Financials - PepsiCo

2009
Snacks volume grew 9%, reflecting broad-based increases driven
by double-digit growth in India and the Middle East, partially
offset by a low-single-digit decline in China. Additionally, South
Africa grew volume at a low-single-digit rate and Australia grew
volume slightly. The net impact of acquisitions and divestitures
contributed 2 percentage points to the snacks volume growth.
Beverage volume grew 8%, reflecting broad-based increases
driven by double-digit growth in India and high-single-digit
growth in Pakistan. Additionally, the Middle East grew at a
mid-single-digit rate and China grew at a low-single-digit rate.
Acquisitions had a nominal impact on the beverage volume
growth rate.
Net revenue grew 9%, reflecting volume growth and favorable
effective net pricing. Foreign currency reduced net revenue
growth by over 3 percentage points. The net impact of acquisitions
and divestitures contributed 1 percentage point to the net
revenue growth.
Operating profit grew 21%, driven primarily by the net revenue
growth. The net impact of acquisitions and divestitures
contributed 11 percentage points to the operating profit growth
and included a one-time gain associated with the contribution of
our snacks business in Japan to form a joint venture with Calbee.
Foreign currency reduced operating profit growth by 3 percentage
points.
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 borrowings),
will be adequate to meet our operating, investing and financing
needs. 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 for a description of our credit facilities.
See also “Unfavorable economic conditions in the countries in
which we operate may have an adverse impact on our business
results or financial condition.”
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 25, 2010, our operations in Venezuela
comprised 4% 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
During 2010, net cash provided by operating activities was
$8.4 billion, compared to net cash provided of $6.8 billion in the
prior year. The increase over the prior year primarily reflects
the incremental operating results from our acquisitions of PBG
and PAS, as well as favorable working capital comparisons to
the prior year. Also see “Management Operating Cash Flow”
below for certain other items impacting net cash provided by
operating activities.
In 2009, our operations provided $6.8 billion of cash, compared
to $7.0 billion in 2008, 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
merger cost payments related to our acquisitions of PBG and
PAS. Operating cash flow also reflected net favorable working
capital comparisons to 2008.
Investing Activities
During 2010, net cash used for investing activities was $7.7 billion,
primarily reflecting $3.2 billion for net capital spending,
$2.8 billion of net cash paid in connection with our acquisitions
of PBG and PAS, and $0.9 billion of cash paid in connection with
our manufacturing and distribution agreement with DPSG.
We also paid $0.5 billion to acquire WBD American Depositary
Shares in the open market.
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.
Subsequent to year-end 2010, we paid $0.2 billion to acquire
WBD American Depositary Shares in the open market. We also
spent approximately $3.8 billion to acquire approximately 66% of
WBD’s outstanding ordinary shares, increasing our total ownership
of WBD to approximately 77%. In addition to these transactions,
we expect to incur an additional $1.4 billion of investing
cash outflows in connection with our intended purchase of the
remaining outstanding WBD shares, funded primarily through
existing international cash. See Note 15.
We anticipate net capital spending in 2011 of about $3.7 billion,
which includes about $150 million of capital spending related
to the integration of PBG and PAS, as well as capital spending
related to our acquisition of WBD.
Financing Activities
During 2010, net cash provided by financing activities was
$1.4 billion, primarily reflecting proceeds from issuances of
long-term debt of $6.5 billion, mostly in connection with our
acquisitions of PBG and PAS, and net proceeds from short-term
borrowings of $2.5 billion. These increases were largely offset
by the return of operating cash flow to our shareholders through
share repurchases and dividend payments of $8.0 billion.
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
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