PepsiCo, a snack food and beverage company, has over $39 billion in annual revenues with 185,000 full-time employees. PepsiCo’s principal source of liquidity is their operating cash flow; however, their operating activities are impacted by seasonality. Working capital needs are impacted by weekly sales, which are high in the third quarter due to holiday and seasonal sales patterns and lowest in the first quarter.
In 2007, in order to raise money to repay existing short term debt of some 500 million dollars, Pepsi issued 1 billion dollars worth of senior unsecured notes. The notes mature in 2012 and pay 3.2% annually. The balance was used for general corporate purposes. The aforementioned actions were taken in the second quarter of 2007. Similar acts and or arrangements were made in the third and fourth quarters of 2007. Operating activities in 2007 accounted for $6.934 billion of the $10.3 billion that Pepsi recognized as the total source of cash. The balance came from long-term debt ($1.6 billion), stock option exercises ($1.11 billion), the sale of PBG stock ($315 million) and other ($357 million). As of December 29, 2007, PepsiCo has $4.7 billion in long-term debt with $1.4 billion reclassified short-term borrowings. PepsiCo borrows from various lenders to supplement their working capital. PepsiCo has securitized $850 million in authorized debt from The Chase Manhattan Bank of New York with zero coupon serial debentures due in 2012. Another lender that PepsiCo borrows from is Credit Suisse of Zurich. They are authorized $400 million in Swiss francs, and have acquired perpetual Swiss bonds at the return rate of 7.5%. The bonds were issued in 1986 and interest accrues annually on April 18th.
Pepsi has chosen Bank of New York Mellon to issue its stock. This is a recently merged corporation between The Bank of New York Company, Inc. and Mellon Financial Corporation of Pittsburgh. Bank of New York...