01—Abstract
Summary
Summary of the 10-K filed February 15, 2017. Cited figures are marked; the original filing is the authoritative source.
PepsiCo, Inc.'s 2016 10-K filing reveals a company navigating a dynamic market landscape.
Despite a slight dip in net revenue year-over-year, largely due to unfavorable foreign exchange, the company demonstrated resilience with a significant increase in operating profit and diluted earnings per share. This growth was propelled by effective net pricing, volume expansion across key segments like Frito-Lay North America and North America Beverages, and substantial cost savings from productivity initiatives. The company continues to emphasize its 'Performance with Purpose' strategy, focusing on healthier product innovation, sustainability, and community engagement.
Key risk factors identified include shifts in consumer preferences towards healthier options, regulatory changes (such as potential taxes on sugary beverages), and geopolitical instability, all of which PepsiCo is actively addressing through portfolio adjustments and strategic investments in research and development. The company also highlights its strong liquidity position and ongoing commitment to returning capital to shareholders through dividends and share repurchases.
02—Key points
Key Highlights
- Net revenue for fiscal year 2016 was $62.8 billion, a slight decrease from $63.1 billion in 2015, impacted by foreign exchange. The company noted its 2016 fiscal year included an extra reporting week.
- Operating profit significantly increased to $9.8 billion in 2016, up from $8.4 billion in 2015, reflecting strong productivity savings, effective net pricing, and volume growth across key segments.
- Diluted earnings per share (EPS) grew by 19% to $4.36 in 2016, compared to $3.67 in 2015, indicating improved profitability.
- The Frito-Lay North America (FLNA) segment showed robust performance with net revenue up 5% and operating profit up 8% in 2016, driven by volume growth in brands like Doritos and Cheetos.
- North America Beverages (NAB) segment experienced a 3% net revenue increase and a 6% operating profit increase, supported by strong performance in non-carbonated beverages, particularly water and ready-to-drink teas.
- The company is actively managing risks related to changing consumer preferences for healthier products and potential regulatory impacts, such as taxes on sugar-sweetened beverages, by investing in R&D and portfolio diversification.
- PepsiCo continues its commitment to returning capital to shareholders, with dividends paid of $4.2 billion and share repurchases of $3.0 billion in 2016.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2016, Pepsico Inc kept $0.10.
- Revenue$62.80B100.0%
- Cost of revenue−$28.22B44.9%
- Gross profit$34.58B55.1%
- Operating costs−$24.77B39.4%
- Operating income$9.80B15.6%
- Interest, other & tax−$3.48B5.5%
- Net income$6.33B10.1%
Where FY2016 revenue went
$62.80B- Cost of revenue: $28.22B, 45% of revenue
- SG&A: $24.77B, 39% of revenue
- Net income: $6.33B, 10% of revenue
- R&D: $760.0M, 1.2% of revenue
- Interest, other & tax: $3.48B, 5.5% of revenue
Kept 10% as net incomeNet income $6.33B · 10%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2016filed February 15, 2017Financial Statements
FY2016 against FY2015
| Line item | FY2016FY2015 | Change |
|---|---|---|
| Revenue | $62.80B$63.06B | −0.4% |
| Cost of Revenue | $28.22B$28.73B | −1.8% |
| Gross Profit | $34.58B$34.33B | +0.7% |
| R&D Expenses | $760.00M$754.00M | +0.8% |
| SG&A Expenses | $24.77B$24.61B | +0.7% |
| Operating Income | $9.80B$8.35B | +17.4% |
| Interest Expense | $1.34B$970.00M | +38.4% |
| Net Income | $6.33B$5.45B | +16.1% |
| EPS (Basic) | $4.39$3.71 | +18.3% |
| EPS (Diluted) | $4.36$3.67 | +18.8% |
| Shares Outstanding (Basic) | 1.44B1.47B | −2.0% |
| Shares Outstanding (Diluted) | 1.45B1.49B | −2.2% |
05—Questions
Frequently Asked Questions
What were PepsiCo's key financial highlights for fiscal year 2016?
For fiscal year 2016, PepsiCo reported net revenue of $62.8 billion, a slight decrease from $63.1 billion in 2015, partly due to foreign exchange impacts. However, operating profit increased significantly to $9.8 billion, up from $8.4 billion in 2015, driven by strong productivity savings, effective net pricing, and volume growth. Diluted earnings per share also saw a substantial increase of 19% to $4.36.
How did the different business segments perform in 2016?
The Frito-Lay North America segment performed strongly with a 5% increase in net revenue and an 8% increase in operating profit, fueled by volume growth. The North America Beverages segment also saw positive growth, with net revenue up 3% and operating profit up 6%, primarily due to strong performance in non-carbonated beverages. Other international segments showed mixed results, with Latin America experiencing a significant net revenue decrease primarily due to currency impacts and the deconsolidation of its Venezuelan operations.
What are the main risks and challenges highlighted by PepsiCo in this filing?
PepsiCo identifies several key risks and challenges, including shifts in consumer preferences towards healthier products, potential regulatory actions such as taxes on sugar-sweetened beverages, and fluctuating economic and political conditions in global markets. The company also faces competition and risks related to supply chain disruptions and cyber security.
How is PepsiCo addressing the trend towards healthier products?
PepsiCo is addressing the trend towards healthier products by increasing its investment in research and development (up 45% since 2011, totaling approximately $3.5 billion over five years) to reformulate existing products and develop new ones with improved nutritional profiles. They are also focusing on expanding their portfolio of 'good-for-you' and 'better-for-you' options through innovation and strategic acquisitions.
06—Continue