Pepsi 2009 Annual Report Download - page 69

57PepsiCo, Inc. 2009 Annual Report
OUR LIQUIDITY AND CAPITAL RESOURCES
Global capital and credit markets, including the commercial paper
markets, experienced considerable volatility in 2009. This volatility
did not have a material unfavorable impact on our liquidity, and
we continue to have access to the capital and credit markets. In
addition, we have revolving credit facilities that are discussed in
Note 9. We believe that our cash generating capability and financial
condition, together with our revolving credit facilities and other
available methods of debt financing, will be adequate to meet our
operating, investing and financing needs. However, there can be
no assurance that continued or increased volatility in the global
capital and credit markets will not impair our ability to access these
markets on terms commercially acceptable to us. See also “The
global economic downturn has resulted in unfavorable economic
conditions and increased volatility in foreign exchange rates and
may have an adverse impact on our business results or financial
condition.” and “Any downgrade of our credit rating could increase
our future borrowing costs.” in “Our Business Risks.”
In addition, currency restrictions enacted by the government
in Venezuela have impacted our ability to pay dividends from our
snack and beverage operations in Venezuela outside of the country.
As of December 26, 2009, our operations in Venezuela comprised
7% of our cash and cash equivalents balance.
Furthermore, our cash provided from operating activities is
somewhat impacted by seasonality. Working capital needs are
impacted by weekly sales, which are generally highest in the third
quarter due to seasonal and holiday-related sales patterns, and
generally lowest in the first quarter. On a continuing basis, we
consider various transactions to increase shareholder value and
enhance our business results, including acquisitions, divestitures,
joint ventures and share repurchases. These transactions may
result in future cash proceeds or payments.
Operating Activities
In 2009, our operations provided $6.8 billion of cash, compared
to $7.0 billion in the prior year, reflecting a $1.0 billion ($0.6 billion
after-tax) discretionary pension contribution to our U.S. pension
plans, $196 million of restructuring payments related to our
Productivity for Growth program and $49 million of PBG/PAS
merger cost payments. Operating cash flow also reflected net
favorable working capital comparisons to the prior year.
In 2008, our operations provided $7.0 billion of cash, compared
to $6.9 billion in the prior year, primarily reflecting our solid business
results. Our operating cash flow in 2008 reflects restructuring
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.
Investing Activities
In 2009, net cash used for investing activities was $2.4 billion,
primarily reflecting $2.1 billion for capital spending and $0.5 billion
for acquisitions.
In 2008, we used $2.7 billion for our investing activities, primarily
reflecting $2.4 billion for capital spending and $1.9 billion for
acquisitions. Significant 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.
We anticipate net capital spending of about $3.6 billion in 2010.
Additionally, in connection with our December 7, 2009 agreement
with Dr Pepper Snapple Group, Inc. (DPSG) to manufacture and
distribute certain DPSG products in the territories where they are
currently sold by PBG and PAS, we will make an upfront payment
of $900 million to DPSG upon closing of the proposed mergers
with PBG and PAS.
Financing Activities
In 2009, net cash used for financing activities was $2.5 billion, primarily
reflecting the return of operating cash flow to our shareholders
through dividend payments of $2.7 billion. Net proceeds from
issuances of long-term debt of $0.8 billion and stock option proceeds
of $0.4 billion were mostly offset by net repayments of short-term
borrowings of $1.0 billion.
In 2008, we used $3.0 billion for our financing activities, primarily
reflecting the return of operating cash flow 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 proceeds
from short-term borrowings of $445 million.
Subsequent to year-end 2009, we issued $4.25 billion of fixed
and floating rate notes. We intend to use the net proceeds from
this offering to finance a portion of the purchase price for the
PBG and PAS mergers and to pay related fees and expenses in
connection with the mergers. See Note 9 for further information
regarding financing in connection with the PBG and PAS mergers.
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