PURCHASE, N.Y., April 18, 2016 /PRNewswire/ -- PepsiCo, Inc. today reported organic revenue growth of 3.5 percent and 11 percent core constant currency EPS growth for the first quarter of 2016.
"We delivered strong first quarter operating results driven by balanced execution of our commercial agenda and productivity programs. Our marketing initiatives and new product launches are generating solid organic top line growth, and our focus on driving greater efficiency throughout our operations contributed significantly to attractive core gross margin expansion," said Chairman and CEO Indra Nooyi. "We are off to a strong start to the year and that gives us added confidence in achieving our financial objectives for 2016."
Summary of First Quarter Financial Performance:
- Organic revenue grew 3.5 percent and reported net revenue declined 3 percent. Foreign exchange translation had a 4.5-percentage-point unfavorable impact and the Venezuela deconsolidation had a 2-percentage-point unfavorable impact on reported net revenue.
- Core gross margin expanded 130 basis points and core operating margin increased 165 basis points. Margin expansion reflects the implementation of effective revenue management strategies and previously announced productivity initiatives, partially offset by a 65 basis point increase in advertising and marketing expense as a percentage of sales. Reported gross margin expanded 160 basis points, while reported operating margin contracted 105 basis points reflecting a $373 million non-core impairment charge related to our 5% indirect equity interest in TAB.
- Core constant currency operating profit increased 12 percent. Reported operating profit decreased 10 percent reflecting the non-core impairment charge mentioned above.
- The Company's core effective tax rate was 24.7 percent, which compares to 23.0 percent in the prior-year quarter. The reported effective tax rate of 31.9 percent compares to 23.1 percent in the prior year quarter and was impacted by the non-core impairment charge referred to above, which had no tax benefit.
- Core EPS was $0.89 and reported EPS was $0.64. Core EPS excludes a $0.26 per share non-core impairment charge related to our 5% indirect equity interest in TAB.
- Cash flow provided by operating activities was $131 million.
Discussion of First Quarter Division Core Constant Currency Operating Profit Results:
Core constant currency operating profit results for all divisions were impacted by organic revenue results as presented in the tables on pages 2 and A-6. In addition, results for each division were impacted by the following:
Frito-Lay North America (FLNA)
Positively impacted by productivity gains and lower raw material costs, partially offset by operating cost inflation and higher advertising and marketing expense.
Quaker Foods North America (QFNA)
Positively impacted by the lapping of a first quarter 2015 impairment charge and the prior year operating performance associated with a dairy joint venture (operations of which ceased in the fourth quarter of 2015), productivity gains and lower raw material costs, partially offset by higher advertising and marketing expense and operating cost inflation.
North America Beverages (NAB)
Positively impacted by productivity gains and lower raw material costs, partially offset by operating cost inflation and higher advertising and marketing expense. Full report.
