PepsiCo Annual Report 2001

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Consolidated Cash Flows

Operating cash flow for 2001 was $2.9 billion compared with $3.1 billion for 2000. Operating cash flow primarily reflects externally reported net cash provided by operating activities of $4.2 billion, excluding after-tax net interest payments and the cash payments for merger-related costs and other impairment and restructuring charges, less capital spending, sales of property, plant and equipment and other net investing activity. Our 2001 operating cash flow reflects a $421 million contribution to our U.S. pension plans compared to a $70 million contribution in 2000. The 2001 payment was made following a review of our anticipated future sources and uses of cash. We do not expect to make a cash contribution to our U.S. pension plans in 2002. Additionally, in 2001, we received tax refunds of $62 million versus $145 million in 2000.

As shown in our Consolidated Statement of Cash Flows, our 2001 cash and cash equivalents decreased $355 million to $683 million reflecting cash used for investing and financing activities primarily funded from net cash provided by operations. The cash used in investing activities reflects capital spending, net purchases of short-term investments, the acquisition of SoBe and the contribution to our pension plans. The cash used in financing activities reflects share repurchases and dividend payments, partially offset by proceeds from the exercise of stock options and the net proceeds of $524 million from the issuance of shares in connection with the merger with Quaker. We issued 13.2 million shares of our repurchased common stock to qualify for pooling-of-interests accounting treatment.

Our 2000 cash and cash equivalents decreased $208 million to $1 billion reflecting cash used for financing and investing activities primarily funded from net cash provided by operations. The cash used in financing activities reflects share repurchases, dividend payments and net long-term debt payments, partially offset by proceeds from the exercise of stock options. The cash used in investing activities reflects capital spending and net purchases of short-term investments.

Common Share Repurchases
Common share repurchase activity was as follows:

common share repurchases

Quaker repurchased common shares totaling $242 million in 2000 and $373 million in 1999.

Subsequent to our merger with Quaker, we repurchased 35 million shares of our common stock at a cost of $1.7 billion under the emergency and exemptive orders from the Securities and Exchange Commission aimed at facilitating the reopening of the U.S. equities market on September 17, 2001, following the September 11th terrorist attacks. Our Board of Directors authorized the repurchase of up to $2 billion worth of our common stock during the terms of the orders. Repurchases under the orders did not compromise our ability to account for the merger with Quaker as a pooling-of-interests. All authorizations for share repurchases have been rescinded as a result of the PepsiCo and Quaker merger.

Management's Discussion and Analysis continued -->