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Management's Discussion and Analysis
LIQUIDITY AND CAPITAL RESOURCES
At the end of the third quarter, we completed the acquisitions of Tropicana for $3.3 billion in cash and TSSC for $270 million in cash. The purchase prices were largely funded by the issuance of one year notes and commercial paper resulting in an increase in short-term borrowings at year-end 1998.
We increased our revolving credit facilities by $2.0 billion to $4.75 billion from $2.75 billion at year-end 1997. These unused credit facilities exist largely to support issuances of short-term debt. The facilities are composed of $3.1 billion expiring March 1999 and $1.65 billion expiring March 2003. At year-end 1998, $1.65 billion of short-term borrowings were reclassified as long-term, reflecting our intent and ability, through the existence of the unused revolving credit facilities, to refinance these borrowings. Annually, these facilities can be extended an additional year upon the mutual consent of PepsiCo and the lending institutions.
As discussed in Managementšs Discussion and Analysis Pending Transactions/Events, our Board of Directors approved a plan for the separation of PBG. As noted, an initial public offering is expected to be consummated in the second quarter of 1999 subject to market conditions and regulatory approvals. In February and March of 1999, PBG and its principal operating subsidiary, Bottling LLC incurred $6.55 billion of indebtedness, a large portion of which is intended to be temporary and be repaid with the proceeds of the Offering. It is intended that the remainder will be carried as PBGšs long-term indebtedness of which $2.3 billion is unconditionally guaranteed by PepsiCo. A substantial portion of the debt proceeds obtained by PBG was used to settle pre-existing intercompany amounts due to us. We plan to use these proceeds for general corporate purposes, including the repayment of a portion of our short-term borrowings.
As noted earlier in the discussion regarding pending transactions, as part of our agreement with Whitman to realign bottling territories, certain indebtedness associated with our transferred U.S. operations is planned to be assumed by new Whitman with net proceeds to us of $300 million.
Capital spending is expected to decline in 1999 to approximately $1.2 billion as we will no longer directly fund the capital spending related to PBG after the Offering. The decline will be offset, in part, by continued investment in other international bottling operations and in Frito-Lay International and full year capital spending in Tropicana.
Our strong cash-generating capability and financial condition give us ready access to capital markets throughout the world.
[Consolidated Cash Flows] [Consolidated Statement of Income]