PepsiCo Reports 17 Percent Increased Earnings In Second Quarter 2013

PepsiCo, Inc. reported core earnings per share of $1.31 for the second quarter, an increase of 17 percent on organic revenue growth of 4.2 percent.

"We're pleased with our performance in the second quarter and for the first half of 2013. PepsiCo delivered another quarter of mid-single-digit organic revenue growth, driven by our balanced food and beverage product portfolio and global geographic footprint. We continue to invest in advertising and marketing, innovation, and other marketplace initiatives to sustain our organic revenue growth and we are driving a robust productivity agenda that serves as a funding source for these investments," said Chairman and CEO Indra Nooyi, in a prepared statement.

The company’s organic revenue grew 4.2 percent and reported net revenue grew 2 percent. Structural changes, principally the refranchising of the company's beverage operations in Vietnam and China, negatively impacted reported net revenue performance by nearly 1 percentage point and foreign exchange translation had a 1.5-percentage-point unfavorable impact in the quarter.

Core constant currency operating profit increased 11 percent reflecting solid revenue growth, productivity gains, and a $137 million gain related to refranchising the company's bottling operations in Vietnam, partially offset by increased advertising and marketing expense and $46 million of incremental investments. The gain, net of the $46 million incremental investments, contributed 3 percentage points to core constant currency operating profit growth. Reported operating profit increased 21 percent and included the net impact of mark-to-market losses on commodity hedges, and certain restructuring and integration costs in both 2013 and 2012. The Vietnam gain, net of incremental investments, contributed 4 percentage points to reported operating profit growth.

The company's core effective tax rate was 24.5 percent, below the prior year quarter primarily due to favorable resolution of certain tax matters in the quarter. The company's reported tax rate was 24.4 percent, below the prior year quarter primarily due to favorable resolution of certain tax matters in the quarter and lapping the prior year tax impact of the China refranchising transaction with Tingyi.

Core EPS was $1.31 and reported EPS was $1.28. Core EPS includes a $0.09 per share gain related to refranchising the company's bottling operations in Vietnam, partially offset by a $0.02 impact from incremental investments. Core EPS excludes a net impact of $0.02 per share related to mark-to-market losses on commodity hedges, and a $0.01 impact from restructuring and integration charges. Mark-to-market gains and losses on commodity hedges are subsequently reflected in core division results when the divisions recognize the cost of the underlying commodity in net income.

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