10-QPeriod: Q3 FY2011

PEPSICO INC Quarterly Report for Q3 Ended Sep 3, 2011

Filed October 12, 2011For Securities:PEP

Summary

PepsiCo, Inc. reported strong revenue growth for the 36 weeks ended September 3, 2011, with a 17% increase to $46.3 billion, compared to the same period in the prior year. This growth was driven by strategic acquisitions, notably Wimm-Bill-Dann Foods OJSC (WBD) in Europe, and solid performance across its divisions, particularly in Latin America Foods and PepsiCo Americas Beverages. Net income attributable to PepsiCo increased by 1.5% to $5.03 billion, though this growth was tempered by significant integration costs and a substantial gain recorded in the prior year related to the acquisition of The Pepsi Bottling Group (PBG) and PepsiAmericas (PAS). The company's liquidity remains adequate, supported by strong operating cash flow, despite increased debt financing to fund its strategic initiatives. Investors should note the significant impact of acquisitions on both revenue and expenses. While the WBD acquisition bolsters the Europe segment's revenue, it also contributes to merger and integration charges. The company continues its focus on returning capital to shareholders through dividends and share repurchases, demonstrating a commitment to shareholder value while managing its growth strategy.

Financial Highlights

50 data points
Beta

Revenue

$17.58B

51.9% Gross Margin

Net Income

$2.00B

11.4% Net Margin

EPS (Diluted)

$1.25

Total Assets

$75.38B

Cash & Equivalents

$3.08B

Free Cash Flow

$3.48B

Financial Statements
Beta
Revenue$17.58B
Cost of Revenue$8.45B
Gross Profit$9.13B
SG&A Expenses$6.19B
Operating Income$2.91B
Interest Expense$205.00M
Net Income$2.00B
EPS (Basic)$1.27
EPS (Diluted)$1.25
Shares Outstanding (Basic)1.58B
Shares Outstanding (Diluted)1.60B

Key Highlights

  • 1Net revenue for the 36 weeks ended September 3, 2011, increased by 17% to $46.3 billion, compared to $39.7 billion in the prior year period.
  • 2Net income attributable to PepsiCo for the 36 weeks ended September 3, 2011, was $5.03 billion, a 1.5% increase from $4.96 billion in the prior year.
  • 3The acquisition of Wimm-Bill-Dann Foods OJSC (WBD) significantly impacted the Europe segment, contributing substantially to revenue and volume growth.
  • 4PepsiCo Americas Beverages saw a 14% increase in net revenue for the 36-week period, driven by integration of acquisitions and pricing.
  • 5Merger and integration charges amounted to $174 million for the 36 weeks ended September 3, 2011, reflecting ongoing integration efforts from recent acquisitions.
  • 6Net cash provided by operating activities remained strong at $5.8 billion for the 36 weeks ended September 3, 2011.
  • 7The company returned $4.3 billion to shareholders through share repurchases and dividend payments in the first 36 weeks of 2011.

Frequently Asked Questions

Revenue growth was primarily driven by strategic acquisitions, notably the acquisition of Wimm-Bill-Dann Foods OJSC (WBD), which significantly boosted the Europe segment. Additionally, strong performance in Latin America Foods and PepsiCo Americas Beverages, along with effective net pricing and favorable foreign exchange rates across various divisions, contributed to the overall increase.

The acquisitions, while driving revenue growth, also resulted in significant merger and integration charges totaling $174 million for the 36-week period. These costs, along with other items affecting comparability, impacted the reported net income. However, the underlying operational performance of the acquired businesses is expected to contribute positively in the long term.

PepsiCo maintains a strong liquidity position, with $5.8 billion in net cash provided by operating activities for the 36-week period. The company has adequate resources to meet its operating, investing, and financing needs. It continues to return capital to shareholders through dividends and share repurchases, while also utilizing debt financing for strategic initiatives and acquisitions.

The 'Items Affecting Comparability' section highlights significant one-time or non-recurring items that can distort the year-over-year comparison of financial results. These include gains or losses from asset write-offs, mark-to-market adjustments on commodity hedges, merger and integration charges, and gains on previously held equity interests. Investors are encouraged to review these items to understand the underlying operational performance of the business.