2 Executive SummaryPepsiCo, Inc. is one of the largest and most successful consumer product companies in the world. In the year 2004, PepsiCo generated $78 billion in retail sales and has maintained excellence since the corporation was founded in 1965.For more information about PepsiCo’s annual reports, visit:For more information about PepsiCo’s products, click the icons on the front page.
3 Part A. Introduction Chief Executive Officer: Steve Reinemund Home Office: 700 Anderson Hill Rd.Purchase, NY,Ending date of last fiscal year: December 25, 2004Consumer products: this company provides foods andbeverages. The principal brands include: Frito-Lay,Pepsi-Cola, Tropicana, Gatorade, and Quaker.Main geographic area of activity: PepsiCo is aninternational company that provides its products toabout 175 countries.
4 Part A. Audit Report Independent Auditor: KPMG LLP All of the financial reports were fair and accurate assessments as to where the company stands financially.
5 Part A. Stock Market Information Price and VolumeRecent price of stock: $59.1152 week trading range:High- $60.34 Low- $51.75Dividend per share: 1.04All information above wasretrieved on: Feb.28, 2006In my opinion, investors in this company’s stock should hold. PepsiCo is a valuable stock to have, but the price is too high if you do not already own stock in this company.
6 Part B. Industry Situation and Company Plans PepsiCo is considered a premier consumer products company in a billion dollar industry. In an effort to raise snack sales in Europe, PepsiCo has stated that it will acquire “Star Foods,” which is one of Poland’s leading snack makers. PepsiCo has also made a commitment to provide families with plans to live healthier lives. According to PepsiCo, “the S.M.A.R.T. program, a program designed by PepsiCo, complements PepsiCo’s efforts to introduce energy balanced lesson plans in schools nationwide.”Resources:
7 Part C. Income Statement Format: Single-step formatI believe that the data from the table above, as it relates to the income statement, reflects a successful year in This conclusion is due to the increases in all areas.*All data are dollar amounts20032004Gross Profit14,592,00015,855,000Income from Operations9,810,00010,596,000Net Income3,568,0004,212,000
8 Part C. Balance Sheet Year Liabilities + Stockholder’s Equity = Assets 200313,453, ,896,000 = 25,327,000200414,464, ,572,000 = 27,987,000All three balance sheet accounts increased from 2003 to 2004.The biggest change is in total assets from 2003 to 2004.*All data are dollar amounts
9 Part C. Statement of Cash Flows Cash flow from operations was more than net income for the past two years.PepsiCo is growing through investing activities.This company’s primary source of financing is stock sales.Overall, cash has increased over the past two years.
10 Part D. Accounting Policies Significant Accounting Policies:Impairment of investments in unconsolidated affairs.Impairment of disposal of long-lived assets.Impairment of goodwill and indefinite-lived intangible assets.Allowance for franchise and license receivables and contingent liabilities.Self-insured property and casualty losses.Income tax valuation allowances and tax reserves.Part D- Accounting Policies continued on next slide
11 Notes to the Financial Statements: Summary of significant accounting policiesUnusual items affecting comparability of income from continuing operationsImpairment of long-lived assetsDiscontinued operationsIncome per shareInventoriesProperty, plant & equipmentIntangible assetsAccounts payable and other current liabilitiesLong-term debtFinancial instrumentsIncome taxesEmployee stock optionsPost-retirement benefits other than pensionsPension plansContingenciesBusiness segments (industry segments and geographic areas)Selected quarterly financial data
12 Part E. Financial Analysis Liquidity Ratios 20032004Working Capital (in millions)5151887Current Ratio1.081.28Receivable turnover10.0610.04Average days’ sales uncollected36.2836.25Inventory turnover8.989.28Average days’ inventory on hand40.6439.33Working capital was the only liquidity ratio that showed a significant change from 2003 to This area more than doubled within the year interval.
13 Part E. Financial Analysis Profitability Ratios 20032004Profit Margin13%14%Asset Turnover1.101.09Return on Assets15%Return on Equity33%34%There were no significant changes in profitability ratios from to 2004.
14 Part E. Financial Analysis Solvency Ratio Debt to equity:2003= 1.132004= 1.06Although this company’s debt to equity is over 1.0 for both years, meaning that more than half of the company’s assets are financed by creditors, the number has decreased from 2003 to 2004.
15 Part E. Financial Analysis Market Strength Ratios Price earnings per share:2003= $2.302004= $2.39Dividend yield:2003= 1.42004= 1.4PepsiCo’s dividend yield of 1.4% is below the snack company average of 2%.