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PepsiCo Inc. Reports Operating Results (10-Q)

July 25, 2012 | About:
10qk

10qk

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PepsiCo Inc. (PEP) filed Quarterly Report for the period ended 2012-06-16.

Pepsico, Inc. has a market cap of $109.41 billion; its shares were traded at around $70.3 with a P/E ratio of 16 and P/S ratio of 1.7. The dividend yield of Pepsico, Inc. stocks is 3.1%. Pepsico, Inc. had an annual average earning growth of 8.7% over the past 10 years. GuruFocus rated Pepsico, Inc. the business predictability rank of 5-star.

Highlight of Business Operations:

Options to purchase 10.2 million and 19.9 million shares, respectively, for the 12 and 24 weeks in 2012 were not included in the calculation of earnings per share because these options were out-of-the-money. These out-of-the-money options had average exercise prices of $68.93 and $67.44, respectively. Options to purchase 10.1 million and 20.7 million shares, respectively, for the 12 and 24 weeks in 2011 were not included in the calculation of earnings per share because these options were out-of-the-money. Out-of-the-money options for the 12 and 24 weeks in 2011 had average exercise prices of $68.88 and $67.35, respectively.

Our foreign currency derivatives had a total face value of $2.6 billion as of June 16, 2012 and $2.3 billion as of June 11, 2011. During the next 12 months, we expect to reclassify net gains of $27 million related to foreign currency contracts that qualify for hedge accounting from accumulated other comprehensive loss into net income. Additionally, ineffectiveness is not material. For foreign currency derivatives that do not qualify for hedge accounting treatment, all losses and gains were offset by changes in the underlying hedged items, resulting in no net material impact on earnings.

The notional amounts of the interest rate derivative instruments outstanding as of June 16, 2012 and June 11, 2011 were $7.3 billion and $8.7 billion, respectively. We classify both the earnings and cash flow impact from these interest rate derivative instruments consistent with the underlying hedged item. For those interest rate derivative instruments that qualify for cash flow hedge accounting, any ineffectiveness is recorded immediately. Ineffectiveness is not material. During the next 12 months, we expect to reclassify net losses of $23 million related to these hedges from accumulated other comprehensive loss into net income.

In the 12 and 24 weeks ended June 11, 2011, we recorded $4 million ($2 million after-tax with a nominal impact per share) and $38 million ($23 million after-tax or $0.01 per share), respectively, of incremental costs in cost of sales related to fair value adjustments to the acquired inventory included in WBDs balance sheet at the acquisition date and hedging contracts included in PBGs and PASs balance sheets at the acquisition date.

Reported operating profit increased 11%, primarily reflecting favorable effective net pricing and the timing of advertising and marketing expenses, partially offset by higher commodity costs. Excluding the items affecting comparability in the above table (see Items Affecting Comparability), operating profit increased 8%. A benefit in the prior year from the accelerated timing of concentrate shipments in connection with our global SAP implementation and the impact of less-favorable settlements of promotional spending accruals in the current year negatively impacted reported operating profit growth by 4 percentage points and 2 percentage points, respectively. Unfavorable foreign currency reduced operating profit growth by 7 percentage points.

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