10-QPeriod: Q2 FY2011

PEPSICO INC Quarterly Report for Q2 Ended Jun 11, 2011

Filed July 21, 2011For Securities:PEP

Summary

PepsiCo, Inc. (PEP) reported solid financial results for the period ending June 11, 2011. The company demonstrated strong revenue growth, driven by a combination of volume increases and effective net pricing across its diverse global segments. Notably, significant revenue uplift in the Europe and Latin America Foods divisions, partly fueled by strategic acquisitions like Wimm-Bill-Dann Foods (WBD), contributed positively to the top line. Profitability also saw an improvement, with operating profit rising considerably, particularly for the 24-week period, which was influenced by the robust performance of the PepsiCo Americas Beverages (PAB) segment and a favorable shift in comparability items compared to the prior year. While the company faced some cost pressures from commodities and integration expenses related to recent acquisitions, overall operational efficiency and strategic pricing supported margin expansion. PepsiCo continues to focus on returning value to shareholders through share repurchases and dividend payments, while also managing its debt obligations and ensuring liquidity through robust credit facilities.

Financial Highlights

51 data points
Beta

Revenue

$16.83B

52.7% Gross Margin

Net Income

$1.89B

11.2% Net Margin

EPS (Diluted)

$1.17

Total Assets

$75.68B

Cash & Equivalents

$2.91B

Free Cash Flow

$1.97B

Financial Statements
Beta
Revenue$16.83B
Cost of Revenue$7.96B
Gross Profit$8.86B
SG&A Expenses$6.07B
Operating Income$2.75B
Interest Expense$199.00M
Net Income$1.89B
EPS (Basic)$1.19
EPS (Diluted)$1.17
Shares Outstanding (Basic)1.58B
Shares Outstanding (Diluted)1.60B

Key Highlights

  • 1Net revenue increased by 14% to $16.8 billion for the 12 weeks ended June 11, 2011, and by 19% to $28.8 billion for the 24 weeks ended June 11, 2011.
  • 2Operating profit saw a significant increase, up 12% to $2.75 billion for the 12-week period and a substantial 36% to $4.48 billion for the 24-week period, bolstered by strategic acquisitions and favorable comparability items.
  • 3The acquisition of Wimm-Bill-Dann Foods (WBD) in Russia significantly contributed to the 53% net revenue growth in the Europe segment.
  • 4PepsiCo Americas Beverages (PAB) reported a 50% increase in operating profit for the 24-week period, driven by revenue growth from acquisitions and favorable comparability items.
  • 5The company repurchased $746 million of common stock and $4 million of preferred stock during the 24 weeks ended June 11, 2011, as part of its ongoing capital return program.
  • 6Net income attributable to PepsiCo per diluted common share increased by 20% to $1.17 for the 12-week period and was largely flat at $1.89 for the 24-week period, although adjusted for comparability items, it showed growth.
  • 7The company ended the period with $2.91 billion in cash and cash equivalents, demonstrating solid liquidity despite significant investment in acquisitions and capital spending.

Frequently Asked Questions

Revenue growth was primarily driven by a combination of volume increases and effective net pricing across its global divisions. Strategic acquisitions, such as Wimm-Bill-Dann Foods (WBD) in Europe and the integration of PBG and PAS in the Americas, also significantly contributed to the revenue uplift, particularly in the beverage segments.

The acquisitions, notably Wimm-Bill-Dann Foods (WBD) and the integration of PBG and PAS, had a substantial impact. They drove significant net revenue growth, especially in the Europe and PAB segments, and contributed to operating profit. However, these acquisitions also led to increased merger and integration charges, which affected short-term profitability metrics but are expected to yield long-term benefits.

While PepsiCo faced higher commodity costs, the company managed profitability through effective net pricing and operational efficiencies. The positive impact of comparability items, particularly in the 24-week period, also boosted reported operating profit. Management believes its strategies are adequate to meet operating, investing, and financing needs, with ongoing efforts to return cash to shareholders.

PepsiCo maintains strong liquidity through its cash-generating capabilities, revolving credit facilities, and access to debt financing. During the period, the company utilized its financing activities to fund acquisitions, share repurchases, and capital expenditures, while also repurchasing debt related to its WBD acquisition.