Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
OUR BUSINESS
Executive Overview
Our Operations
Other Relationships
Our Business Risks
OUR FINANCIAL RESULTS
Results of Operations – Consolidated Review
Results of Operations – Segment Review
PFNA
PBNA
IB Franchise
EMEA
LatAm Foods
Asia Pacific Foods
Non-GAAP Measures
Items Affecting Comparability
Our Liquidity and Capital Resources
Return on Invested Capital
OUR CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Revenue Recognition
Goodwill and Other Intangible Assets
Income Tax Expense and Accruals
Pension and Retiree Medical Plans
CONSOLIDATED STATEMENT OF INCOME
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
CONSOLIDATED STATEMENT OF CASH FLOWS
CONSOLIDATED BALANCE SHEET
CONSOLIDATED STATEMENT OF EQUITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 1 – Basis of Presentation and Our Segments
Note 2 – Our Significant Accounting Policies
Note 3 – Restructuring and Impairment Charges
Note 4 – Intangible Assets
Note 5 – Income Taxes
Note 6 – Share-Based Compensation
Note 7 – Pension, Retiree Medical and Savings Plans
Note 8 – Debt Obligations
Note 9 – Financial Instruments
Note 10 – Net Income Attributable to PepsiCo per Common Share
Note 11 – Accumulated Other Comprehensive Loss Attributable to PepsiCo
Note 12 – Leases
Note 13 – Acquisitions and Divestitures
Note 14 – Supply Chain Financing Arrangements
Note 15 – Supplemental Financial Information
Note 16 – Legal Contingencies
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
GLOSSARY
Our discussion and analysis is intended to help the reader understand our results of operations and financial condition and is provided as an addition to, and should be read in connection with, our consolidated financial statements and the accompanying notes. Definitions of key terms can be found in the glossary. Unless otherwise noted, tabular dollars are presented in millions, except per share amounts. All per share amounts reflect common stock per share amounts, assume dilution unless otherwise noted, and are based on unrounded amounts. Percentage changes are based on unrounded amounts.
Discussion in this Form 10-K includes results of operations and financial condition for 2025 and 2024 and year-over-year comparisons between 2025 and 2024. For discussion on results of operations and financial condition pertaining to 2023 and year-over-year comparisons between 2024 and 2023, please refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of Exhibit 99.2 to our Current Report on Form 8-K dated July 17, 2025.
OUR BUSINESS
Executive Overview
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. Through our operations, authorized bottlers, contract manufacturers, and other third parties, we make, market, distribute, and sell a wide array of beverages and convenient foods, serving customers and consumers in more than 200 countries and territories.
As a global company with strong local connections, we faced many of the same challenges in 2025 as our consumers, customers, and competitors worldwide. These included ongoing supply chain disruptions; tariffs; persistent inflationary pressures; evolving consumer consumption patterns and preferences; an intensely competitive business environment, including the increased adoption of artificial intelligence technologies; the continued expansion of e-commerce in a rapidly changing retail landscape, including customers moving away from DSD systems; the need for further innovation and collaboration as we progress toward our ambitious packaging and other goals; ongoing macroeconomic and political volatility; and an increasingly complex regulatory environment.
In response to these challenges, we have continued to adapt and innovate, reinforcing our resilience and continued focus on growth. We are focused on improving our productivity, optimizing our operations and harnessing our scale and capabilities across our markets and further elevating the interests, occasions, and channels of consumers in our strategies to lead and shape the future of our categories. This is underpinned by our pep+ (PepsiCo Positive) transformation, now in its fifth year.
A Bold Ambition: Against this backdrop, we have a clear set of priorities: reigniting our North America business by combining operations where it makes the most sense and using the savings to support meaningful investments in our brands; increasing the size, presence and scale of our International business, with a focus on capturing growth in large and developing markets; and working to grow our away-from-home business by expanding our availability and extending into new occasions.
Laying the Groundwork: Since 2018, we have made significant investments in the business to adapt to the changing landscape. This includes increasing investments to strengthen our brands, from transforming our portfolio through innovation and acquisitions, to foundational investments in technology and artificial intelligence to position ourselves to be fit for the future, building a set of high impact commercial, operational, and digital capabilities; expanding and updating our manufacturing footprint to enable geographic growth and capture future demand; right-sizing and modernizing our warehousing and distribution capacity; and transforming our operating model to become more agile, efficient and responsive to the consumer.
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Big Changes to Big Things: Guided by pep+, we continue to work to reshape our portfolio to fit today’s world. That includes: reducing added sugar, sodium and saturated fat in core brands like Lay’s and Gatorade; advancing efforts to remove artificial colors and flavors in brands like Lay’s, Cheetos, and Doritos; adding new products with functional benefits, such as Pepsi Prebiotic Cola; and welcoming popular brands like Siete, Sabra and poppi.
We continued to expand our away-from-home business into new occasions. The successful Walking Taco platform is thriving in stadiums, arenas, and parks across the United States, while our “Food Deserves Pepsi” campaign and the “Pepsi Zero Sugar Taste Challenge” have driven higher brand awareness and contributed positively to our performance.
We are becoming a more deeply integrated, more productive organization. This has been one of our biggest priorities over the past year. Since we shifted our operating model at the start of 2025, we have worked hard to be more agile, simpler and more unified. From sharing global services, to streamlining processes, to launching our first new corporate brand identity in nearly 25 years, we are making One PepsiCo real. In North America, we are carefully evaluating an integrated model for our food and beverage supply chains, go-to-market, and commercial capabilities and intend to take a nuanced approach factoring in key components such as return on investment, scale and market share. Our Global Capability Centers now support multiple functions, enabling us to centralize information, reduce duplicative work, and share best practices across the organization.
We are building smarter systems with technologies like artificial intelligence to better serve our customers and consumers, so we can have the right products, at the right place, at the right price. Through our collaborations with cutting-edge technology providers, we are using artificial intelligence to reimagine our go-to-market model, enhance customer support, and empower sales teams to focus on strategic growth. This allows us to unify data, gain real-time inventory visibility, and provide faster, more responsive customer service.
We are becoming more resilient through pep+. pep+ remains central to our strategy, ensuring that we continue to create value for shareholders, customers and consumers, while doing what is right for communities and the planet. In 2025, we stepped up our efforts around key pillars like regenerative agriculture and water use efficiency, with the aim to make a positive impact in markets around the world.
Our Operations
See “Item 1. Business” for information on our segments and a description of our distribution network, ingredients and other supplies, brands and intellectual property rights, seasonality, customers, competition, research and development, regulatory matters and human capital. In addition, see Note 1 to our consolidated financial statements for financial information about our segments and geographic areas.
Other Relationships
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. Our transactions with these vendors and customers are in the normal course of business and are consistent with terms negotiated with other vendors and customers. In addition, certain of our employees serve on the boards of Pepsi Bottling Ventures LLC and other affiliated companies of PepsiCo and do not receive incremental compensation for such services.
Our Business Risks
Risks Associated with Commodities and Our Supply Chain
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
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the use of fixed-price contracts and purchase orders, pricing agreements and derivative instruments, including swaps and futures. A number of external factors, including volatile geopolitical conditions, the inflationary cost environment, import/export restrictions and tariffs, adverse weather conditions and supply chain disruptions, have impacted and may continue to impact commodity, transportation and labor costs. When prices increase, we may or may not pass on such increases to our customers, which may result in reduced volume, revenue, margins and operating results.
See Note 9 to our consolidated financial statements for further information on how we manage our exposure to commodity prices.
Risks Associated with Climate Change
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, 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. We continue to monitor existing and proposed laws and regulations in the jurisdictions in which our products are made, manufactured, distributed and sold and to consider actions we may take to potentially mitigate the unfavorable impact, if any, of such laws or regulations.
Risks Associated with International Operations
We are subject to risks in the normal course of business that are inherent to international operations. During the periods presented in this report, volatile economic, political, social and geopolitical conditions, civil unrest and wars and other military conflicts, acts of terrorism and natural disasters and other catastrophic events in certain markets in which our products are made, manufactured, distributed or sold, including in Argentina, Brazil, China, Mexico, the Middle East (including Egypt) , Russia, Turkey and Ukraine, continue to result in challenging operating environments and have resulted in and could continue to result in changes in how we operate in certain of these markets. Debt and credit issues, currency controls or fluctuations, sanctions and export controls in certain of these international markets (including restrictions on the transfer of funds to and from certain markets) have also continued to impact our operations in certain of these international markets. We continue to closely monitor the economic, operating and political environment in the markets in which we operate, including risks of additional impairments or write-offs and currency fluctuation, and to identify actions to potentially mitigate any impacts on our future results.
Our operations in Russia accounted for 5% and 4% of our consolidated net revenue for the years ended December 27, 2025 and December 28, 2024, respectively. Russia accounted for 5% and 3% of our consolidated assets, 20% and 10% of our consolidated cash and cash equivalents, and 39% and 41% of our accumulated currency translation adjustment loss as of December 27, 2025 and December 28, 2024 , respectively.
See Notes 1 and 4 to our consolidated financial statements for a discussion of i mpairment and other charges recognized in the years ended December 27, 2025, December 28, 2024, and December 30, 2023 .
Risks Associated with Tariffs
The imposition of tariffs (including U.S. tariffs imposed or threatened to be imposed on China, the European Union, Canada and Mexico and other countries and any tariffs imposed by such countries) have impacted and could continue to impact our supply chain resulting in increased input costs, including the
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cost of certain raw materials and packaging. The impact of tariffs will continue to vary, including based on where inputs are sourced from and shipped to. In addition, any supply chain constraints, inflationary impacts or reduced consumer demand for our products as a result of such tariffs or ongoing macroeconomic uncertainty have impacted and could continue to impact our results. We will continue to evaluate the nature and extent of the impact of these tariffs on our business and to identify actions to potentially mitigate, where possible, any unfavorable impacts on our future results.
Imposition of Taxes and Regulations on our Products
Certain jurisdictions in which our products are made, manufactured, distributed or sold have either imposed, or are considering imposing, new or increased taxes or regulations on the manufacture, distribution or sale of our products or their packaging, ingredients or substances contained in, or attributes of, our products or their packaging, commodities used in the production of our products or their packaging or the recyclability or recoverability of our packaging. These taxes and regulations vary in scope and form. For example, some taxes apply to all beverages, including non-caloric beverages, while others apply only to beverages with a caloric sweetener (e.g., sugar). 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. In addition, certain jurisdictions in which our snack products are sold have either imposed or are considering imposing, new or increased taxes on the manufacture, distribution or sale of certain of our snack products as a result of ingredients (such as sugar, sodium or saturated fat) contained in our products.
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. Because of this, we cannot predict the scope or form potential taxes, regulations or other limitations on our products or their packaging may take, and therefore cannot predict the impact of such taxes, regulations or limitations on our financial results. In addition, taxes, regulations and limitations may impact us and our competitors differently. We expect continued scrutiny of certain ingredients and substances present in certain of our products and packaging. We continue to monitor existing and proposed taxes and regulations in the jurisdictions in which our products are made, manufactured, distributed and sold and to consider actions we may take to potentially mitigate the unfavorable impact, if any, of such taxes, regulations or limitations, including advocating alternative measures with respect to the imposition, form and scope of any such taxes, regulations or limitations.
OECD Model Global Minimum Tax
Numerous countries, including European Union member states, have enacted or are expected to enact legislation incorporating the OECD model rules for a global minimum tax rate of 15% with widespread implementation expected by the end of 2026. As the legislation becomes effective in countries in which we do business, our taxes will increase and negatively impact our provision for income taxes.
Retail Landscape
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. 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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Changing dynamics at the retail level have also impacted and may continue to impact our ability to grow in certain jurisdictions. In this changing retail landscape, retailers and buying groups are shifting traditional value propositions, removing our products or otherwise reducing shelf space allocated to our products and focusing on introducing and developing private-label brands. We have seen and expect to continue to see retailers and buying groups impact our ability to compete in these jurisdictions. We continue to monitor our relationships with retailers and buying groups and seek to identify actions we may take to maintain mutually beneficial relationships and resolve any significant disputes and potentially mitigate any unfavorable impacts on our future results.
See also “Item 1A. Risk Factors,” “Executive Overview” above and “Market Risks” below for more information about these risks and the actions we have taken to address key challenges.
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 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. 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 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 Chief Strategy and Transformation 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 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 2025, the Board or its relevant Committee were provided updates on the impact of events, including geopolitical events and tensions in certain international markets. 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 , economic , labor market trends, changing consumer behavior, retail and digitalization.
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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;
◦ The Nominating and Corporate Governance Committee assists the Board in its oversight of the Company’s governance structure and other corporate governance matters, including succession planning; and
◦ The Sustainability 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), inclusion and public policy matters.
• 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 and designated Committees. 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, Region Chief Executive Officers, and the heads of Enterprise Risk, Corporate Affairs, Human Resources, Research & Development, Information Technology, Sustainability, Strategy, Transformation, International Beverages, Commercial, Global Operations and Marketing;
• Segment and key market risk committees, comprised of cross-functional senior management teams, meet regularly to identify, assess, prioritize and address segment and market-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 segment and key market and function 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; and
• 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
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designed to appropriately escalate key risks to the Board as well as to analyze potential risks for disclosure.
Market Risks
We are exposed to market risks arising from adverse changes in:
• commodity prices, affecting the cost of our raw materials and energy;
• foreign exchange rates and currency restrictions; and
• interest rates.
In the normal course of business, we manage commodity price, foreign exchange and interest rate risks through a variety of strategies, including productivity initiatives, global purchasing programs and hedging. Ongoing productivity initiatives involve the identification and effective implementation of meaningful cost-saving opportunities or efficiencies, including the use of derivatives. Our global purchasing programs include fixed-price contracts and purchase orders and pricing agreements. See “Item 1A. Risk Factors” for further discussion of our market risks.
The fair value of our derivatives fluctuates based on market rates and prices. The sensitivity of our derivatives to these market fluctuations is discussed below. See Note 9 to our consolidated financial statements for further discussion of these derivatives and our hedging policies. 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. See “Item 1A. Risk Factors” for further discussion.
Commodity Prices
Our commodity derivative contracts had a total notional value of $1.5 billion as of December 27, 2025 and $1.4 billion as of December 28, 2024. At the end of 2025, the potential change in fair value of commodity derivative contracts, assuming a 10% decrease in the underlying commodity price, would have decreased our net unrealized gains in 2025 by $155 million, which would generally be offset by a reduction in the cost of the underlying commodity purchases.
Foreign Exchange
Our operations outside of the United States generated 44% of our consolidated net revenue in 2025, with Mexico, Russia, Canada, China, the United Kingdom, Brazil and South Africa, collectively, comprising 25% of our consolidated net revenue in 2025. As a result, we are exposed to foreign exchange risks in the international markets in which our products are made, manufactured, distributed or sold. 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 2025, unfavorable foreign exchange had a net nominal impact on net revenue performance primarily due to declines in the Mexican peso and Turkish lira, 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.
Our foreign exchange derivative contracts had a total notional value of $3.1 billion as of both December 27, 2025 and December 28, 2024. At the end of 2025, we estimate that an unfavorable 10% change in the underlying exchange rates would have increased our net unrealized losses in 2025 by $308 million, which would be significantly offset by an inverse change in the fair value of the underlying exposure. Subsequent to December 27, 2025, we executed $1.6 billion of foreign exchange contracts
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maturing in February 2026 and designated them as net investment hedges to partially offset the effects of foreign currency on our investments in certain of our foreign subsidiaries.
Our cross-currency swap contracts had a total notional value of $1.7 billion as of December 27, 2025 and $1.2 billion as of December 28, 2024. At the end of 2025, we estimate that an unfavorable 10% change in the underlying exchange rates would have increased our net unrealized losses in 2025 by $173 million, which would be significantly offset by an inverse change in the fair value of the underlying exposure.
The total notional amount of our debt instruments designated as net investment hedges was $4.4 billion as of December 27, 2025 and $2.9 billion as of December 28, 2024. Subsequent to December 27, 2025, we designated $4.5 billion of existing euro denominated debt as net investment hedges to partially offset the effects of foreign currency on our investments in certain of our foreign subsidiaries.
Interest Rates
Our interest rate swap contracts had a total notional value of $2.0 billion as of both December 27, 2025 and December 28, 2024. Assuming year-end 2025 investment levels and variable rate debt, a 1-percentage-point increase in interest rates would have decreased our net interest expense in 2025 by $36 million due to higher cash and cash equivalents and short-term investments levels, as compared with our variable rate debt.
OUR FINANCIAL RESULTS
Results of Operations — Consolidated Review
Volume
Physical or unit volume is one of the key metrics management uses internally to make operating and strategic decisions, including the preparation of our annual operating plan and the evaluation of our business performance. 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. Unit volume performance adjusts for the impacts of acquisitions and divestitures. Acquisitions and divestitures, when used in this report, reflect mergers and acquisitions activity, as well as divestitures and other structural changes. Further, unit volume performance excludes the impact of a 53 rd reporting week, where applicable. Our fiscal year ends on the last Saturday of each December, resulting in an additional reporting week every five or six years (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. Beverage volume also includes volume of finished products bearing company-owned or licensed trademarks sold by our noncontrolled affiliates. Concentrate volume sold to independent bottlers is reported in concentrate shipments and equivalents (CSE), whereas finished beverage product volume is reported in bottler case sales (BCS). Both CSE and BCS convert all beverage volume to an 8-ounce-case metric. Typically, CSE and BCS are not equal in any given period due to seasonality, timing of product launches, product mix, bottler inventory practices and other factors. While our net revenue is not entirely based on BCS volume due to the independent bottlers in our supply chain, we believe that BCS is a better measure of the consumption of our beverage products. PBNA, IB Franchise and EMEA, 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.
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
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product volume in kilograms, while in North America we measure convenient food product volume in pounds.
Consolidated Net Revenue and Operating Profit
Change
Net revenue
Operating profit
Operating margin
See “Results of Operations – Segment Review” for a tabular presentation and discussion of key drivers of net revenue.
Operating profit decreased 11%, primarily driven by certain operating cost increases, impairment charges related to the Rockstar brand, a decline in organic volume, a 5-percentage-point impact of higher commodity costs and higher acquisition and divestiture-related charges. These impacts were partially offset by productivity savings and effective net pricing. Additionally, a favorable impact of prior-year impairment and other charges associated with our TBG investment and receivables related to the sale of Tropicana, Naked and other select juice brands (Juice Transaction) and lower advertising and marketing expenses contributed to the decline.
Other Consolidated Results
Change
Other pension and retiree medical benefits expense
Net interest expense and other
Annual tax rate
Net income attributable to PepsiCo
Net income attributable to PepsiCo per common share – diluted
Other pension and retiree medical benefits expense increased $111 million, primarily reflecting recognition of fixed income losses on plan assets and the impact of the freeze of benefit accruals to U.S. salaried participants effective December 31, 2025. See Note 7 to our consolidated financial statements for further information.
Net interest expense and other increased $202 million, due to higher average debt balances, higher interest rates on average debt balances and lower interest rates on average cash balances, partially offset by higher average cash balances.
The reported tax rate decreased 0.4 percentage points, primarily reflecting the release of federal interest accruals.
Results of Operations — Segment Review
See “Our Business Risks,” “Non-GAAP Measures” and “Items Affecting Comparability” for a discussion of items to consider when evaluating our results and related information regarding measures not in accordance with U.S. 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.
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Net Revenue and Organic Revenue Performance
Organic revenue performance is a non-GAAP financial measure. For a description of and further information regarding this measure, see “Non-GAAP Measures.”
Impact of
Impact of
Reported
% Change, GAAP measure
Foreign exchange translation
Acquisitions and divestitures
Organic
% Change, non-GAAP measure (a )
Organic volume (b)
Effective net pricing
PFNA
PBNA
IB Franchise
EMEA
LatAm Foods
Asia Pacific Foods
Total
(a) Amounts may not sum due to rounding.
(b) In certain instances, the impact of organic volume change on net revenue performance differs from the unit volume change disclosed in the following segment discussions due to the impacts of product mix, nonconsolidated joint venture volume, and, for our franchise beverage businesses, temporary timing differences between BCS and CSE. We report net revenue from our franchise beverage businesses based on CSE. The volume sold by our nonconsolidated joint ventures has no direct impact on our net revenue.
Operating Profit, Operating Profit Adjusted for Items Affecting Comparability and Operating Profit Performance Adjusted for Items Affecting Comparability on a Constant Currency Basis
Operating profit adjusted for items affecting comparability and operating profit performance adjusted for items affecting comparability on a constant currency basis are both non-GAAP financial measures. For a description of and further information regarding these measures, see “Non-GAAP Measures” and “Items Affecting Comparability.”
PFNA
PBNA
IB Franchise
EMEA
LatAm Foods
Asia Pacific Foods
Corporate unallocated expenses
Total
Reported, GAAP measure
Items Affecting Comparability (a)
Mark-to-market net impact
Restructuring and impairment charges
Acquisition and divestiture-related charges
Impairment and other charges
Indirect tax impact
Pension and retiree medical-related impact
Core, non-GAAP measure
Impact of foreign exchange translation
Core Constant Currency, non-GAAP measure
Reported Operating Profit % Change, GAAP measure
Core Operating Profit % Change, non-GAAP measure
Core Constant Currency Operating Profit % Change, non-GAAP measure
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PFNA
PBNA
IB Franchise
EMEA
LatAm Foods
Asia Pacific Foods
Corporate unallocated expenses
Total
Reported, GAAP measure
Items Affecting Comparability (a)
Mark-to-market net impact
Restructuring and impairment charges
Acquisition and divestiture-related charges
Impairment and other charges
Indirect tax impact
Product recall-related impact
Core, non-GAAP measure
(a) See “Items Affecting Comparability” for further information.
PFNA
Net revenue increased slightly, primarily driven by the favorable impact of acquisitions and effective net pricing, partially offset by a decrease in organic volume.
Unit volume declined 2%, driven by a 3% decrease in savory snacks volume.
Operating profit decreased 7%, primarily reflecting certain operating cost increases, including strategic initiatives, higher restructuring charges and the decrease in organic volume. These impacts were partially offset by productivity savings and a favorable impact of the prior-year charges associated with a previously announced voluntary recall of certain bars and cereals in our PFNA segment (Quaker Recall).
PBNA
Net revenue increased 1.5%, primarily driven by effective net pricing, partially offset by an organic volume decline.
Unit volume declined 3%, driven by a 6% decline in non-carbonated beverage volume and a slight decline in CSD volume.
Operating profit decreased 53%, primarily reflecting impairment charges related to the Rockstar brand. Operating profit also decreased due to certain operating cost increases, acquisition and divestiture-related charges related to our VNGR Beverage, LLC (poppi) acquisition, the decline in organic volume and a 5-percentage-point impact of higher commodity costs, driven by a 6-percentage-point impact of tariffs. These impacts were partially offset by a favorable impact of prior-year impairment and other charges associated with our TBG investment and Juice Transaction-related receivables, the effective net pricing, productivity savings, and lower advertising and marketing expenses.
IB Franchise
Net revenue increased 2%, primarily reflecting effective net pricing.
Unit volume grew 1.5%, primarily reflecting growth in the Middle East, China and Pakistan.
Operating profit increased 21%, primarily reflecting a favorable impact of a prior-year indirect tax reserve, the net revenue growth and lower advertising and marketing costs, partially offset by an impairment charge related to the Rockstar brand.
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EMEA
Net revenue increased 8%, primarily reflecting effective net pricing and a 2.5-percentage-point impact of favorable foreign exchange translation, partially offset by an organic volume decline.
Convenient food unit volume declined 5%, primarily reflecting a decline in South Africa.
Beverage unit volume grew slightly, primarily reflecting growth in the Middle East, Germany, Poland and Turkey, partially offset by declines in South Africa and Russia.
Operating profit increased 7%, primarily reflecting the effective net pricing, productivity savings, a favorable impact of prior-year impairment and other charges associated with our TBG investment and Juice Transaction-related receivables and a 5-percentage-point impact of favorable foreign exchange translation. These impacts were partially offset by certain operating cost increases, a 22-percentage-point impact of higher commodity costs, primarily dairy, potatoes and cooking oil, an impairment charge related to the Rockstar brand and higher restructuring charges.
LatAm Foods
Net revenue decreased slightly, primarily reflecting a 5-percentage-point impact of unfavorable foreign exchange translation, partially offset by effective net pricing.
Unit volume grew 1%, primarily reflecting growth in Brazil, Peru, Colombia and Argentina, partially offset by a decline in Mexico.
Operating profit decreased 2%, primarily reflecting certain operating cost increases, a 6-percentage-point impact each of higher commodity costs and unfavorable foreign exchange translation and an unfavorable impact of an indirect tax audit settlement, partially offset by productivity savings and the effective net pricing.
Asia Pacific Foods
Net revenue increased 2%, primarily reflecting organic volume growth, partially offset by unfavorable net pricing.
Unit volume grew 4%, primarily reflecting growth in India, Thailand and Australia, partially offset by a decline in China.
Operating profit decreased 2%, primarily reflecting certain operating cost increases, an impairment charge related to the Be & Cheery brand and the unfavorable net pricing. These impacts were partially offset by productivity savings, the organic volume growth, lower advertising and marketing costs and a 5-percentage-point impact of lower commodity costs.
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 GAAP. We use non-GAAP financial measures internally to make operating and strategic decisions, including the preparation of our annual operating plan, evaluation of our overall business performance and as a factor in determining compensation for certain employees. We believe presenting non-GAAP financial measures in this Form 10-K provides additional information to facilitate comparison of our historical operating results and trends in our underlying operating results and provides additional transparency on how we evaluate our business. We also believe presenting these measures in this Form 10-K allows investors to view our performance using the same measures that we use in evaluating our financial and business performance and trends.
We consider quantitative and qualitative factors in assessing whether to adjust for the impact of items that may be significant or that could affect an understanding of our ongoing financial and business
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performance or trends. Examples of items for which we may make adjustments include: amounts related to mark-to-market gains or losses (non-cash); charges related to restructuring plans; charges associated with acquisitions and divestitures; gains associated with divestitures; asset impairment charges (non-cash); product recall-related impact; pension and retiree medical-related amounts, including all settlement and curtailment gains and losses; 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; tax benefits related to reorganizations of our operations; and debt redemptions, cash tender or exchange offers. See below and “Items Affecting Comparability” for a description of adjustments to our 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 GAAP. In addition, our non-GAAP financial measures may not be the same as or comparable to similar non-GAAP measures presented by other companies.
The following non-GAAP financial measures contained in this Form 10-K are discussed below:
Organic revenue performance
We define organic revenue performance as a measure that adjusts for the impacts of foreign exchange translation (on a constant currency basis, as defined below), acquisitions and divestitures, and every five or six years, the impact of the 53 rd reporting week. Beginning in 2025, on a prospective basis, we are also applying the constant currency calculation for our subsidiaries operating in highly inflationary economies. Adjusting for acquisitions and divestitures reflects 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. We believe organic revenue performance provides useful information in evaluating the results of our business because it adjusts for items that we believe are not indicative of ongoing performance or that we believe impact comparability with the prior year.
See “Net Revenue and Organic Revenue Performance” in “Results of Operations – Segment Review” for further information.
Cost of sales, gross profit, selling, general and administrative expenses, impairment of intangible assets, other pension and retiree medical benefits expense/income, provision for income taxes 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), charges associated with our acquisitions and divestitures, impairment and other charges/credits, indirect and income tax impacts, product recall-related impact and the impact of settlement, curtailment and certain other gains and losses related to pension and retiree medical plans (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. In order to compute our constant currency results, we multiply or divide, as appropriate, our current-year U.S. dollar results by the current-year average foreign exchange rates and then multiply or divide, as appropriate, those amounts by the prior-year average foreign exchange rates. In addition, beginning in 2025, on a prospective basis, we are also applying the constant currency calculation for our subsidiaries operating in highly inflationary economies. We believe these measures provide useful information in evaluating the
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results of our business because they exclude items that we believe are not indicative of our ongoing performance or that we believe impact comparability with the prior year.
Free cash flow
We define free cash flow as net cash from operating activities less capital spending, plus sales of property, plant and equipment. Since net capital spending is essential to our product innovation initiatives and maintaining our operational capabilities, we believe that it is a recurring and necessary use of cash. As such, we believe investors should also consider net capital spending when evaluating our cash from operating activities. Free cash flow is used by us primarily for acquisitions and financing activities, including debt repayments, dividends and share repurchases. Free cash flow is not a measure of cash available for discretionary expenditures since we have certain non-discretionary obligations such as debt service that are not deducted from the measure.
See “Free Cash Flow” in “Our Liquidity and Capital Resources” for further information.
Return on invested capital (ROIC) and net ROIC, excluding items affecting comparability
We define ROIC as net income attributable to PepsiCo plus interest expense after-tax divided by the sum of quarterly average debt obligations and quarterly average common shareholders’ equity. Although ROIC is a common financial metric, numerous methods exist for calculating ROIC. Accordingly, the method used by management to calculate ROIC may differ from the methods other companies use to calculate their ROIC.
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. 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. We believe the calculation of ROIC and net ROIC, excluding items affecting comparability, provides useful information to investors and is an additional relevant comparison of our performance to consider when evaluating our capital allocation efficiency.
See “Return on Invested Capital” in “Our Liquidity and Capital Resources” for further information.
Items Affecting Comparability
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
Impairment of intangible assets
Operating profit
Other pension and retiree medical benefits (expense)/income
Provision
for income taxes (a)
Net income attributable to PepsiCo
Reported, GAAP measure
Items Affecting Comparability
Mark-to-market net impact
Restructuring and impairment charges
Acquisition and divestiture-related charges
Impairment and other charges
Indirect and income tax impact (b)
Pension and retiree medical-related impact
Core, non-GAAP measure
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Cost of sales
Gross profit
Selling, general and administrative expenses
Impairment of intangible assets
Operating profit
Other pension and retiree medical benefits (expense)/income
Provision for income taxes (a)
Net income attributable to PepsiCo
Reported, GAAP measure
Items Affecting Comparability
Mark-to-market net impact
Restructuring and impairment charges
Acquisition and divestiture-related charges
Impairment and other charges
Indirect and income tax impact
Product recall-related impact
Pension and retiree medical-related impact
Core, non-GAAP measure
(a) Provision for income taxes is the expected tax charge/benefit on the underlying item based on the tax laws and income tax rates applicable to the underlying item in its corresponding tax jurisdiction.
(b) Provision for income taxes includes the impact of an income tax audit settlement in our LatAm Foods segment.
Change
Net income attributable to PepsiCo per common share – diluted, GAAP measure
Mark-to-market net impact
Restructuring and impairment charges
Acquisition and divestiture-related charges
Impairment and other charges
Indirect and income tax impact
Product recall-related impact
Pension and retiree medical-related impact
Core net income attributable to PepsiCo per common share – diluted, non-GAAP measure
Impact of foreign exchange translation
Growth in core net income attributable to PepsiCo per common share – diluted, on a constant currency basis, non-GAAP measure
Mark-to-Market Net Impact
We centrally manage commodity derivatives on behalf of our segments. These commodity derivatives include agricultural products, energy and metals. Commodity derivatives that do not qualify for hedge accounting treatment are marked to market each period with the resulting gains and losses recorded in corporate unallocated expenses as either cost of sales or selling, general and administrative expenses, depending on the underlying commodity. These gains and losses are subsequently reflected in segment results when the segments recognize the cost of the underlying commodity in operating profit. Therefore, the segments realize the economic effects of the derivative without experiencing any resulting mark-to-market volatility, which remains in corporate unallocated expenses.
Restructuring and Impairment Charges
2019 Multi-Year Productivity Plan
The 2019 Productivity Plan leverages new technology and business models to further simplify, harmonize and automate processes; re-engineers our go-to-market and information systems, including deploying the right automation for each market; and simplifies our organization and optimizes our manufacturing and supply chain footprint. To build on the successful implementation of the 2019 Productivity Plan, in 2024, we further expanded and extended the plan through the end of 2030 to take advantage of additional opportunities within the initiatives described above. As a result, we expect to incur pre-tax charges of approximately $6.15 billion, including cash expenditures of approximately $5.1 billion. Plan to date through December 27, 2025, we have incurred pre-tax charges of $3.6 billion, including cash expenditures of $2.7 billion. In our 2026 financial results, we expect to incur pre-tax charges of approximately $900
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million, including cash expenditures of approximately $750 million. 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 through 2027, with the balance to be incurred through 2030. 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. We regularly evaluate productivity initiatives beyond the productivity plan and other initiatives discussed above and in Note 3 to our consolidated financial statements.
Acquisition and Divestiture-Related Charges
Acquisition and divestiture-related charges include merger and integration charges, transaction expenses, such as consulting, advisory and other professional fees, as well as fair value adjustments to contingent consideration and acquired inventory included in the acquisition-date balance sheets. Merger and integration charges include distribution agreement termination fees, impairment of certain acquisition-related intangible assets, employee-related costs, closing costs and other integration costs.
See Note 13 to our consolidated financial statements for further information.
Impairment and Other Charges/Credits
We recognized impairment charges taken primarily as a result of our quantitative assessments of certain of our indefinite-lived intangible assets and related to our investment in TBG. In addition, we recorded allowance for expected credit losses related to outstanding receivables from TBG associated with the Juice Transaction.
See Notes 1, 4 and 9 to our consolidated financial statements for further information.
Indirect and Income Tax Impact
We recognized additional expenses related to an indirect and income tax audit settlement in our LatAm Foods segment and an indirect tax reserve in our IB Franchise segment.
See Note 1 to our consolidated financial statements for further information.
Product Recall-Related Impact
We recognized property, plant and equipment write-offs, employee severance costs and other costs in our PFNA segment associated with a previously announced voluntary recall of certain bars and cereals.
See Note 1 to our consolidated financial statements for further information.
Pension and Retiree Medical-Related Impact
Pension and retiree medical-related impact includes settlement charges due to lump sum distributions to retired or terminated employees and the purchases of group annuity contracts whereby a third-party insurance company assumed the obligation to pay and administer future benefit payments for certain retirees. The settlement charges were triggered when the aggregate of the cumulative lump sum distributions and the annuity contract premium exceeded the total annual service and interest costs. Pension and retiree medical-related impact also includes curtailment losses due to restructuring actions as part of our 2019 Productivity Plan. We also recorded pre-tax income in our PBNA segment associated with pension-related liabilities from previous acquisitions.
See Notes 1 and 7 to our consolidated financial statements for further information.
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Our Liquidity and Capital Resources
We believe that our cash generating capability and financial condition, together with our revolving credit facilities, working capital lines and other available methods of debt financing, such as commercial paper borrowings and long-term debt financing, will be adequate to meet our operating, investing and financing needs, including with respect to our net capital spending plans. Our primary sources of liquidity include cash from operations, proceeds obtained from issuances of commercial paper and long-term debt, and cash and cash equivalents. 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; operating leases; purchase, marketing, and other contractual commitments, including capital expenditures and the transition tax liability under the Tax Cuts and Jobs Act (TCJ Act). In addition, these sources of cash fund other cash outflows including anticipated dividend payments and share repurchases. We do not have guarantees or off-balance sheet financing arrangements, including variable interest entities, that we believe could have a material impact on our liquidity. See “Item 1A. Risk Factors,” “Our Business Risks” and Note 8 to our consolidated financial statements for further information.
As of December 27, 2025, cash, cash equivalents and short-term investments in our consolidated subsidiaries outside of Russia that are subject to currency controls or currency exchange restrictions were not material. As of December 27, 2025, Russia accounted for 20% of our consolidated cash and cash equivalents. Our sources and uses of cash were not materially adversely impacted by the cash and cash equivalents held in Russia and, to date, we have not identified any material impact on our liquidity or capital resources as a result of these amounts. See “Our Business Risks” for further information on our operations in Russia.
The TCJ Act imposed a one-time mandatory transition tax on undistributed international earnings. As of December 27, 2025, our mandatory transition tax liability was $965 million, which must be paid in 2026 and will represent our final payment under the provisions of the TCJ Act. See Note 5 to our consolidated financial statements for further discussion of the TCJ Act.
Supply chain financing 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. See Note 14 to our consolidated financial statements for further discussion of supply chain financing arrangements.
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 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. These transactions may result in future cash proceeds or payments.
The table below summarizes our cash activity:
Net cash provided by operating activities
Net cash used for investing activities
Net cash used for financing activities
Operating Activities
In 2025, net cash provided by operating activities was $12.1 billion, compared to $12.5 billion in the prior year. The decrease in operating cash flow primarily reflects increased cash payments for restructuring charges and cash payments for acquisition and divestiture-related charges.
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Investing Activities
In 2025, net cash used for investing activities was $6.9 billion, primarily reflecting net cash paid in connection with our acquisitions of poppi of $1.95 billion and Garza Food Ventures LLC (Siete) of $1.2 billion, as well as net capital spending of $3.9 billion.
In 2024, net cash used for investing activities was $5.5 billion, primarily reflecting net capital spending of $5.0 billion.
See Note 1 to our consolidated financial statements for further discussion of capital spending by segment 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 and believe that we have sufficient liquidity to meet our net capital spending needs.
Financing Activities
In 2025, net cash used for financing activities was $5.0 billion, primarily reflecting the return of operating cash flow to our shareholders through dividend payments and share repurchases of $8.6 billion, as well as payments of long-term debt borrowings of $4.1 billion, partially offset by proceeds from the issuances of long-term debt of $8.2 billion.
In 2024, net cash used for financing activities was $7.6 billion, primarily reflecting the return of operating cash flow to our shareholders through dividend payments and share repurchases of $8.2 billion, as well as payments of long-term debt borrowings of $3.9 billion, partially offset by proceeds from the issuances of long-term debt of $4.0 billion.
See Note 8 to our consolidated financial statements for further discussion of debt obligations.
We annually review our capital structure with our Board, including our dividend policy and share repurchase activity. On February 3, 2026, we announced the 2026 Share Repurchase Program. See “Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities” for further information. In addition, on February 3, 2026, we announced a 4% increase in our annualized dividend to $5.92 per share from $5.69 per share, effective with the dividend expected to be paid in June 2026. We expect to return a total of approximately $8.9 billion to shareholders in 2026, comprising dividends of approximately $7.9 billion and share repurchases of approximately $1.0 billion.
Free Cash Flow
The table below reconciles net cash provided by operating activities, as reflected on our cash flow statement, to our free cash flow. Free cash flow is a non-GAAP financial measure. For further information on free cash flow, see “Non-GAAP Measures.”
Change
Net cash provided by operating activities, GAAP measure
Capital spending
Sales of property, plant and equipment
Free cash flow, non-GAAP measure
We use free cash flow primarily for acquisitions and financing activities, including debt repayments, dividends and share repurchases. We expect to continue to return free cash flow to our shareholders primarily through dividends and share repurchases while maintaining Tier 1 commercial paper access, which we believe will facilitate appropriate financial flexibility and ready access to global capital and credit markets at favorable interest rates. However, see “Item 1A. Risk Factors” and “Our Business Risks” for certain factors that may impact our credit ratings or our operating cash flows.
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Any downgrade of our credit ratings by a credit rating agency, especially any downgrade to below investment grade, whether or not as a result of our actions or factors which are beyond our control, could increase our future borrowing costs and impair our ability to access capital and credit markets on terms commercially acceptable to us, or at all. In addition, any downgrade of our current short-term credit ratings could impair our ability to access the commercial paper market with the same flexibility that we have experienced historically, and therefore require us to rely more heavily on more expensive types of debt financing. See “Item 1A. Risk Factors,” “Our Business Risks” and Note 8 to our consolidated financial statements for further information.
Return on Invested Capital
ROIC is a non-GAAP financial measure. For further information on ROIC, see “Non-GAAP Measures.”
Net income attributable to PepsiCo
Interest expense
Tax on interest expense
Average debt obligations (a)
Average common shareholders’ equity (b)
Average invested capital
ROIC, non-GAAP measure
(a) Includes a quarterly average of short-term and long-term debt obligations.
(b) Includes a quarterly average of common stock, capital in excess of par value, retained earnings, accumulated other comprehensive loss and repurchased common stock.
The table below reconciles ROIC as calculated above to net ROIC, excluding items affecting comparability.
ROIC, non-GAAP measure
Impact of:
Average cash, cash equivalents and short-term investments
Interest income
Tax on interest income
Mark-to-market net impact (a)
Restructuring and impairment charges (a)
Acquisition and divestiture-related charges (a)
Impairment and other charges (a)
Indirect and income tax impact (a)
Product recall-related impact (a)
Pension and retiree medical-related impact (a)
Core Net ROIC, non-GAAP measure
(a) See “Items Affecting Comparability” for a detailed description.
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OUR CRITICAL ACCOUNTING POLICIES AND ESTIMATES
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 the business and economic uncertainty resulting from volatile geopolitical conditions 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. We applied our critical accounting policies and estimation methods consistently in all material respects and for all periods presented. We have discussed our critical accounting policies and estimates with our Audit Committee.
Our critical accounting policies and estimates are:
• revenue recognition;
• goodwill and other intangible assets;
• income tax expense and accruals; and
• pension and retiree medical plans.
Revenue Recognition
We recognize revenue when our performance obligation is satisfied. Our primary performance obligation (the distribution and sales of beverage and convenient food products) is satisfied upon the shipment or delivery of products to our customers, which is also when control is transferred. The transfer of control of products to our customers is typically based on written sales terms that generally do not allow for a right of return, except in the instance of a product recall or other limited circumstances that may allow for product returns. Our policy for DSD 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. As a result, we record reserves, based on estimates, for product recall, anticipated damaged and out-of-date produc ts.
Our products are sold for cash or on credit terms. 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.
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. In fact, our commitment to freshness and product dating serves to regulate the quantity of product shipped or delivered. In addition, DSD products are placed on the shelf by our employees with customer shelf space and storerooms limiting the quantity of product. For product delivered through other distribution networks, we monitor customer inventory levels.
As discussed in “Our Customers” in “Item 1. Business,” we offer sales incentives and discounts through various programs to customers and consumers. Total marketplace spending includes sales incentives, discounts, advertising and other marketing activities. Sales incentives and discounts are primarily accounted for as a reduction of revenue and include payments to customers for performing activities on our behalf, such as payments for in-store displays, payments to gain distribution of new products, payments for shelf space and discounts to promote lower retail prices. Sales incentives and discounts also
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include support provided to our independent bottlers through funding of advertising and other marketing activities.
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 levels. Differences between estimated expense and actual incentive costs are normally insignificant and are recognized in earnings in the period such differences are determined. In addition, certain advertising and marketing costs are also based on annual targets and recognized during the year as incurred.
See Note 2 to our consolidated financial statements for further information on our revenue recognition and related policies, including total marketplace spending.
Goodwill and Other Intangible Assets
We sell products under a number of brand names, many of which were developed by us. Brand development costs are expensed as incurred. We also purchase brands and other intangible assets in acquisitions. 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 volatile geopolitical conditions 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. If these indefinite-lived brand criteria are not met, brands are amortized over their expected useful lives, which generally range from 20 to 40 years. Determining the expected life of a brand requires management judgment and is based on an evaluation of a number of factors, including market share, consumer awareness, brand history, future expansion expectations and regulatory restrictions, as well as the macroeconomic environment of the countries in which the brand is sold.
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. Therefore, certain of these franchise rights are considered as indefinite-lived. Franchise rights that are not considered indefinite-lived are amortized over the remaining contractual period of the contract in which the right was granted.
Indefinite-lived intangible assets and goodwill are not amortized and, as a result, are assessed for impairment at least annually, using either a qualitative or quantitative approach. We perform this annual assessment during our third quarter, or more frequently if circumstances indicate that the carrying value may not be recoverable. 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 conditions (including those related to volatile geopolitical conditions 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
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qualitative assessment indicates that it is more likely than not that an impairment exists, then a quantitative assessment is performed.
In the quantitative assessment for indefinite-lived intangible assets and goodwill, an assessment is performed to determine the fair value of the indefinite-lived intangible asset and the reporting unit, respectively. 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 volatile geopolitical conditions 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. A deterioration in these assumptions could adversely impact our results. Additionally, indefinite-lived intangible assets acquired in recent acquisitions are more to because they are recorded at fair value at the time of acquisition. These assumptions could be impacted by certain of the risks described in “Item 1A. Risk Factors” and “Our Business Risks.”
As of December 27, 2025, the estimated fair value of the SodaStream reporting unit narrowly exceeded its carrying value. Given the low coverage, there could be further impairment to the carrying value of the SodaStream reporting unit goodwill if future sales and operating profit results are not in line with the forecasted future cash flows of the business and/or if macroeconomic conditions worsen and drive an increase in the weighted-average cost of capital used to estimate its fair value. We continue to monitor the performance of the SodaStream reporting unit, 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 Notes 2, 4 and 13 to our consolidated financial statements for further information.
Income Tax Expense and Accruals
Our annual tax rate is based on our income, statutory tax rates and tax structure and transactions, including transfer pricing arrangements, available to us in the various jurisdictions in which we operate. Significant judgment is required in determining our annual tax rate and in evaluating our tax positions. We establish reserves when, despite our belief that our tax return positions are fully supportable, we believe that certain positions are subject to challenge and that we likely will not succeed. We adjust these reserves, as well as the related interest, in light of changing facts and circumstances, such as the progress of a tax audit, new tax laws, relevant court cases or tax authority settlements. See “Item 1A. Risk Factors” for further discussion.
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. We consider the tax adjustments from the resolution of prior-year tax matters to be among such items.
Tax law requires items to be included in our tax returns at different times than the items are reflected in our consolidated financial statements. As a result, our annual tax rate reflected in our consolidated
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financial statements is different than that reported in our tax returns (our cash tax rate). Some of these differences are permanent, such as expenses that are not deductible in our tax return, and some differences reverse over time, such as depreciation expense. These temporary differences create deferred tax assets and liabilities. Deferred tax assets generally represent items that can be used as a tax deduction or credit in our tax returns in future years for which we have already recorded the tax benefit on our consolidated financial statements. 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. Deferred tax liabilities generally represent tax expense recognized in our consolidated financial statements for which payment has been deferred, or expense for which we have already taken a deduction in our tax return but have not yet recognized as expense in our consolidated financial statements.
In 2025, our annual tax rate was 19.0% compared to 19.4% in 2024. See “Other Consolidated Results” for further information.
See Note 5 to our consolidated financial statements for further information.
Pension and Retiree Medical Plans
Our pension plans cover certain employees in the United States and certain international employees. Benefits are determined based on either years of service or a combination of years of service and earnings. Certain U.S. and Canada retirees are also eligible for medical and life insurance benefits (retiree medical) if they meet age and service requirements. Generally, our share of retiree medical costs is capped at specified dollar amounts, which vary based upon years of service, with retirees contributing the remainder of the cost. In addition, we have been phasing out certain subsidies of retiree medical benefits.
See “Items Affecting Comparability” and Note 7 to our consolidated financial statements for information about changes and settlements within our pension plans.
Our Assumptions
The determination of pension and retiree medical expenses and obligations requires the use of assumptions to estimate the amount of benefits that employees earn while working, as well as the present value of those benefits. Annual pension and retiree medical expense amounts are principally based on four components: (1) the value of benefits earned by employees for working during the year (service cost), (2) the increase in the projected benefit obligation due to the passage of time (interest cost), and (3) other gains and losses as discussed in Note 7 to our consolidated financial statements, reduced by (4) the expected return on assets for our funded plans.
Significant assumptions used to measure our annual pension and retiree medical expenses include:
• certain employee-related demographic factors, such as turnover, retirement age and mortality;
• the expected rate of return on assets in our funded plans; and
• the spot rates along the yield curve used to determine service and interest costs and the present value of liabilities.
Certain assumptions reflect our historical experience and management’s best judgment regarding future expectations. All actuarial assumptions are reviewed annually, except in the case of an interim remeasurement due to a significant event such as a curtailment or settlement. Due to the significant management judgment involved, these assumptions could have a material impact on the measurement of our pension and retiree medical expenses and obligations.
At each measurement date, the discount rates are based on interest rates for high-quality, long-term corporate debt securities with maturities comparable to those of our liabilities. Our U.S. obligation and pension and retiree medical expense is based on the discount rates determined using the Mercer Above
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Mean Curve. This curve includes bonds that closely match the timing and amount of our expected benefit payments and reflects the portfolio of investments we would consider to settle our liabilities.
See Note 7 to our consolidated financial statements for information about the expected rate of return on plan assets and our plans’ investment strategy. Although we review our expected long-term rates of return on an annual basis, our asset returns in a given year do not significantly influence our evaluation of long-term rates of return.
Weighted-average assumptions for pension and retiree medical expense are as follows:
Pension
Service cost discount rate
Interest cost discount rate
Expected rate of return on plan assets
Retiree medical
Service cost discount rate
Interest cost discount rate
Expected rate of return on plan assets
In 2025, the aggregate of lump sum distributions and the purchase of a group annuity contract 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 impact of the freeze of benefit accruals to U.S. salaried participants effective December 31, 2025, changes in discount rates and higher expected rate of return on plan assets to decrease our pension and retiree medical expense in 2026.
Sensitivity of Assumptions
A decrease in each of the collective discount rates or in the expected rate of return assumptions would increase expense for our benefit plans. A 100-basis-point decrease in each of the above discount rates and expected rate of return assumptions would individually increase 2026 pre-tax pension and retiree medical expense as follows:
Assumption
Amount
Discount rates used in the calculation of expense
Expected rate of return
Funding
We make contributions to pension trusts that provide plan benefits for certain pension plans. These contributions are made in accordance with applicable tax regulations that provide for current tax deductions for our contributions and taxation to the employee only upon receipt of plan benefits. Generally, we do not fund our pension plans when our contributions would not be currently tax deductible. 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 of $200 million to a U.S. qualified defined benefit plan and $52 million to our international pension benefit plans in January 2026.
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 regularly evaluate different opportunities to reduce risk and volatility associated with our pension and retiree medical plans. See Note 7 to our consolidated financial statements for our past and expected contributions and estimated future benefit payments.
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Consolidated Statement of Income
PepsiCo, Inc. and Subsidiaries
Fiscal years ended December 27, 2025, December 28, 2024 and December 30, 2023
(in millions except per share amounts)
Net Revenue
Cost of sales
Gross profit
Selling, general and administrative expenses
Impairment of intangible assets (see Notes 1 and 4)
Operating Profit
Other pension and retiree medical benefits (expense)/income
Net interest expense and other
Income before income taxes
Provision for income taxes
Net income
Less: Net income attributable to noncontrolling interests
Net Income Attributable to PepsiCo
Net Income Attributable to PepsiCo per Common Share
Basic
Diluted
Weighted-average common shares outstanding
Basic
Diluted
See accompanying notes to the consolidated financial statements.
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Consolidated Statement of Comprehensive Income
PepsiCo, Inc. and Subsidiaries
Fiscal years ended December 27, 2025, December 28, 2024 and December 30, 2023
(in millions)
Net income
Other comprehensive income/(loss), net of taxes:
Net currency translation adjustment
Net change on cash flow hedges
Net pension and retiree medical adjustments
Net change on available-for-sale debt securities and other
Total other comprehensive income/(loss), net of taxes
Comprehensive income
Less: Comprehensive income attributable to noncontrolling interests
Comprehensive Income Attributable to PepsiCo
See accompanying notes to the consolidated financial statements.
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Consolidated Statement of Cash Flows
PepsiCo, Inc. and Subsidiaries
Fiscal years ended December 27, 2025, December 28, 2024 and December 30, 2023
(in millions)
Operating Activities
Net income
Depreciation and amortization
Impairment and other charges
Product recall-related impact
Cash payments for product recall-related impact
Operating lease right-of-use asset amortization
Share-based compensation expense
Restructuring and impairment charges
Cash payments for restructuring charges
Acquisition and divestiture-related charges
Cash payments for acquisition and divestiture-related charges
Pension and retiree medical plan expenses
Pension and retiree medical plan contributions
Deferred income taxes and other tax charges and credits
Tax payments related to the TCJ Act
Change in assets and liabilities:
Accounts and notes receivable
Inventories
Prepaid expenses and other current assets
Accounts payable and other current liabilities
Income taxes payable
Other, net
Net Cash Provided by Operating Activities
Investing Activities
Capital spending
Sales of property, plant and equipment
Acquisitions, net of cash acquired, investments in noncontrolled affiliates and purchases of intangible and other assets
Divestitures, sales of investments in noncontrolled affiliates and other assets
Short-term investments, by original maturity:
More than three months - purchases
More than three months - maturities
More than three months - sales
Three months or less, net
Other investing, net
Net Cash Used for Investing Activities
(Continued on following page)
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Consolidated Statement of Cash Flows (continued)
PepsiCo, Inc. and Subsidiaries
Fiscal years ended December 27, 2025, December 28, 2024 and December 30, 2023
(in millions)
Financing Activities
Proceeds from issuances of long-term debt
Payments of long-term debt
Short-term borrowings, by original maturity:
More than three months - proceeds
More than three months - payments
Three months or less, net
Cash dividends paid
Share repurchases
Proceeds from exercises of stock options
Withholding tax payments on restricted stock units (RSUs) and performance stock units (PSUs) converted
Other financing
Net Cash Used for Financing Activities
Effect of exchange rate changes on cash and cash equivalents and restricted cash
Net Increase/(Decrease) in Cash and Cash Equivalents and Restricted Cash
Cash and Cash Equivalents and Restricted Cash, Beginning of Year
Cash and Cash Equivalents and Restricted Cash, End of Year
See accompanying notes to the consolidated financial statements.
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Consolidated Balance Sheet
PepsiCo, Inc. and Subsidiaries
December 27, 2025 and December 28, 2024
(in millions except per share amounts)
ASSETS
Current Assets
Cash and cash equivalents
Short-term investments
Accounts and notes receivable, net
Inventories
Raw materials and packaging
Work-in-process
Finished goods
Prepaid expenses and other current assets
Total Current Assets
Property, Plant and Equipment, net
Amortizable Intangible Assets, net
Goodwill
Other Indefinite-Lived Intangible Assets
Investments in Noncontrolled Affiliates
Deferred Income Taxes
Other Assets
Total Assets
LIABILITIES AND EQUITY
Current Liabilities
Short-term debt obligations
Accounts payable and other current liabilities
Total Current Liabilities
Long-Term Debt Obligations
Deferred Income Taxes
Other Liabilities
Total Liabilities
Commitments and contingencies
PepsiCo Common Shareholders’ Equity
Common stock, par value 1 2 / 3 ¢ per share (authorized 3,600 shares; issued, net of repurchased common stock at par value: 1,367 and 1,372 shares, respectively)
Capital in excess of par value
Retained earnings
Accumulated other comprehensive loss
Repurchased common stock, in excess of par value 500 and 495 shares, respectively)
Total PepsiCo Common Shareholders’ Equity
Noncontrolling interests
Total Equity
Total Liabilities and Equity
See accompanying notes to the consolidated financial statements.
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Consolidated Statement of Equity
PepsiCo, Inc. and Subsidiaries
Fiscal years ended December 27, 2025, December 28, 2024 and December 30, 2023
(in millions except per share amounts)
Shares
Amount
Shares
Amount
Shares
Amount
Common Stock
Balance, beginning of year
Change in repurchased common stock
Balance, end of year
Capital in Excess of Par Value
Balance, beginning of year
Share-based compensation expense
Stock option exercises, RSUs and PSUs converted
Withholding tax on RSUs and PSUs converted
Other
Balance, end of year
Retained Earnings
Balance, beginning of year
Net income attributable to PepsiCo
Cash dividends declared (a)
Balance, end of year
Accumulated Other Comprehensive Loss
Balance, beginning of year
Other comprehensive income/(loss) attributable to PepsiCo
Balance, end of year
Repurchased Common Stock
Balance, beginning of year
Share repurchases
Stock option exercises, RSUs and PSUs converted
Other
Balance, end of year
Total PepsiCo Common Shareholders’ Equity
Noncontrolling Interests
Balance, beginning of year
Net income attributable to noncontrolling interests
Distributions to noncontrolling interests
Other, net
Balance, end of year
Total Equity
(a) Cash dividends declared per common share were $ 5.6225 , $ 5.3300 and $ 4.9450 for 2025, 2024 and 2023, respectively.
See accompanying notes to the consolidated financial statements.
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Notes to the Consolidated Financial Statements
Note 1 — Basis of Presentation and Our Segments
Basis of Presentation
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. In addition, we include our share of the results of certain other affiliates using the equity method based on our economic ownership interest, our ability to exercise significant influence over the operating or financial decisions of these affiliates or our ability to direct their economic resources. We do not control these other affiliates, as our ownership in these other affiliates is generally 50 % or less. Intercompany balances and transactions are eliminated. As a result of exchange restrictions and other operating restrictions, during the periods presented, we did not have control over our Venezuelan subsidiaries. As such, our Venezuelan subsidiaries are not included within our consolidated financial results for any period presented.
Raw materials, direct labor and plant overhead, as well as purchasing and receiving costs, costs directly related to production planning, inspection costs and raw materials handling facilities, are included in cost of sales. The costs of moving, storing and delivering finished product, including merchandising activities, are included in selling, general and administrative expenses.
The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect reported amounts of assets, liabilities, revenues, expenses and disclosure of contingent assets and liabilities. Estimates are used in determining, among other items, sales incentives accruals, tax reserves, share-based compensation, pension and retiree medical accruals, amounts and useful lives for intangible assets and future cash flows associated with impairment testing for indefinite-lived intangible assets, goodwill and other long-lived assets. 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 volatile geopolitical conditions and changes in the interest rate and inflationary cost environment have 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. While our North America financial results are reported on a weekly calendar basis, our international operations are reported on a monthly calendar basis. The following chart details our quarterly reporting schedule:
Quarter
United States and Canada
International
First Quarter
12 weeks
January and February
Second Quarter
12 weeks
March, April and May
Third Quarter
12 weeks
June, July and August
Fourth Quarter
16 weeks
September, October, November and December
Unless otherwise noted, tabular dollars are in millions, except per share amounts. All per share amounts reflect common per share amounts, assume dilution unless otherwise noted, and are based on unrounded amounts. Certain reclassifications were made to the prior year’s consolidated financial statements to conform to the current year presentation.
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Our Segments
We are organized into six reportable segments, as follows:
1) PepsiCo Foods North America (PFNA), which includes all of our convenient food businesses in the United States and Canada;
2) PepsiCo Beverages North America (PBNA), which includes all of our beverage businesses in the United States and Canada;
3) International Beverages Franchise (IB Franchise), which includes our international franchise beverage businesses, as well as our SodaStream business;
4) Europe, Middle East and Africa (EMEA), which includes our convenient food businesses and our beverage businesses with company-owned bottlers in Europe, the Middle East and Africa;
5) Latin America Foods (LatAm Foods), which includes all of our convenient food businesses in Latin America; and
6) Asia Pacific Foods, which consists of our convenient food businesses in Asia Pacific, including China, Australia and New Zealand, as well as India.
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, Brazil and South Africa.
The accounting policies for the segments are the same as those described in Note 2, except for the following allocation methodologies:
• share-based compensation expense;
• pension and retiree medical expense; and
• derivatives.
Share-Based Compensation Expense
Our segments are held accountable for share-based compensation expense and, therefore, this expense is allocated to our segments as an incremental employee compensation cost. The expense allocated to our segments excludes any impact of changes in our assumptions during the year which reflect market conditions over which segment management has no control. Therefore, any variances between allocated expense and our actual expense are recognized in corporate unallocated expenses.
Pension and Retiree Medical Expense
Pension and retiree medical service costs measured at fixed discount rates are reflected in segment results. The variance between the fixed discount rate used to determine the service cost reflected in segment results and the discount rate as disclosed in Note 7 is reflected in corporate unallocated expenses.
Derivatives
We centrally manage commodity derivatives on behalf of our segments. These commodity derivatives include agricultural products, energy and metals. Commodity derivatives that do not qualify for hedge accounting treatment are marked to market each period with the resulting gains and losses recorded in corporate unallocated expenses as either cost of sales or selling, general and administrative expenses, depending on the underlying commodity. These gains and losses are subsequently reflected in segment results when the segments recognize the cost of the underlying commodity in operating profit. Therefore, the segments realize the economic effects of the derivative without experiencing any resulting mark-to-market volatility, which remains in corporate unallocated expenses. These derivatives hedge underlying commodity price risk and were not entered into for trading or speculative purposes.
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Net Revenue, Significant Expenses and Operating Profit by Segment
Our chief operating decision maker (CODM) is our Chairman and Chief Executive Officer. Our CODM uses segment operating profit as the profit measure to evaluate segment performance and allocate resources across segments. Corporate unallocated expenses, other pension and retiree medical benefits (expense)/income and net interest expense and other are centrally managed costs and are therefore excluded from this profit measure to provide better transparency of our segment operating results. Our CODM considers variances of actual performance to our annual operating plan and periodic forecasts when making decisions.
Significant expenses are expenses which are regularly provided to the CODM and are included in segment operating profit. These consist of segment cost of sales, segment selling, general and administrative expenses, and various items affecting comparability. Segment cost of sales includes raw materials, direct labor and plant overhead, as well as purchasing and receiving costs, costs directly related to production planning, inspection costs and raw materials handling facilities, excluding the impact of items affecting comparability. Segment selling, general and administrative expenses include the costs to execute sales to customers, distribution costs, including the costs of shipping and handling activities, which include certain merchandising activities, costs related to brand and product marketing to consumers, other ongoing operating costs that are not directly related to manufacturing, distribution, selling, advertising or marketing activities as well as other income or expense items, excluding the impact of items affecting comparability. Items affecting comparability include restructuring and impairment charges, acquisition and divestiture-related charges, impairment and other charges/credits, indirect tax impact, product recall-related impact and pension and retiree medical-related impact.
Asset and other balance sheet information for segments is not provided to the CODM.
Net revenue, significant expenses and operating profit of each segment are as follows:
PFNA
PBNA
IB Franchise
EMEA
LatAm Foods
Asia Pacific Foods
Total
Net revenue
Segment cost of sales (a)
Segment selling, general and administrative expenses (a)
Restructuring and impairment charges (b)
Acquisition and divestiture-related charges (c)
Impairment and other charges (d)
Indirect tax impact (e)
Pension and retiree medical-related impact (f)
Segment operating profit
Corporate unallocated expenses
Operating profit
Other pension and retiree medical benefits expense
Net interest expense and other
Income before income taxes
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PFNA
PBNA
IB Franchise
EMEA
LatAm Foods
Asia Pacific Foods
Total
Net revenue
Segment cost of sales (a)
Segment selling, general and administrative expenses (a)(g)
Restructuring and impairment charges (b)
Acquisition and divestiture-related charges (c)
Impairment and other charges (d)
Indirect tax impact (e)
Product recall-related impact (h)
Segment operating profit
Corporate unallocated expenses
Operating profit
Other pension and retiree medical benefits expense
Net interest expense and other
Income before income taxes
PFNA
PBNA
IB Franchise
EMEA
LatAm Foods
Asia Pacific Foods
Total
Net revenue
Segment cost of sales (a)
Segment selling, general and administrative expenses (a)
Restructuring and impairment charges (b)
Acquisition and divestiture-related charges (c)
Impairment and other charges/credits (d)
Product recall-related impact (h)
Segment operating profit
Corporate unallocated expenses
Operating profit
Other pension and retiree medical benefits income
Net interest expense and other
Income before income taxes
(a) Does not include items recorded in the cost of sales or selling, general and administrative expenses lines on our income statement that are presented in the restructuring and impairment charges, acquisition and divestiture-related charges, impairment and other charges/credits, indirect tax impact, product recall-related impact and pension and retiree medical-related impact lines of these tables.
(b) See Note 3 for further information related to restructuring and impairment charges.
(c) See Note 13 for further information related to acquisitions and divestiture-related charges.
(d) See below and Note 4 for impairment and other charges taken. In 2023, EMEA included adjustments for changes in estimates of previously recorded amounts.
(e) In 2025, we recorded a pre-tax charge of $ 82 million in selling, general and administrative expenses and income tax expense of $ 29 million in provision for income taxes (collectively, $ 0.08 per share) related to an indirect and income tax audit settlement in our LatAm Foods segment. In 2024, we recorded a pre-tax charge of $ 218 million ($ 218 million after-tax or $ 0.16 per share) in cost of sales related to an indirect tax reserve in our IB Franchise segment.
(f) We recognized pre-tax income of $ 30 million ($ 22 million after-tax or $ 0.02 per share) in our PBNA segment, recorded in selling, general and administrative expenses, associated with pension-related liabilities from previous acquisitions.
(g) We recognized a pre-tax gain of $ 122 million ($ 92 million after-tax or $ 0.07 per share) in our PFNA segment, recorded in selling, general and administrative expenses, related to the remeasurement of our previously held 50 % equity ownership in Sabra at fair value. See Note 13 for further information.
(h) In 2024, we recorded a pre-tax charge of $ 187 million ($ 143 million after-tax or $ 0.10 per share) associated with the Quaker Recall with $ 176 million recorded in cost of sales related to property, plant and equipment write-offs, employee severance costs and other costs,
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$ 8 million recorded in selling, general and administrative expenses and $ 3 million recorded in other pension and retiree medical benefits (expense)/income, which is not included in operating profit. In 2023, we recorded a pre-tax charge of $ 136 million ($ 104 million after-tax or $ 0.07 per share) in cost of sales for product returns, inventory write-offs and customer and consumer-related costs associated with the Quaker Recall.
Disaggregation of Net Revenue
Our primary performance obligation is the distribution and sales of beverage and convenient food products to our customers. The following table reflects the percentage of net revenue generated between our beverage business and our convenient food business:
Beverages (a)
Convenient Foods
Beverages (a)
Convenient Foods
Beverages (a)
Convenient Foods
North America
International (b)
PepsiCo
(a) Beverage revenue from company-owned bottlers, which primarily includes our consolidated bottling operations in our PBNA and EMEA segments, is 36 % of our consolidated net revenue in 2025 and 35 % of our consolidated net revenue in both 2024 and 2023. 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) Beverage and convenient food revenue generated from our EMEA segment is 37 % and 63 % of EMEA net revenue, respectively, in 2025, and 35 % and 65 % of EMEA net revenue, respectively, in both 2024 and 2023.
Impairment and Other Charges
A summary of impairment and other charges taken, which are primarily as a result of our quantitative assessments, is as follows:
Affected Line Item in the Income Statement
PFNA
Other
Impairment of intangible assets
PBNA
Rockstar (a)
Impairment of intangible assets
TBG (b)
Selling, general and administrative expenses
IB Franchise
Rockstar (a)
Impairment of intangible assets
SodaStream (a)
Impairment of intangible assets
Other
Selling, general and administrative expenses
EMEA
Rockstar (a)
Impairment of intangible assets
TBG (b)
Selling, general and administrative expenses
Other (c)
Impairment of intangible assets, selling, general and administrative expenses and cost of sales
LatAm Foods
Other
Selling, general and administrative expenses
Asia Pacific Foods
Be & Cheery
Impairment of intangible assets
Total
After-tax amount (d)
Impact on net income attributable to PepsiCo per common share (d)
(a) See Note 4 for further information regarding impairment of intangible assets. For information on our policies for indefinite-lived intangible assets, see Note 2.
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(b) See Note 9 for further information regarding our proportionate share of TBG’s indefinite-lived intangible assets impairment and other-than-temporary impairment of our investment in TBG. In 2024, we recorded an allowance for expected credit losses of $ 193 million, primarily related to outstanding receivables associated with the Juice Transaction. In 2025, we recorded adjustments for changes in estimates of previously recorded amounts.
(c) 2023 amount includes adjustments for changes in estimates of previously recorded amounts.
(d) 2025 includes a tax benefit of $ 39 million ($ 0.03 per share) related to the prior-year impairment of our investment in TBG.
Other Segment Information
Capital spending and depreciation and amortization of each segment are as follows:
Capital Spending
Depreciation and Amortization
PFNA
PBNA
IB Franchise
EMEA
LatAm Foods
Asia Pacific Foods
Total segment
Corporate
Total
Net revenue by country is as follows:
United States
Mexico
Russia
Canada
China
United Kingdom
Brazil
South Africa
All other countries
Total
Property, plant and equipment, net by geography is as follows:
United States
International (a)
Total
(a) Mexico accounted for 9 % and 8 % of our consolidated property, plant and equipment, net as of December 27, 2025 and December 28, 2024, respectively. No other individual country exceeded 5 % of our consolidated property, plant and equipment, net.
Corporate Unallocated Expenses
Corporate unallocated expenses include costs of our corporate headquarters, centrally managed initiatives such as our ongoing business transformation initiatives, unallocated research and development costs, foreign exchange transaction gains and losses, unallocated insurance and benefit programs, commodity derivative gains and losses, as well as certain other items.
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Note 2 — Our Significant Accounting Policies
Revenue Recognition
We recognize revenue when our performance obligation is satisfied. Our primary performance obligation (the distribution and sales of beverage and convenient food products) is satisfied upon the shipment or delivery of products to our customers, which is also when control is transferred. Merchandising activities are performed after a customer obtains control of the product, are accounted for as fulfillment of our performance obligation to ship or deliver product to our customers and are recorded in selling, general and administrative expenses. Merchandising activities are immaterial in the context of our contracts. In addition, we exclude from net revenue all sales, use, value-added and certain excise taxes assessed by government authorities on revenue producing transactions.
The transfer of control of products to our customers is typically based on written sales terms that generally do not allow for a right of return, except in the instance of a product recall or other limited circumstances that may allow for product returns. Our policy for DSD 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. As a result, we record reserves, based on estimates, for product recall, anticipated damaged and out-of-date produc ts.
Our products are sold for cash or on credit terms. 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.
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.
We are exposed to concentration of credit risk from our major customers, including Walmart. We have not experienced credit issues with these customers. In 2025, sales to Walmart and its affiliates (including Sam’s) represented approximately 14 % of our consolidated net revenue, including concentrate sales to our independent bottlers, which were used in finished goods sold by them to Walmart.
Total Marketplace Spending
We offer sales incentives and discounts through various programs to customers and consumers. Total marketplace spending includes sales incentives, discounts, advertising and other marketing activities. Sales incentives and discounts are primarily accounted for as a reduction of revenue and include payments to customers for performing activities on our behalf, such as payments for in-store displays, payments to gain distribution of new products, payments for shelf space and discounts to promote lower retail prices. Sales incentives and discounts also include support provided to our independent bottlers through funding of advertising and other marketing activities.
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 levels. Differences between estimated expense and actual incentive costs are normally insignificant and are recognized in earnings in the period such differences are determined. In addition, certain advertising and marketing costs are also based on annual targets and recognized during the year as incurred.
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The terms of most of our incentive arrangements do not exceed one year and, therefore, do not require highly uncertain long-term estimates. Certain arrangements, such as fountain pouring rights, may extend beyond one year. Upfront payments to customers under these arrangements are recognized over the shorter of the economic or contractual life, primarily as a reduction of revenue, and the remaining balances of $ 329 million as of December 27, 2025 and $ 237 million as of December 28, 2024 are included in prepaid expenses and other current assets and other assets on our balance sheet.
For interim reporting, our policy is to allocate our forecasted full-year sales incentives for most of our programs to each of our interim reporting periods in the same year that benefits from the programs. The allocation methodology is based on our forecasted sales incentives for the full year and the proportion of each interim period’s actual gross revenue or volume, as applicable, to our forecasted annual gross revenue or volume, as applicable. Based on our review of the forecasts at each interim period, any changes in estimates and the related allocation of sales incentives are recognized beginning in the interim period that they are identified. In addition, we apply a similar allocation methodology for interim reporting purposes for certain advertising and other marketing activities. 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 $ 5.4 billion in 2025, $ 5.9 billion in 2024 and $ 5.7 billion in 2023, including advertising expenses of $ 3.4 billion in 2025, $ 3.9 billion in 2024 and $ 3.8 billion in 2023. Deferred advertising costs are not expensed until the year first used and consist of:
• media and personal service prepayments;
• promotional materials in inventory; and
• production costs of future media advertising.
Deferred advertising costs of $ 48 million and $ 58 million as of December 27, 2025 and December 28, 2024, respectively, are classified as prepaid expenses and other current assets on our balance sheet.
Distribution Costs
Distribution costs, including the costs of shipping and handling activities, which include certain merchandising activities, are reported as selling, general and administrative expenses. Shipping and handling expenses were $ 16.7 billion in 2025, $ 16.0 billion in 2024 and $ 15.4 billion in 2023.
Software Costs
We capitalize certain computer software and software development costs incurred in connection with developing or obtaining computer software for internal use when both the preliminary project stage is completed and it is probable that the software will be used as intended. Capitalized software costs include (1) external direct costs of materials and services utilized in developing or obtaining computer software, (2) compensation and related benefits for employees who are directly associated with the software projects and (3) interest costs incurred while developing internal-use computer software. Capitalized software costs are included in property, plant and equipment on our balance sheet and amortized on a straight-line basis when placed into service over the estimated useful lives of the software, which approximate five to 10 years. Software amortization totaled $ 260 million in 2025, $ 199 million in 2024 and $ 159 million in 2023. Net capitalized software and development costs were $ 1.8 billion and $ 1.5 billion as of December 27, 2025 and December 28, 2024, respectively.
Commitments and Contingencies
We are subject to various claims and contingencies related to lawsuits, certain taxes and environmental matters, as well as commitments under contractual and other commercial obligations. We recognize liabilities for contingencies and commitments when a loss is probable and estimable.
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Research and Development
We engage in a variety of research and development activities and continue to invest to accelerate growth and to drive innovation globally. Consumer research is excluded from research and development costs and included in other marketing costs. Research and development costs were $ 839 million, $ 813 million and $ 804 million in 2025, 2024 and 2023, respectively, and are reported within selling, general and administrative expenses.
Goodwill and Other Intangible Assets
Indefinite-lived intangible assets and goodwill are not amortized and, as a result, are assessed for impairment at least annually, using either a qualitative or quantitative approach. We perform this annual assessment during our third quarter, or more frequently if circumstances indicate that the carrying value may not be recoverable. 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 conditions (including those related to volatile geopolitical conditions 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.
In the quantitative assessment for indefinite-lived intangible assets and goodwill, an assessment is performed to determine the fair value of the indefinite-lived intangible asset and the reporting unit, respectively. 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 volatile geopolitical conditions 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. A deterioration in these assumptions could adversely impact our results.
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 4 for further information.
Other Significant Accounting Policies
Our other significant accounting policies are disclosed as follows:
• Basis of Presentation – Note 1 includes a description of our policies regarding use of estimates, basis of presentation and consolidation.
• Income Taxes – Note 5.
• Share-Based Compensation – Note 6.
• Pension, Retiree Medical and Savings Plans – Note 7.
• Financial Instruments – Note 9.
• Leases – Note 12.
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• Acquisitions and Divestitures – Note 13.
• Supply Chain Financing Arrangements – Note 14 .
• Cash Equivalents – Cash equivalents are highly liquid investments with original maturities of three months or less.
• Inventories – Inventories are valued at the lower of cost or net realizable value. Cost is determined using the average; first-in, first-out (FIFO); or, in limited instances, last-in, first-out (LIFO) methods. For inventories valued under the LIFO method, the differences between the LIFO and FIFO methods of valuing inventories are not material.
• Property, Plant and Equipment – Note 15. Property, plant and equipment is recorded at historical cost. Depreciation is recognized on a straight-line basis over an asset’s estimated useful life. Construction in progress is not depreciated until ready for service.
• Translation of Financial Statements of Foreign Subsidiaries – Generally, financial statements of foreign subsidiaries are translated into U.S. dollars using period-end exchange rates for assets and liabilities and average exchange rates for revenues and expenses. Adjustments resulting from translating net assets are reported as a separate component of accumulated other comprehensive loss within common shareholders’ equity as currency translation adjustment. For foreign subsidiaries operating in highly inflationary economies, the reporting currency of the immediate parent becomes the functional currency. Non-functional currency monetary assets and liabilities are remeasured at period-end exchange rates, with the impact of any changes in exchange rates included in net income. Non-monetary assets and liabilities are carried forward at historical exchange rates starting from when hyperinflationary accounting is implemented.
Recently Issued Accounting Pronouncements
Adopted
In December 2023, the Financial Accounting Standards Board (FASB) issued guidance to enhance transparency of income tax disclosures. On an annual basis, the new guidance requires a public entity to disclose: (1) specific categories in the rate reconciliation, (2) additional information for reconciling items that are equal to or greater than 5% of the amount computed by multiplying income (or loss) from continuing operations before income tax expense (or benefit) by the applicable statutory income tax rate, (3) income taxes paid (net of refunds received) disaggregated by federal (national), state, and foreign taxes, with foreign taxes disaggregated by individual jurisdictions in which income taxes paid is equal to or greater than 5% of total income taxes paid, (4) income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign, and (5) income tax expense (or benefit) from continuing operations disaggregated between federal (national), state and foreign. We adopted the guidance in our 2025 annual reporting, on a prospective basis. See Note 5 for further information.
Not Yet Adopted
In September 2025, the FASB issued guidance to improve the accounting for costs related to internal-use software. The new guidance eliminates project stages and requires capitalizing software costs to begin when (1) management has authorized and committed to funding the software project and (2) it is probable that the project will be completed and the software will be used to perform the function intended. When evaluating if a project is probable to be completed, significant development uncertainty must be assessed. Additionally, disclosures for property, plant and equipment will be required for all capitalized software costs. The guidance is effective in the first quarter of 2028 with early adoption permitted as of the beginning of an annual reporting period. Upon adoption, the guidance may be applied prospectively, retrospectively or using a modified transition approach. We are evaluating the impact of this guidance on our consolidated financial statements.
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In July 2025, the FASB issued guidance to provide for a practical expedient that an entity may assume that conditions as of the balance sheet date remain unchanged over the remaining life of the asset when estimating expected credit losses for current accounts receivable and current contract assets arising from revenue transactions from contracts with customers. The guidance is effective in the first quarter of 2026 with early adoption permitted, to be applied on a prospective basis. We will adopt the guidance when it becomes effective. The guidance is not expected to have a material impact on our consolidated financial statements.
In November 2024, the FASB issued guidance to improve the disclosure of expenses in commonly presented expense captions. The new guidance requires a public entity to provide tabular disclosure, on an annual and interim basis, of amounts for the following expense categories: (1) purchases of inventory, (2) employee compensation, (3) depreciation and (4) intangible asset amortization, as included in each relevant expense caption. A relevant expense caption is an expense caption presented on the face of the income statement that contains any of the expense categories noted. Additionally, on an annual and interim basis, a qualitative description is required for amounts remaining in relevant expense captions that are not separately disaggregated quantitatively. The guidance also requires certain amounts that are currently required to be disclosed to be included in the same tabular disclosure as these disaggregation requirements. Furthermore, on an annual and interim basis, a public entity is required to separately disclose selling expenses and annually, disclose a description of the selling expenses. The guidance is effective for 2027 annual reporting, and in the first quarter of 2028 for interim reporting, with early adoption permitted, to be applied on a prospective basis, with retrospective application permitted. We will adopt the guidance when it becomes effective, in our 2027 annual reporting and each quarter thereafter, on a prospective basis.
Note 3 — Restructuring and Impairment Charges
2019 Multi-Year Productivity Plan
The 2019 Productivity Plan leverages new technology and business models to further simplify, harmonize and automate processes; re-engineers our go-to-market and information systems, including deploying the right automation for each market; and simplifies our organization and optimizes our manufacturing and supply chain footprint. To build on the successful implementation of the 2019 Productivity Plan, in 2024, we further expanded and extended the plan through the end of 2030 to take advantage of additional opportunities within the initiatives described above. As a result, we expect to incur pre-tax charges of approximately $ 6.15 billion, including cash expenditures of approximately $ 5.1 billion. These pre-tax charges are expected to consist of approximately 50 % of severance and other employee-related costs, 15 % 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 plan pre-tax charges are expected to be incurred by segment approximately as follows:
PFNA
PBNA
IB Franchise
EMEA
LatAm Foods
Asia Pacific Foods
Corporate
Expected pre-tax charges
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A summary of our 2019 Productivity Plan charges is as follows:
Cost of sales
Selling, general and administrative expenses
Impairment of intangible assets
Other pension and retiree medical benefits expense/(income) (a)
Total restructuring and impairment charges
After-tax amount
Impact on net income attributable to PepsiCo per common share
Plan to Date
through 12/27/2025
PFNA
PBNA
IB Franchise
EMEA
LatAm Foods
Asia Pacific Foods
Corporate
Other pension and retiree medical benefits expense/(income) (a)
Total
(a) Income amount represents adjustments for changes in estimates of previously recorded amounts.
Plan to Date
through 12/27/2025
Severance and other employee costs
Asset impairments
Other costs
Total
Severance and other employee costs primarily include severance and other termination benefits, as well as voluntary separation arrangements. Other costs primarily include costs associated with the implementation of our initiatives, including consulting and other professional fees, as well as contract termination costs.
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A summary of our 2019 Productivity Plan is as follows:
Severance and Other Employee Costs
Asset
Impairments
Other Costs
Total
Liability as of December 31, 2022
2023 restructuring charges
Cash payments (a)
Non-cash charges and translation
Liability as of December 30, 2023
2024 restructuring charges
Cash payments (a)
Non-cash charges and translation
Liability as of December 28, 2024
2025 restructuring charges
Cash payments (a)
Non-cash charges and translation
Liability as of December 27, 2025
(a) Excludes cash expenditures of $ 12 million in 2025 , $ 7 million in 2024 and $ 1 million in 2023, reported in the cash flow statement in pension and retiree medical plan contributions.
Substantially all of the restructuring accrual at December 27, 2025 is expected to be paid by the end of 2026.
Other Productivity Initiatives
There were no material charges related to other productivity and efficiency initiatives outside the scope of the 2019 Productivity Plan.
We regularly evaluate different productivity initiatives beyond the productivity plan and other initiatives described above.
For information on additional impairment charges, see Notes 1, 4 and 9.
Note 4 — Intangible Assets
A summary of our amortizable intangible assets is as follows:
Average
Useful Life (Years)
Gross
Accumulated
Amortization
Net
Gross
Accumulated
Amortization
Net
Acquired franchise rights
Customer relationships (a)
Brands
Other identifiable intangibles
Total
Amortization expense
(a) Increase is primarily related to acquisitions of poppi and Siete. See Note 13 for further information on acquisitions.
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Amortization is recognized on a straight-line basis over an intangible asset’s estimated useful life. Amortization of intangible assets for each of the next five years , based on existing intangible assets as of December 27, 2025 and using average 2025 foreign exchange rates, is expected to be as follows:
Five-year projected amortization
Depreciable and amortizable assets are evaluated for impairment upon a significant change in the operating or macroeconomic environment. In these circumstances, if an evaluation of the undiscounted cash flows indicates impairment, the asset is written down to its estimated fair value, which is based on discounted future cash flows. Useful lives are periodically evaluated to determine whether events or circumstances have occurred which indicate the need for revision.
Indefinite-Lived Intangible Assets
In 2025, business performance in conjunction with lower expectations of future business performance compared to projections, as well as the transaction discussed below, indicated a deterioration of the significant inputs used to determine the fair value of our indefinite-lived intangible assets in certain markets and required us to perform quantitative assessments 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 (significant unobservable inputs) measurement. We determined that the carrying value exceeded the fair value, which reflected our most current estimates of future sales and their contributions to operating profit and expected future cash flows (including perpetuity growth assumptions), as well as an increase in the weighted-average cost of capital. As a result of the quantitative assessments, we recorded pre-tax impairment charges of $ 1.9 billion ($ 1.5 billion after-tax or $ 1.11 per share) in impairment of intangible assets primarily comprised of the Rockstar brand in our PBNA, EMEA, and IB Franchise segments.
On August 28, 2025, we consummated a transaction with Celsius, pursuant to which we acquired convertible preferred shares and transferred cash and certain non-cash assets, primarily the Rockstar brand of $ 0.5 billion in the United States and Canada (Celsius Transaction). For further information on the convertible preferred shares, see Note 9. On the same date, we entered into an agreement with Celsius to be the exclusive distributor for the Alani Nu brand in certain channels in the United States and Canada that commenced in the fourth quarter of 2025.
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 2025, based on best available market information and our internal forecasts and operating plans at the time, did not result in any further material impairment charges.
As of December 27, 2025, the estimated fair value of the SodaStream reporting unit narrowly exceeded its carrying value. Given the low coverage, there could be further impairment to the carrying value of the SodaStream reporting unit goodwill if future sales and operating profit results are not in line with the forecasted future cash flows of the business and/or if macroeconomic conditions worsen and drive an increase in the weighted-average cost of capital used to estimate its fair value. We continue to monitor the performance of the SodaStream reporting unit, as well as all of our indefinite-lived intangible assets.
We did not recognize any impairment charges for goodwill in the years ended December 27, 2025 and December 28, 2024.
In 2023, macroeconomic conditions, including higher interest rates, inflationary costs, and the ongoing conflict in the Middle East, and 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,
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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 for certain of our intangible assets, 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 $ 0.6 billion ($ 0.5 billion after-tax or $ 0.35 per share) for brands and $ 0.3 billion ($ 0.3 billion after-tax or $ 0.22 per share) for goodwill, both in impairment of intangible assets, primarily related to the SodaStream brand and reporting unit in our IB Franchise segment, in the year ended December 30, 2023. See Note 1 for further information.
For further information on our policies for indefinite-lived intangible assets, see Note 2.
The components of indefinite-lived intangible assets are as follows:
Goodwill
Other indefinite-lived intangible assets
Reacquired franchise rights
Acquired franchise rights (a)
Brands (b)
Total indefinite-lived intangible assets
(a) Increase is primarily related to acquired distribution rights for the Alani Nu brand.
(b) Decrease is primarily related to impairments of the Rockstar and Be & Cheery brands as well as the sale of the Rockstar brand in connection with the transaction described above, partially offset by acquisitions of poppi and Siete. See Note 13 for further information on acquisitions.
The change in the book value of goodwill is as follows:
PFNA
PBNA
IB Franchise
EMEA (a)
LatAm Foods
Asia Pacific Foods
Total
Balance as of December 30, 2023
Acquisitions (b)
Translation and other
Balance as of December 28, 2024
Acquisitions (b)
Translation and other
Balance as of December 27, 2025
(a) Translation and other in 2024 primarily reflects the depreciation of the Russian ruble and euro. Translation and other in 2025 primarily reflects appreciation of the Russian ruble, euro and South African rand.
(b) Primarily related to the acquisitions of Sabra in 2024 and Siete in 2025 in our PFNA segment and poppi in our PBNA segment. See Note 13 for further information on acquisitions.
Note 5 — Income Taxes
The components of income before income taxes are as follows:
United States
Foreign
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The provision for income taxes consisted of the following:
Current:
U.S. Federal
Foreign
State
Deferred:
U.S. Federal
Foreign
State
A reconciliation of the U.S. Federal statutory tax rate to our 2025 annual tax rate is as follows:
Amount
Tax Rate
U.S. Federal statutory tax
State income tax, net of U.S. Federal tax benefit (a)
Changes in valuation allowances
Foreign tax effects
Ireland
Statutory income tax rate differential
Other
Singapore
Tax incentive
Other
Switzerland
Changes in valuation allowances
Other
Bermuda
Statutory income tax rate differential
Other foreign jurisdictions
Effect of cross-border tax laws (b)
Transfer pricing adjustments
Global intangible low-tax income (GILTI)
Other
Tax credits
Changes in unrecognized tax benefits
Nondeductible and nontaxable items, net
Other
Reported tax
(a) State taxes in California, Illinois, New Jersey, Texas, Minnesota, Oregon, Wisconsin, Louisiana, Michigan, and Arizona make up the majority (greater than 50%) of the tax effect in this category.
(b) Includes the impact of any tax credits.
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A reconciliation of the U.S. Federal statutory tax rate to our 2024 and 2023 annual tax rate is as follows:
U.S. Federal statutory tax rate
State income tax, net of U.S. Federal tax benefit
Lower taxes on foreign results
Juice Transaction
Other, net
Annual tax rate
A summary of income taxes paid in 2025 is as follows:
Amount
U.S. Federal
U.S. State and Local (a)
Foreign
Ireland
Mexico
Russia
Other
Total
(a) No single state or local jurisdiction accounts for more than 5 % of the total income taxes paid.
Tax Cuts and Jobs Act
As of December 27, 2025, our mandatory transition tax liability was $ 965 million, which must be paid in 2026 and will represent our final payment under the provisions of the TCJ Act. We reduced our liability through cash payments by $ 772 million in 2025 , $ 579 million in 2024 and $ 309 million in 2023.
The TCJ Act also created a requirement that certain income earned by foreign subsidiaries, known as GILTI, must be included in the gross income of their U.S. shareholder. The FASB allows an accounting policy election of either recognizing deferred taxes for temporary differences expected to reverse as GILTI in future years or recognizing such taxes as a current-period expense when incurred. We elected to treat the tax effect of GILTI as a current-period expense when incurred.
Other Tax Matters
On July 4, 2025, the One Big Beautiful Bill (OBBB) Act, which includes a broad range of tax reform provisions, was signed into law in the United States. The OBBB Act did not have a material impact on our annual effective tax rate in 2025 and we do not expect it to have a material impact in 2026.
Numerous countries, including European Union member states, have enacted or are expected to enact legislation incorporating the OECD model rules for a global minimum tax rate of 15 % with widespread implementation expected by the end of 2026. Legislation enacted as of December 27, 2025 did not have a material impact on our financial statements for 2025. As the legislation becomes effective in countries in which we do business, our taxes will increase and negatively impact our provision for income taxes.
In 2024 and 2023, tax benefits of $ 54 million ($ 0.04 per share) and $ 68 million ($ 0.05 per share), respectively, were recorded related to the impairment of certain consolidated investments.
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Deferred tax liabilities and assets are comprised of the following:
Deferred tax liabilities
Property, plant and equipment
Right-of-use assets
Debt guarantee of wholly-owned subsidiary
Recapture of net operating losses
Pension liabilities
Other
Gross deferred tax liabilities
Deferred tax assets
Net carryforwards
Intangible assets other than nondeductible goodwill
Lease liabilities
Share-based compensation
Retiree medical benefits
Other employee-related benefits
Deductible state tax and interest benefits
Capitalized research and development
Other
Gross deferred tax assets
Valuation allowances
Deferred tax assets, net
Net deferred tax (assets)/liabilities
A summary of our valuation allowance activity is as follows:
Balance, beginning of year
(Benefit)/provision
Other additions/(deductions)
Balance, end of year
Reserves
A number of years may elapse before a particular matter, for which we have established a reserve, is audited and finally resolved. The number of years with open tax audits varies depending on the tax jurisdiction. Our major taxing jurisdictions and the related open tax audits are as follows:
Jurisdiction
Years Open to Audit
Years Currently Under Audit
United States
Mexico
Canada (Domestic)
Canada (International)
Russia
None
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Our annual tax rate is based on our income, statutory tax rates and tax planning strategies and transactions, including transfer pricing arrangements, available to us in the various jurisdictions in which we operate. Significant judgment is required in determining our annual tax rate and in evaluating our tax positions. We establish reserves when, despite our belief that our tax return positions are fully supportable, we believe that certain positions are subject to challenge and that we likely will not succeed. We adjust these reserves, as well as the related interest, in light of changing facts and circumstances, such as the progress of a tax audit, new tax laws, relevant court cases or tax authority settlements. Settlement of any particular issue would usually require the use of cash. Favorable resolution would be recognized as a reduction to our annual tax rate in the year of resolution.
As of December 27, 2025, the total gross amount of reserves for income taxes, reported in other liabilities, was $ 2.4 billion. We accrue interest related to reserves for income taxes in our provision for income taxes and any associated penalties are recorded in selling, general and administrative expenses. The gross amount of interest accrued, reported in other liabilities, was $ 450 million as of December 27, 2025, of which $ 2 million of tax benefit was recognized in 2025, reflecting the release of federal interest accruals. The gross amount of interest accrued, reported in other liabilities, was $ 469 million as of December 28, 2024, of which $ 103 million of tax expense was recognized in 2024.
A reconciliation of unrecognized tax benefits is as follows:
Balance, beginning of year
Additions for tax positions related to the current year
Additions for tax positions from prior years
Reductions for tax positions from prior years
Settlement payments
Statutes of limitations expiration
Translation and other
Balance, end of year
Carryforwards and Allowances
Operating loss carryforwards and income tax credits totaling $ 35.5 billion as of December 27, 2025 are being carried forward in a number of foreign and state jurisdictions where we are permitted to use tax operating losses and income tax credits from prior periods to reduce future taxable income or income tax liabilities. These operating losses and income tax credits will expire as follows: $ 0.8 billion in 2026, $ 29.9 billion between 2027 and 2044 and $ 4.8 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.
Undistributed International Earnings
As of December 27, 2025, we had approximately $ 12 billion of undistributed international earnings. We intend to continue to reinvest $ 12 billion of earnings outside the United States for the foreseeable future and while future distribution of these earnings would not be subject to U.S. federal tax expense, no deferred tax liabilities with respect to items such as certain foreign exchange gains or losses, foreign withholding taxes or state taxes have been recognized. It is not practicable for us to determine the amount of unrecognized tax expense on these reinvested international earnings.
Note 6 — Share-Based Compensation
Our share-based compensation program is designed to attract and retain employees while also aligning employees’ interests with the interests of our shareholders. PepsiCo has granted stock options, RSUs,
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PSUs and long-term cash awards to employees under the shareholder-approved PepsiCo, Inc. Long-Term Incentive Plan (LTIP). Executives who are awarded long-term incentives based on their performance may generally elect to receive their grant in the form of stock options or RSUs, or a combination thereof. Executives who elect stock options receive four stock options for every one RSU that would have otherwise been granted. Certain executive officers and other senior executives do not have a choice and are granted 66 % PSUs and 34 % long-term cash, each of which are subject to pre-established performance targets.
The Company may use authorized and unissued shares to meet share requirements resulting from the exercise of stock options and the vesting of RSUs and PSUs.
As of December 27, 2025, 89 million shares were available for future share-based compensation grants under the LTIP.
The following table summarizes our total share-based compensation expense, which is primarily recorded in selling, general and administrative expenses, and excess tax benefits recognized:
Share-based compensation expense - equity awards
Share-based compensation expense - liability awards
Restructuring charges
Total
Income tax benefits recognized in earnings related to share-based compensation
Excess tax benefits related to share-based compensation
As of December 27, 2025, there was $ 329 million of total unrecognized compensation cost related to nonvested share-based compensation grants. This unrecognized compensation cost is expected to be recognized over a weighted-average period of two years.
Method of Accounting and Our Assumptions
The fair value of share-based award grants is amortized to expense over the vesting period, primarily three years . 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.
We do not backdate, reprice or grant share-based compensation awards retroactively. Repricing of awards would require shareholder approval under the LTIP.
Stock Options
A stock option permits the holder to purchase shares of PepsiCo common stock at a specified price. We account for our employee stock options under the fair value method of accounting using a Black-Scholes valuation model to measure stock option expense at the date of grant. All stock option grants have an exercise price equal to the fair market value of our common stock on the date of grant and generally have a 10 -year term.
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Our weighted-average Black-Scholes fair value assumptions are as follows:
Expected life
7 years
7 years
7 years
Risk-free interest rate
Expected volatility
Expected dividend yield
The expected life is the period over which our employee groups are expected to hold their options. It is based on our historical experience with similar grants. The risk-free interest rate is based on the expected U.S. Treasury rate over the expected life. Volatility reflects movements in our stock price over the most recent historical period equivalent to the expected life. Dividend yield is estimated over the expected life based on our stated dividend policy and forecasts of net income, share repurchases and stock price.
A summary of our stock option activity for the year ended December 27, 2025 is as follows:
Options (a)
Weighted-Average Exercise
Price Per Unit
Weighted-Average Contractual
Life Remaining
(years)
Aggregate Intrinsic
Value (a)
Outstanding at December 28, 2024
Granted
Exercised
Forfeited/expired
Outstanding at December 27, 2025
Exercisable at December 27, 2025
Expected to vest as of December 27, 2025
(a) In thousands.
Restricted Stock Units and Performance Stock Units
Each RSU represents our obligation to deliver to the holder one share of PepsiCo common stock when the award vests at the end of the service period. PSUs are awards pursuant to which a number of shares are delivered to the holder upon vesting at the end of the service period based on PepsiCo’s performance against specified financial performance metrics. The number of shares may be increased to the maximum or reduced to the minimum threshold based on the results of these performance metrics in accordance with the terms established at the time of the award. During the vesting period, RSUs and PSUs accrue dividend equivalents that pay out in cash (without interest) if and when the applicable RSU or PSU vests and becomes payable.
The fair value of RSUs and PSUs is measured at the market price of the Company’s stock on the date of grant.
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A summary of our RSU and PSU activity for the year ended December 27, 2025 is as follows:
RSUs/PSUs (a)
Weighted-Average
Grant-Date Fair Value Per Unit
Weighted-Average Contractual Life
Remaining (years)
Aggregate
Intrinsic
Value (a)
Outstanding at December 28, 2024
Granted
Converted
Forfeited
Outstanding at December 27, 2025 (b)
Expected to vest as of December 27, 2025 (c)
(a) In thousands. Outstanding awards are disclosed at target.
(b) The outstanding PSUs for which the vesting period has not ended as of December 27, 2025, at the threshold, target and maximum award levels were zero , 0.7 million and 1.4 million, respectively.
(c) Represents the number of outstanding awards expected to vest, including estimated performance adjustments on all outstanding PSUs as of December 27, 2025.
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.
A summary of our long-term cash activity for the year ended December 27, 2025 is as follows:
Long-Term Cash
Award (a)
Balance Sheet Date Fair Value (b)
Contractual Life Remaining
(years)
Outstanding at December 28, 2024
Granted
Vested
Forfeited
Outstanding at December 27, 2025 (c)
Expected to vest as of December 27, 2025
(a) In thousands, disclosed at target.
(b) In thousands, based on the most recent valuation as of December 27, 2025.
(c) The outstanding awards for which the vesting period has not ended as of December 27, 2025, at the threshold, target and maximum award levels based on the achievement of its market conditions were zero , $ 57 million and $ 114 million, respectively.
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Other Share-Based Compensation Data
The following is a summary of other share-based compensation data:
Stock Options
Total number of options granted (a)
Weighted-average grant-date fair value per unit of options granted
Total intrinsic value of options exercised (a)
Total grant-date fair value of options vested (a)
RSUs/PSUs
Total number of RSUs/PSUs granted (a)
Weighted-average grant-date fair value per unit of RSUs/PSUs granted
Total intrinsic value of RSUs/PSUs converted (a)
Total grant-date fair value of RSUs/PSUs vested (a)
(a) In thousands.
As of December 27, 2025 and December 28, 2024, there were approximately 341,000 and 311,000 outstanding awards, respectively, consisting primarily of phantom stock units that were granted under the PepsiCo Director Deferral Program and will be settled in shares of PepsiCo common stock pursuant to the LTIP at the end of the applicable deferral period, not included in the tables above.
Note 7 — Pension, Retiree Medical and Savings Plans
In 2025 and 2024, we recognized pre-tax settlement charges of $ 237 million ($ 183 million after-tax or $ 0.13 per share) and $ 213 million ($ 165 million after-tax or $ 0.12 per share), respectively, in a U.S. qualified defined benefit pension plan due to lump sum distributions to retired or terminated employees and the purchases of group annuity contracts whereby a third-party insurance company assumed the obligation to pay and administer future benefit payments for certain retirees. The settlement charges were triggered when the aggregate of the cumulative lump sum distributions and the annuity contract premiums exceeded the total annual service and interest cost.
As of December 31, 2025, benefit accruals for salaried participants in the U.S. qualified defined benefit plans were frozen.
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 PepsiCo Employees Retirement Hourly Plan (Plan H) (approximately 10 years) and retiree medical (approximately 12 years), and the remaining life expectancy for participants in PepsiCo Employees Retirement Plan I (Plan I) (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 benefit accruals freeze effective December 31, 2025 was amortized on a straight-line basis over the period up to the effective date of the freeze.
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Selected financial information for our pension and retiree medical plans is as follows:
Pension
Retiree Medical
International
Change in projected benefit obligation
Obligation at beginning of year
Service cost
Interest cost
Plan amendments
Participant contributions
Experience loss/(gain)
Benefit payments
Settlement/curtailment
Special termination benefits
Other, including foreign currency adjustment
Obligation at end of year
Change in fair value of plan assets
Fair value at beginning of year
Actual return on plan assets
Employer contributions/funding
Participant contributions
Benefit payments
Settlement
Other, including foreign currency adjustment
Fair value at end of year
Funded status
Amounts recognized
Other assets
Other current liabilities
Other liabilities
Net amount recognized
Amounts included in accumulated other comprehensive loss (pre-tax)
Net loss/(gain)
Prior service cost/(credit)
Total
Changes recognized in net loss/(gain) included in other comprehensive loss
Net (gain)/loss arising in current year
Amortization and settlement recognition
Foreign currency translation loss/(gain)
Total
Accumulated benefit obligation at end of year
The net gain arising in the current year is primarily attributable to higher actual asset return as compared to expected return on plan assets, partially offset by losses due to changes in discount rates and demographic experience.
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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:
• Interest cost is the accrued interest on the projected benefit obligation due to the passage of time.
• Expected return on plan assets is the long-term return we expect to earn on plan investments for our funded plans that will be used to settle future benefit obligations.
• Amortization of prior service cost/(credit) represents the recognition in the income statement of benefit changes resulting from plan amendments.
• Amortization of net loss/(gain) represents the recognition in the income statement of changes in the amount of plan assets and the projected benefit obligation based on changes in assumptions and actual experience.
• Settlement/curtailment loss/(gain) represents the result of actions that effectively eliminate all or a portion of related projected benefit obligations. Settlements are triggered when payouts to settle the projected benefit obligation of a plan due to lump sums or other events exceed the 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. Lump sum payouts are generally higher when interest rates are lower. Curtailments are recognized when events such as plant closures, the sale of a business, or plan changes result in a significant reduction of future service or benefits. Curtailment losses are recognized when an event is probable and estimable, while curtailment gains are recognized when an event has occurred (when the related employees or an amendment is adopted).
• Special termination benefits are the additional benefits offered to employees upon departure due to actions such as restructuring.
The components of total pension and retiree medical benefit costs are as follows:
Pension
Retiree Medical
International
Service cost
Other pension and retiree medical benefits expense/(income):
Interest cost
Expected return on plan assets
Amortization of prior service costs/(credits)
Amortization of net losses/(gains)
Net settlement/curtailment losses (a)
Special termination benefits
Total other pension and retiree medical benefits expense/(income)
Total
(a) In 2025 and 2024, U.S. includes settlement charges of $ 237 million ($ 183 million after-tax or $ 0.13 per share) and $ 213 million ($ 165 million after-tax or $ 0.12 per share), respectively, related to the aggregate of lump sum distributions and the purchases of group annuity contracts exceeding the total of annual service and interest cost.
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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:
Pension
Retiree Medical
International
Net Periodic Benefit Cost
Service cost discount rate
Interest cost discount rate
Expected return on plan assets
Rate of salary increases
Projected Benefit Obligation
Discount rate
Rate of salary increases
The following table provides selected information about plans with accumulated benefit obligation and total projected benefit obligation in excess of plan assets:
Pension
Retiree Medical
International
Selected information for plans with accumulated benefit obligation in excess of plan assets
Obligation for service to date
Fair value of plan assets
Selected information for plans with projected benefit obligation in excess of plan assets
Benefit obligation
Fair value of plan assets
Of the total projected pension benefit obligation as of December 27, 2025, approximately $ 632 million relates to plans that we do not fund because the funding of such plans does not receive favorable tax treatment.
Future Benefit Payments
Our estimated future benefit payments are as follows:
Pension
Retiree medical (a)
(a) Expected future benefit payments for our retiree medical plans do not reflect any estimated subsidies expected to be received under the 2003 Medicare Act. Subsidies are expected to be less than $ 1 million for each of the years from 2026 through 2030 and approximately $ 2 million in total for 2031 through 2035.
These future benefit payments to beneficiaries include payments from both funded and unfunded plans.
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Funding
Contributions to our pension and retiree medical plans were as follows:
Pension
Retiree Medical
Discretionary (a)
Non-discretionary
Total
(a) Includes $ 250 million contribution in 2025, $ 150 million contribution in 2024 and $ 250 million contribution in 2023 to fund our U.S. qualified defined benefit plans.
We made discretionary contributions of $ 200 million to a U.S. qualified defined benefit plan and $ 52 million to our international pension benefit plans in January 2026. In addition, in 2026, we expect to make non-discretionary contributions of approximately $ 80 million to our U.S. 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.
Plan Assets
Our pension plan investment strategy includes the use of actively managed accounts and is reviewed periodically in conjunction with plan obligations, an evaluation of market conditions, tolerance for risk and cash requirements for benefit payments. This strategy is also applicable to funds held for the retiree medical plans. Our investment objective includes ensuring that funds are available to meet the plans’ benefit obligations when they become due. Assets contributed to our pension plans are no longer controlled by us, but become the property of our individual pension plans. However, we are indirectly impacted by changes in these plan assets as compared to changes in our projected obligations. Our overall investment policy is to prudently invest plan assets in a well-diversified portfolio of equity and high-quality debt securities and real estate to achieve our long-term return expectations. Our investment policy also permits the use of derivative instruments, such as futures and forward contracts, to reduce interest rate and foreign currency risks. Futures contracts represent commitments to purchase or sell securities at a future date and at a specified price. Forward contracts consist of currency forwards. We also participate in securities lending programs to generate additional income by loaning plan assets to borrowers on a fully collateralized basis, including both cash and non-cash collaterals.
For 2026 and 2025, our expected long-term rate of return on U.S. plan assets is 7.8 % and 7.5 %, respectively. Our target investment allocations for U.S. plan assets are as follows:
Fixed income
U.S. equity
International equity
Real estate
Actual investment allocations may vary from our target investment allocations due to prevailing market conditions. We regularly review our actual investment allocations and periodically rebalance our investments.
The expected return on plan assets is based on our investment strategy and our expectations for long-term rates of return by asset class, taking into account volatility and correlation among asset classes and our historical experience. We also review current levels of interest rates and inflation to assess the reasonableness of the long-term rates. We evaluate our expected return assumptions annually to ensure
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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. This has the effect of reducing year-to-year volatility.
Plan assets measured at fair value as of year-end 2025 and 2024 are categorized consistently by Level 1 (quoted prices in active markets for identical assets), Level 2 (significant other observable inputs) and Level 3 in both years and are as follows:
Fair Value Hierarchy Level
U.S. plan assets (a)(b)
Equity securities, including preferred stock (c)
Government securities (d)
Corporate bonds (d)
Mortgage-backed securities (d)
Contracts with insurance companies (e)
Cash and cash equivalents (f) (g)
Sub-total U.S. plan assets
Investments measured at net asset value (h)
Securities lending payables, net of dividends and interest receivable (g)
Total U.S. plan assets
International plan assets
Equity securities (c)
Government securities (d)
Corporate bonds (d)
Fixed income commingled funds (i)
Contracts with insurance companies (e)
Cash and cash equivalents
Sub-total international plan assets
Investments measured at net asset value (h)
Dividends and interest receivable
Total international plan assets
(a) Includes $ 155 million and $ 163 million in 2025 and 2024, respectively, of retiree medical plan assets that are restricted for purposes of providing health benefits for U.S. retirees and their beneficiaries.
(b) Includes securities loaned to borrowers under the securities lending program with fair value of $ 649 million and $ 630 million in 2025 and 2024, respectively.
(c) Invested in U.S. and international common stock and commingled funds, and the preferred stock portfolio was invested in domestic and international corporate preferred stock investments. The common and preferred stock investments are based on quoted prices in active markets. The commingled funds are based on the published price of the fund and include one large-cap fund that represents 12 % of total U.S. plan assets for both 2025 and 2024.
(d) 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 represents 31 % of total U.S. plan assets for both 2025 and 2024.
(e) Based on the fair value of the contracts as determined by the insurance companies using inputs that are not observable. During 2025, our international plans liquidated Level 3 investments, resulting in no Level 3 assets as of year-end. The changes in U.S. Level 3 amounts were not significant in the years ended December 27, 2025 and December 28, 2024.
(f) Includes Level 1 assets of $ 446 million and $ 456 million, and Level 2 assets of $ 254 million and $ 276 million for 2025 and 2024, respectively.
(g) Includes $ 430 million and $ 447 million of cash collateral for 2025 and 2024, respectively, under the securities lending program offset by corresponding securities lending payable of the same amount. The net impact on the fair value of U.S. plan assets is zero .
(h) Includes investments in private credit funds, limited partnerships and mortgage funds. These funds are based on the net asset value of the investments owned by these funds as determined by independent third parties using inputs that are not observable. The majority of the funds are redeemable quarterly subject to availability of cash and have notice periods ranging from 30 to 90 days.
(i) Based on the published price of the fund.
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Retiree Medical Cost Trend Rates
The assumed health care cost trend rates are as follows:
Average increase assumed
Ultimate projected increase
Year of ultimate projected increase
Annually, we review external data and our historical experience to estimate assumed health care cost trend rates that impact our retiree medical plan obligation and expense, however the cap on our share of retiree medical costs limits the impact.
Savings Plan
Certain U.S. employees are eligible to participate in a 401(k) savings plan, which is a voluntary defined contribution plan. The plan is designed to help employees accumulate savings for retirement and we make Company matching contributions for certain employees on a portion of employee contributions based on years of service.
Certain U.S. employees, who are either not eligible to participate in a defined benefit pension plan or whose benefit is capped, are also eligible to receive an employer contribution based on either years of service or age and years of service regardless of employee contribution.
In 2025, 2024 and 2023, our total Company contributions were $ 434 million, $ 411 million and $ 356 million, respectively.
Note 8 — Debt Obligations
The following table summarizes our debt obligations:
Short-term debt obligations (b)
Current maturities of long-term debt
Commercial paper ( 3.8 % and 4.5 %)
Other borrowings
Long-term debt obligations (b)
Notes due 2025 ( 3.2 %)
Notes due 2026 ( 3.6 % and 3.7 %)
Notes due 2027 ( 3.2 % and 3.1 %)
Notes due 2028 ( 2.4 % and 2.1 %)
Notes due 2029 ( 4.3 % and 4.6 %)
Notes due 2030 ( 3.2 % and 2.6 %)
Notes due 2031-2060 ( 3.4 % and 3.2 %)
Other, due 2025-2042
Less: current maturities of long-term debt obligations
Total
(a) Amounts are shown net of unamortized net discounts of $ 224 million and $ 267 million for 2025 and 2024, respectively.
(b) The interest rates presented reflect weighted-average effective interest rates at year-end. Certain of our fixed rate indebtedness have been swapped to floating rates through the use of interest rate derivative instruments. See Note 9 for further information regarding our interest rate swap contracts.
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As of December 27, 2025 and December 28, 2024, our international debt of $ 272 million and $ 325 million, respectively, was related to borrowings from external parties, including various lines of credit. These lines of credit are subject to normal banking terms and conditions and are fully committed at least to the extent of our borrowings.
In 2025, we issued the following senior notes:
Interest Rate
Maturity Date
Principal Amount (a)
February 2027
February 2028
February 2030
February 2035
January 2029
July 2030
July 2032
July 2035
July 2037
July 2055
(a) Excludes debt issuance costs, discounts and premiums.
(b) These notes, issued in euros, were designated as net investment hedges to partially offset the effects of foreign currency on our investments in certain of our foreign subsidiaries.
The net proceeds from the issuances of the above notes were used for general corporate purposes, including the repayment of commercial paper.
In 2025, we entered into a new five-year unsecured revolving credit agreement (2025 Five-Year Credit Agreement), which expires on May 23, 2030. The 2025 Five-Year Credit Agreement enables us and our borrowing subsidiaries to borrow up to $ 5.0 billion in U.S. dollars and/or euros, including a $ 0.75 billion swing line subfacility for euro-denominated borrowings permitted to be borrowed on a same-day basis, subject to customary terms and conditions. We may request that commitments under this agreement be increased up to $ 5.75 billion (or the equivalent amount in euros). Additionally, we may, up to two times during the term of the 2025 Five-Year Credit Agreement, request renewal of the agreement for an additional one-year period. The 2025 Five-Year Credit Agreement replaced our $ 5.0 billion five-year credit agreement, dated as of May 24, 2024.
Also in 2025, we entered into a new 364-day unsecured revolving credit agreement (2025 364-Day Credit Agreement), which expires on May 22, 2026. The 2025 364-Day Credit Agreement enables us and our borrowing subsidiaries to borrow up to $ 5.0 billion in U.S. dollars and/or euros, subject to customary terms and conditions. We may request that commitments under this agreement be increased up to $ 5.75 billion (or the equivalent amount in euros). We may request renewal of this facility for an additional 364-day period or convert any amounts outstanding into a term loan for a period of up to one year, which term loan would mature no later than the anniversary of the then effective termination date. The 2025 364-Day Credit Agreement replaced our $ 5.0 billion 364-day credit agreement, dated as of May 24, 2024.
Funds borrowed under the 2025 Five-Year Credit Agreement and the 2025 364-Day Credit Agreement may be used for general corporate purposes. Subject to certain conditions, we may borrow, prepay and reborrow amounts under these agreements. As of December 27, 2025, there were no outstanding borrowings under the 2025 Five-Year Credit Agreement or the 2025 364-Day Credit Agreement.
In 2023, we discharged via legal defeasance $ 94 million outstanding principal amount of certain notes originally issued by our subsidiary, The Quaker Oats Company, following the deposit of $ 102 million of U.S. government securities with the Bank of New York Mellon, as trustee, in the fourth quarter of 2022.
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Note 9 — Financial Instruments
Derivatives and Hedging
We are exposed to market risks arising from adverse changes in:
• commodity prices, affecting the cost of our raw materials and energy;
• foreign exchange rates and currency restrictions; and
• interest rates.
In the normal course of business, we manage commodity price, foreign exchange and interest rate risks through a variety of strategies, including productivity initiatives, global purchasing programs and hedging. Ongoing productivity initiatives involve the identification and effective implementation of meaningful cost-saving opportunities or efficiencies, including the use of derivatives. We do not use derivative instruments for trading or speculative purposes. Our global purchasing programs include fixed-price contracts and purchase orders and pricing agreements.
Our hedging strategies include the use of derivatives and non-derivative debt instruments. Certain derivatives are designated as either cash flow, fair value or net investment hedges and qualify for hedge accounting treatment, while others do not qualify and are marked to market through earnings. 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 and net investment hedges are recorded in accumulated other comprehensive loss within common shareholders’ equity and reclassified to our income statement when the hedged transaction affects earnings for cash flow hedges and when the hedged foreign operation is either sold or substantially liquidated for net investment hedges. 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 27, 2025 were not material .
Cash flows from derivatives used to manage commodity price, foreign exchange or interest rate risks are classified as operating activities in the cash flow statement. We classify both the earnings and cash flow impact from these derivatives consistent with the underlying hedged item. Cash flows associated with the settlement of derivative instruments designated as net investment hedges of foreign operations are classified within investing activities.
Credit Risk
We perform assessments of our counterparty credit risk regularly, including reviewing netting agreements, if any, and a review of credit ratings, credit default swap rates and potential nonperformance of the counterparty. Based on our most recent assessment of our counterparty credit risk, we consider this risk to be low. In addition, we enter into derivative contracts with a variety of financial institutions that we believe are creditworthy in order to reduce our concentration of credit risk.
Certain of our agreements with our counterparties require us to post full collateral on derivative instruments in a net liability position if our credit rating is at A2 (Moody’s Investors Service, Inc.) or A (S&P Global Ratings) and we have been placed on credit watch for possible downgrade or if our credit rating falls below either of these levels. The fair value of all derivative instruments with credit-risk-related contingent features that were in a net liability position as of December 27, 2025 was $ 96 million. We have posted no collateral under these contracts and no credit-risk-related contingent features were triggered as of December 27, 2025.
Commodity Prices
We are subject to commodity price risk because our ability to recover increased costs through higher pricing may be limited in the competitive environment in which we operate. This risk is managed through
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the use of fixed-price contracts and purchase orders, pricing agreements and derivative instruments, which primarily include swaps and futures. In addition, risk to our supply of certain raw materials is mitigated through purchases from multiple geographies and suppliers. We use derivatives, with terms of no more than two years , to hedge price fluctuations related to a portion of our anticipated commodity purchases, primarily for agricultural products, energy and metals. Derivatives used to hedge commodity price risk that do not qualify for hedge accounting treatment are marked to market each period with the resulting gains and losses recorded in corporate unallocated expenses as either cost of sales or selling, general and administrative expenses, depending on the underlying commodity. These gains and losses are subsequently reflected in segment results when the segments recognize the cost of the underlying commodity in operating profit.
Interest Rates
We centrally manage our debt and investment portfolios considering investment opportunities and risks, tax consequences and overall financing strategies. We use various interest rate derivative instruments including, but not limited to, interest rate swaps, cross-currency interest rate swaps, Treasury locks and swap locks to manage our overall interest expense. These instruments effectively change the interest rate 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 our interest rate swap contracts match the principal, interest payment and maturity date of the related debt, and they have terms of no more than six years . Our Treasury locks and swap locks are entered into to protect against unfavorable interest rate changes relating to forecasted debt transactions.
As of December 27, 2025, approximately 11 % of total debt was subject to variable rates, after the impact of the related interest rate swap contracts, compared to approximately 13 % as of December 28, 2024.
Foreign Exchange
We are exposed to foreign exchange risks in the international markets in which our products are made, manufactured, distributed or sold. Additionally, we are exposed to foreign exchange risk from foreign currency purchases and foreign currency assets and liabilities created in the normal course of business. We manage this risk through sourcing purchases from local suppliers, negotiating contracts in local currencies with foreign suppliers and through the use of derivatives including, but not limited to, forward contracts and cross-currency interest rate swap contracts. Exchange rate gains or losses related to foreign currency transactions are recognized as transaction gains or losses on our income statement as incurred. The forward contracts and cross-currency interest rate swap contracts have terms of no more than two years and twelve years , respectively. The notional amount, interest payment and maturity date of our cross-currency interest rate swap contracts match the principal, interest payment and maturity date of the related foreign currency debt. 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.
Net Investment Hedges
We are exposed to foreign exchange risk from net investments in our foreign operations. We manage this risk for certain of our foreign operations by utilizing derivative and non-derivative instruments, including cross-currency interest rate swaps, forward contracts and foreign currency denominated debt designated as net investment hedges. The cross-currency interest rate swaps and forward contracts have terms of no more than ten years and one year , respectively.
We use the spot method to assess hedge effectiveness for our net investment hedges. Excluded components in the form of interest accruals on cross-currency interest rate swaps are recorded in net
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interest expense and other. Excluded components in the form of forward points on forward contracts are recorded in selling, general and administrative expenses.
The notional amounts of our financial instruments used to hedge the above risks as of December 27, 2025 and December 28, 2024 are as follows:
Notional Amounts (a)
Commodity contracts
Interest rate swap contracts
Foreign exchange contracts (b)
Cross-currency contracts
Non-derivative debt instruments (b)
(a) In billions.
(b) Subsequent to December 27, 2025, we designated $ 1.6 billion of foreign exchange contracts maturing in February 2026 and $ 4.5 billion of existing euro denominated debt as net investment hedges to partially offset the effects of foreign currency on our investments in certain of our foreign subsidiaries.
Debt Securities
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 and invested $ 550 million in Series A convertible preferred shares (Series A shares) issued by Celsius, which included certain conversion and redemption features. Shares underlying the transaction were priced at $ 75 per share ($ 25 per share after a three-for-one stock split in 2023), and are entitled to a 5 % annual dividend, payable either in cash or in-kind. On August 28, 2025, as part of the Celsius Transaction described in Note 4, we acquired Series B convertible preferred shares (Series B shares) issued by Celsius, valued at $ 585 million upon acquisition, excluding acquisition-related charges. Shares underlying the transaction were priced at $ 51.75 per share and are entitled to a 5 % annual dividend, payable either in cash or in-kind. In addition, as part of this transaction, the conversion and redemption periods of the Series A shares were extended to match the terms of the newly issued Series B shares, which was accounted for as a modification. Both series of shares include certain conversion and redemption features and convert into Celsius common shares after six years from issuance of the Series B shares if certain market-based conditions are met, or can be redeemed for cash after seven years from issuance of the Series B shares. Given our redemption rights associated with both series of shares, we classified our investments as Level 3 investments in available-for-sale debt securities.
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The activity related to our Level 3 investments in certain available-for-sale debt securities is as follows:
Celsius:
Balance, beginning of year
Acquired
Net unrealized gain/(loss)
Cash dividends received
Balance, end of year
Other:
Balance, beginning of year
Transfer from Level 2 (a)
Net unrealized gain
Balance, end of year
Total Level 3 available-for-sale balance, end of year
(a) Unobservable inputs to the fair value became more significant.
There were no impairment charges related to our investments in available-for-sale debt securities in the years ended December 27, 2025, December 28, 2024 and December 30, 2023. There were net unrealized pre-tax gains of $ 860 million and $ 334 million as of December 27, 2025 and December 28, 2024, respectively, associated with our available-for-sale debt securities.
TBG Investment
We hold a 39 % noncontrolling interest in TBG, operating across North America and Europe, and we account for our investment under the equity method.
In 2023, we recorded our proportionate share of TBG’s earnings, which included an impairment of TBG’s indefinite-lived intangible assets, and recorded an other-than-temporary impairment of our investment, both of which resulted in pre-tax impairment charges of $ 321 million ($ 243 million after-tax or $ 0.18 per share), recorded in selling, general and administrative expenses in our PBNA segment. We estimated the fair value of our ownership in TBG using discounted cash flows and an option pricing model related to our liquidation preference in TBG, which we categorized as Level 3 in the fair value hierarchy.
In 2024, after identifying several indicators of impairment such as worsening operating losses and liquidity position, we quantitatively assessed our investment in TBG for impairment and, consequently, recorded an other-than-temporary impairment of our remaining investment, resulting in pre-tax impairment charges of $ 498 million ($ 416 million after-tax or $ 0.30 per share), with $ 409 million in our PBNA segment and $ 89 million in our EMEA segment, recorded in selling, general and administrative expenses. We estimated the fair value of our ownership in TBG using discounted cash flows. We also recorded an allowance for expected credit losses in selling, general and administrative expenses in 2024, primarily related to outstanding receivables associated with the Juice Transaction; see Note 1 for further information.
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Recurring Fair Value Measurements
The fair values of our financial assets and liabilities as of December 27, 2025 and December 28, 2024 are categorized as follows:
Fair Value Hierarchy Levels (a)
Assets (a)
Liabilities (a)
Assets (a)
Liabilities (a)
Available-for-sale debt securities (b)
Index funds (c)
Deferred compensation (d)
Contingent consideration (e)
Derivatives designated as fair value hedging instruments:
Interest rate swap contracts (f)
Derivatives designated as cash flow hedging instruments:
Foreign exchange contracts (g)
Cross-currency contracts (g)
Commodity contracts (h)
Derivatives designated as net investment hedging instruments:
Foreign exchange contracts (g)
Cross-currency contracts (g)
Derivatives not designated as hedging instruments:
Foreign exchange contracts (g)
Commodity contracts (h)
Total derivatives at fair value (i)
Total
(a) Fair value hierarchy levels are defined in Note 7. Unless otherwise noted, financial assets are classified on our balance sheet within prepaid expenses and other current assets and other assets. Financial liabilities are classified on our balance sheet within accounts payable and other current liabilities and other liabilities.
(b) Classified as other assets. The fair value of our investment in Celsius is estimated using probability-weighted discounted future cash flows based on a Monte Carlo simulation using significant unobservable inputs such as an 80 % probability that a certain market-based condition will be met and an average estimated discount rate of 8.5 % and 7.3 % as of December 27, 2025 and December 28, 2024, respectively. The fair value of the other investment is estimated using a lattice model primarily based on the underlying stock price, volatility and certain significant unobservable inputs, such as a discount rate of 8.3 % based on an estimated synthetic credit rating. An increase in the probability that certain market-based conditions will be met or a decrease in the discount rate would result in a higher fair value measurement, while a decrease in the probability that certain market-based conditions will be met or an increase in the discount rate would result in a lower fair value measurement.
(c) Based on the price of index funds. These investments are classified as short-term investments and are used to manage a portion of market risk arising from our deferred compensation liability.
(d) Based on the fair value of investments corresponding to employees’ investment elections.
(e) In connection with our acquisition of poppi, we recorded a liability at fair value for the contingent consideration payable upon achievement of certain performance milestones by the third quarter of 2027, with a maximum payment of $ 300 million. If these performance milestones are not met, no payment will be made. The fair value of the liability is estimated using discounted future cash flows based on a Monte Carlo simulation using significant unobservable inputs such as forecasts of net revenue and margin. An increase in the net revenue and margin forecasts would result in a higher fair value measurement, while a decrease in the net revenue and margin forecasts would result in a lower fair value measurement. As of December 27, 2025, the fair value of the contingent consideration was $ 278 million, comprised of the acquisition date fair value of $ 180 million and a fair value increase of $ 98 million recorded in selling, general and administrative expenses.
(f) Based on Secured Overnight Financing Rate forward rates. As of December 27, 2025, the carrying amount of hedged fixed-rate debt was $ 2.0 billion, which was classified on the balance sheet within long-term debt obligations.
(g) Based on recently reported market transactions of spot and/or forward rates.
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(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 our balance sheet as of December 27, 2025 and December 28, 2024 were not material . Collateral received or posted against our asset or liability positions was not material . Exchange-traded commodity futures are cash-settled on a daily basis and, therefore, not included in the table.
The carrying amounts of our cash and cash equivalents and short-term investments recorded at amortized cost approximate fair value (classified as Level 2 in the fair value hierarchy) due to their short-term maturity. The fair value of our debt obligations as of December 27, 2025 and December 28, 2024 was $ 46 billion and $ 40 billion, respectively, based upon prices of identical or similar instruments in the marketplace, which are considered Level 2 inputs.
Losses/(gains) on our fair value hedges recognized in the income statement are as follows:
Interest rate swap contracts (a)
(a) Interest rate derivative losses/(gains) are included in net interest expense and other. These losses/(gains) are substantially offset by decreases/increases in the value of the underlying debt, which are also included in net interest expense and other.
Losses/(gains) on our cash flow hedges are categorized as follows:
Losses/(Gains)
Recognized in
Accumulated Other
Comprehensive Loss
Losses/(Gains)
Reclassified from
Accumulated Other
Comprehensive Loss
into Income
Statement (a)
Foreign exchange contracts
Cross-currency contracts
Commodity contracts
Total
(a) Foreign exchange derivative losses/(gains) are included in net revenue and cost of sales. Cross-currency interest rate swap derivative losses/(gains) 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. See Note 11 for further information.
Losses/(gains) on our net investment hedges are categorized as follows:
Losses/(Gains)
Recognized in
Accumulated Other
Comprehensive Loss
Losses/(Gains)
Recognized in Income Statement (a)
Non-derivative debt instruments
Cross-currency contracts
Foreign exchange contracts
Total
(a) Amount excluded from the assessment of effectiveness recognized in earnings associated with cross-currency interest rate swaps and
forward contracts.
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Based on current market conditions, we expect to reclassify net gains of $ 100 million related to our cash flow hedges from accumulated other comprehensive loss within common shareholders’ equity into net income during the next 12 months.
Losses/(gains) recognized in the income statement related to our non-designated hedges are categorized as follows:
Cost of sales
Selling, general and administrative expenses
Total
Cost of sales
Selling, general and administrative expenses
Total
Foreign exchange contracts
Commodity contracts
Total
Note 10 — Net Income Attributable to PepsiCo per Common Share
The computations of basic and diluted net income attributable to PepsiCo per common share are as follows:
Income
Shares (a)
Income
Shares (a)
Income
Shares (a)
Basic net income attributable to PepsiCo per common share
Net income available for PepsiCo common shareholders
Dilutive securities:
Stock options, RSUs, PSUs and other (b)
Diluted
Diluted net income attributable to PepsiCo per common share
(a) Weighted-average common shares outstanding (in millions).
(b) The dilutive effect of these securities is calculated using the treasury stock method.
The weighted-average amount of antidilutive securities excluded from the calculation of diluted earnings per common share was 8 million, 4 million and 3 million for the years ended December 27, 2025, December 28, 2024 and December 30, 2023, respectively.
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Note 11 — Accumulated Other Comprehensive Loss Attributable to PepsiCo
The changes in the balances of each component of accumulated other comprehensive loss attributable to PepsiCo are as follows:
Currency Translation Adjustment
Cash Flow Hedges
Pension and Retiree Medical
Available-for-Sale Debt Securities and Other (a)
Accumulated Other Comprehensive Loss Attributable to PepsiCo
Balance as of December 31, 2022 (b)
Other comprehensive (loss)/income before reclassifications (c)
Amounts reclassified from accumulated other comprehensive loss
Net other comprehensive (loss)/income
Tax amounts
Balance as of December 30, 2023 (b)
Other comprehensive loss before reclassifications (d)
Amounts reclassified from accumulated other comprehensive loss
Net other comprehensive (loss)/income
Tax amounts
Balance as of December 28, 2024 (b)
Other comprehensive income before reclassifications (e)
Amounts reclassified from accumulated other comprehensive loss
Net other comprehensive income
Tax amounts
Balance as of December 27, 2025 (b)
(a) The movements primarily represent fair value changes in available-for-sale debt securities, including our investment in Celsius convertible preferred stock. See Note 9 for further information.
(b) Pension and retiree medical amounts are net of taxes of $ 1,184 million as of December 31, 2022, $ 1,282 million as of both December 30, 2023 and December 28, 2024 and $ 1,138 million as of December 27, 2025.
(c) Currency translation adjustment primarily reflects depreciation of the Russian ruble and South African rand, partially offset by appreciation of the Mexican peso.
(d) Currency translation adjustment primarily reflects depreciation of the Mexican peso and Russian ruble.
(e) Currency translation adjustment primarily reflects appreciation of the Russian ruble and Mexican peso.
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The reclassifications from accumulated other comprehensive loss to the income statement are summarized as follows:
Amount Reclassified from Accumulated Other Comprehensive Loss
Affected Line Item in the Income Statement
Currency translation:
Divestitures
Selling, general and administrative expenses
Cash flow hedges:
Foreign exchange contracts
Net revenue
Foreign exchange contracts
Cost of sales
Cross-currency contracts
Selling, general and administrative expenses
Interest rate swap contracts
Selling, general and administrative expenses
Commodity contracts
Cost of sales
Commodity contracts
Selling, general and administrative expenses
Net (gains)/losses before tax
Tax amounts
Net (gains)/losses after tax
Pension and retiree medical items:
Amortization of net prior service credit
Other pension and retiree medical benefits (expense)/income
Amortization of net losses
Other pension and retiree medical benefits (expense)/income
Settlement/curtailment losses
Other pension and retiree medical benefits (expense)/income
Net losses before tax
Tax amounts
Net losses after tax
Total net losses reclassified for the year, net of tax
Note 12 — Leases
Lessee
We determine whether an arrangement is a lease at inception. We have operating leases for plants, warehouses, distribution centers, storage facilities, offices and other facilities, as well as machinery and equipment, including fleet. Our leases generally have remaining lease terms of up to 20 years, some of which include options to extend the lease term for up to five years and some of which include options to terminate the lease within one year . We consider these options in determining the lease term used to establish our right-of-use assets and lease liabilities. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.
As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.
We have lease agreements that contain both lease and non-lease components. For real estate leases, we account for lease components together with non-lease components (e.g., common-area maintenance).
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Components of lease cost are as follows:
Operating lease cost (a)
Variable lease cost (b)
Short-term lease cost (c)
(a) Includes right-of-use asset amortization of $ 727 million, $ 655 million, and $ 570 million in 2025 , 2024, and 2023, respectively.
(b) Primarily related to adjustments for inflation, common-area maintenance and property tax.
(c) Not recorded on our balance sheet.
In 2025 , 2024 and 2023, we recognized gains of $ 291 million, $ 118 million and $ 52 million, respectively, on sale-leaseback transactions with lease terms of ten years or less.
Supplemental cash flow information and non-cash activity related to our operating leases are as follows:
Operating cash flow information:
Cash paid for amounts included in the measurement of lease liabilities
Non-cash activity:
Right-of-use assets obtained in exchange for lease obligations
Supplemental balance sheet information related to our operating leases is as follows:
Balance Sheet Classification
Right-of-use assets
Other assets
Current lease liabilities
Accounts payable and other current liabilities
Noncurrent lease liabilities
Other liabilities
Weighted-average remaining lease term and discount rate for our operating leases are as follows:
Weighted-average remaining lease term
7 years
7 years
7 years
Weighted-average discount rate
Maturities of lease liabilities by year for our operating leases are as follows:
2031 and beyond
Total lease payments
Less: Imputed interest
Present value of lease liabilities
Operating lease payments presented in the table above exclude approximately $ 900 million of minimum lease payments related to leases entered into but not yet commenced as of December 27, 2025, with weighted-average lease terms of thirteen years.
Finance leases were not material as of December 27, 2025, December 28, 2024 and December 30, 2023.
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Lessor
We have various arrangements for certain foodservice and vending equipment under which we are the lessor. These leases meet the criteria for operating lease classification. Lease income associated with these leases is not material.
Note 13 — Acquisitions and Divestitures
Acquisition of poppi
On May 19, 2025, we acquired all of the outstanding equity interest in poppi, a prebiotic soda business, for cash consideration of $ 1.95 billion and contingent consideration with an acquisition date fair value of $ 0.2 billion. See Note 9 for further information on the contingent consideration. In connection with this acquisition, other payments may be incurred, subject to the achievement of certain conditions.
We accounted for the transaction as a business combination in the second quarter of 2025. We recognized and measured the identifiable assets acquired and liabilities assumed at their estimated fair values on the date of acquisition, in our PBNA segment. The preliminary estimates of the fair value of the identifiable assets acquired and liabilities assumed in this transaction as of the acquisition date primarily include goodwill and other intangible assets of approximately $ 2.0 billion. These preliminary estimates include management’s assumptions and are subject to revision as additional information is obtained about the facts and circumstances that existed as of the acquisition date, primarily related to intangible assets, which may result in adjustments to the preliminary values discussed above as valuations are finalized. We expect to finalize these amounts as soon as possible, but no later than the second quarter of 2026.
Acquisition of Siete
On January 17, 2025, we acquired all of the outstanding equity interest in Siete, a Mexican-American foods business, for total consideration of $ 1.2 billion in cash.
We accounted for the transaction as a business combination in the first quarter of 2025. We recognized and measured the identifiable assets acquired and liabilities assumed at their estimated fair values on the date of acquisition, in our PFNA segment. The preliminary estimates of the fair value of the identifiable assets acquired and liabilities assumed in this transaction as of the acquisition date primarily include goodwill and other intangible assets of approximately $ 1.2 billion. These preliminary estimates include management’s assumptions and are subject to revision as additional information is obtained about the facts and circumstances that existed as of the acquisition date, primarily related to intangible assets, which may result in adjustments to the preliminary values discussed above as valuations are finalized. We will finalize these amounts in the first quarter of 2026.
Acquisition of remaining ownership in Sabra
On December 3, 2024, we acquired the Strauss Group’s 50 % ownership in Sabra for total consideration of $ 241 million in cash, resulting in Sabra becoming a wholly-owned subsidiary. Upon consolidation, we recognized a pre-tax gain of $ 122 million ($ 92 million after-tax or $ 0.07 per share) in our PFNA segment, recorded in selling, general and administrative expenses, related to the remeasurement of our previously held 50 % equity ownership in Sabra at fair value using a combination of the transaction price, net of a control premium, and discounted cash flows.
We accounted for the acquisition as a business combination. We recognized and measured the identifiable assets acquired and liabilities assumed at their estimated fair values on the date of acquisition in our PFNA segment, which primarily included goodwill and other intangible assets of $ 0.3 billion and property, plant and equipment of $ 0.1 billion. The purchase price allocation was finalized in the fourth quarter of 2025.
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Acquisition and Divestiture-Related Charges
Acquisition and divestiture-related charges include merger and integration charges, transaction expenses, such as consulting, advisory and other professional fees, as well as fair value adjustments to contingent consideration and acquired inventory included in the acquisition-date balance sheets. Merger and integration charges include distribution agreement termination fees, impairment of certain acquisition-related intangible assets, employee-related costs, closing costs and other integration costs.
A summary of charges is as follows:
Cost of sales
Selling, general and administrative expenses
Impairment of intangible assets
Total
After-tax amount
Impact on net income attributable to PepsiCo per common share
PFNA
PBNA
EMEA (a)
Asia Pacific Foods
Corporate
Total
(a) Income amount represents adjustments for changes in estimates of previously recorded amounts.
Note 14 — Supply Chain Financing Arrangements
As part of our evolving market practices, we work with our suppliers to optimize our terms and conditions, which include the extension of payment terms. Our current payment terms with a majority of our suppliers generally range from 60 to 90 days, which we deem to be commercially reasonable. We will continue to monitor economic conditions and market practice working with our suppliers to adjust as necessary. We also maintain voluntary supply chain finance agreements with several participating global financial institutions. Under these agreements, our suppliers, at their sole discretion, may elect to sell their accounts receivable with PepsiCo to these participating global financial institutions. Supplier participation in these financing arrangements is voluntary. Our suppliers negotiate their financing agreements directly with the respective global financial institutions and we are not a party to these agreements. These financing arrangements allow participating suppliers to leverage PepsiCo’s creditworthiness in establishing credit spreads and associated costs, which generally provides our suppliers with more favorable terms than they would be able to secure on their own. Neither PepsiCo nor any of its subsidiaries provide any guarantees to any third party in connection with these financing arrangements. We have no economic interest in our suppliers’ decision to participate in these agreements. Our obligations to our suppliers, including amounts due and scheduled payment terms, are not impacted. 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.
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A summary of our outstanding obligations confirmed as valid under the supplier finance program is as follows:
Confirmed obligations outstanding at beginning of year
Invoices confirmed
Confirmed invoices paid
Translation and other
Confirmed obligations outstanding at end of year
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Note 15 — Supplemental Financial Information
Balance Sheet
Accounts and notes receivable
Trade receivables
Other receivables
Total
Allowance, beginning of year
Net amounts charged to expense (a)
Deductions
Translation and other (a)
Allowance, end of year
Accounts and notes receivable, net
Property, plant and equipment, net
Average
Useful Life (Years)
Land
Buildings and improvements
Machinery and equipment, including fleet and software
Construction in progress
Accumulated depreciation
Property, plant and equipment, net
Depreciation expense
Other assets
Noncurrent notes and accounts receivable
Deferred marketplace spending
Pension plans
Right-of-use assets
Other investments (b)
Other
Total
Accounts payable and other current liabilities
Accounts payable (c)
Accrued marketplace spending
Accrued compensation and benefits
Dividends payable
Current lease liabilities
Other current liabilities (d)
Total
(a) In 2024, we recognized an allowance for expected credit losses related to outstanding receivables from TBG associated with the Juice Transaction. In 2025, the outstanding receivables and related allowance were reclassified to noncurrent notes and accounts receivable. See Note 1 for further information.
(b) Includes our investment in Celsius convertible preferred stock. See Note 9 for further information.
(c) Increase primarily reflects timing of payments and currency translation adjustments, partially offset by a decrease in capital expenditure payables.
(d) Increase primarily reflects acquisition of poppi. See Note 13 for further information on acquisitions.
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Statement of Cash Flows
Interest paid
Income taxes paid, net of refunds (a)
(a) Includes tax payments of $ 772 million in 2025 , $ 579 million in 2024 and $ 309 million in 2023 related to the TCJ Act.
Supplemental Non-Cash Activity
Debt discharged via legal defeasance
Investment obtained for certain assets (see Notes 4 and 9)
The following table provides a reconciliation of cash and cash equivalents and restricted cash as reported within the balance sheet to the same items as reported in the cash flow statement:
Cash and cash equivalents
Restricted cash included in other assets (a)
Total cash and cash equivalents and restricted cash
(a) Primarily relates to collateral posted against certain of our derivative positions.
Note 16 — Legal Contingencies
The Company is party to a variety of litigation, claims, legal or regulatory proceedings, inquiries and investigations. While the results of such litigation, claims, legal or regulatory proceedings, inquiries and investigations cannot be predicted with certainty, management believes that the final outcome of the foregoing is not expected to have a material adverse effect on our financial condition, results of operations or cash flows.
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Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
PepsiCo, Inc.:
Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting
We have audited the accompanying Consolidated Balance Sheet of PepsiCo, Inc. and Subsidiaries (the Company) as of December 27, 2025 and December 28, 2024, the related Consolidated Statements of Income, Comprehensive Income, Cash Flows, and Equity for each of the fiscal years in the three-year period ended December 27, 2025, and the related notes (collectively, the consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of December 27, 2025, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 27, 2025 and December 28, 2024, and the results of its operations and its cash flows for each of the fiscal years in the three-year period ended December 27, 2025, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 27, 2025 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
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Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Unrecognized tax benefits
As discussed in Note 5 to the consolidated financial statements, the Company’s global operating model gives rise to income tax obligations in the United States and in certain foreign jurisdictions in which it operates. As of December 27, 2025, the Company recorded reserves for unrecognized tax benefits of $2.4 billion. The Company establishes reserves if it believes that certain positions taken in its tax returns are subject to challenge and the Company likely will not succeed, even though the Company believes the tax return position is supportable under the tax law. 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.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the unrecognized tax benefits process, including controls to (1) identify uncertain income tax positions, (2) evaluate the tax law and tax authority’s settlement history used to estimate the unrecognized tax benefits, and (3) monitor for new information that may give rise to changes to the existing unrecognized tax benefits, such as progress of a tax examination, new tax law or tax authority
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settlements. We involved tax and valuation professionals with specialized skills and knowledge, who assisted in assessing the unrecognized tax benefits by (1) evaluating the Company’s tax structure and transactions, including transfer pricing arrangements, and (2) assessing the Company’s interpretation of existing tax law as well as new and amended tax laws, tax positions taken, associated external counsel opinions, information from tax examinations, relevant court rulings and tax authority settlements.
/s/ KPMG LLP
We have served as the Company’s auditor since 1990.
New York, New York
February 2, 2026
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GLOSSARY
Acquisitions and divestitures : 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.
Bottler Case Sales (BCS) : measure of physical beverage volume shipped to retailers and independent distributors from both PepsiCo and our independent bottlers.
Bottler funding : financial incentives we give to our independent bottlers to assist in the distribution and promotion of our beverage products.
Chief Operating Decision Maker (CODM) : our Chairman and Chief Executive Officer.
Concentrate Shipments and Equivalents (CSE) : measure of our physical beverage volume shipments to independent bottlers.
Constant currency : financial results assuming constant foreign currency exchange rates used for translation based on the rates in effect for the comparable prior-year period. In order to compute our constant currency results, we multiply or divide, as appropriate, our current-year U.S. dollar results by the current-year average foreign exchange rates and then multiply or divide, as appropriate, those amounts by the prior-year average foreign exchange rates. Beginning in 2025, on a prospective basis, we are also applying the constant currency calculation for our subsidiaries operating in highly inflationary economies.
Consumers : people who eat and drink our products.
CSD : carbonated soft drinks.
Customers : authorized independent bottlers, distributors and retailers.
Direct-Store-Delivery (DSD) : delivery system used by us, our independent bottlers and our distributors to deliver beverages and convenient foods directly to retail stores where our products are merchandised.
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.
Free cash flow : net cash from operating activities less capital spending, plus sales of property, plant and equipment.
Independent bottlers : customers to whom we have granted exclusive contracts to sell and manufacture certain beverage products bearing our trademarks within a specific geographical area.
Mark-to-market net impact : change in market value for commodity derivative contracts that we purchase to mitigate the volatility in costs of energy and raw materials that we consume. The market value is determined based on prices on national exchanges and recently reported transactions in the marketplace.
NCB : non-carbonated beverage.
Organic : a measure that adjusts for the impacts of foreign exchange translation, acquisitions and divestitures, and where applicable, the impact of the 53 rd reporting week. In excluding the impact of foreign exchange translation, we assume constant foreign exchange rates used for translation based on the rates in effect for the comparable prior-year period. See the definition of “Constant currency” for further information.
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Total marketplace spending : includes sales incentives and discounts offered through various programs to our customers, consumers or independent bottlers, as well as advertising and other marketing activities.
Transaction gains and losses : the impact on our consolidated financial statements of exchange rate changes arising from specific transactions.
Translation adjustment : the impact of converting our foreign affiliates’ financial statements into U.S. dollars for the purpose of consolidating our financial statements.
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