UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 8, 20187, 2019 (36 weeks)
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-1183
pepsicologo20185a02.jpg
PepsiCo, Inc.
(Exact Name of Registrant as Specified in its Charter)
   
North Carolina 13-1584302
(State or Other Jurisdiction of
Incorporation or Organization)
 
(I.R.S. Employer
Identification No.)
700 Anderson Hill Road, Purchase, New York 10577
700 Anderson Hill Road, Purchase, New York10577
(Address of Principal Executive Offices)(principal executive offices and Zip Code)

(914) 253-2000
Registrant's telephone number, including area code
N/A
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
914-253-2000Title of each classTrading SymbolsName of each exchange on which registered
(Registrant’s Telephone Number, Including Area Code)Common Stock, par value 1-2/3 cents per sharePEPThe Nasdaq Stock Market LLC
2.500% Senior Notes Due 2022PEP22aThe Nasdaq Stock Market LLC
1.750% Senior Notes Due 2021PEP21aThe Nasdaq Stock Market LLC
2.625% Senior Notes Due 2026PEP26The Nasdaq Stock Market LLC
0.875% Senior Notes Due 2028PEP28The Nasdaq Stock Market LLC
0.750% Senior Notes Due 2027PEP27The Nasdaq Stock Market LLC
1.125% Senior Notes Due 2031PEP31The Nasdaq Stock Market LLC

N/A
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    YES   Yes   x    NO      No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    YES   Yes   x    NO      No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filerx
x
Accelerated filer¨
☐
Non-accelerated filer¨
☐
Smaller reporting company¨
☐
  
Emerging growth company¨
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    YES   ¨    NO  Yes   ☐    No  x
Number of shares of Common Stock outstanding as of September 25, 201826, 2019 was 1,411,568,000.1,394,435,338.


Table of Contents




PepsiCo, Inc. and Subsidiaries


Table of Contents
  Page No.
Part I Financial Information 
Item 1.Condensed Consolidated Financial Statements
3
 
Condensed Consolidated Statement of Income –

12 and 36 Weeks Ended September 8, 20187, 2019 and September 9, 20178, 2018
3
 
Condensed Consolidated Statement of Comprehensive Income –

12 and 36 Weeks Ended September 8, 20187, 2019 and September 9, 20178, 2018
4
 
Condensed Consolidated Statement of Cash Flows –

36 Weeks Ended September 8, 20187, 2019 and September 9, 20178, 2018
5
 
Condensed Consolidated Balance Sheet –

September 8, 20187, 2019 and December 30, 201729, 2018
6
 
Condensed Consolidated Statement of Equity –

12 and 36 Weeks Ended September 8, 20187, 2019 and September 9, 20178, 2018
7
 
Notes to the Condensed Consolidated Financial Statements
8
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
2728
Report of Independent Registered Public Accounting Firm
5048
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
5149
Item 4.
Controls and Procedures
5149
Part II Other Information 
Item 1.
Legal Proceedings
5250
Item 1A.
Risk Factors
5250
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
5350
Item 6.
Exhibits
5350


Table of Contents




PART I FINANCIAL INFORMATION
ITEM 1. Condensed Consolidated Financial Statements.


Condensed Consolidated Statement of Income
PepsiCo, Inc. and Subsidiaries
(in millions except per share amounts, unaudited)
12 Weeks Ended 36 Weeks Ended12 Weeks Ended 36 Weeks Ended
9/8/2018
 9/9/2017
 9/8/2018
 9/9/2017
9/7/2019
 9/8/2018
 9/7/2019
 9/8/2018
Net Revenue$16,485
 $16,240
 $45,137
 $43,999
$17,188
 $16,485
 $46,521
 $45,137
Cost of sales7,527
 7,368
 20,445
 19,717
7,694
 7,527
 20,786
 20,445
Gross profit8,958
 8,872
 24,692
 24,282
9,494
 8,958
 25,735
 24,692
Selling, general and administrative expenses6,114
 5,948
 17,013
 16,576
6,639
 6,114
 18,143
 17,013
Operating Profit2,844
 2,924
 7,679
 7,706
2,855
 2,844
 7,592
 7,679
Other pension and retiree medical benefits income74
 69
 231
 210
38
 74
 163
 231
Interest expense(302) (269) (904) (786)(262) (302) (790) (904)
Interest income and other81
 52
 248
 141
38
 81
 139
 248
Income before income taxes2,697
 2,776
 7,254
 7,271
2,669
 2,697
 7,104
 7,254
Provision for income taxes (See Note 5)188
 620
 1,562
 1,668
Provision for income taxes559
 188
 1,529
 1,562
Net income2,509
 2,156
 5,692
 5,603
2,110
 2,509
 5,575
 5,692
Less: Net income attributable to noncontrolling interests11
 12
 31
 36
10
 11
 27
 31
Net Income Attributable to PepsiCo$2,498
 $2,144
 $5,661
 $5,567
$2,100
 $2,498
 $5,548
 $5,661
Net Income Attributable to PepsiCo per Common Share              
Basic$1.77
 $1.50
 $3.99
 $3.90
$1.50
 $1.77
 $3.96
 $3.99
Diluted$1.75
 $1.49
 $3.97
 $3.87
$1.49
 $1.75
 $3.94
 $3.97
Weighted-average common shares outstanding              
Basic1,414
 1,425
 1,417
 1,427
1,397
 1,414
 1,401
 1,417
Diluted1,424
 1,438
 1,427
 1,440
1,405
 1,424
 1,409
 1,427
Cash dividends declared per common share$0.9275
 $0.805
 $2.66
 $2.3625
See accompanying notes to the condensed consolidated financial statements.
Table of Contents




Condensed Consolidated Statement of Comprehensive Income
PepsiCo, Inc. and Subsidiaries
(in millions, unaudited)
12 Weeks Ended 36 Weeks Ended12 Weeks Ended 36 Weeks Ended
9/8/2018
 9/9/2017
 9/8/2018
 9/9/2017
9/7/2019
 9/8/2018
 9/7/2019
 9/8/2018
Net income$2,509
 $2,156
 $5,692
 $5,603
$2,110
 $2,509
 $5,575
 $5,692
Other comprehensive (loss)/income, net of taxes:              
Net currency translation adjustment(728) 320
 (1,409) 1,156
(159) (728) (51) (1,409)
Net change on cash flow hedges(1) (32) 75
 (83)(38) (1) (71) 75
Net pension and retiree medical adjustments54
 9
 134
 20
56
 54
 115
 134
Net change on available-for-sale securities2
 2
 4
 (64)(1) 2
 —
 4
Other—
 —
 —
 16
(673) 299
 (1,196) 1,045
(142) (673) (7) (1,196)
Comprehensive income1,836
 2,455
 4,496
 6,648
1,968
 1,836
 5,568
 4,496
Comprehensive income attributable to
noncontrolling interests		(11) (12) (31) (37)(10) (11) (27) (31)
Comprehensive Income Attributable to PepsiCo$1,825
 $2,443
 $4,465
 $6,611
$1,958
 $1,825
 $5,541
 $4,465


See accompanying notes to the condensed consolidated financial statements.
Table of Contents




Condensed Consolidated Statement of Cash Flows
PepsiCo, Inc. and Subsidiaries
(in millions, unaudited)
36 Weeks Ended36 Weeks Ended
9/8/2018
 9/9/2017
9/7/2019
 9/8/2018
Operating Activities      
Net income$5,692
 $5,603
$5,575
 $5,692
Depreciation and amortization1,636
 1,604
1,634
 1,636
Share-based compensation expense203
 206
169
 203
Restructuring and impairment charges79
 69
282
 79
Cash payments for restructuring charges(179) (83)(248) (179)
Pension and retiree medical plan expenses147
 141
165
 147
Pension and retiree medical plan contributions(1,664) (169)(391) (1,664)
Deferred income taxes and other tax charges and credits(609) 284
195
 (609)
Provisional net tax expense related to the Tax Cuts and Jobs Act (TCJ Act)854
 —
Tax (benefits)/net tax expense related to the Tax Cuts and Jobs Act (TCJ Act)(29) 854
Tax payments related to the TCJ Act(393) (41)
Change in assets and liabilities:      
Accounts and notes receivable(1,299) (999)(1,716) (1,299)
Inventories(362) (424)(573) (362)
Prepaid expenses and other current assets(158) (119)(264) (158)
Accounts payable and other current liabilities116
 (496)80
 116
Income taxes payable633
 633
347
 674
Other, net(357) (163)230
 (357)
Net Cash Provided by Operating Activities4,732
 6,087
5,063
 4,732
      
Investing Activities      
Capital spending(1,578) (1,474)(1,959) (1,578)
Sales of property, plant and equipment119
 82
63
 119
Acquisitions and investments in noncontrolled affiliates(253) (45)
Acquisition of SodaStream International Ltd. (SodaStream)(1,905) —
Other acquisitions and investments in noncontrolled affiliates(723) (253)
Divestitures294
 143
253
 294
Short-term investments, by original maturity:      
More than three months - purchases(5,637) (11,742)—
 (5,637)
More than three months - maturities11,874
 10,400
8
 11,874
More than three months - sales772
 345
3
 772
Three months or less, net7
 4
13
 7
Other investing, net—
 9
(38) —
Net Cash Provided by/(Used for) Investing Activities5,598
 (2,278)
Net Cash (Used for)/Provided by Investing Activities(4,285) 5,598
      
Financing Activities      
Proceeds from issuances of long-term debt—
 3,525
3,098
 —
Payments of long-term debt(2,506) (3,256)(2,954) (2,506)
Short-term borrowings, by original maturity:      
More than three months - proceeds2
 77
6
 2
More than three months - payments(17) (91)—
 (17)
Three months or less, net(1,384) 1,526
94
 (1,384)
Cash dividends paid(3,621) (3,324)(3,971) (3,621)
Share repurchases - common(1,442) (1,464)(2,268) (1,442)
Share repurchases - preferred(2) (4)—
 (2)
Proceeds from exercises of stock options215
 396
282
 215
Withholding tax payments on restricted stock units (RSUs), performance stock units (PSUs) and PepsiCo
equity performance units (PEPunits) converted		(93) (131)(100) (93)
Other financing(23) (29)(16) (23)
Net Cash Used for Financing Activities(8,871) (2,775)(5,829) (8,871)
Effect of exchange rate changes on cash and cash equivalents and restricted cash(73) 76
(11) (73)
Net Increase in Cash and Cash Equivalents and Restricted Cash1,386
 1,110
Net (Decrease)/Increase in Cash and Cash Equivalents and Restricted Cash(5,062) 1,386
Cash and Cash Equivalents and Restricted Cash, Beginning of Year10,657
 9,169
10,769
 10,657
Cash and Cash Equivalents and Restricted Cash, End of Period$12,043
 $10,279
$5,707
 $12,043
See accompanying notes to the condensed consolidated financial statements.
Table of Contents




Condensed Consolidated Balance Sheet
PepsiCo, Inc. and Subsidiaries
(in millions except per share amounts)
(Unaudited)
  (Unaudited)
  
9/8/2018
 12/30/2017
9/7/2019
 12/29/2018
ASSETS      
Current Assets      
Cash and cash equivalents$11,991
 $10,610
$5,494
 $8,721
Short-term investments1,907
 8,900
287
 272
Accounts and notes receivable, less allowance: 9/18 - $120 and 12/17 - $1297,975
 7,024
Restricted cash127
 1,997
Accounts and notes receivable, less allowance: 9/19 - $114 and 12/18 - $1018,735
 7,142
Inventories:      
Raw materials and packaging1,401
 1,344
1,509
 1,312
Work-in-process164
 167
316
 178
Finished goods1,577
 1,436
1,842
 1,638
3,142
 2,947
3,667
 3,128
Prepaid expenses and other current assets827
 1,546
888
 633
Total Current Assets25,842
 31,027
19,198
 21,893
Property, plant and equipment38,878
 39,106
40,645
 40,164
Accumulated depreciation(22,337) (21,866)(23,059) (22,575)
16,541
 17,240
17,586
 17,589
Amortizable Intangible Assets, net1,193
 1,268
1,437
 1,644
Goodwill14,332
 14,744
15,338
 14,808
Other nonamortizable intangible assets12,273
 12,570
Nonamortizable Intangible Assets26,605
 27,314
Other indefinite-lived intangible assets14,375
 14,181
Indefinite-Lived Intangible Assets29,713
 28,989
Investments in Noncontrolled Affiliates2,394
 2,042
2,690
 2,409
Deferred Income Taxes4,340
 4,364
Other Assets1,057
 913
2,480
 760
Total Assets$73,632
 $79,804
$77,444
 $77,648
      
LIABILITIES AND EQUITY      
Current Liabilities      
Short-term debt obligations$4,474
 $5,485
$2,924
 $4,026
Accounts payable and other current liabilities15,230
 15,017
17,207
 18,112
Total Current Liabilities19,704
 20,502
20,131
 22,138
Long-Term Debt Obligations30,643
 33,796
29,630
 28,295
Deferred Income Taxes3,643
 3,499
Other Liabilities9,538
 11,283
9,816
 9,114
Deferred Income Taxes3,358
 3,242
Total Liabilities63,243
 68,823
63,220
 63,046
      
Commitments and contingencies      
      
Preferred Stock, no par value—
 41
Repurchased Preferred Stock—
 (197)
PepsiCo Common Shareholders’ Equity      
Common stock, par value 12/3¢ per share (authorized 3,600 shares; issued, net of repurchased common stock at par value: 1,412 and 1,420 shares, respectively)
24
 24
Common stock, par value 12/3¢ per share (authorized 3,600 shares; issued, net of repurchased common stock at par value: 1,396 and 1,409 shares, respectively)
23
 23
Capital in excess of par value3,939
 3,996
3,842
 3,953
Retained earnings54,404
 52,839
61,514
 59,947
Accumulated other comprehensive loss(14,253) (13,057)(15,126) (15,119)
Repurchased common stock, in excess of par value (455 and 446 shares, respectively)(33,828) (32,757)
Repurchased common stock, in excess of par value (471 and 458 shares, respectively)(36,124) (34,286)
Total PepsiCo Common Shareholders’ Equity10,286
 11,045
14,129
 14,518
Noncontrolling interests103
 92
95
 84
Total Equity10,389
 10,981
14,224
 14,602
Total Liabilities and Equity$73,632
 $79,804
$77,444
 $77,648
See accompanying notes to the condensed consolidated financial statements.
Table of Contents





Condensed Consolidated Statement of Equity
PepsiCo, Inc. and Subsidiaries
(in millions, unaudited)
36 Weeks Ended12 Weeks Ended 36 Weeks Ended
9/8/2018 9/9/20179/7/2019 9/8/2018 9/7/2019 9/8/2018
Shares Amount Shares AmountShares Amount Shares Amount Shares Amount Shares Amount
Preferred Stock                      
Balance, beginning of year0.8
 $41
 0.8
 $41
Balance, beginning of period—
 $—
 —
 $—
 —
 $—
 0.8
 $41
Conversion to common stock(0.1) (6) —
 —
—
 —
 —
 —
 —
 —
 (0.1) (6)
Retirement of preferred stock(0.7) (35) —
 —
—
 —
 —
 —
 —
 —
 (0.7) (35)
Balance, end of period—
 —
 0.8
 41
—
 —
 —
 —
 —
 —
 —
 —
Repurchased Preferred Stock                      
Balance, beginning of year(0.7) (197) (0.7) (192)
Balance, beginning of period—
 —
 —
 —
 —
 —
 (0.7) (197)
Redemptions—
 (2) —
 (4)—
 —
 —
 —
 —
 —
 —
 (2)
Retirement of preferred stock0.7
 199
 —
 —
—
 —
 —
 —
 —
 —
 0.7
 199
Balance, end of period—
 —
 (0.7) (196)—
 —
 —
 —
 —
 —
 —
 —
Common Stock                      
Balance, beginning of year1,420
 24
 1,428
 24
Balance, beginning of period1,399
 23
 1,415
 24
 1,409
 23
 1,420
 24
Shares issued in connection with preferred stock conversion to common stock1
 —
 —
 —
—
 —
 —
 —
 —
 —
 1
 —
Change in repurchased common stock(9) —
 (5) —
(3) —
 (3) —
 (13) —
 (9) —
Balance, end of period1,412
 24
 1,423
 24
1,396
 23
 1,412
 24
 1,396
 23
 1,412
 24
Capital in Excess of Par Value                      
Balance, beginning of year  3,996
   4,091
Balance, beginning of period  3,796
   3,915
   3,953
   3,996
Share-based compensation expense  204
   209
  51
   56
   170
   204
Equity issued in connection with preferred stock conversion to common stock  6
   —
  —
   —
   —
   6
Stock option exercises, RSUs, PSUs and PEPunits converted  (172)   (221)  (5)   (22)   (181)   (172)
Withholding tax on RSUs, PSUs and PEPunits converted  (93)   (131)  —
   (11)   (100)   (93)
Other  (2)   (4)  —
   1
   —
   (2)
Balance, end of period  3,939
   3,944
  3,842
   3,939
   3,842
   3,939
Retained Earnings                      
Balance, beginning of year  52,839
   52,518
Balance, beginning of period  60,752
   53,223
   59,947
   52,839
Cumulative effect of accounting changes  (145)   —
  —
   —
   8
   (145)
Net income attributable to PepsiCo  5,661
   5,567
  2,100
   2,498
   5,548
   5,661
Cash dividends declared – common(a)  (3,787)   (3,387)  (1,338)   (1,317)   (3,989)   (3,787)
Retirement of preferred stock  (164)   —
  —
   —
   —
   (164)
Balance, end of period  54,404
   54,698
  61,514
   54,404
   61,514
   54,404
Accumulated Other Comprehensive Loss                      
Balance, beginning of year  (13,057)   (13,919)
Other comprehensive (loss)/income attributable to PepsiCo  (1,196)   1,044
Balance, beginning of period  (14,984)   (13,580)   (15,119)   (13,057)
Other comprehensive loss attributable to PepsiCo  (142)   (673)   (7)   (1,196)
Balance, end of period  (14,253)   (12,875)  (15,126)   (14,253)   (15,126)   (14,253)
Repurchased Common Stock                      
Balance, beginning of year(446) (32,757) (438) (31,468)
Balance, beginning of period(468) (35,635) (452) (33,471) (458) (34,286) (446) (32,757)
Share repurchases(14) (1,453) (13) (1,495)(4) (551) (4) (449) (19) (2,301) (14) (1,453)
Stock option exercises, RSUs, PSUs and PEPunits converted5
 381
 8
 620
1
 62
 1
 92
 6
 463
 5
 381
Other—
 1
 —
 2
—
 —
 —
 —
 —
 —
 —
 1
Balance, end of period(455) (33,828) (443) (32,341)(471) (36,124) (455) (33,828) (471) (36,124) (455) (33,828)
Total PepsiCo Common Shareholders’ Equity  10,286
   13,450
  14,129
   10,286
   14,129
   10,286
Noncontrolling Interests                      
Balance, beginning of year  92
   104
Balance, beginning of period  85
   110
   84
   92
Net income attributable to noncontrolling interests  31
   36
  10
   11
   27
   31
Distributions to noncontrolling interests  (20)   (25)  —
   (20)   (15)   (20)
Currency translation adjustment  —
   1
Other, net  —
   2
   (1)   —
Balance, end of period  103
   116
  95
   103
   95
   103
Total Equity  $10,389
   $13,411
  $14,224
   $10,389
   $14,224
   $10,389
(a)Cash dividends declared per common share were $0.955 and $0.9275 for the 12 weeks ended September 7, 2019 and September 8, 2018, respectively, and $2.8375 and $2.66 for the 36 weeks ended September 7, 2019 and September 8, 2018, respectively.
See accompanying notes to the condensed consolidated financial statements.
Table of Contents




Notes to the Condensed Consolidated Financial Statements
Note 1 - Basis of Presentation and Our Divisions
Basis of Presentation
When used in this report, the terms “we,” “us,” “our,” “PepsiCo” and the “Company” mean PepsiCo, Inc. and its consolidated subsidiaries, collectively.
Our Condensed Consolidated Balance Sheet as of September 8, 2018,7, 2019, Condensed Consolidated Statements of Income, and Comprehensive Income and Equity for the 12and36 weeks ended September 8, 20187, 2019 and September 9, 2017,8, 2018 and the Condensed Consolidated StatementsStatement of Cash Flows and Equity for the 36 weeks ended September 8, 20187, 2019 and September 9, 20178, 2018 have not been audited. These statements have been prepared on a basis that is substantially consistent with the accounting principles applied in our Annual Report on Form 10-K for the fiscal year ended December 30, 2017 (201729, 2018 (2018 Form 10-K), as modified to reflect the adoption of those recently issued accounting pronouncements disclosed in Note 2 in this Form 10-Q. This report should be read in conjunction with our 20172018 Form 10-K. In our opinion, these financial statements include all normal and recurring adjustments necessary for a fair presentation. The results for the 12and 36 weeks ended September 8, 20187, 2019 are not necessarily indicative of the results expected for any future period or the full year.
While our financial results in the United States and Canada (North America) are reported on a 12-week basis, mostsubstantially all of our international operations report on a monthly calendar basis. In the 12 weeks ended September 8, 2018, our financial results outside of North America reflectbasis for which the months of June, July and August. InAugust are reflected in our results for the 12 weeks ended September 7, 2019, and the months of January through August are reflected in our results for the 36 weeks ended September 8, 2018, our financial results outside of North America reflect the months of January through August.7, 2019.
Our significant interim accounting policies include the recognition of a pro rata share of certain estimated annual sales incentives and certain advertising and marketing costs in proportion to revenue or volume, as applicable, and the recognition of income taxes using an estimated annual effective tax rate. Raw materials, direct labor and plant overhead, as well as purchasing and receiving costs, costs directly related to production planning, inspection costs and raw materials handling facilities, are included in cost of sales. The costs of moving, storing and delivering finished product, including merchandising activities, are included in selling, general and administrative expenses.
The following information is unaudited. Unless otherwise noted, tabular dollars are in millions, except per share amounts. All per share amounts reflect common per share amounts, assume dilution unless otherwise noted, and are based on unrounded amounts. Certain reclassifications were made to the prior year’s financial statements to conform to the current year presentation, including the adoption during the first quarter of 2018 of those recently issued accounting pronouncements disclosed in Note 2.
presentation.
Our Divisions
We are organized into six6 reportable segments (also referred to as divisions), as follows:
1)Frito-Lay North America (FLNA), which includes our branded food and snack businesses in the United States and Canada;
2)Quaker Foods North America (QFNA), which includes our cereal, rice, pasta and other branded food businesses in the United States and Canada;
3)PepsiCo Beverages North America Beverages (NAB)(PBNA), which includes our beverage businesses in the United States and Canada;Canada. PBNA was formerly named North America Beverages; this change did not impact the results of PBNA or our other reportable segments;
4)Latin America (LatAm), which includes all of our beverage, food and snack businesses in Latin America;

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5)Europe Sub-Saharan Africa (ESSA), which includes all of our beverage, food and snack businesses in Europe and Sub-Saharan Africa; and
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6)Asia, Middle East and North Africa (AMENA), which includes all of our beverage, food and snack businesses in Asia, the Middle East and North Africa.
Net revenue and operating profit of each division are as follows:
12 Weeks Ended 36 Weeks Ended12 Weeks Ended 36 Weeks Ended
Net Revenue(a)
9/8/2018(a)


9/9/2017
 
9/8/2018(a)

 9/9/2017
9/7/2019
 9/8/2018
 9/7/2019
 9/8/2018
FLNA$3,891
 $3,792
 $11,345
 $10,969
$4,105
 $3,891
 $11,930
 $11,345
QFNA567
 578
 1,695
 1,729
576
 567
 1,710
 1,695
NAB5,456
 5,332
 15,064
 15,034
Latin America1,868
 1,873
 4,935
 4,773
PBNA5,643
 5,456
 15,475
 15,064
LatAm1,904
 1,868
 5,031
 4,935
ESSA3,161
 3,098
 7,945
 7,355
3,347
 3,161
 8,173
 7,945
AMENA1,542
 1,567
 4,153
 4,139
1,613
 1,542
 4,202
 4,153
Total division$16,485
 $16,240
 $45,137
 $43,999
Total$17,188
 $16,485
 $46,521
 $45,137
(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 AmericaLatAm 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 NABPBNA and ESSA segments, is approximately 40% of our consolidated net revenue. Generally, our finished goods beverage operations produce higher net revenue, but lower operating margins as compared to concentrate sold to authorized bottling partners for the manufacture of finished goods beverages.
 12 Weeks Ended 36 Weeks Ended
Operating Profit9/7/2019
 9/8/2018
 9/7/2019
 9/8/2018
FLNA$1,286
 $1,241
 $3,694
 $3,491
QFNA126
 143
 391
 443
PBNA640
 703
 1,719
 1,838
LatAm277
 284
 785
 742
ESSA474
 439
 965
 995
AMENA (a)
357
 311
 883
 994
Total division$3,160
 $3,121
 $8,437
 $8,503
Corporate unallocated expenses(305) (277) (845) (824)
Total$2,855
 $2,844
 $7,592
 $7,679
 12 Weeks Ended 36 Weeks Ended
Operating Profit9/8/2018
 
9/9/2017(a)

 9/8/2018
 
9/9/2017(a)

FLNA$1,241
 $1,199
 $3,491
 $3,392
QFNA143
 145
 443
 453
NAB703
 813
 1,838
 2,204
Latin America284
 284
 742
 645
ESSA (b)
439
 427
 995
 1,015
AMENA (c)
311
 267
 994
 745
Total division$3,121
 $3,135
 $8,503
 $8,454
Corporate unallocated(277) (211) (824) (748)
 $2,844
 $2,924
 $7,679
 $7,706

(a)
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.
(b)Operating profit for ESSA for the 36 weeks ended September 9, 2017 includes a gain of $95 million associated with the sale of our minority stake in Britvic plc (Britvic).
(c)Operating profit for AMENA for the 36 weeks ended September 8, 2018 includes a gain of $144 million associated with refranchising a portion of our beverage business in Thailand.
Note 2 - Recently Issued Accounting Pronouncements
Adopted
In 2017,2018, the Financial Accounting Standards Board (FASB) issued guidance to retrospectively present the service cost component of net periodic benefit cost for pension and retiree medical plans along with other compensation costs in operating profit and present the other components of net periodic benefit cost separately below operating profit in the income statement. The guidance also allows only the service cost component
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of net periodic benefit cost to be eligible for capitalization within inventory or fixed assets on a prospective basis. We adopted the provisions of this guidance retrospectively in the first quarter of 2018, using historical information previously disclosed in our pension and retiree medical benefits footnote as the estimation basis. We also updated our allocation of service costs to our divisions to better approximate actual service cost. The impact from retrospective adoption of this guidance resulted in an increase to cost of sales and selling, general and administrative expenses of $2 million and $67 million, respectively, for the 12 weeks ended September 9, 2017 and $9 million and $201 million, respectively, for the 36 weeks ended September 9, 2017. We recorded a corresponding increase to other pension and retiree medical benefits income below operating profit of $69 million and $210 million for the 12 and 36 weeks ended September 9, 2017, respectively.
The following table shows the (decreases)/increases to operating profit for each division and to corporate unallocated for the respective periods presented below:
 9/9/2017
 12 Weeks Ended
 36 Weeks Ended
FLNA (a)
$(9) $(29)
QFNA(1) (3)
NAB (b)
(4) (12)
Latin America3
 4
ESSA(9) (24)
AMENA—
 —
Corporate unallocated (c)
(49) (146)
Total$(69) $(210)
(a)Includes restructuring charges of $1 million for the 12 and 36 weeks ended September 9, 2017.
(b)Includes restructuring charges of $1 million for the 36 weeks ended September 9, 2017.
(c)Includes restructuring charges of $1 million and $2 million for the 12 weeks and 36 weeks ended September 9, 2017, respectively.
For the years ended December 30, 2017 and December 31, 2016, implementation of this guidance resulted in a decrease in operating profit of $233 million and an increase in operating profit of $19 million, respectively, primarily impacting selling, general and administrative expenses. The changes described above had no impact on our consolidated net revenue, net income or earnings per share. See Note 7 to our consolidated financial statements in our 2017 Form 10-K and Note 7 in this Form 10-Q for further information on our service cost and other components of net periodic benefit cost for pension and retiree medical plans.
In 2016, the FASB issued guidance to clarify how restricted cash should be presented in the cash flow statement. We adopted the provisions of this guidance retrospectively during the first quarter of 2018; the adoption did not have a material impact on our financial statements and primarily relates to collateral posted against our derivative asset or liability positions. See Note 9 and Note 13 for further information.
In 2016, the FASB issued guidance that requires companies to account for the income tax effects of intercompany transfers of assets, other than inventory, when the transfer occurs versus deferring income tax effects until the transferred asset is sold to an outside party or otherwise recognized. We adopted the provisions of this guidance during the first quarter of 2018; the adoption did not have a material impact on our financial statements and we recorded an adjustment of $8 million to beginning retained earnings.
In 2016, the FASB issued guidance that requires companies to measure investments in certain equity securities at fair value and recognize any changes in fair value in net income. We adopted the provisions of this guidance during the first quarter of 2018; the adoption did not have an impact on our financial statements. See Note 9 to our consolidated financial statements in our 2017 Form 10-K for further information on our investments in equity securities.
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In 2014, the FASB issued guidance on revenue recognition, with final amendments issued in 2016. The guidance provides for a five-step model to determine the revenue recognized for the transfer of goods or services to customers that reflects the expected entitled consideration in exchange for those goods or services. It also provides clarification for principal versus agent considerations and identifying performance obligations. In addition, the FASB introduced practical expedients related to disclosures of remaining performance obligations, as well as other amendments related to guidance on collectibility, non-cash consideration and the presentation of sales and other similar taxes. Financial statement disclosures required under the guidance will enable users to understand the nature, amount, timing, judgments and uncertainty of revenue and cash flows relating to customer contracts. The two permitted transition methods under the guidance are the full retrospective approach or a cumulative effect adjustment to the opening retained earnings in the year of adoption (cumulative effect approach). We adopted the guidance applied to all contracts using the cumulative effect approach during the first quarter of 2018; the adoption did not have a material impact on our financial statements.
We utilized a comprehensive approach to assess the impact of the guidance on our contract portfolio by reviewing our current accounting policies and practices to identify potential differences that would result from applying the new requirements to our revenue contracts, including evaluation of our performance obligations, principal versus agent considerations and variable consideration. We completed our contract and business process reviews and implemented changes to our controls to support recognition and disclosures under the new guidance. We recognize revenue when our performance obligation is satisfied. Our primary performance obligation (the distribution and sales of beverage products and food and snack products) is satisfied upon shipment or delivery to our customers based on written sales terms, which is also when control is transferred.
As a result of implementing certain changes, which did not have a material impact on our accounting policies upon adoption, in the first quarter of 2018, we recorded an adjustment of $137 million to beginning retained earnings to reflect marketplace spending that our customers and independent bottlers expect to be entitled to in line with revenue recognition. In addition, we excluded from net revenue and cost of sales all sales, use, value-added and certain excise taxes assessed by governmental authorities on revenue-producing transactions that were not already excluded. The impact of these taxes previously recognized in net revenue and cost of sales was $19 million and $58 million for the 12 and 36 weeks ended September 9, 2017, respectively, and approximately $75 million for the fiscal year ended December 30, 2017, with no impact on operating profit. Shipping and handling activities, including certain merchandising activities, that are performed after a customer obtains control of the product are recorded as fulfillment costs in selling, general and administrative expenses. See Note 2 to our consolidated financial statements in our 2017 Form 10-K for further information on our significant accounting policies related to revenue recognition and total marketplace spending.
Not Yet Adopted
In 2018, the FASB issued guidance related to the TCJ Act for the optional reclassification of the residual tax effects, arising from the change in corporate tax rate, in accumulated other comprehensive loss to retained earnings. The reclassification is the difference between the amount previously recorded in other comprehensive income at the historical U.S. federal tax rate that remains in accumulated other comprehensive loss at the time the TCJ Act was effective and the amount that would have been recorded using the newly enacted rate. If elected, theThis guidance can be applied retrospectively to each periodbecame effective during which the impact of the TCJ Act is recognized or in the period of adoption. We are currently evaluating the impact and, if elected, we will adopt the guidance when it becomes effective in the first quarter of 2019.2019; however, we did not elect to make the optional reclassification.
In 2017, the FASB issued guidance to amend and simplify the application of hedge accounting guidance to better portray the economic results of risk management activities in the financial statements. The guidance
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expands the ability to hedge nonfinancial and financial risk components, reduces complexity in fair value hedges of interest rate risk, eliminates the requirement to separately measure and report hedge ineffectiveness, as well as eases certain hedge effectiveness assessment requirements. We are currently evaluating the impact ofUnder this guidance, including transition elections and required disclosures, oncertain of our financial statements.
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derivatives used to hedge commodity price risk that did not previously qualify for hedge accounting treatment can now qualify prospectively. We will adopt theadopted this guidance when it becomes effective induring the first quarter of 2019.2019; the adoption did not have a material impact on our financial statements or disclosures. See Note 9 for further information.
In 2016, the FASB issued guidance on leases, with amendments issued in 2018. The guidance requires lessees to recognize most leases on the balance sheet but recorddoes not change the manner in which expenses onare recorded in the income statement in a manner similar to current accounting.statement. For lessors, the guidance modifies the classification criteria and the accounting for sales-type and direct financing leases. The two permitted transition methods under the guidance are the modified retrospective transition approach, which requires application of the guidance infor all comparative periods presented, and the cumulative effect adjustment approach, which requires prospective application at the adoption date.
We are currently evaluatingutilized a comprehensive approach to assess the impact of this guidance on our financial statements and related disclosures, including the increase in the assets and liabilities on our balance sheet and the impact on our current lease portfolio from both a lessor and lessee perspective. To facilitate this, we are progressing onWe completed our comprehensive review of our lease portfolio, and enhancing our controls. We identified ourincluding significant leases by geography and by asset type that will bewere impacted by the new guidance, and enhanced our controls. In addition, we are in the process of implementingimplemented a new software platform, and corresponding controls, for administering our leases and facilitating compliance with the new guidance.
We adopted the guidance prospectively during the first quarter of 2019. As part of our adoption, we elected not to reassess historical lease classification, recognize short-term leases on our balance sheet, nor separate lease and non-lease components for our real estate leases. In addition, we are currently evaluatingutilized the methodportfolio approach to group leases with similar characteristics and did not use hindsight to determine lease term. The adoption did not have a material impact on our financial statements, resulting in an increase of transition.2% to each of our total assets and total liabilities on our balance sheet, and had an immaterial increase to retained earnings as of the beginning of 2019. See Note 13 for further information.
Not Yet Adopted
In 2016, the FASB issued guidance that changes the impairment model used to measure credit losses for most financial assets. For our trade, certain other receivables and certain other financial instruments, we will be required to use a new forward-looking expected credit loss model that will replace the existing incurred credit loss model, which would generally result in earlier recognition of allowances for credit losses. We will adopt the guidance when it becomes effective in the first quarter of 2019. See Note 13 to2020. We are currently evaluating the impact of this guidance and do not expect it will have a material impact on our consolidated financial statements in our 2017 Form 10-K for our minimum lease payments under non-cancelable operating leases.or disclosures.
Note 3 - Restructuring and Impairment Charges
2019 Multi-Year Productivity Plan
We publicly announced a multi-year productivity plan on February 15, 2019 (2019 Productivity Plan) that will leverage new technology and business models to further simplify, harmonize and automate processes; re-engineer our go-to-market and information systems, including deploying the right automation for each market; and simplify our organization and optimize our manufacturing and supply chain footprint.
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A summary of our 2019 Productivity Plan charges is as follows:
 9/7/2019
 12 Weeks Ended 36 Weeks Ended
Cost of sales$10
 $100
Selling, general and administrative expenses83
 182
Other pension and retiree medical benefits expense5
 —
Total restructuring and impairment charges$98
 $282
After-tax amount$82
 $225
Net income attributable to PepsiCo per common share$0.06
 $0.16
 9/7/2019  
 12 Weeks Ended 36 Weeks Ended
 Plan to Date
FLNA$16
 $22
 $53
QFNA2
 2
 7
PBNA26
 42
 82
LatAm22
 43
 52
ESSA14
 73
 81
AMENA10
 63
 66
Corporate3
 37
 44
 93
 282
 385
Other pension and retiree medical benefits expense5
 —
 35
 $98
 $282
 $420

 9/7/2019  
 12 Weeks Ended 36 Weeks Ended Plan to Date
Severance and other employee costs$65
 $105
 $242
Asset impairments3
 87
 87
Other costs (a)
30
 90
 91
 $98
 $282
 $420
(a)Includes other costs associated with the implementation of our initiatives, including contract termination costs, consulting and other professional fees.
A summary of our 2019 Productivity Plan activity for the 36 weeks ended September 7, 2019 is as follows:
 Severance and Other Employee Costs 
Asset
Impairments
 Other Costs Total
Liability as of December 29, 2018$105
 $—
 $1
 $106
2019 restructuring charges105
 87
 90
 282
Cash payments (a)
(88) —
 (45) (133)
Non-cash charges and translation(5) (87) 1
 (91)
Liability as of September 7, 2019$117
 $—
 $47
 $164
(a)Excludes cash expenditures of $3 million reported in the cash flow statement in pension and retiree medical contributions.
The majority of the restructuring accrual at September 7, 2019 is expected to be paid by the end of 2019.
2014 Multi-Year Productivity Plan
We publicly announced a multi-year productivity plan on February 13, 2014 (2014 Productivity Plan) that includes the next generation of productivity initiatives that we believe will strengthen our beverage, food and snack businesses by: accelerating our investment in manufacturing automation; further optimizing our global manufacturing footprint, including closing certain manufacturing facilities; re-engineering our go-to-marketgo-to-
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market systems in developed markets; expanding shared services; and implementing simplified organization structures to drive efficiency. To build on the 2014 Productivity Plan, in the fourth quarter of 2017, we expanded and extended the programplan through the end of 2019 to take advantage of additional opportunities within the initiatives described above to further strengthen our beverage, food and snack businesses.
InWe have substantially completed our 2014 Productivity Plan and do not expect to incur material charges in 2019 associated with this plan. The pre-tax charges and cash expenditures approximate the original total plan estimates of $1.3 billion and $960 million, respectively.
For the 12 and 36 weeks ended September 8, 2018 and September 9, 2017, we incurred restructuring7, 2019, there were no material charges of $35 million ($31 million after-tax or $0.02 per share) and $8 million ($7 million after-tax with a nominal amount per share), respectively, in conjunction with our 2014 Productivity Plan. Inrelated to this plan. Cash payments for the 36 weeks ended September 8, 20187, 2019 were $115 million. The accrual related to this plan as of September 7, 2019 is not material and September 9, 2017, we incurred restructuring charges of $79 million ($66 million after-tax or $0.05 per share) and $69 million ($65 million after-tax or $0.05 per share), respectively. These net charges were recorded in selling, general and administrative expenses and other pension and retiree medical benefits income and primarily relate to severance and other employee-related costs, asset impairments (all non-cash) and other costs associated with the implementation of our initiatives, including contract termination costs. The majority of the restructuring accrual at September 8, 2018 is expected to be paid by the end of 2018.2019.
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A summary of our 2014 Productivity Plan charges is as follows:
 12 Weeks Ended
 9/8/2018 9/9/2017
 
Severance and Other Employee Costs(a)
 Asset
Impairments		 Other  
Costs		 Total 
Severance and Other
Employee Costs(a)
 Asset Impairments 
Other 
Costs(b)
 Total
FLNA$(4) $—
 $1
 $(3) $2
 $—
 $—
 $2
QFNA—
 —
 —
 —
 —
 —
 —
 —
NAB9
 2
 2
 13
 —
 —
 (3) (3)
Latin America 
2
 1
 3
 6
 (5) 2
 1
 (2)
ESSA16
 —
 1
 17
 10
 1
 1
 12
AMENA1
 —
 1
 2
 (2) —
 (1) (3)
Corporate—
 —
 —
 —
 2
 —
 —
 2
 $24
 $3
 $8
 $35
 $7
 $3
 $(2) $8
 9/8/2018
 12 Weeks Ended 36 Weeks Ended
Selling, general and administrative expenses$35
 $75
Other pension and retiree medical benefits expense—
 4
Total restructuring and impairment charges$35
 $79
After-tax amount$31
 $66
Net income attributable to PepsiCo per common share$0.02
 $0.05
 9/8/2018
 12 Weeks Ended 36 Weeks Ended
FLNA (a)
$(3) $6
QFNA—
 1
PBNA13
 25
LatAm6
 18
ESSA17
 25
AMENA2
 6
Corporate (a)
—
 (2)
 $35
 $79
(a)There were no net charges related to other pension and retiree medical benefits for the 12 weeks ended September 8, 2018. The 12 weeks ended September 9, 2017 includes charges related to other pension and retiree medical benefits of $2 million. Income amounts represent adjustments for changes in estimates of previously recorded amounts.
(b)Income amount for NAB primarily reflects a gain on the sale of property, plant and equipment. Income amount for AMENA represents an adjustment for changes in estimates of previously recorded amounts.
 36 Weeks Ended
 9/8/2018 9/9/2017
 
Severance and Other Employee Costs(a)
 Asset
Impairments		 Other 
Costs		 Total 
Severance and Other Employee 
 
Costs(a)
 Asset Impairments 
Other 
Costs(b)
 Total
FLNA$1
 $3
 $2
 $6
 $6
 $—
 $—
 $6
QFNA1
 —
 —
 1
 —
 —
 —
 —
NAB13
 6
 6
 25
 —
 —
 (1) (1)
Latin America10
 1
 7
 18
 28
 15
 4
 47
ESSA23
 1
 1
 25
 20
 1
 (2) 19
AMENA5
 —
 1
 6
 (2) —
 (5) (7)
Corporate(5) —
 3
 (2) 4
 —
 1
 5
 $48
 $11
 $20
 $79
 $56
 $16
 $(3) $69
 9/8/2018
 12 Weeks Ended 36 Weeks Ended
Severance and other employee costs$24
 $48
Asset impairments3
 11
Other costs8
 20
 $35
 $79
(a)Includes charges related to other pension and retiree medical benefits of $4 million for each of the 36 weeks ended September 8, 2018 and September 9, 2017. Income amounts represent adjustments for changes in estimates of previously recorded amounts.
(b)Income amounts primarily reflect gains on the sales of property, plant and equipment.
Since the inception of the 2014Other Productivity Plan, we incurred restructuring charges of $1,113 million:
 2014 Productivity Plan Costs to Date
 Severance and Other Employee Costs 
Asset
Impairments
 Other Costs Total
FLNA$132
 $12
 $25
 $169
QFNA27
 —
 6
 33
NAB162
 75
 89
 326
Latin America119
 30
 21
 170
ESSA150
 42
 60
 252
AMENA28
 6
 16
 50
Corporate57
 —
 56
 113
 $675
 $165
 $273
 $1,113
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A summary of our 2014 Productivity Plan activity for the 36 weeks ended September 8, 2018 is as follows:
 
Severance and
Other Employee Costs
 Asset Impairments Other Costs Total
Liability as of December 30, 2017$212
 $—
 $14
 $226
2018 restructuring charges48
 11
 20
 79
Cash payments(150) —
 (29) (179)
Non-cash charges and translation(10) (11) 2
 (19)
Liability as of September 8, 2018$100
 $—
 $7
 $107
Initiatives
There were no material charges related to other productivity and efficiency initiatives outside the scope of the 2019 and 2014 Productivity Plan.Plans.
We regularly evaluate different productivity initiatives beyond the 2014 Productivity Plan discussedproductivity plans and other initiatives described above.
See additional unaudited information in “Items Affecting Comparability” in Management’s Discussion and Analysis of Financial Condition and Results of Operations.
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Note 4 - Intangible Assets
A summary of our amortizable intangible assets is as follows:
  9/7/2019 12/29/2018
  Gross Accumulated Amortization Net Gross Accumulated Amortization Net
Acquired franchise rights $844
 $(152) $692
 $838
 $(140) $698
Reacquired franchise rights 106
 (105) 1
 106
 (105) 1
Brands 1,300
 (1,047) 253
 1,306
 (1,032) 274
Other identifiable intangibles (a)
 800
 (309) 491
 959
 (288) 671
  $3,050
 $(1,613) $1,437
 $3,209
 $(1,565) $1,644
  9/8/2018 12/30/2017
  Gross Accumulated Amortization Net Gross Accumulated Amortization Net
Acquired franchise rights $846
 $(136) $710
 $858
 $(128) $730
Reacquired franchise rights 106
 (104) 2
 106
 (104) 2
Brands 1,297
 (1,027) 270
 1,322
 (1,026) 296
Other identifiable intangibles 494
 (283) 211
 521
 (281) 240
  $2,743
 $(1,550) $1,193
 $2,807
 $(1,539) $1,268
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The change in the book value of nonamortizable intangible assets is as follows:
 
Balance
12/30/2017
 Translation
and Other		 
Balance
9/8/2018

  
FLNA (a)

 
 
Goodwill$280
 $23
 $303
Brands25
 140
 165

305
 163
 468
QFNA     
Goodwill175
 —
 175
      
NAB     
Goodwill9,854
 (24) 9,830
Reacquired franchise rights7,126
 (39) 7,087
Acquired franchise rights1,525
 (9) 1,516
Brands353
 —
 353

18,858
 (72) 18,786
Latin America     
Goodwill555
 (51) 504
Brands141
 (17) 124

696
 (68) 628
ESSA     
Goodwill3,452
 (330) 3,122
Reacquired franchise rights549
 (45) 504
Acquired franchise rights195
 (31) 164
Brands2,545
 (288) 2,257

6,741
 (694) 6,047
AMENA     
Goodwill428
 (30) 398
Brands111
 (8) 103

539
 (38) 501
      
Total goodwill14,744
 (412) 14,332
Total reacquired franchise rights7,675
 (84) 7,591
Total acquired franchise rights1,720
 (40) 1,680
Total brands3,175
 (173) 3,002

$27,314
 $(709) $26,605

(a)The change infrom December 29, 2018 isto September 7, 2019 primarily relatedreflects revisions to the purchase price allocation for our acquisition of Bare Foods Co.SodaStream.




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The change in the book value of indefinite-lived intangible assets is as follows:
 
Balance
12/29/2018
 Acquisitions/
(Divestitures)		 Translation
and Other		 
Balance
9/7/2019

   
FLNA
   
 
Goodwill$297
 $(3) $4
 $298
Brands161
 —
 1
 162

458
 (3) 5
 460
QFNA       
Goodwill184
 10
 —
 194
Brands25
 (14) —
 11
 209
 (4) —
 205
PBNA (a)
       
Goodwill9,813
 134
 14
 9,961
Reacquired franchise rights7,058
 —
 24
 7,082
Acquired franchise rights1,510
 —
 5
 1,515
Brands353
 322
 (7) 668

18,734
 456
 36
 19,226
LatAm       
Goodwill509
 —
 (17) 492
Brands127
 —
 (6) 121

636
 —
 (23) 613
ESSA (b)
       
Goodwill3,611
 395
 16
 4,022
Reacquired franchise rights497
 —
 (11) 486
Acquired franchise rights161
 —
 (6) 155
Brands4,188
 (149) 40
 4,079

8,457
 246
 39
 8,742
AMENA       
Goodwill394
 (4) (19) 371
Brands101
 —
 (5) 96

495
 (4) (24) 467
        
Total goodwill14,808
 532
 (2) 15,338
Total reacquired franchise rights7,555
 —
 13
 7,568
Total acquired franchise rights1,671
 —
 (1) 1,670
Total brands4,955
 159
 23
 5,137

$28,989
 $691
 $33
 $29,713

(a)The change from December 29, 2018 to September 7, 2019 primarily reflects our acquisition of CytoSport Inc.
(b)The change from December 29, 2018 to September 7, 2019 primarily reflects revisions to the purchase price allocation for our acquisition of SodaStream.
Note 5 - Income Taxes
A reconciliation of unrecognized tax benefits is as follows:
 9/8/2018
 12/30/2017
Balance, beginning of year$2,212
 $1,885
Additions for tax positions related to the current year102
 309
Additions for tax positions from prior years124
 86
Reductions for tax positions from prior years(734) (51)
Settlement payments(229) (4)
Statutes of limitations expiration(28) (33)
Translation and other(10) 20
Balance, end of period$1,437
 $2,212
For the 12 weeks ended September 8, 2018, we recognized a non-cash tax benefit of $364 million ($0.26 per share) resulting from the conclusion of certain international tax audits. In the second quarter of 2018, we reached an agreement with the Internal Revenue Service (IRS) resolving all open matters related to the audits of taxable years 2012 and 2013. The conclusion of certain international tax audits and the resolution with the IRS, collectively, resulted in a non-cash tax benefit totaling $678 million ($0.48 per share) for the 36 weeks ended September 8, 2018.
Tax Cuts and Jobs Act
During the fourth quarter of 2017, the TCJ Act was enacted in the United States. Among its many provisions, the TCJ Act imposed a mandatory one-time transition tax on undistributed international earnings and reduced the U.S. corporate income tax rate from 35% to 21%, effective January 1, 2018. As
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The U.S. Securities and Exchange Commission previously issued guidance related to the TCJ Act which allowed recording of provisional tax expense using a result ofmeasurement period, not to exceed one year, when information necessary to complete the enactmentaccounting for the effects of the TCJ Act we recognized a provisional netwas not available. We elected to apply the measurement period provisions of this guidance to certain income tax expenseeffects of $2.5 billionthe TCJ Act when it became effective in the fourth quarter of 2017. SeeThe provisional measurement period ended in the fourth quarter of 2018. As a result, we recognized a net tax benefit of $28 million ($0.02 per share) for the fiscal year ended December 29, 2018. We recognized provisional transition tax expense of $76 million ($0.05 per share) recorded in the 12 weeks ended September 8, 2018 and $854 million ($0.60 per share) recorded in the 36 weeks ended September 8, 2018.
While our accounting for the recorded impact of the TCJ Actas of December 29, 2018 was deemed to be complete, this amount was based on prevailing regulations and available information as of December 29, 2018, and additional guidance issued by the Internal Revenue Service (IRS) impacted, and may continue to impact, our recorded amounts after December 29, 2018.
In the 36 weeks ended September 7, 2019, we recognized tax benefits totaling $29 million ($0.02 per share) in connection with the TCJ Act, including the impact of additional guidance issued by the IRS in the first quarter of 2019.
For further information and discussion of the impact of the TCJ Act, refer to Note 5 to our consolidated financial statements in our 20172018 Form 10-K for further information10-K.
Other Tax Matters
On May 19, 2019, a public referendum held in Switzerland passed the Federal Act on this provisional net tax expense.
ForTax Reform and AHV Financing (TRAF), effective January 1, 2020. Certain provisions of the TRAF were enacted in the third quarter of 2019, resulting in adjustments to our deferred taxes. In the 12 and 36 weeks ended September 7, 2019, we recorded net tax benefits of $45 million and $33 million, respectively, related to the impact of the TRAF. Enactment of the TRAF provisions subsequent to our third quarter of 2019 is expected to result in adjustments to our financial statements and related disclosures in future periods. The future impact of the TRAF cannot currently be reasonably estimated; we will continue to monitor and assess the impact the TRAF may have on our business and financial results.
In the 12 weeks endedSeptember 8, 2018, we recognized additional provisional transitiona non-cash tax expensebenefit of $76$364 million ($0.05 ($0.26 per share) reflecting the TCJ Act impact onresulting from the conclusion of certain international tax audits, as discussed above. Foraudits. In the 36 weeks ended September 8, 2018, we recognized additional provisional transition tax expense of $854 million ($0.60 per share) reflecting the impact of additional transition tax guidance issued by the IRS through the thirdsecond quarter of 2018, we reached an agreement with the TCJ Act impact onIRS resolving all open matters related to the audits of taxable years 2012 and 2013. The conclusion of certain international tax audits and the resolution with the IRS, of all open matters related to the audits of taxable years 2012 and 2013, as discussed above, as well as the impact of actions taken by states within the United States that adopted the TCJ Act. These amounts werecollectively, resulted in addition to the provisional netnon-cash tax expense of $2.5 billion recognizedbenefits totaling $678 million ($0.48 per share) in the fourth quarter of 2017.
The TCJ Act also created a new requirement that certain income earned by foreign subsidiaries, known as global intangible low-tax income (GILTI), must be included in the gross income of their U.S. shareholder. The FASB allows an accounting policy election of either recognizing deferred taxes for temporary differences expected to reverse as GILTI in future years or recognizing such taxes as a current-period expense when incurred. During the first quarter of 2018, we elected to treat the tax effect of GILTI as a current-period expense when incurred.
The components of the provisional net tax expense recorded in 2017 and through the 36 weeks endedSeptember 8, 2018 were based on currently available information and additional information needs to be prepared, obtained and/or analyzed to determine the final amounts. The provisional tax expense for the mandatory repatriation of undistributed international earnings will require further analysis of certain foreign
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exchange gains or losses, substantiation of foreign tax credits, as well as estimated cash and cash equivalents as of November 30, 2018, the tax year-end of our foreign subsidiaries. The provisional tax benefit for the remeasurement of deferred taxes will require additional information necessary for the preparation of our U.S. federal tax return, and further analysis and interpretation of certain provisions of the TCJ Act impacting deferred taxes, for example 100% expensing of qualified assets, could impact our deferred tax balance as of December 30, 2017.
Tax effects for these items will be recorded as discrete adjustments to our income tax provision, once complete. We elected to adopt the guidance issued by the Securities and Exchange Commission that allows for a measurement period, not to exceed one year after the enactment date of the TCJ Act, to finalize the recording of the related tax impacts. We currently expect to finalize and record any resulting adjustments by the end of 2018.
The recorded impact of the TCJ Act is provisional and the final amount may differ, possibly materially, due to, among other things, changes in estimates, interpretations and assumptions we have made, changes in IRS interpretations, the issuance of new guidance, legislative actions, changes in accounting standards or related interpretations in response to the TCJ Act and future actions by states within the United States that have not currently adopted the TCJ Act.
For further unaudited information and discussion of the potential impact of the TCJ Act, refer to “Item 1A. Risk Factors” and Note 5 to our consolidated financial statements in our 2017 Form 10-K and “Our Critical Accounting Policies,” “Our Business Risks” and “Our Liquidity and Capital Resources” in Management’s Discussion and Analysis of Financial Condition and Results of Operations in this Form 10-Q. .
Note 6 - Share-Based Compensation
The following table summarizes our total share-based compensation expense:
 12 Weeks Ended 36 Weeks Ended
 9/7/2019
 9/8/2018
 9/7/2019
 9/8/2018
Share-based compensation expense - equity awards$51
 $57
 $169
 $203
Share-based compensation expense - liability awards3
 2
 7
 4
Restructuring charges—
 (1) 1
 1
Total$54
 $58
 $177
 $208
  12 Weeks Ended 36 Weeks Ended
  9/8/2018
 9/9/2017
 9/8/2018
 9/9/2017
Share-based compensation expense - equity awards $57
 $63
 $203
 $206
Share-based compensation expense - liability awards 2
 3
 4
 10
Restructuring and impairment charges (1) 1
 1
 3
Total $58
 $67
 $208
 $219

For the 12 weeks ended September 8, 20187, 2019 and September 9, 2017,8, 2018, our grants of stock options, RSUs, PSUs and long-term cash awards were nominal.
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The following table summarizes share-based awards granted under the terms of the PepsiCo, Inc. Long-Term Incentive Plan:
36 Weeks Ended36 Weeks Ended
9/8/2018 9/9/20179/7/2019 9/8/2018
Granted(a)
 Weighted-Average Grant Price 
Granted(a)
 Weighted-Average Grant Price
Granted(a)
 Weighted-Average Grant Price 
Granted(a)
 Weighted-Average Grant Price
Stock options1.4
 $108.75
 1.4
 $110.04
1.2
 $117.21
 1.4
 $108.75
RSUs and PSUs2.6
 $108.70
 2.8
 $109.84
2.8
 $116.05
 2.6
 $108.70
(a)In millions. All grant activity is disclosed at target.
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We granted long-term cash awards to certain executive officers and other senior executives with an aggregate target value of $21$16 million and $19$21 million during the 36 weeks ended September 7, 2019 and September 8, 2018, and September 9, 2017, respectively.
Our weighted-average Black-Scholes fair value assumptions are as follows:
 36 Weeks Ended
 9/7/2019
 9/8/2018
Expected life5 years
 5 years
Risk-free interest rate2.5% 2.6%
Expected volatility14% 12%
Expected dividend yield3.1% 2.7%
 36 Weeks Ended
 9/8/2018
 9/9/2017
Expected life5 years
 5 years
Risk-free interest rate2.6% 2.0%
Expected volatility12% 11%
Expected dividend yield2.7% 2.7%
Note 7 - Pension and Retiree Medical Benefits
The components of net periodic benefit cost for pension and retiree medical plans are as follows: 
 12 Weeks Ended
 Pension Retiree Medical
 9/8/2018
 9/9/2017
 9/8/2018
 9/9/2017
 9/8/2018
 9/9/2017
 U.S. International  
Service cost$99
 $93
 $23
 $21
 $7
 $6
Interest cost111
 108
 23
 21
 8
 8
Expected return on plan assets(218) (196) (50) (42) (4) (5)
Amortization of prior service cost/(credits)1
 —
 —
 —
 (5) (5)
Amortization of net losses/(gains)41
 29
 12
 12
 (2) (3)
 34
 34
 8
 12
 4
 1
Settlement loss7
 —
 2
 2
 —
 —
Special termination benefits—
 2
 —
 —
 —
 —
Total$41
 $36
 $10
 $14
 $4
 $1
36 Weeks Ended12 Weeks Ended
Pension Retiree MedicalPension Retiree Medical
9/8/2018
 9/9/2017
 9/8/2018
 9/9/2017
 9/8/2018
 9/9/2017
9/7/2019
 9/8/2018
 9/7/2019
 9/8/2018
 9/7/2019
 9/8/2018
U.S. International  U.S. International  
Service cost$298
 $278
 $63
 $58
 $22
 $19
$87
 $99
 $18
 $23
 $5
 $7
Interest cost333
 324
 63
 57
 24
 25
125
 111
 24
 23
 9
 8
Expected return on plan assets(653) (588) (134) (112) (13) (15)(205) (218) (46) (50) (4) (4)
Amortization of prior service cost/(credits)2
 1
 —
 —
 (14) (17)2
 1
 —
 —
 (4) (5)
Amortization of net losses/(gains)124
 85
 31
 33
 (7) (9)37
 41
 8
 12
 (7) (2)
104
 100
 23
 36
 12
 3
46
 34
 4
 8
 (1) 4
Settlement loss7
 —
 2
 2
 —
 —
Settlement losses15
 7
 3
 2
 —
 —
Special termination benefits3
 4
 1
 —
 —
 —
5
 —
 —
 —
 —
 —
Total$114
 $104
 $26
 $38
 $12
 $3
$66
 $41
 $7
 $10
 $(1) $4
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 36 Weeks Ended
 Pension Retiree Medical
 9/7/2019
 9/8/2018
 9/7/2019
 9/8/2018
 9/7/2019
 9/8/2018
 U.S. International  
Service cost$263
 $298
 $49
 $63
 $16
 $22
Interest cost376
 333
 64
 63
 25
 24
Expected return on plan assets(617) (653) (124) (134) (12) (13)
Amortization of prior service cost/(credits)7
 2
 —
 —
 (13) (14)
Amortization of net losses/(gains)111
 124
 21
 31
 (19) (7)
 140
 104
 10
 23
 (3) 12
Settlement losses15
 7
 3
 2
 —
 —
Special termination benefits—
 3
 —
 1
 —
 —
Total$155
 $114
 $13
 $26
 $(3) $12

We regularly evaluate opportunities to reduce risk and volatility associated with our pension and retiree medical plans.plans, including the offer of an optional lump sum distribution to certain participants, which may result in settlement charges that would be reflected as an item affecting comparability in future periods. During the first quarter of 2018,36 weeks ended September 7, 2019, we made discretionary contributions of $1.4 billion$150 million to the PepsiCo Employees Retirement Plan A (Plan A) in the United States.States and $17 million to our international plans. During the third quarter of36 weeks ended September 8, 2018, we made discretionary contributions of $1.4 billion to Plan A in the United States, $17 million to our international pension plans and $37 million to fund U.S. retiree medical plan benefits. We made discretionary contributions to our international pension plans of $17 million and $6 million for the 36 weeks ended September 8, 2018 and September 9, 2017, respectively.
Note 8 - Debt Obligations
In the 36 weeks ended September 8, 2018, $2.57, 2019, we issued the following senior notes:
Interest Rate
 Maturity Date 
Amount(a)

 
0.750% March 2027 €500
(b) 
1.125% March 2031 €500
(b) 
2.625% July 2029 $1,000
 
3.375% July 2049 $1,000
 
(a)Represents gross proceeds from issuances of long-term debt excluding debt issuance costs, discounts and premiums.
(b)These notes, issued in euros, were designated as net investment hedges to partially offset the effects of foreign currency on our investments in certain of our foreign subsidiaries.
The net proceeds from the issuances of the above notes were used for general corporate purposes, including the repayment of commercial paper.
In the 36 weeks ended September 7, 2019, $3.0 billion of senior notes matured and were paid.
As of September 8, 2018,7, 2019, we had no commercial paper outstanding.
In the second quarter of 2018,2019, we entered into a new five-year unsecured revolving credit agreement (Five-Year Credit Agreement) which expires on June 4, 2023.3, 2024. The Five-Year Credit Agreement enables us and our borrowing subsidiaries to borrow up to $3.75 billion in U.S. dollars and/or euros, including a $0.75 billion swing line subfacility for euro-denominated borrowings permitted to be borrowed on a same-day basis, subject to customary terms and conditions. We may request that commitments under this agreement be increased up to $4.5 billion.billion (or the equivalent amount in euros). Additionally, we may, once a year, request renewal of the agreement for an additional one-year period.
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Also in the second quarter of 2018,2019, we entered into a new 364-day unsecured revolving credit agreement (364-Day Credit Agreement) which expires on June 3, 2019.1, 2020. The 364-Day Credit Agreement enables us and our borrowing subsidiaries to borrow up to $3.75 billion in U.S. dollars and/or euros, subject to customary terms and conditions. We may request that commitments under this agreement be increased up to $4.5 billion.billion (or the equivalent amount in euros). We may request renewal of this facility for an additional 364-day period or convert any amounts outstanding into a term loan for a period of up to one year, which would mature no later than the anniversary of the then effective termination date. The Five-Year Credit Agreement and the 364-Day Credit Agreement together replaced our $3.75 billion five-year credit agreement and our $3.75 billion 364-day credit agreement, both dated as of June 5, 2017.4, 2018. Funds borrowed under the Five-Year Credit Agreement and the 364-Day Credit Agreement may be used for general corporate purposes. Subject to certain conditions, we may borrow, prepay and reborrow amounts under these agreements. As of September 8, 2018,7, 2019, there were no outstanding borrowings under the Five-Year Credit Agreement or the 364-Day Credit Agreement.
In the fourth quarter of 2019, we paid $1.0 billion to redeem all $1.0 billion outstanding principal amount of our 4.50% senior notes due 2020.
Note 9 - Financial Instruments
We are exposed to market risks arising from adverse changes in:
commodity prices, affecting the cost of our raw materials and energy;
foreign exchange rates and currency restrictions; and
interest rates.
There have been no material changes during the 36 weeks ended September 8, 20187, 2019 with respect to our risk management policies or strategies and valuation techniques used in measuring the fair value of the financial assets or liabilities disclosed in Note 9 to our consolidated financial statements in our 20172018 Form 10-K.
The notional amounts of our financial instruments used to hedge the above risks as of September 8, 20187, 2019 and December 30, 201729, 2018 are as follows:
Notional Amounts(a)
Notional Amounts(a)
9/8/2018
 12/30/2017
9/7/2019
 12/29/2018
Commodity$0.9
 $0.9
$1.0
 $1.1
Foreign exchange$1.9
 $1.6
$2.0
 $2.0
Interest rate(b)$11.9
 $14.2
$5.7
 $10.5
Net investment(c)$1.4
 $1.5
$1.9
 $0.9
(a)In billions.
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Ineffectiveness for all derivatives and non-derivatives that qualify for hedge accounting treatment was not material for all periods presented.
(b)The decrease is due to interest rate swap terminations and maturities.
(c)The total notional of our net investment hedge consists of non-derivative debt instruments.
As of September 8, 2018,7, 2019, approximately 36%12% of total debt, after the impact of the related interest rate derivative instruments, was subject to variable rates, compared to approximately 43%29% as of December 30, 2017.29, 2018.
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Fair Value Measurements
The fair values of our financial assets and liabilities as of September 8, 20187, 2019 and December 30, 201729, 2018 are categorized as follows:
 9/8/2018 12/30/2017 9/7/2019 12/29/2018
Fair Value Hierarchy Levels 
Assets(a)
 
Liabilities(a)
 
Assets(a)
 
Liabilities(a)
Fair Value Hierarchy Levels 
Assets(a)
 
Liabilities(a)
 
Assets(a)
 
Liabilities(a)
Available-for-sale debt securities (b)
2 $8,218
 $—
 $14,510
 $—
2 $67
 $—
 $3,658
 $—
Short-term investments (c)
1 $234
 $—
 $228
 $—
1 $220
 $—
 $196
 $—
Prepaid forward contracts (d)
2 $22
 $—
 $27
 $—
2 $17
 $—
 $22
 $—
Deferred compensation (e)
2 $—
 $489
 $—
 $503
2 $—
 $460
 $—
 $450
Derivatives designated as fair value hedging instruments:                
Interest rate (f)
2 $—
 $224
 $24
 $130
2 $—
 $7
 $1
 $108
Derivatives designated as cash flow hedging instruments:                
Foreign exchange (g)
2 $46
 $10
 $15
 $31
2 $26
 $7
 $44
 $14
Interest rate (g)
2 —
 242
 —
 213
2 —
 440
 —
 323
Commodity (h)
1 —
 1
 —
 2
1 —
 15
 —
 1
Commodity (i)
2 2
 —
 2
 —
2 —
 7
 —
 3
 $48
 $253
 $17
 $246
 $26
 $469
 $44
 $341
Derivatives not designated as hedging instruments:                
Foreign exchange (g)
2 $2
 $6
 $10
 $3
2 $2
 $9
 $3
 $10
Commodity (h)
1 1
 16
 —
 19
1 1
 20
 2
 17
Commodity (i)
2 47
 32
 85
 12
2 1
 38
 5
 92
 $50
 $54
 $95
 $34
 $4
 $67
 $10
 $119
Total derivatives at fair value (j)
 $98
 $531
 $136
 $410
 $30
 $543
 $55
 $568
Total $8,572
 $1,020
 $14,901
 $913
 $334
 $1,003
 $3,931
 $1,018
(a)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 September 8, 2018, $6.5 billion and $1.7 billion of7, 2019, these debt securities were classified as cash equivalents and short-term investments, respectively.investments. As of December 30, 2017, $5.8 billion and $8.7 billion of29, 2018, these debt securities were primarily classified as cash equivalents and short-term investments, respectively.equivalents. Unrealized gains and losses on our investments in debt securities as of September 8, 20187, 2019 and December 30, 201729, 2018 were not material. All of ourThe decrease in available-for-sale debt securities havewas due to maturities of one year or less.during the current year.
(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. As of September 7, 2019 and December 29, 2018, the carrying amount of the hedged fixed-rate debt was $3.0 billion and $7.7 billion, respectively, and classified on our balance sheet within short-term and long-term debt obligations. As of September 7, 2019, the cumulative amount of fair value hedging adjustments on discontinued hedges was a $63 million loss, which is being amortized over the remaining life of the related debt obligations.
(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 September 8, 20187, 2019 and December 30, 201729, 2018 were not material. Collateral received or posted against our asset or liability positions was not material. Collateral posted is classified as restricted cash. See Note 12 for further information.
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cash. See Note 13 for further information.
The carrying amounts of our cash and cash equivalents and short-term investments approximate fair value due to their short-term maturity. The fair value of our debt obligations as of September 8,7, 2019and
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December 29, 2018and December 30, 2017 was $35 billion and $41$32 billion, respectively, based upon prices of similar instruments in the marketplace, which are considered Level 2 inputs.
Losses/(gains) on our hedging instruments are categorized as follows:
 12 Weeks Ended
 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)
 9/7/2019
 9/8/2018
 9/7/2019
 9/8/2018
 9/7/2019
 9/8/2018
Foreign exchange$11
 $11
 $(2) $(10) $4
 $(10)
Interest rate(12) (20) 65
 20
 38
 17
Commodity27
 20
 32
 1
 1
 —
Net investment—
 —
 (40) 3
 —
 —
Total$26
 $11
 $55
 $14
 $43
 $7
 12 Weeks Ended
 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)
 9/8/2018
 9/9/2017
 9/8/2018
 9/9/2017
 9/8/2018
 9/9/2017
Foreign exchange$11
 $16
 $(10) $47
 $(10) $5
Interest rate(20) (18) 20
 (102) 17
 (102)
Commodity20
 (32) 1
 2
 —
 —
Net investment—
 —
 3
 118
 —
 —
Total$11
 $(34) $14
 $65
 $7
 $(97)

 36 Weeks Ended
 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)
 9/7/2019
 9/8/2018
 9/7/2019
 9/8/2018
 9/7/2019
 9/8/2018
Foreign exchange$15
 $8
 $16
 $(40) $—
 $6
Interest rate(62) 118
 117
 29
 54
 72
Commodity16
 17
 19
 (1) 3
 2
Net investment—
 —
 (55) (52) —
 —
Total$(31) $143
 $97
 $(64) $57
 $80
 36 Weeks Ended
 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)
 9/8/2018
 9/9/2017
 9/8/2018
 9/9/2017
 9/8/2018
 9/9/2017
Foreign exchange$8
 $4
 $(40) $83
 $6
 $(6)
Interest rate118
 (37) 29
 (156) 72
 (180)
Commodity17
 (12) (1) 3
 2
 3
Net investment—
 —
 (52) 184
 —
 —
Total$143
 $(45) $(64) $114
 $80
 $(183)

(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.
Based on current market conditions, we expect to reclassify net gainslosses of $13$24 million related to our cash flow hedges from accumulated other comprehensive loss into net income during the next 12 months.
See further unaudited information in “Items Affecting Comparability” in Management’s Discussion and Analysis of Financial Condition and Results of Operations.
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Available-for-Sale Equity Securities
In the second quarter of 2017, we recognized a pre-tax gain of $95 million ($85 million after-tax or $0.06 per share), net of discount and fees, associated with the sale of our minority stake in Britvic. This gain was recorded in our ESSA segment in selling, general and administrative expenses.
Note 10 - Net Income Attributable to PepsiCo per Common Share
The computations of basic and diluted net income attributable to PepsiCo per common share are as follows:
 12 Weeks Ended
 9/7/2019 9/8/2018
 Income 
Shares(a)
 Income 
Shares(a)
Basic net income attributable to PepsiCo per common share$1.50
   $1.77
  
Net income available for PepsiCo common shareholders$2,100
 1,397
 $2,498
 1,414
Dilutive securities:       
Stock options, RSUs, PSUs and Other—
 8
 —
 10
Diluted$2,100
 1,405
 $2,498
 1,424
Diluted net income attributable to PepsiCo per common share$1.49
   $1.75
  
 12 Weeks Ended
 9/8/2018 9/9/2017
 Income 
Shares(a)
 Income 
Shares(a)
Net income attributable to PepsiCo$2,498
   $2,144
  
Preferred shares:       
Redemption premium—
   (1)  
Net income available for PepsiCo common shareholders$2,498
 1,414
 $2,143
 1,425
Basic net income attributable to PepsiCo per common share$1.77
   $1.50
  
Net income available for PepsiCo common shareholders$2,498
 1,414
 $2,143
 1,425
Dilutive securities:       
Stock options, RSUs, PSUs, PEPunits and Other—
 10
 —
 12
Employee stock ownership plan (ESOP) convertible preferred stock—
 —
 1
 1
Diluted$2,498
 1,424
 $2,144
 1,438
Diluted net income attributable to PepsiCo per common share$1.75
   $1.49
  

 36 Weeks Ended
 9/7/2019 9/8/2018
 Income 
Shares(a)
 Income 
Shares(a)
Net income attributable to PepsiCo$5,548
   $5,661
  
Preferred stock: (b)
       
Redemption premium—
   (2)  
Net income available for PepsiCo common shareholders$5,548
 1,401
 $5,659
 1,417
Basic net income attributable to PepsiCo per common share$3.96
   $3.99
  
Net income available for PepsiCo common shareholders$5,548
 1,401
 $5,659
 1,417
Dilutive securities:       
Stock options, RSUs, PSUs and Other—
 8
 —
 10
Employee stock ownership plan convertible preferred stock—
 —
 2
 —
Diluted$5,548
 1,409
 $5,661
 1,427
Diluted net income attributable to PepsiCo per common share$3.94
   $3.97
  
 36 Weeks Ended
 9/8/2018 9/9/2017
 Income 
Shares(a)
 Income 
Shares(a)
Net income attributable to PepsiCo$5,661
   $5,567
  
Preferred shares:       
Redemption premium(2)   (3)  
Net income available for PepsiCo common shareholders$5,659
 1,417
 $5,564
 1,427
Basic net income attributable to PepsiCo per common share$3.99
   $3.90
  
Net income available for PepsiCo common shareholders$5,659
 1,417
 $5,564
 1,427
Dilutive securities:       
Stock options, RSUs, PSUs, PEPunits and Other—
 10
 —
 12
ESOP convertible preferred stock2
 —
 3
 1
Diluted$5,661
 1,427
 $5,567
 1,440
Diluted net income attributable to PepsiCo per common share$3.97
   $3.87
  

(a)Weighted-average common shares outstanding (in millions).
(b)All of the outstanding shares of our convertible preferred stock were converted into common stock on January 26, 2018 and retired for accounting purposes. For further information, refer to Note 11 to our consolidated financial statements in our 2018 Form 10-K.
Out-of-the-money options excluded from the calculation of diluted earnings per common share are as follows:
12 Weeks Ended 36 Weeks Ended12 Weeks Ended 36 Weeks Ended
9/8/2018
 9/9/2017
 9/8/2018
 9/9/2017
9/7/2019
 9/8/2018
 9/7/2019
 9/8/2018
Out-of-the-money options (a)
0.1
 —
 1.0
 0.5
—
 0.1
 0.4
 1.0
Average exercise price per option$115.75
 $—
 $109.63
 $109.69
$—
 $115.75
 $115.98
 $109.63
(a)In millions.
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Note 11 - Preferred Stock
On January 26, 2018, all of the outstanding shares of our convertible preferred stock were converted into an aggregate of 550,102 shares of our common stock at the conversion ratio set forth in Exhibit A to our amended and restated articles of incorporation. As a result, there were no shares of our convertible preferred stock outstanding as of January 26, 2018, and our convertible preferred stock is retired for accounting purposes.
Activities associated with our preferred stock are included in the equity statement.
Note 1211 - Accumulated Other Comprehensive Loss Attributable to PepsiCo
The changes in the balances of each component of accumulated other comprehensive loss attributable to PepsiCo are as follows:
Currency Translation Adjustment Cash Flow Hedges Pension and Retiree Medical Available-For-Sale Securities Other Accumulated Other Comprehensive Loss Attributable to PepsiCoCurrency 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 30, 2017 (a)
$(10,277) $47
 $(2,804) $(4) $(19) $(13,057)
Balance as of December 29, 2018 (a)
$(11,918) $87
 $(3,271) $2
 $(19) $(15,119)
Other comprehensive (loss)/income
before reclassifications (b)
288
 93
 (13) (2) —
 366
475
 (20) (16) —
 —
 439
Amounts reclassified from accumulated other comprehensive loss��
 (55) 43
 —
 —
 (12)—
 (15) 34
 —
 —
 19
Net other comprehensive (loss)/income288
 38
 30
 (2) —
 354
475
 (35) 18
 —
 —
 458
Tax amounts2
 (10) (6) —
 —
 (14)(2) 8
 (1) —
 —
 5
Balance as of March 24, 2018 (a)
(9,987) 75
 (2,780) (6) (19) (12,717)
Balance as of March 23, 2019 (a)
$(11,445) $60
 $(3,254) $2
 $(19) $(14,656)
Other comprehensive (loss)/income
before reclassifications (c)
(953) (70) 28
 4
 —
 (991)(365) (37) 16
 1
 —
 (385)
Amounts reclassified from accumulated other comprehensive loss—
 128
 46
 —
 —
 174
—
 29
 37
 —
 —
 66
Net other comprehensive (loss)/income(953) 58
 74
 4
 —
 (817)(365) (8) 53
 1
 —
 (319)
Tax amounts(18) (10) (18) —
 —
 (46)—
 2
 (11) —
 —
 (9)
Balance as of June 16, 2018 (a)
(10,958) 123
 (2,724) (2) (19) (13,580)
Balance as of June 15, 2019 (a)
$(11,810) $54
 $(3,212) $3
 $(19) $(14,984)
Other comprehensive (loss)/income before reclassifications (d)
(730) (11) 16
 2
 —
 (723)(149) (95) 19
 (1) —
 (226)
Amounts reclassified from accumulated other comprehensive loss—
 7
 56
 —
 —
 63
—
 43
 54
 —
 —
 97
Net other comprehensive (loss)/income(730) (4) 72
 2
 —
 (660)(149) (52) 73
 (1) —
 (129)
Tax amounts2
 3
 (18) —
 —
 (13)(10) 14
 (17) —
 —
 (13)
Balance as of September 8, 2018 (a)
$(11,686) $122
 $(2,670) $—
 $(19) $(14,253)
Balance as of September 7, 2019 (a)
$(11,969) $16
 $(3,156) $2
 $(19) $(15,126)
(a)Pension and retiree medical amounts are net of taxes of $1,466 million as of December 29, 2018, $1,465 million as of March 23, 2019, $1,454 million as of June 15, 2019 and $1,437 million as of September 7, 2019.
(b)Currency translation adjustment primarily reflects appreciation of the Russian ruble, Mexican peso and Pound sterling.
(c)Currency translation adjustment primarily reflects depreciation of the euro, Mexican peso and Swiss franc.
(d)Currency translation adjustment primarily reflects depreciation of the Pound sterling, Russian ruble and Mexican peso.
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 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 30, 2017 (a)
$(10,277) $47
 $(2,804) $(4) $(19) $(13,057)
Other comprehensive (loss)/income before reclassifications (b)
288
 93
 (13) (2) —
 366
Amounts reclassified from accumulated other comprehensive loss—
 (55) 43
 —
 —
 (12)
Net other comprehensive (loss)/income288
 38
 30
 (2) —
 354
Tax amounts2
 (10) (6) —
 —
 (14)
Balance as of March 24, 2018 (a)
$(9,987) $75
 $(2,780) $(6) $(19) $(12,717)
Other comprehensive (loss)/income before reclassifications (c)
(953) (70) 28
 4
 —
 (991)
Amounts reclassified from accumulated other comprehensive loss—
 128
 46
 —
 —
 174
Net other comprehensive (loss)/income(953) 58
 74
 4
 —
 (817)
Tax amounts(18) (10) (18) —
 —
 (46)
Balance as of June 16, 2018 (a)
$(10,958) $123
 $(2,724) $(2) $(19) $(13,580)
Other comprehensive (loss)/income before reclassifications (d)
(730) (11) 16
 2
 —
 (723)
Amounts reclassified from accumulated other comprehensive loss—
 7
 56
 —
 —
 63
Net other comprehensive (loss)/income(730) (4) 72
 2
 —
 (660)
Tax amounts2
 3
 (18) —
 —
 (13)
Balance as of September 8, 2018 (a)
$(11,686) $122
 $(2,670) $—
 $(19) $(14,253)

(a)Pension and retiree medical amounts are net of taxes of $1,338 million as of December 30, 2017, $1,332 million as of March 24, 2018, $1,314 million as of June 16, 2018 and $1,296 million as of September 8, 2018.
(b)Currency translation adjustment primarily reflects the appreciation inof the Russian ruble and Mexican peso.
(c)Currency translation adjustment primarily reflects the depreciation inof the Russian ruble, Brazilian real and Mexican peso.
(d)Currency translation adjustment primarily reflects the depreciation inof the Russian ruble, Turkish lira and Pound sterling.
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 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 31, 2016 (a)
$(11,386) $83
 $(2,645) $64
 $(35) $(13,919)
Other comprehensive (loss)/income
    before reclassifications (b)
513
 (3) (14) 9
 —
 505
Amounts reclassified from accumulated other comprehensive loss—
 (33) 28
 —
 —
 (5)
Net other comprehensive (loss)/income513
 (36) 14
 9
 —
 500
Tax amounts4
 9
 (5) (5) —
 3
Balance as of March 25, 2017 (a)
(10,869) 56
 (2,636) 68
 (35) (13,416)
Other comprehensive (loss)/income
    before reclassifications (c)
297
 20
 (27) 18
 —
 308
Amounts reclassified from accumulated other comprehensive loss (d)
—
 (53) 32
 (99) —
 (120)
Net other comprehensive (loss)/income297
 (33) 5
 (81) —
 188
Tax amounts21
 9
 (3) 11
 16
 54
Balance as of June 17, 2017 (a)
(10,551) 32
 (2,634) (2) (19) (13,174)
Other comprehensive (loss)/income before reclassifications (e)
277
 53
 (20) 2
 —
 312
Amounts reclassified from accumulated other comprehensive loss—
 (97) 35
 —
 —
 (62)
Net other comprehensive (loss)/income277
 (44) 15
 2
 —
 250
Tax amounts43
 12
 (6) —
 —
 49
Balance as of September 9, 2017 (a)
$(10,231) $—
 $(2,625) $—
 $(19) $(12,875)
(a)Pension and retiree medical amounts are net of taxes of $1,280 million as of December 31, 2016, $1,275 million as of March 25, 2017, $1,272 million as of June 17, 2017 and $1,266 million as of September 9, 2017.
(b)Currency translation adjustment primarily reflects the appreciation in the Russian ruble, Egyptian pound and Australian dollar.
(c)Currency translation adjustment primarily reflects the appreciation in the euro and Russian ruble.
(d)Available-for-sale securities reflect a reclassification associated with the sale of our minority stake in Britvic.
(e)Currency translation adjustment primarily reflects the appreciation in the Canadian dollar and euro.
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The reclassifications from accumulated other comprehensive loss to the income statement are summarized as follows:
  12 Weeks Ended 36 Weeks Ended  
  9/7/2019
 9/8/2018
 9/7/2019
 9/8/2018
 Affected Line Item in the Income Statement
Cash flow hedges:          
Foreign exchange contracts $—
 $(1) $1
 $(1) Net revenue
Foreign exchange contracts 4
 (9) (1) 7
 Cost of sales
Interest rate derivatives 38
 17
 54
 72
 Interest expense
Commodity contracts —
 1
 2
 4
 Cost of sales
Commodity contracts 1
 (1) 1
 (2) Selling, general and administrative expenses
Net losses before tax 43
 7
 57
 80
  
Tax amounts (11) (3) (13) (20)  
Net losses after tax $32
 $4
 $44
 $60
  
           
Pension and retiree medical items:          
Amortization of prior service credits $(2) $(4) $(6) $(12) Other pension and retiree medical benefits income
Amortization of net losses 38
 51
 113
 148
 Other pension and retiree medical benefits income
Settlement losses 18
 9
 18
 9
 Other pension and retiree medical benefits income
Net losses before tax 54
 56
 125
 145
  
Tax amounts (12) (12) (27) (32)  
Net losses after tax $42
 $44
 $98
 $113
  
           
Total net losses reclassified, net of tax $74
 $48
 $142
 $173
  
  12 Weeks Ended 36 Weeks Ended  
  9/8/2018
 9/9/2017
 9/8/2018
 9/9/2017
 Affected Line Item in the Income Statement
Cash flow hedges:          
    Foreign exchange contracts $(1) $—
 $(1) $—
 Net revenue
    Foreign exchange contracts (9) 5
 7
 (6) Cost of sales
    Interest rate derivatives 17
 (102) 72
 (180) Interest expense
    Commodity contracts 1
 —
 4
 4
 Cost of sales
    Commodity contracts (1) —
 (2) (1) Selling, general and administrative expenses
    Net losses/(gains) before tax 7
 (97) 80
 (183)  
    Tax amounts (3) 37
 (20) 67
  
    Net losses/(gains) after tax $4
 $(60) $60
 $(116)  
           
Pension and retiree medical items:          
    Amortization of prior service credits $(4) $(5) $(12) $(16) Other pension and retiree medical benefits income
    Amortization of net losses 51
 38
 148
 109
 Other pension and retiree medical benefits income
    Settlement losses 9
 2
 9
 2
 Other pension and retiree medical benefits income
    Net losses before tax 56
 35
 145
 95
  
    Tax amounts (12) (10) (32) (28)  
    Net losses after tax $44
 $25
 $113
 $67
  
           
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, net of tax $48
 $(35) $173
 $(138)  

Note 1312 - Restricted Cash
The following table provides a reconciliation of cash and cash equivalents and restricted cash as reported within the balance sheet to the same items as reported in the cash flow statement.
 9/7/2019
 12/29/2018
Cash and cash equivalents$5,494
 $8,721
Restricted cash (a)
127
 1,997
Restricted cash included in other assets (b)
86
 51
Total cash and cash equivalents and restricted cash$5,707
 $10,769

(a)Primarily represents consideration held by our paying agent in connection with our acquisition of SodaStream.
(b)Primarily relates to collateral posted against our derivative asset or liability positions.
 9/8/2018
 12/30/2017
Cash and cash equivalents$11,991
 $10,610
Restricted cash included in other assets52
 47
Total cash and cash equivalents and restricted cash$12,043
 $10,657
Restricted cash included in other assets primarily relates to collateral posted against our derivative asset or liability positions.
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Note 13 - Leases
Lessee
We determine whether an arrangement is a lease at inception. We have operating leases for plants, warehouses, distribution centers, storage facilities, offices and other facilities, as well as machinery and equipment, including fleet. Our leases have remaining lease terms of one year to 20 years, some of which include options to extend the lease term for up to five years, and some of which include options to terminate the lease within one year. We consider these options in determining the lease term used to establish our right-of-use assets and lease liabilities. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.
As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.
We have lease agreements that contain both lease and non-lease components. For real estate leases, we account for lease components together with non-lease components (e.g., common-area maintenance).
Components of lease cost are as follows:
 9/7/2019
 12 Weeks Ended
 36 Weeks Ended
Operating lease cost (a)
$115
 $306
Variable lease cost (b)
$29
 $71
Short-term lease cost (c)
$83
 $260
(a)Includes right-of-use asset amortization of $101 million and $269 million for the 12 and 36 weeks ended September 7, 2019, respectively.
(b)Primarily related to adjustments for inflation, common-area maintenance and property tax.
(c)Not recorded on our balance sheet.
Supplemental cash flow information and non-cash activity related to our operating leases are as follows:
 9/7/2019
 36 Weeks Ended
Operating cash flow information: 
Cash paid for amounts included in the measurement of lease liabilities$326
Non-cash activity: 
Right-of-use assets obtained in exchange for lease obligations$304

Supplemental balance sheet information related to our operating leases is as follows:
  Balance Sheet Classification 9/7/2019
Right-of-use assets Other assets $1,499
Current lease liabilities Accounts payable and other current liabilities $412
Non-current lease liabilities Other liabilities $1,081

Weighted-average remaining lease term and discount rate for our operating leases are as follows:
9/7/2019
Weighted-average remaining lease term6 years
Weighted-average discount rate4%

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Maturities of lease liabilities by fiscal year for our operating leases are as follows:
2019 (a)
$146
2020450
2021336
2022247
2023155
2024 and beyond360
Total lease payments1,694
Less: Imputed interest(201)
Present value of lease liabilities$1,493
(a)Excluding the 36 weeks ended September 7, 2019.
As of December 29, 2018, minimum lease payments under non-cancelable operating leases by period were expected to be as follows:
2019$459
2020406
2021294
2022210
2023161
2024 and beyond310
Total$1,840

A summary of rent expense for the fiscal years ended December 29, 2018 and December 30, 2017 is as follows:
 2018 2017
Rent expense$771
 $742

Lessor
We have various arrangements for certain foodservice and vending equipment under which we are the lessor. These leases meet the criteria for operating lease classification. Lease income associated with these leases is not material.
Note 14 - Acquisitions &and Divestitures
Acquisition of SodaStream InternationalPioneer Food Group Ltd. (SodaStream)(Pioneer Foods)
On August 20, 2018,July 19, 2019, we entered into an agreement under which we willto acquire all of the outstanding shares of Pioneer Foods for 110.00 South African rand per share in cash, in a transaction valued at approximately $1.7 billion.
The transaction is subject to a Pioneer Foods shareholder vote, certain regulatory approvals and other customary conditions, and closing is expected by the first quarter of 2020.
Acquisition of SodaStream International Ltd.
On December 5, 2018, we acquired all of the outstanding shares of SodaStream, a manufacturer and distributor of sparkling water makers, for $144.00 per share in cash, in a transaction valued at approximately $3.3 billion. The total consideration transferred was approximately $3.3 billion (or $3.2 billion.billion, net of cash and cash equivalents acquired).
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We accounted for the transaction as a business combination. We recognized and measured the identifiable assets acquired and liabilities assumed at their estimated fair values on the date of acquisition. The preliminary estimates of the fair value of the identifiable assets acquired and liabilities assumed as of the acquisition has been unanimously approved bydate include goodwill and other intangible assets of $3.0 billion and property, plant and equipment of $0.2 billion, all of which are recorded in our ESSA segment. The preliminary estimates of the Boardsfair value of Directors of both companies. The transaction isidentifiable assets acquired and liabilities assumed are subject to a SodaStream shareholder vote, certain regulatory approvals and other customary conditions, and is currently expectedrevisions, which may result in adjustments to close by Januarythe preliminary values discussed above as valuations are finalized. We expect to finalize these amounts in the fourth quarter of 2019.
Refranchising in Thailand
During the second quarter of 2018, we refranchised our beverage business in Thailand by selling a controlling interest in our Thailand bottling operations to form a joint venture, where we now have an alliance formed with Suntory Beverage & Food Asia Pte. Ltd. (Suntory). The alliance serves as the franchise bottler for both PepsiCo and Suntory.equity method investment. We recorded a pre-tax gain of $144 million ($126 million after-tax or $0.09 per share) in selling, general and administrative expenses in our AMENA segment in the second quarter of 2018 as a result of this transaction.
Refranchising in Czech Republic, Hungary, and Slovakia (CHS)
During the first quarter of 2018, we entered into an agreement to refranchise our entire beverage bottling operations and snack distribution operations in CHS (included within our ESSA segment). The transaction is currently expected to be completed in the fourth quarter of 2018.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
FINANCIAL REVIEW
Our discussion and analysis is intended to help the reader understand our results of operations and financial condition and is provided as an addition to, and should be read in connection with, our condensed consolidated financial statements and the accompanying notes. Also refer to Note 1 of our condensed consolidated financial statements. Unless otherwise noted, tabular dollars are presented in millions, except per share amounts. All per share amounts reflect common stock per share amounts, assume dilution unless otherwise noted, and are based on unrounded amounts. Percentage changes are based on unrounded amounts.
Our Critical Accounting Policies
The critical accounting policies below should be read in conjunction with those outlined in our 20172018 Form 10-K.
Revenue Recognition and Total Marketplace Spending
We recognize revenue when our performance obligation is satisfied. Our primary performance obligation (the distribution and sales of beverage products and food and snack products) is satisfied upon the shipment or delivery of products to our customers, which is also when control is transferred. The transfer of control of products to our customers is typically based on written sales terms that do not allow for a right of return.
We offer sales incentives and discounts through various programs to customers and consumers. Total marketplace spending includes sales incentives, discounts, advertising and other marketing activities. Sales incentives and discounts are primarily accounted for as a reduction of revenue. A number of our sales incentives, such as bottler funding to independent bottlers and customer volume rebates, are based on annual targets, and accruals are established during the year for the expected payout.
These accruals are based on contract terms and our historical experience with similar programs and require management’smanagement judgment with respect to estimating customer participation and performance levels. Differences between estimated expense and actual incentive costs are normally insignificant and are recognized in earnings in the period such differences are determined. In addition, certain advertising and marketing costs are also based on annual targets and recognized during the year as incurred.
For interim reporting, our policy is to allocate our forecasted full-year sales incentives for most of our programs to each of our interim reporting periods in the same year that benefits from the programs. The allocation methodology is based on our forecasted sales incentives for the full year and the proportion of each interim period’s actual gross revenue or volume, as applicable, to our forecasted annual gross revenue or volume, as applicable. Based on our review of the forecasts at each interim period, any changes in estimates and the related allocation of sales incentives are recognized beginning in the interim period that they are identified. In addition, we apply a similar allocation methodology for interim reporting purposes for certain advertising and other marketing activities.
See Note 1 and Note 2 to our condensed consolidated financial statements for additional information on our revenue recognition and related policies.
Income Taxes
In determining our quarterly provision for income taxes, we use an estimated annual effective tax rate which is based on our expected annual income, statutory tax rates and tax planning opportunities available to us in the various jurisdictions in which we operate. Subsequent recognition, derecognition and measurement of a tax position taken in a previous period are separately recognized in the quarter in which they occur.
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During the fourth quarter of 2017, the TCJ Act was enacted in the United States. Among its many provisions, the TCJ Act imposed a mandatory one-time transition tax on undistributed international earnings and reduced the U.S. corporate income tax rate from 35% to 21%, effective January 1, 2018. As a result of
While our accounting for the enactmentrecorded impact of the TCJ Act we recognized a provisional transition tax expenseas of $76 million ($0.05 per share) for the 12 weeks ended September 8, December 29, 2018 was deemed to be complete, this amount was based on prevailing regulations and available information as of December 29,
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2018, and $854 million ($0.60 per share) foradditional guidance issued by the IRSimpacted, and may continue to impact, our recorded amounts after December 29, 2018.
In the 36 weeks ended September 8, 2018. These amounts7, 2019, we recognized tax benefits totaling$29 million ($0.02 per share) in connection with the TCJ Act, including the impact of additional guidance issued by the IRS in the first quarter of 2019.
On May 19, 2019, a public referendum held in Switzerland passed the TRAF, effective January 1, 2020. Certain provisions of the TRAF were enacted in additionthe third quarter of 2019, resulting in adjustments to our deferred taxes. In the 12 and 36 weeks ended September 7, 2019, we recorded net tax benefits of $45 million and $33 million, respectively, related to the provisional net tax expenseimpact of $2.5 billion recognized in the fourthTRAF. Enactment of the TRAF provisions subsequent to our third quarter of 2017. 2019 is expected to result in adjustments to our financial statements and related disclosures in future periods. The future impact of the TRAF cannot currently be reasonably estimated; we will continue to monitor and assess the impact the TRAF may have on our business and financial results.
See Note 5 to our condensed consolidated financial statements in this Form 10-Q and Note 5 to our consolidated financial statements in our 2017 Form 10-K for further information on our provisional net tax expense.
The recorded impact of the TCJ Act is provisional and the final amount may differ, possibly materially, due to, among other things, changes in estimates, interpretations and assumptions we have made, changes in IRS interpretations, the issuance of new guidance, legislative actions, changes in accounting standards or related interpretations in response to the TCJ Act and future actions by states within the United States that have not currently adopted the TCJ Act.information.
Our Business Risks
This Quarterly Report on Form 10-Q (Form 10-Q) contains statements reflecting our views about our future performance that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (Reform Act). Statements that constitute forward-looking statements within the meaning of the Reform Act are generally identified through the inclusion of words such as “aim,” “anticipate,” “believe,” “drive,” “estimate,” “expect,” “expressed confidence,” “forecast,” “future,” “goal,” “guidance,” “intend,” “may,” “objective,” “outlook,” “plan,” “position,” “potential,” “project,” “seek,” “should,” “strategy,” “target,” “will” or similar statements or variations of such words and other similar expressions. All statements addressing our future operating performance, and statements addressing events and developments that we expect or anticipate will occur in the future, are forward-looking statements within the meaning of the Reform Act. These forward-looking statements are based on currently available information, operating plans and projections about future events and trends. They inherently involve risks and uncertainties that could cause actual results to differ materially from those predicted in any such forward-looking statement. Such risks and uncertainties include, but are not limited to: changes in demand for PepsiCo’s products, as a result of changes in consumer preferences or otherwise; changes in laws related to the use or disposal of plastics or other packaging of PepsiCo’s products; changes in, or failure to comply with, applicable laws and regulations; imposition or proposed imposition of new or increased taxes aimed at PepsiCo’s products; imposition of labeling or warning requirements on PepsiCo’s products; changes in laws related to packaging and disposal of PepsiCo’s products; PepsiCo’s ability to compete effectively; failure to realize anticipated benefits from PepsiCo’s productivity initiatives or operating model; political conditions, civil unrest or other developments and risks in the markets where PepsiCo’s products are made, manufactured, distributed or sold; PepsiCo’s ability to grow its business in developing and emerging markets; uncertain or unfavorable economic conditions in the countries in which PepsiCo operates; the ability to protect information systems against, or effectively respond to, a cybersecurity incident or other disruption; increased costs, disruption of supply or shortages of raw materials and other supplies; business disruptions; product contamination or tampering or issues or concerns with respect to product quality, safety and integrity; damage to PepsiCo’s reputation or brand image; failure to successfully complete, integrate or integratemanage acquisitions and joint ventures into PepsiCo’s existing operations or to complete or manage divestitures or refranchisings; changes in estimates and underlying assumptions regarding future performance that could result in an impairment charge; increase in income tax rates, changes in income tax laws, including as a result of enactment and implementation of the TRAF, or disagreements with tax authorities; failure to realize anticipated benefits from PepsiCo’s productivity initiatives or global operating model; PepsiCo’s ability to recruit, hire or retain key employees or a highly skilled and diverse workforce; loss of, or a significant reduction in sales to, any key customer orcustomer; disruption to the retail landscape, including rapid growth in hard discounters and the e-commerce channel; any downgrade or potential
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downgrade of PepsiCo’s credit ratings; PepsiCo’s ability to implement shared services or utilize information technology systems and networks
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effectively; fluctuations or other changes in exchange rates; climate change or water scarcity, or legal, regulatory or market measures to address climate change or water scarcity; failure to successfully negotiate collective bargaining agreements, or strikes or work stoppages; infringement of intellectual property rights; potential liabilities and costs from litigation, claims, legal or regulatory proceedings, inquiries or investigations; and other factors that may adversely affect the price of PepsiCo’s publicly traded securities and financial performance including those described in “Item 1A. Risk Factors” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Our Business Risks,” included in our 20172018 Form 10-K and in “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Our Business Risks” of this Form 10-Q. Investors are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date they are made. We undertake no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise.
In the 12 weeks ended September 8, 2018,7, 2019, substantially all of our financial results outside of North America reflect the months of June, July and August. In the 36 weeks ended September 8, 2018,7, 2019, substantially all of our financial results outside of North America reflect the months of January through August. In the 36 weeks ended September 8, 2018,7, 2019, our operations outside of the United States generated 42%41% of our consolidated net revenue, with Mexico, Russia, Canada, the United Kingdom and BrazilChina comprising approximately 19% of our consolidated net revenue. As a result, we are exposed to foreign exchange risks in the international markets in which our products are made, manufactured, distributed or sold. In the 12 weeks ended September 8, 2018,7, 2019, unfavorable foreign exchange negatively impactedreduced net revenue growth by 1 percentage point, reflecting declines in the euro, Turkish lira and Pakistani rupee. In the 36 weeks ended September 7, 2019, unfavorable foreign exchange reduced net revenue growth by 2 percentage points, primarily due toreflecting declines in the Russian ruble, euro, Turkish lira, MexicanArgentine peso Brazilian real and Russian ruble. In the 36 weeks ended September 8, 2018, unfavorable foreign exchange had a net nominal impact on net revenue growth due to declines in the Turkish lira and Brazilian real, offset by appreciation in the euro.real. Currency declines against the U.S. dollar which are not offset could adversely impact our future financial results.
In addition, volatile economic, political and social conditions and civil unrest in certain markets in which our products are made, manufactured, distributed or sold, including in Argentina, Brazil, China, India, Mexico, the Middle East, Russia and Turkey, and currency controls or fluctuations in certain of these international markets, continue to, and the threat or imposition of tariffs in or related to these international markets may, result in challenging operating environments. We also continue to monitor the economic and political developments related to the United Kingdom’s pending withdrawal from the European Union, including how the United Kingdom will interact with other European Union countries following its departure, as well as the economic, operating and political environment in Russia and the potential impact for the ESSA segment and our other businesses.
In addition, certainCertain jurisdictions in which our products are made, manufactured, distributed or sold have either imposed, or are considering imposing, new or increased taxes or regulations on the manufacture, distribution or sale of our products or their packaging, ingredients or substances contained in, or attributes of, our products or their packaging, commodities used in the production of our products.products or their packaging or the recyclability or recoverability of our packaging. These taxes and regulations vary in scope and form:form. For example, some taxes apply to all beverages, including non-caloric beverages, while others apply only to beverages with a caloric sweetener (e.g., sugar). Similarly,In addition, some measuresregulations apply a single tax rate per liquid ounceto all products using certain types of packaging (e.g., plastic), while others apply a graduated tax rate depending uponare designed to increase the amountsustainability of added sugar in the beverage,packaging and some apply a flat tax rate on beverages containing a particular substance or ingredient.encourage waste reduction and increased recycling rates.
We sell a wide variety of beverages, foods and snacks in more than 200 countries and territories and the profile of the products we sell, and the amount of revenue attributable to such products and the type of packaging used varies by jurisdiction. Because of this, we cannot predict the scope or form potential taxes, regulations
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or other potential limitations on our products or their packaging may take, and therefore cannot predict the impact of such taxes, regulations or limitations on our financial results. In addition, taxes, regulations and limitations may impact us and our competitors differently. We continue to monitor existing and proposed taxes and regulations in the jurisdictions in which our products are made, manufactured,
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distributed and sold and to consider actions we may take to potentially mitigate the unfavorable impact, if any, of such taxes, regulations or limitations, including advocating alternative measures with respect to the imposition, form and scope of any such taxes, regulations or limitations.
Additionally, our industry has beencontinues to be affected by disruption of the retail landscape, including the rapid growth in sales through e-commerce websites and mobile commerce applications, including through subscription services, the integration of physical and digital operations among retailers and the international expansion of hard discounters. We continue to monitor changes in the retail landscape and to identify actions we may take to build our global e-commerce capabilities, distribute our products effectively through all existing and emerging channels of trade and potentially mitigate any unfavorable impacts on our future results.
The changes arising fromDuring the fourth quarter of 2017, the TCJ Act which was enacted in 2017, are broad and complex and we continue to examine the impactUnited States. While our accounting for the TCJ Act may have on our business and financial results. Among its many provisions, the TCJ Act imposed a mandatory one-time transition tax on undistributed international earnings and reduced the U.S. corporate income tax rate from 35% to 21%. The recorded impact of the TCJ Act is provisionalas of December 29, 2018 was deemed to be complete, this amount was based on prevailing regulations and available information as of December 29, 2018, and additional guidance issued by the final amountIRSimpacted, and may differ from the estimate, possibly materially, duecontinue to among other things, changes in estimates, interpretations and assumptions we have made, changes in IRS interpretations, the issuance of new guidance, legislative actions, changes in accounting standards or related interpretations in response to the TCJ Act and future actions by states within the United States that have not currently adopted the TCJ Act.impact, our recorded amounts after December 29, 2018. For additionalfurther information on the impact of the TCJ Act, see Note 5 to our condensed consolidated financial statements, “Our Critical Accounting Policies” and “Our Liquidity and Capital Resources” in this Form 10-Q, as well as Note 5 to our consolidated financial statements in our 20172018 Form 10-K.
On May 19, 2019, a public referendum held in Switzerland passed theTRAF, effective January 1, 2020. Certain provisions of the TRAF were enacted in the third quarter of 2019, resulting in adjustments to our deferred taxes. In the 12 and 36 weeks ended September 7, 2019, we recorded net tax benefits of $45 million and $33 million, respectively, related to the impact of the TRAF. Enactment of the TRAF provisions subsequent to our third quarter of 2019 is expected to result in adjustments to our financial statements and related disclosures in future periods. The future impact of the TRAF cannot currently be reasonably estimated; we will continue to monitor and assess the impact the TRAF may have on our business and financial results. See Note 5 to our condensed consolidated financial statements for further information.
See Note 9 to our condensed consolidated financial statements in this Form 10-Q for the fair values of our financial instruments as of September 8, 20187, 2019 and December 30, 201729, 2018 and Note 9 to our consolidated financial statements in our 20172018 Form 10-K for a discussion of these items. Cautionary statements included above, and in “Item 1A. Risk Factors” and in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Our Business Risks,” includedRisks” in our 20172018 Form 10-K should be considered when evaluating our trends and future results.
Results of Operations – Consolidated Review
Consolidated Results
Volume
Since our divisions each use different measures of physical unit volume (i.e., kilos, gallons, pounds and case sales), a common servings metric is necessary to reflect our consolidated physical unit volume. Our divisions’ physical volume measures are converted into servings based on U.S. Food and Drug Administration guidelines for single-serving sizes of our products. For the 12 and 36 weeks ended September 8, 2018,7, 2019, total servings increased 3% and 2%, respectively.4%.
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We discuss volume for our beverage businesses on a bottler case sales (BCS) basis in which all beverage volume is converted to an 8-ounce-case metric. Most of our beverage volume is sold by our Company-owned and franchise-owned bottlers, and that portion is based on our bottlers’ sales to retailers and independent distributors. The remainder of our volume is based on our direct shipments to retailers and independent distributors. We report the majoritysubstantially all of our international beverage volume on a monthly calendar basis. The 12 weeks ended September 8, 20187, 2019 include beverage volume outside of North America for the months of June, July and August. The 36 weeks ended September 8, 20187, 2019 include beverage volume outside of North America for the months of January through August. Concentrate shipments and equivalents (CSE) represent our physical beverage volume shipments to independent bottlers, retailers and independent distributors, and is the measure upon which our revenue is based.
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Net Revenue and Operating Profit
12 Weeks Ended 36 Weeks Ended12 Weeks Ended 36 Weeks Ended
9/8/2018
 9/9/2017
 Change 9/8/2018
 9/9/2017
 Change9/7/2019
 9/8/2018
 Change 9/7/2019
 9/8/2018
 Change
Net revenue$16,485
 $16,240
 1.5 % $45,137
 $43,999
 3 %$17,188
 $16,485
 4 % $46,521
 $45,137
 3 %
Operating profit$2,844
 $2,924
(a) 
(3)% $7,679
 $7,706
(a) 
— %$2,855
 $2,844
 — % $7,592
 $7,679
 (1)%
Operating margin17.3% 18.0%
(a) 
(0.7) 17.0% 17.5%
(a) 
(0.5)
Operating profit margin16.6% 17.3% (0.7) 16.3% 17.0% (0.7)
(a)
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 to our condensed consolidated financial statements for additional information.
See “Results of Operations – Division Review” for a tabular presentation and discussion of key drivers of net revenue.
12 Weeks
Operating profit decreased 3%increased slightly and operating profit margin decreased 0.7 percentage points. Operating profit growth was driven by net revenue growth and productivity savings, partially offset by certain operating cost increases, a 4-percentage-point impact of higher commodity costs, and higher advertising and marketing expenses. The operating profit margin decrease primarily reflects certain operating cost increases.
36 Weeks
Operating profit decreased 1% and operating profit margin decreased 0.7 percentage points. Operating profit performance was driven by certain operating cost increases, a 6-percentage-point impact of higher commodity costs, and higher advertising and marketing expenses, and unfavorable foreign exchange translation. Higher commodity costs negatively impacted operating profit performance by 6 percentage points, attributable to inflation in the NAB, Latin America, ESSA, AMENA and QFNA segments. These impacts were partially offset by net revenue growth and planned cost reductions across a number of expense categories. Corporate unallocated expenses (see Note 1 to our condensed consolidated financial statements) increased 32%, primarily due to mark-to-market net impact associated with commodity derivativesproductivity savings.
Higher restructuring and impairment charges (see “Items Affecting Comparability”). Items affecting comparability, primarily mark-to-market net impact included in corporate unallocated expenses, negatively impacted operating profit performance by 3 percentage points.
36 Weeks
Operating profit decreased slightly and operating margin decreased 0.5 percentage points. The operating profit decrease was driven by certain operating cost increases and higher advertising and marketing expenses, as well as higher commodity costs across all divisions which negatively impacted operating profit performance by 5 percentage points. Additionally, a prior-year gain associated withon the salerefranchising of a portion of our minority stakebeverage business in Britvic and a current-year bonus extended to certain U.S. employees in connection with the TCJ ActThailand each negatively impacted operating profit performance by 1 percentage point. These impacts were partially offset by planned cost reductions across a number of expense categories and net revenue growth, as well as a gain on refranchising our beverage business in Thailand in 2018 which positively contributed 2 percentage points to operating profit performance. Corporate unallocated expenses (see Note 1 to our condensed consolidated financial statements) increased 10%, primarily due to mark-to-market net impact associated with commodity derivatives (see “Items Affecting Comparability”) and higher foreign exchange transaction losses. Items affecting comparability, primarily mark-to-market net impact included in corporate unallocated expenses, negatively impacted operating profit performance by 1 percentage point.points.
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Other Consolidated Results
12 Weeks Ended 36 Weeks Ended12 Weeks Ended 36 Weeks Ended 
9/8/2018
 9/9/2017
 Change 9/8/2018
 9/9/2017
 Change9/7/2019
 9/8/2018
 Change 9/7/2019
 9/8/2018
 Change 
Other pension and retiree medical benefits income$74
 $69
(a) 
$5
 $231
 $210
(a) 
$21
$38
 $74
 $(36) $163
 $231
 $(68) 
Net interest expense$(221) $(217) $(4) $(656) $(645) $(11)$(224) $(221) $(3) $(651) $(656) $5
 
Tax rate (b)(a)
7.0% 22.3%   21.5% 22.9%  21.0% 7.0%   21.5% 21.5%   
Net income attributable to PepsiCo$2,498
 $2,144
 16% $5,661
 $5,567
 2%$2,100
 $2,498
 (16)% $5,548
 $5,661
 (2)% 
Net income attributable to PepsiCo per common share – diluted$1.75
 $1.49
 18% $3.97
 $3.87
 3%$1.49
 $1.75
 (15)% $3.94
 $3.97
 (1)% 
Mark-to-market net impact0.02
 (0.01)   0.03
 0.01
  —
 0.02
   (0.03) 0.03
   
Restructuring and impairment charges0.02
 —
   0.05
 0.05
  0.06
 0.02
   0.16
 0.05
   
Provisional net tax expense related to the TCJ Act (b)
0.05
 —
   0.60
 —
  
Tax benefits(0.26) —
   (0.48) —
  
Net income attributable to PepsiCo per common share – diluted, excluding above items (c)
$1.59
(d) 
$1.48
 7% $4.17
 $3.92
(d) 
6%
Inventory fair value adjustments and merger and integration charges—
 —
   0.03
 —
   
Tax (benefits)/net tax expense related to the TCJ Act (a)
—
 0.05
   (0.02) 0.60
   
Tax benefits (a)
—
 (0.26)   —
 (0.48)   
Net income attributable to PepsiCo per common share – diluted, excluding above items (b)
$1.56
(c) 
$1.59
(c) 
(2)% $4.07
(c) 
$4.17
(c) 
(2)% 
Impact of foreign exchange translation    2
     —
    1
     2
 
Growth in net income attributable to PepsiCo per common share – diluted, excluding above items, on a constant currency basis (c)
    9%     6%
Growth in net income attributable to PepsiCo per common share – diluted, excluding above items, on a constant currency basis (b)
    (1)%     (0.5)%
(c) 
(a)
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 to our condensed consolidated financial statements for additional information.
(b)See Note 5 to our condensed consolidated financial statements.statements for further information.
(c)(b)See “Non-GAAP Measures.”
(d)(c)Does not sum due to rounding.
12 Weeks
Other pension and retiree medical benefits income increased $5decreased $36 million, primarily reflecting the impact of the $1.4 billion discretionary pension contributionslower expected return on plan assets due to Plan A in the United States, as well asa lower plan asset balance following the recognition of net asset gains, partially offset by2018 losses, higher amortization of net losses.interest costs and settlement losses in the U.S. pension plans.
Net interest expense increased $4$3 million, reflecting higherlower interest income due to lower average cash balances. This impact was partially offset by lower interest expense due to higher interest rates onlower average debt balances, partially offset by higher interest income due to higher interest rates on average cash balances, as well as higher gains on the market value of investments used to economically hedge a portion of our deferred compensation liability.
The reported tax rate decreased 15.4increased 14.0 percentage points, primarily reflecting the prior-year favorable conclusion of certain international tax audits, which reduced the reported tax rate by 13 percentage points, as well as a lower U.S. corporate income tax rate related to the enactment of the TCJ Act. These impacts were partially offset by the provisional net tax expense related to the TCJ Act, which increased the reported tax rate by 3 percentage points.audits. See Note 5 to our condensed consolidated financial statements for further information.
Net income attributable to PepsiCo increaseddecreased 16% and net income attributable to PepsiCo per common share increased 18%decreased 15%. Items affecting comparability (see “Items Affecting Comparability”) positively contributed 10 percentage points tonegatively impacted both net income attributable to PepsiCo growthperformance and net income attributable to PepsiCo per common share growth.performance by 13 percentage points.
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36 Weeks
Other pension and retiree medical benefits income increased $21decreased $68 million, primarily reflecting the impact of the $1.4 billion discretionary pension contributionslower expected return on plan assets due to Plan A in the United States, as well asa lower plan asset balance following the recognition of net asset gains, partially offset by2018 losses, higher amortization of net losses.interest costs and settlement losses in the U.S. pension plans.
Net interest expense increased $11decreased $5 million, reflecting higherlower interest expense due to higher interest rates onlower average debt balances, as well as lowerhigher gains on the market value of investments used to economically hedge a portion of our deferred compensation liability. These impacts were partially offset by higherlower interest income due to higher interest rates onlower average cash balances.
The reported tax rate decreased 1.4 percentage points,was even with the prior year, primarily reflecting a lower U.S. corporate incomethe prior-year provisional net tax rateexpense related to the enactment of the TCJ Act, as well asoffset by the prior-year impacts of the favorable conclusion of certain international tax audits and the favorable resolution with the IRS of all open matters related to the audits of taxable years 2012 and 2013. The conclusion of certain international tax audits and the resolution with the IRS, collectively, reduced the reported tax rate by 9 percentage points. These impacts were partially offset by the provisional net tax expense related to the TCJ Act, which increased the reported tax rate by 12 percentage points. See Note 5 to our condensed consolidated financial statements for further information.
Net income attributable to PepsiCo increaseddecreased 2% and net income attributable to PepsiCo per common share increased 3%decreased 1%. Items affecting comparability (see “Items Affecting Comparability”) negatively impactedpositively contributed 1.5 percentage points to both net income attributable to PepsiCo growthperformance and net income attributable to PepsiCo per common share growth by 4 percentage points.performance.
Non-GAAP Measures
Certain financial measures contained in this Form 10-Q adjust for the impact of specified items and are not in accordance with U.S. Generally Accepted Accounting Principles (GAAP). We use non-GAAP financial measures internally to make operating and strategic decisions, including the preparation of our annual operating plan, evaluation of our overall business performance and as a factor in determining compensation for certain employees. We believe presenting non-GAAP financial measures in this Form 10-Q provides additional information to facilitate comparison of our historical operating results and trends in our underlying operating results, and provides additional transparency on how we evaluate our business. We also believe presenting these measures in this Form 10-Q allows investors to view our performance using the same measures that we use in evaluating our financial and business performance and trends.
We consider quantitative and qualitative factors in assessing whether to adjust for the impact of items that may be significant or that could affect an understanding of our ongoing financial and business performance or trends. Examples of items for which we may make adjustments include: amounts related to mark-to-market gains or losses (non-cash); charges related to restructuring programs;plans; charges or adjustments related to the enactment of new laws, rules or regulations, such as significant tax law changes; amounts related to the resolution of tax positions; gains or lossestax benefits related to reorganizations of our operations; amounts associated with mergers, acquisitions, divestitures and other structural changes; debt redemptions, cash tender or modifications;exchange offers; pension and retiree medical related items; asset impairments (non-cash); and remeasurements of net monetary assets. See below and “Items Affecting Comparability” for a description of adjustments to our U.S. GAAP financial measures in this Form 10-Q. measures. 
Non-GAAP information should be considered as supplemental in nature and is not meant to be considered in isolation or as a substitute for the related financial information prepared in accordance with U.S. GAAP. In addition, our non-GAAP financial measures may not be the same as or comparable to similar non-GAAP measures presented by other companies.
The following non-GAAP financial measures are contained in this Form 10-Q:
•
cost of sales, gross profit, selling, general and administrative expenses, other pension and retiree
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medical benefits income, provision for income taxes and net income attributable to noncontrolling interests, each adjusted for items affecting comparability;
•
operating profit, adjusted for items affecting comparability, and net income attributable to PepsiCo per common share – diluted, adjusted for items affecting comparability, and the corresponding constant currency growth rates;
organic revenue growth; and
free cash flow.
Cost of sales, gross profit, selling, general and administrative expenses, other pension and retiree
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medical benefits income, provision for income taxes and net income attributable to noncontrolling interests, each adjusted for items affecting comparability;
comparability, operating profit, adjusted for items affecting comparability, and net income attributable to PepsiCo per common share – diluted, adjusted for items affecting comparability, and the corresponding constant currency growth rates;rates
organic revenue; and
free cash flow.
Cost of Sales, Gross Profit, Selling, General and Administrative Expenses, Other Pension and Retiree Medical Benefits Income, Provision for Income Taxes and Noncontrolling Interests, Adjusted for Items Affecting Comparability; Operating Profit, Adjusted for Items Affecting Comparability, and Net Income Attributable to PepsiCo per Common Share – Diluted, Adjusted for Items Affecting Comparability, and the Corresponding Constant Currency Growth Rates
These measures exclude the net impact of mark-to-market gains and losses on centrally managed commodity derivatives that do not qualify for hedge accounting, restructuring and impairment charges related to our 2019 and 2014 Productivity Plan, a provisional Plans, inventory fair value adjustments and merger and integration charges largely associated with our acquisition of SodaStream, tax benefits/net tax expense associatedin connection with the enactment of the TCJ Act and tax benefits.benefits (see “Items Affecting Comparability” for a detailed description of each of these items). We also evaluate performance on operating profit, adjusted for items affecting comparability, and net income attributable to PepsiCo per common share – diluted, adjusted for items affecting comparability, on a constant currency basis, which measure our financial results assuming constant foreign currency exchange rates used for translation based on the rates in effect for the comparable prior-year period. In order to compute our constant currency results, we multiply or divide, as appropriate, our current yearcurrent-year U.S. dollar results by the current yearcurrent-year average foreign exchange rates and then multiply or divide, as appropriate, those amounts by the prior-year average foreign exchange rates. We believe these measures provide useful information in evaluating the results of our business because they exclude items that we believe are not indicative of our ongoing performance.
Organic Revenuerevenue growth
We define organic revenue growth as net revenue growth adjusted for the impact of foreign exchange translation, as well as the impact from acquisitions, divestitures and other structural changes. Additionally, our fiscal 2018 reported results reflect the accounting policy election taken in conjunction with the adoption of the revenue recognition guidance to exclude from net revenue and cost of sales all sales, use, value-added and certain excise taxes assessed by governmental authorities on revenue-producing transactions not already excluded. Our 2018 fiscal year organic revenue growth will exclude the impact of approximately $75 million of these taxes previously recognized in net revenue. See Note 2 to our condensed consolidated financial statements for additional information.
We believe organic revenue provides useful information in evaluating the results of our business because it excludes items that we believe are not indicative of ongoing performance or that we believe impact comparability with the prior year.
See “Organic“Net Revenue and Organic Revenue Growth” in “Results of Operations – Division Review.”Review” for further information.
Free Cash Flowcash flow
We define free cash flow as net cash provided by operating activities less capital spending, plus sales of property, plant and equipment. Since net capital spending is essential to our product innovation initiatives and maintaining our operational capabilities, we believe that it is a recurring and necessary use of cash. As such, we believe investors should also consider net capital spending when evaluating our cash from operating activities. Free cash flow is used by us primarily for financing activities, including debt repayments, dividends and share repurchases. Free cash flow is not a measure of cash available for discretionary expenditures since
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we have certain non-discretionary obligations such as debt service that are not deducted from the measure.
See “Free Cash Flow” in “Our Liquidity and Capital Resources.”Resources” for further information.
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Items Affecting Comparability
Our reported financial results in this Form 10-Q are impacted by the following items in each of the following periods:
12 Weeks Ended 9/8/201812 Weeks Ended 9/7/2019
Cost of sales Gross profit Selling, general and administrative expenses Operating profit 
Provision for income taxes(a)
 Net income attributable to noncontrolling interests Net income attributable to PepsiCoCost of sales Gross profit Selling, general and administrative expenses Operating profit Other pension and retiree medical benefits income 
Provision for income taxes(a)
 Net income attributable to PepsiCo
Reported, GAAP Measure$7,527
 $8,958
 $6,114
 $2,844
 $188
 $11
 $2,498
$7,694
 $9,494
 $6,639
 $2,855
 $38
 $559
 $2,100
Items Affecting Comparability                          
Mark-to-market net impact(31) 31
 2
 29
 6
 —
 23
(13) 13
 9
 4
 —
 1
 3
Restructuring and impairment charges—
 —
 (35) 35
 3
 1
 31
(10) 10
 (83) 93
 5
 16
 82
Provisional net tax expense related to the TCJ Act—
 —
 —
 —
 (76) —
 76
Tax benefit—
 —
 —
 —
 364
 —
 (364)
Inventory fair value adjustments and merger and integration charges—
 —
 (7) 7
 —
 1
 6
Core, Non-GAAP Measure$7,496
 $8,989
 $6,081
 $2,908
 $485
 $12
 $2,264
$7,671
 $9,517
 $6,558
 $2,959
 $43
 $577
 $2,191
12 Weeks Ended 9/9/2017(b)
12 Weeks Ended 9/8/2018
Cost of sales Gross profit Selling, general and administrative expenses Operating profit Other pension and retiree medical benefits income 
Provision for income
taxes(a)
 Net income attributable to PepsiCoCost of sales Gross profit Selling, general and administrative expenses Operating profit 
Provision for income
taxes(a)
 Net income attributable to noncontrolling interests Net income attributable to PepsiCo
Reported, GAAP Measure$7,368
 $8,872
 $5,948
 $2,924
 $69
 $620
 $2,144
$7,527
 $8,958
 $6,114
 $2,844
 $188
 $11
 $2,498
Items Affecting Comparability                          
Mark-to-market net impact1
 (1) 26
 (27) —
 (10) (17)(31) 31
 2
 29
 6
 —
 23
Restructuring and impairment charges—
 —
 (6) 6
 2
 1
 7
—
 —
 (35) 35
 3
 1
 31
Provisional net tax expense related to the TCJ Act—
 —
 —
 —
 (76) —
 76
Tax benefit—
 —
 —
 —
 364
 —
 (364)
Core, Non-GAAP Measure$7,369
 $8,871
 $5,968
 $2,903
 $71
 $611
 $2,134
$7,496
 $8,989
 $6,081
 $2,908
 $485
 $12
 $2,264
 36 Weeks Ended 9/7/2019
 Cost of sales Gross profit Selling, general and administrative expenses Operating profit 
Provision for income taxes(a)
 Net income attributable to noncontrolling interests Net income attributable to PepsiCo
Reported, GAAP Measure$20,786
 $25,735
 $18,143
 $7,592
 $1,529
 $27
 $5,548
Items Affecting Comparability             
Mark-to-market net impact19
 (19) 31
 (50) (12) —
 (38)
Restructuring and impairment charges(100) 100
 (182) 282
 57
 4
 221
Inventory fair value adjustments and merger and integration charges(34) 34
 (12) 46
 8
 —
 38
Tax benefits related to the TCJ Act—
 —
 —
 —
 29
 —
 (29)
Core, Non-GAAP Measure$20,671
 $25,850
 $17,980
 $7,870
 $1,611
 $31
 $5,740
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 36 Weeks Ended 9/8/2018
 Cost of sales Gross profit Selling, general and administrative expenses Operating profit Other pension and retiree medical benefits income 
Provision for income taxes(a)
 Net income attributable to noncontrolling interests Net income attributable to PepsiCo
Reported, GAAP Measure$20,445
 $24,692
 $17,013
 $7,679
 $231
 $1,562
 $31
 $5,661
Items Affecting Comparability               
Mark-to-market net impact(51) 51
 (6) 57
 —
 14
 —
 43
Restructuring and impairment charges—
 —
 (75) 75
 4
 12
 1
 66
Provisional net tax expense related to the TCJ Act—
 —
 —
 —
 —
 (854) —
 854
Tax benefits—
 —
 —
 —
 —
 678
 —
 (678)
Core, Non-GAAP Measure$20,394
 $24,743
 $16,932
 $7,811
 $235
 $1,412
 $32
 $5,946
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36 Weeks Ended 9/7/2017(b)
 Cost of sales Gross profit Selling, general and administrative expenses Operating profit Other pension and retiree medical benefits income 
Provision for income taxes(a)
 Net income attributable to PepsiCo
Reported, GAAP Measure$19,717
 $24,282
 $16,576
 $7,706
 $210
 $1,668
 $5,567
Items Affecting Comparability             
Mark-to-market net impact7
 (7) (20) 13
 —
 2
 11
Restructuring and impairment charges—
 —
 (65) 65
 4
 4
 65
Core, Non-GAAP Measure$19,724
 $24,275
 $16,491
 $7,784
 $214
 $1,674
 $5,643
(a)
Provision for income taxes is the expected tax benefit/charge on the underlying item based on the tax laws and income tax rates applicable to the underlying item in its corresponding tax jurisdiction.
(b)
Reflects the retrospective adoption of guidance requiring the presentation of non-service cost components of net periodic benefit cost below operating profit. The changes described above had no impact on the provision for income taxes or net income attributable to PepsiCo. See Note 2 to our condensed consolidated financial statements for additional information.
Mark-to-Market Net Impact
We centrally manage commodity derivatives on behalf of our divisions. These commodity derivatives include energy, agricultural products energy and metals.Commodity derivatives that do not qualify for hedge accounting treatment are marked to market each period with the resulting gains and losses recorded in corporate unallocated expenses as either cost of sales or selling, general and administrative expenses, depending on the underlying commodity. These gains and losses are subsequently reflected in division results when the divisions recognize the cost of the underlying commodity in operating profit. Therefore, the divisions realize the economic effects of the derivative without experiencing any resulting mark-to-market volatility, which remains in corporate unallocated expenses.
Restructuring and Impairment Charges
To build on the successful implementation of the 20142019 Multi-Year Productivity Plan we expanded and extended the program through the end of 2019 to take advantage of additional opportunities within the initiatives of the 2014 Productivity Plan to further strengthen our beverage, food and snack businesses.
In connection with this program,our 2019 Productivity Plan, we expect to incur pre-tax charges of approximately $2.5 billion, of which we have incurred $420 million to date. We expect to incur pre-tax charges of approximately $200 million for the remainder of 2019, with the balance to be reflected in our fiscal 2020 through 2023 results. These total pre-tax charges are expected to consist of approximately 70% of severance and other employee-related costs, 15% for asset impairments (all non-cash) resulting from plant closures and related actions, and 15% for other costs associated with the implementation of our initiatives. We expect to incur cash expenditures of approximately $1.3$1.6 billion, and $985of which we have incurred $136 million respectively.
The expectedto date. We expect cash expenditures of approximately $150 million for the remainder of 2019, with the balance to be reflected in our fiscal 2020 through 2023 cash flows. We expect to incur the majority of the pre-tax charges and cash expenditures in our fiscal 2019, 2020 and 2021 results.
The total expected plan pre-tax charges are summarizedexpected to be incurred by perioddivision approximately as follows:
 Charges Cash Expenditures 
2013$53
 $—
 
2014357
 175
(b) 
2015169
 165
(b) 
2016160
 95
 
2017295
 113
 
First quarter 201812
 45
(b) 
Second quarter 201832
 88
(b) 
Third quarter 201835
 55
(b) 
 1,113
 736
 
Fourth quarter 2018 (expected)168
 134
 
2019 (expected)24
 115
 
 $1,305
(a) 
$985
 
 FLNA QFNA PBNA LatAm ESSA AMENA Corporate
Expected pre-tax charges10% 3% 35% 12% 25% 13% 2%
(a)This total pre-tax charge is expected to consist of approximately $760 million of severance and other employee-related costs, approximately$185 million for asset impairments (all non-cash) resulting from plant closures and related actions, and approximately $360 million for other costs associated with the implementation of our initiatives, including contract termination costs. This charge is expected to impact
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reportable segments2014 Multi-Year Productivity Plan
We have substantially completed our 2014 Productivity Plan and Corporate approximately as follows: FLNA 14%do not expect to incur material charges in 2019 associated with this plan. The pre-tax charges and cash expenditures approximate the original total plan estimates of $1.3 billion and $960 million, QFNA 3%, NAB 30%, Latin America 15%, ESSA 20%, AMENA 6% and Corporate 12%.respectively.
(b)In the 12 weeks ended March 24, 2018, June 16, 2018 and September 8, 2018, cash expenditures included $6 million, $1 million and $2 million, respectively, reported on our Condensed Consolidated Statement of Cash Flows in pension and retiree medical plan contributions. In 2015 and 2014, cash expenditures included $2 million and $10 million, respectively, reported on our Consolidated Statement of Cash Flows in pension and retiree medical plan contributions.
See Note 3 to our condensed consolidated financial statements in this Form 10-Q, as well as Note 3 to our consolidated financial statements in our 2018 Form 10-K for further information related to our 2019 and 2014 Productivity Plan.Plans.
We regularly evaluate productivity initiatives beyond the productivity planplans and other initiatives discussed above and in Note 3 to our condensed consolidated financial statements.
Provisional Inventory Fair Value Adjustments and Merger and Integration Charges
During the 12 and 36 weeks ended September 7, 2019, we incurred incremental costs of $7 million ($6 million after-tax with a nominal amount per share) in our ESSA segment and $46 million ($38 million after-tax or $0.03 per share), including $45 million in our ESSA segment and $1 million in corporate unallocated expenses, respectively, largely associated with our acquisition of SodaStream. These incremental costs are primarily related to fair value adjustments to the acquired inventory included in SodaStream’s balance sheet at acquisition date, as well as merger and integration charges, including employee-related costs.
See Note 14 to our condensed consolidated financial statements for further information.
Tax Benefits/Net Tax Expense Related to the TCJ Act
During the fourth quarter of 2017, the TCJ Act was enacted in the United States. Among its many provisions, the TCJ Act imposed a mandatory one-time transition tax on undistributed international earnings and reduced the U.S. corporate income tax rate from 35% to 21%, effective January 1, 2018. As a result of the enactment of
In connection with the TCJ Act, we recognized a tax benefits totaling $29 million ($0.02 per share) in the 36 weeks ended September 7, 2019, and provisional transition tax expense of $76 million ($0.05 per share) forin the 12 weeks ended September 8, 2018 and $854 million ($0.60 per share) forin the 36 weeks ended September 8, 2018. These amounts were in addition to the provisional net tax expense of $2.5 billion recognized in the fourth quarter of 2017.
See Note 5 to our condensed consolidated financial statements.statements for further information.
Tax Benefits
ForIn the 12 weeks endedSeptember 8, 2018, we recognized a non-cash tax benefit of $364$364 million ($ ($0.26 per share) resulting from the conclusion of certain international tax audits. DuringIn the second quarter of 2018, we reached an agreement with the IRS resolving all open matters related to the audits of taxable years 2012 and 2013. The conclusion of certain international tax audits and the resolution with the IRS, collectively, resulted in a non-cash tax benefitbenefits totaling $678$678 million ($ ($0.48 per share) forin the 36 weeks endedSeptember 8, 2018.2018.
See Note 5 to our condensed consolidated financial statements.statements for further information.
Results of Operations – Division Review
The results and discussions below are based on how our Chief Executive Officer monitors the performance of our divisions. See “Non-GAAP Measures” and “Items Affecting Comparability” for a discussion of items to consider when evaluating our results and related information regarding non-GAAP measures.
In the discussions of net revenue and operating profit below, “effective net pricing” reflects the year-over-year impact of discrete pricing actions, sales incentive activities and mix resulting from selling varying
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products in different package sizes and in different countries, and “net pricing” reflects the year-over-year combined impact of list price changes, weight changes per package, discounts and allowances. “Acquisitions and divestitures,” except as otherwise noted, reflect all mergers and acquisitions activity, including the impact of acquisitions, divestitures and changes in ownership or control in consolidated subsidiaries and nonconsolidated equity investees. Additionally, “sales
Net Revenue and certain other taxes” refers to the exclusion from netOrganic Revenue Growth
Organic revenue of prior year sales, use, value-added and certain excise taxes assessed by governmental authoritiesgrowth is a non-GAAP financial measure. For further information on revenue-producing transactions as a result of the accounting policy election taken in conjunction with the adoption oforganic revenue recognition guidance as described in Note 2 to our condensed consolidated financial statements.
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growth see “Non-GAAP Measures.”
Net Revenue
 
 
   
 
 
 
12 Weeks Ended
FLNA
QFNA
NAB Latin America
ESSA
AMENA
Total
9/8/2018
$3,891
 $567
 $5,456
 $1,868
 $3,161
 $1,542
 $16,485
9/9/2017
$3,792
 $578
 $5,332
 $1,873
 $3,098
 $1,567
 $16,240
% Impact of:
             
Volume (a)

1 % 1 % 1 % 2 % 5 % 5 % 2 %
Effective net pricing (b)

2
 (2) 2
 8
 2
 4
 3
Foreign exchange translation
—
 —
 —
 (10) (5) (2) (2)
Acquisitions and divestitures
—
 —
 —
 —
 —
 (9) (1)
Sales and certain other taxes —
 —
 —
 —
 (1) —
 —
Reported Growth (c)

3 % (2)% 2 % — % 2 % (2)% 1.5 %
 12 Weeks Ended 9/7/2019
   Impact of  Impact of
 
Reported
% Change, GAAP Measure
 Foreign exchange translation Acquisitions and divestitures 
Organic
% Change, Non-GAAP Measure(a)
 
Volume(b)
 Effective net pricing
FLNA5.5% — —
 5.5% 2
 3.5
QFNA1.5% — —
 1% (1) 2
PBNA3.5% — (1) 3% (1) 3
LatAm2% 2 —
 4% (3) 7
ESSA6% 4 (5) 4% (2) 6
AMENA5% 1 3.5
 9% 7
 3
Total4% 1 (1) 4% —
 4
36 Weeks Ended FLNA QFNA NAB Latin America ESSA AMENA Total
9/8/2018 $11,345
 $1,695
 $15,064
 $4,935
 $7,945
 $4,153
 $45,137
9/9/2017 $10,969
 $1,729
 $15,034
 $4,773
 $7,355
 $4,139
 $43,999
% Impact of:              
Volume (a)
 1% (0.5)% (1)% 0.5 % 5.5 % 4 % 1 %
Effective net pricing (b)
 2
 (2) 1
 7
 2
 3
 2
Foreign exchange translation —
 —
 —
 (4) 1
 1
 —
Acquisitions and divestitures —
 —
 —
 —
 —
 (7) (1)
Sales and certain other taxes —
 —
 —
 —
 (0.5) —
 —
Reported Growth (c)
 3% (2)% — % 3 % 8 % — % 3 %
 36 Weeks Ended 9/7/2019
   Impact of  Impact of
 
Reported
% Change, GAAP Measure
 Foreign exchange translation Acquisitions and divestitures 
Organic
% Change, Non-GAAP Measure(a)
 
Volume(b)
 Effective net pricing
FLNA5% — —
 5% 2
 3.5
QFNA1% — (0.5) 1% (1) 1
PBNA3% — (0.5) 2% (1.5) 4
LatAm2% 6 —
 8% —
 7
ESSA3% 7 (5) 5% (1) 6
AMENA1% 3 3
 8% 6
 2
Total3% 2 (1) 5% —
 4
(a)Amounts may not sum due to rounding.
(b)Excludes the impact of acquisitions divestitures and other structural changes.divestitures. In certain instances, volume growth varies from the amounts disclosed in the following divisional discussions due to nonconsolidated joint venture volume, and, for our beverage businesses, temporary timing differences between BCS and CSE, as well as the mix of beverage volume sold by our Company-owned and franchise-owned bottlers. Our net revenue excludes nonconsolidated joint venture volume, and, for our franchise-owned beverage businesses, is based on CSE.
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Operating Profit, Operating Profit Adjusted for Items Affecting Comparability and Operating Profit Growth Adjusted for Items Affecting Comparability on a Constant Currency Basis
Operating profit adjusted for items affecting comparability and operating profit growth adjusted for items affecting comparability on a constant currency basis are both non-GAAP financial measures. For further information on these measures see “Non-GAAP Measures” and “Items Affecting Comparability.”
Operating Profit and Operating Profit Adjusted for Items Affecting Comparability
 12 Weeks Ended 9/7/2019
   
Items Affecting Comparability(a)
  
 Reported, GAAP Measure Mark-to-market net impact Restructuring and impairment charges Inventory fair value adjustments and merger and integration charges 
Core,
Non-GAAP Measure
FLNA$1,286
 $—
 $16
 $—
 $1,302
QFNA126
 —
 2
 —
 128
PBNA640
 —
 26
 —
 666
LatAm277
 —
 22
 —
 299
ESSA474
 —
 14
 7
 495
AMENA357
 —
 10
 —
 367
Corporate unallocated expenses(305) 4
 3
 —
 (298)
Total$2,855
 $4
 $93
 $7
 $2,959
 12 Weeks Ended 9/8/2018
   
Items Affecting Comparability(a)
  
 
Reported,
GAAP Measure
 Mark-to-market net impact Restructuring and impairment charges 
Core,
Non-GAAP Measure
FLNA$1,241
 $—
 $—
 $1,241
QFNA143
 —
 —
 143
PBNA703
 —
 12
 715
LatAm284
 —
 4
 288
ESSA439
 —
 17
 456
AMENA311
 —
 2
 313
Corporate unallocated expenses(277) 29
 —
 (248)
Total$2,844
 $29
 $35
 $2,908
 36 Weeks Ended 9/7/2019
   
Items Affecting Comparability(a)
  
 Reported, GAAP Measure Mark-to-market net impact Restructuring and impairment charges Inventory fair value adjustments and merger and integration charges 
Core,
Non-GAAP Measure
FLNA$3,694
 $—
 $22
 $—
 $3,716
QFNA391
 —
 2
 —
 393
PBNA1,719
 —
 42
 —
 1,761
LatAm785
 —
 43
 —
 828
ESSA965
 —
 73
 45
 1,083
AMENA883
 —
 63
 —
 946
Corporate unallocated expenses(845) (50) 37
 1
 (857)
Total$7,592
 $(50) $282
 $46
 $7,870
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 36 Weeks Ended 9/8/2018
   
Items Affecting Comparability(a)
  
 
Reported,
GAAP Measure
 Mark-to-market net impact Restructuring and impairment charges 
Core,
Non-GAAP Measure
FLNA$3,491
 $—
 $4
 $3,495
QFNA443
 —
 —
 443
PBNA1,838
 —
 23
 1,861
LatAm742
 —
 16
 758
ESSA995
 —
 25
 1,020
AMENA994
 —
 6
 1,000
Corporate unallocated expenses(824) 57
 1
 (766)
Total$7,679
 $57
 $75
 $7,811
(b)(a)Includes the year-over-year impact of discrete pricing actions, sales incentive activities and mix resulting from selling varying products in different package sizes and in different countries.See “Items Affecting Comparability.”
Operating Profit Growth and Operating Profit Growth Adjusted for Items Affecting Comparability on a Constant Currency Basis
 12 Weeks Ended 9/7/2019
   
Impact of Items Affecting Comparability(a)
   Impact of  
 Reported % Change, GAAP Measure Mark-to-market net impact Restructuring and impairment charges Inventory fair value adjustments and merger and integration charges 
Core
% Change, Non-GAAP Measure(b)
 Foreign exchange translation 
Core Constant Currency
% Change, Non-GAAP Measure(b)
FLNA4 % —
 1
 —
 5 % — 5 %
QFNA(12)% —
 1
 —
 (11)% — (11)%
PBNA(9)% —
 2
 —
 (7)% — (7)%
LatAm(3)% —
 6
 —
 4 % 1 5 %
ESSA8 % —
 —
 1
 9 % 4 13 %
AMENA15 % —
 3
 —
 18 % 1 19 %
Corporate unallocated expenses10 % 11
 (1) —
 20 % — 20 %
Total— % (1) 2
 —
 2 % 1 3 %
 36 Weeks Ended 9/7/2019
   
Impact of Items Affecting Comparability(a)
   Impact of  
 Reported % Change, GAAP Measure Mark-to-market net impact Restructuring and impairment charges Inventory fair value adjustments and merger and integration charges 
Core
% Change, Non-GAAP Measure(b)
 
Foreign exchange
translation
 
Core Constant Currency
% Change, Non-GAAP Measure(b)
FLNA6 % —
 0.5
 — 6 % — 7 %
QFNA(12)% —
 —
 — (11)% — (11)%
PBNA(6)% —
 1
 — (5)% — (5)%
LatAm6 % —
 3.5
 — 9 % 3 12 %
ESSA(3)% —
 —
 9 6 % 8 14 %
AMENA(11)% —
 6
 — (5)% 2.5 (3)%
Corporate unallocated expenses3 % 14
 (5) — 12 % — 12 %
Total(1)% (1) 2
 1 1 % 2 2 %
(a)See “Items Affecting Comparability” for further information.
(c)(b)Amounts may not sum due to rounding.
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Organic Revenue GrowthFLNA
Organic revenue is a non-GAAP financial measure. For further information on organic revenue see “Non-GAAP Measures.”
12 Weeks Ended 9/8/2018
FLNA
QFNA
NAB Latin America
ESSA
AMENA
Total
Reported Growth
3 % (2)% 2 % — % 2% (2)% 1.5%
% Impact of:
             
Foreign exchange translation
—
 —
 —
 10
 5
 2
 2
Acquisitions and divestitures
—
 —
 —
 —
 —
 9
 1
Sales and certain other taxes —
 —
 —
 —
 1
 —
 —
Organic Growth (a)

3 % (2)% 2.5 % 10 % 8% 9 % 5%
36 Weeks Ended 9/8/2018 FLNA QFNA NAB Latin America ESSA AMENA Total
Reported Growth 3 % (2)% — % 3% 8 % — % 3%
% Impact of:              
Foreign exchange translation —
 —
 —
 4
 (1) (1) —
Acquisitions and divestitures —
 —
 —
 —
 —
 7
 1
Sales and certain other taxes —
 —
 —
 —
 0.5
 —
 —
Organic Growth (a)
 3 % (2)% — % 7% 7 % 7 % 3%
(a) Amounts may not sum due to rounding.
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Frito-Lay North America
 12 Weeks Ended 
 36 Weeks Ended  
 9/8/2018
 9/9/2017
 % Change 9/8/2018
 9/9/2017
 % Change
Net revenue$3,891
 $3,792
 3 $11,345
 $10,969
 3
Impact of foreign exchange translation    —     —
Impact of acquisitions    —     —
Organic revenue growth (a)
    3     3
            
Operating profit$1,241
 $1,199
(b) 
3.5 $3,491
 $3,392
(b) 
3
Restructuring and impairment charges (c)
—
 1
   4
 5
  
Operating profit excluding above item (a)
$1,241
 $1,200
 3 $3,495
 $3,397
 3
Impact of foreign exchange translation    —     —
Operating profit growth excluding above item, on a constant currency basis (a)
    4
(d) 
    3
(a)See “Non-GAAP Measures.”
(b)
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 to our condensed consolidated financial statements for additional information.
(c)See “Items Affecting Comparability.”
(d)Does not sum due to rounding.
12 Weeks
Net revenue grew 3%5.5% and volume grew 2%. The net revenue growth was driven by effective net pricing and volume growth. The volume growth reflects high-single-digit growth in trademark Doritos and Cheetos and low-single-digit growth in variety packs, partially offset by a double-digit decline in our Sabra joint venture products.
Operating profit grew 4%, primarily reflecting the net revenue growth and productivity savings, partially offset by certain operating cost increases.
36 Weeks
Net revenue grew 5% and volume grew 1%. The net revenue growth was primarily driven by effective net pricing and the volume growth. The volume growth reflects high-single-digitmid-single-digit growth in trademark Doritos and Cheetos and low-single-digit growth in variety packs and trademark Ruffles, partially offset by a double-digit decline in Santitas and a low-single-digit decline in trademark Lay’s.our Sabra joint venture products.
Operating profit increased 3.5%grew 6%, primarily reflecting the net revenue growth and planned cost reductions across a number of expense categories,productivity savings, partially offset by certain operating cost increases.
36 Weeks
Net revenue grew 3% and volume grew 2%. The net revenue growth was primarily driven by effective net pricing and the volume growth. The volume growth reflects high-single-digit growth in variety packs and mid-single-digit growth in trademark Doritos, partially offset by Additionally, a double-digit decline in Santitas.
Operating profit increased 3%, primarily reflecting the net revenue growth and planned cost reductions across a number of expense categories. These impacts were partially offset by certain operating cost increases, as well as higher commodity costs, primarily potatoes and motor fuel, which reduced operating profit growth by 2 percentage points. Additionally, aprior-year bonus extended to certain U.S. employees in connection with the TCJ Act reducedcontributed 1 percentage point to operating profit growth by 1 percentage point. growth.
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QFNA

Quaker Foods North America
 12 Weeks Ended 
 36 Weeks Ended  
 9/8/2018
 9/9/2017
 % Change 9/8/2018
 9/9/2017
 % Change
Net revenue$567
 $578
 (2) $1,695
 $1,729
 (2)
Impact of foreign exchange translation    —
     —
Organic revenue growth (a)
    (2)     (2)
            
Operating profit$143
 $145
(b) 
(1.5) $443
 $453
(b) 
(2)
Restructuring and impairment charges (c)
—
 —
   —
 —
  
Operating profit excluding above item (a)
$143
 $145
 (1) $443
 $453
 (2)
Impact of foreign exchange translation    —
     —
Operating profit growth excluding above item, on a constant currency basis (a)
    (1)     (2)
(a)See “Non-GAAP Measures.”
(b)
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 to our condensed consolidated financial statements for additional information.
(c)See “Items Affecting Comparability.”
12 Weeks
Net revenue declined 2%grew 1.5% and volume grewdeclined 1%. The net revenue performancegrowth reflects unfavorablefavorable net pricing and mix, partially offset by the volume growth.decline. The volume growthdecline was driven by a high-single-digit decline in ready-to-eat cereals and a mid-single-digit decline in oatmeal, partially offset by double-digit growth in trademark Gamesa and mid-single-digit growth in oatmeal and Aunt Jemima syrup and mix, partially offset by a double-digit decline in trademark Gamesa.mix.
Operating profit decreased 1.5%12%, reflecting certain operating costcosts increases, and unfavorable net pricing and mix, as well asa 5-percentage-point impact of higher commodity costs which negatively impacted operating profit performance by 2.5 percentage points. These impacts were partially offset by planned cost reductions acrossand a number2-percentage-point prior-year impact of expense categories, lower advertising and marketing expenses and the volume growth. Additionally, insurance settlement recoveries related to the 2017 earthquake in Mexico, positively contributed 2 percentage points to operating profit performance.partially offset by productivity savings and the net revenue growth.
36 Weeks
Net revenue declined 2%grew 1% and volume declined 0.5%1%. The net revenue performancegrowth reflects unfavorablefavorable net pricing and mix, andpartially offset by the volume decline. The volume decline was driven by mid-single-digit declines in oatmeal and ready-to-eat cereals, partially offset by double-digit growth in trademark Gamesa and mid-single-digit growth in Aunt Jemima syrup and mix.
Operating profit decreased 12%, reflecting certain operating costs increases and a 5-percentage-point impact of higher commodity costs, partially offset by productivity savings and the net revenue growth.
PBNA
12 Weeks
Net revenue increased 3.5%, primarily driven by effective net pricing, partially offset by a decline in volume. Acquisitions contributed 1 percentage point to the net revenue growth. Volume decreased 0.5%, driven by a 3% decline in carbonated soft drink (CSD) volume partially offset by a 3% increase in non-carbonated beverage (NCB) volume. The NCB volume increase primarily reflected a high-single-digit increase in our overall water portfolio and a low-single-digit increase in Gatorade sports drinks, partially offset by a low-
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single-digit decrease in Lipton ready-to-drink teas. Acquisitions had a nominal positive contribution to the volume performance.
Operating profit decreased 9%, reflecting certain operating cost increases, higher advertising and marketing expenses and a 5-percentage-point impact of higher commodity costs. These impacts were partially offset by the effective net pricing and productivity savings. A gain associated with the sale of an asset in the prior year negatively impacted operating profit performance by 5 percentage points and was largely offset by a gain associated with an insurance recovery in the current year, which positively contributed 4 percentage points to operating profit performance.
36 Weeks
Net revenue increased 3%, primarily driven by effective net pricing, partially offset by a decline in volume. Acquisitions contributed 0.5 percentage points to the net revenue growth. Volume decreased 1%, driven by a 3% decline in CSD volume partially offset by a 1% increase in NCB volume. The NCB volume increase primarily reflected a high-single-digit increase in our overall water portfolio, partially offset by a mid-single-digit decrease in our juice and juice drink portfolio and low-single-digit decreases in Lipton ready-to-drink teas and Gatorade sports drinks. Acquisitions had a nominal positive contribution to the volume performance.
Operating profit decreased 6%, reflecting certain operating cost increases, higher advertising and marketing expenses, a 7-percentage-point impact of higher commodity costs and the volume decline. These impacts were partially offset by the effective net pricing and productivity savings. Gains associated with the sale of assets in the prior year negatively impacted operating profit performance by 3 percentage points and were partially offset by a current-year gain associated with a sale of an asset, which positively contributed 2 percentage points to operating profit performance. A gain associated with an insurance recovery positively contributed 2 percentage points to current-year operating profit performance and was partially offset by less-favorable insurance adjustments compared to the prior year, which negatively impacted the current-year operating profit performance by 1.5 percentage points. Additionally, a prior-year bonus extended to certain U.S. employees in connection with the TCJ Act positively contributed 2 percentage points to operating profit performance.
LatAm
12 Weeks
Net revenue increased 2%, reflecting effective net pricing, partially offset by a net decline in volume and a 2-percentage-point impact of unfavorable foreign exchange.
Snacks volume declined 3%, reflecting a double-digit decline in trademark GamesaBrazil, partially offset by low-single-digit growth in Mexico.
Beverage volume grew 5%, reflecting high-single-digit growth in Brazil and double-digit growth in Guatemala, partially offset by a high-single-digit decline in Colombia and a low-single-digit decline in ready-to-eat cereals,Argentina. Additionally, Mexico experienced mid-single-digit growth and Honduras experienced low-single-digit growth.
Operating profit decreased 3%, reflecting certain operating cost increases, the net volume decline and a 12-percentage-point impact of higher commodity costs largely due to transaction-related foreign exchange, partially offset by mid-single-digitthe effective net pricing and productivity savings. Additionally, insurance settlement recoveries in the prior year related to the 2017 earthquake in Mexico negatively impacted operating profit performance by 5percentage points. Higher restructuring and impairment charges negatively impacted operating profit performance by 6 percentage points.
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36 Weeks
Net revenue increased 2%, primarily reflecting effective net pricing, partially offset by a 6-percentage-point impact of unfavorable foreign exchange.
Snacks volume grew slightly, reflecting low-single-digit growth in oatmeal.Mexico, partially offset by a high-single-digit decline in Brazil.
Beverage volume grew 5%, reflecting double-digit growth in Brazil and Guatemala, partially offset by a high-single-digit decline in Argentina. Additionally, Mexico, Colombia and Honduras each experienced low-single-digit growth and Chile experienced mid-single-digit growth.
Operating profit decreased 2%increased 6%, reflecting the net revenue performancegrowth and productivity savings, partially offset by certain operating cost increases as well asand a 13-percentage-point impact of higher commodity costs largely due to transaction-related foreign exchange. Higher restructuring and impairment charges and unfavorable foreign exchange reduced operating profit growth by 3.5 percentage points and 3 percentage points, respectively.
ESSA
12 Weeks
Net revenue increased 6%, primarily reflecting effective net pricing and a 7-percentage-point impact of the SodaStream acquisition, partially offset by a 4-percentage-point impact of unfavorable foreign exchange.
Snacks volume grew slightly, reflecting mid-single-digit growth in France and Poland and slight growth in Spain, partially offset by low-single-digit declines in Russia, Turkey and the United Kingdom, a mid-single-digit decline in South Africa and a slight decline in the Netherlands.
Beverage volume grew 17%, primarily reflecting an 18-percentage-point impact of the SodaStream acquisition, high-single-digit growth in the United Kingdom and mid-single-digit growth in Poland and Nigeria, partially offset by a high-single-digit decline in Russia, a double-digit-decline in Turkey, a mid-single-digit decline in France and a low-single-digit decline Germany.
Operating profit increased 8%, reflecting the effective net pricing, productivity savings and a 7-percentage-point net impact of the SodaStream acquisition. These impacts were partially offset by certain operating cost increases, a 9-percentage-point impact of higher commodity costs largely due to transaction-related foreign exchange and higher advertising and marketing expenses. Unfavorable foreign exchange reduced operating profit growth by 4 percentage points.
36 Weeks
Net revenue increased 3%, reflecting effective net pricing and a 6-percentage-point impact of the SodaStream acquisition, partially offset by a 7-percentage-point impact of unfavorable foreign exchange.
Snacks volume grew 1%, reflecting mid-single-digit growth in Poland and low-single-digit growth in France and the Netherlands, partially offset by low-single-digit declines in the United Kingdom and South Africa and a mid-single-digit decline in Turkey. Additionally, Russia experienced slight growth.
Beverage volume grew 20%, primarily reflecting a 19-percentage-point impact of the SodaStream acquisition, high-single-digit growth in Nigeria and Poland and low-single-digit growth in the United Kingdom, partially offset by a mid-single-digit decline in Russia, a high-single-digit decline in Turkey and low-single-digit declines in Germany and France.
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Operating profit decreased 3%, reflecting certain operating cost increases, a 14-percentage-point impact of higher commodity costs largely due to transaction-related foreign exchange, a 6-percentage-point impact of restructuring and impairment charges and higher advertising and marketing expenses. These impacts were partially offset by the effective net pricing and productivity savings. The SodaStream acquisition positively contributed 7 percentage points to operating profit performance and was partially offset by inventory fair value adjustments and merger and integration charges which negatively impacted operating profit performance by 3 percentage points. These impacts were partially offset by planned cost reductions across a number of expense categories and lower advertising and marketing expenses. Additionally, insurance settlement recoveries related to the 2017 earthquake in Mexico positively contributed 1 percentage point to operating profit performance.
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North America Beverages
 12 Weeks Ended 
 36 Weeks Ended   
 9/8/2018
 9/9/2017
 % Change 9/8/2018
 9/9/2017
 % Change 
Net revenue$5,456
 $5,332
 2
 $15,064
 $15,034
 —
 
Impact of foreign exchange translation    —
     —
 
Impact of acquisitions and divestitures    —
     —
 
Impact of sales and certain other taxes (a)
    —
     —
 
Organic revenue growth (a)
    2.5
(d) 
    —
 
             
Operating profit$703
 $813
(b) 
(14) $1,838
 $2,204
(b) 
(17) 
Restructuring and impairment charges (c)
12
 (3)   23
 (2)   
Operating profit excluding above item (a)
$715
 $810
 (12) $1,861
 $2,202
 (15) 
Impact of foreign exchange translation    —
     —
 
Operating profit growth excluding above item, on a constant currency basis (a)
    (11)
(d) 
    (16)
(d) 
(a)See “Non-GAAP Measures.”
(b)
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 to our condensed consolidated financial statements for additional information.
(c)See “Items Affecting Comparability.”
(d)Does not sum due to rounding.
12 Weeks
Net revenue grew 2% driven by effective net pricing and volume growth. Volume increased 1%, driven by a 4% increase in non-carbonated beverage volume, partially offset by a 1.5% decline in carbonated soft drink (CSD) volume. The non-carbonated beverage volume increase primarily reflected mid-single-digit increases in Gatorade sports drinks and in our overall water portfolio.
Operating profit decreased 14%, reflecting certain operating cost increases, including increased transportation costs, higher commodity costs whichUnfavorable foreign exchange negatively impacted operating profit performance by 98 percentage points.
AMENA
12 Weeks
Net revenue increased 5%, reflecting volume growth and effective net pricing, partially offset by a 3-percentage-point impact of refranchising a portion of our beverage business in India in 2019.
Snacks volume grew 8%, reflecting double-digit growth in Pakistan and high-single-digit growth in the Middle East, India and China. Additionally, Australia experienced low-single-digit growth.
Beverage volume grew 4%, reflecting double-digit growth in India and Vietnam, partially offset by a low-single-digit decline in Pakistan. Additionally, China and the Middle East each experienced low-single-digit growth.
Operating profit increased 15%, reflecting the net revenue growth and productivity savings, partially offset by certain operating cost increases and higher advertising and marketing expenses. Higher restructuring and impairment charges reduced operating profit growth by 3 percentage points.
36 Weeks
Net revenue increased 1%, reflecting volume growth and effective net pricing, partially offset by unfavorable foreign exchange and refranchising a portion of our beverage business in India in 2019 and in Thailand in 2018 which reduced net revenue growth by 3 percentage points each.
Snacks volume grew 6%, reflecting high-single-digit growth in China, double-digit growth in Pakistan and mid-single-digit growth in India and the Middle East. Additionally, Australia experienced low-single-digit growth.
Beverage volume grew 2%, reflecting high-single-digit growth in India and the Philippines and double-digit growth in Vietnam, partially offset by a low-single-digit decline in the Middle East and Pakistan. Additionally, China experienced slight growth.
Operating profit decreased 11%, reflecting a 14-percentage-point impact of a gain on the prior-year refranchising of a portion of our beverage business in Thailand, certain operating cost increases and higher advertising and marketing expenses. These impacts were partially offset by the net revenue growth and planned cost reductions across a number of expense categories. A current-year gain associated with a sale of an asset positively contributed 4 percentage points to operating profit performanceproductivity savings. Higher restructuring and was offset by a gain associated with a sale of an asset in the prior year whichimpairment charges and unfavorable foreign exchange negatively impacted operating profit performance by 3 percentage points.
36 Weeks
Net revenue was even with the prior year, primarily reflecting effective net pricing offset by a decline in volume. Volume decreased 1%, driven by a 3% decline in CSD volume, partially offset by a 2% increase in non-carbonated beverage volume. The non-carbonated beverage volume increase primarily reflected a mid-single-digit increase in our overall water portfolio and a low-single-digit increase in Gatorade sports drinks.
Operating profit decreased 17%, reflecting certain operating cost increases, including increased transportation costs, as well as higher commodity costs which negatively impacted operating profit performance by 7 percentage points. These impacts were partially offset by planned cost reductions across a number of expense categories. Current-year gains associated with sales of assets positively contributed 3 percentage points to
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operating profit performance and were offset by a gain associated with the sale of an asset in the prior year which negatively impacted operating profit performance by 1 percentage point. A bonus extended to certain U.S. employees in connection with the TCJ Act negatively impacted operating profit performance by 2 percentage points.
Latin America
 12 Weeks Ended 
 36 Weeks Ended  
 9/8/2018
 9/9/2017
 % Change 9/8/2018
 9/9/2017
 % Change
Net revenue$1,868
 $1,873
 —
 $4,935
 $4,773
 3
Impact of foreign exchange translation    10
     4
Organic revenue growth (a)
    10
     7
            
Operating profit$284
 $284
(b) 
—
 $742
 $645
(b) 
15
Restructuring and impairment charges (c)
4
 (2)   16
 47
  
Operating profit excluding above item (a)
$288
 $282
 3
 $758
 $692
 10
Impact of foreign exchange translation    6
     —
Operating profit growth excluding above item, on a constant currency basis (a)
    9
     10
(a)See “Non-GAAP Measures.”
(b)
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 to our condensed consolidated financial statements for additional information.
(c)See “Items Affecting Comparability.”
12 Weeks
Net revenue was even with the prior year, reflecting effective net pricing and volume growth offset by unfavorable foreign exchange, which negatively impacted net revenue performance by 10 percentage points.
Snacks volume grew 3%, reflecting high-single-digit growth in Brazil and low-single-digit growth in Mexico.
Beverage volume grew 0.5%, reflecting double-digit growth in Colombia, high-single-digit growth in Guatemala and low-single-digit growth in Honduras, partially offset by low-single-digit declines in Mexico and Argentina, and a slight decline in Brazil.
Operating profit increased slightly, reflecting planned cost reductions across a number of expense categories, the effective net pricing and the volume growth, as well as insurance settlement recoveries related to the 2017 earthquake in Mexico which contributed 5 percentage points to operating profit growth. These impacts were offset by certain operating cost increases and higher advertising and marketing expenses, as well as higher commodity costs which reduced operating profit growth by 15 percentage points. Unfavorable foreign exchange translation reduced operating profit growth by 6 percentage points.
36 Weeks
Net revenue grew 3%, reflecting effective net pricing and net volume growth, partially offset by unfavorable foreign exchange, which reduced net revenue growth by 4 percentage points.
Snacks volume grew 1%, reflecting low-single-digit growth in Mexico, partially offset by a low-single-digit decline in Brazil.
Beverage volume declined 2%, reflecting a double-digit decline in Brazil and a mid-single-digit decline in Mexico, partially offset by double-digit growth in Colombia, mid-single-digit growth in Guatemala and low-single-digit-growth in Honduras. Additionally, Argentina experienced a low-single-digit decline.
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Operating profit increased 15%, reflecting the net revenue growth and planned cost reductions across a number of expense categories, as well as insurance settlement recoveries related to the 2017 earthquake in Mexico which contributed 5 percentage points to operating profit growth. These impacts were partially offset by certain operating cost increases and higher advertising and marketing expenses, as well as higher commodity costs which reduced operating profit growth by 11 percentage points. Lower restructuring and impairment charges contributed 6 percentage points to operating profit growth.
Europe Sub-Saharan Africa
 12 Weeks Ended 
 36 Weeks Ended   
 9/8/2018
 9/9/2017
 % Change 9/8/2018
 9/9/2017
 % Change 
Net revenue$3,161
 $3,098
 2 $7,945
 $7,355
 8
 
Impact of foreign exchange translation    5     (1) 
Impact of sales and certain other taxes (a)
    1     0.5
 
Organic revenue growth (a)
    8     7
(d) 
             
Operating profit$439
 $427
(b) 
3 $995
 $1,015
(b) 
(2) 
Restructuring and impairment charges (c)
17
 12
   25
 19
   
Operating profit excluding above item (a)
$456
 $439
 4 $1,020
 $1,034
 (1) 
Impact of foreign exchange translation    5     (1) 
Operating profit growth excluding above item, on a constant currency basis (a)
    9     (2) 
(a)See “Non-GAAP Measures.”
(b)
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 to our condensed consolidated financial statements for additional information.
(c)See “Items Affecting Comparability.”
(d)Does not sum due to rounding.
12 Weeks
Net revenue increased 2%, reflecting volume growth and effective net pricing, partially offset by unfavorable foreign exchange, which reduced net revenue growth by 5 percentage points.
Snacks volume grew 5%, reflecting high-single-digit growth in Russia and the Netherlands, double-digit growth in Poland and mid-single-digit growth in Turkey. Additionally, the United Kingdom, Spain and France experienced low-single-digit growth and South Africa experienced mid-single-digit growth.
Beverage volume grew 7%, reflecting double-digit growth in Germany, Nigeria and France and high-single-digit growth in Russia and Poland, partially offset by a high-single-digit decline in the United Kingdom. Additionally, Turkey experienced low-single-digit growth.
Operating profit increased 3%, reflecting the net revenue growth and planned cost reductions across a number of expense categories. These impacts were partially offset by certain operating cost increases and higher advertising and marketing expenses, as well as higher commodity costs which reduced operating profit growth by 7 percentage points. Unfavorable foreign exchange translation reduced operating profit growth by 5 percentage points.
36 Weeks
Net revenue increased 8%, reflecting volume growth and effective net pricing.
Snacks volume grew 5%, reflecting mid-single-digit growth in Russia and Turkey and high-single-digit growth in France. Additionally, the United Kingdom grew slightly, South Africa and Spain experienced low-single-digit growth and the Netherlands experienced mid-single-digit growth.
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Beverage volume grew 7%, reflecting double-digit growth in Germany, France and Poland and high-single-digit growth in Russia. Additionally, the United Kingdom grew slightly, Turkey experienced mid-single-digit growth and Nigeria experienced high-single-digit growth.
Operating profit decreased 2%, reflecting certain operating cost increases and higher advertising and marketing expenses. Additionally, a prior-year gain associated with the sale of our minority stake in Britvic and higher commodity costs negatively impacted operating profit performance by 9 percentage points and 5 percentage points, respectively. These impacts were partially offset by the net revenue growth and planned cost reductions across a number of expense categories.
Asia, Middle East and North Africa
 12 Weeks Ended 
 36 Weeks Ended   
 9/8/2018
 9/9/2017
 % Change 9/8/2018
 9/9/2017
 % Change 
Net revenue$1,542
 $1,567
 (2) $4,153
 $4,139
 —
 
Impact of foreign exchange translation    2
     (1) 
Impact of acquisitions and divestitures    9
     7
 
Impact of sales and certain other taxes (a)
    —
     —
 
Organic revenue growth (a)
    9
     7
(c) 
             
Operating profit$311
 $267
 17
 $994
 $745
 34
 
Restructuring and impairment charges (b)
2
 (3)   6
 (7)   
Operating profit excluding above item (a)
$313
 $264
 18
 $1,000
 $738
 36
 
Impact of foreign exchange translation    1
     (1) 
Operating profit growth excluding above item, on a constant currency basis (a)
    19
     34
(c) 
(a)See “Non-GAAP Measures.”
(b)See “Items Affecting Comparability.”
(c)Does not sum due to rounding.
12 Weeks
Net revenue decreased 2%, reflecting the impact of refranchising our beverage businesses in Thailand in 2018 and Jordan in 2017, which negatively impacted net revenue performance by 9 percentage points, partially offset by volume growth and effective net pricing. Unfavorable foreign exchange negatively impacted net revenue performance by 2 percentage points.
Snacks volume grew 7%, reflecting double-digit growth in India, China and Pakistan and high-single-digit growth in Australia, partially offset by a low-single-digit decline in the Middle East.
Beverage volume grew 2%, reflecting double-digit growth in India and high-single-digit growth in Pakistan, partially offset by a double-digit decline in the Philippines. Additionally, China grew slightly and the Middle East experienced low-single-digit growth.
Operating profit increased 17%, reflecting the effective net pricing, planned cost reductions across a number of expense categories and the volume growth. These impacts were partially offset by certain operating cost increases and higher advertising and marketing expenses. Additionally, higher commodity costs reduced operating profit growth by 6 percentage points and the impact of refranchising our beverage businesses in Thailand in 2018 and Jordan in 2017 reduced operating profit growth by 42.5 percentage points.points, respectively.
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36 Weeks
Net revenue grew slightly, reflecting volume growth and effective net pricing. The impact of refranchising our beverage businesses in Thailand in 2018 and Jordan in 2017 reduced net revenue growth by 7 percentage points.
Snacks volume grew 6%, reflecting double-digit growth in China, India and Pakistan, partially offset by a mid-single-digit decline in the Middle East. Additionally, Australia experienced mid-single-digit growth.
Beverage volume grew 1%, reflecting high-single-digit growth in Pakistan, low-single-digit growth in China and mid-single-digit growth in India, partially offset by a double-digit decline in the Philippines and a low-single-digit decline in the Middle East.
Operating profit increased 34%, primarily reflecting the net revenue growth and planned cost reductions across a number of expense categories, as well as the net impact of refranchising our beverage businesses in Thailand in 2018 and Jordan in 2017, which contributed 15 percentage points to operating profit growth. These impacts were partially offset by certain operating cost increases, as well as higher commodity costs which reduced operating profit growth by 4 percentage points.
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Our Liquidity and Capital Resources
We believe that our cash generating capability and financial condition, together with our revolving credit facilities and other available methods of debt financing, such as commercial paper borrowings and long-term debt financing, will be adequate to meet our operating, investing and financing needs. Our primary sources of cash available to fund cash outflows, such as our anticipated share repurchases, dividend payments, debt repayments, and our pendingproposed acquisition of SodaStream,Pioneer Foods and transition tax liability under the TCJ Act, include cash from operations, proceeds obtained from issuances of commercial paper and long-term debt, and cash and cash equivalents and short-term investments repatriated from our foreign subsidiaries.equivalents. However, there can be no assurance that volatility in the global capital and credit markets will not impair our ability to access these markets on terms commercially acceptable to us, or at all. See “Our Business Risks” included in this Form 10-Q and “Item 1A. Risk Factors” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Our Business Risks” included in our 20172018 Form 10-K.10-K for further information.
As of December 30, 2017,September 7, 2019, we had cash, cash equivalents, and short-term investments in our consolidated subsidiaries of $18.9 billion outside the United States. The TCJ Act imposed a mandatory one-time transition tax on undistributed international earnings, including the $18.9 billion heldand restricted cash in our consolidated subsidiaries outside the United States as of December 30, 2017, as a result of which we recognized a provisional mandatory transition tax liability of $854 million in the 36 weeks ended September 8, 2018, in addition to approximately $4$3.2 billion, that we recognized as part of the $2.5 billion provisional net tax expense in the fourth quarter of 2017. Under the provisions of the TCJ Act, this transition tax liability must be paid over eight years. We currently expect to pay approximately $0.4 billion per year in 2019 to 2023, $0.7 billion in 2024, $1.0 billion in 2025 and $1.2 billion in 2026. The recorded impact of the TCJ Act is provisional and the final amount may differ from the above estimate, possibly materially, due to, among other things, changes in estimates, interpretations and assumptions we have made, changes in IRS interpretations, the issuance of new guidance, legislative actions, changes in accounting standards or related interpretations in response to the TCJ Act and future actions by states withinincluding restricted cash held outside the United States that have not currently adopted the TCJ Act.
As of September 8, 2018, we had cash, cash equivalents and short-term investments inapproximately $0.1 billion related to our consolidated subsidiaries of $8.4 billion outside the United States. In connection with the enactment of the TCJ Act, during the 36 weeks ended September 8, 2018, we repatriated $13.7 billion of cash, cash equivalents and short-term investments held in our foreign subsidiaries without such funds being subject to further U.S. income tax liability. The repatriated cash was used primarily for repayment of commercial paper and to fund discretionary benefit plan contributions, scheduled debt maturities, dividend and share repurchases. We are currently evaluating when to repatriate any additional funds currently held by our foreign subsidiaries and how to utilize such funds, including whether to utilize such funds or other available methods of debt financing such as commercial paper borrowings to fund our anticipated share repurchases, dividend payments, scheduled debt maturities, discretionary benefit plan contributions, capital expenditures, certain investments into our business, our pending acquisition of SodaStream, or other uses.SodaStream. See “Item 1A. Risk Factors” in our 2017 Form 10-K and “Our Critical Accounting Policies,” “Our Business Risks” and “Items Affecting Comparability” and Note 512 to our condensed consolidated financial statements in this Form 10-Q.
for further discussion of restricted cash. As of September 8, 2018,7, 2019, cash, cash equivalents and short-term investments in our consolidated subsidiaries subject to currency controls or currency exchange restrictions were not material.
The TCJ Act imposed a mandatory one-time transition tax on undistributed international earnings. As of September 7, 2019, our mandatory transition tax liability was $3.4 billion. This transition tax liability will be paid over the remaining seven years. Any additional guidance issued by the IRS may impact our recorded amounts for this transition tax liability. See Note 5 to our condensed consolidated financial statements for further discussion of the TCJ Act.
Operating Activities
During the 36 weeks ended September 8, 2018,7, 2019, net cash provided by operating activities was $4.7$5.1 billion, compared to $6.1net cash provided by operating activities of $4.7 billion in the prior-year period. The operating cash flow performance primarily reflects theprior-year discretionary contributions of $1.5 billion to our pension and retiree medical plans, partially offset by higher net cash tax payments in the current year. See also Note 7 to our condensed consolidated financial statements.
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Investing Activities
During the 36 weeks ended September 8, 2018,7, 2019, net cash provided byused for investing activities was $5.6$4.3 billion, primarily reflecting net maturities and sales$1.9 billion of debt securitiescash paid in connection with maturities greater than three monthsour acquisition of $7.0 billion, partially offset bySodaStream, as well as net capital spending of $1.5$1.9 billion.
We expect 20182019 net capital spending to be approximately $3.3$4.5 billion.
Financing Activities
During the 36 weeks ended September 8, 2018,7, 2019, net cash used for financing activities was $8.9$5.8 billion, primarily reflecting the return of operating cash flow to our shareholders through dividend payments and share repurchases of $5.1$6.2 billion and payments of long-term debt borrowings of $2.5$3.0 billion, and net paymentspartially offset by proceeds from issuances of short-term borrowingslong-term debt of $1.4$3.1 billion.
We annually review our capital structure with our Board of Directors, including our dividend policy and share repurchase activity. On February 11, 2015, we announced a share repurchase program providing for the repurchase of up to $12.0 billion of PepsiCo common stock which commenced on July 1, 2015 and expired on June 30, 2018 (2015 share repurchase program). The 2015 share repurchase program had approximately $4.3 billion of authorized repurchase capacity unused at expiration. On February 13, 2018, we announced a new share repurchase program providing for the repurchase of up to $15.0 billion of PepsiCo common stock which commenced on July 1, 2018 and will expire on June 30, 2021 (2018 share repurchase program).2021. In addition, on February 13, 2018,15, 2019, we announced a 15.2%3% increase in our annualized
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dividend to $3.71$3.82 per share from $3.22$3.71 per share, effective with the dividend paid in June 2018.2019. We expect to return a total of approximately $7$8 billion to shareholders in 20182019 through share repurchases of approximately $2$3 billion and dividends of approximately $5 billion. See Part II, “Item 2. Unregistered Sales of Equity Securities and Use of Proceeds” for a description of our share repurchase program.
Free Cash Flow
Free cash flow is a non-GAAP financial measure. For further information on free cash flow see “Non-GAAP Measures.”
The table below reconciles net cash provided byused for operating activities, as reflected on our cash flow statement, to our free cash flow.
 36 Weeks Ended
 9/8/2018

9/9/2017
Net cash provided by operating activities$4,732

$6,087
Capital spending(1,578)
(1,474)
Sales of property, plant and equipment119

82
Free cash flow (a)
$3,273

$4,695
(a)See “Non-GAAP Measures.” In addition, when evaluating free cash flow, we also consider the following items impacting comparability: $1.5 billion and $6 million in discretionary pension and retiree medical contributions in the 36 weeks ended September 8, 2018 and September 9, 2017, respectively; net cash tax benefit related to discretionary pension and retiree medical contributions of $302 million and $1 million in the 36 weeks ended September 8, 2018 and September 9, 2017, respectively; $188 million and $83 million of payments related to restructuring charges in the 36 weeks ended September 8, 2018 and September 9, 2017, respectively; net cash tax benefits related to restructuring charges of $9 million and $23 million in the 36 weeks ended September 8, 2018 and September 9, 2017, respectively; and tax payments related to the TCJ Act of $41 million in the 36 weeks ended September 8, 2018.
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 36 Weeks Ended
 9/7/2019

9/8/2018
Net cash provided by operating activities$5,063

$4,732
Capital spending(1,959)
(1,578)
Sales of property, plant and equipment63

119
Free cash flow$3,167

$3,273
We use free cash flow primarily for financing activities, including debt repayments, dividends and share repurchases. We expect to continue to return free cash flow to our shareholders through dividends and share repurchases while maintaining Tier 1 commercial paper access, which we believe will facilitate appropriate financial flexibility and ready access to global capital and credit markets at favorable interest rates. See “Our Business Risks” included in this Form 10-Q and “Item 1A. Risk Factors” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Our Business Risks,” included in our 20172018 Form 10-K, for certain factors that may impact our credit ratings or our operating cash flows.
Any downgrade of our credit ratings by a credit rating agency, especially any downgrade to below investment grade, whether or not as a result of our actions or factors which are beyond our control, could increase our future borrowing costs and impair our ability to access capital and credit markets on terms commercially acceptable to us, or at all. In addition, any downgrade of our current short-term credit ratings could impair our ability to access the commercial paper market with the same flexibility that we have experienced historically, and therefore require us to rely more heavily on more expensive types of debt financing. See Note 8 to our condensed consolidated financial statements and “Our Business Risks” included in this Form 10-Q, as well as “Item 1A. Risk Factors” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Our Business Risks” included in our 20172018 Form 10-K.10-K for further information.
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Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
PepsiCo, Inc.:
Results of Review of Interim Financial Information
We have reviewed the Condensed Consolidated Balance Sheet of PepsiCo, Inc. and subsidiaries (the Company) as of September 8, 2018,7, 2019, the related Condensed Consolidated Statements of Income, and Comprehensive Income and Equity for the twelve and thirty-six weeksweek periods ended September 8, 20187, 2019 and September 9, 2017, and8, 2018, the related Condensed Consolidated StatementsStatement of Cash Flows and Equity for the thirty-six weeksweek periods ended September 8, 20187, 2019 and September 9, 2017,8, 2018, and the related notes (collectively, the consolidated interim financial information). Based on our reviews, we are not aware of any material modifications that should be made to the consolidated interim financial information for it to be in conformity with U.S. generally accepted accounting principles.
We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Consolidated Balance Sheet of the Company as of December 30, 2017,29, 2018, and the related Consolidated Statements of Income, Comprehensive Income, Cash Flows and Equity for the year then ended (not presented herein); and in our report dated February 13, 2018,15, 2019, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying Condensed Consolidated Balance Sheet as of December 30, 2017,29, 2018, is fairly stated, in all material respects, in relation to the Consolidated Balance Sheet from which it has been derived.
Basis for Review Results
This consolidated interim financial information is the responsibility of the Company’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our reviews in accordance with the standards of the PCAOB. A review of consolidated interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.


/s/ KPMG LLP


New York, New York
October 2, 20183, 2019
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ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.
See “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Our Business Risks.” In addition, see “Item 1A. Risk Factors,” “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Our Business Risks” and Note 9 to our consolidated financial statements in our 20172018 Form 10-K.
ITEM 4. Controls and Procedures.
As of the end of the period covered by this report, we carried out an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the Exchange Act). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of the end of the period covered by this report our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in reports we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and (2) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
There were no changes in our internal control over financial reporting during our third fiscal quarter of 20182019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
During our third fiscal quarter of 2018,2019, we continued migrating certain of our financial processing systems to an enterprise-wide systems solution. These systems implementations are part of our ongoing global business transformation initiative, and we plan to continue implementing such systems throughout other parts of our businesses. In addition, in connection with our 2019 multi-year productivity plan, we continue to migrate to shared business models across our operations to further simplify, harmonize and automate processes. In connection with these implementations and resulting business process changes, we continue to enhance the design and documentation of our internal control over financial reporting processes to maintain effective controls over our financial reporting. This transition hasThese transitions have not materially affected, and we do not expect itthem to materially affect, our internal control over financial reporting.
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PART II OTHER INFORMATION


ITEM 1. Legal Proceedings.
The following information should be read in conjunction with the discussion set forth under Part I, “Item 3. Legal Proceedings” in our 20172018 Form 10-K and Part II, “Item 1. Legal Proceedings” in our Quarterly Reports on Form 10-Q for the fiscal quarters ended March 24, 201823, 2019 and June 16, 2018.15, 2019.
In April 2017, Corporación Autónoma Regional de Cundinamarca, a Colombian environmental authority (the environmental authority), initiated an administrative proceeding regarding our subsidiary, PepsiCo Alimentos Z.F., Ltda. (PAZ), for allegedly delivering wastewater to a third party without first verifying that the third party had appropriate permits with respect to the discharge of such wastewater. In July 2018, the environmental authority initiated an administrative proceeding to impose a monetary sanction against PAZ with respect to the alleged permitting violation by the third party and on August 13, 2018, PAZ submitted evidence of its defense to these allegations. If the environmental authority determines PAZ is responsible for the alleged permitting violations by the third party, the environmental authority may seek to impose monetary sanctions of up to $1.3 million, which PAZ would be entitled to appeal.
In addition, weWe and our subsidiaries are party to a variety of litigation, claims, legal or regulatory proceedings, inquiries and investigations. While the results of such litigation, claims, legal or regulatory proceedings, inquiries and investigations cannot be predicted with certainty, management believes that the final outcome of the foregoing will not have a material adverse effect on our financial condition, results of operations or cash flows. Sanctions imposed by foreign authorities are levied in local currency and disclosed using the U.S. dollar equivalent at the time of imposition and are subject to currency fluctuations. See also “Item 1. Business – Regulatory Matters” and “Item 1A. Risk Factors” in our 20172018 Form 10-K.
ITEM 1A. Risk Factors.
There have been no material changes with respect to the risk factors disclosed in our 20172018 Form 10-K.
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ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.
A summary of our common stock repurchases (in millions, except average price per share) during the third quarter of 20182019 is set forth in the table below.
Issuer Purchases of Common Stock
Period 
Total
Number of
Shares
Repurchased
 
Average Price
Paid Per Share
 
Total Number
of Shares
Purchased as
Part of Publicly
Announced
Plans or
Programs
 
Maximum
Number (or
Approximate
Dollar Value) of
Shares That May
Yet Be
Purchased
Under the Plans
or Programs(c)
2015 Repurchase Program        
6/17/2018 - 6/30/2018 0.7
(a) 
$107.38
 0.7
  
Total 0.7
 $107.38
 0.7
 $—
         
2018 Repurchase Program        
        $15,000
7/1/2018 - 7/14/2018 0.3
(b) 
$109.09
 0.3
 (30)
        14,970
7/15/2018 - 8/11/2018 1.4
(b) 
$114.66
 1.4
 (161)
        14,809
8/12/2018 - 9/8/2018 1.6
(b) 
$112.51
 1.6
 (178)
Total 3.3
 $113.15
 3.3
 14,631
Total Repurchase Programs 4.0
 $112.08
 4.0
 $14,631
Period 
Total
Number of
Shares
Repurchased(a)
 
Average Price
Paid Per Share
 
Total Number
of Shares
Purchased as
Part of Publicly
Announced
Plans or
Programs
 
Maximum
Number (or
Approximate
Dollar Value) of
Shares That May Yet Be
Purchased
Under the Plans
or Programs
6/15/2019       $12,334
         
6/16/2019 - 7/13/2019 1.1
 $132.63
 1.1
 (144)
        12,190
7/14/2019 - 8/10/2019 1.4
 $129.35
 1.4
 (187)
        12,003
8/11/2019 - 9/7/2019 1.7
 $133.46
 1.7
 (220)
Total 4.2
 $131.82
 4.2
 $11,783
(a)All shares were repurchased in open market transactions pursuant to the $12 billion 2015 repurchase program authorized by our Board of Directors and publicly announced on February 11, 2015, which commenced on July 1, 2015 and expired on June 30, 2018. The 2015 share repurchase program had approximately $4.3 billion of authorized repurchase capacity unused at expiration.
(b)All shares were repurchased in open market transactions pursuant to the $15 billion 2018share repurchase program authorized by our Board of Directors and publicly announced on February 13, 2018, which commenced on July 1, 2018 and will expire on June 30, 2021.
(c)Represents shares authorized for repurchase under the 2018 share repurchase program. Such shares may be repurchased in open market transactions, in privately negotiated transactions, in accelerated stock repurchase transactions or otherwise.
ITEM 6. Exhibits.
See “Index to Exhibits” on page 5451.
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INDEX TO EXHIBITS
ITEM 6
EXHIBIT 
Exhibit 3.1
Amended and Restated Articles of Incorporation of PepsiCo, Inc., as amended and restated,Inc, effective as of May 9, 2011,1, 2019, which are incorporated herein by reference to Exhibit 3.1 to PepsiCo, Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 9, 2011.3, 2019.
Exhibit 3.2
By-Laws of PepsiCo, Inc., as amended and restated, effective as of January 11, 2016, which are incorporated herein by reference to Exhibit 3.2 to PepsiCo, Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 11, 2016.
Exhibit 1215
Computation of Ratio of Earnings to Fixed Charges.
Exhibit 15
Letter re: Unaudited Interim Financial Information.
Exhibit 31
Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 32
Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Exhibit 101The following materials from PepsiCo, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 8, 20187, 2019 formatted in XBRL (eXtensibleiXBRL (Inline eXtensible Business Reporting Language): (i) the Condensed Consolidated Statement of Income, (ii) the Condensed Consolidated Statement of Comprehensive Income, (iii) the Condensed Consolidated Statement of Cash Flows, (iv) the Condensed Consolidated Balance Sheet, (v) the Condensed Consolidated Statement of Equity, and (vi) Notes to the Condensed Consolidated Financial Statements.
Exhibit 104The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 7, 2019, formatted in iXBRL and contained in Exhibit 101.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
    
  
    PepsiCo, Inc.    
 
  (Registrant) 
    
Date:October 2, 20183, 2019/s/ Marie T. Gallagher 
  Marie T. Gallagher 
  Senior Vice President and Controller 
  (Principal Accounting Officer) 
    
Date:October 2, 20183, 2019/s/ David Yawman 
  David Yawman 
  Executive Vice President, Government Affairs, General Counsel and Corporate Secretary 
  (Duly Authorized Officer) 


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