What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-02-09 compared with 2022-02-10 · 715 added, 592 removed, 1914 unchanged (41% of the section changed)

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Results of Operations – Division Review 39

Results of Operations – Other Consolidated Results 43

Non-GAAP Measures 44

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Our Liquidity and Capital Resources 49

Material Changes in Line Items in Our Consolidated Financial Statements 52

Return on Invested Capital 54

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Executive Overview

PepsiCo is a leading global beverage and convenient food company with a complementary portfolio of brands, including Lays, Doritos, Cheetos, Gatorade, Pepsi-Cola, Mountain Dew, Quaker and SodaStream.

PepsiCo is a leading global beverage and convenient food company with a complementary portfolio of brands, including Lay’s, Doritos, Cheetos, Gatorade, Pepsi-Cola, Mountain Dew, Quaker and SodaStream.

As a global company with deep local ties, we faced many of the same challenges in 2021 as our consumers, customers, and competitors across the world, including the second year of the COVID-19 pandemic;

a worsening climate crisis;

supply chain disruptions;

As a global company with deep local ties, we faced many of the same challenges in 2022 as our consumers, customers, and competitors across the world, including supply chain disruptions;

inflationary pressures;

shifting consumer preferences and behaviors;

another year of the COVID-19 pandemic;

a worsening climate crisis;

a highly competitive operating environment;

a rapidly changing retail landscape, including the growth in e-commerce;

continued macroeconomic and political volatility;

continued macroeconomic and political volatility, including the deadly conflict in Ukraine;

and an evolving regulatory landscape.

To meet the challenges of today – and those of tomorrow – we are driven by an approach called PepsiCo Positive (pep+).

pep+ is a strategic end-to-end transformation of our business, with sustainability at the center of how the company will strive to create growth and value by operating within planetary boundaries and inspiring positive change for the planet and people.

pep+ will guide how we will work to transform our business operations, from sourcing ingredients and making and selling products in a more sustainable way, to leveraging our more than one billion connections with consumers each day to take sustainability mainstream and engage people to make choices that are better for themselves and the planet.

To meet the challenges of today – and those of tomorrow – we are driven by an approach called pep+ (PepsiCo Positive).

pep+ is a strategic end-to-end transformation of our business, with sustainability and human capital at the center of how the company will strive to create growth and value by operating within planetary boundaries and inspiring positive change for the planet and people.

pep+ guides how we are working to transform our business operations, from sourcing ingredients and making and selling products in a more sustainable way, to leveraging our more than one billion connections with consumers each day to take sustainability mainstream and engage people to make choices that are better for themselves and the planet.

pep+ drives action and progress across three key pillars, bringing together a number of industry-leading 2030 sustainability goals under a comprehensive framework:

• Positive Agriculture :

We are working to spread regenerative practices to restore the Earth across land equal to the company's entire agricultural footprint (approximately 7 million acres), sustainably source key crops and ingredients, and improve the livelihoods of more people in our agricultural supply chain.

We are working to spread regenerative practices to restore the earth across seven million acres of land, an area approximately equal to our entire agricultural footprint, sustainably source key crops and ingredients, and improve the livelihoods of more people in our agricultural supply chain.

In 2022, we elevated a number of external strategic partnerships and key engagements with this focus, including a partnership with Archer Daniels Midland Company (ADM) to scale regenerative agriculture across our shared supply chains, up to 2 million acres;

a research agreement with MIT to develop a more precise measurement of the greenhouse gas impact of regenerative agriculture practices;

a strategic engagement with Corteva focused on agriculture sustainability, new substrates, and affordability in food corn and vegetable oils;

and a joint effort with a start-up called N-Drip to scale advantaged micro irrigation technology that can provide water-saving, crop-enhancing benefits to farmers around the world.

• Positive Value Chain :

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and introduce more sustainable packaging into the value chain.

Our packaging goals include cutting virgin plastic per serving, using recycled content in our plastic packaging, and scaling our SodaStream business globally, an innovative platform that almost entirely eliminates the need for beverage packaging, among other levers.

Additionally, we are making progress on our diversity, equity and inclusion journey.

And we have introduced a new global workforce volunteering program, One Smile at a

Time, to encourage, support and empower each one of our approximately 309,000 employees to make positive impacts in their local communities.

Our packaging goals include cutting virgin plastic per serving, using more recycled content in our plastic packaging, and scaling our SodaStream business globally, potentially eliminating the need for more than 200 billion plastic bottles by 2030.

In 2022, we also announced a new global packaging goal intended to double the percentage of all beverage servings delivered through reusable models from 10% to 20% by 2030.

Additionally, we are making progress on our diversity, equity and inclusion journey around the world.

And we continue to empower each one of our approximately 315,000 employees to make a positive impact in their communities through our global workforce volunteering program, One Smile at a Time.

• Positive Choices :

We continue working to evolve our portfolio of beverage and convenient food products so that they are better for the planet and people, including by incorporating more diverse ingredients in both new and existing food products that are better for the planet and/or deliver nutritional benefits, prioritizing chickpeas, plant-based proteins and whole grains;

expanding our position in the nuts & seeds category, where PepsiCo is already the global branded leader, including leadership positions in Mexico, China and several Western European markets;

and accelerating our reduction of added sugars and sodium through the use of science-based targets across our portfolio and cooking our food offerings with healthier oils.

We are also continuing to scale new business models that require little or no single-use packaging, including SodaStream – an icon of a Positive Choice and the largest sparkling water brand in the world by volume.

SodaStream, already sold in more than 40 countries, and its new SodaStream Professional platform is expected to expand into functional beverages and reach additional markets by the end of 2022, part of the brand's effort to help consumers avoid plastic bottles.

We continue working to evolve our portfolio of convenient food & beverage products so that they are better for the planet and people, including by incorporating more diverse ingredients in both new and existing products, prioritizing chickpeas, plant-based proteins and whole grains;

expanding our position in the nuts & seeds category;

accelerating our reduction of added sugars and sodium through the use of science-based targets across our portfolio;

and offering more products with healthier oils.

We are also continuing to scale new business models that require little or no single-use packaging, including the iconic SodaStream, already sold in more than 45 countries, and the new SodaStream Professional platform, allowing users to personalize their choices in reusable containers at home or on the go.

We believe these priorities will position our Company for long-term sustainable growth.

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Our Operations

Business” for information on our divisions and a description of our distribution network, ingredients and other supplies, brands and intellectual property rights, seasonality, customers, competition and human capital.

In addition, see Note 1 to our consolidated financial statements for financial information about our divisions and geographic areas.

Other Relationships

Certain members of our Board of Directors also serve on the boards of certain vendors and customers.

Certain members of our Board also serve on the boards of certain vendors and customers.

These Board members do not participate in our vendor selection and negotiations nor in our customer negotiations.

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Our Business Risks

Our global operations continue to expose us to risks associated with the COVID-19 pandemic, which continues to result in challenging operating environments and has affected almost all of the more than 200 countries and territories in which our products are made, manufactured, distributed or sold.

Numerous measures have been implemented around the world to try to reduce the spread of the virus, including travel bans and restrictions, quarantines, curfews, restrictions on public gatherings, shelter in place and safer-at-home orders, business shutdowns and closures.

These measures have impacted and will continue to impact us, our customers (including foodservice customers), consumers, employees, bottlers, contract manufacturers, distributors, joint venture partners, suppliers and other third parties with whom we do business, which may continue to result in changes in demand for our products, increases in operating costs (whether as a result of changes to our supply chain or increases in employee costs, including expanded benefits and frontline incentives, costs associated with the provision of personal protective equipment and increased sanitation, or otherwise), or adverse impacts to our supply chain through labor shortages, raw

material shortages or reduced availability of air or other commercial transport, port closures or border restrictions, any of which can impact our ability to make, manufacture, distribute and sell our products.

In addition, measures that impact our ability to access our offices, plants, warehouses, distribution centers or other facilities, or that impact the ability of our business partners to do the same or the inability of a significant portion of our or our business partners’ workforce to work because of illness, absenteeism, quarantine, vaccine mandates, or travel or other governmental restrictions, may continue to impact the availability or productivity of our and their employees, many of whom are not able to perform their job functions remotely.

Public concern regarding the risk of contracting COVID-19 has impacted and may continue to impact demand from consumers, including due to consumers not leaving their homes or leaving their homes less often than they did prior to the start of the pandemic or otherwise shopping for and consuming food and beverage products in a different manner than they historically have or because some of our consumers have lower discretionary income due to unemployment or reduced or limited work as a result of measures taken in response to the pandemic.

Even as governmental restrictions are relaxed and economies gradually, partially, or fully reopen in certain of these jurisdictions and markets, the ongoing economic impacts and health concerns associated with the pandemic may continue to affect consumer behavior, spending levels and shopping and consumption preferences.

Changes in consumer purchasing and consumption patterns may increase demand for our products in one quarter, resulting in decreased demand for our products in subsequent quarters, or in a lower-margin sales channel resulting in potentially reduced profit from sales of our products.

We continue to see shifts in product and channel preferences as markets move through varying stages of restrictions and re-opening at different times, including changes in at-home consumption, in immediate consumption and away-from-home channels, such as convenience and gas and foodservice.

In addition, we continue to see an increase in demand in the e-commerce and online-to-offline channels and any failure to capitalize on this demand could adversely affect our ability to maintain and grow sales or category share and erode our competitive position.

Any reduced demand for our products or change in consumer purchasing and consumption patterns, as well as continued economic uncertainty (including supply chain disruptions and labor shortages), can adversely affect our customers’ and business partners’ financial condition, which can result in bankruptcy filings and/or an inability to pay for our products, reduced or canceled orders of our products, continued or additional closing of restaurants, stores, entertainment or sports complexes, schools or other venues in which our products are sold, or reduced capacity at any of the foregoing, or our business partners’ inability to supply us with ingredients or other items necessary for us to make, manufacture, distribute or sell our products.

Such adverse changes in our customers’ or business partners’ financial condition have also resulted and may continue to result in our recording additional charges for our inability to recover or collect any accounts receivable, owned or leased assets, including certain foodservice and vending and other equipment, or prepaid expenses.

In addition, continued economic uncertainty associated with the COVID-19 pandemic has resulted in volatility in the global capital and credit markets which can impair our ability to access these markets on terms commercially acceptable to us, or at all.

While we have developed and implemented and continue to develop and implement health and safety protocols, business continuity plans and crisis management protocols in an effort to mitigate the negative impact of COVID-19 to our employees and our business, the extent of the impact of the pandemic on our business and financial results will continue to depend on numerous evolving factors that we are not able to accurately predict and which will vary by jurisdiction and market, including the duration and scope of the pandemic, the emergence and spread of new variants of the virus, including the omicron and delta variants, the development and availability of effective treatments and vaccines, the speed at which vaccines are administered, the efficacy of vaccines against the virus and evolving strains or variants of the virus, global economic conditions during and after the pandemic, governmental actions that have been

taken, or may be taken in the future, in response to the pandemic and changes in consumer behavior in response to the pandemic, some of which may be more than just temporary.

Risks Associated with Commodities and Our Supply Chain

During 2022, we continued to experience significantly higher operating costs, including on transportation, labor and commodity (including energy) costs, which we expect to continue in 2023.

Many of the commodities used in the production and transportation of our products are purchased in the open market.

The prices we pay for such items are subject to fluctuation, and we manage this risk through the use of fixed-price contracts and purchase orders, pricing agreements and derivative instruments, including swaps and futures.

During 2021, we experienced higher than anticipated transportation and commodity costs, which we expect to continue in 2022.

A number of external factors, including the COVID-19 pandemic, adverse weather conditions, supply chain disruptions (including raw material shortages) and labor shortages, have impacted and may continue to impact transportation and commodity availability and costs.

A number of external factors, including the deadly conflict in Ukraine, the COVID-19 pandemic, the inflationary cost environment, adverse weather conditions, supply chain disruptions

(including raw material shortages) and labor shortages, have impacted and may continue to impact transportation, labor and commodity availability and costs.

When prices increase, we may or may not pass on such increases to our customers without suffering reduced volume, revenue, margins and operating results.

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Certain jurisdictions in which our products are made, manufactured, distributed or sold have either imposed, or are considering imposing, new or increased legal and regulatory requirements to reduce or mitigate the potential effects of climate change, including regulation of greenhouse gas emissions and potential carbon pricing programs.

These new or increased legal or regulatory requirements could result in significant increased costs of compliance and additional investments in facilities and equipment.

These new or increased legal or regulatory requirements, along with initiatives to meet our sustainability goals, could result in significant increased costs and additional investments in facilities and equipment.

However, we are unable to predict the scope, nature and timing of any new or increased environmental laws and regulations and therefore cannot predict the ultimate impact of such laws and regulations on our business or financial results.

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During the periods presented in this report, certain jurisdictions in which our products are made, manufactured, distributed or sold, including in certain developing and emerging markets, operated in a challenging environment, experiencing unstable economic, political and social conditions, civil unrest, natural disasters, debt and credit issues and currency controls or fluctuations.

We continue to monitor the economic, operating and political environment in these markets closely and to identify actions to potentially mitigate any unfavorable impacts on our future results.

We continue to monitor the economic, operating and political environment in these markets closely, including risks of additional impairments or write-offs, and to identify actions to potentially mitigate any unfavorable impacts on our future results.

See Notes 1 and 4 to our consolidated financial statements for a discussion of impairment charges recognized in the year ended December 31, 2022 .

Risks Associated with the Deadly Conflict in Ukraine

In addition to the risks associated with international operations discussed above, we continue to face risks associated with the deadly conflict in Ukraine.

The conflict has continued to result in worldwide geopolitical and macroeconomic uncertainty, and certain of our operations in Ukraine remain suspended.

We have suspended sales to our customers of Pepsi-Cola and certain of our other global beverage brands, our discretionary capital investments and advertising and promotional activities in Russia, which has negatively impacted and could continue to negatively impact our business.

We continue to offer our other products in Russia.

Our operations in Russia accounted for 5% and 4% of our consolidated net revenue for the year ended December 31, 2022 and December 25, 2021, respectively.

Russia accounted for 4% and 5% of our consolidated assets, including 9% and 1% of our consolidated cash and cash equivalents, and 32% and 35% of our accumulated currency translation adjustment loss as of December 31, 2022 and December 25, 2021, respectively.

Our operations in Ukraine accounted for 0.2% and 0.5% of our consolidated net revenue for the year ended December 31, 2022 and December 25, 2021, respectively.

Ukraine accounted for 0.1% and 0.3% of our consolidated assets as of December 31, 2022 and December 25, 2021, respectively.

The conflict has resulted and could continue to result in volatile commodity markets, supply chain disruptions, increased risk of cyber incidents or other disruptions to our information systems, reputational risks, heightened risks to employee safety, business disruptions (including labor shortages), significant volatility of the Russian ruble, limitations on access to credit markets and other corporate banking services, including working capital facilities, reduced availability and increased costs for transportation, energy, packaging, raw materials and other input costs, environmental, health and safety risks related to securing and maintaining facilities, additional sanctions, export controls and other legislation or regulations (including restrictions on the transfer of funds to and from Russia).

The ongoing conflict could result in the temporary or permanent loss of assets or additional impairment charges.

We cannot predict how and the extent to which the conflict will continue to affect our employees, customers, operations or business partners or our ability to achieve certain of our sustainability goals.

The conflict has adversely affected and could continue to adversely affect demand for our products and our global business.

See Notes 1 and 4 to our consolidated financial statements for a discussion of the Russia-Ukraine conflict charges, including i mpairment charges, recognized in the year ended December 31, 2022 .

The extent of the impact of these tragic events on our business remains uncertain and will continue to depend on numerous evolving factors that we are not able to accurately predict, including the duration and scope of the conflic t, regional instability and ongoing and additional financial and economic sanctions, export controls and other legislation imposed by governments.

We will continue to monitor and assess the situation as circumstances evolve and to identify actions to potentially m itigate any unfavorable impacts on our future results.

Imposition of Taxes and Regulations on our Products

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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).

In addition, COVID-19 has resulted in increased regulatory focus on labeling in certain jurisdictions, including in Mexico which enacted product labeling requirements and limitations on the marketing of certain of our products as a result of ingredients or substances contained in such products.

Further, some regulations apply to all products using certain types of packaging (e.g., plastic), while others are designed to increase the sustainability of packaging,

encourage waste reduction and increased recycling rates or facilitate the waste management process or restrict the sale of products in certain packaging.

Further, some regulations apply to all products using certain types of packaging (e.g., plastic), while others are designed to increase the sustainability of packaging, encourage waste reduction and increased recycling rates or facilitate the waste management process or restrict the sale of products in certain packaging.

We sell a wide variety of beverages and convenient foods in more than 200 countries and territories and the profile of the products we sell, the amount of revenue attributable to such products and the type of packaging used vary by jurisdiction.

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Retail Landscape

Our industry continues 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 have seen and expect to continue to see a further shift to e-commerce, online-to-offline and other online purchasing by consumers, including as a result of the COVID-19 pandemic.

Our industry continues to be affected by disruption of the retail landscape, including the continued 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 have seen and expect to continue to see a further shift to e-commerce, online-to-

offline and other online purchasing by consumers, including as a result of the COVID-19 pandemic.

We continue to monitor changes in the retail landscape and seek to identify actions we may take to build our global e-commerce and digital capabilities, such as expanding our direct-to-consumer business, and distribute our products effectively through all existing and emerging channels of trade and potentially mitigate any unfavorable impacts on our future results.

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Risk Management Framework

The achievement of our strategic and operating objectives involves taking risks and that those risks may evolve over time.

To identify, assess, prioritize, address, manage, monitor and communicate these risks across the Company’s operations, we leverage an integrated risk management framework.

The achievement of our strategic and operating objectives involves risks, many of which evolve over time.

To identify, assess, prioritize, address, manage, monitor and communicate these risks across the Company’s operations and foster a corporate culture of integrity and risk awareness, we leverage an integrated risk management framework.

This framework includes the following:

• PepsiCo’s Board of Directors has oversight responsibility for PepsiCo’s integrated risk management framework.

• PepsiCo’s Board has oversight responsibility for PepsiCo’s integrated risk management framework.

One of the Board’s primary responsibilities is overseeing and interacting with senior management with respect to key aspects of the Company’s business, including risk assessment and risk mitigation of the Company’s top risks.

The Board receives updates on key risks throughout the year, including risks related to food safety and cybersecurity.

During 2021, in addition to COVID-19 discussions as part of risk updates to the Board and the relevant Committees, the Board was provided with updates on COVID-19’s impact to our business, financial condition and operations through memos, teleconferences or other appropriate means of communication.

In addition, the Board has tasked designated Committees of the Board with oversight of certain categories of risk management, and the Committees report to the Board regularly on these matters.

◦ The Audit Committee of the Board reviews and assesses the guidelines and policies governing PepsiCo’s risk management and oversight processes, and assists the Board’s oversight of financial, compliance and employee safety risks facing PepsiCo;

Throughout the year, the Board and relevant Committees of the Board receive updates from management with respect to various enterprise risk management issues and dedicate a portion of their meetings to reviewing and discussing specific risk topics in greater detail, including risks related to cybersecurity, food safety, sustainability, human capital management (including diversity, equity and inclusion) and supply chain and commodity inflation.

The Board receives and provides feedback on regular updates from management regarding the Company’s top risks, including updates from members of management responsible for overseeing impacted areas (for example, the Global Chief Information Officer and Chief Information Security Officer), governance processes associated with managing these risks, the status of projects to strengthen the Company’s risk mitigation efforts and recent incidents impacting the industry and threat landscape.

Given that cybersecurity risks can impact various areas of responsibility of the Committees of the Board, the Board believes it is useful and effective for the full Board to maintain direct oversight over cybersecurity matters.

In evaluating top risks, the Board and management consider short-, medium- and long-term potential impacts on the Company’s business, financial condition and results of operations, including looking at the internal and external environment when evaluating risks, risk amplifiers and emerging trends, and considers the risk horizon as part of prioritizing the Company’s risk mitigation efforts.

The Board receives updates through presentations, memos and other written materials, teleconferences and other appropriate means of communication, with numerous opportunities for discussion and feedback, and continuously evaluates its approach in addressing top risks as circumstances evolve.

For example, as part of risk updates to the Board and relevant Committees during 2022, the Board or its relevant Committee were provided updates on the impact of disruptive events, such as the Russia-Ukraine conflict, COVID-19 and supply chain disruption and commodity inflation.

The Board also receives periodic updates from external experts and advisers on global macroeconomic trends and conditions that may impact the Company’s strategy and financial performance, including geopolitical conflicts, economic instability, labor market trends, changing consumer behavior, retail disruption and digitalization.

The Board has tasked designated Committees of the Board with oversight of certain categories of risk management, and the Committees report to the Board regularly on these matters.

◦ The Audit Committee of the Board reviews and assesses the guidelines and policies governing PepsiCo’s risk management and oversight processes, and assists the Board’s

oversight of financial, compliance and employee safety risks facing PepsiCo.

The Audit Committee also assists the Board’s oversight of the Company’s compliance with legal and regulatory requirements and the Chief Compliance & Ethics Officer, who reports to the General Counsel, meets regularly with the Audit Committee, including in executive session without management present;

◦ The Compensation Committee of the Board reviews PepsiCo’s employee compensation policies and practices to assess whether such policies and practices could lead to unnecessary risk-taking behavior;

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◦ The Sustainability, Diversity and Public Policy Committee of the Board assists the Board in its oversight of PepsiCo’s policies, programs and related risks that concern key sustainability (including climate change), diversity, equity and inclusion, and public policy matters.

• The PepsiCo Risk Committee (PRC), which is comprised of a cross-functional, geographically diverse, senior management group, including PepsiCo’s Chairman of the Board of Directors and Chief Executive Officer, meets regularly to identify, assess, prioritize and address top strategic, financial, operating, compliance, safety, reputational and other risks.

• The PepsiCo Risk Committee (PRC) meets regularly to identify, assess, prioritize and address top strategic, financial, operating, compliance, safety, reputational and other risks.

The PRC is also responsible for reporting progress on our risk mitigation efforts to the Board.

The PRC is comprised of a cross-functional, geographically diverse, senior management group, including PepsiCo’s Chairman of the Board of Directors and Chief Executive Officer, Chief Financial Officer, General Counsel, Sector Chief Executive Officers and the heads of Corporate Affairs, Human Resources, Research & Development, Information Technology, Sustainability, Strategy, Transformation, International Beverages, Commercial, Global Operations, Marketing and Financial Planning & Analysis;

• Division and key market risk committees, comprised of cross-functional senior management teams, meet regularly to identify, assess, prioritize and address division and country-specific business risks;

• PepsiCo’s Risk Management Office, which manages the overall risk management process, provides ongoing guidance, tools and analytical support to the PRC and the division and key country risk committees, identifies and assesses potential risks and facilitates ongoing communication between the parties, as well as with PepsiCo’s Board of Directors, the Audit Committee of the Board and other Committees of the Board;

• PepsiCo’s Corporate Audit Department evaluates the ongoing effectiveness of our key internal controls through periodic audit and review procedures;

• PepsiCo’s Risk Management Office, which manages the overall risk management process, provides ongoing guidance, tools and analytical support to the PRC and the division and key country risk committees, identifies and assesses potential risks and facilitates ongoing communication between the parties, as well as with PepsiCo’s Board, the Audit Committee of the Board and other Committees of the Board;

• PepsiCo’s Internal Audit Department evaluates the ongoing effectiveness of our key internal controls through periodic audit and review procedures;

• PepsiCo’s Compliance & Ethics and Law Departments lead and coordinate our compliance policies and practices.

• PepsiCo’s Disclosure Committee, comprised of the General Counsel, Controller and heads of Internal Audit, Financial Planning & Analysis and Investor Relations, evaluates information from PepsiCo’s integrated risk management framework as part of the Disclosure Committee’s monitoring of the integrity and effectiveness of the Company’s disclosure controls and procedures.

PepsiCo’s risk oversight processes and disclosure controls and procedures are designed to appropriately escalate key risks to the Board as well as to analyze potential risks for disclosure.

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

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See Note 9 to our consolidated financial statements for further discussion of these derivatives and our hedging policies.

See “Our Critical Accounting Policies and Estimates” for a discussion of the exposure of our pension and retiree medical plan assets and liabilities to risks related to market fluctuations.

The fair value of our indefinite-lived intangible assets is impacted by changes in market conditions, including interest rates and inflationary, deflationary and recessionary conditions.

See “Our Critical Accounting Policies and Estimates” for a discussion of the exposure of our goodwill and other intangible assets and pension and retiree medical plan assets and liabilities to risks related to market fluctuations.

Inflationary, deflationary and recessionary conditions impacting these market risks also impact the demand for and pricing of our products.

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Additionally, we are exposed to foreign exchange risk from net investments in foreign subsidiaries, foreign currency purchases, foreign currency assets and liabilities created in the normal course of business.

During 2021, favorable foreign exchange contributed 1 percentage point to net revenue growth, primarily due to appreciation in the Mexican peso, Canadian dollar and South African rand.

During 2022, unfavorable foreign exchange reduced net revenue growth by 3 percentage points, primarily due to declines in the Turkish lira, euro, Egyptian pound, British pound sterling and South African rand, partially offset by an appreciation of the Russian ruble.

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, 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 new or increased tariffs or sanctions or other impositions in or related to these international markets may, result in challenging operating environments.

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, Mexico, the Middle East, Russia, Turkey and Ukraine, and currency controls or fluctuations in certain of these international markets, continue to, and the threat or imposition of new or increased tariffs or sanctions or other impositions in or related to these international markets may, result in challenging operating environments.

Our foreign currency derivatives had a total notional value of $3.0 billion as of December 31, 2022 and $2.8 billion as of December 25, 2021.

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We believe volume provides additional information to facilitate the comparison of our historical operating performance and underlying trends, and provides additional transparency on how we evaluate our business because it measures demand for our products at the consumer level.

Beginning in 2022, unit volume growth adjusts for the impacts of acquisitions, divestitures and other structural changes.

Further, our fiscal 2022 results include an additional week (53 rd reporting week).

Unit volume growth excludes the impact of the 53 rd reporting week.

Beverage volume includes volume of concentrate sold to independent bottlers and volume of finished products bearing company-owned or licensed trademarks and allied brand products and joint venture trademarks sold by company-owned bottling operations.

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PBNA, LatAm, Europe, AMESA and APAC, either independently or in conjunction with third parties, make, market, distribute and sell ready-to-drink tea products through a joint venture with Unilever (under the Lipton brand name), and PBNA, either independently or in conjunction with third parties, makes, markets, distributes and sells ready-to-drink coffee products through a joint venture with Starbucks.

In addition, APAC licenses the Tropicana brand for use in China on co-branded juice products in connection with a strategic alliance with Tingyi.

Convenient food volume includes volume sold by our subsidiaries and noncontrolled affiliates of convenient food products bearing company-owned or licensed trademarks.

Convenient food volume includes volume sold by us and our noncontrolled affiliates of convenient food products bearing company-owned or licensed trademarks.

Internationally, we measure convenient food product volume in kilograms, while in North America we measure convenient food product volume in pounds.

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See “Results of Operations – Division Review” for a tabular presentation and discussion of key drivers of net revenue.

Operating profit grew 11% and operating margin declined 0.3 percentage points.

Operating profit growth was primarily driven by net revenue growth and productivity savings, partially offset by certain operating cost increases, a 14-percentage-point impact of higher commodity costs, and higher advertising and marketing expenses.

The operating margin decline primarily reflects higher commodity costs.

Lower charges taken as a result of the COVID-19 pandemic compared to the prior year contributed 6 percentage points to operating profit growth.

Additionally, lower acquisition and divestiture-related charges included in “Items Affecting Comparability” contributed 3 percentage points to operating profit growth.

Operating profit grew 3% while operating margin declined 0.7 percentage points.

Operating profit growth was primarily driven by net revenue growth and productivity savings, partially offset by certain operating cost increases and a 42-percentage-point impact of higher commodity costs.

The loss of net revenue due to the Juice Transaction reduced operating profit growth by 3 percentage points and was partially offset by a 1-percentage-point contribution from the 53 rd reporting week.

Operating profit growth also reflects a 13-percentage-point unfavorable impact of impairment charges related to certain indefinite-lived intangible assets due to an increase in the weighted-average cost of capital as well as our most current estimates of future financial performance (other impairment charges), a 12-percentage-point unfavorable impact of the charges associated with the Russia-Ukraine conflict and a 6-percentage-point unfavorable impact of impairment on intangible assets, investment and property, plant and equipment and other charges as a result of management’s decision to reposition or discontinue the sale/distribution of certain brands and to sell an investment (brand portfolio impairment charges).

These impacts were partially offset by a 29-percentage-point contribution from the gain associated with the Juice Transaction.

The operating margin decline primarily reflects the unfavorable impacts of other impairment charges, the charges associated with the Russia-Ukraine conflict and the brand portfolio impairment charges, partially offset by the gain associated with the Juice Transaction.

Juice Transaction

In the first quarter of 2022, we sold our Tropicana, Naked and other select juice brands to PAI Partners, while retaining a 39% noncontrolling interest in a newly formed joint venture that will operate across North America and Europe.

In the first quarter of 2022, we sold our Tropicana, Naked and other select juice brands to PAI Partners, while retaining a 39% noncontrolling interest in TBG, operating across North America and Europe.

These juice businesses delivered approximately $3 billion in net revenue in 2021.

In the U.S., PepsiCo acts as the exclusive distributor for the new joint venture’s portfolio of brands for small-format and foodservice customers with chilled direct-store-delivery.

In the United States, PepsiCo acts as the exclusive distributor for TBG’s portfolio of brands for small-format and foodservice customers with chilled DSD.

See Note 13 to our consolidated financial statements for further information.

Other Consolidated Results

2022 2021 Change

Other pension and retiree medical benefits income $ 132 $ 522 $ (390)

Net interest expense and other $ (939) $ (1,863) $ 924

Annual tax rate 16.1 % 21.8 %

Net income attributable to PepsiCo $ 8,910 $ 7,618 17 %

Net income attributable to PepsiCo per common share – diluted $ 6.42 $ 5.49 17 %

Other pension and retiree medical benefits income decreased $390 million, primarily due to higher settlement losses compared to the prior year.

Net interest expense and other decreased $924 million, reflecting the prior-year charge of $842 million related to our cash tender offers, higher interest rates on average cash balances and lower average debt balances, partially offset by losses on the market value of investments used to economically hedge a portion of our deferred compensation liability and higher interest rates on debt.

The reported tax rate decreased 5.7 percentage points, primarily reflecting the impact of the Juice Transaction and adjustments to reserves for uncertain tax positions as a result of the Internal Revenue Service (IRS) audit.

Results of Operations — Division Review

1 unchanged sentence

Generally Accepted Accounting Principles (GAAP).

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 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.

Additionally, “acquisitions and divestitures” reflect mergers and acquisitions activity, as well as divestitures and other structural changes, including changes in ownership or control in consolidated subsidiaries and nonconsolidated equity investees.

3 unchanged sentences

Impact of Impact of

% Change, GAAP Measure Foreign exchange translation Acquisitions and divestitures Organic

% Change, GAAP Measure Foreign exchange translation Acquisitions and divestitures 53 rd reporting week

% Change, Non-GAAP Measure (a )

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(a) Amounts may not sum due to rounding.

(b) Excludes the impact of acquisitions and divestitures, including the impact of an extra month of volume for our acquisitions of Pioneer Food Group Ltd.

(Pioneer Foods) in our AMESA division and Hangzhou Haomusi Food Co., Ltd.

(Be & Cheery) in our APAC division as we aligned the reporting calendars of these acquisitions with those of our divisions.

In certain instances, the impact of organic volume growth on net revenue growth differs from the unit volume growth disclosed in the following divisional discussions due to the impacts of acquisitions and divestitures, product mix, nonconsolidated joint venture volume, and, for our beverage businesses, temporary timing differences between BCS and CSE.

Our net revenue excludes nonconsolidated joint venture volume, and, for our franchise-owned beverage businesses, is based on CSE.

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.

(b) Excludes the impact of acquisitions, divestitures and other structural changes and the 53 rd reporting week.

In certain instances, the impact of organic volume growth on net revenue growth differs from the unit volume growth disclosed in the following divisional discussions due to the impacts of product mix, nonconsolidated joint venture volume, and, for our franchise-owned beverage businesses, temporary timing differences between BCS and CSE.

We report net revenue from our franchise-owned beverage businesses based on CSE.

The volume sold by our nonconsolidated joint ventures has no direct impact on our net revenue.

Operating Profit/(Loss), Operating Profit/(Loss) Adjusted for Items Affecting Comparability and Operating Profit/(Loss) Performance Adjusted for Items Affecting Comparability on a Constant Currency Basis

Operating profit/(loss) adjusted for items affecting comparability and operating profit/(loss) performance 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

Operating Profit/(Loss) and Operating Profit/(Loss) Adjusted for Items Affecting Comparability

Items Affecting Comparability (a)

Reported, GAAP Measure (b)

Mark-to-market net impact Restructuring and impairment charges Acquisition and divestiture-related charges (c)

Mark-to-market net impact Restructuring and impairment charges Acquisition and divestiture-related charges Gain associated with the Juice Transaction Impairment and other charges Core,

Non-GAAP Measure (b)

$ 5,633 $ — $ 28 $ 2 $ 5,663

578 — — — 578

2,442 — 20 11 2,473

1,369 — 37 — 1,406

1,292 — 81 8 1,381

858 — 15 10 883

673 — 7 4 684

FLNA $ 6,135 $ — $ 46 $ — $ — $ 88 $ 6,269

QFNA 604 — 7 — — — 611

PBNA 5,426 — 68 51 (3,029) 160 2,676

LatAm 1,627 — 32 — — 71 1,730

Europe (1,380) — 109 14 (292) 2,932 1,383

AMESA 666 — 12 3 — 190 871

APAC 537 — 16 — — 177 730

Corporate unallocated expenses (2,103) 62 90 6 — — (1,945)

(1,683) 19 49 (39) (1,654)

Total $ 11,512 $ 62 $ 380 $ 74 $ (3,321) $ 3,618 $ 12,325

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(a) See “Items Affecting Comparability.”

(b) Includes the charges taken as a result of the COVID-19 pandemic.

(b) Includes charges taken as a result of the COVID-19 pandemic.

See Note 1 to our consolidated financial statements for further information.

(c) The income amounts primarily relate to gains associated with the contingent consideration in connection with our acquisition of Rockstar Energy Beverages (Rockstar).

In 2021, this impact is partially offset by divestiture-related charges associated with the Juice Transaction.

(c) In 2021, income amount primarily relates to gains associated with the contingent consideration in connection with our acquisition of Rockstar Energy Beverages (Rockstar).

This impact is partially offset by divestiture-related charges associated with the Juice Transaction.

See Note 13 to our consolidated financial statements for further information.

Operating Profit Growth and Operating Profit Growth Adjusted for Items Affecting Comparability on a Constant Currency Basis

Operating Profit/(Loss) Performance and Operating Profit/(Loss) Performance Adjusted for Items Affecting Comparability on a Constant Currency Basis

Impact of Items Affecting Comparability (a)

Reported % Change, GAAP Measure Mark-to-market net impact Restructuring and impairment charges Acquisition and divestiture-related charges Core

Reported % Change, GAAP Measure Mark-to-market net impact Restructuring and impairment charges Acquisition and divestiture-related charges Gain associated with the Juice Transaction Impairment and other charges Core

% Change, Non-GAAP Measure (b)

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% Change, Non-GAAP Measure (b)

5.5 % — (1) (0.5) 4 % — 3 %

(14) % — (0.5) — (14) % — (14) %

26 % — (2) (4) 21 % (1) 20 %

33 % — — — 32 % (4.5) 28 %

(4.5) % — 2.5 1 (1.5) % (1.5) (3) %

43 % — — (31) 12 % (2) 10 %

14 % — 1 (1.5) 14 % (3) 10 %

FLNA 9 % — — — — 1.5 11 % — 11 %

QFNA 4.5 % — 1 — — — 6 % — 6 %

PBNA 122 % — 2 2 (124) 7 8 % — 9 %

LatAm 19 % — — — — 4.5 23 % — 23 %

Europe (207) % — 2 0.5 (23) 228 — % 7 7 %

AMESA (22) % — — (1) — 23 (1) % 9 7 %

APAC (20) % — 1 (0.5) — 26 7 % 4 11 %

Corporate unallocated expenses 25 % (2.5) (2) (2.5) — — 18 % — 18 %

17 % (7) (1) 1 10 % — 10 %

Total 3 % — 1 1 (29) 31 8 % 2 10 %

(a) See “Items Affecting Comparability” for further information.

(a) See “Items Affecting Comparability.”

(b) Amounts may not sum due to rounding.

Net revenue grew 8%, primarily driven by effective net pricing and organic volume growth.

Unit volume grew 2%, primarily reflecting double-digit growth in variety packs and the impact of our BFY Brands, Inc.

(BFY Brands) acquisition in the first quarter of 2020, partially offset by a low-single-digit decline in trademark Tostitos and a double-digit decline in trademark Santitas.

Operating profit increased 5.5%, primarily reflecting the net revenue growth, productivity savings and a 3-percentage-point impact of lower charges taken as a result of the COVID-19 pandemic.

These impacts were partially offset by certain operating cost increases, including strategic initiatives and incremental transportation costs, and a 4-percentage-point impact of higher commodity costs, primarily packaging material and cooking oil.

Net revenue grew slightly and unit volume declined 7%.

The net revenue growth reflects effective net pricing and a 1-percentage-point impact of favorable foreign exchange, largely offset by a decrease in organic volume.

The unit volume decline was primarily driven by double-digit declines in pancake syrups and mixes and in ready-to-eat cereals and a high-single-digit decline in oatmeal, partially offset by growth in Cheetos macaroni and cheese, which was introduced in the third quarter of 2020, and double-digit growth in lite snacks.

Operating profit declined 14%, primarily reflecting certain operating cost increases, including incremental transportation costs, and an 8-percentage-point impact of higher commodity costs, partially offset by productivity savings.

The impact of the COVID-19 pandemic contributed to a current-year decrease in consumer demand, which had a negative impact on net revenue, unit volume and operating profit performance compared to the significant COVID-19 related surge in consumer demand in the prior year.

Net revenue grew 19%, primarily driven by effective net pricing and a 2-percentage-point contribution from the 53 rd reporting week.

Unit volume decreased 1%, primarily reflecting a double-digit decline in our Sabra joint venture products and a low-single-digit decline in variety packs, partially offset by low-single-digit growth in trademark Doritos and double-digit growth in trademark Popcorners.

Operating profit increased 9%, primarily reflecting the effective net pricing and productivity savings.

These impacts were partially offset by certain operating cost increases, including strategic initiatives, a 17-percentage-point impact of higher commodity costs, primarily cooking oil, potatoes and seasoning, and higher advertising and marketing expenses.

Additionally, impairment charges associated with a baked fruit convenient food brand reduced operating profit growth by 1.5 percentage points (other impairment charges).

The 53 rd reporting week contributed 2 percentage points to operating profit growth.

Net revenue grew 15%, primarily driven by effective net pricing and a 2-percentage-point contribution from the 53 rd reporting week, partially offset by a decrease in organic volume.

Unit volume declined 3%, primarily reflecting mid-single-digit declines in oatmeal and ready-to-eat cereals and a high-single-digit decline in pancake syrups and mixes, partially offset by mid-single-digit growth in rice/pasta sides and low-single-digit growth in bars.

Operating profit grew 4.5%, primarily reflecting the effective net pricing and productivity savings.

These impacts were partially offset by a 37-percentage-point impact of higher commodity costs, primarily grains and packaging materials, certain operating cost increases, including incremental transportation costs, the decrease in organic volume and higher advertising and marketing expenses.

The 53 rd reporting week contributed 2 percentage points to operating profit growth.

Net revenue increased 4%, primarily driven by effective net pricing and an increase in organic volume.

Unit volume increased 6%, driven by a 7% increase in non-carbonated beverage (NCB) volume and a 4% increase in CSD volume.

The NCB volume increase primarily reflected double-digit increases in our

overall water portfolio and our energy portfolio, a low-single-digit increase in Gatorade sports drinks and a mid-single-digit increase in Lipton ready-to-drink teas.

Operating profit increased 26%, primarily reflecting the net revenue growth, a 15-percentage-point impact of lower charges taken as a result of the COVID-19 pandemic and productivity savings.

These impacts were partially offset by certain operating cost increases, including incremental transportation costs, an 18-percentage-point impact of higher commodity costs and higher advertising and marketing expenses.

Higher prior-year acquisition and divestiture-related charges contributed 4 percentage points to operating profit growth.

Changes in consumer behavior as a result of the COVID-19 pandemic contributed to a current-year increase in consumer demand, which had a positive impact on net revenue, unit volume and operating profit performance.

In 2020, we received a notice of termination without cause from Vital Pharmaceuticals, Inc., which would end our distribution rights of Bang Energy drinks, effective October 24, 2023.

The 53 rd reporting week contributed 2 percentage points to net revenue growth offset by a 9-percentage-point unfavorable impact of lower net revenue due to the Juice Transaction.

Unit volume grew slightly, driven by a 1% increase in our NCB volume, offset by a 1% decrease in CSD volume.

The NCB volume increase primarily reflected a mid-single-digit increase in Gatorade sports drinks, partially offset by a double-digit decrease in our energy portfolio.

Operating profit increased 122%, primarily reflecting a 124-percentage-point impact of the gain of $3.0 billion associated with the Juice Transaction, partially offset by a 2-percentage-point impact of related transaction costs.

Operating profit growth was also driven by the net revenue growth and productivity savings, partially offset by certain operating cost increases, including incremental transportation and information technology costs, and a 42-percentage-point impact of higher commodity costs, primarily aluminum and resin.

A current-year gain associated with the sale of an asset and the 53 rd reporting week contributed 6 percentage points and 2 percentage points, respectively, to operating profit growth.

Additionally, operating profit growth was reduced by a 15-percentage-point impact of the lower net revenue due to the Juice Transaction.

As a result of our decision to terminate the agreement with Vital Pharmaceuticals, Inc.

to distribute Bang energy drin ks, we recorded impairment and other related charges which reduced operating profit growth by 7 percentage points (brand portfolio impairment charges).

Net revenue increased 21%, primarily reflecting effective net pricing and organic volume growth.

Convenient foods unit volume grew 3.5%, primarily reflecting low-single-digit growth in Brazil and Mexico.

Beverage unit volume grew 8%, primarily reflecting double-digit growth in Argentina and Chile.

Additionally, Brazil experienced low-single-digit growth, Mexico experienced mid-single-digit growth and Guatemala experienced high-single-digit growth.

Operating profit increased 33%, primarily reflecting the net revenue growth, productivity savings and a 4.5-percentage-point impact of favorable foreign exchange.

These impacts were partially offset by certain operating cost increases, a 30-percentage-point impact of higher commodity costs and higher advertising and marketing expenses.

A current-year recognition of certain indirect tax credits in Brazil and lower charges taken as a result of the COVID-19 pandemic contributed 6 percentage points and 4 percentage points, respectively, to operating profit growth.

Net revenue increased 9%, primarily reflecting organic volume growth and effective net pricing.

Convenient foods unit volume grew 4%, primarily reflecting double-digit growth in Turkey and mid-single-digit growth in Russia and Poland, partially offset by a mid-single-digit decline in the United Kingdom.

Additionally, the Netherlands grew slightly and France experienced low-single-digit growth.

Beverage unit volume grew 8%, primarily reflecting double-digit growth in Russia, Turkey and the United Kingdom and high-single-digit growth in France, partially offset by a low-single-digit decline in Germany.

Operating profit decreased 4.5%, primarily reflecting certain operating cost increases, a 28-percentage-point impact of higher commodity costs and a 2.5-percentage-point impact each from higher restructuring and impairment charges and a gain on an asset sale in the prior year.

These impacts were partially offset by the net revenue growth and productivity savings.

Additionally, lower charges taken as a result of the COVID-19 pandemic and favorable settlements of promotional spending accruals compared to the prior

year positively contributed 5 percentage points and 3 percentage points, respectively, to operating profit performance.

Changes in consumer behavior as a result of the COVID-19 pandemic contributed to a current-year increase in consumer demand, which had a positive impact on net revenue and unit volume performance.

During the fourth quarter of 2021, the implementation of an Enterprise Resource Planning (ERP) system in the United Kingdom caused a temporary disruption to our United Kingdom operations which had a negative impact on net revenue, unit volume and operating profit performance.

These issues were largely resolved within the quarter and the business operations had resumed by year end.

Net revenue increased 33%, reflecting a 14-percentage-point impact of our Pioneer Foods acquisition, which included the impact of an extra month of net revenue compared to the prior year as we aligned Pioneer Foods’ reporting calendar with that of our AMESA division, as well as organic volume growth and effective net pricing.

Favorable foreign exchange contributed 4.5 percentage points to net revenue growth.

Convenient foods unit volume grew 38%, primarily reflecting a 35-percentage-point impact of our Pioneer Foods acquisition, which included the impact of an extra month of unit volume as we aligned Pioneer Foods’ reporting calendar with that of our AMESA division, double-digit growth in India and Pakistan and high-single-digit growth in the Middle East, partially offset by a low-single-digit decline in South Africa (excluding our Pioneer Foods acquisition).

Beverage unit volume grew 20%, primarily reflecting double-digit growth in India and Pakistan.

Additionally, the Middle East experienced double-digit growth and Nigeria experienced high-single-digit growth.

Operating profit increased 43%, primarily reflecting the net revenue growth, a 31-percentage-point impact of the prior-year acquisition and divestiture-related charges associated with our Pioneer Foods acquisition and productivity savings.

These impacts were partially offset by certain operating cost increases, a 13-percentage-point impact of higher commodity costs and higher advertising and marketing expenses.

Additionally, lower charges taken as a result of the COVID-19 pandemic and our Pioneer Foods acquisition contributed 3 percentage points and 2 percentage points, respectively, to operating profit growth.

Net revenue increased 34%, reflecting a 15-percentage-point impact of our Be & Cheery acquisition, which included the impact of an extra month of net revenue compared to the prior year as we aligned Be & Cheery’s reporting calendar with that of our APAC division, as well as organic volume growth, a 6- percentage-point impact of favorable foreign exchange and effective net pricing.

Convenient foods unit volume grew 19%, primarily reflecting a 16-percentage-point impact of our Be & Cheery acquisition, which included the impact of an extra month of unit volume as we aligned Be & Cheery’s reporting calendar with that of our APAC division, and double-digit growth in China (excluding our Be & Cheery acquisition) and Thailand.

Additionally, Australia, Indonesia and Taiwan each experienced low-single-digit growth.

Beverage unit volume grew 13%, primarily reflecting double-digit growth in China, partially offset by a low-single-digit decline in Vietnam.

Additionally, the Philippines experienced low-single-digit growth and Thailand experienced mid-single-digit growth.

Operating profit increased 14%, primarily reflecting the net revenue growth, productivity savings and a 2- percentage-point contribution from our Be & Cheery acquisition, partially offset by certain operating cost increases and higher advertising and marketing expenses.

Additionally, impairment charges associated with an equity method investment reduced operating profit growth by 3 percentage points.

Favorable foreign exchange contributed 3 percentage points to operating profit growth.

Other Consolidated Results

2021 2020 Change

Other pension and retiree medical benefits income $ 522 $ 117 $ 405

Net interest expense and other $ (1,863) $ (1,128) $ (735)

Annual tax rate 21.8 % 20.9 %

Net income attributable to PepsiCo (a)

$ 7,618 $ 7,120 7 %

Net income attributable to PepsiCo per common share – diluted (a)

$ 5.49 $ 5.12 7 %

(a) In 2021, lower charges taken as a result of the COVID-19 pandemic contributed 7 percentage points to both net income attributable to PepsiCo growth and net income attributable to PepsiCo per common share growth.

See Note 1 to our consolidated financial statements for further information.

Other pension and retiree medical benefits income increased $405 million, primarily reflecting lower settlement charges in 2021, the recognition of fixed income gains on plan assets, the impact of plan changes approved in 2020, as discussed in Note 7 to our consolidated financial statements, and the impact of discretionary plan contributions, partially offset by a decrease in the expected rate of return on plan assets.

Net interest expense and other increased $735 million, reflecting a charge of $842 million in connection with our cash tender offers.

See Note 8 to our consolidated financial statements for further information.

This impact was partially offset by lower interest rates on average debt balances.

The reported tax rate increased 0.9 percentage points, primarily reflecting the net tax impact of adjustments to uncertain tax positions related to the final assessment from the Internal Revenue Service (IRS) audit for the tax years 2014 through 2016.

Convenient foods unit volume grew 3.5%, primarily reflecting mid-single-digit growth in Mexico, partially offset by a low-single-digit decline in Brazil.

Beverage unit volume grew 6%, primarily reflecting double-digit growth in Argentina.

Additionally, Brazil, Guatemala, Chile and Mexico each experienced mid-single-digit growth.

Operating profit increased 19%, primarily reflecting the net revenue growth, productivity savings and a 3-percentage-point favorable impact of lower charges taken as a result of the COVID-19 pandemic.

These impacts were partially offset by certain operating cost increases, a 41-percentage-point impact of higher commodity costs, primarily cooking oil, packaging materials and grains, and higher advertising and marketing expenses.

Additionally, impairment and other charges associated with the sale of certain non-strategic brands reduced operating profit growth by 4.5 percentage points (brand portfolio impairment charges).

Net revenue decreased 2%, reflecting a 9-percentage-point impact of unfavorable foreign exchange, an organic volume decline and a 4.5-percentage-point unfavorable impact of the Juice Transaction, partially offset by effective net pricing.

Convenient foods unit volume declined 4%, primarily reflecting double-digit declines in Russia and Ukraine and a mid-single-digit decline in Poland, partially offset by low-single-digit growth in the United Kingdom and France and mid-single-digit growth in Turkey.

Additionally, the Netherlands experienced a low-single-digit decline.

Beverage unit volume declined 7%, primarily reflecting double-digit declines in Russia, Ukraine and Germany, partially offset by low-single-digit growth in France.

Additionally, the United Kingdom experienced a low-single-digit decline and Turkey experienced a mid-single-digit decline.

Operating profit decreased 207%, primarily reflecting a 110-percentage-point unfavorable impact of charges associated with the Russia-Ukraine conflict, a 98-percentage-point unfavorable impact of impairment charges related to the SodaStream brand (other impairment charges) and a 20-percentage-point unfavorable impact primarily related to the impairment of intangible assets due to the discontinuation or repositioning of certain juice and dairy brands in Russia (brand portfolio impairment charges), partially offset by a 23-percentage-point favorable impact of the gain associated with the Juice Transaction.

Operating profit performance was also negatively impacted by a 91-percentage-point impact of higher commodity costs, primarily packaging materials, raw milk and potatoes, certain operating cost increases, the organic volume decline, a 4-percentage-point impact of less favorable settlements of promotional spending accruals compared to the prior year and a 4-percentage-point impact of payments to employees for a change in pension benefits.

These impacts were partially offset by the effective net pricing, productivity savings and lower advertising and marketing expenses.

Unfavorable foreign exchange negatively impacted operating profit performance by 7 percentage points.

Net revenue increased 6%, primarily reflecting effective net pricing and organic volume growth, partially offset by a 3-percentage-point unfavorable impact of an extra month of net revenue in 2021 as we aligned Pioneer Food Group Ltd.’s (Pioneer Foods) reporting calendar with that of our AMESA division.

Unfavorable foreign exchange reduced net revenue growth by 12 percentage points.

Convenient foods unit volume grew 2%, primarily reflecting double-digit growth in the Middle East and Pakistan and high-single-digit growth in India, partially offset by a low-single-digit decline in South Africa.

Beverage unit volume grew 14%, primarily reflecting double-digit growth in India.

Additionally, the Middle East experienced high-single-digit growth, Nigeria experienced low-single-digit growth and Pakistan experienced double-digit growth.

Operating profit decreased 22%, primarily reflecting a 19-percentage-point impact of impairment and other charges associated with our decision to sell or discontinue certain non-strategic brands and an investment (brand portfolio impairment charges) and a 4-percentage-point impact of impairment charges primarily related to certain juice brands from the Pioneer Foods acquisition (other impairment charges).

Operating profit performance was also negatively impacted by a 74-percentage-point impact of higher commodity costs, primarily packaging materials, grains and cooking oil, certain operating cost increases and higher advertising and marketing expenses, partially offset by the net revenue growth and productivity savings.

Unfavorable foreign exchange negatively impacted operating profit performance by 9 percentage points.

Net revenue increased 4%, primarily reflecting effective net pricing and organic volume growth, partially offset by a 2-percentage-point unfavorable impact of an extra month of net revenue in 2021 as we aligned Hangzhou Haomusi Food Co., Ltd.’s (Be & Cheery) reporting calendar with that of our APAC division.

Unfavorable foreign exchange reduced net revenue growth by 5 percentage points.

Convenient foods unit volume grew 3%, primarily reflecting low-single-digit growth in China and Australia and mid-single-digit growth in Thailand, partially offset by a low-single-digit decline in Taiwan.

Beverage unit volume grew 8%, primarily reflecting double-digit growth in Vietnam.

Additionally, China experienced mid-single-digit growth, Thailand experienced low-single-digit growth and the Philippines experienced high-single-digit growth.

Operating profit decreased 20%, primarily reflecting a 25-percentage-point impact of impairment charges related to the Be & Cheery brand (other impairment charges).

Operating profit performance was also

negatively impacted by a 25-percentage-point impact of higher commodity costs, primarily cooking oil and potatoes, certain operating cost increases and higher advertising and marketing expenses, partially offset by the net revenue growth and productivity savings.

Additionally, prior-year impairment charges associated with an equity method investment positively contributed 3 percentage points to operating profit performance.

Unfavorable foreign exchange negatively impacted operating profit performance by 4 percentage points.

Non-GAAP Measures

Certain financial measures contained in this Form 10-K adjust for the impact of specified items and are not in accordance with U.S.

Certain financial measures contained in this Form 10-K adjust for the impact of specified items and are not in accordance with 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.

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charges related to restructuring plans;

costs associated with mergers, acquisitions, divestitures and other structural changes;

charges associated with mergers, acquisitions, divestitures and other structural changes;

gains associated with divestitures;

asset impairment charges (non-cash);

pension and retiree medical-related amounts (including all settlement and curtailment gains and losses);

adjustments related to the enactment of new laws, rules or regulations, such as tax law changes;

charges or adjustments related to the enactment of new laws, rules or regulations, such as tax law changes;

amounts related to the resolution of tax positions;

1 unchanged sentence

debt redemptions, cash tender or exchange offers;

asset impairments (non-cash);

and remeasurements of net monetary assets.

Previously, certain immaterial pension and retiree medical-related settlement and curtailment gains and losses were not considered items affecting comparability.

Pension and retiree medical-related service cost, interest cost, expected return on plan assets, and other net periodic pension costs will continue to be reflected in our core results.

See below and “Items Affecting Comparability” for a description of adjustments to our U.S.

GAAP financial measures in this Form 10-K.

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.

Prior to the fourth quarter of 2021, certain immaterial pension and retiree medical-related settlement and curtailment gains and losses were not considered items affecting comparability.

Pension and retiree medical-related service cost, interest cost, expected return on plan assets, and other net periodic pension costs continue to be reflected in our core results.

See below and “Items Affecting Comparability” for a description of adjustments to our GAAP financial measures in this Form 10-K.

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 contained in this Form 10-K are discussed below:

Cost of sales, gross profit, selling, general and administrative expenses, other pension and retiree medical benefits income, net interest expense and other, provision for income taxes, net income attributable to noncontrolling interests and net income attributable to PepsiCo, each adjusted for items affecting comparability, operating profit and net income attributable to PepsiCo per common share – diluted, each 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 Multi-Year Productivity Plan (2019 Productivity Plan), costs associated with our acquisitions and divestitures, the impact of settlement and curtailment gains and losses related to pension and retiree medical plans, a charge related to cash tender offers and tax expense related to the Tax Cuts and Jobs Act (TCJ Act) (see “Items Affecting Comparability” for a detailed description of each of these items).

Cost of sales, gross profit, selling, general and administrative expenses, gain associated with the Juice Transaction, impairment of intangible assets, other pension and retiree medical benefits income, net interest expense and other, provision for income taxes, net income attributable to noncontrolling interests and net income attributable to PepsiCo, each adjusted for items affecting comparability, operating profit and net income attributable to PepsiCo per common share – diluted, each adjusted for items affecting comparability, and the corresponding constant currency growth rates

comprised of Russia-Ukraine conflict charges, brand portfolio impairment charges and other impairment charges, the impact of settlement and curtailment gains and losses related to pension and retiree medical plans, a charge related to cash tender offers, tax benefit related to the IRS audit and tax expense related to the Tax Cuts and Jobs Act (TCJ Act) (see “Items Affecting Comparability” for a detailed description of each of these items).

We also evaluate performance on operating profit and net income attributable to PepsiCo per common share – diluted, each 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.

3 unchanged sentences

Organic revenue growth

We define organic revenue growth as a measure that adjusts for the impacts of foreign exchange translation, acquisitions and divestitures, and where applicable, the impact of an additional week of results every five or six years (53 rd reporting week), including in our 2022 financial results.

We define organic revenue growth as a measure that adjusts for the impacts of foreign exchange translation, acquisitions, divestitures and other structural changes, and every five or six years, the impact of the 53 rd reporting week, including in our 2022 financial results.

Adjusting for acquisitions and divestitures reflects mergers and acquisitions activity, including the impact in 2021 of an extra month of net revenue for our acquisitions of Pioneer Foods in our AMESA division and Be & Cheery in our APAC division as we aligned the reporting calendars of these acquisitions with those of our divisions, as well as divestitures and other structural changes, including changes in ownership or control in consolidated subsidiaries and nonconsolidated equity investees.

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We believe this metric serves as a measure of how well we use our capital to generate returns.

In addition, we use net ROIC, excluding items affecting comparability, to compare our performance over various reporting periods on a consistent basis because it removes from our operating results the impact of items that we believe are not indicative of our ongoing performance and reflects how management evaluates our operating results and trends.

operating results and trends.

We define net ROIC, excluding items affecting comparability, as ROIC, adjusted for quarterly average cash, cash equivalents and short-term investments, after-tax interest income and items affecting comparability.

3 unchanged sentences

Our reported financial results in this Form 10-K are impacted by the following items in each of the following years:

Cost of sales Gross profit Selling, general and administrative expenses Operating profit Other pension and retiree medical benefits income Net interest expense and other Provision for income taxes (a)

Cost of sales Gross profit Selling, general and administrative expenses Gain associated with the Juice Transaction Impairment of intangible assets 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

5 unchanged sentences

— — (74) — — 74 6 14 — 66

Gain associated with the Juice Transaction — — — 3,321 — (3,321) — (433) — (2,888)

Impairment and other charges (201) 201 (251) — (3,166) 3,618 — 671 — 2,947

Pension and retiree medical-related impact

— — — — — — 307 69 — 238

Charge related to cash tender offers — — — — — 842 165 — 677

Tax benefit related to the IRS audit — — — — — — — 319 — (319)

Tax expense related to the TCJ Act

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Core, Non-GAAP Measure $ 40,290 $ 46,102 $ 33,777 $ — $ — $ 12,325 $ 476 $ 2,372 $ 69 $ 9,421

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

Net income attributable to noncontrolling interests Net income attributable to PepsiCo

Reported, GAAP Measure $ 37,075 $ 42,399 $ 31,237 $ 11,162 $ 522 $ (1,863) $ 2,142 $ 61 $ 7,618

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— — — — 12 — 1 — 11

Charge related to cash tender offers — — — — — 842 165 — 677

Tax expense related to the TCJ Act — — — — — — (190) — 190

Core, Non-GAAP Measure $ 37,006 $ 42,468 $ 31,054 $ 11,414 $ 544 $ (1,021) $ 2,187 $ 62 $ 8,688

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Acquisition and divestiture-related charges

Gain associated with the Juice Transaction (2.08) —

Impairment and other charges 2.12 —

Pension and retiree medical-related impact

Charge related to cash tender offers — 0.49

Tax benefit related to the IRS audit (0.23) —

Tax expense related to the TCJ Act

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Impact of foreign exchange translation 2

Growth in core net income attributable to PepsiCo per common share – diluted, on a constant currency basis, non-GAAP measure 12 % (a)

Growth in core net income attributable to PepsiCo per common share – diluted, on a constant currency basis, non-GAAP measure 11 %

(a) Does not sum due to rounding.

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and simplify our organization and optimize our manufacturing and supply chain footprint.

To build on the successful implementation of the 2019 Productivity Plan to date, we expanded and extended the program through the end of 2026 to take advantage of additional opportunities within the initiatives of the 2019 Productivity Plan.

We now expect to incur pre-tax charges of approximately $3.15 billion, including cash expenditures of approximately $2.4 billion, as compared to our previous estimate of pre-tax charges of approximately $2.5 billion, which included cash expenditures of approximately $1.6 billion.

Plan to date through December 25, 2021, we have incurred pre-tax charges of $1.0 billion, including cash expenditures of $776 million.

In our 2022 financial results, we expect to incur pre-tax charges of approximately $350 million, including cash expenditures of approximately $300 million.

To build on the successful

implementation of the 2019 Productivity Plan, in the fourth quarter of 2022, we expanded and extended the plan through the end of 2028 to take advantage of additional opportunities within the initiatives described above.

As a result, we expect to incur pre-tax charges of approximately $3.65 billion, including cash expenditures of approximately $2.9 billion.

Plan to date through December 31, 2022, we have incurred pre-tax charges of $1.5 billion, including cash expenditures of $1.0 billion.

In our 2023 financial results, we expect to incur pre-tax charges and cash expenditures of approximately $600 million each.

These charges will be funded primarily through cash from operations.

We expect to incur the majority of the remaining pre-tax charges and cash expenditures in our 2022 and 2023 financial results, with the balance to be incurred through 2026.

We expect to incur the majority of the remaining pre-tax charges and cash expenditures in our 2023 through 2024 financial results, with the balance to be incurred through 2028.

Charges include severance and other employee costs, asset impairments and other costs.

See Note 3 to our consolidated financial statements for further information related to our 2019 Productivity Plan.

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Acquisition and Divestiture-Related Charges

Acquisition and divestiture-related charges primarily include fair value adjustments to the acquired inventory included in the acquisition-date balance sheets, merger and integration charges and costs associated with divestitures.

Merger and integration charges include liabilities to support socioeconomic programs in South Africa, closing costs, employee-related costs, gains associated with contingent consideration, contract termination costs and other integration costs.

Acquisition and divestiture-related charges primarily include fair value adjustments to the acquired inventory included in the acquisition-date balance sheets (recorded in cost of sales), merger and integration charges and costs associated with divestitures (recorded in selling, general and administrative expenses).

Merger and integration charges include liabilities to support socioeconomic programs in South Africa, gains associated with contingent consideration, employee-related costs, contract termination costs, closing costs and other integration costs.

Divestiture-related charges reflect transaction expenses, including consulting, advisory and other professional fees.

See Note 13 to our consolidated financial statements for further information.

Pension and Retiree Medical-Related Impact

Pension and retiree medical-related impact primarily includes settlement charges related to lump sum distributions exceeding the total of annual service and interest costs, as well as curtailment gains related to plan changes.

Gain Associated with the Juice Transaction

We recognized a gain associated with the Juice Transaction in our PBNA and Europe divisions.

See Note 13 to our consolidated financial statements for further information.

Impairment and Other Charges

We recognized Russia-Ukraine conflict charges, brand portfolio impairment charges and other impairment charges as described below.

Russia-Ukraine Conflict Charges

In connection with the deadly conflict in Ukraine, we recognized charges related to indefinite-lived intangible assets and property, plant and equipment impairment, allowance for expected credit losses, inventory write-downs and other costs.

See Notes 1 and 4 to our consolidated financial statements for further information.

Brand Portfolio Impairment Charges

We recognized intangible asset, investment and property, plant and equipment impairments and other charges as a result of management’s decision to reposition or discontinue the sale/distribution of certain brands and to sell an investment.

See Notes 1 and 4 to our consolidated financial statements for further information.

Other Impairment Charges

We recognized impairment charges related to certain of our indefinite-lived intangible assets which reflect an increase in the weighted-average cost of capital as well as our most current estimates of future financial performance.

See Notes 1 and 4 to our consolidated financial statements for further information.

Pension and Retiree Medical-Related Impact

See Notes 7 and 13 to our consolidated financial statements for further information.

Charge Related to Cash Tender Offers

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See Note 8 to our consolidated financial statements for further information.

Tax Benefit Related to the IRS Audit

We recognized a non-cash tax benefit resulting from our agreement with the IRS to settle one of the issues assessed in the 2014 through 2016 tax audit.

The agreement covers tax years 2014 through 2019.

See Note 5 to our consolidated financial statements for further information.

Tax Expense Related to the TCJ Act

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These sources of cash are available to fund cash outflows that have both a short- and long-term component, including debt repayments and related interest payments;

payments for acquisitions, including support for socioeconomic programs in South Africa related to our acquisition of Pioneer Foods;

payments for acquisitions;

operating leases;

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Risk Factors,” “Our Business Risks” and Note 8 to our consolidated financial statements for further information.

Our sources and uses of cash were not materially adversely impacted by COVID-19 and, to date, we have not identified any material liquidity deficiencies as a result of the COVID-19 pandemic.

Based on the information currently available to us, we do not expect the impact of the COVID-19 pandemic to have a material impact on our future liquidity.

We will continue to monitor and assess the impact the COVID-19 pandemic may have on our business and financial results.

Our sources and uses of cash were not materially adversely impacted by the Russia-Ukraine conflict and, to date, we have not identified any material liquidity deficiencies as a result of the conflict.

Based on the information currently available to us, we do not expect the impact of the Russia-Ukraine conflict to have a material impact on our future liquidity.

We will continue to monitor and assess the impact the Russia-Ukraine conflict may have on our business and financial results.

See “Item 1A.

Risk Factors,” “Our Business Risks” and Note 1 to our consolidated financial statements for further information related to the impact of the COVID-19 pandemic on our business and financial results.

Risk Factors,” “Our Business Risks” and Note 1 to our consolidated financial statements for further information related to the impact of the Russia-Ukraine conflict on our business and financial results.

As of December 31, 2022, 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 one-time mandatory transition tax on undistributed international earnings, including $18.9 billion held in our consolidated subsidiaries outside the United States as of December 30, 2017.

The TCJ Act imposed a one-time mandatory transition tax on undistributed international earnings.

As of December 31, 2022, our mandatory transition tax liability was $2.6 billion, which must be paid through 2026 under the provisions of the TCJ Act;

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Our obligations to our suppliers, including amounts due and scheduled payment terms, are not impacted.

outstanding amounts related to suppliers participating in such financing arrangements are recorded within accounts payable and other current liabilities in our consolidated balance sheet.

We were informed by the participating financial institutions that as of December 25, 2021 and December 26, 2020, $1.5 billion and $1.2 billion, respectively, of our accounts payable to suppliers who participate in these financing arrangements are outstanding.

All outstanding amounts related to suppliers participating in such financing arrangements are recorded within accounts payable and other current liabilities in our consolidated balance sheet.

We were informed by the participating financial institutions that as of both December 31, 2022 and December 25, 2021, $1.5 billion of our accounts payable to suppliers who participate in these financing arrangements are outstanding.

These supply chain finance arrangements did not have a material impact on our liquidity or capital resources in the periods presented and we do not expect such arrangements to have a material impact on our liquidity or capital resources for the foreseeable future.

Furthermore, our cash provided from operating activities is somewhat impacted by seasonality.

Working capital needs are impacted by weekly sales, which are generally highest in the third quarter due to seasonal and holiday-related sales patterns and generally lowest in the first quarter.

Working capital needs are impacted by weekly sales, which are generally highest in the third quarter due to seasonal and holiday-related patterns and generally lowest in the first quarter.

On a continuing basis, we consider various transactions to increase shareholder value and enhance our business results, including acquisitions, divestitures, joint ventures, dividends, share repurchases, productivity and other efficiency initiatives and other structural changes.

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Net cash used for investing activities $ (2,430) $ (3,269)

Net cash (used for)/provided by financing activities $ (10,780) $ 3,819

Net cash used for financing activities $ (8,523) $ (10,780)

Operating Activities

In 2022, net cash provided by operating activities was $10.8 billion, compared to $11.6 billion in the prior year.

The increase in operating cash flow primarily reflects favorable working capital comparisons and operating profit performance, partially offset by higher pre-tax pension and retiree medical plan contributions and higher net cash tax payments in the current year.

The decrease in operating cash flow primarily reflects unfavorable working capital comparisons and higher net cash tax payments, partially offset by favorable operating profit performance and lower pre-tax pension and retiree medical plan contributions in the current year.

Investing Activities

In 2022, net cash used for investing activities was $2.4 billion, primarily reflecting net capital spending of $5.0 billion and our investment in Celsius Holdings, Inc.

(Celsius) convertible preferred stock and agreement to distribute Celsius energy drinks of $0.8 billion, partially offset by proceeds associated with the Juice Transaction of $3.5 billion.

In 2021, net cash used for investing activities was $3.3 billion, primarily reflecting net capital spending of $4.5 billion, partially offset by maturities of short-term investments with maturities greater than three months of $1.1 billion.

In 2020, net cash used for investing activities was $11.6 billion, primarily reflecting net cash paid in connection with our acquisitions of Rockstar of $3.85 billion, Pioneer Foods of $1.2 billion and Be & Cheery of $0.7 billion, net capital spending of $4.2 billion, as well as purchases of short-term investments with maturities greater than three months of $1.1 billion.

See Note 1 to our consolidated financial statements for further discussion of capital spending by division;

see Note 9 to our consolidated financial statements for further discussion of our investments in debt securities;

see Notes 4 and 9 to our consolidated financial statements for further discussion of our agreement with and investment in Celsius;

and see Note 13 to our consolidated financial statements for further discussion of our acquisitions.

We regularly review our plans with respect to net capital spending, including in light of the ongoing uncertainty caused by the COVID-19 pandemic on our business, and believe that we have sufficient liquidity to meet our net capital spending needs.

We regularly review our plans with respect to net capital spending, including in light of the ongoing uncertainty caused by the Russia-Ukraine conflict on our business, and believe that we have sufficient liquidity to meet our net capital spending needs.

Financing Activities

payments of acquisition-related contingent consideration of $0.8 billion, partially offset by proceeds from issuances of long-term debt of $4.1 billion.

In 2020, net cash provided by financing activities was $3.8 billion, primarily reflecting proceeds from issuances of long-term debt of $13.8 billion, partially offset by the return of operating cash flow to our shareholders through dividend payments and share repurchases of $7.5 billion, payments of long-term debt borrowings of $1.8 billion and debt redemptions of $1.1 billion.

In 2022, net cash used for financing activities was $8.5 billion, primarily reflecting the return of operating cash flow to our shareholders through dividend payments of $6.2 billion and share repurchases of $1.5 billion, payments of long-term debt borrowings of $2.5 billion and debt redemptions/cash tender offers of $1.7 billion, partially offset by proceeds from issuances of long-term debt of $3.4 billion.

In 2021, net cash used for financing activities was $10.8 billion, primarily reflecting the return of operating cash flow to our shareholders largely through dividend payments of $5.8 billion, cash tender offers/debt redemption of $4.8 billion, payments of long-term debt borrowings of $3.5 billion and payments of acquisition-related contingent consideration of $0.8 billion, partially offset by proceeds from issuances of long-term debt of $4.1 billion.

See Note 8 to our consolidated financial statements for further discussion of debt obligations.

We annually review our capital structure with our Board of Directors, including our dividend policy and share repurchase activity.

On February 13, 2018, we announced the 2018 share repurchase program providing for the repurchase of up to $15.0 billion of PepsiCo common stock which commenced on July 1, 2018 and expired on June 30, 2021.

On February 10, 2022, we announced the 2022 share repurchase program.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities” for further information.

We annually review our capital structure with our Board, including our dividend policy and share repurchase activity.

On February 10, 2022, we announced a share repurchase program providing for the repurchase of up to $10.0 billion of PepsiCo common stock which commenced on February 11, 2022 and will expire on February 28, 2026.

In addition, on February 9, 2023, we announced a 10.0% increase in our annualized dividend to $5.06 per share from $4.60 per share, effective with the dividend expected to be paid in June 2023.

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Material Changes in Line Items in Our Consolidated Financial Statements

Material changes in line items in our consolidated statement of income are discussed in “Results of Operations – Division Review” and “Items Affecting Comparability.”

Material changes in line items in our consolidated statement of income are discussed in “Results of Operations – Consolidated Review,” “Results of Operations – Division Review” and “Items Affecting Comparability.”

Material changes in line items in our consolidated statement of cash flows are discussed in “Our Liquidity and Capital Resources.”

Material changes in line items in our consolidated balance sheet are discussed below:

In 2021, total assets were $92.4 billion, compared to $92.9 billion in the prior year.

The decrease in total assets is primarily driven by the following line items:

Cash and cash equivalents $ (2.6) Consolidated Statement of Cash Flows

Short-term investments $ (1.0) Consolidated Statement of Cash Flows

Assets held for sale $ 1.8 Note 13

Property, plant and equipment, net $ 1.0 Note 1, Note 14

Other indefinite-lived intangible assets $ (0.5) Note 4

Other assets $ 0.9 Note 14

Total Liabilities

In 2021, total liabilities were $76.2 billion, compared to $79.4 billion in the prior year.

The decrease in total liabilities is primarily driven by the following line items:

Accounts payable and other current liabilities $ 1.6 Note 14

Liabilities held for sale $ 0.8 Note 13

Long-term debt obligations $ (4.3) Note 8

Other liabilities (b)

$ (2.2) Note 7, Note 9 and Note 12

2022 Change (a)

Decrease in cash and cash equivalents (b)

Increase in accounts and notes receivable, net (c)

Increase in inventories (d)

Decrease in assets held for sale (e)

Increase in property, plant and equipment, net (f)

Decrease in other indefinite-lived intangible assets (g)

Increase in investments in noncontrolled affiliates (h)

Increase in other assets (i)

Decrease in short-term debt obligations (j)

Increase in accounts payable and other current liabilities (k)

Decrease in liabilities held for sale (e)

Decrease in deferred income taxes (l)

Decrease in other liabilities (m)

(a) In billions.

(b) Reflects changes primarily related to pension and retiree medical plans, contingent consideration associated with our acquisition of Rockstar and leases.

Refer to our consolidated statement of equity for material changes in equity line items.

(b) See consolidated statement of cash flows.

See Note 14 to our consolidated financial statements for further information.

(d) Primarily reflects higher commodity costs in 2022.

See Note 14 to our consolidated financial statements for further information.

(e) Reflects closing of the Juice Transaction.

See Note 13 to our consolidated financial statements for further information.

(f) Primarily reflects capital spending, partially offset by depreciation.

See Notes 1 and 14 to our consolidated financial statements for further information.

(g) Primarily reflects impairments.

See Notes 1 and 4 to our consolidated financial statements for further information.

(h) Primarily reflects closing of the Juice Transaction.

See Note 13 to our consolidated financial statements for further information.

(i) Primarily reflects our investment in Celsius convertible preferred stock.

See Note 9 to our consolidated financial statements for further information.

(j) Primarily reflects debt payments and redemptions, partially offset by debt maturing within one year.

See Note 8 to our consolidated financial statements for further information.

(k) Primarily reflects higher commodity costs and capital expenditures in 2022.

See Note 14 to our consolidated financial statements for further information.

(l) Primarily reflects certain impairments and the capitalization of research and development expenses under the TCJ Act, partially offset by the deferred tax impacts of our Juice Transaction.

See Note 5 to our consolidated financial statements for further information.

(m) Primarily reflects changes related to pension and retiree medical plans.

See Note 7 to our consolidated financial statements for further information.

Material changes in equity line items are discussed in our consolidated statement of equity and notes 7 and 11 to our consolidated financial statements.

Return on Invested Capital

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Acquisition and divestiture-related charges 0.1 (0.1)

Gain associated with the Juice Transaction (3.3) —

Impairment and other charges 3.7 —

Pension and retiree medical-related impact 0.3 (0.1)

Charge related to cash tender offers (0.2) —

Tax benefit related to the IRS audit (0.4) —

Tax expense related to the TCJ Act 0.1 0.3

Other net tax benefits — 1.0

Core Net ROIC, non-GAAP measure 19.6 % 18.4 %

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An appreciation of our critical accounting policies and estimates is necessary to understand our financial results.

These policies may require management to make difficult and subjective judgments regarding uncertainties, including those related to the COVID-19 pandemic, and as a result, such estimates may significantly impact our financial results.

These policies may require management to make difficult and subjective judgments regarding uncertainties, including the business and economic uncertainty resulting from the Russia-Ukraine conflict and the high interest rate and inflationary cost environment, and as a result, such estimates may significantly impact our financial results.

The precision of these estimates and the likelihood of future changes depend on a number of underlying variables and a range of possible outcomes.

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Our credit terms, which are established in accordance with local and industry practices, typically require payment within 30 days of delivery in the United States, and generally within 30 to 90 days internationally, and may allow discounts for early payment.

related to the COVID-19 pandemic), leveraging estimates of creditworthiness and projections of default and recovery rates for certain of our customers.

We estimate and reserve for our expected credit loss exposure based on our experience with past due accounts and collectibility, write-off history, the aging of accounts receivable, our analysis of customer data, and forward-looking information (including the expected impact of a high interest rate and inflationary cost environment), leveraging estimates of creditworthiness and projections of default and recovery rates for certain of our customers.

Our policy is to provide customers with product when needed.

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In a business combination, the consideration is first assigned to identifiable assets and liabilities, including brands and other intangible assets, based on estimated fair values, with any excess recorded as goodwill.

Determining fair value requires significant estimates and assumptions, including those related to the COVID-19 pandemic, based on an evaluation of a number of factors, such as marketplace participants, product life cycles, market share, consumer awareness, brand history and future expansion expectations, amount and timing of future cash flows and the discount rate applied to the cash flows.

Determining fair value requires significant estimates and assumptions, including those related to the Russia-Ukraine conflict and a high interest rate and inflationary cost environment, based on an evaluation of a number of factors, such as marketplace participants, product life cycles, market share, consumer awareness, brand history and future expansion expectations, amount and timing of future cash flows and the discount rate applied to the cash flows.

We believe that a brand has an indefinite life if it has a history of strong revenue and cash flow performance and we have the intent and ability to support the brand with marketplace spending for the foreseeable future.

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In connection with previous acquisitions, we reacquired certain franchise rights which provided the exclusive and perpetual rights to manufacture and/or distribute beverages for sale in specified territories.

In determining the useful life of these franchise rights, many factors were considered, including the pre-

existing perpetual bottling arrangements, the indefinite period expected for these franchise rights to contribute to our future cash flows, as well as the lack of any factors that would limit the useful life of these franchise rights to us, including legal, regulatory, contractual, competitive, economic or other factors.

In determining the useful life of these franchise rights, many factors were considered, including the pre-existing perpetual bottling arrangements, the indefinite period expected for these franchise rights to contribute to our future cash flows, as well as the lack of any factors that would limit the useful life of these franchise rights to us, including legal, regulatory, contractual, competitive, economic or other factors.

Therefore, certain of these franchise rights are considered as indefinite-lived.

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Where we use the qualitative assessment, first we determine if, based on qualitative factors, it is more likely than not that an impairment exists.

Factors considered include macroeconomic (including those related to the COVID-19 pandemic), industry and competitive conditions, legal and regulatory environment, historical financial performance and significant changes in the brand or reporting unit.

Factors considered include macroeconomic conditions (including those related to the Russia-Ukraine conflict and a high interest rate and inflationary cost environment), industry and competitive conditions, legal and regulatory environment, historical financial performance and significant changes in the brand or reporting unit.

If the qualitative assessment indicates that it is more likely than not that an impairment exists, then a quantitative assessment is performed.

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Estimated fair value is determined using discounted cash flows and requires an analysis of several estimates including future cash flows or income consistent with management’s strategic business plans, annual sales growth rates, perpetuity growth assumptions and the selection of assumptions underlying a discount rate (weighted-average cost of capital) based on market data available at the time.

Significant management judgment is necessary to estimate the impact of competitive operating, macroeconomic and other factors (including those related to the COVID-19 pandemic) to estimate future levels of sales, operating profit or cash flows.

Significant management judgment is necessary to estimate the impact of competitive operating, macroeconomic and other factors (including those related to the Russia-Ukraine conflict and a high

interest rate and inflationary cost environment) to estimate future levels of sales, operating profit or cash flows.

All assumptions used in our impairment evaluations for indefinite-lived intangible assets and goodwill, such as forecasted growth rates (including perpetuity growth assumptions) and weighted-average cost of capital, are based on the best available market information and are consistent with our internal forecasts and operating plans.

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Risk Factors” and “Our Business Risks.”

In 2022, we recorded $1.3 billion ($1.1 billion after-tax or $0.78 per share) of indefinite-lived intangible asset impairment charges related to the SodaStream brand in Europe.

As a result, its carrying value as of December 31, 2022 is equal to its fair value and the brand is at a heightened risk of future impairment if certain assumptions and estimates were to change.

For example, a mutually exclusive 100-basis-point increase in the discount rate and a 100-basis-point decrease in the perpetuity growth rate used to estimate the fair value of the SodaStream brand would result in an additional estimated impairment charge of approximately $0.2 billion and $0.1 billion, respectively.

We will continue to monitor the performance of the SodaStream brand and goodwill, as well as all of our indefinite-lived intangible assets.

Amortizable intangible assets are only evaluated for impairment upon a significant change in the operating or macroeconomic environment.

If an evaluation of the undiscounted future cash flows indicates impairment, the asset is written down to its estimated fair value, which is based on its discounted future cash flows.

See Note 2 and Note 4 to our consolidated financial statements for further information.

See Notes 2 and 4 to our consolidated financial statements for further information.

Income Tax Expense and Accruals

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An estimated annual effective tax rate is applied to our quarterly operating results.

In the event there is a significant or unusual item recognized in our quarterly operating results, the tax attributable to that item is

separately calculated and recorded at the same time as that item.

In the event there is a significant or unusual item recognized in our quarterly operating results, the tax attributable to that item is separately calculated and recorded at the same time as that item.

We consider the tax adjustments from the resolution of prior-year tax matters to be among such items.

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2023 2022 2021

Service cost discount rate 3.1 % 2.6 % 3.4 %

Interest cost discount rate 2.4 % 1.9 % 2.8 %

Expected rate of return on plan assets 6.1 % 6.2 % 6.6 %

Service cost discount rate (a)

5.5 % 3.2 % 2.6 %

Interest cost discount rate (a)

5.4 % 2.9 % 1.9 %

Expected rate of return on plan assets (a)

7.0 % 6.3 % 6.2 %

Expected rate of salary increases 3.3 % 3.1 % 3.1 %

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Current health care cost trend rate 5.5 % 5.8 % 5.5 %

Based on our assumptions, we expect our total pension and retiree medical expense to decrease in 2022 primarily reflecting plan changes and related impacts, and higher discount rates.

(a) 2022 rates reflect remeasurement of a U.S.

qualified defined benefit pension plan in the second quarter of 2022.

In 2022, lump sum distributions exceeded the total of annual service and interest cost and triggered pre-tax settlement charges for certain U.S defined pension plans.

In addition, we expect the recognition of fixed income losses on plan assets, partially offset by higher discount rates, to increase our pension and retiree medical expense in 2023.

Sensitivity of Assumptions

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As our retiree medical plans are not subject to regulatory funding requirements, we generally fund these plans on a pay-as-you-go basis, although we periodically review available options to make additional contributions toward these benefits.

We made discretionary contributions to our U.S.

qualified defined benefit plans of $75 million in January 2022 and expect to make an additional $75 million contribution in the third quarter of 2022.

We made a discretionary contribution of $125 million to a U.S.

qualified defined benefit plan in January 2023 and expect to make an additional $125 million in the third quarter of 2023.

Our pension and retiree medical plan contributions are subject to change as a result of many factors, such as changes in interest rates, deviations between actual and expected asset returns and changes in tax or other benefit laws.

We continue to monitor the impact of the COVID-19 pandemic and related global economic conditions and uncertainty on the net unfunded status of our pension and retiree medical plans.

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

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Selling, general and administrative expenses 34,459 31,237 28,453

Gain associated with the Juice Transaction (see Note 13) ( 3,321 ) — —

Impairment of intangible assets (see Notes 1 and 4) 3,166 — 42

Operating Profit 11,512 11,162 10,080

Other pension and retiree medical benefits income/(expense) 522 117 ( 44 )

Other pension and retiree medical benefits income 132 522 117

Net interest expense and other ( 939 ) ( 1,863 ) ( 1,128 )

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Net income $ 8,978 $ 7,679 $ 7,175

Other comprehensive income/(loss), net of taxes:

Other comprehensive (loss)/income, net of taxes:

Net currency translation adjustment ( 643 ) ( 369 ) ( 650 )

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Depreciation and amortization 2,763 2,710 2,548

Gain associated with the Juice Transaction ( 3,321 ) — —

Impairment and other charges 3,618 — —

Operating lease right-of-use asset amortization 517 505 478

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Deferred income taxes and other tax charges and credits ( 873 ) 298 361

Tax expense/(benefit) related to the TCJ Act 190 — ( 8 )

Tax expense related to the TCJ Act 86 190 —

Tax payments related to the TCJ Act ( 309 ) ( 309 ) ( 78 )

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Sales of property, plant and equipment 251 166 55

Acquisitions, net of cash acquired, and investments in noncontrolled affiliates ( 61 ) ( 6,372 ) ( 2,717 )

Divestitures and sales of investments in noncontrolled affiliates 169 6 253

Acquisitions, net of cash acquired, investments in noncontrolled affiliates and purchases of intangible and other assets ( 873 ) ( 61 ) ( 6,372 )

Proceeds associated with the Juice Transaction 3,456 — —

Other divestitures, sales of investments in noncontrolled affiliates and other assets 49 169 6

Short-term investments, by original maturity:

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More than three months - maturities 150 1,135 —

More than three months - sales — — 62

Three months or less, net 24 ( 58 ) 27

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Payments of long-term debt ( 2,458 ) ( 3,455 ) ( 1,830 )

Cash tender offers/debt redemption ( 4,844 ) ( 1,100 ) ( 1,007 )

Debt redemptions/cash tender offers ( 1,716 ) ( 4,844 ) ( 1,100 )

Short-term borrowings, by original maturity:

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Accounts and notes receivable, net

Inventories 5,222 4,347

Prepaid expenses and other current assets 806 980

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Balance, beginning of year ( 14,898 ) ( 15,476 ) ( 14,300 )

Other comprehensive income/(loss) attributable to PepsiCo 578 ( 1,176 ) 819

Other comprehensive (loss)/income attributable to PepsiCo ( 404 ) 578 ( 1,176 )

Balance, end of year ( 15,302 ) ( 14,898 ) ( 15,476 )

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Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with U.S.

GAAP and include the consolidated accounts of PepsiCo, Inc.

The accompanying consolidated financial statements have been prepared in accordance with GAAP and include the consolidated accounts of PepsiCo, Inc.

and the affiliates that we control.

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We evaluate our estimates on an ongoing basis using our historical experience, as well as other factors we believe appropriate under the circumstances, such as current economic conditions, and adjust or revise our estimates as circumstances change.

Additionally, the business and economic uncertainty resulting from the COVID-19 pandemic has made such estimates and assumptions more difficult to calculate.

Additionally, the business and economic uncertainty resulting from the Russia - Ukraine conflict and the high interest rate and inflationary cost environment has made such estimates and assumptions more difficult to calculate.

As future events and their effect cannot be determined with precision, actual results could differ significantly from those estimates.

Our fiscal year ends on the last Saturday of each December, resulting in a 53 rd reporting week every five or six years, including in our 2022 financial results.

While our North America results are reported on a weekly calendar basis, substantially all of our international operations reported on a monthly calendar basis prior to the fourth quarter of 2021, and beginning in the fourth quarter of 2021, all of our international operations report on a monthly calendar basis.

While our North America financial results are reported on a weekly calendar basis, substantially all of our international operations reported on a monthly calendar basis prior to the fourth quarter of 2021.

Beginning in the fourth quarter of 2021, all of our international operations reported on a monthly calendar basis.

This change did not have a material impact on our consolidated financial statements.

The following chart details our quarterly reporting schedule for the three years presented:

The following chart details our quarterly reporting schedule for 2022, reflecting the additional week in the fourth quarter:

Quarter United States and Canada International

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We are organized into seven reportable segments (also referred to as divisions), as follows:

1) FLNA, which includes our branded convenient food businesses in the United States and Canada;

2) QFNA, which includes our branded convenient food businesses, such as cereal, rice, pasta and other branded food, in the United States and Canada;

3) PBNA, which includes our beverage businesses in the United States and Canada;

4) LatAm, which includes all of our beverage and convenient food businesses in Latin America;

1) Frito-Lay North America (FLNA), which includes our branded convenient food businesses in the United States and Canada;

2) Quaker Foods North America (QFNA), which includes our branded convenient food businesses, such as cereal, rice, pasta and other branded food, in the United States and Canada;

3) PepsiCo Beverages North America (PBNA), which includes our beverage businesses in the United States and Canada;

4) Latin America (LatAm), which includes all of our beverage and convenient food businesses in Latin America;

5) Europe, which includes all of our beverage and convenient food businesses in Europe;

6) AMESA, which includes all of our beverage and convenient food businesses in Africa, the Middle East and South Asia;

7) APAC, which includes all of our beverage and convenient food businesses in Asia Pacific, Australia and New Zealand, and China region.

6) Africa, Middle East and South Asia (AMESA), which includes all of our beverage and convenient food businesses in Africa, the Middle East and South Asia;

7) Asia Pacific, Australia, and New Zealand and China region (APAC), which includes all of our beverage and convenient food businesses in Asia Pacific, Australia and New Zealand, and China region.

Through our operations, authorized bottlers, contract manufacturers and other third parties, we make, market, distribute and sell a wide variety of beverages and convenient foods, serving customers and consumers in more than 200 countries and territories with our largest operations in the United States, Mexico, Russia, Canada, China, the United Kingdom and South Africa.

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These derivatives hedge underlying commodity price risk and were not entered into for trading or speculative purposes.

Net Revenue and Operating Profit

Net revenue and operating profit of each division are as follows:

Net Revenue Operating Profit

2021 2020 2019 2021 2020 2019

Net Revenue and Operating Profit/(Loss)

Net revenue and operating profit/(loss) of each division are as follows:

Net Revenue Operating Profit/(Loss)

2022 2021 2020 2022 (a)

FLNA $ 23,291 $ 19,608 $ 18,189 $ 6,135 $ 5,633 $ 5,340

QFNA 3,160 2,751 2,742 604 578 669

PBNA 25,276 22,559 21,730 2,442 1,937 2,179

26,213 25,276 22,559 5,426 2,442 1,937

LatAm 9,779 8,108 6,942 1,627 1,369 1,033

Europe 13,038 11,922 11,728 1,292 1,353 1,327

12,724 13,038 11,922 ( 1,380 ) 1,292 1,353

6,438 6,078 4,573 666 858 600

4,787 4,615 3,445 537 673 590

Total division 86,392 79,474 70,372 13,615 12,845 11,522

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Total $ 86,392 $ 79,474 $ 70,372 $ 11,512 $ 11,162 $ 10,080

(a) The increase in net revenue reflects our acquisition of Pioneer Foods.

(a) See below for impairment and other charges taken related to the Russia-Ukraine conflict, brand portfolio impairment and other impairment.

(b) In 2022, we recorded a gain of $ 3,029 million and $ 292 million in our PBNA and Europe divisions, respectively, associated with the Juice Transaction.

The total after-tax amount was $ 2,888 million or $ 2.08 per share.

See Note 13 for further information.

(b) The increase in net revenue reflects our acquisition of Be & Cheery.

(c) In 2021, the increase in net revenue in our AMESA and APAC divisions reflect our acquisitions of Pioneer Foods and Be & Cheery, respectively.

See Note 13 for further information.

Disaggregation of Net Revenue

Our primary performance obligation is the distribution and sales of beverage and convenient food products to our customers.

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2022 2021 2020

Convenient Food Beverage (a)

Convenient Food

Beverages (a)

Convenient Foods Beverages (a)

Convenient Foods

LatAm 10 % 90 % 10 % 90 % 10 % 90 %

Europe 50 % 50 % 55 % 45 % 55 % 45 %

30 % 70 % 30 % 70 % 40 % 60 %

AMESA 30 % 70 % 30 % 70 % 30 % 70 %

APAC 25 % 75 % 20 % 80 % 25 % 75 %

PepsiCo 40 % 60 % 45 % 55 % 45 % 55 %

(a) Beverage revenue from company-owned bottlers, which primarily includes our consolidated bottling operations in our PBNA and Europe segments, is approximately 40 % of our consolidated net revenue.

(a) Beverage revenue from company-owned bottlers, which primarily includes our consolidated bottling operations in our PBNA and Europe divisions, is approximately 35 % of our consolidated net revenue in 2022 and approximately 40 % of our consolidated net revenue in 2021 and 2020.

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

(b) The increase in the approximate percentage of net revenue generated by our convenient food business in 2020 primarily reflects our acquisition of Pioneer Foods.

See Note 13 for further information.

Operating profit in 2021 and 2020 includes certain pre-tax charges/credits taken as a result of the COVID-19 pandemic.

These pre-tax charges/credits by division are as follows:

Allowances for Expected Credit Losses (a)

Upfront Payments to Customers (b)

Inventory Write-Downs and Product Returns (c)

Employee Compensation Expense (d)

Employee Protection Costs (e)

FLNA $ ( 8 ) $ — $ — $ 35 $ 27 $ 2 $ 56

QFNA ( 1 ) — — 2 1 — 2

PBNA ( 19 ) ( 21 ) — 31 14 ( 16 ) ( 11 )

LatAm — — 1 44 15 4 64

Europe ( 3 ) ( 2 ) — 13 8 5 21

AMESA ( 1 ) — ( 2 ) 1 3 6 7

APAC — — — 2 2 5 9

Impairment and Other Charges

We recognized Russia-Ukraine conflict charges, brand portfolio impairment charges and other impairment charges as described below.

A summary of pre-tax charges taken in 2022 in our Europe division as a result of the Russia-Ukraine conflict is as follows:

Russia-Ukraine conflict charges

Cost of sales Selling, general and administrative expenses Impairment of intangible assets (a)

Impairment charges related to intangible assets $ — $ — $ 1,198 $ 1,198

Impairment charges related to property, plant and equipment 103 22 — 125

Allowance for expected credit losses — 12 — 12

Allowance for inventory write downs 28 1 — 29

Other 9 42 — 51

Total $ 140 $ 77 $ 1,198 $ 1,415

Allowances for Expected Credit Losses (a)

Upfront Payments to Customers (b)

Inventory Write-Downs and Product Returns (c)

Employee Compensation Expense (d)

Employee Protection Costs (e)

After-tax amount $ 1,124

Impact on net income attributable to PepsiCo per common share $ ( 0.81 )

(a) See Note 4 for further information.

For information on our policies for indefinite-lived intangible assets, see Note 2.

A summary of pre-tax charges taken in 2022 as a result of our decision to reposition or discontinue the sale/distribution of certain brands and to sell an investment is as follows:

Brand portfolio impairment charges

Cost of sales Selling, general and administrative expenses Impairment of intangible assets (a)

PBNA $ 26 $ 8 $ 126 $ 160 Impairment and other charges associated with distribution rights and inventory due to the termination of Bang energy drinks distribution agreement

LatAm — 35 36 71 Loss on sale and impairment of intangible assets related to the sale of certain non-strategic brands

Europe 1 10 242 253 Primarily impairment of intangible assets related to the discontinuation or repositioning of certain juice and dairy brands in Russia

AMESA 29 121 9 159 Primarily impairment of investment, property, plant and equipment and intangible assets related to the sale or discontinuation of non-strategic investment and brands

APAC 5 — — 5 Impairment of property, plant and equipment related to the discontinuation of a non-strategic brand in China

Total $ 61 $ 174 $ 413 $ 648

After-tax amount $ 522

Impact on net income attributable to PepsiCo per common share $ ( 0.38 )

(a) See Note 4 for further information.

For information on our policies for indefinite-lived intangible assets, see Note 2.

A summary of pre-tax impairment charges taken in 2022 as a result of our quantitative assessments of certain of our indefinite-lived intangible assets is as follows:

Other impairment charges

Impairment of intangible assets (a)

FLNA $ 88 Related to a baked fruit convenient food brand

Europe 1,264 Related to the SodaStream brand

AMESA 31 Primarily related to certain juice brands from the Pioneer Foods acquisition

APAC 172 Related to the Be & Cheery brand

Total $ 1,555

After-tax amount $ 1,301

Impact on net income attributable to PepsiCo per common share $ ( 0.94 )

(a) See Note 4 for further information.

For information on our policies for indefinite-lived intangible assets, see Note 2.

COVID-19 Charges

Operating profit includes certain pre-tax charges taken as a result of the COVID-19 pandemic related to incremental employee compensation costs, such as certain leave benefits and labor costs, employee protection costs, allowances for expected credit losses and upfront payments to customers and their related adjustments for changes in estimates as conditions improve, inventory write-downs, product returns and other expenses.

These pre-tax charges by division are as follows:

COVID-19 charges

2022 2021 2020

FLNA $ 25 $ 56 $ 229

QFNA 2 — — 9 3 1 15

PBNA 29 56 28 115 50 26 304

23 ( 11 ) 304

LatAm 15 64 102

Europe 5 21 88

AMESA 2 — 3 9 7 12 33

APAC — — 3 ( 7 ) 2 5 3

Total $ 95 $ 148 $ 774

(a) Reflects the expected impact of the global economic uncertainty caused by COVID-19, leveraging estimates of creditworthiness and projections of default and recovery rates for certain of our customers, including foodservice and vending businesses.

Income amounts represent reductions in the previously recorded reserves due to improved projected default rates and lower at-risk receivable balances.

(b) Relates to promotional spending for which benefit is not expected to be received.

Income amounts represent reductions in previously recorded reserves due to improved projected default rates and lower overall advance balances.

Includes a reserve for product returns of $ 20 million in 2020.

(d) Includes incremental frontline incentive pay, crisis child care and other leave benefits and labor costs.

Income amount includes a social welfare relief credit of $ 11 million.

(e) Includes costs associated with personal protective equipment, temperature scans, cleaning and other sanitization services.

(f) Includes certain reserves for property, plant and equipment, donations of cash and product, and other costs.

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

(a) Income amount primarily relates to adjustments for changes in estimates of allowances for expected credit losses and upfront payments to customers, due to improved projected default rates and lower at-risk balances.

Corporate Unallocated Expenses

Corporate unallocated expenses include costs of our corporate headquarters, centrally managed initiatives such as commodity derivative gains and losses, foreign exchange transaction gains and losses, our ongoing business transformation initiatives, unallocated research and development costs, unallocated insurance and benefit programs, tax-related contingent consideration, certain acquisition and divestiture-related charges, as well as certain other items.

Other Division Information

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Total $ 92,187 $ 92,377 $ 5,207 $ 4,625 $ 4,240

(a) Corporate assets consist principally of certain cash and cash equivalents, restricted cash, short-term investments, derivative instruments, property, plant and equipment and tax assets.

In 2021, the change in assets was primarily due to a decrease in cash and cash equivalents and short-term investments.

Refer to the cash flow statement for further information.

(a) Corporate assets consist principally of certain cash and cash equivalents, restricted cash, short-term investments, derivative instruments, property, plant and equipment, pension plan assets and tax assets.

In 2022, the change in assets was primarily due to a decrease in cash and cash equivalents.

Amortization of intangible assets and depreciation and other amortization of each division are as follows:

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Total $ 86,392 $ 79,474 $ 70,372 $ 61,965 $ 62,080

(a) Long-lived assets represent property, plant and equipment, indefinite-lived intangible assets, amortizable intangible assets and investments in noncontrolled affiliates.

See Note 2 and Note 14 for further information on property, plant and equipment.

See Note 2 and Note 4 for further information on goodwill and other intangible assets.

Investments in noncontrolled affiliates are evaluated for

impairment upon a significant change in the operating or macroeconomic environment.

(a) Long-lived assets represent property, plant and equipment, indefinite-lived intangible assets, amortizable intangible assets, investments in noncontrolled affiliates and other investments included in other assets.

See Notes 2 and 14 for further information on property, plant and equipment.

See Notes 2 and 4 for further information on goodwill and other intangible assets.

See Note 14 for further information on other assets.

Investments in noncontrolled affiliates are evaluated for impairment upon a significant change in the operating or macroeconomic environment.

These assets are reported in the country where they are primarily used.

(b) The increase in net revenue reflects our acquisition of Be & Cheery.

(b) In 2021, the increase in net revenue reflects our acquisition of Be & Cheery.

See Note 13 for further information.

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However, our policy for DSD, including certain chilled products, is to remove and replace damaged and out-of-date products from store shelves to ensure that consumers receive the product quality and freshness they expect.

Similarly, our policy for certain warehouse-distributed products is to replace damaged and out-of-date products.

Similarly, our policy for certain warehouse-distributed products

is to replace damaged and out-of-date products.

As a result, we record reserves, based on estimates, for anticipated damaged and out-of-date produc ts.

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We estimate and reserve for our expected credit loss exposure based on our experience with past due accounts and collectibility, write-off history, the aging of accounts receivable, our analysis of customer data, and forward-looking information (including the expected impact of the global economic uncertainty related to the COVID-19 pandemic), leveraging estimates of creditworthiness and projections of default and recovery rates for certain of our customers.

We are exposed to concentration of credit risk from our major customers, including Walmart.

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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, as products are delivered, for the expected payout, which may occur after year-end once reconciled and settled.

These accruals are based on contract terms and our historical experience with similar programs and require management judgment with respect to estimating customer and consumer participation and performance

Differences between estimated expense and actual incentive costs are normally insignificant and are recognized in earnings in the period such differences are determined.

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Our annual consolidated financial statements are not impacted by this interim allocation methodology.

Advertising and other marketing activities, reported as selling, general and administrative expenses, totaled $ 5.1 billion in 2021, $ 4.6 billion in 2020 and $ 4.7 billion in 2019, including advertising expenses of $ 3.5 billion in 2021 and $ 3.0 billion in both 2020 and 2019.

Advertising and other marketing activities, reported as selling, general and administrative expenses, totaled $ 5.2 billion in 2022, $ 5.1 billion in 2021 and $ 4.6 billion in 2020, including advertising expenses of $ 3.5 billion in both 2022 and 2021, and $ 3.0 billion in 2020.

Deferred advertising costs are not expensed until the year first used and consist of:

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Software amortization totaled $ 123 million in 2022, $ 135 million in 2021 and $ 152 million in 2020.

Net capitalized software and development costs were $ 809 million and $ 664 million as of December 25, 2021 and December 26, 2020, respectively.

Net capitalized software and development costs were $ 1.1 billion and $ 0.8 billion as of December 31, 2022 and December 25, 2021, respectively.

Commitments and Contingencies

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Where we use the qualitative assessment, first we determine if, based on qualitative factors, it is more likely than not that an impairment exists.

historical financial performance and significant changes in the brand or reporting unit.

If the qualitative assessment indicates that it is more likely than not that an impairment exists, then a quantitative assessment is performed.

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Significant management judgment is necessary to estimate the impact of competitive operating, macroeconomic and other factors (including those related to the Russia-Ukraine conflict and a high interest rate and inflationary cost environment) to estimate future levels of sales, operating profit or cash flows.

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Adjustments resulting from translating net assets are reported as a separate component of accumulated other comprehensive loss within common shareholders’ equity as currency translation adjustment.

Recently Issued Accounting Pronouncements - Adopted

In 2019, the Financial Accounting Standards Board (FASB) issued guidance to simplify the accounting for income taxes.

The guidance primarily addresses how to (1) recognize a deferred tax liability after we transition to or from the equity method of accounting, (2) evaluate if a step-up in the tax basis of goodwill is related to a business combination or is a separate transaction, (3) recognize all of the effects of a change in tax law in the period of enactment, including adjusting the estimated annual tax rate, and (4) include the amount of tax based on income in the income tax provision and any incremental amount as a tax not based on income for hybrid tax regimes.

We adopted the guidance in the first quarter of 2021.

The adoption did not have a material impact on our consolidated financial statements or related disclosures.

Recently Issued Accounting Pronouncements - Not Yet Adopted

In September 2022, the Financial Accounting Standards Board (FASB) issued guidance to enhance the transparency of supplier finance programs to allow financial statement users to understand the effect on working capital, liquidity and cash flows.

The new guidance requires disclosure of key terms of the program, including a description of the payment terms, payment timing and assets pledged as security or other forms of guarantees provided to the finance provider or intermediary.

Other requirements include the disclosure of the amount that remains unpaid as of the end of the reporting period, a description of where these obligations are presented in the balance sheet and a rollforward of the obligation during the annual period.

The guidance is effective in the first quarter of 2023, except for the rollforward, which is effective in 2024.

Early adoption is permitted.

We will adopt the guidance when effective.

Note 3 — Restructuring and Impairment Charges

2019 Multi-Year Productivity Plan

The 2019 Productivity Plan, publicly announced on February 15, 2019, will leverage new technology and business models to further simplify, harmonize and automate processes;

We publicly announced a multi-year productivity plan on February 15, 2019 (2019 Productivity Plan) that will leverage new technology and business models to further simplify, harmonize and automate processes;

re-engineer our go-to-market and information systems, including deploying the right automation for each market;

and simplify our organization and optimize our manufacturing and supply chain footprint.

To build on the successful implementation of the 2019 Productivity Plan to date, we expanded and extended the plan through the end of 2026 to take advantage of additional opportunities within the initiatives described above.

We now expect to incur pre-tax charges of approximately $ 3.15 billion, including cash expenditures of approximately $ 2.4 billion, as compared to our previous estimate of pre-tax charges of approximately $ 2.5 billion, which included cash expenditures of approximately $ 1.6 billion.

These pre-tax charges are expected to consist of approximately 55 % of severance and other employee-related costs, 10 % for asset impairments (all non-cash) resulting from plant closures and related actions and 35 % for other costs associated with the implementation of our initiatives.

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

To build on the successful implementation of the 2019 Productivity Plan, in the fourth quarter of 2022, we expanded and extended the plan through the end of 2028 to take advantage of additional opportunities within the initiatives described above.

As a result, we expect to incur pre-tax charges of approximately $ 3.65 billion, including cash expenditures of approximately $ 2.9 billion.

These pre-tax charges are expected to consist of approximately 55 % of severance and other employee-related costs, 10 % for asset impairments (all non-cash) resulting from plant closures and related actions and 35 % for other co sts associated with the implementation of our initiatives.

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

FLNA QFNA PBNA LatAm Europe AMESA APAC Corporate

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380 237 269 1,357

Other pension and retiree medical benefits expense 10 20 2 67

Other pension and retiree medical benefits income 31 10 20 98

Total $ 411 $ 247 $ 289 $ 1,455

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Other costs primarily include costs associated with the implementation of our initiatives, including contract termination costs, consulting and other professional fees.

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

A summary of our 2019 Productivity Plan is as follows:

Severance and Other Employee Costs Asset

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$ 188 $ — $ 8 $ 196

(a) Excludes cash expenditures of $ 2 million in both 2021 and 2020, and $ 4 million in 2019, reported in the cash flow statement in pension and retiree medical plan contributions.

(a) Excludes cash expenditures of $ 1 million in 2022 and $ 2 million in both 2021 and 2020, reported in the cash flow statement in pension and retiree medical plan contributions.

Substantially all of the restructuring accrual at December 31, 2022 is expected to be paid by the end of 2023.

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

For information on additional impairment charges, see Notes 1 and 4 for brand portfolio impairment charges, other impairment charges and Russia-Ukraine conflict charges.

Note 4 — Intangible Assets

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571 ( 237 ) 334 623 ( 227 ) 396

Brands 20 – 40

1,097 ( 973 ) 124 1,151 ( 989 ) 162

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Amortization expense $ 78 $ 91 $ 90

(a) Acquired franchise rights includes our distribution agreement with Vital Pharmaceuticals, Inc., with an expected residual value higher than our carrying value.

The distribution agreement’s useful life is three years, in accordance with the three-year termination notice issued, and is not reflected in the average useful life above.

(b) The change primarily reflects assets reclassified as held for sale in connection with our Juice Transaction.

(a) Decrease is primarily due to the write-off of our distribution rights for Bang energy drinks.

See Note 1 for further information.

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Indefinite-Lived Intangible Assets

In the first quarter of 2022, we discontinued or repositioned certain juice and dairy brands in Russia in our Europe division.

As a result, we recognized pre-tax impairment charges (included in brand portfolio impairment charges) of $ 241 million ($ 193 million after-tax or $ 0.14 per share) in impairment of intangible assets, primarily related to indefinite-lived intangible assets in the year ended December 31, 2022.

See Note 1 for further information.

In the second quarter of 2022, macroeconomic factors, sanctions and other regul ations as a result of the Russia-Ukraine conflict indicated a material deterioration of the significant inputs used to determine the fair value of our indefinite-lived intangible assets in Russia, primarily assumptions underlying the weighted-average cost of capital.

These factors required us to perform a quantitative assessment, despite the absence of a material adverse impact on these assets’ financial performance (e.g., sales, operating profit, cash flows).

The fair value of our indefinite-lived intangible assets in Russia was estimated using discounted cash flows under the income approach, which we consider to be a Level 3 measurement.

We determined that the carrying value exceeds the fair value, with the decrease in the fair value primarily attributable to a significant increase in the weighted-average cost of capital, which reflects the macroeconomic uncertainty in Russia.

As a result of the quantitative assessment, we recorded pre-tax impairment charges of $ 1.2 billion ($ 958 million after-tax or $ 0.69 per share) in impairment of intangible assets, related to our juice and dairy brands in Russia in our Europe division, in the year ended December 31, 2022.

See Note 1 for further information.

As discussed in Note 2, we perform our annual impairment assessment on indefinite-lived intangible assets during our third quarter.

The annual impairment assessment on indefinite-lived intangible assets performed in the third quarter of 2022, based on best available market information and our internal forecasts and operating plans at the time, resulted in no impairment.

In the fourth quarter of 2022, macroeconomic conditions including a high interest rate and inflationary cost environment, coupled with recent business performance, indicated a deterioration of the significant inputs used to determine the fair value of our indefinite-lived intangible assets in various markets, primarily assumptions underlying the weighted-average cost of capital and the impact of economic uncertainty on current and future financial performance, and required us to perform a quantitative assessment on certain assets.

The fair value of our indefinite-lived intangible assets was estimated using discounted cash flows under the income approach, which we consider to be a Level 3 measurement.

We determined that the carrying value exceeded the fair value, which reflects the increase in the weighted-average cost of capital as well as our most current estimates of future sales and their contributions to operating profit and expected future cash flows (including perpetuity growth assumptions).

As a result of the quantitative assessment, we recorded pre-tax impairment charges of $ 1.6 billion ($ 1.3 billion after-tax or $ 0.94 per share) in impairment of intangible assets, primarily related to the SodaStream brand in our Europe division, in the year ended December 31, 2022.

See Note 1 for further information.

As of December 31, 2022, the estimated fair values of our indefinite-lived reacquired and acquired franchise rights recorded at PBNA exceeded their carrying values.

However, there could be an impairment of the carrying value of PBNA’s reacquired and acquired franchise rights, as well as further impairment to the carrying value of the SodaStream brand and goodwill, if future sales and their contributions to operating profit do not achieve our expected future cash flows (including perpetuity growth assumptions) or if macroeconomic conditions result in a future increase in the weighted-average cost of capital used to estimate fair value.

We did not recognize any impairment charges for goodwill in each of the years ended December 31, 2022, December 25, 2021 and December 26, 2020.

We did not recognize any impairment charges for indefinite-lived intangible assets in the year ended December 25, 2021.

In 2020, we recognized a pre-tax impairment charge of $ 41 million related to a coconut water brand in PBNA.

We did not recognize any material impairment charges for indefinite-lived intangible assets in the year ended December 28, 2019.

As of December 25, 2021, the estimated fair values of our indefinite-lived reacquired and acquired franchise rights recorded at PBNA exceeded their carrying values.

However, there could be an impairment of the carrying value of PBNA’s reacquired and acquired franchise rights if future revenues and their contribution to the operating results of PBNA’s CSD business do not achieve our expected future cash flows or if macroeconomic conditions result in a future increase in the weighted-average cost of capital used to estimate fair value.

We have also analyzed the impact of the macroeconomic conditions in Russia on the estimated fair value of our indefinite-lived intangible assets in Russia and have concluded that there are no impairments for the year ended December 25, 2021.

The estimated fair value of indefinite-lived intangible assets is dependent on macroeconomic conditions (including a resulting increase in the weighted-average cost of capital used to estimate fair value), future revenues and their contributions to operating results and expected future cash flows (including perpetuity growth assumptions), and significant changes in the decisions regarding assets that do not perform consistent with our expectations.

Subsequent to December 25, 2021, we discontinued or repositioned certain juice and dairy brands in Russia in our Europe segment.

As a result, we will recognize pre-tax impairment charges of approximately $ 0.2 billion in the first quarter of 2022 in selling, general and administrative expenses.

In 2020, we recognized pre-tax impairment charges of $ 42 million, primarily related to a coconut water brand in PBNA.

For further information on our policies for indefinite-lived intangible assets, see Note 2.

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

2020 Acquisitions Translation

and Other Balance,

2021 Acquisitions/(Divestitures) Translation

and Other Balance,

2021 Acquisitions/(Divestitures) Impairment Translation

and Other Balance,

Goodwill $ 465 $ ( 8 ) $ 1 $ 458 $ — $ — $ ( 7 ) $ 451

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Goodwill 458 — ( 25 ) 433 — — 3 436

Brands 125 — ( 17 ) 108 ( 1 ) ( 7 ) 100

108 ( 1 ) ( 7 ) 100 — ( 29 ) 4 75

Total 566 ( 1 ) ( 32 ) 533 — ( 29 ) 7 511

3,806 ( 28 ) ( 78 ) 3,700 — — ( 54 ) 3,646

Reacquired franchise rights (e)

Reacquired franchise rights (f)

496 ( 23 ) ( 32 ) 441 — — ( 20 ) 421

Acquired franchise rights (e)

Acquired franchise rights (f)

172 — ( 14 ) 158 — ( 1 ) ( 9 ) 148

Brands (g) (h)

4,072 — 182 4,254 — ( 2,684 ) 94 1,664

1 unchanged sentence

Goodwill 1,096 ( 2 ) ( 31 ) 1,063 14 — ( 62 ) 1,015

Brands — 183 31 214 — ( 9 ) 205

214 — ( 9 ) 205 — ( 36 ) ( 13 ) 156

Total 1,310 ( 2 ) ( 40 ) 1,268 14 ( 36 ) ( 75 ) 1,171

Goodwill 554 3 7 564 — — ( 46 ) 518

Brands (c) (j)

445 — 31 476 — ( 172 ) ( 37 ) 267

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Total $ 36,369 $ ( 564 ) $ ( 297 ) $ 35,508 $ 244 $ ( 3,010 ) $ ( 231 ) $ 32,511

(a) Acquisitions/divestitures in 2021 and acquisitions in 2020 primarily reflect our acquisition of BFY Brands.

(b) Acquisitions/divestitures in 2021 primarily reflects assets reclassified as held for sale in connection with our Juice Transaction.

(a) Acquisitions/divestitures in 2021 primarily reflect purchase price allocation adjustments related to our acquisition of BFY Brands, Inc.

(BFY Brands).

Impairment in 2022 is related to a baked fruit convenient food brand.

(b) Acquisitions/divestitures in 2021 primarily reflect assets reclassified as held for sale in connection with our Juice Transaction.

See Note 13 for further information.

Acquisitions/divestitures in 2022 primarily reflect our agreement with Celsius to distribute Celsius energy drinks in the United States.

See Note 9 for further information.

(d) Translation and other in 2021 primarily reflects the allocation of the Rockstar brand to the respective divisions, which was finalized in 2021 as part of purchase price allocation.

(e) Translation and other primarily reflects the depreciation of the euro in 2021 and depreciation of the Russian ruble in 2020.

(f) Translation and other in 2021 reflects the allocation of the Rockstar brand from PBNA, which was finalized in 2021 as part of purchase price allocation, partially offset by the depreciation of the euro.

Translation and other in 2020 primarily reflects the depreciation of the Russian ruble.

(g) Acquisitions in 2020 primarily reflects our acquisition of Pioneer Foods.

(c) Translation and other in 2021 primarily reflects the allocation of the Rockstar brand to the respective divisions, which was finalized in 2021 as part of purchase price allocation.

(d) Impairment in 2022 is related to the sale of certain non-strategic brands.

See Note 1 for further information.

(h) Acquisitions in 2020 primarily reflects our acquisition of Be & Cheery.

(e) Acquisitions/divestitures in 2021 primarily reflect assets reclassified as held for sale in connection with our Juice Transaction.

See Note 13 for further information.

(f) Translation and other primarily reflects the depreciation of the euro in 2021 and the depreciation of British pound and euro, partially offset by appreciation of the Russian ruble in 2022.

(g) Impairment in 2022 is related to the SodaStream brand, the decrease in fair value as a result of the Russia-Ukraine conflict and the discontinuation or repositioning of certain juice and dairy brands in Russia.

(h) Translation and other in 2021 reflects the allocation of the Rockstar brand from PBNA, which was finalized in 2021 as part of purchase price allocation, partially offset by the depreciation of the euro.

(i) Impairment in 2022 is primarily related to certain juice brands from the Pioneer Foods acquisition.

(j) Impairment in 2022 is related to the Be & Cheery brand.

Note 5 — Income Taxes

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( 683 ) 441 137

$ 1,727 $ 2,142 $ 1,894

A reconciliation of the U.S.

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One-time mandatory transition tax - TCJ Act 0.8 1.9 —

Juice Transaction ( 2.4 ) — —

Tax settlements ( 3.0 ) — —

Other, net ( 0.6 ) ( 0.5 ) ( 0.5 )

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Tax Cuts and Jobs Act

In 2022, we recorded $ 86 million ($ 0.06 per share) of net tax expense related to the TCJ Act as a result of correlating adjustments related to a partial audit settlement with the IRS for tax years 2014 through 2019.

In 2021, we recorded $ 190 million ($ 0.14 per share) of net tax expense related to the TCJ Act as a result of adjustments related to the final assessment of the 2014 through 2016 IRS audit .

There were no tax amounts recognized in 2020 related to the TCJ Act.

In 2019, we recognized a net tax benefit totaling $ 8 million ($ 0.01 per share) related to the TCJ Act.

As of December 31, 2022, our mandatory transition tax liability was $ 2.6 billion, which must be paid through 2026 under the provisions of the TCJ Act.

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The TCJ Act also created a 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.

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.

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.

We elected to treat the tax effect of GILTI as a current-period expense when incurred.

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On October 29, 2021, we filed a formal written protest of the assessment and requested an appeals conference.

As a result of the analysis of the 2014 through 2016 final assessment, we remeasured all applicable reserves for uncertain tax positions for all years open under the statute of limitations, including any correlating adjustments impacting the mandatory transition tax liability under the TCJ Act, resulting in a net non-cash tax expense of $ 112 million in 2021.

In 2022 , we came to an agreement with the IRS to settle one of the issues assessed in the 2014 through 2016 tax audit.

The agreement covers tax years 2014 through 2019.

As a result, we reduced our reserves for uncertain tax positions, including any correlating adjustments impacting the mandatory transition tax liability under the TCJ Act, resulting in a net non-cash tax benefit of $ 233 million ($ 0.17 per share) in 2022 .

Tax years 2014 through 2019 remain under audit for other issues.

On August 16, 2022, the “Inflation Reduction Act” (H.R.

5376) was signed into law in the United States.

We do not currently expect the Inflation Reduction Act to have a material impact on our financial results, including on our annual estimated effective tax rate or on our liquidity.

On May 19, 2019, a public referendum held in Switzerland passed the Federal Act on Tax Reform and AHV Financing (TRAF), effective January 1, 2020.

The enactment of certain provisions of the TRAF resulted in adjustments to our deferred taxes.

During 2021, no income tax adjustments related to the TRAF were recorded.

During 2020, we recorded a net tax benefit of $ 72 million related to the adoption of the TRAF in the Swiss Canton of Bern.

During 2019, we recorded a net tax expense of $ 24 million related to the impact of the TRAF.

While the accounting for the impacts of the TRAF are deemed to be complete, further adjustments to our financial statements and related disclosures could be made in future quarters, including in connection with final tax return filings.

During 2020, we recorded a net tax benefit of $ 72 million ($ 0.05 per share) related to the adoption of the TRAF in the Swiss Canton of Bern.

Deferred tax liabilities and assets are comprised of the following:

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Right-of-use assets 534 450

Investment in TBG 186 —

Other 232 254

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Other employee-related benefits 349 379

Pension benefits — 80

Deductible state tax and interest benefits 144 149

Lease liabilities 534 450

Capitalized research and development 150 —

Other 1,050 842

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Deferred tax assets, net 4,408 3,522

Net deferred tax liabilities/(assets) $ 516 $ ( 88 )

Net deferred tax (assets)/liabilities $ ( 71 ) $ 516

A summary of our valuation allowance activity is as follows:

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The gross amount of interest accrued, reported in other liabilities, was $ 292 million as of December 31, 2022, of which $ 4 million of tax benefit was recognized in 2022.

The gross amount of interest accrued, reported in other liabilities, was $ 338 million as of December 26, 2020, of which $ 93 million of tax expense was recognized in 2020.

The gross amount of interest accrued, reported in other liabilities, was $ 326 million as of December 25, 2021, of which $ 3 million of tax benefit was recognized in 2021.

A reconciliation of unrecognized tax benefits is as follows:

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$ 0.2 billion in 2023, $ 27.6 billion between 2024 and 2041 and $ 4.4 billion may be carried forward indefinitely.

We establish valuation allowances for our deferred tax assets if, based on the available evidence, it is not more likely than not that some portion or all of the deferred tax assets will be realized.

establish valuation allowances for our deferred tax assets if, based on the available evidence, it is not more likely than not that some portion or all of the deferred tax assets will be realized.

Undistributed International Earnings

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Share-based compensation expense - liability awards 30 20 11

Acquisition and divestiture-related charges 3 — —

Restructuring charges — 1 ( 1 )

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Awards to employees eligible for retirement prior to the award becoming fully vested are amortized to expense over the period through the date that the employee first becomes eligible to retire and is no longer required to provide service to earn the award.

In addition, we use historical data to estimate forfeiture rates and record share-based compensation expense only for those awards that are expected to vest.

In addition, we use historical data to estimate

forfeiture rates and record share-based compensation expense only for those awards that are expected to vest.

We do not backdate, reprice or grant share-based compensation awards retroactively.

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Long-Term Cash

Certain executive officers and other senior executives were granted long-term cash awards for which final payout is based on PepsiCo’s Total Shareholder Return relative to a specific set of peer companies and

achievement of a specified performance target over a three-year performance period.

Long-term cash awards that qualify as liability awards under share-based compensation guidance are valued through the end of the performance period on a mark-to-market basis using the Monte Carlo simulation model.

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Long-Term Cash

Balance Sheet Date Fair Value (a)

Balance Sheet Date Fair Value (b)

Contractual Life Remaining

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Forfeited ( 2,356 )

Outstanding at December 25, 2021 (b)

$ 45,792 $ 50,238 1.29

Expected to vest as of December 25, 2021 (c)

Outstanding at December 31, 2022 (c)

$ 50,254 $ 68,167 1.17

(a) In thousands.

Outstanding awards are disclosed at target.

(b) The outstanding awards for which the vesting period has not ended as of December 25, 2021, at the threshold, target and maximum award levels based on the achievement of its market conditions were zero , $ 46 million and $ 92 million, respectively.

(c) Represents the number of outstanding awards expected to vest, based on the most recent valuation as of December 25, 2021.

Expected to vest as of December 31, 2022 $ 46,841 $ 65,835 1.15

(a) In thousands, disclosed at target.

(b) In thousands, based on the most recent valuation as of December 31, 2022.

(c) The outstanding awards for which the vesting period has not ended as of December 31, 2022, at the threshold, target and maximum award levels based on the achievement of its market conditions were zero , $ 50 million and $ 101 million, respectively.

Other Share-Based Compensation Data

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Note 7 — Pension, Retiree Medical and Savings Plans

In connection with our Juice Transaction subsequent to December 25, 2021, we transferred pension and retiree medical obligations of approximately $ 150 million and related assets to the newly formed joint venture.

Effective December 31, 2022, we merged two U.S.

qualified defined benefit pension plans, PepsiCo Employees Retirement Plan I (Plan I), mostly inactive participants, and PepsiCo Employees Retirement Plan A (Plan A), mostly active participants, with Plan I remaining.

The accrued benefits offered to the plans’ participants were unchanged.

The merger was made to provide additional flexibility in evaluating opportunities to reduce risk and volatility.

Actuarial gains and losses of the merged plan will be amortized over the average remaining life expectancy of participants.

There is no material impact to pre-tax pension benefits expense from this merger.

In 2022, we transferred pension and retiree medical obligations of $ 145 million and related assets to TBG in connection with the Juice Transaction.

See Note 13 for further information.

In 2021, we adopted a change to the Canadian defined benefit plans to freeze pension accruals for salaried participants, effective January 1, 2024, and to close the hourly plan to new non-union employees hired on or after January 1, 2022.

After the effective date, all salaried participants will receive an employer contribution to the defined contribution plan based on age and years of service regardless of employee contribution and will have the opportunity to receive employer contributions to match employee contributions up to defined limits.

After the effective date, all salaried participants receive an employer contribution to the defined contribution plan based on age and years of service regardless of employee contribution and the opportunity to receive employer contributions to match employee contributions up to defined limits.

We also adopted a change to the U.K.

defined benefit plan to freeze pension accruals for all participants effective March 31, 2022.

After the effective date, participants will have the opportunity to receive employer contributions to match employee contributions up to defined limits.

After the effective date, participants have the opportunity to receive employer contributions to match employee contributions up to defined limits.

Pre-tax pension benefits expense will decrease after the effective dates, partially offset by contributions to defined contribution plans.

In 2021, we adopted a change to the U.S.

qualified defined benefit plans to transfer certain participants from PepsiCo Employees Retirement Plan A (Plan A) to PepsiCo Employees Retirement Plan I (Plan I), effective January 1, 2022.

The benefits offered to the plans’ participants were unchanged.

There is no material impact to pre-tax pension benefits expense from this transaction.

In 2020, lump sum distributions exceeded the total of annual service and interest cost and triggered a pre-tax settlement charge in Plan A of $ 205 million ($ 158 million after-tax or $ 0.11 per share).

qualified defined benefit plans to transfer certain participants from Plan A to Plan I, effective January 1, 2022.

The accrued benefits offered to the plans’ participants were unchanged.

There was no material impact to pre-tax pension benefits expense from this transaction.

In 2020, we adopted an amendment to the U.S.

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Since 2011, salaried new hires are not eligible to participate in the defined benefit plan.

After the effective date, all salaried participants will receive an employer contribution to the 401(k) savings plan based on age and years of service regardless of employee contribution and will have the opportunity to receive employer contributions to match employee contributions up to defined limits.

After the effective date, all salaried participants receive an employer contribution to the 401(k) savings plan based on age and years of service regardless of employee contribution and the opportunity to receive employer contributions to match employee contributions up to defined limits.

As a result of this amendment, pre-tax pension benefits expense decreased $ 70 million in 2021, primarily impacting corporate unallocated expenses.

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qualified defined benefit pension plans that resulted in the transfer of certain participants from Plan A to Plan I and to a newly created plan, PepsiCo Employees Retirement Hourly Plan (Plan H), effective January 1, 2021.

The benefits offered to the plans’ participants were unchanged.

The accrued benefits offered to the plans’ participants were unchanged.

The reorganization facilitated a more targeted investment strategy and provided additional flexibility in evaluating opportunities to reduce risk and volatility.

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As a result of this amendment, pre-tax pension benefits expense increased $ 45 million in 2021, primarily impacting service cost expense.

In 2019, Plan A purchased a group annuity contract whereby a third-party insurance company assumed the obligation to pay and administer future annuity payments for certain retirees.

This transaction triggered a pre-tax settlement charge in 2019 of $ 220 million ($ 170 million after-tax or $ 0.12 per share).

Also in 2019, certain former employees who had vested benefits in our U.S.

defined benefit pension plans were offered the option of receiving a one-time lump sum payment equal to the present value of the participant’s pension benefit.

This transaction triggered a pre-tax settlement charge in 2019 of $ 53 million ($ 41 million after-tax or $ 0.03 per share).

Collectively, the group annuity contract and one-time lump sum payments to certain former employees who had vested benefits resulted in settlement charges in 2019 of $ 273 million ($ 211 million after-tax or $ 0.15 per share).

Gains and losses resulting from actual experience differing from our assumptions, including the difference between the actual return on plan assets and the expected return on plan assets, as well as changes in our assumptions, are determined at each measurement date.

These differences are recognized as a component of net gain or loss in accumulated other comprehensive loss.

Gains and losses resulting from actual experience differing from our assumptions, including the difference between the actual and expected return on plan assets, as well as changes in our assumptions, are determined at each measurement date.

These differences are recognized as a component of net gain or loss in accumulated other comprehensive loss within common shareholders’ equity.

If this net accumulated gain or loss exceeds 10 % of the greater of the market-related value of plan assets or plan obligations, a portion of the net gain or loss is included in other pension and retiree medical benefits (expense)/income for the following year based upon the average remaining service life for participants in Plan A (approximately 9 years), Plan H (approximately 11 years) and retiree medical (approximately 9 years), and the remaining life expectancy for participants in Plan I (approximately 27 years).

The cost or benefit of plan changes that increase or decrease benefits for prior employee service (prior service cost/(credit)) is included in other pension and retiree medical benefits (expense)/income on a straight-line basis over the average remaining service life for participants in both Plan A and Plan H, except that prior service cost/(credit) for salaried participants subject to the freeze is amortized on a straight-line basis over the period up to the effective date of the freeze, or the remaining life expectancy for participants in Plan I.

In 2023, we expect the average remaining service life for participants in Plan H to be approximately 11 years and the average remaining life expectancy for participants in Plan I to be approximately 26 years.

The cost or benefit of plan changes that increase or decrease benefits for prior employee service (prior service cost/(credit)) is included in other pension and retiree medical benefits (expense)/income on a straight-line basis over the average remaining service life for participants in Plan H, and the remaining life expectancy for participants in Plan I, except that prior service cost/(credit) for salaried participants subject to the freeze is amortized on a straight-line basis over the period up to the effective date of the freeze.

Selected financial information for our pension and retiree medical plans is as follows:

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Participant contributions — — 2 3 — —

Experience (gain)/loss ( 215 ) 2,042 ( 178 ) 467 ( 17 ) 81

Experience gain ( 3,989 ) ( 215 ) ( 1,284 ) ( 178 ) ( 198 ) ( 17 )

Benefit payments ( 412 ) ( 976 ) ( 127 ) ( 106 ) ( 81 ) ( 83 )

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Net loss/(gain) $ 3,337 $ 3,550 $ 571 $ 696 $ ( 320 ) $ ( 220 )

Prior service (credit)/cost ( 63 ) ( 119 ) ( 11 ) ( 19 ) ( 34 ) ( 45 )

Prior service credit ( 21 ) ( 63 ) ( 9 ) ( 11 ) ( 25 ) ( 34 )

Total $ 3,316 $ 3,487 $ 562 $ 685 $ ( 345 ) $ ( 254 )

Changes recognized in net (gain)/loss included in other comprehensive loss

Net (gain)/loss arising in current year $ ( 301 ) $ 1,009 $ ( 355 ) $ 268 $ ( 22 ) $ 50

Net loss/(gain) arising in current year $ 254 $ ( 301 ) $ ( 40 ) $ ( 355 ) $ ( 114 ) $ ( 22 )

Amortization and settlement recognition ( 467 ) ( 265 ) ( 30 ) ( 95 ) 14 14

Foreign currency translation (gain)/loss — — ( 3 ) 42 — —

Foreign currency translation gain — — ( 55 ) ( 3 ) — —

Total $ ( 213 ) $ ( 566 ) $ ( 125 ) $ ( 453 ) $ ( 100 ) $ ( 8 )

Accumulated benefit obligation at end of year $ 11,104 $ 15,489 $ 2,483 $ 4,021

The net gain arising in the current year is primarily attributable to the increase in discount rate offset by actual experience differing from demographic assumptions.

The amount we report in operating profit as pension and retiree medical cost is service cost, which is the value of benefits earned by employees for working during the year.

The net loss arising in the current year is primarily attributable to a decrease in the actual return on plan assets offset by the impact of higher discount rates.

The amount we report in operating profit as pension and retiree medical cost is service cost, which is the

value of benefits earned by employees for working during the year.

The amounts we report below operating profit as pension and retiree medical cost consist of the following components:

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• Settlement/curtailment loss/(gain) represents the result of actions that effectively eliminate all or a portion of related projected benefit obligations.

Settlements are triggered when payouts to settle the projected benefit obligation of a plan due to lump sums or other events exceed the annual service and interest cost.

Settlements are triggered when payouts to settle the projected benefit obligation of a plan due to lump sums or other events exceed the total of annual service and interest cost.

Settlements are recognized when actions are irrevocable and we are relieved of the primary responsibility and risk for projected benefit obligations.

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Expected return on plan assets ( 912 ) ( 970 ) ( 929 ) ( 218 ) ( 231 ) ( 202 ) ( 16 ) ( 15 ) ( 16 )

Amortization of prior service (credits)/cost ( 31 ) 12 10 ( 2 ) — — ( 11 ) ( 12 ) ( 19 )

Amortization of prior service (credit)/cost ( 28 ) ( 31 ) 12 ( 1 ) ( 2 ) — ( 8 ) ( 11 ) ( 12 )

Amortization of net losses/(gains) 149 224 196 29 77 61 ( 14 ) ( 14 ) ( 23 )

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Total $ 489 $ 114 $ 380 $ ( 35 ) $ 11 $ 49 $ 2 $ 8 $ ( 1 )

(a) In 2020, U.S.

includes a settlement charge of $ 205 million ($ 158 million after-tax or $ 0.11 per share) related to lump sum distributions exceeding the total of annual service and interest cost.

In 2019, U.S.

includes settlement charges related to the purchase of a group annuity contract of $ 220 million ($ 170 million after-tax or $ 0.12 per share) and a pension lump sum settlement charge of $ 53 million ($ 41 million after-tax or $ 0.03 per share).

(a) In 2022 and 2020, U.S.

includes a settlement charge of $ 318 million ($ 246 million after-tax or $ 0.18 per share) and $ 205 million ($ 158 million after-tax or $ 0.11 per share), respectively, related to lump sum distributions exceeding the total of annual service and interest cost.

The following table provides the weighted-average assumptions used to determine net periodic benefit cost and projected benefit obligation for our pension and retiree medical plans:

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Net Periodic Benefit Cost

Service cost discount rate 2.6 % 3.4 % 4.4 % 2.7 % 3.2 % 4.2 % 2.3 % 3.2 % 4.3 %

Interest cost discount rate 2.0 % 2.9 % 4.1 % 1.7 % 2.4 % 3.2 % 1.6 % 2.6 % 3.8 %

Expected return on plan assets 6.4 % 6.8 % 7.1 % 5.3 % 5.6 % 5.8 % 5.4 % 5.8 % 6.6 %

Service cost discount rate (a)

3.1 % 2.6 % 3.4 % 4.2 % 2.7 % 3.2 % 2.8 % 2.3 % 3.2 %

Interest cost discount rate (a)

3.1 % 2.0 % 2.9 % 2.3 % 1.7 % 2.4 % 2.1 % 1.6 % 2.6 %

Expected return on plan assets (a)

6.7 % 6.4 % 6.8 % 5.3 % 5.3 % 5.6 % 5.7 % 5.4 % 5.8 %

Rate of salary increases 3.0 % 3.0 % 3.1 % 3.3 % 3.3 % 3.3 %

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Rate of salary increases 3.2 % 3.0 % 3.0 % 4.2 % 3.3 % 3.3 %

(a) 2022 U.S.

rates reflect remeasurement of a U.S.

qualified defined benefit pension plan in the second quarter of 2022.

The following table provides selected information about plans with accumulated benefit obligation and total projected benefit obligation in excess of plan assets:

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2022 2021 2022 2021 2022 2021

Selected information for plans with accumulated benefit obligation in excess of plan assets (a)

Selected information for plans with accumulated benefit obligation in excess of plan assets

Obligation for service to date $ ( 584 ) $ ( 1,499 ) $ ( 158 ) $ ( 127 )

Fair value of plan assets $ — $ 705 $ 129 $ 102

Selected information for plans with projected benefit obligation in excess of plan assets (a)

Selected information for plans with projected benefit obligation in excess of plan assets

Benefit obligation $ ( 620 ) $ ( 1,709 ) $ ( 273 ) $ ( 286 ) $ ( 714 ) $ ( 954 )

Fair value of plan assets $ — $ 705 $ 157 $ 171 $ 196 $ 299

(a) The decrease in U.S.

pension plans with obligations in excess of plan assets primarily reflects employer contributions to Plan H.

Of the total projected pension benefit obligation as of December 31, 2022, approximately $ 625 million relates to plans that we do not fund because the funding of such plans does not receive favorable tax treatment.

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Total $ 336 $ 738 $ 507 $ 48 $ 47 $ 55

(a) Includes $ 500 million contribution in 2021, $ 325 million contribution in 2020 and $ 400 million contribution in 2019 to fund our qualified defined benefit plans in the United States.

We made a discretionary contribution of $ 75 million to our U.S.

qualified defined benefit plans in January 2022 and expect to make an additional $ 75 million contribution in the third quarter of 2022.

(a) Includes $ 150 million contribution in 2022, $ 500 million contribution in 2021 and $ 325 million contribution in 2020 to fund our U.S.

qualified defined benefit plans.

We made a discretionary contribution of $ 125 million to a U.S.

qualified defined benefit plan in January 2023 and expect to make an additional contribution of $ 125 million in the third quarter of 2023.

In addition, in 2023, we expect to make non-discretionary contributions of approximately $ 90 million to our U.S.

and international pension benefit plans and approximately $ 55 million for retiree medical benefits.

We continue to monitor the impact of the COVID-19 pandemic and related global economic conditions and uncertainty on the net unfunded status of our pension and retiree medical plans.

and international pension benefit plans and contributions of approximately $ 55 million for retiree medical benefits.

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

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Our target investment allocations for U.S.

plan assets are as follows:

plan assets for both 2023 and 2022 are as follows:

Fixed income 56 %

equity 22 % 24 %

International equity 18 %

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We evaluate our expected return assumptions annually to ensure that they are reasonable.

To calculate the expected return on plan assets, our market-related value of assets

for fixed income is the actual fair value.

For all other asset categories, such as equity securities, we use a method that recognizes investment gains or losses (the difference between the expected and actual return based on the market-related value of assets) over a five-year period.

To calculate the expected return on plan assets, our market-related value of assets for fixed income is the actual fair value.

For all other asset categories, such as equity securities, we use a

method that recognizes investment gains or losses (the difference between the expected and actual return based on the market-related value of assets) over a five -year period.

This has the effect of reducing year-to-year volatility.

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(c) These investments are based on quoted bid prices for comparable securities in the marketplace and broker/dealer quotes in active markets.

Corporate bonds of U.S.-based companies represent 32 % and 30 % of total U.S.

plan assets for 2021 and 2020, respectively.

Corporate bonds of U.S.-based companies represents 32 % of total U.S.

plan assets for 2022 and 2021.

(d) Based on the fair value of the contracts as determined by the insurance companies using inputs that are not observable.

The changes in Level 3 amounts were not significant in the years ended December 31, 2022 and December 25, 2021.

(e) Includes Level 1 assets of $ 216 million and $ 178 million for 2021 and 2020, respectively, and Level 2 assets of $ 136 million and $ 100 million for 2021 and 2020, respectively.

(e) Includes Level 1 assets of $ 216 million for 2021 and Level 2 assets of $ 157 million and $ 136 million for 2022 and 2021, respectively.

(f) The real estate commingled funds include investments in limited partnerships.

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Retiree Medical Cost Trend Rates

The assumed health care cost trend rates are as follows:

Average increase assumed 6 % 6 %

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(b) The interest rates presented reflect weighted-average effective interest rates at year-end.

Certain of our fixed rate indebtedness have been swapped to floating rates through the use of interest rate derivative instruments.

See Note 9 for further information regarding our interest rate derivative instruments.

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In 2022, we issued the following senior notes:

Interest Rate Maturity Date Amount (a)

0.750 % October 2033 € 1,000

1.950 % October 2031 $ 1,250

2.625 % October 2041 $ 750

2.750 % October 2051 $ 1,000

(a) Represents gross proceeds from issuances of long-term debt excluding debt issuance costs, discounts and premiums.

The net proceeds from the issuances of the above notes will be used for general corporate purposes, including the repurchase of outstanding indebtedness and the repayment of commercial paper.

In 2021, we paid $ 4.8 billion in cash in connection with the tender of certain notes redeemed in the following amounts:

Interest Rate Maturity Date Principal Amount Tendered

5.500 % May 2035 $ 8

5.500 % May 2035 $ 1 (a)

5.500 % January 2040 $ 26

3.500 % March 2040 $ 443

4.875 % November 2040 $ 30

4.000 % March 2042 $ 261

3.600 % August 2042 $ 210

4.250 % October 2044 $ 190

Interest Rate Maturity Date Principal Amount (a)

3.200 % July 2029 £ 300 (b)

3.550 % July 2034 £ 450 (b)

3.600 % February 2028 $ 750

3.900 % July 2032 $ 1,250

4.450 % April 2046 $ 532

3.450 % October 2046 $ 622

4.000 % May 2047 $ 212

4.200 % July 2052 $ 500

3.625 % March 2050 $ 611

3.875 % March 2060 $ 240

(a) Series A.

As a result of the cash tender offers, we recorded a pre-tax charge of $ 842 million ($ 677 million after-tax or $ 0.49 per share) to net interest expense and other, primarily representing the tender price paid over the carrying value of the tendered notes and loss on treasury rate locks used to mitigate the interest rate risk on the cash tender offers.

See Note 9 to our consolidated financial statements for the mark-to-market impact of treasury rate locks associated with the cash tender offers.

(a) Excludes debt issuance costs, discounts and premiums.

(b) These notes, issued in British pounds, 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, except for an amount equivalent to the net proceeds from our 3.900 % senior notes due 2032 that will be allocated to fund, in whole or in part, eligible green projects in the categories of investments in recycling and sustainable plastics and packaging, decarbonizing our operations and supply chain, water sustainability, and regenerative agriculture, which promote our selected Sustainable Development Goals, as defined by the United Nations.

In 2022, we entered into a new five-year unsecured revolving credit agreement (Five-Year Credit Agreement), which expires on May 27, 2027.

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We may request that commitments under this agreement be increased up to $ 4.5 billion (or the equivalent amount in euros).

Additionally, we may, once a year,

request renewal of the agreement for an additional one-year period.

The Five-Year Credit Agreement replaced our $ 3.75 billion five year credit agreement, dated as of June 3, 2019.

Additionally, we may, once a year, request renewal of the agreement for an additional one-year period.

The Five-Year Credit Agreement replaced our $ 3.75 billion five-year credit agreement, dated as of May 28, 2021.

Also in 2022, we entered into a new 364-day unsecured revolving credit agreement (364-Day Credit Agreement), which expires on May 26, 2023.

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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 term loan would mature no later than the anniversary of the then effective termination date.

The 364-Day Credit Agreement replaced our $ 3.75 billion 364-day credit agreement, dated as of June 1, 2020.

The 364-Day Credit Agreement replaced our $ 3.75 billion 364-day credit agreement, dated as of May 28, 2021.

Funds borrowed under the Five-Year Credit Agreement and the 364-Day Credit Agreement may be used for general corporate purposes.

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As of December 31, 2022, there were no outstanding borrowings under the Five-Year Credit Agreement or the 364-Day Credit Agreement.

In 2020, one of our international consolidated subsidiaries borrowed 21.7 billion South African rand, or approximately $ 1.3 billion, from our two unsecured bridge loan facilities (Bridge Loan Facilities) to fund our acquisition of Pioneer Foods.

These borrowings were fully repaid in April 2020 and no further borrowings under these Bridge Loan Facilities are permitted.

In 2021, we paid $ 750 million to redeem all $ 750 million outstanding principal amount of our 1.70 % senior notes due 2021 and terminated the associated interest rate swap with a notional amount of $ 250 million.

In 2022, we paid $ 750 million to redeem all $ 750 million outstanding principal amount of our 2.25 % senior notes due May 2022, we paid $ 800 million to redeem all $ 800 million outstanding principal amount of our 3.10 % senior notes due July 2022 and we paid $ 154 million to redeem all $ 133 million outstanding principal amount of our subsidiary, Pepsi-Cola Metropolitan Bottling Company, Inc.’s 7.00 % senior notes due March 2029 and 5.50 % notes due May 2035.

Additionally, we deposited $ 102 million of U.S.

government securities with the Bank of New York Mellon, as trustee, in legal defeasance of $ 94 million outstanding principal amount of certain notes originally issued by our subsidiary, The Quaker Oats Company (Quaker notes).

PepsiCo will be deemed to have paid and discharged the Quaker notes on April 12, 2023.

In 2021, we completed cash tender offers to redeem $ 4.1 billion principal amount of certain notes, with maturity dates ranging from May 2035 to March 2060 and interest rates ranging from 3.375 % to 5.500 %, for $ 4.8 billion in cash.

Also in 2021, we paid $ 750 million to redeem all $ 750 million outstanding principal amount of our 1.70 % senior notes due 2021 and terminated the associated interest rate swap with a notional amount of $ 250 million.

In 2020, we paid $ 1.1 billion to redeem all $ 1.1 billion outstanding principal amount of our 2.15 % senior notes due 2020 and terminated associated interest rate swaps with a notional amount of $ 0.8 billion.

In 2019, we paid $ 1.0 billion to redeem all $ 1.0 billion outstanding principal amount of our 4.50 % senior notes due 2020.

Also in 2020, one of our international consolidated subsidiaries borrowed 21.7 billion South African rand, or approximately $ 1.3 billion, from our two unsecured bridge loan facilities (Bridge Loan Facilities) to fund our acquisition of Pioneer Foods.

These borrowings were fully repaid in April 2020 and no further borrowings under these Bridge Loan Facilities are permitted.

Note 9 — Financial Instruments

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The accounting for qualifying hedges allows changes in a hedging instrument’s fair value to offset corresponding changes in the hedged item in the same reporting period that the hedged item impacts earnings.

Gains or losses on derivatives designated as cash flow hedges are recorded in accumulated other

comprehensive loss and reclassified to our income statement when the hedged transaction affects earnings.

If it becomes probable that the hedged transaction will not occur, we immediately recognize the related hedging gains or losses in earnings;

Gains or losses on derivatives designated as cash flow hedges are recorded in accumulated other comprehensive loss within common shareholders’ equity and reclassified to our income statement when the hedged transaction affects earnings.

If it becomes probable that the hedged transaction will not occur,

we immediately recognize the related hedging gains or losses in earnings;

such gains or losses reclassified during the year ended December 31, 2022 were not material.

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Our foreign currency derivatives had a total notional value of $ 3.0 billion as of December 31, 2022 and $ 2.8 billion as of December 25, 2021.

The total notional amount of our debt instruments designated as net investment hedges was $ 2.1 billion as of December 25, 2021 and $ 2.7 billion as of December 26, 2020.

The total notional amount of our debt instruments designated as net

investment hedges was $ 2.9 billion as of December 31, 2022 and $ 2.1 billion as of December 25, 2021.

For foreign currency derivatives that do not qualify for hedge accounting treatment, gains and losses were offset by changes in the underlying hedged items, resulting in no material net impact on earnings.

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These instruments effectively change the interest rate and currency of specific debt issuances.

Certain of our fixed rate indebtedness have been swapped to floating rates.

The notional amount, interest payment and maturity date of the interest rate and cross-currency interest rate swaps match the principal, interest payment and maturity date of the related debt.

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As of December 31, 2022, approximately 1 % of total debt was subject to variable rates, compared to approximately 2 %, after the impact of the related interest rate derivative instruments, as of December 25, 2021.

Held-to-Maturity Debt Securities

Debt Securities

Held-to-Maturity

Investments in debt securities that we have the positive intent and ability to hold until maturity are classified as held-to-maturity.

Highly liquid debt securities with original maturities of three months or less are recorded as cash equivalents.

Our held-to-maturity debt securities consist of U.S.

Treasury securities and commercial paper.

As of December 25, 2021, we had no investments in U.S.

Treasury securities.

As of December 26, 2020, we had $ 2.1 billion of investments in U.S.

Treasury securities with $ 2.0 billion recorded in cash and cash equivalents and $ 0.1 billion in short-term investments.

As of December 31, 2022, we had no investments in held-to-maturity debt securities.

As of December 25, 2021, we had $ 130 million of investments in commercial paper recorded in cash and cash equivalents.

As of December 26, 2020, we had $ 260 million of investments in commercial paper with $ 75 million recorded in cash and cash equivalents and $ 185 million in short-term investments.

Held-to-maturity debt securities are recorded at amortized cost, which approximates fair value, and realized gains or losses are reported in earnings.

Our investments mature in less than one year.

As of December 25, 2021 and December 26, 2020, gross unrecognized gains and losses and the allowance for expected credit losses were not material.

As of December 25, 2021, gross unrecognized gains and losses and the allowance for expected credit losses were not material.

Available-for-Sale

Investments in available-for-sale debt securities are reported at fair value.

Changes in the fair value of available-for-sale debt securities are generally recognized in accumulated other comprehensive loss within common shareholders’ equity.

Changes in the fair value of available-for-sale debt securities impact earnings only when such securities are sold, or an allowance for expected credit losses or impairment is recognized.

We regularly evaluate our investment portfolio for expected credit losses and impairment.

In making this judgment, we evaluate, among other things, the extent to which the fair value of a debt security is less than its amortized cost;

the financial condition of the issuer, including the credit quality, and any changes thereto;

and our intent to sell, or whether we will more likely than not be required to sell, the debt security before recovery of its amortized cost basis.

Our assessment of whether a debt security has a credit loss or is impaired could change in the future due to new developments or changes in assumptions related to any particular debt security.

In 2022, we entered into an agreement with Celsius to distribute Celsius energy drinks in the United States (see Note 4 for further information) and invested $ 550 million in Series A convertible preferred shares issued by Celsius, which included certain conversion and redemption features.

The preferred shares automatically convert into Celsius common shares after six years if certain market-based conditions are met, or can be redeemed after seven years.

Shares underlying the transaction were priced at $ 75 per share,

and the preferred shares are entitled to a 5 % annual dividend, payable either in cash or in-kind.

Given our redemption right, we classified our investment in the convertible preferred stock as an available-for-sale debt security.

There were no unrealized gains and losses on our investment as of December 31, 2022.

There were no impairment charges related to our investment in the year ended December 31, 2022.

Fair Value Measurements

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Liabilities (a)

Index funds (b)

1 $ 337 $ — $ 231 $ —

Prepaid forward contracts (c)

Available-for-sale debt securities (b)

2 $ 660 $ — $ — $ —

Deferred compensation (d)

Index funds (c)

1 $ 257 $ — $ 337 $ —

Contingent consideration (e)

Prepaid forward contracts (d)

2 $ 14 $ — $ 21 $ —

Derivatives designated as fair value hedging instruments:

Interest rate (f)

Deferred compensation (e)

2 $ — $ 434 $ — $ 505

Derivatives designated as cash flow hedging instruments:

Foreign exchange (g)

Foreign exchange (f)

2 $ 24 $ 22 $ 29 $ 14

Interest rate (g)

Interest rate (f)

2 — 164 14 264

Commodity (h)

Commodity (g)

$ 26 $ 246 $ 113 $ 283

Derivatives not designated as hedging instruments:

Foreign exchange (g)

Foreign exchange (f)

2 $ 21 $ 21 $ 19 $ 7

Commodity (h)

Commodity (g)

2 11 51 35 22

Total derivatives at fair value (i)

$ 32 $ 72 $ 54 $ 29

Total derivatives at fair value (h)

$ 58 $ 318 $ 167 $ 312

Total $ 989 $ 752 $ 525 $ 817

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Financial liabilities are classified on our balance sheet within accounts payable and other current liabilities and other liabilities.

(b) Based on the price of index funds.

(b) Primarily related to our investment in Celsius convertible preferred stock.

The fair value of our investment approximates the transaction price and any accrued dividends, as well as the amortized cost.

As of December 31, 2022, $ 3 million, $ 104 million and $ 553 million were classified as cash equivalents, short-term investments and other assets, respectively.

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 on the fair value of investments corresponding to employees’ investment elections.

(e) In connection with our acquisition of Rockstar, we recorded a liability for tax-related contingent consideration payable over up to 15 years, with an option to accelerate all remaining payments, with estimated maximum payments of approximately $ 1.1 billion, using current tax rates.

The fair value of the liability is estimated using probability-weighted, discounted future cash flows at current tax rates.

In the fourth quarter of 2021, we exercised our option to accelerate all remaining payments.

The change in the contingent consideration in 2021 is comprised of the fourth quarter payment of $ 773 million, a recognized pre-tax gain of $ 86 million ($ 66 million after-tax or $ 0.05 per share), recorded in selling, general and administrative expenses, and a fair value decrease of $ 2 million, recorded in goodwill as a result of the finalization of purchase price allocation.

(f) Based on London Interbank Offered Rate forward rates.

As of December 25, 2021, we had no hedged fixed-rate debt.

As of December 26, 2020, the carrying amount of hedged fixed-rate debt was $ 0.2 billion and classified on our balance sheet within short-term debt obligations.

As of December 25, 2021, there were no fair value hedging adjustments to hedged fixed-rate debt.

As of December 26, 2020, the cumulative amount of fair value hedging adjustments to hedged fixed-rate debt was a $ 2 million gain.

As of December 25, 2021, the cumulative amount of fair value hedging adjustments on discontinued hedges was a $ 2 million net 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) Primarily based on recently reported market transactions of swap arrangements.

(i) Derivative assets and liabilities are presented on a gross basis on our balance sheet.

Amounts subject to enforceable master netting arrangements or similar agreements which are not offset on the balance sheet as of December 25, 2021 and December 26, 2020 were not material.

(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 recently reported market transactions of spot and forward rates.

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

(h) 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 our balance sheet as of December 31, 2022 and December 25, 2021 were not material.

Collateral received or posted against our asset or liability positions was not material.

Exchange-traded commodity futures are cash-settled on a daily basis and, therefore, not included in the table as of December 25, 2021.

Exchange-traded commodity futures are cash-settled on a daily basis and, therefore, not included in the table.

The carrying amounts of our cash and cash equivalents and short-term investments recorded at amortized cost approximate fair value (classified as Level 2 in the fair value hierarchy) due to their short-term maturity.

The fair value of our debt obligations as of December 25, 2021 and December 26, 2020 was $ 43 billion and $ 50 billion, respectively, based upon prices of similar instruments in the marketplace, which are considered Level 2 inputs.

The fair value of our debt obligations as of December 31, 2022 and December 25, 2021 was $ 35 billion and $ 43 billion, respectively, based upon prices of identical or similar instruments in the marketplace, which are considered Level 2 inputs.

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

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Total $ ( 237 ) $ ( 166 ) $ ( 42 ) $ ( 440 ) $ ( 129 ) $ ( 48 )

(a) Foreign exchange derivative losses/gains are primarily included in selling, general and administrative expenses.

Interest rate derivative losses/gains are primarily from treasury rate locks, with a total notional value of $ 3.2 billion, to mitigate the interest rate risk on the cash tender offers and are included in net interest expense and other.

See Note 8 to our consolidated financial statements for further information.

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.

(a) Foreign exchange derivative losses/gains are included in selling, general and administrative expenses.

Commodity derivative gains included in cost of sales totaled $ 8 million in 2022 and $ 109 million in 2021 and commodity derivative gains included in selling, general and administrative expenses totaled $ 171 million in 2022 and $ 109 million in 2021.

(b) Foreign exchange derivative losses/gains are included in net revenue and cost of sales.

Interest rate derivative losses/gains on cross-currency interest rate swaps are included in selling, general and administrative expenses.

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

Based on current market conditions, we expect to reclassify net gains of $ 176 million related to our cash flow hedges from accumulated other comprehensive loss into net income during the next 12 months.

See Note 11 for further information.

Based on current market conditions, we expect to reclassify net losses of $ 51 million related to our cash flow hedges from accumulated other comprehensive loss within common shareholders’ equity into net income during the next 12 months.

Note 10 — Net Income Attributable to PepsiCo per Common Share

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Amounts reclassified from accumulated other comprehensive loss — ( 129 ) 440 — 311

Net other comprehensive (loss)/income ( 322 ) 200 1,001 22 901

Net other comprehensive (loss)/income ( 603 ) Ye ( 207 ) 488 8 ( 314 )

Tax amounts ( 36 ) 49 ( 99 ) ( 4 ) ( 90 )

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(b) Pension and retiree medical amounts are net of taxes of $ 1,370 million as of December 28, 2019, $ 1,514 million as of December 26, 2020, $ 1,283 million as of December 25, 2021 and $ 1,184 million as of December 31, 2022.

(c) Currency translation adjustment primarily reflects the appreciation of the Russian ruble, Canadian dollar, Mexican peso and Pound sterling.

(d) Currency translation adjustment primarily reflects the depreciation of the Russian ruble and Mexican peso.

(e) Currency translation adjustment primarily reflects the depreciation of the Turkish lira, Swiss franc and Mexican peso.

(d) Currency translation adjustment primarily reflects depreciation of the Turkish lira, Swiss franc and Mexican peso.

(e) Currency translation adjustment primarily reflects depreciation of the Egyptian pound and British pound sterling.

The following table summarizes the reclassifications from accumulated other comprehensive loss to the income statement:

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Commodity contracts ( 15 ) ( 4 ) 6 Selling, general and administrative expenses

Net (gains)/losses before tax ( 48 ) ( 116 ) 14

Net gains before tax ( 129 ) ( 48 ) ( 116 )

Tax amounts 23 11 29

Net (gains)/losses after tax $ ( 37 ) $ ( 87 ) $ 12

Net (gains) after tax $ ( 106 ) $ ( 37 ) $ ( 87 )

Pension and retiree medical items:

Amortization of net prior service credit $ ( 44 ) $ — $ ( 9 ) Other pension and retiree medical benefits income/(expense)

Amortization of net losses 289 238 169 Other pension and retiree medical benefits income/(expense)

Settlement/curtailment losses 54 227 308 Other pension and retiree medical benefits income/(expense)

Amortization of net prior service credit $ ( 37 ) $ ( 44 ) $ — Other pension and retiree medical benefits income

Amortization of net losses 164 289 238 Other pension and retiree medical benefits income

Settlement/curtailment losses 313 54 227 Other pension and retiree medical benefits income

Net losses before tax 440 299 465

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Note 13 — Acquisitions and Divestitures

Juice Transaction

In the first quarter of 2022, we sold our Tropicana, Naked and other select juice brands to PAI Partners for approximately $ 3.5 billion in cash, subject to purchase price adjustments, and a 39% noncontrolling interest in TBG, operating across North America and Europe.

The North America portion of the transaction was completed on January 24, 2022 and the Europe portion of the transaction was completed on February 1, 2022.

In the United States, PepsiCo acts as the exclusive distributor for TBG’s portfolio of brands for small-format and foodservice customers with chilled DSD.

We have significant influence over our investment in TBG and account for our investment under the equity method, recognizing our proportionate share of TBG’s earnings on our income statement (recorded in selling, general and administrative expenses).

As a result of this transaction, in the year ended December 31, 2022, we recorded a gain in our PBNA and Europe divisions (see detailed income statement activity below), including $ 520 million related to the remeasurement of our 39 % ownership in TBG at fair value using a combination of the transaction price, discounted cash flo ws and an option pricing model related to our liquidation preference in TBG .

In the fourth quarter of 2022, we reached an agreement on final purchase price adjustments for net working capital and net debt amounts as of the transaction close date compared to targeted amounts set forth in the purchase agreement.

A summary of income statement activity related to the Juice Transaction for the year ended December 31, 2022 is as follows:

PBNA Europe Corporate Total PepsiCo Provision for income taxes (a)

Net income attributable to PepsiCo Impact on net income attributable to PepsiCo per common share

Gain associated with the Juice Transaction $ ( 3,029 ) $ ( 292 ) $ — $ ( 3,321 ) $ 433 $ ( 2,888 ) $ 2.08

Acquisition and divestiture-related charges 51 14 6 71 ( 13 ) 58 ( 0.04 )

Operating profit $ ( 2,978 ) $ ( 278 ) $ 6 ( 3,250 ) 420 ( 2,830 ) 2.04

Other pension and retiree medical benefits income (b)

( 10 ) 3 ( 7 ) 0.01

Total Juice Transaction $ ( 3,260 ) $ 423 $ ( 2,837 ) $ 2.04 (c)

(a) Includes $ 186 million of deferred tax expense related to the recognition of our investment in TBG.

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

In connection with the sale, we entered into a transition services agreement with PAI Partners, under which we provide certain services to TBG to help facilitate an orderly transition of the business following the sale.

In return for these services, TBG is required to pay certain agreed upon fees to reimburse us for our costs without markup.

As of December 25, 2021, $ 1.8 billion of assets, primarily accounts receivable, net, and inventories of $ 0.5 billion, goodwill and other intangible assets of $ 0.6 billion and property, plant and equipment of $ 0.5 billion, and liabilities of $ 0.8 billion, primarily accounts payable and other liabilities of $ 0.6 billion and deferred income taxes of $ 0.2 billion, related to the Juice Transaction were reclassified as held for sale in our consolidated balance sheet.

The Juice Transaction did not meet the criteria to be classified as discontinued operations.

As of December 31, 2022, there were no amounts classified as held for sale.

2020 Acquisitions

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In the fourth quarter of 2021, we exercised our option to accelerate all remaining payments due under the contingent consideration arrangement.

See Note 9 for further information about the contingent consideration.

On June 1, 2020, we acquired all of the outstanding shares of Be & Cheery, one of the largest online convenient food companies in China, from Haoxiangni Health Food Co., Ltd.

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The goodwill recorded as part of the acquisition of Pioneer Foods primarily reflects synergies expected to arise from our combined brand portfolios and distribution networks, and is not deductible for tax purposes.

All of the goodwill is recorded in the AMESA segment.

All of the goodwill is recorded in the AMESA division.

The goodwill recorded as part of the acquisition of Rockstar primarily represents the value of PepsiCo’s expected new innovation in the energy category and is deductible for tax purposes.

All of the goodwill is recorded in the PBNA segment.

All of the goodwill is recorded in the PBNA division.

The goodwill recorded as part of the acquisition of Be & Cheery primarily reflects growth opportunities for PepsiCo as we leverage Be & Cheery’s direct-to-consumer and supply chain capabilities and is not deductible for tax purposes.

All of the goodwill is recorded in the APAC segment.

Juice Transaction

In the first quarter of 2022, we sold our Tropicana, Naked and other select juice brands to PAI Partners for approximately $ 3.5 billion in cash and a 39 % noncontrolling interest in a newly formed joint venture that will operate across North America and Europe.

The North America portion of the transaction was completed on January 24, 2022 and the Europe portion of the transaction was completed on February 1, 2022.

In the U.S., PepsiCo acts as the exclusive distributor for the new joint venture’s portfolio of brands for small-format and foodservice customers with chilled direct-store-delivery.

In connection with the sale, we entered into a transition services agreement with PAI Partners, under which we will provide certain services to the joint venture to help facilitate an orderly transition of the business following the sale.

In return for these services, the new joint venture is required to pay certain agreed upon fees to reimburse us for our actual costs without markup.

Subsequent to the transaction close date, the purchase price will be adjusted for net working capital and net debt amounts as of the transaction close date compared to targeted amounts set forth in the purchase agreement.

We expect to record a pre-tax gain of approximately $ 3 billion in our PBNA and Europe segments in the first quarter of 2022 as a result of this transaction.

We have reclassified $ 1.8 billion of assets, primarily accounts receivable, net, and inventories of $ 0.5 billion, goodwill and other intangible assets of $ 0.6 billion and property, plant and equipment of

$ 0.5 billion, and liabilities of $ 0.8 billion, primarily accounts payable and other liabilities of $ 0.6 billion and deferred income taxes of $ 0.2 billion, related to the Juice Transaction as held for sale in our consolidated balance sheet as of December 25, 2021.

The Juice Transaction does not meet the criteria to be classified as discontinued operations.

All of the goodwill is recorded in the APAC division.

Acquisition and Divestiture-Related Charges

Divestiture-related charges reflect transaction expenses, including consulting, advisory and other professional fees.

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

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Selling, general and administrative expenses (a)

Other pension and retiree medical benefits expense 6 — —

Total $ 80 $ ( 4 ) $ 255

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(b) In 2021, includes a tax benefit related to contributions to socioeconomic programs in South Africa.

Acquisition and divestiture-related charges by division are as follows:

2022 2021 2020 Transaction

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PBNA 51 11 66 Juice Transaction, Rockstar

Europe 8 — 46 Juice Transaction, SodaStream International Ltd.

AMESA 10 173 7 Pioneer Foods

Europe 14 8 — Juice Transaction

AMESA 3 10 173 Pioneer Foods, Other

APAC — 4 7 Be & Cheery

Corporate (a)

( 39 ) ( 20 ) 2 Rockstar, Juice Transaction

6 ( 39 ) ( 20 ) Juice Transaction, Rockstar

Total 74 ( 4 ) 255

Other pension and retiree medical benefits expense 6 — — Juice Transaction

Total acquisition and divestiture-related charges $ 80 $ ( 4 ) $ 255

(a) In 2021, the income amount primarily relates to the acceleration payment made in the fourth quarter of 2021 under the contingent consideration arrangement associated with our acquisition of Rockstar, which is partially offset by divestiture-related charges associated with the Juice Transaction.

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2022 2021 2020

Accounts and notes receivable

Accounts and notes receivable (a)

Trade receivables $ 8,192 $ 7,172

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Cumulative effect of accounting change — — 44

Net amounts charged to expense (a)

Deductions (b)

Net amounts charged to expense (b)

Deductions (c)

( 12 ) ( 25 ) ( 32 )

( 6 ) ( 10 ) 5

Allowance, end of year 150 147 $ 201

Net receivables $ 10,163 $ 8,680

Inventories (d)

Inventories (e)

Raw materials and packaging $ 2,366 $ 1,898

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Total $ 5,222 $ 4,347

Property, plant and equipment, net (e)

Property, plant and equipment, net (f)

Useful Life (Years)

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Deferred marketplace spending 123 119

Pension plans (f)

Right-of-use assets (g)

Pension plans (g)

Right-of-use assets (h)

Other investments (i)

Other 833 694

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Accounts payable and other current liabilities

Accounts payable (h)

Accounts payable (j)

$ 10,732 $ 9,834

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Dividends payable 1,610 1,508

Current lease liabilities (g)

Current lease liabilities (h)

Other current liabilities 4,390 3,960

Total $ 23,371 $ 21,159

(a) 2021 includes reductions in the previously recorded reserves of $ 32 million, while 2020 includes an allowance for expected credit losses of $ 56 million, related to the COVID-19 pandemic.

See Note 1 for further information.

(b) Includes accounts written off.

(d) Approximately 7 % and 6 % of the inventory cost in 2021 and 2020, respectively, were computed using the LIFO method.

(a) Increase primarily reflects strong revenue performance across much of our portfolio in 2022.

(b) 2021 includes reductions in allowance for expected credit losses related to COVID-19 pandemic recorded in 2020.

(d) Includes adjustments related primarily to currency translation and other adjustments.

(e) Increase reflects higher commodity costs in 2022.

Approximately 9 % and 7 % of the inventory cost in 2022 and 2021, respectively, were computed using the LIFO method.

The differences between LIFO and FIFO methods of valuing these inventories were not material.

See Note 2 for further information.

(e) See Note 2 for further information.

(f) See Note 2 for further information.

(g) See Note 7 for further information.

(h) Increase reflects higher production payables due to strong business performance across a number of our divisions as well as higher commodity prices, partially offset by liabilities reclassified as held for sale in connection with our Juice Transaction.

(h) See Note 12 for further information.

(i) Increase in 2022 primarily reflects our investment in Celsius convertible preferred stock.

See Note 9 for further information.

(j) Increase reflects higher commodity costs and capital expenditures in 2022.

Statement of Cash Flows

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$ 2,766 $ 1,933 $ 1,770

(a) In 2021, excludes the charge related to cash tender offers.

(a) 2022 excludes the premiums paid in accordance with the debt transactions.

2021 excludes the charge related to cash tender offers.

See Note 8 for further information.

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based on volumes sold and terms of the sales incentives, (3) assessed the Company’s ability to accurately estimate its sales incentive accrual by comparing previously established accruals to actual settlements, and (4) tested a sample of settlements or claims that occurred after period end, and compared them to the recorded sales incentive accrual.

Carrying value of certain reacquired and acquired franchise rights and certain juice and dairy brands

Carrying value of certain reacquired and acquired franchise rights and SodaStream brand

As discussed in Notes 2 and 4 to the consolidated financial statements, the Company performs impairment testing of its indefinite-lived intangible assets on an annual basis during the third quarter of each fiscal year and whenever events and changes in circumstances indicate that there is a greater than 50% likelihood that the asset is impaired.

The carrying value of indefinite-lived intangible assets as of December 31, 2022 was $32.5 billion which represents 35% of total assets, and includes PepsiCo Beverages North America’s (PBNA) reacquired and acquired franchise rights which had a carrying value of $8.8 billion as of December 31, 2022.

We identified the assessment of the carrying value of PBNA’s reacquired and acquired franchise rights and certain of Europe’s juice and dairy brands in Russia as a critical audit matter.

We identified the assessment of the carrying value of PBNA’s reacquired and acquired franchise rights and the SodaStream brand in Europe as a critical audit matter.

Significant auditor judgment is necessary to assess the impact of competitive operating and macroeconomic factors on future levels of sales, operating profit and cash flows.

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The Company adjusts these reserves, as well as the related interest, in light of new information, such as the progress of a tax examination, new tax law, relevant court rulings or tax authority settlements.

We identified the evaluation of certain of the Company’s unrecognized tax benefits as a critical audit matter because the application of tax law and interpretation of a tax authority’s settlement history is

complex and involves subjective judgment.

Such judgments impact both the timing and amount of the reserves that are recognized, including judgments about re-measuring liabilities for positions taken in prior years’ tax returns in light of new information.

Such judgments impact both the timing and amount of

the reserves that are recognized, including judgments about re-measuring liabilities for positions taken in prior years’ tax returns in light of new information.

The following are the primary procedures we performed to address this critical audit matter.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis