cgj-pepsico

8/2/2019 CGJ-PepsiCo

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Chris Johnson

ACG2021 Sec.002
http://gatorade.com/home/index.phphttp://www.quakeroats.com/http://www.tropicana.com/index.cfmhttp://www.fritolay.com/http://www.pepsi.com/home.php


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Executive Summary

PepsiCo, Inc. is one of the largest and mostsuccessful consumer product companies in

the world. In the year 2004, PepsiCo

generated $78 billion in retail sales and hasmaintained excellence since the corporationwas founded in 1965.

For more information about PepsiCos annual reports, visit:

http://www.pepsico.com/PEP_Investors/AnnualReports/04/index.cfm

For more information about PepsiCos products, click the icons on thefront page.
http://www.pepsico.com/PEP_Investors/AnnualReports/04/index.cfmhttp://www.pepsico.com/PEP_Investors/AnnualReports/04/index.cfm


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Part A. Introduction

Chief Executive Officer: Steve Reinemund

Home Office: 700 Anderson Hill Rd.

Purchase, NY, 10577

Ending date of last fiscal year: December 25, 2004

Consumer products: this company provides foods and

beverages. The principal brands include: Frito-Lay,

Pepsi-Cola, Tropicana, Gatorade, and Quaker.

Main geographic area of activity: PepsiCo is an

international company that provides its products to

about 175 countries.


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Part A. Audit Report

Independent Auditor: KPMG LLP

All of the financial reports were fair andaccurate assessments as to where thecompany stands financially.


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Part A. Stock Market Information

Recent price of stock: $59.11

52 week trading range: High- $60.34 Low- $51.75

Dividend per share: 1.04

All information above was

retrieved on: Feb.28, 2006

In my opinion, investors in this companys stockshould hold. PepsiCo is a valuable stock to have,but the price is too high if you do not already ownstock in this company.

Price and Volume


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Part B. Industry Situation and

Company PlansPepsiCo is considered a premier consumer productscompany in a billion dollar industry. In an effort to raisesnack sales in Europe, PepsiCo has stated that it willacquire Star Foods, which is one of Polands leading

snack makers. PepsiCo has also made a commitment toprovide families with plans to live healthier lives.According to PepsiCo, the S.M.A.R.T. program, aprogram designed by PepsiCo, complements PepsiCosefforts to introduce energy balanced lesson plans inschools nationwide.

Resources:

http://phx.corporate-ir.net/phoenix.zhtml?c=78265&p=irol-newsArticle&ID=799589&highlight

http://phx.corporate-ir.net/phoenix.zhtml?c=78265&p=irol-newsArticle&ID=822210&highlight
http://phx.corporate-ir.net/phoenix.zhtml?c=78265&p=irol-newsArticle&ID=799589&highlighthttp://phx.corporate-ir.net/phoenix.zhtml?c=78265&p=irol-newsArticle&ID=799589&highlighthttp://phx.corporate-ir.net/phoenix.zhtml?c=78265&p=irol-newsArticle&ID=822210&highlighthttp://phx.corporate-ir.net/phoenix.zhtml?c=78265&p=irol-newsArticle&ID=822210&highlighthttp://phx.corporate-ir.net/phoenix.zhtml?c=78265&p=irol-newsArticle&ID=822210&highlighthttp://phx.corporate-ir.net/phoenix.zhtml?c=78265&p=irol-newsArticle&ID=822210&highlighthttp://phx.corporate-ir.net/phoenix.zhtml?c=78265&p=irol-newsArticle&ID=822210&highlighthttp://phx.corporate-ir.net/phoenix.zhtml?c=78265&p=irol-newsArticle&ID=822210&highlighthttp://phx.corporate-ir.net/phoenix.zhtml?c=78265&p=irol-newsArticle&ID=822210&highlighthttp://phx.corporate-ir.net/phoenix.zhtml?c=78265&p=irol-newsArticle&ID=799589&highlighthttp://phx.corporate-ir.net/phoenix.zhtml?c=78265&p=irol-newsArticle&ID=799589&highlighthttp://phx.corporate-ir.net/phoenix.zhtml?c=78265&p=irol-newsArticle&ID=799589&highlighthttp://phx.corporate-ir.net/phoenix.zhtml?c=78265&p=irol-newsArticle&ID=799589&highlighthttp://phx.corporate-ir.net/phoenix.zhtml?c=78265&p=irol-newsArticle&ID=799589&highlight


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Part C. Income Statement Format: Single-step format

I believe that the data from the table above, as it relatesto the income statement, reflects a successful year in2004. This conclusion is due to the increases in allareas.

*All data are dollar amounts 2003 2004

Gross Profit 14,592,000 15,855,000

Income fromOperations

9,810,000 10,596,000

Net Income 3,568,000 4,212,000


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Part C. Balance Sheet

All three balance sheet accounts increasedfrom 2003 to 2004.

The biggest change is in total assets from 2003to 2004.

Year Liabilities + Stockholders Equity = Assets

2003 13,453,000 + 11,896,000 = 25,327,000

2004 14,464,000 + 13,572,000 = 27,987,000

*All data are dollar amounts


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Part C. Statement of Cash Flows

Cash flow from operations was more thannet income for the past two years.

PepsiCo is growing through investingactivities.

This companys primary source of

financing is stock sales. Overall, cash has increased over the past

two years.


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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 intangibleassets.

Allowance for franchise and license receivables andcontingent liabilities.

Self-insured property and casualty losses.

Income tax valuation allowances and tax reserves.

Part D- Accounting Policies continued on next slide


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Notes to the Financial Statements:

1. Summary of significant accounting policies

2. Unusual items affecting comparability of income from continuing operations3. Impairment of long-lived assets4. Discontinued operations5. Income per share6. Inventories7. Property, plant & equipment

8. Intangible assets9. Accounts payable and other current liabilities10. Long-term debt11. Financial instruments12. Income taxes13. Employee stock options14. Post-retirement benefits other than pensions15. Pension plans16. Contingencies17. Business segments (industry segments and geographic areas)18. Selected quarterly financial data


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Part E. Financial Analysis

Liquidity Ratios 2003 2004Working Capital (in millions) 515 1887

Current Ratio 1.08 1.28Receivable turnover 10.06 10.04

Average days sales uncollected 36.28 36.25

Inventory turnover 8.98 9.28Average days inventory on hand 40.64 39.33

Working capital was the only liquidity ratio that showed a significantchange from 2003 to 2004. This area more than doubled within the year

interval.


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Profitability Ratios2003 2004

Profit Margin 13% 14%

Asset Turnover 1.10 1.09

Return on Assets 14% 15%

Return on Equity 33% 34%

There were no significant changes in profitability ratios from2003 to 2004.


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Solvency Ratio Debt to equity: 2003= 1.13

2004= 1.06

Although this companys debt to equity is

over 1.0 for both years, meaning thatmore than half of the companys assetsare financed by creditors, the numberhas decreased from 2003 to 2004.


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Market Strength Ratios Price earnings per share:

2003= $2.30

2004= $2.39

Dividend yield: 2003= 1.4

2004= 1.4

PepsiCos dividend yield of 1.4% is below thesnack company average of 2%.

cgj-pepsico

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