Pepsi 2006 Annual Report Download - page 55

Management Operating Cash Flow
We focus on management operating
cash flow as a key element in achieving
maximum shareholder value, and it is
the primary measure we use to monitor
cash flow performance. However, it is
not a measure provided by accounting
principles generally accepted in the U.S.
Since net capital spending is essential to
our product innovation initiatives and
maintaining our operational capabili-
ties, we believe that it is a recurring and
necessary use of cash. As such, we
believe investors should also consider
net capital spending when evaluating
our cash from operating activities. The
table above reconciles the net cash pro-
vided by operating activities as
reflected in our Consolidated Statement
of Cash Flows to our management oper-
ating cash flow. Management
operating cash flow was used primarily
to repurchase shares and pay dividends.
We expect to continue to return
approximately all of our management
operating cash flow to our shareholders
through dividends and share
repurchases. However, see “Our
Business Risks” for certain factors that
may impact our operating cash flows.
Credit Ratings
Our debt ratings of Aa3 from Moody’s
and A+ from Standard & Poor’s
contribute to our ability to access global
capital markets. We have maintained
strong investment grade ratings for
over a decade. Each rating is considered
strong investment grade and is in the
first quartile of their respective ranking
systems. These ratings also reflect the
impact of our anchor bottlers’ cash
flows and debt.
Credit Facilities and Long-Term
Contractual Commitments
See Note 9 for a description of our
credit facilities and long-term contrac-
tual commitments.
Off-Balance-Sheet Arrangements
It is not our business practice to enter
into off-balance-sheet arrangements,
other than in the normal course of
business, nor is it our policy to issue
guarantees to our bottlers, non-
controlled affiliates or third parties.
However, certain guarantees were nec-
essary to facilitate the separation of our
bottling and restaurant operations
from us. At year-end 2006, we believe it
is remote that these guarantees would
require any cash payment. We do not
enter into off-balance-sheet trans-
actions specifically structured to provide
income or tax benefits or to avoid
recognizing or disclosing assets or
liabilities. See Note 9 for a description
of our off-balance-sheet arrangements.
2006 2005 2004
Net cash provided by operating activities $ 6,084 $ 5,852 $ 5,054
Capital spending (2,068) (1,736) (1,387)
Sales of property, plant and equipment 49 88 38
Management operating cash flow $ 4,065 $ 4,204 $ 3,705
53
Operating activities
$5,852
Acquisitions
$1,095
Dividends
$1,642
Short-term investments
$991
Capital spending
$1,736
Share repurchases
$3,031
Use of Cash
Source of Cash
Stock option exercises
$1,099
Short-term borrowings
$1,848
Cash proceeds
from sale of PBG stock
$214
Other, net
$70 Long-term debt
$152
Use of CashSource of Cash
Operating activities
$5,054
Short-term borrowings
$1,112
Other, net
$69
Stock option exercises
$965
Dividends
$1,329
Capital spending
$1,387
Share repurchases
$3,055
Short-term
investments
$969
2005 Cash Utilization 2004 Cash Utilization
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