PepsiCo, Inc. reported its fourth-quarter and full-year 2013 results and announced a substantial increase in its targeted shareholder cash returns for 2014 and an extension of its $1 billion annual productivity savings targets through 2019. The company also announced 2014 financial targets that are consistent with its long-term goals.
"We are pleased to report that PepsiCo achieved its financial goals for 2013, despite continued challenging and volatile macroeconomic conditions around the globe. We met or exceeded our organic revenue, cash flow, productivity and core operating margin, constant currency earnings per share (EPS), and net return on invested capital (ROIC) targets and, at the same time, continued to invest in our brands, innovation and execution to strengthen the long-term health of our business," said Chairman and CEO Indra Nooyi, in a prepared statement.
"We look ahead to 2014 with confidence that our business is positioned to continue to perform well and to generate attractive returns for our shareholders. We have a well-balanced geographic profile, a complementary portfolio of food and beverage products grounded in taste and convenience that are leaders in their respective categories, and iconic brands that are loved by consumers the world over. The breadth and diversity of our portfolio provides our investors with an attractive combination of sustainable growth and strong cash flow generation capability. Further, we have strengthened the durability of our financial performance by extending our productivity plans by five years.
"Our financial targets for 2014 are consistent with our long-term goals. As a reflection of our positive outlook for the business and our expectation for consistent, strong cash flow generation, we intend to increase our cash returns to shareholders in 2014 to $8.7 billion through both higher dividends and share repurchases."
Summary of Fourth Quarter 2013 Financial Performance
Organic revenue grew 4.1 percent primarily reflecting effective net pricing. Reported net revenue grew 1 percent. Structural changes, principally the refranchising of the company's beverage operations in Vietnam, negatively impacted reported net revenue performance by 1 percentage point and foreign exchange translation had a 3-percentage-point unfavorable impact on reported net revenue in the quarter. Core constant currency operating profit rose 1 percent reflecting the impacts of revenue growth and productivity savings, offset by operating cost inflation, negative geographic mix and $56 million of incremental investments. Reported operating profit rose 8 percent and included restructuring and impairment costs in both 2013 and 2012 as well as the overlap of a lump sum pension settlement charge recorded in 2012. The company's core effective tax rate was 28.2 percent and the reported effective tax rate was 19.0 percent, both above the prior year quarter. Core EPS was $1.05 and reported EPS was $1.12, both including a $0.03 per share charge related to incremental investments. Core EPS excludes $0.06 per share of restructuring and impairment charges and a $0.13 benefit due to certain tax audit settlements.
Summary Full Year 2013 Financial Performance
Organic revenue grew 4 percent primarily reflecting effective net pricing. Reported net revenue grew 1 percent. Structural changes, principally the refranchising of the certain beverage operations, negatively impacted reported net revenue performance by 1 percentage point and foreign exchange translation had a 2-percentage-point unfavorable impact on reported net revenue for the full year. Core constant currency operating profit rose 6 percent reflecting the impacts of revenue growth and productivity savings, offset partially by operating cost inflation, negative geographic mix and incremental advertising and marketing expenses. A gain related to the company's refranchising of its Vietnam beverage operations in the second quarter was substantially offset by incremental investments during the second through fourth quarters. Reported operating profit rose 7 percent and included restructuring and impairment costs and the commodity mark-to-market net impact in both 2012 and 2013, as well as the impact of the Venezuela currency devaluation in 2013 and the overlap of a lump sum pension settlement charge recorded in 2012. Core operating margin expanded 40 basis points and reported operating margin expanded 70 basis points. The core effective tax rate was 25.7 percent and the reported effective tax rate was 23.7 percent, both below the prior year. Core EPS was $4.37 and reported EPS was $4.32. Core EPS excludes $0.03 per share impact of mark-to-market net losses on commodity hedges, $0.09 per share of merger and integration and restructuring and impairment charges, $0.07 per share impact from currency devaluation in Venezuela and a $0.13 benefit due to certain tax audit settlements. Free cash flow, excluding certain items, was $8.2 billion, an increase of 10 percent compared to 2012. Cash from operating activities was $9.7 billion, an increase of 14 percent compared to 2012. Total cash returned to shareholders was $6.4 billion. Dividends were $3.4 billion and share repurchases totaled $3.0 billion. Full report.
