10-QPeriod: Q3 FY2010

PEPSICO INC Quarterly Report for Q3 Ended Sep 4, 2010

Filed October 7, 2010For Securities:PEP

Summary

PepsiCo, Inc. (PEP) reported strong top-line growth for the 36 weeks ended September 4, 2010, with net revenue increasing by 33% to $39.7 billion, primarily driven by significant acquisitions of The Pepsi Bottling Group, Inc. (PBG) and PepsiAmericas, Inc. (PAS). Net income attributable to PepsiCo also saw a healthy increase of 10% to $4.96 billion for the same period. The company's strategic acquisitions have substantially expanded its footprint, particularly within the PepsiCo Americas Beverages (PAB) segment, which experienced a 92% revenue surge. Despite integration costs and a gain on previously held equity interests significantly impacting reported results, underlying operational performance appears robust, with divisions like Frito-Lay North America showing consistent operating profit growth. Investors should note the substantial impact of the PBG and PAS acquisitions on the balance sheet and cash flow statements, including a significant increase in long-term debt and goodwill. While integration costs and certain one-time charges are present, the company's ability to generate substantial operating cash flow, even after significant capital expenditures and pension contributions, indicates financial resilience. The company also repurchased a notable amount of its own stock and increased its quarterly dividend, signaling confidence in future performance and a commitment to returning value to shareholders.

Financial Highlights

52 data points
Beta

Revenue

$15.51B

54.8% Gross Margin

Net Income

$1.92B

12.4% Net Margin

EPS (Diluted)

$1.19

Total Assets

$66.70B

Cash & Equivalents

$5.58B

Free Cash Flow

$3.35B

Financial Statements
Beta
Revenue$15.51B
Cost of Revenue$7.01B
Gross Profit$8.51B
SG&A Expenses$5.68B
Operating Income$2.80B
Interest Expense$169.00M
Net Income$1.92B
EPS (Basic)$1.21
EPS (Diluted)$1.19
Shares Outstanding (Basic)1.59B
Shares Outstanding (Diluted)1.61B

Key Highlights

  • 1Net revenue for the 36 weeks ended September 4, 2010, increased 33% to $39.7 billion, largely due to the acquisitions of PBG and PAS.
  • 2Net income attributable to PepsiCo increased 10% to $4.96 billion for the 36-week period.
  • 3The PepsiCo Americas Beverages (PAB) segment saw its net revenue jump 92% in the 36-week period, reflecting the integration of acquired bottlers.
  • 4Operating profit for Frito-Lay North America (FLNA) grew 10% for both the 12- and 36-week periods, demonstrating consistent performance in the snacks division.
  • 5Total assets significantly increased to $66.7 billion as of September 4, 2010, from $39.8 billion at the end of 2009, primarily due to the acquisitions.
  • 6The company repurchased $4.4 billion of common stock during the 36 weeks ended September 4, 2010, and increased its quarterly dividend.
  • 7Net cash provided by operating activities increased to $5.8 billion for the 36 weeks ended September 4, 2010, up from $4.4 billion in the prior year, aided by the acquisitions.

Frequently Asked Questions

The primary driver of PepsiCo's significant revenue growth was the completion of acquisitions of The Pepsi Bottling Group, Inc. (PBG) and PepsiAmericas, Inc. (PAS) in February 2010. These acquisitions substantially expanded the company's beverage operations and contributed significantly to the reported net revenue increase.

The acquisitions of PBG and PAS led to a substantial increase in total assets, goodwill, and long-term debt on the balance sheet. The consolidated income statement reflects the full results of the acquired companies, and the cash flow statement shows significant cash outflows for the acquisitions, partially offset by the cash generated from the acquired businesses. There was also a notable gain recorded related to previously held equity interests in PBG and PAS.

The 'Items Affecting Comparability' section highlights significant non-recurring or unusual items that impact the reported financial results. These include PBG/PAS merger and integration charges, inventory fair value adjustments, and a gain on previously held equity interests. Investors should analyze these items to understand the underlying operational performance of PepsiCo's core businesses.

PepsiCo demonstrated a commitment to returning capital to shareholders by repurchasing a significant amount of its common stock and approving a 7% increase in its annual dividend. This indicates management's confidence in the company's financial health and future cash-generating capabilities.