Pepsi 2006 Annual Report Download - page 74

Such amounts are settled on terms
consistent with other trade receivables
and payables. See Note 9 regarding our
guarantee of certain PBG debt.
In addition, we coordinate, on an
aggregate basis, the negotiation and
purchase of sweeteners and other raw
materials requirements for certain of
our bottlers with suppliers. Once we
have negotiated the contracts, the bot-
tlers order and take delivery directly
from the supplier and pay the suppliers
directly. Consequently, these
transactions are not reflected in our
consolidated financial statements. As
the contracting party, we could be liable
to these suppliers in the event of any
nonpayment by our bottlers, but we
consider this exposure to be remote.
In the second quarter of 2006, we
entered into a new unsecured revolving
credit agreement which enables us to
borrow up to $1.5 billion subject to cus-
tomary terms and conditions. Funds
borrowed under this agreement may be
used for general corporate purposes,
including supporting our outstanding
commercial paper issuances. The agree-
ment terminates in May 2011 and
replaces our previous $2.1 billion of
credit facilities. As of December 30,
2006, we have reclassified $1.5 billion of
short-term debt to long-term based on
our intent and ability to refinance on a
long-term basis.
In addition, $394 million of our debt
related to borrowings from various lines
of credit maintained for our international
divisions. These lines of credit are subject
to normal banking terms and conditions
and are fully committed to the extent
of our borrowings.
In the third quarter of 2006, we
entered into a U.S. $2.5 billion euro
medium term note program. Under the
program, we may issue unsecured notes
under mutually agreed upon terms with
the purchasers of the notes. Proceeds
from any issuance of notes may be used
for general corporate purposes, except
as otherwise specified in the related
prospectus. As of December 30, 2006,
we have no outstanding notes under
the program.
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 variable weighted-average interest
rate that we pay is linked to LIBOR and
is subject to change. The notional
amount of the interest rate swaps out-
standing at December 30, 2006 and
December 31, 2005 was $500 million.
The terms of the interest rate swaps
match the terms of the debt they mod-
ify. The swaps mature in May 2007.
At December 30, 2006, approxi-
mately 63% of total debt, after the
impact of the related interest rate
swaps, was exposed to variable interest
rates, compared to 78% at December
31, 2005. In addition to variable rate
long-term debt, all debt with maturities
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 unrealized gain related to this swap
was less than $1 million at December
30, 2006 and December 31, 2005,
resulting in a U.S. dollar liability of
$50 million. We have also entered into
cross currency interest rate swaps to
hedge the currency exposure on U.S.
dollar denominated intercompany debt
of $95 million at December 30, 2006
and $125 million at December 31, 2005.
The terms of the swaps match the terms
of the debt they modify. The swaps
mature in 2007. The net unrealized loss
related to these swaps was less than
$1 million at December 30, 2006 and
the net unrealized gain related to
these swaps was $5 million at
December 31, 2005.
2006 2005
Short-term debt obligations
Current maturities of long-term debt $ 605 $ 143
Commercial paper (5.3% and 3.3%) 792 3,140
Other borrowings (7.3% and 7.4%) 377 356
Amounts reclassified to long-term debt (1,500) (750)
$ 274 $2,889
Long-term debt obligations
Short-term borrowings, reclassified $1,500 $ 750
Notes due 2007-2026 (6.0% and 5.4%) 1,148 1,161
Zero coupon notes, $425 million due 2007-2012 (13.4%) 299 312
Other, due 2007-2016 (6.1% and 6.3%) 208 233
$3,155 2,456
Less: current maturities of long-term debt obligations (605) (143)
$2,550 $2,313
The interest rates in the above table reflect weighted-average rates at year-end.
Note 9 — Debt Obligations and Commitments
72
2006 2005 2004
Net revenue $4,837 $4,633 $4,170
Selling, general and administrative expenses $87 $143 $114
Accounts and notes receivable $175 $178
Accounts payable and other current liabilities $62 $117
These transactions with our bottling affiliates are reflected in our consolidated
financial statements as follows:
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