Review Moody’s Credit Opinion for PepsiCo posted below. Which of the 6 steps of financial statement analysis described in the text does Moody’s appear to be using? Which steps does it appear not to be using? What questions do you have about Moody’s analysis?CORPORATES

26 June 2017



PepsiCo, Inc.
Domicile Purchase, New York,

United States

Long Term Rating A1

Type Senior Unsecured – Fgn

Outlook Stable

Please see the ratings section at the end of this report
for more information. The ratings and outlook shown
reflect information as of the publication date.


Linda Montag 212-553-1336
Senior Vice President

Peter H. Abdill, CFA 212-553-4024
MD-Corporate Finance

PepsiCo, Inc.
Update to Discussion of Key Credit Factors

Summary Rating Rationale
PepsiCo’s A1 long-term senior unsecured rating reflects its strong snack food and beverage
franchises, extensive global footprint, and solid innovation pipelines. It also reflects its
efficient operations, and an extensive multifaceted distribution network, as well as its
excellent liquidity and solid financial performance. These factors are tempered by gross
leverage that – while modest – has been rising over time. The company’s liquidity is strong,
with solid and predictable cash flow, large cash balances and $7.5 billion in committed
bank facilities. While PepsiCo’s scale, diversity and strong franchises help to offset some
leverage creep, we expect that debt to EBITDA will remain slightly above 3 times over the
next 12-18 months. PepsiCo faces challenges to grow its volume in mature carbonated soft
drink (CSD) markets. But this weakness is partially offset by its strong innovation program
and productivity initiatives. It is also helped by good growth prospects in food and beverage
internationally, and in its Frito-Lay North American snacks segment.

Exhibit 1

Gross Leverage at High End of Range for Rating

2.4x 2.4x



3.2x 3.2x 3.2x

1.7x 1.7x

1.8x 1.8x








FYE 2013 FYE 2014 FYE 2015 FYE 2016 FYE 2017P FYE 2018P FYE 2019P

Debt / EBITDA Possible Downgrade Net Debt / EBITDA

[1] All ratios are based on ‘Adjusted’ financial data and incorporate Moody’s Global Standard Adjustments for Non-Financial
Source: Moody’s Financial Metrics™


Credit Strengths

» World leader in convenience foods; strong soft beverage positions

» Excellent liquidity; strong cash flows

» Good product diversification

» Restructuring program savings

Credit Challenges

» Gross leverage will remain somewhat high for the rating

» Some degree of customer and geographic concentration

» Declining CSD volume in mature markets; slow growth in some emerging markets

Rating Outlook
The stable rating outlook reflects our expectation that PepsiCo will continue to generate solid cash flow, sustain healthy liquidity, and
maintain debt to EBITDA around 3 times over the next twelve to eighteen months.

Factors that Could Lead to an Upgrade

» Good growth momentum in North American beverage business,

» Solid oper

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