Pepsi 2012 Annual Report Download - page 68

Our Liquidity and Capital Resources
We believe that our cash generating capability and financial
condition, together with our revolving credit facilities and
other available methods of debt financing (including long-term
debt financing which, depending upon market conditions, we
may use to replace a portion of our commercial paper bor-
rowings), will be adequate to meet our operating, investing
and financing needs. Sources of cash available to us to fund
cash outflows, such as our anticipated share repurchases and
dividend payments, include cash from operations and pro-
ceeds obtained in the U.S. debt markets. However, there can
be no assurance that volatility in the global capital and credit
markets will not impair our ability to access these markets on
terms commercially acceptable to us, or at all. See Note9 to
our consolidated financial statements for a description of our
credit facilities. See also “Unfavorable economic conditions
may have an adverse impact on our business results or finan-
cial condition.” in “Our Business Risks.”
As of December 29, 2012, we had cash, cash equivalents
and short-term investments of $5.3billion outside the U.S.
To the extent foreign earnings are repatriated, such amounts
would be subject to income tax liabilities, both in the U.S. and
in various applicable foreign jurisdictions. In addition, currency
restrictions enacted by the government in Venezuela have
impacted our ability to pay dividends outside of the country
from our snack and beverage operations in Venezuela. As
of December29, 2012, our operations in Venezuela com-
prised 7% of our cash and cash equivalents balance. Effective
February 2013, the Venezuelan government devalued the
bolivar by resetting the official exchange rate to 6.3 bolivars
per dollar. For additional information on the impact of the
devaluation, see “Market Risks — Foreign Exchange” in “Our
Business Risks.”
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 con-
tinuing basis, we consider various transactions to increase
shareholder value and enhance our business results, including
acquisitions, divestitures, joint ventures, share repurchases
and other structural changes. These transactions may result
in future cash proceeds or payments.
The table below summarizes our cash activity:
2012 2011 2010
Net cash provided by operating
activities $ 8,479 $ 8,944 $ 8,448
Net cash used for investing
activities $ (3,005) $ (5,618) $ (7,668)
Net cash (used for)/provided by
financing activities $ (3,306) $ (5,135) $ 1,386
Operating Activities
During 2012, net cash provided by operating activities was
$8.5billion, compared to net cash provided of $8.9billion in
the prior year. The operating cash flow performance primarily
reflects discretionary pension and retiree medical contribu-
tions of $1.5 billion ($1.1billion after-tax) in 2012, partially
offset by favorable working capital comparisons to 2011.
During 2011, net cash provided by operating activities was
$8.9billion, compared to net cash provided of $8.4billion in
the prior year. The increase over 2010 primarily reflects the
overlap of discretionary pension contributions of $1.3billion
($1.0billion after-tax) in 2010, partially offset by unfavorable
working capital comparisons to the prior year.
Also see “Management Operating Cash Flow” below for
certain other items impacting net cash provided by operat-
ing activities.
Investing Activities
During 2012, net cash used for investing activities was $3.0bil-
lion, primarily reflecting $2.6 billion for net capital spending
and $0.3billion of cash payments related to the transaction
with Tingyi.
During 2011, net cash used for investing activities was
$5.6billion, primarily reflecting $3.3 billion for net capital
spending and $2.4billion of cash paid, net of cash and cash
equivalents acquired, in connection with our acquisition
of WBD.
We expect 2013 net capital spending to be approximately
$3.0 billion, within our long-term capital spending target of
less than or equal to 5% of net revenue.
Financing Activities
During 2012, net cash used for financing activities was
$3.3billion, primarily reflecting the return of operating cash
flow to our shareholders through dividend payments and
share repurchases of $6.5 billion as well as net repayments
ofshort-term borrowings of $1.5 billion, partially offset by
net proceeds from long-term debt of $3.6billion and stock
option proceeds of $1.1billion.
During 2011, net cash used for financing activities was
$5.1billion, primarily reflecting the return of operating cash
flow to our shareholders through share repurchases and divi-
dend payments of $5.6billion, our purchase of an additional
$1.4billion of WBD ordinary shares (including shares under-
lying American Depositary Shares (ADS)) and our repurchase
of certain WBD debt obligations of $0.8billion, partially offset
by net proceeds from long-term debt of $1.4billion and stock
option proceeds of $0.9billion.
We annually review our capital structure with our Board
of Directors, including our dividend policy and share repur-
chase activity. In the first quarter of 2013, we approved a new
Management’s Discussion and Analysis
2012 PEPSICO ANNUAL REPORT66