ACCT 321: Cost Accounting SEC 10-K Project Requirements
Summary: This SEC 10-K project challenges you to review, analyze, and interpret financial statements and disclosures of a manufacturing corporation headquartered in the U.S. To simulate processes used by practicing accountants, you are presented analyses and findings to the class and participate in a peer review process in the Discussions area. The deliverables are in response to information and analysis requests by your supervisor.
Outcomes: Prepare discussion postings and reports on a U.S. publicly-traded manufacturing corporation using its most current SEC 10-K report.
Competencies: Review cost accounting-related information in a SEC 10-K filing for a manufacturing corporation. Compare, interpret, and contrast the information available for a manufacturing versus a non-manufacturing corporation.
PepsiCo SEC 10-K Report Erica Redmon ACCT 221 / 6382 March 4, 2019 PepsiCo is a successful food (snack) and beverage company first incorporated in Delaware in 1919 and reincorporated in North Carolina in 1986. PepsiCo brands include Pepsi, Frito-Lay, Tropicana, Quaker, and Gatorade Products. PepsiCo appeared on the Fortune 500 list as number 45, which was 42 spots above their main competitor in Coca-Cola. PepsiCo has consumers in over 200 countries and territories, which contribute to their success. PepsiCo is traded on the NASDAQ, under the symbol PEP. A SEC Form 10-K is the annual financial report which summarizes whether a company is successful financially or not. This report is important because it gives the shareholders an idea of how their stock is doing within a company. The SEC 10-K also provides information about the company, their history, the structure of the organization, audited financial statements, and more information. There are four main components of a SEC 10-K report that we will discuss, which include the Income Statement, Balance Sheet, Statement of Stockholder’s Equity, and Statement of Cash Flows. Income Statement (Amounts in Millions) The Income Statement (below) shows PepsiCo’s revenue and expenses for 2017 and 2016. From the revenue and expenses, one can figure out whether the company was profitable for the year. As you can see below, in 2017 the Net Sales were $63,525 and Cost of Goods Sold was $28,785, which would make Gross Profit for 2017 $34,740. In 2016, the Net Sales were $62,799 and Cost of Goods Sold was $28,209, which left a Gross profit of $34,590. The information for those two years shows us that PepsiCo has been profitable the last couple years, with more gross profit in 2017. Consolidated Statement of Income PepsiCo, Inc. and Subsidiaries Fiscal years ended December 30, 2017, December 31, 2016 and December 26, 2015 (in millions except per share amounts) 2017 2016 Net Revenue $ 63,525 $ 62,799 Cost of sales 28,785 28,209 Gross profit 34,740 34,590 Selling, general and administrative expenses 24,231 24,805 Venezuela impairment charges — — Operating Profit 10,509 9,785 Interest expense (1,151 ) (1,342 ) Interest income and other 244 110 Income before income taxes 9,602 8,553 Provision for income taxes (See Note 5) 4,694 2,174 Net income 4,908 6,379 Less: Net income attributable to noncontrolling interests 51 50 Net Income Attributable to PepsiCo $ 4,857 $ 6,329 Net Income Attributable to PepsiCo per Common Share Basic $ 3.40 $ 4.39 Diluted $ 3.38 $ 4.36 Weighted-average common shares outstanding Basic 1,425 1,439 Diluted 1,438 1,452 Cash dividends declared per common share $ 3.1675 $ 2.96 See accompanying notes to the consolidated financial statements. The Statement of Comprehensive Income shows any accumulated comprehensive income attributable to PepsiCo that the company may have. In 2017, the comprehensive income attributable to PepsiCo was $5,719, and in 2016 it was $5,729. 2017 2016 Net interest expense $ (907 ) $ (1,232 ) Annual tax rate (a) 48.9 % 25.4 % Net income attributable to PepsiCo $ 4,857 $ 6,329 Net income attributable to PepsiCo per common share – diluted $ 3.38 $ 4.36 Mark-to-market net impact (0.01 ) (0.08 ) Restructuring and impairment charges 0.16 0.09 Provisional net tax expense related to the TCJ Act (a) 1.70 — Charges related to the transaction with Tingyi — 0.26 Charge related to debt redemption — 0.11 Pension-related settlement charge/(benefits) — 0.11 Venezuela impairment charges — — Tax benefit — — Net income attributable to PepsiCo per common share – diluted, excluding above items (b) $ 5.23 $ 4.85 Impact of foreign exchange translation Growth in net income attributable to PepsiCo per common share – diluted, excluding above items, on a constant currency basis (b) Page 75 of the SEC 10-K report (above) explained the annual tax rate for 2017 being 48.9%, with 2016 having a 25.4% tax rate. This is a significant increase in taxes for 2017. Balance Sheet (Amounts in Millions) A Balance Sheet shows a company’s assets, liabilities, and shareholder’s equity for a period. The Balance Sheet below shows the following, the value of accumulated other comprehensive net loss in 2017 was ($13,057) and ($13,919) in 2016. This means that the loss was less in 2017 than it was in 2016. Total assets for 2017 were high at $79,804, as compared to 2016, which were only $73,490. The total liabilities in 2017 are $68,823, which was also higher than 2016 at $62,291. The total stockholder’s equity was $11,045 in 2017, versus $11,246 in 2016. PepsiCo had a higher working capital in 2017, which was $10,981, less than 2016’s $11,199 in working capital. Under Repurchased common stock, in excess of par value, you can see a negative dollar amount of ($32,757), which is their value of treasury stock for 2017. Consolidated Balance Sheet PepsiCo, Inc. and Subsidiaries December 30, 2017 and December 31, 2016 (in millions except per share amounts) 2017 2016 ASSETS Current Assets Cash and cash equivalents $ 10,610 $ 9,158 Short-term investments 8,900 6,967 Accounts and notes receivable, net 7,024 6,694 Inventories 2,947 2,723 Prepaid expenses and other current assets 1,546 908 Total Current Assets 31,027 26,450 Property, Plant and Equipment, net 17,240 16,591 Amortizable Intangible Assets, net 1,268 1,237 Goodwill 14,744 14,430 Other nonamortizable intangible assets 12,570 12,196 Nonamortizable Intangible Assets 27,314 26,626 Investments in Noncontrolled Affiliates 2,042 1,950 Other Assets 913 636 Total Assets $ 79,804 $ 73,490 LIABILITIES AND EQUITY Current Liabilities Short-term debt obligations $ 5,485 $ 6,892 Accounts payable and other current liabilities 15,017 14,243 Total Current Liabilities 20,502 21,135 Long-Term Debt Obligations 33,796 30,053 Other Liabilities 11,283 6,669 Deferred Income Taxes 3,242 4,434 Total Liabilities 68,823 62,291 Commitments and contingencies Preferred Stock, no par value 41 41 Repurchased Preferred Stock (197 ) (192 ) PepsiCo Common Shareholders’ Equity Common stock, par value 12/3¢ per share (authorized 3,600 shares, issued, net of repurchased common stock at par value: 1,420 and 1,428 shares, respectively) 24 24 Capital in excess of par value 3,996 4,091 Retained earnings 52,839 52,518 Accumulated other comprehensive loss (13,057 ) (13,919 ) Repurchased common stock, in excess of par value (446 and 438 shares, respectively) (32,757 ) (31,468 ) Total PepsiCo Common Shareholders’ Equity 11,045 11,246 Noncontrolling interests 92 104 Total Equity 10,981 11,199 Total Liabilities and Equity $ 79,804 $ 73,490 See accompanying notes to the consolidated financial statements. Statement of Stockholder’s Equity (Amounts in Millions) The Statement of Stockholder’s Equity (below) shows a breakdown of the total equity of the company each year. This statement includes information on all stocks, whether common, preferred, or repurchased. Consolidated Statement of Equity PepsiCo, Inc. and Subsidiaries Fiscal years ended December 30, 2017, December 31, 2016 and December 26, 2015 (in millions) 2017 2016 Shares Amount Shares Amount Preferred Stock 0.8 $ 41 0.8 $ 41 Repurchased Preferred Stock Balance, beginning of year (0.7 ) (192 ) (0.7 ) (186 ) Redemptions — (5 ) — (6 ) Balance, end of year (0.7 ) (197 ) (0.7 ) (192 ) Common Stock Balance, beginning of year 1,428 24 1,448 24 Change in repurchased common stock (8 ) — (20 ) — Balance, end of year 1,420 24 1,428 24 Capital in Excess of Par Value Balance, beginning of year 4,091 4,076 Share-based compensation expense 290 289 Stock option exercises, RSUs, PSUs and PEPunits converted (a) (236 ) (138 ) Withholding tax on RSUs, PSUs and PEPunits converted (145 ) (130 ) Other (4 ) (6 ) Balance, end of year 3,996 4,091 Retained Earnings Balance, beginning of year 52,518 50,472 Net income attributable to PepsiCo 4,857 6,329 Cash dividends declared - common (4,536 ) (4,282 ) Cash dividends declared - preferred — (1 ) Balance, end of year 52,839 52,518 Accumulated Other Comprehensive Loss