Third quarter reported EPS of $1.21 and core1 EPS of $1.20
Company reaffirms 2012 core constant currency1 net revenue and core
constant currency EPS guidance
Reflecting the impact of previously announced structural changes and
negative foreign exchange translation, reported net revenue declined 5
percent, in line with expectations. Excluding these impacts, organic1 net
revenue grew 5 percent
Company expects to return more than $6 billion to shareholders through
dividends and share repurchases in 2012
Company expects to deliver more than $1 billion in productivity savings
in 2012 and $3 billion in savings by 2015
PURCHASE, N.Y. – October 17, 2012 – PepsiCo, Inc. (NYSE: PEP) today
reported a decline in third quarter net revenue of 5 percent, reflecting a negative 5-
percentage-point impact from previously announced structural changes (primarily
beverage refranchisings in China and Mexico), and a negative 5-percentage-point
impact from foreign exchange translation. Excluding these items, third quarter net
revenue grew 5 percent on an organic basis.
Reported EPS was $1.21 and core EPS was $1.20. Management reaffirmed both
its 2012 core constant currency net revenue and core constant currency EPS
guidance and stated that its 2012 strategic initiatives are on track.
“PepsiCo is diligently executing the strategy we set forth at the start of the year,
and we remain on track to achieve our full-year targets,” said PepsiCo Chairman
and CEO Indra Nooyi. “Our disciplined pricing and sustained investment in brand
building drove 5 percent organic net revenue growth reflecting 1 percent organic
volume growth and 4 percent effective net pricing.
1Please refer to the Glossary for the definitions of Non-GAAP financial measures including core, constant
currency, organic and management operating cash flow.
“We remain focused on our five priorities. We will continue to invest aggressively
to build our brands, accelerate innovation to drive growth, focus on execution and
deliver our productivity agenda while returning cash to shareholders.”
Operating and Marketplace Highlights
Achieved 5 percent organic net revenue growth with a good balance
between volume growth and price realization.
Grew global snacks net revenue on a reported basis. Grew both global
snacks and global beverage net revenue on an organic basis.
Emerging and developing market net revenue declined 13 percent, primarily
due to beverage refranchisings in China and Mexico. On an organic basis,
emerging and developing market net revenue grew 11 percent.
While reported net revenue in AMEA and Europe declined 21 percent and 6
percent, respectively, organic net revenue grew 10 percent and 7 percent,
PAF saw balanced revenue growth driven by volume growth and effective
net price realization.
Substantially increased advertising and marketing expense in the quarter,
supporting the company’s long-term brand building initiatives.
Activated our expanded partnership with the NFL across snacks and
beverages with retail programming in 22 of 32 team markets and
announced that Pepsi will be the official sponsor of the 2013 Super Bowl
halftime show. Doritos will again drive its highly popular Crash the Super
Summary of Third Quarter Financial Performance
Organic net revenue growth was 5 percent. Reported net revenue
benefited from 1 percentage point of volume growth and 4 percentage
points of effective net pricing, offset by negative foreign exchange
translation of 5 percentage points. Structural changes, primarily
refranchisings in China and Mexico, negatively impacted reported net
revenue performance by 5 percentage points.
Reported operating profit declined 4 percent and core operating profit
declined 8 percent. Core operating profit performance reflected the impact
of increased commodity costs, increased advertising and marketing
expense, higher corporate unallocated expenses reflecting increased
pension expense and a negative 3 percentage point impact of foreign
exchange translation. Core operating profit excluded mark-to-market net
gains on commodity hedges, restructuring and certain impairment charges
as well as merger and integration charges.
Net interest expense was $181 million and included $24 million in mark-tomarket
gains on investments related to deferred compensation liabilities.
There is a corresponding offset to these gains within selling, general and
administrative expense resulting in no net benefit to earnings.
The company’s reported effective tax rate was 27 percent. The company’s
core effective tax rate was 26.3 percent, 90 basis points above the prior
year quarter due to an adjustment to international deferred taxes, partially
offset by tax benefits generated from an international acquisition.
Reported EPS was $1.21 and core EPS was $1.20. Core EPS excludes a
$0.04 per share impact of certain restructuring, impairment and integration
charges and a $0.05 per share impact from mark-to-market net gains on
commodity hedges. Mark-to-market gains and losses are subsequently
reflected in core division results when the divisions take delivery of the
Operating cash flow was $5.1 billion year to date. Management operating
cash flow (excluding certain items) was $4.9 billion. The company has
returned $4.8 billion to shareholders through dividends and share
repurchases through the end of the third quarter, and expects to return
more than $6 billion to shareholders for the full year 2012.