PepsiCo Reports Fourth Quarter And Full-Year 2015 Results

PepsiCo, Inc. today reported organic revenue growth of 4 percent for the fourth quarter of 2015 and 5 percent for the full year, and core earnings per share of $1.06 for the quarter and $4.57 for the year.

Summary of Fourth Quarter Financial Performance:

• Organic revenue grew 4 percent and reported net revenue declined 7 percent. Foreign exchange translation had an 8-percentage-point unfavorable impact on reported net revenue.
• Core gross margin expanded 165 basis points and core operating margin decreased 20 basis points. Operating margin was negatively impacted by an 85 basis point increase in advertising and marketing expense as a percent of sales, partially offset by the implementation of effective revenue management strategies and previously announced productivity initiatives. Reported gross margin and operating margin both expanded 185 basis points.
• Core constant currency operating profit declined 2 percent. The impact of the deconsolidation of Venezuela negatively impacted fourth quarter operating profit performance by 2 percentage points. Reported operating profit increased 10 percent and benefited from lower restructuring and impairment charges, pension-related settlements, including the lapping of a pension lump sum settlement charge, the mark-to-market net impact on commodity hedges, and the lapping of a re-measurement of certain net monetary assets of our Venezuelan businesses, partially offset by unfavorable foreign exchange translation.
• Company's core effective tax rate was 22.5 percent, which compares to 25.5 percent in the prior-year quarter. The reported effective tax rate was 11.2 percent, below the prior year quarter of 25.6 percent, as a result of a non-cash tax benefit.
• Core EPS was $1.06 and reported EPS was $1.17. Core EPS excludes a $0.16 per share non-cash tax benefit and a $0.01 per share benefit for a pension-related settlement, partially offset by $0.06 per share of restructuring and impairment charges related to our previously announced productivity initiatives.

Summary of Full-Year 2015 Financial Performance:

• Organic revenue grew 5 percent and reported net revenue declined 5 percent. Foreign exchange translation had a 10-percentage-point unfavorable impact on reported net revenue.
• Core gross margin and core operating margin expanded 140 basis points and 30 basis points, respectively. Operating margin improvement reflects the implementation of effective revenue management strategies and productivity initiatives, partially offset by impairment charges related to a dairy joint venture and a 40 basis point increase in advertising and marketing expense to 6.3 percent of sales. Reported gross margin expanded 130 basis points while reported operating margin declined 110 basis points, primarily reflecting the Venezuela charges.
• Core constant currency operating profit increased 6 percent. Reported operating profit declined 13 percent reflecting theVenezuela charges, unfavorable foreign exchange translation and a charge to write off the recorded value of the Tingyi-Asashi Beverages Holding Co. Ltd. (TAB) call option, partially offset by pension-related settlements, including the lapping of a pension lump sum settlement charge, lower restructuring and impairment charges, the mark-to-market net impact on commodity hedges and the lapping of a re-measurement of certain net monetary assets of our Venezuelan businesses.
• Core effective tax rate was 24.3 percent for 2015, which compares to 25.0 percent in the prior-year. Reported effective tax rate was 26.1 percent, above the prior-year's rate of 25.1 percent.
• Core EPS was $4.57 and reported EPS was $3.67. Core EPS excludes $0.91 per share of Venezuela charges, $0.12 per share of restructuring and impairment charges related to our previously announced productivity initiatives and $0.05 per share to write off the recorded value of the TAB call option, partially offset by $0.15 per share for a non-cash tax benefit and a $0.03 per share benefit for pension-related settlements.
• Cash flow provided by operating activities was $10.6 billion for the year. Free cash flow excluding certain items was $8.1 billion for the year.
• Core net return on invested capital was 19.6 percent for the year, an increase of 210 basis points from the prior year. Reported return on invested capital was 13.1 percent for the year, a decrease of 10 basis points from the prior year. Full report.