10-QPeriod: Q3 FY2012

PEPSICO INC Quarterly Report for Q3 Ended Sep 8, 2012

Filed October 17, 2012For Securities:PEP

Summary

PepsiCo, Inc.'s (PEP) third-quarter 2012 filing shows a decrease in net revenue and net income compared to the same period in the prior year, primarily driven by unfavorable foreign currency impacts and higher commodity costs. For the 12 weeks ended September 8, 2012, net revenue was $16.65 billion, down 5% from $17.58 billion in the prior year. Net income attributable to PepsiCo was $1.90 billion, a decrease from $2.00 billion in the prior year. Diluted earnings per share also saw a decline to $1.21 from $1.25. The company experienced a mixed performance across its divisions. While Frito-Lay North America and Quaker Foods North America showed modest revenue growth or stability, PepsiCo Americas Beverages and Asia, Middle East & Africa divisions faced significant revenue declines. The company is actively managing these challenges through productivity plans and strategic cost management, aiming to strengthen its competitive position.

Financial Highlights

50 data points
Beta

Revenue

$16.65B

53.0% Gross Margin

Net Income

$1.90B

11.4% Net Margin

EPS (Diluted)

$1.21

Total Assets

$74.02B

Cash & Equivalents

$5.31B

Free Cash Flow

$3.87B

Financial Statements
Beta
Revenue$16.65B
Cost of Revenue$7.83B
Gross Profit$8.82B
SG&A Expenses$5.99B
Operating Income$2.80B
Interest Expense$204.00M
Net Income$1.90B
EPS (Basic)$1.22
EPS (Diluted)$1.21
Shares Outstanding (Basic)1.56B
Shares Outstanding (Diluted)1.57B

Key Highlights

  • 1Net revenue for the 12 weeks ended September 8, 2012, decreased by 5% to $16.65 billion compared to $17.58 billion in the prior year, largely due to unfavorable foreign currency impacts.
  • 2Net income attributable to PepsiCo for the 12-week period decreased to $1.90 billion from $2.00 billion in the prior year.
  • 3Diluted earnings per share for the 12-week period decreased to $1.21 from $1.25 in the prior year.
  • 4Frito-Lay North America reported a 3% increase in net revenue to $3.27 billion, driven by effective net pricing and volume growth.
  • 5PepsiCo Americas Beverages division experienced a 7% net revenue decline, attributed to the divestiture of its Mexico beverage business and volume declines.
  • 6The company continues to execute its multi-year productivity plan, which aims to enhance cost-competitiveness and fund future innovation.
  • 7PepsiCo's balance sheet showed an increase in cash and cash equivalents to $5.31 billion as of September 8, 2012, from $4.07 billion at the end of 2011.

Frequently Asked Questions

The primary drivers for the revenue decrease were unfavorable foreign currency translation, which negatively impacted net revenue growth by 5 percentage points for the 12-week period, and the divestiture of the Mexico beverage business. Higher commodity costs and advertising expenses also impacted profitability across several divisions.

Performance varied across divisions. Frito-Lay North America saw modest revenue growth. Quaker Foods North America's net revenue was flat. PepsiCo Americas Beverages and Asia, Middle East & Africa divisions experienced significant revenue declines. Europe's net revenue decreased due to unfavorable foreign currency, while operating profit saw an increase when excluding certain items. Latin America Foods showed revenue growth driven by pricing and volume, but operating profit declined.

PepsiCo is focused on its multi-year Productivity Plan, which aims to improve cost-competitiveness, fund innovation, and provide a financial cushion against macroeconomic uncertainty. They are also managing commodity price risks through hedging strategies and sourcing initiatives and closely monitoring foreign currency exposures.

As of September 8, 2012, PepsiCo had $5.31 billion in cash and cash equivalents, an increase from the end of 2011. The company believes its cash-generating capability, credit facilities, and debt financing options are adequate to meet its operational, investing, and financing needs, including anticipated share repurchases and dividend payments.