10-QPeriod: Q2 FY2014

PEPSICO INC Quarterly Report for Q2 Ended Jun 14, 2014

Filed July 23, 2014For Securities:PEP

Summary

PepsiCo, Inc. reported modest revenue growth for the first half of fiscal year 2014, with net revenue increasing by 0.5% to $16.9 billion for the 12 weeks ended June 14, 2014, and remaining relatively flat at $29.5 billion for the 24 weeks ended the same date, compared to the prior year periods. Net income attributable to PepsiCo for the 24-week period rose by 3.5% to $3.2 billion, with diluted EPS growing by 5.5% to $2.08. The company is actively managing its costs through multi-year productivity plans, incurring significant restructuring and impairment charges. International operations contributed approximately 47% of net revenue, highlighting the company's global reach and exposure to currency fluctuations, particularly the weakening of the Russian ruble and Brazilian real impacting reported results. Key financial activities during the period include significant capital allocation towards share repurchases and dividends, totaling $4.0 billion in the first half of 2014. The company also issued new debt to manage its capital structure. Management is focused on driving organic growth through volume increases and effective net pricing, while navigating challenges such as commodity cost inflation and foreign currency headwinds. The company continues to monitor geopolitical risks, particularly in Russia and Venezuela, with specific accounting treatments applied to the Venezuelan operations due to highly inflationary conditions.

Financial Statements
Beta

Key Highlights

  • 1Net revenue for the 12 weeks ended June 14, 2014, increased slightly by 0.5% to $16.9 billion, while revenue for the 24-week period was flat at $29.5 billion compared to the prior year.
  • 2Net income attributable to PepsiCo for the 24 weeks ended June 14, 2014, increased by 3.5% to $3.2 billion, with diluted EPS growing by 5.5% to $2.08.
  • 3The company incurred significant restructuring and impairment charges related to its 2014 and 2012 Productivity Plans, totaling $173 million and $17 million respectively for the 24-week period.
  • 4Foreign currency fluctuations negatively impacted net revenue growth by 3 percentage points for both the 12-week and 24-week periods.
  • 5PepsiCo returned $4.0 billion to shareholders through share repurchases and dividends during the first 24 weeks of 2014.
  • 6Operations outside the U.S. generated 47% of net revenue in the 24-week period, with Russia and Mexico being significant markets.
  • 7The company is employing strategies to manage commodity price risks through fixed-price contracts, purchase orders, and derivative instruments.

Frequently Asked Questions

For the 12 weeks ended June 14, 2014, PepsiCo reported net revenue of $16.9 billion, a slight increase of 0.5% compared to the same period in the prior year. For the 24-week period ended June 14, 2014, net revenue was $29.5 billion, remaining essentially flat year-over-year.

Net income attributable to PepsiCo for the 24 weeks ended June 14, 2014, increased by 3.5% to $3.2 billion. Diluted earnings per share (EPS) also saw an increase of 5.5%, reaching $2.08 for the 24-week period. The 12-week period showed a slight decrease in net income but a small increase in diluted EPS.

PepsiCo incurred substantial restructuring and impairment charges related to its multi-year productivity plans. For the 24 weeks ended June 14, 2014, these charges amounted to $173 million for the 2014 plan and $17 million for the 2012 plan. These charges are part of efforts to improve efficiency and optimize the business.

Foreign currency fluctuations had a negative impact on PepsiCo's reported revenue growth, decreasing it by 3 percentage points for both the 12-week and 24-week periods ending June 14, 2014. This was primarily due to the depreciation of currencies like the Russian ruble, Mexican peso, and Brazilian real against the U.S. dollar.