Pepsi 2005 Annual Report Download - page 69

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Note 9 — Debt Obligations and Commitments
Short-term borrowings are reclassified to
long-term when we have the intent and
ability, through the existence of the unused
lines of credit, to refinance these borrow-
ings on a long-term basis. At year-end
2005, we maintained $2.1 billion in
corporate lines of credit subject to normal
banking terms and conditions. These credit
facilities support short-term debt issuances
and remained unused as of December 31,
2005. Of the $2.1 billion, $1.35 billion
expires in May 2006 with the remaining
$750 million expiring in June 2009.
In addition, $181 million of our debt
was outstanding on various lines of credit
maintained for our international divisions.
These lines of credit are subject to normal
banking terms and conditions and are
committed to the extent of our borrowings.
Interest Rate Swaps
We entered into interest rate swaps in
2004 to effectively convert the interest rate
of a specific debt issuance from a fixed
rate of 3.2% to a variable rate. The vari-
able weighted-average interest rate that we
pay is linked to LIBOR and is subject to
change. The notional amount of the inter-
est rate swaps outstanding at December
31, 2005 and December 25, 2004 was
$500 million. The terms of the interest
rate swaps match the terms of the debt
they modify. The swaps mature in 2007.
At December 31, 2005, approximately
78% of total debt, after the impact of the
associated interest rate swaps, was exposed
to variable interest rates, compared to 67%
at December 25, 2004. In addition to vari-
able rate long-term debt, all debt with matu-
rities of less than one year is categorized
as variable for purposes of this measure.
Cross Currency Interest Rate Swaps
In 2004, we entered into a cross currency
interest rate swap to hedge the currency
exposure on U.S. dollar denominated debt
of $50 million held by a foreign affiliate.
The terms of this swap match the terms of
the debt it modifies. The swap matures in
2008. The unrecognized gain related to
this swap was less than $1 million at
December 31, 2005, resulting in a U.S.
dollar liability of $50 million. At December
25, 2004, the unrecognized loss related to
this swap was $3 million, resulting in a
U.S. dollar liability of $53 million. We
have also entered into cross currency
interest rate swaps to hedge the currency
exposure on U.S. dollar denominated
intercompany debt of $125 million. The
terms of the swaps match the terms of the
debt they modify. The swaps mature over
the next two years. The net unrecognized
gain related to these swaps was $5 million
at December 31, 2005. The net unrecog-
nized loss related to these swaps was less
than $1 million at December 25, 2004.
2005 2004
Short-term debt obligations
Current maturities of long-term debt $ 143 $ 160
Commercial paper (3.3% and 1.6%) 3,140 1,287
Other borrowings (7.4% and 6.6%) 356 357
Amounts reclassified to long-term debt (750) (750)
$2,889 $1,054
Long-term debt obligations
Short-term borrowings, reclassified $ 750 $ 750
Notes due 2006-2026 (5.4% and 4.7%) 1,161 1,274
Zero coupon notes, $475 million due 2006-2012 (13.4%) 312 321
Other, due 2006-2014 (6.3% and 6.2%) 233 212
2,456 2,557
Less: current maturities of long-term debt obligations (143) (160)
$2,313 $2,397
The interest rates in the above table reflect weighted-average rates as of year-end.
Long-Term Contractual Commitments
Payments Due by Period Total 2006 2007-2008 2009-2010 2011 and beyond
Long-term debt obligations(a) .......................................................... $2,313 $ – $1,052 $ 876 $ 385
Operating leases ............................................................................. 769 187 253 132 197
Purchasing commitments(b) ............................................................ 4,533 1,169 1,630 775 959
Marketing commitments.................................................................. 1,487 412 438 381 256
Other commitments......................................................................... 99 82 10 6 1
$9,201 $1,850 $3,383 $2,170 $1,798
(a) Excludes current maturities of long-term debt of $143 million which are classified within current liabilities.
(b) Includes approximately $13 million of long-term commitments which are reflected in other liabilities in our Consolidated Balance Sheet.
The above table reflects non-cancelable commitments as of December 31, 2005 based on year-end foreign exchange rates.