01—Abstract
Summary
Summary of the 10-K filed February 15, 2019. Cited figures are marked; the original filing is the authoritative source.
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.
02—Key points
Key Highlights
- Net revenue increased by 2% to $64.7 billion in 2018, demonstrating continued top-line growth.
- Operating 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.
- The company returned significant capital to shareholders, with $6.9 billion allocated to dividends and share repurchases.
- PepsiCo completed the acquisition of SodaStream International Ltd. in December 2018 for approximately $3.3 billion, expanding its beverage portfolio.
- The company reported a significant net tax benefit of $4.3 billion in 2018 related to the reorganization of its international operations.
- Frito-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.
- North 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.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2018, Pepsico Inc kept $0.19.
- Revenue$64.66B100.0%
- Cost of revenue−$29.38B45.4%
- Gross profit$35.28B54.6%
- Operating costs−$25.17B38.9%
- Operating income$10.11B15.6%
- Interest, other & tax$2.40B3.7%
- Net income$12.52B19.4%
Where FY2018 revenue went
$64.66B- Cost of revenue: $29.38B, 45% of revenue
- SG&A: $25.17B, 39% of revenue
- Operating income: $10.11B, 16% of revenue
- R&D: $680.0M, 1.1% of revenue
Kept 16% as operating income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2018filed February 15, 2019Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $64.66B$63.52B | +1.8% |
| Cost of Revenue | $29.38B$28.80B | +2.0% |
| Gross Profit | $35.28B$34.73B | +1.6% |
| R&D Expenses | $680.00M$737.00M | −7.7% |
| SG&A Expenses | $25.17B$24.45B | +2.9% |
| Operating Income | $10.11B$10.28B | −1.6% |
| Interest Expense | $1.22B$1.15B | +5.9% |
| Net Income | $12.52B$4.86B | +157.7% |
| EPS (Basic) | $8.84$3.40 | +160.0% |
| EPS (Diluted) | $8.78$3.38 | +159.8% |
| Shares Outstanding (Basic) | 1.42B1.43B | −0.7% |
| Shares Outstanding (Diluted) | 1.43B1.44B | −0.9% |
05—Questions
Frequently Asked Questions
What was PepsiCo's overall financial performance in 2018?
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.
What were the key strategic moves made by PepsiCo in 2018?
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.
How did PepsiCo's different business segments perform in 2018?
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.
What impact did the Tax Cuts and Jobs Act (TCJA) have on PepsiCo's 2018 results?
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.
06—Continue