XML 48 R30.htm IDEA: XBRL DOCUMENT v3.10.0.1
Share-Based Compensation Share-Based Compensation (Tables)
 12 Months Ended
Dec. 29, 2018
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]  
Schedule of Liability Award Vested and Expected to Vest [Table Text Block]
 
Long-Term Cash
Award(a)
 
Balance Sheet Date Fair Value(a)
 
Contractual Life Remaining
(years)
Outstanding at December 30, 2017
$
33,200

 
 
 
 
Granted (b)
20,926

 
 
 
 
Forfeited
(2,292
)
 
 
 
 
Actual performance change (c)
2,876

 
 
 
 
Outstanding at December 29, 2018 (d)
$
54,710

 
$
55,809

 
1.22
Expected to vest as of December 29, 2018
$
51,159

 
$
52,148

 
1.17

(a)
In thousands.
(b)
Grant activity for all long-term cash awards are disclosed at target.
(c)
Reflects the net number of long-term cash awards above and below target levels based on actual performance measured at the end of the performance period.
(d)
The outstanding long-term cash awards for which the performance period has not ended as of December 29, 2018, at the threshold, target and maximum award levels were zero, 37.3 million and 74.5 million, respectively
Schedule of Compensation Cost for Share-based Payment Arrangements, Allocation of Share-based Compensation Costs by Plan [Table Text Block]
The following table summarizes our total share-based compensation expense and excess tax benefits recognized:
 
2018

 
2017

 
2016

Share-based compensation expense - equity awards
$
256

 
$
292

 
$
284

Share-based compensation expense - liability awards
20

 
13

 
5

Restructuring and impairment charges
(6
)
 
(2
)
 
5

Total
$
270

 
$
303

 
$
294

Income tax benefits recognized in earnings related to share-based compensation
$
45

 
$
89

(a) 
$
91

Excess tax benefits related to share-based compensation (b)
$
48

 
$
115

 
$
110
Summary of Compensation Costs
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, restricted stock units (RSUs), performance stock units (PSUs), PepsiCo equity performance units (PEPunits) 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 were 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, PSUs and PEPunits.
As of December 29, 2018, 66 million shares were available for future share-based compensation grants under the LTIP.
The following table summarizes our total share-based compensation expense and excess tax benefits recognized:
 
2018

 
2017

 
2016

Share-based compensation expense - equity awards
$
256

 
$
292

 
$
284

Share-based compensation expense - liability awards
20

 
13

 
5

Restructuring and impairment charges
(6
)
 
(2
)
 
5

Total
$
270

 
$
303

 
$
294

Income tax benefits recognized in earnings related to share-based compensation
$
45

 
$
89

(a) 
$
91

Excess tax benefits related to share-based compensation (b)
$
48

 
$
115

 
$
110


(a)
Reflects tax rates effective for the 2017 tax year.
(b)
Included in provision for income taxes in the income statement in 2018 and 2017; included in capital in excess of par value in the equity statement in 2016.
As of December 29, 2018, there was $282 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.
Schedule Of Weighted-Average Black-Scholes Fair Value Assumptions
Our weighted-average Black-Scholes fair value assumptions are as follows:

2018

 
2017

 
2016

Expected life
5 years

 
5 years

 
6 years

Risk-free interest rate
2.6
%
 
2.0
%
 
1.4
%
Expected volatility
12
%
 
11
%
 
12
%
Expected dividend yield
2.7
%
 
2.7
%
 
2.7
%
Our Stock Option Activity
A summary of our stock option activity for the year ended December 29, 2018 is as follows:
 
Options(a)
 
Weighted-Average Exercise
Price
 
Weighted-Average Contractual
Life Remaining
(years)
 
Aggregate Intrinsic
Value(b)
Outstanding at December 30, 2017
19,013

 
$
74.23

 
 
 
 
Granted
1,429

 
$
108.88

 
 
 
 
Exercised
(4,377
)
 
$
62.95

 
 
 
 
Forfeited/expired
(476
)
 
$
94.85

 
 
 
 
Outstanding at December 29, 2018
15,589

 
$
79.94

 
4.29
 
$
474,746

Exercisable at December 29, 2018
11,547

 
$
70.74

 
2.92
 
$
457,529

Expected to vest as of December 29, 2018
3,713

 
$
106.02

 
8.17
 
$
16,606

(a)
Options are in thousands and include options previously granted under the PBG plan. No additional options or shares were granted under the PBG plan after 2009.
(b)
In thousands.
Our RSU and PSU Activity

RSUs/PSUs(a)
 
Weighted-Average
Grant-Date Fair Value
 
Weighted-Average Contractual Life
Remaining (years)
 
Aggregate
Intrinsic
Value(a)
Outstanding at December 30, 2017
7,293

 
$
102.30

 
 
 
 
Granted (b)
2,634

 
$
108.75

 
 
 
 
Converted
(2,362
)
 
$
99.73

 
 
 
 
Forfeited
(647
)
 
$
105.21

 
 
 
 
Actual performance change (c)
257

 
$
98.92

 
 
 
 
Outstanding at December 29, 2018 (d)
7,175

 
$
105.13

 
1.22
 
$
791,878

Expected to vest as of December 29, 2018
6,667

 
$
104.90

 
1.15
 
$
735,813

(a)
In thousands.
(b)
Grant activity for all PSUs are disclosed at target.
(c)
Reflects the net number of PSUs above and below target levels based on actual performance measured at the end of the performance period.
(d)
The outstanding PSUs for which the performance period has not ended as of December 29, 2018, at the threshold, target and maximum award levels were zero, 0.9 million and 1.6 million, respectively.
Our PEPunit Activity
PEPunits
PEPunits provide an opportunity to earn shares of PepsiCo common stock with a value that adjusts based upon changes in PepsiCo’s absolute stock price as well as PepsiCo’s Total Shareholder Return relative to the S&P 500 over a three-year performance period.
The fair value of PEPunits is measured using the Monte-Carlo simulation model.
PEPunits were last granted in 2015 and all 248,000 units outstanding at December 30, 2017, with a weighted average grant date fair value of $68.94, were converted to 278,000 shares during fiscal year 2018.
Other Share-Based Compensation Data
Other Share-Based Compensation Data
The following is a summary of other share-based compensation data:
 
2018

 
2017

 
2016

Stock Options
 
 
 
 
 
Total number of options granted (a)
1,429

 
1,481

 
1,743

Weighted-average grant-date fair value of options granted
$
9.80

 
$
8.25

 
$
6.94

Total intrinsic value of options exercised (a)
$
224,663

 
$
327,860

 
$
290,131

Total grant-date fair value of options vested (a)
$
15,506

 
$
23,122

 
$
18,840

RSUs/PSUs
 
 
 
 
 
Total number of RSUs/PSUs granted (a)
2,634

 
2,824

 
3,054

Weighted-average grant-date fair value of RSUs/PSUs granted
$
108.75

 
$
109.92

 
$
99.06

Total intrinsic value of RSUs/PSUs converted (a)
$
260,287

 
$
380,269

 
$
359,401

Total grant-date fair value of RSUs/PSUs vested (a)
$
232,141

 
$
264,923

 
$
257,648

PEPunits
 
 
 
 
 
Total intrinsic value of PEPunits converted (a)
$
30,147

 
$
39,782

 
$
38,558

Total grant-date fair value of PEPunits vested (a)
$
9,430

 
$
18,833

 
$
16,572

(a)
In thousands.
As of December 29, 2018 and December 30, 2017, there were approximately 248,000 and 250,000 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.