | ||||||||||||||||
Brands | 103 | 8 | 111 | — | (10 | ) | 101 | ||||||||||||||||
515 | 24 | 539 | — | (44 | ) | 495 | |||||||||||||||||
Total goodwill | 14,430 | 314 | 14,744 | 563 | (499 | ) | 14,808 | ||||||||||||||||
Total reacquired franchise rights | 7,552 | 123 | 7,675 | (1 | ) | (119 | ) | 7,555 | |||||||||||||||
Total acquired franchise rights | 1,696 | 24 | 1,720 | (25 | ) | (24 | ) | 1,671 | |||||||||||||||
Total brands | 2,948 | 227 | 3,175 | 2,156 | (376 | ) | 4,955 | ||||||||||||||||
$ | 26,626 | $ | 688 | $ | 27,314 | $ | 2,693 | $ | (1,018 | ) | $ | 28,989 |
(a) | The change in translation and other in 2018 primarily reflects the depreciation of the Canadian dollar. |
(b) | The change in acquisitions/(divestitures) in 2018 is primarily related to the preliminary allocation of the purchase price for our acquisition of SodaStream. See Note 14 for further information. The change in translation and other in 2018 primarily reflects the depreciation of the Russian ruble, euro and Pound sterling. The change in translation and other in 2017 primarily reflects the appreciation of the Russian ruble and euro. |
Average Useful Life (Years) | 2018 | 2017 | 2016 | ||||||||||
Property, plant and equipment, net | |||||||||||||
Land | $ | 1,078 | $ | 1,148 | |||||||||
Buildings and improvements | 15 - 44 | 8,941 | 8,796 | ||||||||||
Machinery and equipment, including fleet and software | 5 - 15 | 27,715 | 27,018 | ||||||||||
Construction in progress | 2,430 | 2,144 | |||||||||||
40,164 | 39,106 | ||||||||||||
Accumulated depreciation | (22,575 | ) | (21,866 | ) | |||||||||
$ | 17,589 | $ | 17,240 | ||||||||||
Depreciation expense | $ | 2,241 | $ | 2,227 | $ | 2,217 |
Amount Reclassified from Accumulated Other Comprehensive Loss | Affected Line Item in the Income Statement | ||||||||||||
2018 | 2017 | 2016 | |||||||||||
Currency translation: | |||||||||||||
Divestitures | $ | 44 | $ | — | $ | — | Selling, general and administrative expenses | ||||||
Cash flow hedges: | |||||||||||||
Foreign exchange contracts | $ | (1 | ) | $ | — | $ | 2 | Net revenue | |||||
Foreign exchange contracts | (7 | ) | 10 | (46 | ) | Cost of sales | |||||||
Interest rate derivatives | 119 | (184 | ) | 187 | Interest expense | ||||||||
Commodity contracts | 3 | 4 | 3 | Cost of sales | |||||||||
Commodity contracts | (3 | ) | (1 | ) | 4 | Selling, general and administrative expenses | |||||||
Net losses/(gains) before tax | 111 | (171 | ) | 150 | |||||||||
Tax amounts | (27 | ) | 64 | (63 | ) | ||||||||
Net losses/(gains) after tax | $ | 84 | $ | (107 | ) | $ | 87 | ||||||
Pension and retiree medical items: | |||||||||||||
Amortization of net prior service credit | $ | (17 | ) | $ | (24 | ) | $ | (39 | ) | Other pension and retiree medical benefits income/(expense) | |||
Amortization of net losses | 216 | 167 | 209 | Other pension and retiree medical benefits income/(expense) | |||||||||
Settlement/curtailment | 19 | 15 | 237 | Other pension and retiree medical benefits income/(expense) | |||||||||
Net losses before tax | 218 | 158 | 407 | ||||||||||
Tax amounts | (45 | ) | (44 | ) | (144 | ) | |||||||
Net losses after tax | $ | 173 | $ | 114 | $ | 263 | |||||||
Available-for-sale securities: | |||||||||||||
Sale of Britvic securities | $ | — | $ | (99 | ) | $ | — | Selling, general and administrative expenses | |||||
Tax amount | — | 10 | — | ||||||||||
Net gain after tax | $ | — | $ | (89 | ) | $ | — | ||||||
Total net losses/(gains) reclassified for the year, net of tax | $ | 301 | $ | (82 | ) | $ | 350 |
2018 | 2017 | 2016 | |||||||||
Selling, general and administrative expenses | $ | 169 | $ | 229 | $ | 155 | |||||
Other pension and retiree medical benefits expense | 1 | 66 | 5 | ||||||||
Total restructuring and impairment charges | $ | 170 | $ | 295 | $ | 160 | |||||
After-tax amount | $ | 143 | $ | 224 | $ | 134 | |||||
Net income attributable to PepsiCo per common share | $ | 0.10 | $ | 0.16 | $ | 0.09 |
2018 | 2017 | 2016 | Plan to Date | ||||||||||||
FLNA | $ | 8 | $ | 67 | $ | 13 | $ | 171 | |||||||
QFNA | 2 | 11 | 1 | 34 | |||||||||||
NAB | 51 | 54 | 35 | 352 | |||||||||||
Latin America | 30 | 63 | 27 | 182 | |||||||||||
ESSA | 55 | 53 | 60 | 282 | |||||||||||
AMENA (a) | 25 | (3 | ) | 14 | 69 | ||||||||||
Corporate (b) | (1 | ) | 50 | 10 | 114 | ||||||||||
$ | 170 | $ | 295 | $ | 160 | $ | 1,204 |
(a) | In 2017, income amount primarily reflects a gain on the sale of property, plant and equipment. |
(b) | In 2018, income amount primarily relates to other pension and retiree medical benefits. |
Severance and Other Employee Costs | Asset Impairments | Other Costs(a) | Total | ||||||||||||
Plan to Date | $ | 713 | $ | 182 | $ | 309 | $ | 1,204 |
(a) | Includes other costs associated with the implementation of our initiatives, including certain consulting and contract termination costs. |
Severance and Other Employee Costs | Asset Impairments | Other Costs | Total | ||||||||||||
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 | ) | (a) | 295 | |||||||||
Cash payments | (91 | ) | — | (22 | ) | (113 | ) | ||||||||
Non-cash charges and translation | (65 | ) | (21 | ) | 34 | (52 | ) | ||||||||
Liability as of December 30, 2017 | 212 | — | 14 | 226 | |||||||||||
2018 restructuring charges | 86 | 28 | 56 | 170 | |||||||||||
Cash payments (b) | (203 | ) | — | (52 | ) | (255 | ) | ||||||||
Non-cash charges and translation | (4 | ) | (28 | ) | 5 | (27 | ) | ||||||||
Liability as of December 29, 2018 | $ | 91 | $ | — | $ | 23 | $ | 114 |
(a) | Income amount represents adjustments for changes in estimates and a gain on the sale of property, plant, and equipment. |
(b) | Excludes cash expenditures of $11 million reported in the cash flow statement in pension and retiree medical plan contributions. |
2018 | 2017 | 2016 | |||||||||
2019 Productivity Plan | $ | 138 | $ | — | $ | — | |||||
2014 Productivity Plan | 170 | 295 | 160 | ||||||||
Total restructuring and impairment charges | 308 | 295 | 160 | ||||||||
Other productivity initiatives | 8 | 16 | 12 | ||||||||
Total restructuring and impairment charges and other productivity initiatives | $ | 316 | $ | 311 | $ | 172 |
2018 | |||
Costs of sales | $ | 3 | |
Selling, general and administrative expenses | 100 | ||
Other pension and retiree medical benefits expense | 35 | ||
Total restructuring and impairment charges | $ | 138 | |
After-tax amount | $ | 109 | |
Net income attributable to PepsiCo per common share | $ | 0.08 |
2018 | |||
FLNA | $ | 31 | |
QFNA | 5 | ||
NAB | 40 | ||
Latin America | 9 | ||
ESSA | 8 | ||
AMENA | 3 | ||
Corporate | 7 | ||
103 | |||
Other pension and retiree medical benefits expense | 35 | ||
$ | 138 |
Severance and Other Employee Costs | Asset Impairments | Other Costs(a) | Total | ||||||||||||
2018 restructuring charges | $ | 137 | $ | — | $ | 1 | $ | 138 | |||||||
Non-cash charges and translation | (32 | ) | — | — | (32 | ) | |||||||||
Liability as of December 29, 2018 | $ | 105 | $ | — | $ | 1 | $ | 106 |
(a) | Includes other costs associated with the implementation of our initiatives, including consulting and other professional fees. |
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 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 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 (b) | 1,049 | 130 | (375 | ) | 25 | — | 829 | ||||||||||||||||
Amounts reclassified from accumulated other comprehensive loss | — | (171 | ) | 158 | (99 | ) | — | (112 | ) | ||||||||||||||
Net 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 | ) | ||||||||||||
Other comprehensive (loss)/income before reclassifications (c) | (1,664 | ) | (61 | ) | (813 | ) | 6 | — | (2,532 | ) | |||||||||||||
Amounts reclassified from accumulated other comprehensive loss | 44 | 111 | 218 | — | — | 373 | |||||||||||||||||
Net other comprehensive (loss)/income | (1,620 | ) | 50 | (595 | ) | 6 | — | (2,159 | ) | ||||||||||||||
Tax amounts | (21 | ) | (10 | ) | 128 | — | — | 97 | |||||||||||||||
Balance as of December 29, 2018 (a) | $ | (11,918 | ) | $ | 87 | $ | (3,271 | ) | $ | 2 | $ | (19 | ) | $ | (15,119 | ) |
(a) | Pension and retiree medical amounts are net of taxes of $1,253 million as of December 26, 2015, $1,280 million as of December 31, 2016, $1,338 million as of December 30, 2017 and $1,466 million as of December 29, 2018. |
(b) | Currency translation adjustment primarily reflects the appreciation of the euro, Russian ruble, Pound sterling and Canadian dollar. |
(c) | Currency translation adjustment primarily reflects the depreciation of the Russian ruble, Canadian dollar, Pound sterling and Brazilian real. |
2019 | 2018 | ||||
Fixed income | 47 | % | 47 | % | |
U.S. equity | 29 | % | 29 | % | |
International equity | 20 | % | 20 | % | |
Real estate | 4 | % | 4 | % |
Pension | Retiree Medical | |||||||||||||||||||||||||
U.S. | International | |||||||||||||||||||||||||
2018 | 2017 | 2016 | 2018 | 2017 | 2016 | 2018 | 2017 | 2016 | ||||||||||||||||||
Liability discount rate | 4.4 | % | 3.7 | % | 4.4 | % | 3.4 | % | 3.0 | % | 3.1 | % | 4.2 | % | 3.5 | % | 4.0 | % | ||||||||
Service cost discount rate | 3.8 | % | 4.5 | % | 4.6 | % | 3.5 | % | 3.6 | % | 4.1 | % | 3.6 | % | 4.0 | % | 4.3 | % | ||||||||
Interest cost discount rate | 3.4 | % | 3.7 | % | 3.8 | % | 2.8 | % | 2.8 | % | 3.5 | % | 3.0 | % | 3.2 | % | 3.3 | % | ||||||||
Expected return on plan assets | 7.2 | % | 7.5 | % | 7.5 | % | 6.0 | % | 6.0 | % | 6.2 | % | 6.5 | % | 7.5 | % | 7.5 | % | ||||||||
Liability rate of salary increases | 3.1 | % | 3.1 | % | 3.1 | % | 3.7 | % | 3.7 | % | 3.6 | % | ||||||||||||||
Expense rate of salary increases | 3.1 | % | 3.1 | % | 3.1 | % | 3.7 | % | 3.6 | % | 3.6 | % |
2018 | 2017 | 2016 | |||||||||
Share-based compensation expense - equity awards | $ | 256 | $ | 292 | $ | 284 | |||||
Share-based compensation expense - liability awards | 20 | 13 | 5 | ||||||||
Restructuring and impairment charges | (6 | ) | (2 | ) | 5 | ||||||
Total | $ | 270 | $ | 303 | $ | 294 | |||||
Income tax benefits recognized in earnings related to share-based compensation | $ | 45 | $ | 89 | (a) | $ | 91 | ||||
Excess tax benefits related to share-based compensation (b) | $ | 48 | $ | 115 | $ | 110 |
2018(a) | 2017(a) | ||||||
Short-term debt obligations (b) | |||||||
Current maturities of long-term debt | $ | 3,953 | $ | 4,020 | |||
Commercial paper (1.3%) | — | 1,385 | |||||
Other borrowings (6.0% and 4.7%) | 73 | 80 | |||||
$ | 4,026 | $ | 5,485 | ||||
Long-term debt obligations (b) | |||||||
Notes due 2018 (2.4%) | $ | — | $ | 4,016 | |||
Notes due 2019 (3.1% and 2.1%) | 3,948 | 3,933 | |||||
Notes due 2020 (3.9% and 3.1%) | 3,784 | 3,792 | |||||
Notes due 2021 (3.1% and 2.4%) | 3,257 | 3,300 | |||||
Notes due 2022 (2.8% and 2.6%) | 3,802 | 3,853 | |||||
Notes due 2023 (2.9% and 2.4%) | 1,270 | 1,257 | |||||
Notes due 2024-2047 (3.7% and 3.8%) | 16,161 | 17,634 | |||||
Other, due 2018-2026 (1.3% and 1.3%) | 26 | 31 | |||||
32,248 | 37,816 | ||||||
Less: current maturities of long-term debt obligations | (3,953 | ) | (4,020 | ) | |||
Total | $ | 28,295 | $ | 33,796 |
(a) | Amounts are shown net of unamortized net discounts of $119 million and $155 million for 2018 and 2017, respectively. |
(b) | The interest rates presented reflect weighted-average effective interest 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. |
Pension | Retiree Medical | ||||||||||||||||||||||
U.S. | International | ||||||||||||||||||||||
2018 | 2017 | 2018 | 2017 | 2018 | 2017 | ||||||||||||||||||
Change in projected benefit liability | |||||||||||||||||||||||
Liability at beginning of year | $ | 14,777 | $ | 13,192 | $ | 3,490 | $ | 3,124 | $ | 1,187 | $ | 1,208 | |||||||||||
Service cost | 431 | 401 | 92 | 91 | 32 | 28 | |||||||||||||||||
Interest cost | 482 | 468 | 93 | 89 | 34 | 36 | |||||||||||||||||
Plan amendments | 83 | 10 | 2 | 2 | — | (5 | ) | ||||||||||||||||
Participant contributions | — | — | 2 | 2 | — | — | |||||||||||||||||
Experience (gain)/loss | (972 | ) | 1,529 | (230 | ) | 5 | (147 | ) | 21 | ||||||||||||||
Benefit payments | (956 | ) | (825 | ) | (114 | ) | (104 | ) | (108 | ) | (107 | ) | |||||||||||
Settlement/curtailment | (74 | ) | (58 | ) | (35 | ) | (22 | ) | — | — | |||||||||||||
Special termination benefits | 36 | 60 | 2 | — | 1 | 2 | |||||||||||||||||
Other, including foreign currency adjustment | — | — | (204 | ) | 303 | (3 | ) | 4 | |||||||||||||||
Liability at end of year | $ | 13,807 | $ | 14,777 | $ | 3,098 | $ | 3,490 | $ | 996 | $ | 1,187 | |||||||||||
Change in fair value of plan assets | |||||||||||||||||||||||
Fair value at beginning of year | $ | 12,582 | $ | 11,458 | $ | 3,460 | $ | 2,894 | $ | 321 | $ | 320 | |||||||||||
Actual return on plan assets | (789 | ) | 1,935 | (136 | ) | 288 | (21 | ) | 52 | ||||||||||||||
Employer contributions/funding | 1,495 | 60 | 120 | 104 | 93 | 56 | |||||||||||||||||
Participant contributions | — | — | 2 | 2 | — | — | |||||||||||||||||
Benefit payments | (956 | ) | (825 | ) | (114 | ) | (104 | ) | (108 | ) | (107 | ) | |||||||||||
Settlement | (74 | ) | (46 | ) | (32 | ) | (18 | ) | — | — | |||||||||||||
Other, including foreign currency adjustment | — | — | (210 | ) | 294 | — | — | ||||||||||||||||
Fair value at end of year | $ | 12,258 | $ | 12,582 | $ | 3,090 | $ | 3,460 | $ | 285 | $ | 321 | |||||||||||
Funded status | $ | (1,549 | ) | $ | (2,195 | ) | $ | (8 | ) | $ | (30 | ) | $ | (711 | ) | $ | (866 | ) |
Amounts recognized | |||||||||||||||||||||||
Other assets | $ | 185 | $ | 286 | $ | 81 | $ | 85 | $ | — | $ | — | |||||||||||
Other current liabilities | (107 | ) | (74 | ) | (1 | ) | (1 | ) | (41 | ) | (75 | ) | |||||||||||
Other liabilities | (1,627 | ) | (2,407 | ) | (88 | ) | (114 | ) | (670 | ) | (791 | ) | |||||||||||
Net amount recognized | $ | (1,549 | ) | $ | (2,195 | ) | $ | (8 | ) | $ | (30 | ) | $ | (711 | ) | $ | (866 | ) | |||||
Amounts included in accumulated other comprehensive loss (pre-tax) | |||||||||||||||||||||||
Net loss/(gain) | $ | 4,093 | $ | 3,520 | $ | 780 | $ | 782 | $ | (287 | ) | $ | (189 | ) | |||||||||
Prior service cost/(credit) | 109 | 29 | (1 | ) | (3 | ) | (51 | ) | (71 | ) | |||||||||||||
Total | $ | 4,202 | $ | 3,549 | $ | 779 | $ | 779 | $ | (338 | ) | $ | (260 | ) | |||||||||
Changes recognized in net loss/(gain) included in other comprehensive loss | |||||||||||||||||||||||
Net loss/(gain) arising in current year | $ | 760 | $ | 431 | $ | 103 | $ | (115 | ) | $ | (107 | ) | $ | (9 | ) | ||||||||
Amortization and settlement recognition | (187 | ) | (131 | ) | (56 | ) | (60 | ) | 8 | 12 | |||||||||||||
Foreign currency translation (gain)/loss | — | — | (49 | ) | 73 | 1 | 1 | ||||||||||||||||
Total | $ | 573 | $ | 300 | $ | (2 | ) | $ | (102 | ) | $ | (98 | ) | $ | 4 | ||||||||
Accumulated benefit obligation at end of year | $ | 12,890 | $ | 13,732 | $ | 2,806 | $ | 2,985 |
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) | |||||||||||||||||||||
2018 | 2017 | 2018 | 2017 | 2018 | 2017 | ||||||||||||||||||
Foreign exchange | $ | 9 | $ | (15 | ) | $ | (52 | ) | $ | 62 | $ | (8 | ) | $ | 10 | ||||||||
Interest rate | 53 | 101 | 110 | (195 | ) | 119 | (184 | ) | |||||||||||||||
Commodity | 117 | (48 | ) | 3 | 3 | — | 3 | ||||||||||||||||
Net investment | — | — | (77 | ) | 157 | — | — | ||||||||||||||||
Total | $ | 179 | $ | 38 | $ | (16 | ) | $ | 27 | $ | 111 | $ | (171 | ) |
(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. |
2018 | 2017 | 2016 | ||||||||||||||||||
Income | Shares(a) | Income | Shares(a) | Income | Shares(a) | |||||||||||||||
Net income attributable to PepsiCo | $ | 12,515 | $ | 4,857 | $ | 6,329 | ||||||||||||||
Preferred shares: | ||||||||||||||||||||
Dividends | — | — | (1 | ) | ||||||||||||||||
Redemption premium | (2 | ) | (4 | ) | (5 | ) | ||||||||||||||
Net income available for PepsiCo common shareholders | $ | 12,513 | 1,415 | $ | 4,853 | 1,425 | $ | 6,323 | 1,439 | |||||||||||
Basic net income attributable to PepsiCo per common share | $ | 8.84 | $ | 3.40 | $ | 4.39 | ||||||||||||||
Net income available for PepsiCo common shareholders | $ | 12,513 | 1,415 | $ | 4,853 | 1,425 | $ | 6,323 | 1,439 | |||||||||||
Dilutive securities: | ||||||||||||||||||||
Stock options, RSUs, PSUs, PEPunits and Other | — | 10 | — | 12 | 1 | 12 | ||||||||||||||
Employee stock ownership plan (ESOP) convertible preferred stock | 2 | — | 4 | 1 | 5 | 1 | ||||||||||||||
Diluted | $ | 12,515 | 1,425 | $ | 4,857 | 1,438 | $ | 6,329 | 1,452 | |||||||||||
Diluted net income attributable to PepsiCo per common share | $ | 8.78 | $ | 3.38 | $ | 4.36 |
(a) | Weighted-average common shares outstanding (in millions). |
2018 | 2017 | 2016 | |||||||||
Out-of-the-money options (a) | 0.7 | 0.4 | 0.7 | ||||||||
Average exercise price per option | $ | 109.83 | $ | 110.12 | $ | 99.98 |
(a) | In millions. |
2019 | 2018 | ||||
Average increase assumed | 6 | % | 6 | % | |
Ultimate projected increase | 5 | % | 5 | % | |
Year of ultimate projected increase | 2039 | 2039 |
2018 | 2017 | 2016 | |||||||||
Share-based compensation expense - equity awards | $ | 256 | $ | 292 | $ | 284 | |||||
Share-based compensation expense - liability awards | 20 | 13 | 5 | ||||||||
Restructuring and impairment charges | (6 | ) | (2 | ) | 5 | ||||||
Total | $ | 270 | $ | 303 | $ | 294 | |||||
Income tax benefits recognized in earnings related to share-based compensation | $ | 45 | $ | 89 | (a) | $ | 91 | ||||
Excess tax benefits related to share-based compensation (b) | $ | 48 | $ | 115 | $ | 110 |
(a) | Reflects tax rates effective for the 2017 tax year. |
(b) | Included in provision for income taxes in the income statement in 2018 and 2017; included in capital in excess of par value in the equity statement in 2016. |
2019 | 2020 | 2021 | 2022 | 2023 | 2024 - 2028 | ||||||||||||||||||
Pension | $ | 1,060 | $ | 960 | $ | 875 | $ | 915 | $ | 950 | $ | 5,265 | |||||||||||
Retiree medical (a) | $ | 115 | $ | 105 | $ | 100 | $ | 100 | $ | 95 | $ | 395 |
(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 2019 through 2023 and approximately $6 million in total for 2024 through 2028. |
2018 | 2017 | ||||||||||||||||
Fair Value Hierarchy Levels(a) | Assets(a) | Liabilities(a) | Assets(a) | Liabilities(a) | |||||||||||||
Available-for-sale debt securities (b) | 2 | $ | 3,658 | $ | — | $ | 14,510 | $ | — | ||||||||
Short-term investments (c) | 1 | $ | 196 | $ | — | $ | 228 | $ | — | ||||||||
Prepaid forward contracts (d) | 2 | $ | 22 | $ | — | $ | 27 | $ | — | ||||||||
Deferred compensation (e) | 2 | $ | — | $ | 450 | $ | — | $ | 503 | ||||||||
Derivatives designated as fair value hedging instruments: | |||||||||||||||||
Interest rate (f) | 2 | $ | 1 | $ | 108 | $ | 24 | $ | 130 | ||||||||
Derivatives designated as cash flow hedging instruments: | |||||||||||||||||
Foreign exchange (g) | 2 | $ | 44 | $ | 14 | $ | 15 | $ | 31 | ||||||||
Interest rate (g) | 2 | — | 323 | — | 213 | ||||||||||||
Commodity (h) | 1 | — | 1 | — | 2 | ||||||||||||
Commodity (i) | 2 | — | 3 | 2 | — | ||||||||||||
$ | 44 | $ | 341 | $ | 17 | $ | 246 | ||||||||||
Derivatives not designated as hedging instruments: | |||||||||||||||||
Foreign exchange (g) | 2 | $ | 3 | $ | 10 | $ | 10 | $ | 3 | ||||||||
Commodity (h) | 1 | 2 | 17 | — | 19 | ||||||||||||
Commodity (i) | 2 | 5 | 92 | 85 | 12 | ||||||||||||
$ | 10 | $ | 119 | $ | 95 | $ | 34 | ||||||||||
Total derivatives at fair value (j) | $ | 55 | $ | 568 | $ | 136 | $ | 410 | |||||||||
Total | $ | 3,931 | $ | 1,018 | $ | 14,901 | $ | 913 |
(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 quoted broker prices or other significant inputs derived from or corroborated by observable market data. As of December 29, 2018, these debt securities were primarily classified as cash equivalents. 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. The decrease primarily reflects net maturities and sales of debt securities with maturities greater than three months. Refer to the cash flow statement and “Our Liquidity and Capital Resources” in Management’s Discussion and Analysis of Financial Condition and Results of Operations for further discussion on use of these proceeds. |
(c) | 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. |
(d) | Based primarily on the price of our common stock. |
(e) | Based on the fair value of investments corresponding to employees’ investment elections. |
(f) | Based on LIBOR forward rates. |
(g) | Based on recently reported market transactions of spot and forward rates. |
(h) | Based on quoted contract prices on futures exchange markets. |
(i) | Based on recently reported market transactions of swap arrangements. |
(j) | 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 29, 2018 and December 30, 2017 were not material. Collateral received or posted against any of our asset or liability positions were not material. Collateral posted is classified as restricted cash. See Note 13 for further information. |
2018 | 2017 | 2016 | |||||||||||||||||||||||||||
Amortizable intangible assets, net | Average Useful Life (Years) | Gross | Accumulated Amortization | Net | Gross | Accumulated Amortization | Net | ||||||||||||||||||||||
Acquired franchise rights | 56 – 60 | $ | 838 | $ | (140 | ) | $ | 698 | $ | 858 | $ | (128 | ) | $ | 730 | ||||||||||||||
Reacquired franchise rights | 5 – 14 | 106 | (105 | ) | 1 | 106 | (104 | ) | 2 | ||||||||||||||||||||
Brands | 20 – 40 | 1,306 | (1,032 | ) | 274 | 1,322 | (1,026 | ) | 296 | ||||||||||||||||||||
Other identifiable intangibles (a) | 10 – 24 | 959 | (288 | ) | 671 | 521 | (281 | ) | 240 | ||||||||||||||||||||
$ | 3,209 | $ | (1,565 | ) | $ | 1,644 | $ | 2,807 | $ | (1,539 | ) | $ | 1,268 | ||||||||||||||||
Amortization expense | $ | 69 | $ | 68 | $ | 70 |
Pension | Retiree Medical | ||||||||||||||||||||||||||||||||||
U.S. | International | ||||||||||||||||||||||||||||||||||
2018 | 2017 | 2016 | 2018 | 2017 | 2016 | 2018 | 2017 | 2016 | |||||||||||||||||||||||||||
Service cost | $ | 431 | $ | 401 | $ | 393 | $ | 92 | $ | 91 | $ | 80 | $ | 32 | $ | 28 | $ | 31 | |||||||||||||||||
Interest cost | 482 | 468 | 484 | 93 | 89 | 94 | 34 | 36 | 41 | ||||||||||||||||||||||||||
Expected return on plan assets | (943 | ) | (849 | ) | (834 | ) | (197 | ) | (176 | ) | (163 | ) | (19 | ) | (22 | ) | (24 | ) | |||||||||||||||||
Amortization of prior service cost/(credits) | 3 | 1 | (1 | ) | — | — | — | (20 | ) | (25 | ) | (38 | ) | ||||||||||||||||||||||
Amortization of net losses/(gains) | 179 | 123 | 168 | 45 | 53 | 40 | (8 | ) | (12 | ) | (1 | ) | |||||||||||||||||||||||
152 | 144 | 210 | 33 | 57 | 51 | 19 | 5 | 9 | |||||||||||||||||||||||||||
Settlement/curtailment losses/(gain) (a) | 8 | 8 | 245 | 6 | 11 | 9 | — | — | (14 | ) | |||||||||||||||||||||||||
Special termination benefits | 36 | 60 | 11 | 2 | — | 1 | 1 | 2 | 1 | ||||||||||||||||||||||||||
Total | $ | 196 | $ | 212 | $ | 466 | $ | 41 | $ | 68 | $ | 61 | $ | 20 | $ | 7 | $ | (4 | ) |
2017(a) | 2016(b) | |||||||
FLNA | $ | (30 | ) | $ | (47 | ) | ||
QFNA | (2 | ) | (4 | ) | ||||
NAB | (7 | ) | (12 | ) | ||||
Latin America | 16 | 17 | ||||||
ESSA | (38 | ) | (47 | ) | ||||
AMENA | — | — | ||||||
Corporate unallocated expenses | (172 | ) | 112 | (c) | ||||
Total | $ | (233 | ) | $ | 19 |
(a) | Includes restructuring charges of $66 million, including $13 million in our FLNA segment, $2 million in our QFNA segment, $11 million in our NAB segment, $7 million in our Latin America segment and $33 million in corporate unallocated expenses. See “Items Affecting Comparability” in Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
(b) | Includes restructuring charges of $5 million, including $1 million in our FLNA segment, $2 million in our NAB segment and $2 million in corporate unallocated expenses. See “Items Affecting Comparability” in Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
(c) | Reflects a settlement charge of $242 million related to a group annuity contract purchase. See “Items Affecting Comparability” in Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
2018 | 2017 | 2016 | |||||||||
2019 Productivity Plan | $ | 138 | $ | — | $ | — | |||||
2014 Productivity Plan | 170 | 295 | 160 | ||||||||
Total restructuring and impairment charges | 308 | 295 | 160 | ||||||||
Other productivity initiatives | 8 | 16 | 12 | ||||||||
Total restructuring and impairment charges and other productivity initiatives | $ | 316 | $ | 311 | $ | 172 |
Net Revenue | Operating Profit(b) | ||||||||||||||||||||||
2018(a) | 2017 | 2016 | 2018 | 2017(c) | 2016(c) | ||||||||||||||||||
FLNA | $ | 16,346 | $ | 15,798 | $ | 15,549 | $ | 5,008 | $ | 4,793 | $ | 4,612 | |||||||||||
QFNA | 2,465 | 2,503 | 2,564 | 637 | 640 | 649 | |||||||||||||||||
NAB | 21,072 | 20,936 | 21,312 | 2,276 | 2,700 | 2,947 | |||||||||||||||||
Latin America | 7,354 | 7,208 | 6,820 | 1,049 | 924 | 904 | |||||||||||||||||
ESSA | 11,523 | 11,050 | 10,216 | 1,364 | 1,316 | 1,061 | |||||||||||||||||
AMENA | 5,901 | 6,030 | 6,338 | 1,172 | 1,073 | 619 | |||||||||||||||||
Total division | 64,661 | 63,525 | 62,799 | 11,506 | 11,446 | 10,792 | |||||||||||||||||
Corporate unallocated expenses | — | — | — | (1,396 | ) | (1,170 | ) | (988 | ) | ||||||||||||||
$ | 64,661 | $ | 63,525 | $ | 62,799 | $ | 10,110 | $ | 10,276 | $ | 9,804 |
(a) | Our primary performance obligation is the distribution and sales of beverage products and food and snack products to our customers, each comprising approximately 50% of our consolidated net revenue. Internationally, our Latin America segment is predominantly a food and snack business, ESSA’s beverage business and food and snack business are each approximately 50% of the segment’s net revenue and AMENA’s beverage business and food and snack business are approximately 35% and 65%, respectively, of the segment’s net revenue. Beverage revenue from company-owned bottlers, which primarily includes our consolidated bottling operations in our NAB and ESSA segments, is approximately 40% of our consolidated net revenue. Generally, our finished goods beverage operations produce higher net revenue, but lower operating margins as compared to concentrate sold to authorized bottling partners for the manufacture of finished goods beverages. See Note 2 for additional information. |
(b) | For further unaudited information on certain items that impacted our financial performance, see “Item 6. Selected Financial Data.” |
(c) | Reflects the retrospective adoption of guidance requiring the presentation of non-service cost components of net periodic benefit cost below operating profit. See Note 2 for additional information. |
RSUs/PSUs(a) | Weighted-Average Grant-Date Fair Value | Weighted-Average Contractual Life Remaining (years) | Aggregate Intrinsic Value(a) | |||||||||
Outstanding at December 30, 2017 | 7,293 | $ | 102.30 | |||||||||
Granted (b) | 2,634 | $ | 108.75 | |||||||||
Converted | (2,362 | ) | $ | 99.73 | ||||||||
Forfeited | (647 | ) | $ | 105.21 | ||||||||
Actual performance change (c) | 257 | $ | 98.92 | |||||||||
Outstanding at December 29, 2018 (d) | 7,175 | $ | 105.13 | 1.22 | $ | 791,878 | ||||||
Expected to vest as of December 29, 2018 | 6,667 | $ | 104.90 | 1.15 | $ | 735,813 |
(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 29, 2018, at the threshold, target and maximum award levels were zero, 0.9 million and 1.6 million, respectively. |
Options(a) | Weighted-Average Exercise Price | Weighted-Average Contractual Life Remaining (years) | Aggregate Intrinsic Value(b) | |||||||||
Outstanding at December 30, 2017 | 19,013 | $ | 74.23 | |||||||||
Granted | 1,429 | $ | 108.88 | |||||||||
Exercised | (4,377 | ) | $ | 62.95 | ||||||||
Forfeited/expired | (476 | ) | $ | 94.85 | ||||||||
Outstanding at December 29, 2018 | 15,589 | $ | 79.94 | 4.29 | $ | 474,746 | ||||||
Exercisable at December 29, 2018 | 11,547 | $ | 70.74 | 2.92 | $ | 457,529 | ||||||
Expected to vest as of December 29, 2018 | 3,713 | $ | 106.02 | 8.17 | $ | 16,606 |
(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. |
2018 | 2017 | 2016 | ||||||
Expected life | 5 years | 5 years | 6 years | |||||
Risk-free interest rate | 2.6 | % | 2.0 | % | 1.4 | % | ||
Expected volatility | 12 | % | 11 | % | 12 | % | ||
Expected dividend yield | 2.7 | % | 2.7 | % | 2.7 | % |
2019 | 2020 | 2021 | 2022 | 2023 | |||||||||||||||
Five-year projected amortization | $ | 89 | $ | 89 | $ | 87 | $ | 85 | $ | 83 |
• | media and personal service prepayments; |
• | promotional materials in inventory; and |
• | production costs of future media advertising. |
• | Basis of Presentation – Note 1 includes 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 15. Inventories are valued at the lower of cost or net realizable value. Cost is determined using the average; first-in, first-out (FIFO) or, in limited instances, 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 | 2014-2017 | 2014-2016 | ||
Mexico | 2017 | None | ||
United Kingdom | 2016-2017 | None | ||
Canada (Domestic) | 2014-2017 | 2014-2015 | ||
Canada (International) | 2010-2017 | 2010-2015 | ||
Russia | 2014-2017 | 2014-2017 |