Pepsi 2013 Annual Report Download - page 83

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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.
We annually review our capital structure with our Board of Directors, including our dividend policy and
share repurchase activity. In the first quarter of 2013, we approved a new 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 succeeded the repurchase program that expired on June 30, 2013. In addition, on February 13, 2014,
we announced a 15% increase in our annualized dividend to $2.62 per share from $2.27 per share, effective
with the dividend that is expected to be paid in June 2014. Under these programs, we expect to return a total
of $8.7 billion to shareholders in 2014 through dividends of approximately $3.7 billion and share repurchases
of approximately $5 billion.
Free Cash Flow
We focus on free cash flow, which we also refer to as management operating cash flow, as an important
element in evaluating our performance. 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 activities. Additionally, we consider certain items (included in the table below) in evaluating free
cash flow. We believe investors should consider these items in evaluating our free cash flow results. Free
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 operating activities, as reflected in our cash flow statement,
to our free cash flow excluding the impact of the items below.
% Change
2013 2012 2011 2013 2012
Net cash provided by operating activities $ 9,688 $ 8,479 $ 8,944 14 (5)
Capital spending (2,795)(2,714)(3,339)
Sales of property, plant and equipment 109 95 84
Free cash flow 7,002 5,860 5,689 19 3
Discretionary pension and retiree medical contributions
(after-tax) 20 1,051 44
Merger and integration payments (after-tax) 21 63 283
Payments related to restructuring charges (after-tax) 105 260 21
Net payments related to income tax settlements 984 ——
Net capital investments related to merger and integration (4)10 108
Net capital investments related to restructuring plan 826 —
Payments for restructuring and other charges related to the
transaction with Tingyi (after-tax) 26 117 —
Free cash flow excluding above items $ 8,162 $ 7,387 $ 6,145 10 20
In all years presented, free cash flow was used primarily to repurchase shares and pay dividends. We expect
to continue to return free cash flow to our shareholders through dividends and share repurchases while
maintaining Tier 1 commercial paper access which we believe will ensure appropriate financial flexibility
and ready access to global credit markets at favorable interest rates. 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 “Risk Factors” in Item 1A. and “Our Business Risks” for certain factors that may
impact our credit ratings or our operating cash flows.