01—Abstract
Summary
Summary of the 10-K filed February 11, 2016. Cited figures are marked; the original filing is the authoritative source.
PepsiCo's 2015 10-K filing indicates a year of significant challenges and strategic adjustments.
The company experienced a decline in net revenue and operating profit, largely attributed to unfavorable foreign exchange rates and the substantial impairment charge related to its Venezuelan operations. Despite these headwinds, PepsiCo demonstrated resilience through effective net pricing, continued productivity initiatives yielding over $1 billiona in savings, and a consistent return of capital to shareholders via dividends and share repurchases. Management's focus remains on upgrading commercial capabilities, building new competencies in areas like e-commerce, and increasing cost efficiencies to navigate a volatile global economic and regulatory landscape.
The company is also actively responding to evolving consumer preferences, particularly the demand for healthier products, by investing in product reformulation and portfolio expansion. Investors should note the significant impact of the Venezuelan deconsolidation and impairment charges on the 2015 financial results, which, when excluded, reveal underlying operational strengths and growth. The company continues to invest in innovation and brand building, with R&D expenses increasing.
Key segments like Frito-Lay North America and North America Beverages showed growth in net revenue and operating profit, highlighting areas of operational strength. However, segments like Latin America and Europe/Sub-Saharan Africa faced significant challenges, including currency devaluation and market-specific economic instability.
02—Key points
Key Highlights
- Net revenue for 2015 decreased by 5% to $63.1 billion, compared to $66.7 billion in 2014, impacted by unfavorable foreign exchange translation (-10%) and the deconsolidation of Venezuelan operations (-1%).
- Operating profit decreased by 13% to $8.4 billion in 2015 from $9.6 billion in 2014. Excluding items affecting comparability (primarily Venezuela impairment charges), operating profit decreased by a lesser extent, indicating underlying operational pressures.
- A significant $1.4 billion impairment charge was recorded in the Latin America segment due to the deconsolidation of Venezuelan subsidiaries and joint venture, heavily impacting profitability.
- The company successfully returned $9 billion to shareholders in 2015 through dividends and share repurchases, demonstrating a commitment to capital allocation.
- Productivity initiatives continued to be a key driver, delivering over $1 billion in cost reductions in 2015, contributing to offset cost increases and support growth.
- Consumer preferences are shifting, with PepsiCo accelerating efforts to reduce sodium, added sugars, and saturated fat in products and expanding its nutrition-focused brands.
- Frito-Lay North America and North America Beverages showed positive revenue and operating profit growth, indicating resilience in key domestic markets.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2015, Pepsico Inc kept $0.09.
- Revenue$63.06B100.0%
- Cost of revenue−$28.73B45.6%
- Gross profit$34.33B54.4%
- Operating costs−$25.97B41.2%
- Operating income$8.35B13.2%
- Interest, other & tax−$2.90B4.6%
- Net income$5.45B8.6%
Where FY2015 revenue went
$63.06B- Cost of revenue: $28.73B, 46% of revenue
- SG&A: $24.61B, 39% of revenue
- Net income: $5.45B, 8.6% of revenue
- R&D: $754.0M, 1.2% of revenue
- Other operating costs: $605.0M, 1.0% of revenue
- Interest, other & tax: $2.90B, 4.6% of revenue
Kept 8.6% as net incomeNet income $5.45B · 8.6%Other operating costs $605.0M · 1.0%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2015filed February 11, 2016Financial Statements
FY2015 against FY2014
| Line item | FY2015FY2014 | Change |
|---|---|---|
| Revenue | $63.06B$66.68B | −5.4% |
| Cost of Revenue | $28.73B$31.24B | −8.0% |
| Gross Profit | $34.33B$35.45B | −3.2% |
| R&D Expenses | $754.00M$718.00M | +5.0% |
| SG&A Expenses | $24.61B$25.77B | −4.5% |
| Operating Income | $8.35B$9.58B | −12.8% |
| Interest Expense | $970.00M$909.00M | +6.7% |
| Net Income | $5.45B$6.51B | −16.3% |
| EPS (Basic) | $3.71$4.31 | −13.9% |
| EPS (Diluted) | $3.67$4.27 | −14.1% |
| Shares Outstanding (Basic) | 1.47B1.51B | −2.7% |
| Shares Outstanding (Diluted) | 1.49B1.53B | −2.8% |
05—Questions
Frequently Asked Questions
What was the primary driver for the decrease in net revenue and operating profit in 2015?
The primary drivers for the decrease in net revenue and operating profit in 2015 were unfavorable foreign exchange rates, a significant $1.4 billion impairment charge related to the deconsolidation of Venezuelan operations, and increased operating costs, including higher advertising and marketing expenses. These factors were partially offset by effective net pricing and savings from productivity initiatives.
How did the Venezuelan deconsolidation and impairment charges affect PepsiCo's financial results?
The deconsolidation of its Venezuelan subsidiaries and joint venture, along with a $1.4 billion impairment charge recorded in the Latin America segment, had a substantial negative impact on PepsiCo's 2015 financial results, particularly on net income and operating profit. This event significantly reduced the reported profitability for the year.
What is PepsiCo's strategy for addressing changing consumer preferences towards healthier products?
PepsiCo is actively responding to evolving consumer demands by accelerating efforts to reduce sodium, added sugars, and saturated fat in many of its products. The company is also investing in its nutrition-focused brands like Quaker and Tropicana and developing new, healthier product options to meet consumer needs and regulatory pressures.
How does PepsiCo return capital to shareholders?
PepsiCo demonstrates a strong commitment to returning capital to shareholders through a combination of regular dividend payments and significant share repurchase programs. In 2015, the company returned $9 billion to shareholders through these methods.
06—Continue