10-QPeriod: Q1 FY2020

PEPSICO INC Quarterly Report for Q1 Ended Mar 21, 2020

Filed April 28, 2020For Securities:PEP

Summary

PepsiCo reported its first-quarter 2020 results, with net revenue increasing by 8% year-over-year to $13.88 billion. This growth was primarily driven by an 8% organic revenue increase, with a significant portion attributed to consumer demand shifts influenced by the COVID-19 pandemic, particularly in at-home consumption. Despite revenue growth, operating profit saw a 4% decrease to $1.92 billion. This decline was impacted by several factors, including a significant unfavorable mark-to-market net impact on commodity derivatives and specific charges related to the COVID-19 pandemic. The company also highlighted strategic acquisitions, including the acquisition of Pioneer Foods in South Africa and the subsequent announcement of the acquisition of Rockstar Energy Beverages, indicating a focus on portfolio expansion. The balance sheet remained robust, though the company noted the use of significant debt financing in the quarter to fund operations and acquisitions.

Financial Highlights

52 data points
Beta

Revenue

$13.88B

55.9% Gross Margin

Net Income

$1.34B

9.6% Net Margin

EPS (Diluted)

$0.96

Total Assets

$85.06B

Cash & Equivalents

$11.29B

Free Cash Flow

-$749.00M

Financial Statements
Beta
Revenue$13.88B
Cost of Revenue$6.13B
Gross Profit$7.75B
SG&A Expenses$5.83B
Operating Income$1.92B
Interest Expense$290.00M
Net Income$1.34B
EPS (Basic)$0.96
EPS (Diluted)$0.96
Shares Outstanding (Basic)1.39B
Shares Outstanding (Diluted)1.40B

Key Highlights

  • 1Net revenue increased by 8% to $13.88 billion for the 12 weeks ended March 21, 2020, compared to the same period in 2019.
  • 2Operating profit decreased by 4% to $1.92 billion, impacted by unfavorable commodity derivative impacts and COVID-19 related charges.
  • 3The company reported an 8% increase in organic revenue, with COVID-19 contributing approximately 2 percentage points to this growth.
  • 4Net income attributable to PepsiCo decreased by 5% to $1.34 billion, resulting in diluted EPS of $0.96, down from $1.00 in the prior year.
  • 5PepsiCo completed the acquisition of Pioneer Foods for approximately $1.2 billion and announced the agreement to acquire Rockstar Energy Beverages for approximately $3.85 billion.
  • 6The company experienced a substantial increase in net cash provided by financing activities ($7.5 billion) driven by long-term debt and short-term borrowings, used to fund operations and acquisitions.
  • 7The report notes a shift in consumer preferences towards at-home consumption and away from immediate consumption and away-from-home channels due to COVID-19, which negatively impacted beverage businesses.

Frequently Asked Questions

The COVID-19 pandemic had a mixed impact. It drove an increase in consumer demand for at-home consumption, contributing approximately 2 percentage points to net revenue and organic revenue growth. However, it also led to specific charges related to expected credit losses, inventory write-downs, and other operational adjustments, which negatively impacted operating profit. The company also noted a decrease in sales for immediate consumption and away-from-home channels, particularly affecting beverage businesses.

PepsiCo is actively pursuing strategic acquisitions to expand its portfolio. During the quarter, it acquired Pioneer Foods in South Africa for $1.2 billion. Subsequently, it announced the agreement to acquire Rockstar Energy Beverages for approximately $3.85 billion. These moves suggest a continued focus on strengthening its market position and diversifying its offerings.

PepsiCo significantly increased its financing activities, with net cash provided by financing activities rising to $7.5 billion. This was primarily driven by $6.4 billion in long-term debt issuances and $3.0 billion in net short-term borrowings. These funds were used to support operations, dividend payments, share repurchases, and importantly, to finance strategic acquisitions like Pioneer Foods.

While net revenue showed positive growth, operating profit declined due to factors like unfavorable commodity derivative impacts and COVID-19 related charges. The company is focused on productivity savings and strategic pricing to offset operating cost increases and higher advertising expenses. The acquisitions of Pioneer Foods and Rockstar Energy Beverages are expected to contribute to future growth, but the overall economic uncertainty, particularly related to COVID-19, presents ongoing risks to profitability.