10-KPeriod: FY2009

PEPSICO INC Annual Report, Year Ended Dec 26, 2009

Filed February 22, 2010For Securities:PEP

Summary

PepsiCo, Inc.'s 2009 10-K report highlights a company navigating a dynamic global economic landscape while strategically positioning for future growth. Despite a challenging economic environment, PepsiCo demonstrated resilience, with net revenue remaining stable year-over-year, supported by effective net pricing and strategic acquisitions. The report prominently features the pending mergers with The Pepsi Bottling Group, Inc. (PBG) and PepsiAmericas, Inc. (PAS), a significant move aimed at consolidating North American bottling operations, enhancing supply chain efficiency, and driving profitability. Management emphasized a "Performance with Purpose" strategy, balancing financial growth with social and environmental responsibility, including investments in healthier product portfolios and sustainable practices. Key financial discussions revolve around managing commodity costs through hedging, the impact of foreign currency fluctuations, and the operational performance across various divisions, including Frito-Lay North America (FLNA) and PepsiCo Americas Beverages (PAB). The company maintained strong liquidity and continued its commitment to shareholder returns through dividends and share repurchases, underscoring its long-term financial health and strategic outlook.

Financial Highlights

53 data points
Beta

Revenue

$43.23B

53.5% Gross Margin

Net Income

$5.95B

13.8% Net Margin

EPS (Diluted)

$3.77

Total Assets

$39.85B

Cash & Equivalents

$3.94B

Free Cash Flow

$6.80B

Financial Statements
Beta
Revenue$43.23B
Cost of Revenue$20.10B
Gross Profit$23.13B
R&D Expenses$414.00M
SG&A Expenses$15.03B
Operating Income$8.04B
Interest Expense$397.00M
Net Income$5.95B
EPS (Basic)$3.81
EPS (Diluted)$3.77
Shares Outstanding (Basic)1.56B
Shares Outstanding (Diluted)1.58B

Key Highlights

  • 1PepsiCo announced significant mergers with The Pepsi Bottling Group, Inc. (PBG) and PepsiAmericas, Inc. (PAS) to consolidate its North American bottling operations, aiming for enhanced efficiency and profitability.
  • 2The company maintained stable net revenue in 2009, demonstrating resilience in a challenging economic environment, supported by effective net pricing and strategic acquisitions.
  • 3PepsiCo's 'Performance with Purpose' strategy guides its operations, focusing on sustainable growth, healthier product portfolios (e.g., 'good for you' products), and environmental responsibility.
  • 4Divisional performance showed strength in Frito-Lay North America (FLNA) with a 6% net revenue increase, while PepsiCo Americas Beverages (PAB) experienced an 8% net revenue decline due to market softness.
  • 5The company continued to manage commodity price volatility through hedging strategies and implemented a "Productivity for Growth" program to improve cost competitiveness.
  • 6PepsiCo maintained a strong liquidity position and a commitment to shareholder returns, declaring dividends and continuing share repurchase programs, while managing a $8.0 billion repurchase authorization.
  • 7The company's R&D spending increased to $414 million in 2009, reflecting a focus on new product development and improvement, particularly in healthier product options.

Frequently Asked Questions

PepsiCo is focused on six key strategic initiatives: expanding its global snacks leadership, ensuring sustainable growth in global beverages, leveraging the 'Power of One' (integrated snacks and beverages strategy), rapidly expanding its 'Good for You' product portfolio, delivering on environmental sustainability goals, and cherishing and developing its employees and leadership. The most significant event discussed is the pending merger with PBG and PAS to consolidate its North American bottling operations.

In 2009, PepsiCo's net revenue remained stable at $43.2 billion, reflecting resilience. Operating profit increased by 16% to $8.0 billion, significantly boosted by favorable mark-to-market gains on commodity hedges and lower restructuring charges. Net income attributable to PepsiCo also increased by 16% to $5.9 billion, or $3.77 per diluted share. The company faced some volume declines in its beverage segments, particularly in North America, but offset this with effective net pricing and growth in its snacks business.

PepsiCo announced agreements to merge with The Pepsi Bottling Group, Inc. (PBG) and PepsiAmericas, Inc. (PAS) on August 3, 2009, with stockholder approvals obtained on February 17, 2010. The mergers are subject to regulatory approvals and are expected to be completed by the end of February 2010. The strategic goal is to create a more efficient and agile bottling system in North America, leading to cost savings, supply chain optimization, and enhanced innovation capabilities, ultimately improving profitability and top-line growth. The company incurred $50 million in merger costs in 2009.

PepsiCo manages commodity price risk through strategies including fixed-price purchase orders, pricing agreements, geographic diversity, and the use of derivatives. For foreign currency risk, the company uses derivatives, primarily forward contracts, to manage its exposure to transaction risk. While foreign currency movements negatively impacted net revenue growth by 5% in 2009, the company actively manages these exposures through its hedging strategies.