10-KPeriod: FY2018

PEPSICO INC Annual Report, Year Ended Dec 29, 2018

Filed February 15, 2019For Securities:PEP

Summary

PepsiCo, Inc.'s 2018 Form 10-K highlights a year of resilient performance with a focus on "Winning with Purpose." The company navigated a dynamic market by strengthening its diverse brand portfolio across snacks, beverages, and foods, supported by ongoing productivity initiatives aimed at improving operational efficiency and reducing costs. Strategic investments in e-commerce capabilities and innovation in healthier product options were key themes. While facing some cost pressures from commodities and operating expenses, PepsiCo demonstrated effective net pricing and continued to return value to shareholders through dividends and share repurchases. The company's geographic segmentation shows varied performance, with North America Beverages experiencing a decline in operating profit due to cost increases, while other segments like Frito-Lay North America and Latin America showed growth. The acquisition of SodaStream in late 2018 is a notable strategic move to bolster its "beyond the bottle" offerings. The company's robust financial position and cash-generating capabilities are expected to support future growth and capital allocation strategies.

Financial Highlights

54 data points
Beta

Revenue

$64.66B

54.6% Gross Margin

Net Income

$12.52B

19.4% Net Margin

EPS (Diluted)

$8.78

Total Assets

$77.65B

Cash & Equivalents

$8.72B

Free Cash Flow

$9.41B

Financial Statements
Beta
Revenue$64.66B
Cost of Revenue$29.38B
Gross Profit$35.28B
R&D Expenses$680.00M
SG&A Expenses$25.17B
Operating Income$10.11B
Interest Expense$1.22B
Net Income$12.52B
EPS (Basic)$8.84
EPS (Diluted)$8.78
Shares Outstanding (Basic)1.42B
Shares Outstanding (Diluted)1.43B

Key Highlights

  • 1Net revenue increased by 2% to $64.7 billion in 2018, demonstrating continued top-line growth.
  • 2Operating profit slightly decreased by 2% to $10.1 billion, impacted by operating cost increases and commodity costs, partially offset by over $1 billion in productivity savings.
  • 3The company returned significant capital to shareholders, with $6.9 billion allocated to dividends and share repurchases.
  • 4PepsiCo completed the acquisition of SodaStream International Ltd. in December 2018 for approximately $3.3 billion, expanding its beverage portfolio.
  • 5The company reported a significant net tax benefit of $4.3 billion in 2018 related to the reorganization of its international operations.
  • 6Frito-Lay North America (FLNA) showed strong performance with net revenue growth of 3.5% and operating profit growth of 4.5%, driven by effective net pricing and volume growth.
  • 7North America Beverages (NAB) experienced a 16% decrease in operating profit, largely due to increased operating costs and commodity costs, despite a 1% net revenue increase.

Frequently Asked Questions

In 2018, PepsiCo reported net revenue of $64.7 billion, a 2% increase from the prior year. Operating profit was $10.1 billion, a slight decrease of 2% primarily due to increased operating costs and commodity costs, which were partially offset by significant productivity savings exceeding $1 billion and effective net pricing.

PepsiCo's key strategic moves in 2018 included the acquisition of SodaStream International Ltd. for approximately $3.3 billion, aiming to enhance its 'beyond the bottle' beverage strategy. The company also continued to focus on its 'Winning with Purpose' approach, investing in productivity initiatives, adapting to a changing retail landscape including e-commerce, and refining its product portfolio to meet evolving consumer preferences for healthier options.

Performance varied across segments. Frito-Lay North America (FLNA) delivered strong results with 3.5% net revenue growth and 4.5% operating profit growth, driven by pricing and volume. North America Beverages (NAB) saw a 1% net revenue increase but a significant 16% decrease in operating profit due to higher costs. Latin America reported a 2% net revenue increase and a 13% operating profit increase. Europe Sub-Saharan Africa (ESSA) had a 4% net revenue increase and a 4% operating profit increase, while Asia, Middle East, and North Africa (AMENA) experienced a 2% net revenue decrease but a 9% operating profit increase.

The TCJA had a complex impact. While PepsiCo recognized a provisional net tax expense in 2017 related to the TCJA, in 2018, the company recorded a net tax benefit of $28 million in connection with the TCJA. Additionally, PepsiCo reported significant 'other net tax benefits' of $4.3 billion in 2018 resulting from the reorganization of its international operations, which also included benefits from the conclusion of international tax audits and a resolution with the IRS.