10-QPeriod: Q2 FY2009

PEPSICO INC Quarterly Report for Q2 Ended Jun 13, 2009

Filed July 22, 2009For Securities:PEP

Summary

PepsiCo Inc. reported its quarterly results for the period ending June 13, 2009. For the twelve weeks ended June 13, 2009, net revenue was $10.59 billion, a decrease of 3% compared to the prior year. Net income attributable to PepsiCo was $1.66 billion, a 2% decrease, with diluted EPS remaining flat at $1.06. The company experienced a decline in net revenue across most divisions, notably in PepsiCo Americas Beverages and Europe, largely due to unfavorable foreign currency exchange rates and challenging macroeconomic conditions. Despite revenue headwinds, operating profit remained stable year-over-year for the twelve-week period, aided by mark-to-market gains on commodity hedges and a 0.7 percentage point improvement in operating margin to 20.7%. The company also incurred restructuring and impairment charges. For the twenty-four weeks ended June 13, 2009, net revenue decreased by 2% to $18.86 billion, while net income attributable to PepsiCo decreased by 2% to $2.80 billion, with diluted EPS increasing slightly to $1.78. The company highlighted efforts to manage commodity costs through hedging strategies and ongoing sourcing initiatives.

Financial Highlights

28 data points
Beta

Revenue

$10.59B

53.9% Gross Margin

Net Income

$1.66B

15.7% Net Margin

EPS (Diluted)

$1.06

Cash & Equivalents

$2.21B

Free Cash Flow

$1.76B

Financial Statements
Beta
Revenue$10.59B
Cost of Revenue$4.88B
Gross Profit$5.71B
SG&A Expenses$3.51B
Operating Income$2.19B
Interest Expense$101.00M
Net Income$1.66B
EPS (Basic)$1.06
EPS (Diluted)$1.06

Key Highlights

  • 1Net revenue for the 12 weeks ended June 13, 2009, was $10.59 billion, a 3% decrease compared to the prior year.
  • 2Net income attributable to PepsiCo for the 12 weeks ended June 13, 2009, was $1.66 billion, a 2% decrease year-over-year.
  • 3Diluted earnings per share remained flat at $1.06 for the 12-week period.
  • 4Operating profit was stable for the 12-week period, with an improved operating margin of 20.7% compared to 20.0% in the prior year.
  • 5Unfavorable foreign currency movements negatively impacted net revenue and operating profit across several divisions, notably in Europe and Latin America Foods.
  • 6The company incurred $11 million and $36 million in restructuring and impairment charges for the 12-week and 24-week periods, respectively.
  • 7PepsiCo announced proposals in April 2009 to acquire outstanding shares of its anchor bottlers, Pepsi Bottling Group (PBG) and PepsiAmericas (PAS), though the bottlers' boards initially declined these proposals.

Frequently Asked Questions

Revenue performance was impacted by several factors. Adverse foreign currency exchange rates significantly reduced net revenue in international markets, particularly in Europe and Latin America. Volume declines were also noted in segments like PepsiCo Americas Beverages and Europe. However, these negative impacts were partially offset by effective net pricing strategies and growth in some segments like Frito-Lay North America and Asia, Middle East & Africa.

PepsiCo's operating profit remained stable for the 12-week period due to an improved operating margin, which benefited from mark-to-market gains on commodity hedges. The company also incurred restructuring and impairment charges related to its 'Productivity for Growth' program, which had a negative impact on profitability. Management is actively employing hedging strategies to mitigate commodity price volatility.

In April 2009, PepsiCo proposed to acquire the outstanding shares of its anchor bottlers, PBG and PAS, that it did not already own. However, the boards of directors of both PBG and PAS initially determined not to accept these proposals. PepsiCo has stated it would not sell or vote in favor of alternative transactions involving its shares in these companies.

Unfavorable foreign currency movements had a significant negative impact on PepsiCo's results. For the 12 weeks, foreign currency negatively impacted operating profit performance by 8 percentage points, and for the 24 weeks, it negatively impacted operating profit growth by almost 8 percentage points. This was particularly evident in regions like Europe, Latin America, and AMEA, where currency depreciation against the US dollar reduced reported revenues and profits.