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share repurchase program providing for the repurchase of up
to $10 billion of PepsiCo common stock from July 1, 2013
through June30, 2016, which will succeed the current repur-
chase program that expires on June30, 2013. In addition, we
announced a 5.6% increase in our annualized dividend to $2.27
per share from $2.15 per share, effective with the dividend
payable in June 2013. Under these programs, we expect to
return a total of $6.4billion to shareholders in 2013 through
dividends of approximately $3.4billion and share repurchases
of approximately $3.0billion.
Management Operating Cash Flow
We focus on management operating cash flow as a key element
in achieving maximum shareholder value. 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 inves-
tors should also consider net capital spending when evaluating
our cash from operating activities. Additionally, we consider
certain items (included in the table below) in evaluating man-
agement operating cash flow. We believe investors should
consider these items in evaluating our management operating
cash flow results. Management operating cash flow excluding
certain items is the primary measure we use to monitor cash
flow performance. However, it is not a measure provided by
U.S. GAAP. Therefore, this measure is not, and should not be
viewed as, a substitute for U.S. GAAP cash flow measures.
The table below reconciles net cash provided by operat-
ing activities, as reflected in our cash flow statement, to our
management operating cash flow excluding the impact of the
items below.
2012 2011 2010
Net cash provided by operating
activities $ 8,479 $ 8,944 $ 8,448
Capital spending (2,714) (3,339) (3,253)
Sales of property, plant and
equipment 95 84 81
Management operating cash flow 5,860 5,689 5,276
Discretionary pension and retiree
medical contributions (after-tax) 1,051 44 983
Merger and integration payments
(after-tax) 63 283 299
Payments related to restructuring
charges (after-tax) 260 21 20
Capital investments related to the
PBG/PAS integration 10 108 138
Capital investments related to the
Productivity Plan 26 – –
Payments for restructuring and other
charges related to the transaction
with Tingyi (after-tax) 117 – –
Foundation contribution (after-tax) – – 64
Debt repurchase (after-tax) – – 112
Management operating cash flow
excluding above items $ 7,387 $ 6,145 $ 6,892
In all years presented, management operating cash flow was
used primarily to repurchase shares and pay dividends. We
expect to continue to return management operating cash flow
to our shareholders through dividends and share repurchases
while maintaining credit ratings that provide us with ready
access to global and capital credit markets. However, see “Our
borrowing costs and access to capital and credit markets may
be adversely affected by a downgrade or potential downgrade
of our credit ratings.” in “Our Business Risks” for certain fac-
tors that may impact our operating cash flows.
Any downgrade of our credit ratings by a credit rating
agency, especially any downgrade to below investment grade,
could increase our future borrowing costs or impair our ability
to access capital and credit markets on terms commercially
acceptable to us, or at all. In addition, any downgrade of our
current short-term credit ratings could impair our ability to
access the commercial paper market with the same flexibility
that we have experienced historically, and therefore require us
to rely more heavily on more expensive types of debt financ-
ing. See “Our Business Risks,” Note9 to our consolidated
financial statements and “Our borrowing costs and access
to capital and credit markets may be adversely affected by a
downgrade or potential downgrade of our credit ratings.” in
“Our Business Risks.”
Credit Facilities and Long-Term Contractual
Commitments
See Note 9 to our consolidated financial statements for a
description of our credit facilities and long-term contrac-
tual commitments.
O-Balance-Sheet Arrangements
It is not our business practice to enter into off-balance-sheet
arrangements, other than in the normal course of business.
Additionally, we do not enter into off-balance-sheet transac-
tions specifically structured to provide income or tax benefits
or to avoid recognizing or disclosing assets or liabilities. See
Note9 to our consolidated financial statements.
Management’s Discussion and Analysis
2012 PEPSICO ANNUAL REPORT 67