PepsiCo, Inc. — FY2023 Form 10-K
Reporting period: Fiscal year ended December 30, 2023, compared with the year ended December 31, 2022. This filing reports full-year results; it does not provide a clear standalone fourth-quarter income statement in the supplied text.
Business context
PepsiCo is a global beverage and convenient-food company operating in more than 200 countries and territories. Its seven divisions span North America, Latin America, Europe, Africa, the Middle East, South Asia and Asia Pacific. The portfolio includes Frito-Lay, Quaker, Pepsi-Cola, Gatorade, Mountain Dew and SodaStream.
Financial and operating performance
| Metric | FY2023 | FY2022 | Change |
|---|---|---|---|
| Net revenue | $91.471 billion | $86.392 billion | +6% |
| Gross profit / margin | $49.590 billion / 54.2% | $45.816 billion / 53.0% | Margin +1.2 percentage points |
| Operating profit / margin | $11.986 billion / 13.1% | $11.512 billion / 13.3% | Profit +4%; margin -0.2 points |
| Net income attributable to PepsiCo | $9.074 billion | $8.910 billion | +2% |
| Diluted EPS | $6.56 | $6.42 | +2% |
| Operating cash flow | $13.442 billion | $10.811 billion | +24% |
| Free cash flow (non-GAAP) | $8.122 billion | $5.855 billion | +39% |
- Organic revenue growth, a non-GAAP measure, was 9%. Effective net pricing contributed 13 percentage points, while organic volume declined 3%; unfavorable foreign exchange reduced reported revenue growth by about 2 percentage points.
- Capital spending was $5.518 billion. Cash dividends paid were $6.682 billion and common-stock repurchases were $1.000 billion.
- At year-end, cash and cash equivalents were $9.711 billion, short-term investments were $292 million, short-term debt was $6.510 billion and long-term debt was $37.595 billion. Management said operating cash generation and available financing sources should meet operating, investing and financing needs.
- Total assets were $100.495 billion and total liabilities were $81.858 billion. Current assets of $26.950 billion were below current liabilities of $31.647 billion.
Material changes and unusual items
- Reported growth was affected by significant prior-year comparability items, notably a $3.321 billion gain on the 2022 Juice Transaction. PepsiCo sold select juice brands and retained a 39% interest in Tropicana Brands Group (TBG).
- 2023 included $1.230 billion of impairment and other charges, including charges related to SodaStream and TBG. PepsiCo recorded $927 million of intangible-asset impairment, including a $572 million SodaStream brand impairment, and $290 million of SodaStream goodwill impairment.
- The Quaker Recall resulted in $136 million of 2023 product-return, inventory and related costs. QFNA revenue fell 2%, unit volume fell 5% and operating profit fell 19%. Management expects the recall to continue weighing on QFNA volume, revenue and profit in 2024.
- GAAP segment performance diverged substantially: PBNA operating profit fell 52%, mainly reflecting the prior-year Juice Transaction gain and a $321 million charge related to TBG; QFNA operating profit fell 19%. FLNA operating profit rose 10%, while reported operating profit increased in LatAm, Europe, AMESA and APAC, with several comparisons affected by prior-year impairments, foreign exchange or other unusual items.
- The reported annual tax rate rose to 19.8% from 16.1%, partly because of prior-year tax and Juice Transaction effects. The 2022 results also included a tax benefit following an IRS settlement.
Outlook, management commentary and risks
- Management emphasized continued cost inflation, commodity and packaging volatility, supply constraints, labor challenges, shifting consumer preferences, retail-channel changes and geopolitical uncertainty. Pricing, productivity savings and hedging helped offset costs, but pricing may not fully offset inflation without affecting volume or margins.
- The 2019 multi-year productivity plan has been extended through 2028. Expected total pre-tax charges are approximately $3.65 billion; about $1.9 billion had been incurred through year-end 2023. For 2024, PepsiCo expects approximately $500 million of pre-tax charges and cash expenditures.
- For 2024, PepsiCo expects to return approximately $8.2 billion to shareholders: about $7.2 billion in dividends and $1.0 billion in share repurchases. The company announced a 7% increase in its annualized dividend to $5.42 per share, effective with the dividend expected in June 2024.
- PepsiCo’s 2024 outlook is not otherwise stated as a clear quantified full-year revenue or EPS forecast in the supplied filing text.
- Key risks include the conflicts in Ukraine and the Middle East, foreign-exchange movements, commodity and supply-chain disruption, water scarcity and climate effects, cybersecurity, regulation and taxes on products or packaging, competition, and changing health and sustainability preferences. Russia represented 4% of 2023 consolidated revenue; PepsiCo suspended sales of Pepsi-Cola and certain other global beverage brands there but continued offering other products.
- A New York State lawsuit filed in November 2023 alleges plastic pollution and related consumer-protection and failure-to-warn claims. The filing states that damages were not specified and management believes the matter, along with other proceedings, will not materially affect financial condition, results or cash flows.
- Auditors gave unqualified opinions on the financial statements and internal control over financial reporting. Critical audit matters included sales-incentive accruals, impairment valuations and unrecognized tax benefits.
Important facts for investors to verify
- Review the Quaker Recall’s continuing sales, costs, remediation and potential litigation effects in subsequent filings.
- Track SodaStream and TBG performance, valuation assumptions and any further impairments; SodaStream goodwill was reported at heightened risk of future impairment.
- Assess whether pricing and productivity can offset input-cost inflation without further volume or margin pressure, particularly in PBNA and international markets.
- Monitor debt maturities, borrowing costs and liquidity alongside the planned dividend and repurchase commitments; total debt obligations increased year over year.
- Check later disclosures on the New York packaging lawsuit, geopolitical exposure, foreign exchange, and implementation of the productivity and ERP initiatives.
- For a fourth-quarter-only assessment, consult the corresponding quarterly or earnings materials: this 10-K’s principal financial comparisons are annual, and the supplied text does not provide a clear standalone Q4 result set.