Pepsi 2008 Annual Report Download - page 66

64 PepsiCo, Inc. 2008 Annual Report
Management’s Discussion and Analysis
Operating Activities
In 2008, our operations provided $7.0 billion of cash, compared
to $6.9 billion in the prior year, primarily reecting our solid busi-
ness results. Our operating cash ow in 2008 reects restructur-
ing payments of $180 million, including $159 million related to
our Productivity for Growth program, and pension and retiree
medical contributions of $219 million, of which $23 million were
discretionary.
In 2007, our operations provided $6.9 billion of cash,
compared to $6.1 billion in 2006, primarily reecting solid
business results.
Substantially all cash payments related to the Productivity
for Growth program are expected to be paid by the end of 2009.
In addition, in 2009, we will make a $640 million after-tax
discretionary contribution to our U.S. pension plans.
Investing Activities
In 2008, we used $2.7 billion for our investing activities, primarily
reecting $2.4 billion for capital spending and $1.9 billion for
acquisitions. Signicant acquisitions included our joint acquisition
with PBG of Lebedyansky in Russia and the acquisition of a snacks
company in Serbia. The use of cash was partially offset by net
proceeds from sales of short-term investments of $1.3 billion
and proceeds from sales of PBG and PAS stock of $358 million.
In 2007, we used $3.7 billion for our investing activities,
reecting capital spending of $2.4 billion and acquisitions of
$1.3 billion. Acquisitions included the remaining interest in a
snacks joint venture in Latin America, Naked Juice Company and
Bluebird Foods, and the acquisition of a minority interest in a
juice company in the Ukraine through a joint venture with PAS.
Proceeds from our sale of PBG stock of $315 million were offset
by net purchases of short-term investments of $383 million.
We expect a high-single-digit decrease in net capital spending
in 2009. In addition, we do not anticipate cash proceeds in
2009 from sales of PBG and PAS stock due to the current capital
market conditions.
Financing Activities
In 2008, we used $3.0 billion for our nancing activities, primarily
reecting the return of operating cash ow to our shareholders
through common share repurchases of $4.7 billion and dividend
payments of $2.5 billion. The use of cash was partially offset by
proceeds from issuances of long-term debt, net of payments, of
$3.1 billion, stock option proceeds of $620 million and net pro-
ceeds from short-term borrowings of $445 million.
In 2007, we used $4.0 billion for our nancing activities,
primarily reecting the return of operating cash ow to our share-
holders through common share repurchases of $4.3 billion and
dividend payments of $2.2 billion, as well as net repayments of
short-term borrowings of $395 million. The use of cash was
partially offset by stock option proceeds of $1.1 billion and net
proceeds from issuances of long-term debt of $1.6 billion.
We annually review our capital structure with our Board,
including our dividend policy and share repurchase activity. In the
second quarter of 2008, our Board of Directors approved a 13%
dividend increase from $1.50 to $1.70 per share. During the third
quarter of 2008, we completed our $8.5 billion repurchase program
publicly announced on May 3, 2006 and expiring on June 30,
2009 and began repurchasing shares under our $8.0 billion
repurchase program authorized by the Board of Directors in
the second quarter of 2007 and expiring on June 30, 2010. The
current $8.0 billion authorization has approximately $6.4 billion
remaining for repurchase. We have historically repurchased
signicantly more shares each year than we have issued under
our stock-based compensation plans, with average net annual
repurchases of 1.8% of outstanding shares for the last ve years.
In 2009, we intend, subject to market conditions, to spend up
to $2.5 billion repurchasing shares.
Source of Cash Use of Cash
Other, net $18
Short-term debt $445
Long-term debt $3,070
Short-term
investments $1,282
Stock option exercises
$620
Operating activities
$6,999 Acquisitions
$1,925
Dividends
$2,541
Capital spending
$2,446
Share repurchases
$4,726
Cash proceeds from sale
of PBG and PAS stock
$358
2008 Cash Utilization