10-QPeriod: Q2 FY2020

PEPSICO INC Quarterly Report for Q2 Ended Jun 13, 2020

Filed July 13, 2020For Securities:PEP

Summary

PepsiCo, Inc. reported its second-quarter 2020 results, which were significantly impacted by the COVID-19 pandemic. While consolidated net revenue saw a slight decrease of 3% to $15.9 billion for the 12-week period, and a 10% decrease in operating profit, the company demonstrated resilience, particularly in its Frito-Lay North America (FLNA) and Quaker Foods North America (QFNA) divisions, which experienced revenue growth. These divisions benefited from increased consumer demand for snacks and pantry staples amid stay-at-home orders. The beverage segment, particularly PepsiCo Beverages North America (PBNA), faced headwinds due to reduced demand in away-from-home channels. The company also made strategic acquisitions during the period, including Rockstar Energy Beverages and Pioneer Foods, which are expected to contribute to future growth but also incurred integration costs. The company highlighted substantial investments in productivity and operational improvements, alongside significant charges related to the pandemic, such as increased employee costs, protective equipment, and credit loss allowances. Despite these challenges, PepsiCo maintained its commitment to returning capital to shareholders through dividends and share repurchases, signaling confidence in its long-term outlook and operational strength. The filing also detailed ongoing restructuring efforts and noted that the company's liquidity remains strong, with no material impact expected from COVID-19 on its financial resources.

Financial Highlights

51 data points
Beta

Revenue

$15.95B

55.5% Gross Margin

Net Income

$1.65B

10.3% Net Margin

EPS (Diluted)

$1.18

Total Assets

$89.53B

Cash & Equivalents

$8.99B

Free Cash Flow

$2.21B

Financial Statements
Beta
Revenue$15.95B
Cost of Revenue$7.09B
Gross Profit$8.86B
SG&A Expenses$6.54B
Operating Income$2.32B
Interest Expense$235.00M
Net Income$1.65B
EPS (Basic)$1.19
EPS (Diluted)$1.18
Shares Outstanding (Basic)1.39B
Shares Outstanding (Diluted)1.39B

Key Highlights

  • 1Consolidated net revenue for the 12 weeks ended June 13, 2020, was $15.9 billion, a 3% decrease compared to the prior year, while operating profit decreased by 15%.
  • 2Frito-Lay North America (FLNA) and Quaker Foods North America (QFNA) divisions showed strong performance with revenue growth of 7% and 23% respectively for the 12-week period, driven by increased demand for snacks and pantry items.
  • 3PepsiCo Beverages North America (PBNA) experienced a 7% decrease in net revenue for the 12-week period, largely due to reduced demand in away-from-home channels impacted by COVID-19.
  • 4The company completed significant acquisitions during the period, including Rockstar Energy Beverages for approximately $3.85 billion and Pioneer Foods for approximately $1.2 billion, impacting investing activities and incurring integration charges.
  • 5COVID-19 related charges, including increased employee costs, protective equipment, and credit loss allowances, negatively impacted operating profit by 13 percentage points in the 12-week period.
  • 6PepsiCo generated $1.46 billion in net cash from operating activities for the 24 weeks ended June 13, 2020, and returned approximately $3.8 billion to shareholders through dividends and share repurchases.
  • 7The company's liquidity remains strong, with no material impact expected from the COVID-19 pandemic on its financial resources.

Frequently Asked Questions

The COVID-19 pandemic had a mixed impact. While it led to increased demand for snacks and pantry staples (benefiting divisions like FLNA and QFNA), it negatively affected the beverage business (PBNA) due to reduced sales in away-from-home channels. The company also incurred significant costs related to COVID-19, including employee costs, protective equipment, and credit loss allowances, which negatively impacted profitability.

PepsiCo made two significant acquisitions: Rockstar Energy Beverages for approximately $3.85 billion and Pioneer Foods Group Ltd. for approximately $1.2 billion. These acquisitions are reflected in the investing activities and contributed to merger and integration charges.

The company generated $1.46 billion in operating cash flow for the 24-week period. During the 24 weeks ended June 13, 2020, PepsiCo returned approximately $3.8 billion to shareholders through dividend payments and share repurchases. The company also announced a 7% increase in its annualized dividend for 2020.

PepsiCo stated that its liquidity remains strong and does not expect a material impact from the COVID-19 pandemic on its financial resources. The company has sufficient cash generating capability, credit facilities, and access to debt markets to meet its operating, investing, and financing needs.