Pepsi 2008 Annual Report Download - page 67

65PepsiCo, Inc. 2008 Annual Report
Management Operating Cash Flow
We focus on management operating cash ow as a key element
in achieving maximum shareholder value, and it is the primary
measure we use to monitor cash ow 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
capabilities, 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 activi-
ties. The table below reconciles the net cash provided by operat-
ing activities, as reected in our cash ow statement, to our
management operating cash ow.
2008 2007 2006
Net cash provided by operating activities (a) $«6,999 $«6,934 $«6,084
Capital spending (2,446) (2,430) (2,068)
Sales of property, plant and equipment 98 47 49
Management operating cash ow $«4,651 $«4,551 $«4,065
(a) Includes restructuring payments of $180 million in 2008, $22 million in 2007 and
$56 million in 2006.
Management operating cash ow was used primarily to repur-
chase shares and pay dividends. We expect to continue to return
approximately all of our management operating cash ow to our
shareholders through dividends and share repurchases. However,
see “Our Business Risks” for certain factors that may impact our
operating cash ows.
Credit Ratings
Our debt ratings of Aa2 from Moody’s and A+ from Standard &
Poor’s contribute to our ability to access global capital and credit
markets. We have maintained strong investment grade ratings for
over a decade. Each rating is considered strong investment grade
and is in the rst quartile of its respective ranking system. These
ratings also reect the impact of our anchor bottlers’ cash ows
and debt.
Credit Facilities and Long-Term Contractual Commitments
See Note 9 for a description of our credit facilities and long-term
contractual 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.
However, at the time of the separation of our bottling operations
from us various guarantees were necessary to facilitate the transac-
tions. In 2008, we extended our guarantee of a portion of Bottling
Group LLC’s long-term debt in connection with the renancing of
a corresponding portion of the underlying debt. At December 27,
2008, we believe it is remote that these guarantees would require
any cash payment. We do not enter into off-balance-sheet transac-
tions specically structured to provide income or tax benets or
to avoid recognizing or disclosing assets or liabilities. See Note 9
for a description of our off-balance-sheet arrangements.
Source of Cash Use of Cash
Other, net $357
Long-term debt $1,589
Stock option exercises
$1,108
Operating activities
$6,934
Short-term investments
$383
Acquisitions
$1,320
Dividends
$2,204
Capital spending
$2,430
Share repurchases
$4,312
Short-term borrowings
$395
Cash proceeds from
sale of PBG stock
$315
2007 Cash Utilization
Source of Cash Use of Cash
Other, net $223
Short-term
investments $2,017
Stock option exercises
$1,194
Operating activities
$6,084
Long-term debt $106
Acquisitions
$522
Dividends
$1,854
Capital spending
$2,068
Share repurchases
$3,010
Short-term borrowings
$2,341
Cash proceeds from
sale of PBG stock
$318
2006 Cash Utilization