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PepsiCo, Inc. reported strong second-quarter operating results, with 14 percent net revenue and 12 percent operating profit growth. The company delivered earnings per share of $1.05. Excluding current and prior year mark-to-market gains on commodity positions included in corporate unallocated expenses, earnings per share would have totaled $1.03, up 11 percent.

PepsiCo Chairman and Chief Executive Officer Indra Nooyi said in a prepared statement, "The strength and breadth of our global portfolio and geographic footprint delivered another quarter of solid results. PepsiCo continued to drive growth across its worldwide snacks and beverage businesses primarily through strong product innovation, well-executed pricing actions and focus on expense control and productivity." Nooyi continued, "We are proud of our first-half performance and confident that we are well-positioned to deliver on our outlook amidst a challenging macroeconomic environment."

The results at PepsiCo Americas Foods (PAF) reflected solid top- and bottom-line performance across all segments of the business in spite of difficult macroeconomic conditions and rapidly escalating commodity costs.

Frito-Lay North America (FLNA) brands enabled 2 percent volume growth even as high-single-digit net price increases were realized from weight-outs and visual pricing to offset commodity inflation. FLNA revenue growth of 8 percent was broad based, and operating profit grew 8 percent, driven by net revenue growth and productivity, partially offset by higher costs for cooking oil, energy and fuel.

Volume growth was driven by double-digit growth in trademark Cheetos, Ruffles, Quaker Chewy Granola and SunChips. Innovation was the key for both Cheetos (e.g. Cracker Trax) and SunChips, which introduced new flavors and was supported by the ‘Made From the Sun’ marketing campaign. Weight-outs and a promotional shift to help manage potato supply constraints led to a high-single-digit volume decrease in trademark Lay’s; but revenues were up high-single-digits. While pricing actions also contributed to a mid-single-digit volume decrease in trademark Doritos, revenues were up low-single digits. Single serve packages continued to provide volume growth.

At Quaker Foods North America (QFNA), volume grew 2 percent, reflecting an increase in Quaker Oatmeal, grits and Rice-A-Roni. Revenue and operating profit grew 4 percent.

At the end of the second quarter, flooding in Cedar Rapids, Ia., shut down the major Quaker manufacturing facility. The company expects to be back to full production levels by mid-August, but we are experiencing supply disruptions, and many Quaker products have been on allocation. We expect insurance to cover asset damage and business interruption exposures in the second half of the year.