10-KPeriod: FY2007

PEPSICO INC Annual Report, Year Ended Dec 29, 2007

Filed February 15, 2008For Securities:PEP

Summary

PepsiCo, Inc. (PEP) reported strong performance in its 2007 fiscal year, driven by a 12% increase in net revenue to $39.5 billion and a 10% rise in operating profit to $7.2 billion. This growth was fueled by a combination of volume increases across its diverse portfolio of snacks and beverages, effective net pricing strategies, and contributions from acquisitions. The company continues to execute its 'Performance with Purpose' strategy, focusing on sustainable growth and community engagement. Internationally, PepsiCo demonstrated robust growth, with its International division seeing a 22% net revenue increase, largely attributed to strong volume in emerging markets and favorable foreign currency movements. North American divisions also showed positive trends, with Frito-Lay North America achieving 7% revenue growth and PepsiCo Beverages North America increasing revenue by 7%, although beverage volume saw a slight decline due to a decrease in carbonated soft drinks (CSDs) offset by growth in non-carbonated beverages. The company is actively managing its capital structure, returning significant value to shareholders through dividends and share repurchases. PepsiCo also announced a strategic organizational realignment into three new business units to better manage growth and develop global leadership talent, which will be reflected in future segment reporting. Management expressed confidence in navigating the evolving economic landscape, emphasizing productivity initiatives and judicious pricing to offset rising commodity costs.

Financial Highlights

27 data points
Beta

Revenue

$39.47B

54.3% Gross Margin

Net Income

$5.66B

14.3% Net Margin

EPS (Diluted)

$3.41

Cash & Equivalents

$910.00M

Free Cash Flow

$6.93B

Financial Statements
Beta
Revenue$39.47B
Cost of Revenue$18.04B
Gross Profit$21.44B
SG&A Expenses$14.20B
Operating Income$7.18B
Interest Expense$224.00M
Net Income$5.66B
EPS (Basic)$3.48
EPS (Diluted)$3.41

Key Highlights

  • 1Net revenue increased by 12% to $39.5 billion, with operating profit growing 10% to $7.2 billion.
  • 2The International division was a key growth driver, with net revenue up 22%, supported by strong performance in emerging markets and favorable currency translation.
  • 3Frito-Lay North America (FLNA) and PepsiCo Beverages North America (PBNA) both reported 7% net revenue growth, with FLNA driven by volume and pricing, and PBNA by pricing and acquisitions despite a dip in CSD volume.
  • 4PepsiCo continued its commitment to shareholder returns, repurchasing $4.3 billion in common stock and paying $2.2 billion in dividends.
  • 5A strategic organizational realignment was announced, creating three new business units (PepsiCo Americas Foods, PepsiCo Americas Beverages, and PepsiCo International) to foster sustained growth and leadership development.
  • 6The company is proactively addressing rising commodity costs through productivity initiatives, global purchasing programs, and strategic pricing.
  • 7PepsiCo is adapting its beverage portfolio to consumer shifts, investing in innovation for both CSDs and non-carbonated beverages (NCBs) like teas, waters, and enhanced waters.

Frequently Asked Questions

PepsiCo's net revenue grew by 12% to $39.5 billion, driven by a combination of factors including volume growth across its snack and beverage divisions, effective net pricing strategies, and contributions from acquisitions. Favorable foreign currency exchange rates also contributed positively, particularly to the International division's performance.

The company is employing a multi-pronged approach to manage rising commodity costs. This includes accelerating productivity initiatives across its operations (product formulation, sourcing, manufacturing, distribution), gaining effective pricing through a combination of mix management, product adjustments, and absolute pricing, and utilizing hedging strategies for raw materials and energy.

PepsiCo announced a strategic realignment into three new business units: PepsiCo Americas Foods (PAF), PepsiCo Americas Beverages (PAB), and PepsiCo International (PI). This restructuring was driven by the company's robust growth, aiming to sustain its growth rate, develop global senior leadership talent, leverage capabilities and innovation between international and North American businesses, and provide investors with more granular international performance data through six reportable segments.

PepsiCo generates substantial cash flow and is disciplined in its reinvestment and shareholder returns. In 2007, the company reinvested over $6 billion in capital expenditures and acquisitions. It returned approximately $16 billion to shareholders through dividends and share repurchases from 2005 to 2007. The company aims to return approximately all of its management operating cash flow to shareholders through dividends and share repurchases and authorized an additional $8 billion in stock repurchases through June 2010.