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PepsiCo Inc. Reports Operating Results (10-Q)

July 20, 2010 | About:
10qk

10qk

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PepsiCo Inc. (PEP) filed Quarterly Report for the period ended 2010-06-12.

Pepsico Inc. has a market cap of $104.39 billion; its shares were traded at around $64.73 with a P/E ratio of 17.2 and P/S ratio of 2.4. The dividend yield of Pepsico Inc. stocks is 3%. Pepsico Inc. had an annual average earning growth of 8.9% over the past 10 years. GuruFocus rated Pepsico Inc. the business predictability rank of 4-star.PEP is in the portfolios of Donald Yacktman of Yacktman Asset Management Co., Chase Coleman of TIGER GLOBAL MANAGEMENT LLC, Jeremy Grantham of GMO LLC, Diamond Hill Capital of Diamond Hill Capital Management Inc, Diamond Hill Capital of Diamond Hill Capital Management Inc, Chris Shumway of Shumway Capital Partners LLC, John Hussman of Hussman Economtrics Advisors, Inc., Michael Price of MFP Investors LLC, Pioneer Investments, Bruce Kovner of Caxton Associates, Tom Russo of Gardner Russo & Gardner, Tom Gayner of Markel Gayner Asset Management Corp, John Buckingham of Al Frank Asset Management, Inc., Paul Tudor Jones of The Tudor Group, Jim Simons of Renaissance Technologies LLC, Ruane Cunniff of Ruane & Cunniff & Goldfarb Inc, Steven Cohen of SAC Capital Advisors, Manning & Napier Advisors, Inc, Jean-Marie Eveillard of First Eagle Investment Management, LLC, Murray Stahl of Horizon Asset Management, PRIMECAP Management, Bill Frels of Mairs & Power Inc. , George Soros of Soros Fund Management LLC, Arnold Van Den Berg of Century Management, Kenneth Fisher of Fisher Asset Management, LLC, Dodge & Cox.

Highlight of Business Operations:

For the 12 weeks ended June 12, 2010, we recognized $4 million ($3 million after-tax with a nominal amount per share) of mark-to-market net losses on commodity hedges in corporate unallocated expenses. For the 24 weeks ended June 12, 2010, we recognized $42 million ($26 million after-tax or $0.02 per share) of mark-to-market net gains on commodity hedges in corporate unallocated expenses.

For the 12 weeks ended June 13, 2009, we recognized $100 million ($65 million after-tax or $0.04 per share) of mark-to-market net gains on commodity hedges in corporate unallocated expenses. For the 24 weeks ended June 13, 2009, we recognized $162 million ($105 million after-tax or $0.07 per share) of mark-to-market net gains on commodity hedges in corporate unallocated expenses.

In the 12 and 24 weeks ended June 13, 2009, we incurred charges of $11 million ($10 million after-tax or $0.01 per share) and $36 million ($29 million after-tax or $0.02 per share), respectively, in conjunction with our Productivity for Growth program. The program included actions in all divisions of the business, including the closure of six plants that we believe will increase cost competitiveness across the supply chain, upgrade and streamline our product portfolio, and simplify the organization for more effective and timely decision-making. These initiatives were completed in the second quarter of 2009.

In the 12 weeks ended June 12, 2010, we incurred merger and integration charges of $155 million related to our acquisitions of PBG and PAS, including $103 million recorded in the PAB segment, $28 million recorded in the Europe segment and $24 million recorded in corporate unallocated expenses. In the 24 weeks ended June 12, 2010, we incurred merger and integration charges of $467 million related to our acquisitions of PBG and PAS, including $296 million recorded in the PAB segment, $29 million recorded in the Europe segment, $112 million recorded in corporate unallocated expenses and $30 million recorded in interest expense. These charges are being incurred to help create a more fully integrated supply chain and go-to-market business model, to improve the effectiveness and efficiency of the distribution of our brands and to enhance our revenue growth. These charges also include closing costs, one-time financing costs and advisory fees related to our acquisitions of PBG and PAS. In addition, we recorded $9 million of charges, representing our share of the respective merger costs of PBG and PAS, in bottling equity income. In total, for the 12 and 24 weeks ended June 12, 2010, these charges had an after-tax impact of $119 million (or $0.07 per share) and $380 million (or $0.23 per share), respectively.

In the 12 and 24 weeks ended June 12, 2010, we recorded $76 million ($68 million after-tax or $0.04 per share) and $357 million ($308 million after-tax or $0.19 per share), respectively, of incremental costs related to fair value adjustments to the acquired inventory and other related hedging contracts included in PBGs and PASs balance sheets at the acquisition date. Substantially all of these costs were recorded in cost of sales.

As of the beginning of our 2010 fiscal year, we recorded a one-time $120 million net charge related to our change to hyperinflationary accounting for our Venezuelan businesses and the related devaluation of the bolivar. $129 million of this net charge was recorded in corporate unallocated expenses, with the balance (income of $9 million) recorded in our PAB segment. In total, this net charge had an after-tax impact of $120 million or $0.07 per share.

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