10-QPeriod: Q1 FY2016

PEPSICO INC Quarterly Report for Q1 Ended Mar 19, 2016

Filed April 18, 2016For Securities:PEP

Summary

PepsiCo Inc. reported net revenue of $11.86 billion for the 12 weeks ended March 19, 2016, a decrease from $12.22 billion in the prior year's comparable period. This revenue decline was primarily attributed to unfavorable foreign exchange rates and the deconsolidation of Venezuelan operations. Net income attributable to PepsiCo also saw a significant decrease, falling to $931 million from $1.22 billion in the prior year, impacted by a substantial $373 million impairment charge related to an investment in Tingyi-Asahi Beverages Holding Co. Ltd. (TAB) within the AMENA segment. Despite the overall decline, key divisions like Frito-Lay North America and North America Beverages showed revenue and operating profit growth, indicating resilience in core markets. Management remains focused on productivity initiatives and capital returns to shareholders, with plans for significant share repurchases and dividend payments.

Financial Highlights

50 data points
Beta

Revenue

$11.86B

56.6% Gross Margin

Net Income

$931.00M

7.8% Net Margin

EPS (Diluted)

$0.64

Total Assets

$70.02B

Cash & Equivalents

$8.12B

Free Cash Flow

$305.00M

Financial Statements
Beta
Revenue$11.86B
Cost of Revenue$5.15B
Gross Profit$6.71B
SG&A Expenses$5.08B
Operating Income$1.62B
Interest Expense$246.00M
Net Income$931.00M
EPS (Basic)$0.64
EPS (Diluted)$0.64
Shares Outstanding (Basic)1.45B
Shares Outstanding (Diluted)1.46B

Key Highlights

  • 1Net revenue decreased by 3% to $11.86 billion for the 12 weeks ended March 19, 2016, compared to $12.22 billion in the prior year, impacted by foreign exchange and deconsolidation of Venezuelan businesses.
  • 2Net income attributable to PepsiCo decreased by 24% to $931 million, largely due to a $373 million impairment charge related to an investment in Tingyi-Asahi Beverages Holding Co. Ltd. (TAB).
  • 3Diluted EPS fell to $0.64 from $0.81 year-over-year.
  • 4Frito-Lay North America and North America Beverages divisions demonstrated revenue growth of 3% and 1.5% respectively, and positive operating profit growth.
  • 5Latin America and Europe Sub-Saharan Africa (ESSA) divisions experienced significant revenue declines (26% and 9% respectively), heavily influenced by foreign exchange impacts and regional challenges.
  • 6The company incurred $30 million in restructuring and impairment charges related to its 2014 Productivity Plan.
  • 7PepsiCo plans to return approximately $7 billion to shareholders in 2016 through dividends ($4 billion) and share repurchases ($3 billion).

Frequently Asked Questions

The primary driver for the decrease in net income was a substantial $373 million impairment charge recognized in the AMENA segment related to a decline in the estimated fair value of PepsiCo's indirect equity interest in Tingyi-Asahi Beverages Holding Co. Ltd. (TAB). This charge, combined with other factors like unfavorable foreign exchange and restructuring costs, led to lower profitability.

Unfavorable foreign exchange rates negatively impacted net revenue performance by 4.5 percentage points for the period. Several divisions, including Latin America and ESSA, reported significant revenue declines largely due to currency fluctuations against the U.S. dollar.

PepsiCo announced a new share repurchase program in February 2015 authorizing up to $12.0 billion of common stock repurchases through June 2018. For 2016, the company expects to return a total of $7 billion to shareholders through approximately $3 billion in share repurchases and approximately $4 billion in dividends. An increase in the annualized dividend to $3.01 per share was also announced.

Yes, the company recorded a significant $373 million impairment charge related to its investment in TAB. Additionally, $30 million in restructuring charges were incurred in connection with the 2014 Productivity Plan, primarily related to severance, asset impairments, and other implementation costs.