|UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

Form 10-Q

/x/   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 1, 2005


/ /   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______

Commission File Number 001-15019


PEPSIAMERICAS, INC.(Exact name of registrant as specified in its charter)
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Delaware                                                                       |  | 13-6167838                                             
|------------------------------------------------------------------------------ |  | -------------------------------------------------------
|(State or other jurisdiction of
                incorporation or organization) |  | (I.R.S. Employer
                Identification Number)

|4000 Dain Rauscher Plaza,
                60 South Sixth Street
                Minneapolis, Minnesota |  | 55402     
|------------------------------------------------------------------------------------------------------ |  | ----------
|(Address of principal executive offices)                                                               |  | (Zip Code)

|Registrant's telephone number, including area code (612) 661-4000


Indicate by check mark
whether the registrant: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|YES | /x/ | NO | / / | 
|--- | --- | -- | --- | 

|Indicate by check mark whether the registrant
is an accelerated filer (as defined in Exchange Act Rule 12b-2).
|--------------------------------------------------------------------------------------------------------------

|YES | /x/ | NO | / / | 
|--- | --- | -- | --- | 

|Indicate by check mark whether the registrant
is a shell company (as defined in Exchange Act Rule 12b-2).
|---------------------------------------------------------------------------------------------------------

|YES | / / | NO | /x/ | 
|--- | --- | -- | --- | 

|As of October 28, 2005 the Registrant
had 133,609,015 outstanding  shares
of common  stock,  par value  $0.01 per  share,  the
Registrant's only class of common stock.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

|PEPSIAMERICAS, INC.FORM 10-QTHIRD QUARTER 2005
|----------------------------------------------

|TABLE OF CONTENTS
|-----------------

|              |  |                       |                                                                                       |     
|------------- |  | --------------------- | ------------------------------------------------------------------------------------- | ----
|              |  |                       |                                                                                       | Page
|              |  |                       |                                                                                       |     
|PART I        |  | FINANCIAL INFORMATION
|             
|              |  | Item 1.               | Financial Statements                                                                  |     
|              |  |                       | Condensed Consolidated Statements of Income                                           | 2   
|              |  |                       | Condensed Consolidated Balance Sheets                                                 | 3   
|              |  |                       | Condensed Consolidated Statements of Cash Flows                                       | 4   
|              |  |                       | Notes to Condensed Consolidated Financial Statements                                  | 5   
|             
|              |  | Item 2.               | Managements Discussion and Analysis of Financial Condition
and Results of Operations | 17  
|             
|              |  | Item 3.               | Quantitative and Qualitative Disclosures About Market Risk                            | 31  
|             
|              |  | Item 4.               | Controls and Procedures                                                               | 32  
|             
|PART II       |  | OTHER INFORMATION    
|             
|              |  | Item 1.               | Legal Proceedings                                                                     | 33  
|             
|              |  | Item 2.               | Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities      | 33  
|             
|              |  | Item 6.               | Exhibits and Reports on Form 8-K                                                      | 33  
|             
|SIGNATURE     |  |                       |                                                                                       | 34  
|             
|EXHIBIT INDEX |  |                       |                                                                                       | 35  

|1
|-

---

|PART I - FINANCIAL INFORMATION
|------------------------------

|Item 1.    Financial Statements
|-------------------------------

|PEPSIAMERICAS, INC.CONDENSED
CONSOLIDATED STATEMENTS OF INCOME(unaudited and in
millions, except per share data)
|----------------------------------------------------------------------------------------------------------------

|                                                                                                  | Third Quarter | First Nine Months
|------------------------------------------------------------------------------------------------- | ------------- | -----------------
|
|Net sales                                                                                         |               |                  
|Cost of goods sold                                                                                |               |                  
|                                                                                                  |               |                  
|Gross profit                                                                                      |               |                  
|Selling, delivery and administrative expenses                                                     |               |                  
|Fructose settlement                                                                               |               |                  
|Special charges, net                                                                              |               |                  
|                                                                                                  |               |                  
|Operating income                                                                                  |               |                  
|Interest expense, net                                                                             |               |                  
|Other income (expense), net                                                                       |               |                  
|                                                                                                  |               |                  
|Income before income taxes and equity in net
          income (loss) of nonconsolidated companies |               |                  
|Income taxes                                                                                      |               |                  
|Equity in net income (loss) of nonconsolidated companies                                          |               |                  
|                                                                                                  |               |                  
|Net income                                                                                        |               |                  
|                                                                                                  |               |                  
|Weighted average common shares:                                                                   |               |                  
|Basic                                                                                             |               |                  
|Incremental effect of stock options and awards                                                    |               |                  
|                                                                                                  |               |                  
|Diluted                                                                                           |               |                  
|                                                                                                  |               |                  
|Net income per share:                                                                             |               |                  
|Basic                                                                                             |               |                  
|Diluted                                                                                           |               |                  
|                                                                                                  |               |                  
|                                                                                                  |               |                  
|Cash dividends per share                                                                          |               |                  

|See
accompanying notes to condensed consolidated financial statements.
|----------------------------------------------------------------------

|2
|-

---

|PEPSIAMERICAS, INC.CONDENSED
CONSOLIDATED BALANCE SHEETS(unaudited and in
millions, except per share data)
|----------------------------------------------------------------------------------------------------------

|                                                                                    | End ofThird Quarter2005 | End ofFiscal Year2004
|----------------------------------------------------------------------------------- | ----------------------- | ---------------------
|ASSETS:                                                                             |                         |                      
|Current assets:                                                                     |                         |                      
|Cash and equivalents                                                                |                         |                      
|Receivables, net                                                                    |                         |                      
|Inventories                                                                         |                         |                      
|Other current assets                                                                |                         |                      
|                                                                                    |                         |                      
|Total current assets                                                                |                         |                      
|Property (at cost)                                                                  |                         |                      
|Accumulated depreciation                                                            |                         |                      
|                                                                                    |                         |                      
|Net property                                                                        |                         |                      
|Goodwill and intangible assets, net                                                 |                         |                      
|Other assets                                                                        |                         |                      
|                                                                                    |                         |                      
|Total assets                                                                        |                         |                      
|                                                                                    |                         |                      
|LIABILITIES AND SHAREHOLDERS' EQUITY:                                               |                         |                      
|Current liabilities:                                                                |                         |                      
|Short-term debt, including current maturities of long-term debt                     |                         |                      
|Payables                                                                            |                         |                      
|Other current liabilities                                                           |                         |                      
|                                                                                    |                         |                      
|Total current liabilities                                                           |                         |                      
|Long-term debt                                                                      |                         |                      
|Deferred income taxes                                                               |                         |                      
|Other liabilities                                                                   |                         |                      
|                                                                                    |                         |                      
|Total liabilities                                                                   |                         |                      
|                                                                                    |                         |                      
|Shareholders' equity:                                                               |                         |                      
|Preferred stock ($0.01 par
value, 12.5 million shares authorized; no shares issued) |                         |                      
|Common stock ($0.01 par value, 350 million
shares authorized; 167.6 million shares  |                         |                      
|issued - 2005 and 2004)                                                             |                         |                      
|Retained income                                                                     |                         |                      
|Unearned stock-based compensation                                                   |                         |                      
|Accumulated other comprehensive income (loss):                                      |                         |                      
|Cumulative translation adjustment                                                   |                         |                      
|Net unrealized
investment and hedging gains                                         |                         |                      
|Minimum pension liability                                                           |                         |                      
|                                                                                    |                         |                      
|Accumulated
other comprehensive income (loss)                                       |                         |                      
|Treasury stock, at cost (33.0 million shares - 2005 and 29.0 million shares - 2004) |                         |                      
|                                                                                    |                         |                      
|Total shareholders' equity                                                          |                         |                      
|                                                                                    |                         |                      
|Total liabilities and shareholders' equity                                          |                         |                      
|                                                                                    |                         |                      

|See
accompanying notes to condensed consolidated financial statements.
|----------------------------------------------------------------------

|3
|-

---

|PEPSIAMERICAS, INCCONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS(unaudited and in
millions)
|--------------------------------------------------------------------------------------------

|                                                                       | First Nine Months
|---------------------------------------------------------------------- | -----------------
|
|CASH FLOWS FROM OPERATING ACTIVITIES:                                  |                  
|Income from continuing operations                                      |                  
|Adjustments to reconcile to net cash provided by operating activities: |                  
|Depreciation and amortization                                          |                  
|Deferred income taxes                                                  |                  
|Special charges, net                                                   |                  
|Cash outlays related to special charges                                |                  
|Gain on sale of investment                                             |                  
|Other                                                                  |                  
|Changes in assets and liabilities, exclusive of acquisitions:          |                  
|Increase in securitized receivables                                    |                  
|Increase in remaining receivables                                      |                  
|Increase in inventories                                                |                  
|Increase (decrease) in payables                                        |                  
|Increase in income taxes payable                                       |                  
|Net change in other assets and liabilities                             |                  
|                                                                       |                  
|Net cash provided by operating activities
of continuing operations     |                  
|                                                                       |                  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                  |                  
|Capital investments                                                    |                  
|Acquisitions, net of cash acquired                                     |                  
|Proceeds from sales of property                                        |                  
|Purchase of equity investment                                          |                  
|Proceeds from sale of investment                                       |                  
|                                                                       |                  
|Net cash used in investing activities                                  |                  
|                                                                       |                  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                  |                  
|Net borrowings of short-term debt                                      |                  
|Proceeds from issuance of long-term debt                               |                  
|Repayment of long-term debt                                            |                  
|Treasury stock purchases                                               |                  
|Issuance of common stock                                               |                  
|Cash dividends                                                         |                  
|                                                                       |                  
|Net cash provided by (used in) financing activities                    |                  
|                                                                       |                  
|Net cash used in discontinued operations                               |                  
|Effects of exchange rate changes on cash and equivalents               |                  
|                                                                       |                  
|Change in cash and equivalents                                         |                  
|Cash and equivalents at beginning of year                              |                  
|                                                                       |                  
|Cash and equivalents at end of third quarter                           |                  
|                                                                       |                  

|See
accompanying notes to condensed consolidated financial statements.
|----------------------------------------------------------------------

|4
|-

---

|PEPSIAMERICAS, INC.NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS(unaudited)
|----------------------------------------------------------------------------------

|1. | Significant Accounting Policies
|-- | -------------------------------

| | Quarterly
reporting  The Condensed Consolidated Financial Statements included herein have
been prepared by PepsiAmericas, Inc. (referred to herein as PepsiAmericas,
we, our or us) without audit. Certain information and
disclosures normally included in financial statements prepared in accordance with United
States generally accepted accounting principles have been condensed or omitted pursuant to
the rules and regulations of the Securities and Exchange Commission, although we believe
that the disclosures made are adequate to provide for fair presentation. These Condensed
Consolidated Financial Statements should be read in conjunction with the financial
statements and notes thereto included in our Annual Report on Form 10-K for the fiscal
year 2004. In the opinion of management, the information furnished herein reflects all
adjustments (consisting only of normal, recurring adjustments) necessary for a fair
statement of results for the interim periods presented.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Our
fiscal year consists of 52 or 53 weeks ending on the Saturday closest to December
31st. Our 2004 fiscal year contained 52 weeks and ended January 1, 2005. Our
third quarter and first nine months of 2005 and 2004 were based on the thirteen and
thirty-nine weeks ended October 1, 2005 and October 2, 2004, respectively. Our business is
highly seasonal; accordingly, the operating results of any individual quarter may not be
indicative of a full years operating results.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Net
income per share  Basic net income per share is based upon the weighted-average
number of common shares outstanding. Diluted net income per share assumes the exercise of
all options and includes the grant of restricted stock awards, which are both dilutive
whether exercisable or not. The dilutive effects of stock options and restricted stock
awards are measured under the treasury stock method.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Options
to purchase the following shares were not included in the computation of diluted net
income per share because the exercise price was greater than the average market price of
the common shares during the related period:
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                                           | Third Quarter |         | First Nine Months |  
| | ----------------------------------------- | ------------- | ------- | ----------------- | -
| |                                           |               |         |                   |  
| |                                           | 2005          |         | 2004              |  
| |                                           |               |         |                   |  
| |                                           |               |         |                   |  
| | Shares under options outstanding          |               | 471,410 |                   |  
| | Weighted-average exercise price per share | $             | 24.79   |                   | $

| | Reclassifications
 Certain amounts in the prior period Condensed Consolidated Financial Statements
have been reclassified to conform to the current year presentation.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Stock-based
compensation We use the intrinsic value method of accounting for our
stock-based compensation under Accounting Principles Board (APB) Opinion No.
25, Accounting for Stock Issued to Employees. No stock-based employee
compensation cost for options is reflected in net income, as all options granted had an
exercise price equal to the market value of the underlying common stock on the date of
grant. Compensation expense for restricted stock awards is reflected in net income, and
this expense is recognized ratably over the awards vesting periods. The following
table illustrates the effect on net income and net income per share if we had applied the
fair value recognition provisions of Statement of Financial Accounting Standards
(SFAS) SFAS No. 123, Accounting for Stock-Based Compensation, to
stock-based employee compensation.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|5
|-

---

| | The
table (in millions, except per share data) is presented pursuant to amended disclosure
requirements of SFAS No. 148, Accounting for Stock-Based Compensation 
Transition and Disclosure.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                                                                                                                                                                     | Third Quarter |      | First Nine Months |  
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------- | ---- | ----------------- | -
| |                                                                                                                                                                     |               |      |                   |  
| |                                                                                                                                                                     | 2005          |      | 2004              |  
| |                                                                                                                                                                     |               |      |                   |  
| |                                                                                                                                                                     |               |      |                   |  
| | Net income, as reported                                                                                                                                             | $             | 63.7 |                   | $
| | Add:  Total stock-based
         compensation expense included in   net income as reported,
        net of tax                                                      |               | 1.6  |                   |  
| | Deduct:  
Total stock-based
      compensation   expense determined under fair value   based method for all
      options and   restricted stock awards, net of tax |               | (2.2 | )                 |  
| |                                                                                                                                                                     |               |      |                   |  
| | Pro forma net income                                                                                                                                                | $             | 63.1 |                   | $
| |                                                                                                                                                                     |               |      |                   |  
| | Net income per share:                                                                                                                                               |               |      |                   |  
| | Basic:     As
      reported                                                                                                                                        | $             | 0.47 |                   | $
| |                                                                                                                                                                     |               |      |                   |  
| | Pro forma                                                                                                                                                           | $             | 0.47 |                   | $
| |                                                                                                                                                                     |               |      |                   |  
| | Diluted:  As reported                                                                                                                                               | $             | 0.47 |                   | $
| |                                                                                                                                                                     |               |      |                   |  
| | Pro forma                                                                                                                                                           | $             | 0.46 |                   | $
| |                                                                                                                                                                     |               |      |                   |  

| | The
Black-Scholes model and the assumptions presented in the following table were used to
estimate the fair values of the options. We did not grant any options during the third
quarter of 2004. The weighted-average estimated fair value, at the dates of grant, of
option grants in the first nine months of 2004 was $4.66. Only restricted shares were
issued under the 2000 Stock Incentive Plan in the first nine months of 2005, and no
options were granted in the first nine months of 2005. The above pro forma compensation
costs measured for options and restricted stock awards are recognized ratably over the
vesting period, which is typically three years.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                                       | 2004 |   | 
| | ------------------------------------- | ---- | - | 
| | Risk-free interest rate               | 3.1  | % | 
| | Expected dividend yield               | 1.6  | % | 
| | Expected volatility                   | 27.0 | % | 
| | Estimated lives of options (in years) | 5.0  |   | 

| | Recently
issued accounting pronouncements In May 2005, the Financial Accounting
Standards Board (FASB) issued SFAS No. 154, Accounting for Changes and
Error Corrections. SFAS No. 154 replaces APB Opinion No. 20, Accounting
Changes, and SFAS No. 3, Reporting Accounting Changes in Interim Financial
Statements, and is effective for accounting changes and error corrections made after
December 31, 2005. Early adoption is also permitted. SFAS No. 154 requires that voluntary
changes in accounting principles be applied retrospectively to all periods presented so
that those financial statements contain a consistent application of the accounting
principle. APB Opinion No. 20 previously required that most voluntary changes in
accounting principles be reflected in the financial statements by showing the cumulative
effect of the change for all periods prior to the change. The guidance in APB Opinion No.
20 regarding the correction of an error in previously issued financial statements and a
change in accounting estimates was carried forward in SFAS No. 154. We plan to adopt this
standard in fiscal year 2006.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
December 2004, the FASB issued a revised SFAS No. 123, Share-Based Payment.
Among its provisions, SFAS No. 123R will require us to measure the cost of employee
services in exchange for an award of equity instruments based on the grant-date fair value
of the award and to recognize the cost over the requisite service period. As issued, SFAS
No. 123R would have become effective for us beginning in the third quarter of 2005.
However, on April 14, 2005, the Securities and Exchange Commission adopted a rule that
deferred the effective date to fiscal years beginning after June 15, 2005, which will make
SFAS No. 123R effective for us beginning in fiscal year 2006. As described above, we
currently use the intrinsic value method to account for stock-based employee compensation.
As a result, the adoption of SFAS No. 123R is expected to reduce our net income in interim
and annual periods after adoption. We believe the best indication of the approximate
impact on net income of adopting the provisions of this revised Statement may be
determined by reviewing the table above under the heading Stock-based
compensation, which shows that net income would have decreased by $0.6 million and
$0.9 million for the third quarters of 2005 and 2004, respectively, and $0.01 per diluted
share for the third quarter of 2005 with no impact on diluted earnings per share for the
third quarter of 2004. For the first nine months of 2005 and 2004, net income would have
decreased by $1.9 million and $2.7 million, respectively, and $0.02 per diluted share for
each respective period. Also, upon adoption, we will be allowed to restate prior interim
periods or prior years in accordance with a modified retrospective method. The modified
retrospective treatment is not required and we have not yet determined whether we will
restate prior periods. We are currently evaluating the impact of this proposed standard on
our Consolidated Financial Statements.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|6
|-

---

|2. | Fructose Settlement
|-- | -------------------

| | In
the third quarter of 2005, we recorded a gain of $1.8 million before taxes related to an
additional distribution from the settlement of a class action lawsuit (In re: High
Fructose Corn Syrup Antitrust Litigation, MDL, No. 1087, Master File No. 95-1447, in the
United States District Court for the Central District of Illinois, Peoria Division). The
lawsuit alleged price fixing related to high fructose corn syrup purchased in the U.S.
from July 1, 1991 through June 30, 1995. The amount received in the third quarter of 2005
related to the Heartland territories purchased from PepsiCo in 1999. For the first nine
months of 2005, we recorded a gain of $15.1 million related to this transaction. We expect
to receive additional distributions in the fourth quarter of 2005, which are estimated to
be approximately $1.7 million before taxes.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3. | Special Charges
|-- | ---------------

| | In
the first nine months of 2005, we recorded special charges of $2.5 million ($1.6 million
after tax) in Central Europe, primarily for the realignment of our Central European
headquarters and the consolidation of certain production facilities as we continue to
rationalize our cost structure. These special charges were primarily for severance costs
and related benefits and asset write-downs.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | We
recorded special charges of $0.5 million ($0.3 million after tax) in the third quarter of
2004 and $2.3 million ($1.4 million after tax) in the first nine months of 2004 in Central
Europe. The special charges recorded in the third quarter and first nine months of 2004
included $0.5 million and $1.7 million, respectively, of severance costs and related
benefits associated with a reduction in the workforce in Central Europe as we continued to
rationalize the cost structure. In addition, we recorded special charges of $0.6 million
in Hungary related to the continued modification of our distribution strategy to increase
utilization of third party distributors in more remote areas. These special charges in
Hungary were primarily for severance costs and related benefits.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The
following table summarizes activity associated with the special charges (in millions):

|2005Charge | 2004Charge                                                                                                                                  | 2002Charge | Total
|---------- | ------------------------------------------------------------------------------------------------------------------------------------------- | ---------- | -----
|           |                                                                                                                                             |            |      
|           |                                                                                                                                             |            |      
|           | Accrued liabilities as of
                fiscal year end 2004    (employee-related, lease cancellation and
                   other costs) | $          |     
|           | Central Europe special charges                                                                                                              |            | 2.5  
|           | Expenditures for employee-related
                and other costs                                                                           |            | (1.2 
|           | Asset write-downs                                                                                                                           |            | (1.1 
|           |                                                                                                                                             |            |      
|           | Accrued liabilities
                at the end of the third quarter of 2005                                                                 | $          | 0.2  
|           |                                                                                                                                             |            |      

| | All
of the special charges we recorded during 2003 were utilized by the end of fiscal year
2003 and thus are not reflected in the table above. The total accrued liabilities
remaining as of the end of the third quarter of 2005 are comprised of deferred severance
payments and certain employee benefits and other costs. We expect to pay a significant
portion of the special charge liability of $0.4 million using cash from operations during
the next twelve months; accordingly, such amounts are classified as Other current
liabilities in the Condensed Consolidated Balance Sheet.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|7
|-

---

|4. | Interest Expense, Net
|-- | ---------------------

Interest
expense, net, is comprised of the following (in millions):

| | Third Quarter         |  | First Nine Months
| | --------------------- |  | -----------------
|
| | Interest expense      |  |                  
| | Interest income       |  |                  
| |                       |  |                  
| | Interest expense, net |  |                  
| |                       |  |                  

| | In
the first nine months of 2005, interest expense included $5.6 million ($3.5 million after
tax) related to the loss on the early extinguishment of debt. See Note 10 for further
discussion.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
the first nine months of 2005, interest income included $1.5 million ($0.9 million after
tax) related to interest income associated with the real estate tax appeals refund on a
previously sold parcel of land in downtown Chicago.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
the third quarter and first nine months of 2004, interest income included $0.8 million
related to a state income tax refund and $1.1 million related to the settlement of certain
state tax audits. See Note 5 for further discussion.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|5. | Income Taxes
|-- | ------------

| | The
effective income tax rate, which is income tax expense expressed as a percentage of income
from continuing operations before income taxes and equity in net income (loss) of
nonconsolidated companies, was 37.7 percent in the third quarter of 2005 compared to 31.7
percent in the third quarter of 2004. Several items impacted our effective tax rate for
the third quarter of 2004. In the third quarter of 2004, we recorded a $2.8 million
benefit relating to the reversal of certain tax liabilities due to the settlement of
income tax audits through the 2002 tax year. In addition, we recorded a $2.6 million
benefit, net of taxes, relating to a state income tax refund. In the aggregate, these
significant items for the third quarter of 2004 reduced our effective income tax rate by
approximately 5.8 percent.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
effective income tax rate was 37.3 percent for the first nine months of 2005 compared to
35.1 percent for the first nine months of 2004. Several significant items impacted our
effective rate for the first nine months of 2005 and 2004. For the first nine months of
2005, we recorded a $0.9 million benefit from a state income tax law change in Ohio, which
reduced our effective income tax rate by approximately 0.4 percent. For the first nine
months of 2004, our effective income tax rate was favorably impacted by the items
previously discussed, which reduced our effective income tax rate by approximately 2.4
percent.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|6. | Comprehensive Income
|-- | --------------------

| | Our
comprehensive income was as follows (in millions):
| | ------------------------------------------------------

| |                                                               | Third Quarter |      | First Nine Months |  
| | ------------------------------------------------------------- | ------------- | ---- | ----------------- | -
| |                                                               |               |      |                   |  
| |                                                               | 2005          |      | 2004              |  
| |                                                               |               |      |                   |  
| |                                                               |               |      |                   |  
| | Net income                                                    | $             | 63.7 |                   | $
| | Minimum pension liability adjustment                          |               |     |                   |  
| | Foreign currency translation adjustment                       |               | 2.6  |                   |  
| | Net unrealized investment
and hedging    gains
      (losses) |               | 0.3  |                   |  
| |                                                               |               |      |                   |  
| | Comprehensive income                                          | $             | 66.6 |                   | $
| |                                                               |               |      |                   |  

| | Net
unrealized investment and hedging gains (losses) are presented net of tax expense of $0.2
million and net of tax benefit of $6.5 million in the third quarter and first nine months
of 2005, respectively, and net of tax expense of $1.7 million and $6.7 million in the
third quarter and first nine months of 2004, respectively. The minimum pension liability
adjustment is shown net of an income tax benefit of $1.3 million in the first nine months
of 2004.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|8
|-

---

|7. | Inventory
|-- | ---------

| | As
of the end of the third quarter of 2005, our inventory was comprised of approximately 44
percent raw materials and supplies and 56 percent finished goods. This mix is relatively
consistent with the mix of inventory at the end of fiscal year 2004.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|8. | Acquisitions and
Investments
|-- | ----------------------------

| | On
January 10, 2005, we completed the acquisition of Central Investment Corporation
(CIC). CIC has bottling operations in Southeast Florida and Central Ohio. We
acquired the capital stock of CIC, the seventh largest Pepsi bottler in the U.S., for a
purchase price of $339.3 million plus $13.1 million related to an adjustment for working
capital and $0.5 million for acquisition-related costs. At the date of closing, $8.4
million of the working capital adjustment was paid to the seller and a final payment of
$4.7 million was paid in the second quarter of 2005. Our cost to acquire CIC has been
preliminarily allocated to the assets acquired and liabilities assumed according to
estimated fair values. This allocation is subject to adjustment when additional
information concerning asset and liability valuations is finalized. We have preliminarily
allocated $298.0 million to acquired goodwill, representing the excess of the purchase
price over the estimated fair value of net assets acquired, and we assigned this goodwill
to the U.S. geographic segment. We are in the process of valuing the intangibles acquired
in connection with the CIC transaction and expect to complete that valuation in the fourth
quarter of 2005. It is expected that a majority of the acquired goodwill will be
reclassified to franchise rights, which are not amortized since they are granted in
perpetuity. The assets acquired and liabilities assumed consisted primarily of cash,
working capital, fixed assets and capital lease obligations. The results of operations of
CIC since the date of the acquisition are included in the Condensed Consolidated
Statements of Income.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Included
in the acquisition purchase price allocation for CIC were restructuring charges, which
reflect severance costs we will incur to effect the integration plan for CICs
operations. A liability of $1.6 million was established to reduce headcount by 75
employees. As of the end of the third quarter of 2005, 52 employees have been terminated.
During the third quarter of 2005, we made severance payments of $0.3 million, resulting in
an ending balance of $1.3 million for this liability. We expect the integration to be
completed during the first quarter of 2006.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
March 31, 2005, we completed the acquisition of FM Vending. We agreed to acquire the
capital stock of FM Vending for a purchase price of $2.2 million, net of cash acquired.
Our cost to acquire FM Vending has been preliminarily allocated to assets acquired and
liabilities assumed according to estimated fair values. This allocation is subject to
adjustment when additional information concerning asset and liability valuations is
finalized. The preliminary allocation has resulted in acquired goodwill of approximately
$2.1 million, which we have assigned to the U.S. geographic segment. The assets acquired
and liabilities assumed consisted primarily of cash, working capital and fixed assets. The
results of operations of FM Vending since the date of the acquisition are included in the
Condensed Consolidated Statements of Income.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
June 16, 2005, we acquired a 49 percent minority interest in Quadrant-Amroq Bottling
Company Limited (QABCL), a holding company that, through its subsidiaries,
produces, sells and distributes Pepsi and other beverages throughout Romania and Moldova.
We paid $51.0 million for this investment which we recorded under the equity method in
accordance with APB Opinion No. 18, The Equity Method of Accounting for Investments
in Common Stock. We have preliminarily allocated $46.6 million to acquired goodwill,
representing the excess of the purchase price over the underlying estimated fair value of
net assets of QABCL. We assigned this goodwill to the Central Europe geographic segment.
Due to the timing of the receipt of available financial information from QABCL, we will
record the equity in net income on a one-month lag basis. Equity in net income for the
third quarter and first nine months of 2005 were $3.2 million for each respective period.
These amounts are recorded in Equity in net income (loss) of nonconsolidated
companies in the Condensed Consolidated Statements of Income.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
March 2004, we acquired 2,000 additional shares of Pepsi-Cola Bahamas for $3.3 million,
which increased our ownership interest in the Bahamas from 30 percent to 70 percent. As a
result, we began consolidating the Bahamas in the first quarter of 2004, as the investment
was accounted for under the equity method prior to this transaction. Our cost to acquire
the Bahamas was allocated to the assets acquired and liabilities assumed according to
estimated fair values. The allocation resulted in intangible assets of $2.9 million
related to franchise and distribution agreements. We assigned the intangible assets to the
Caribbean geographic segment. The assets acquired and liabilities assumed consisted
primarily of inventory, fixed assets, and long-term debt. Minority interest associated
with this investment is recorded in Other expense, net in the Condensed
Consolidated Statements of Income and in Other liabilities in the Condensed
Consolidated Balance Sheets.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|9
|-

---

| | If these businesses had been acquired at the beginning of fiscal
years 2005 and 2004, respectively, revenue, net income and earnings per share would not
differ significantly from the amounts reported in the Condensed Consolidated Financial
Statements for the third quarters of 2005 and 2004 and for the first nine months of 2005
and 2004.  Therefore, pro forma information is not required.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|9. | Intangible Assets and
Goodwill
|-- | ------------------------------

| | The
changes in the carrying value of goodwill by geographic segment for the first nine months
of 2005 were as follows (in millions):
| | ------------------------------------------------------------------------------------------------------------------------------------

| |                                                 | U.S. |         | CentralEurope |   | Caribbean |   | Total |     
| | ----------------------------------------------- | ---- | ------- | ------------- | - | --------- | - | ----- | ----
| |                                                 |      |         |               |   |           |   |       |     
| |                                                 |      |         |               |   |           |   |       |     
| | Balance at end of year 2004                     | $    | 1,688.6 |               | $ | 37.5      |   | $     | 20.1
| | Acquisitions                                    |      | 300.1   |               |   | 46.6      |   |       | (2.4
| | Cumulative translation adjustment               |      |        |               |   | (3.1      | ) |       |    
| |                                                 |      |         |               |   |           |   |       |     
| | Balance at end
        of third quarter of 2005 | $    | 1,988.7 |               | $ | 81.0      |   | $     | 17.7
| |                                                 |      |         |               |   |           |   |       |     

| |                                               | As of End ofThird Quarter 2005 |      | As of End ofFiscal Year 2004 |  
| | --------------------------------------------- | ------------------------------ | ---- | ---------------------------- | -
| |                                               | GrossCarryingAmount            |      | AccumulatedAmortization      |  
| |                                               |                                |      |                              |  
| |                                               |                                |      |                              |  
| | Amortized intangible assets:                  |                                |      |                              |  
| | Non-compete agreements                        | $                              | 0.5  |                              | $
| | Franchise and distribution agreements         |                                | 3.6  |                              |  
| |                                               |                                |      |                              |  
| | Total                                         | $                              | 4.1  |                              | $
| |                                               |                                |      |                              |  
| | Unamortized intangible assets:                |                                |      |                              |  
| | Franchise
        and distribution agreements | $                              | 20.5 |                              |  
| | Pension
        intangible assets             |                                | 2.6  |                              |  
| |                                               |                                |      |                              |  
| | Total                                         | $                              | 27.2 |                              |  
| |                                               |                                |      |                              |  
| |                                               |                                |      |                              |  
| | Aggregate amortization expense:               |                                |      |                              |  
| | For third quarter ended 2005 and 2004         | $                              | 0.1  |                              | $
| | For first nine months ended 2005 and 2004     | $                              | 0.2  |                              | $

| | In
the first quarter of 2005, we acquired CIC and FM Vending resulting in an increase to
goodwill in the U.S. of $298.3 million. We recorded certain adjustments of $1.8 million
associated with the CIC acquisition, which includes the $1.6 million restructuring
liability associated with the integration of the CIC operations into our business.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
the first quarter of 2005, we recorded certain adjustments and completed the intangible
asset valuation associated with the Bahamas purchase completed in the first quarter of
2004. This resulted in an increase in acquired goodwill of $0.5 million and a
reclassification of $2.9 million from goodwill to franchise and distribution agreements,
an unamortized intangible asset. The $0.5 million adjustment related to the final
valuation of accounts receivable and fixed assets.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
the second quarter of 2005, we acquired a 49 percent minority interest in QABCL. As a
result we recorded $49.4 million of goodwill associated with the transaction. In the third
quarter of 2005, we recorded a $2.8 million decrease to goodwill related to adjustments to
the valuation of assets and liabilities at the date of acquisition.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10
|--

---

| | The
decrease in the gross carrying amount of non-compete agreements and related accumulated
amortization since the end of fiscal year 2004 reflected the expiration of certain
non-compete agreements related to previous acquisitions.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10. | Debt
|--- | ----

| | In
January 2005, we issued $300 million of notes with a coupon rate of 4.875 percent due
January 2015. Net proceeds from the transaction were $297.0 million, which reflected the
reduction for the discount of $0.8 million and debt issuance costs of $2.2 million. The
proceeds from the issuance were used to fund the acquisition of CIC. The notes were issued
from our shelf registration statement that became effective September 4, 2003 (the
Registration Statement). Under the Registration Statement, up to $1 billion of
debt securities may be offered. The debt securities are unsecured, senior debt obligations
and rank equally with all other unsecured and unsubordinated indebtedness.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
May 2005, we issued $250 million of notes with a coupon rate of 5.0 percent due May 2017.
Net proceeds from this transaction were $246.1 million, which reflected the reduction for
the discount of $2.0 million and debt issuance costs of $1.9 million. We also issued $250
million of notes with a coupon rate of 5.5 percent due May 2035. Net proceeds from this
transaction were $246.2 million, which reflected the reduction for the discount of $1.5
million and debt issuance costs of $2.3 million. A portion of the proceeds from the
issuances was used to fund the cash tender offer of three outstanding debt notes. The
notes were issued from our Registration Statement. After the issuance of the $300 million
of notes in January 2005 and the $500 million of notes in May 2005, there was $200 million
in debt securities available for issuance under the Registration Statement at the end of
the third quarter of 2005.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
May 2005, we completed a tender offer to pay down three outstanding notes with a total
face value of $550 million. The total amount tendered from these notes was $388.0 million.
Net proceeds paid to the bondholders equaled $395.3 million, which included $4.3 million
of accrued interest and $3.0 million of premiums. The tender offer resulted in a loss on
debt extinguishment of $5.6 million ($3.5 million after tax) primarily brought about by
the premiums paid, fees associated with the tender offer, and unamortized discount and
issuance costs, which were recorded in Interest expense, net.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|11. | Financial Instruments
|--- | ---------------------

| | We
use derivative financial instruments to reduce our exposure to adverse fluctuations in
commodity prices and interest rates. These financial instruments are
over-the-counter instruments and were designated at their inception as hedges
of underlying exposures. We do not use derivative financial instruments for speculative or
trading purposes.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Cash
Flow Hedges  We enter into derivative financial instruments to hedge against
volatility in future cash flows on anticipated aluminum purchases, the prices of which are
indexed to aluminum market prices. We consider these hedges to be highly effective,
because of the high correlation between aluminum commodity prices and our contractual cost
of aluminum. We have hedged a portion of our U.S. aluminum requirements through November
2006. As of the end of the third quarter of 2005 and fiscal year end 2004, we had deferred
$0.8 million (net of $0.5 million in deferred income taxes) and $2.5 million (net of $1.5
million in deferred income taxes) of aluminum hedging gains, respectively, in
Accumulated other comprehensive income (loss). We expect to reclassify a
majority of the deferred aluminum hedging gains as of the end of the third quarter of 2005
into cost of goods sold during the next 12 months.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Beginning
in fiscal year 2004, we entered into derivative financial instruments to hedge against
volatility in future cash flows on anticipated natural gas purchases, the prices of which
are indexed to natural gas market prices. Due to the high correlation between natural gas
commodity prices and our contractual cost of natural gas, we consider these hedges to be
highly effective. We have hedged a portion of our anticipated natural gas purchases
through November 2007. As of the end of the third quarter of 2005 and fiscal year end
2004, we had deferred $1.2 million (net of $0.7 million in deferred income taxes) of
natural gas hedging gains and $0.1 million (net of $0.1 million in deferred income taxes)
of natural gas hedging losses, respectively, in Accumulated other comprehensive
income (loss). We expect to reclassify a majority of the deferred natural gas
hedging gains as of the end of the third quarter of 2005 into cost of goods sold during
the next two years.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Beginning
in fiscal year 2004, we entered into derivative financial instruments to hedge against the
volatility in future cash flows on anticipated diesel fuel purchases, the prices of which
are indexed to heating oil market prices. Due to the high correlation between heating oil
commodity prices and our cost of diesel fuel, we consider these hedges to be highly
effective. We have hedged a portion of our anticipated diesel fuel purchases through
December 2005. As of the end of the third quarter of 2005 and fiscal year end 2004, we had
deferred $0.9 million (net of $0.6 million in deferred income taxes) of heating oil
hedging gains and $0.5 million (net of $0.3 million in deferred income taxes) of heating
oil hedging losses, respectively, in Accumulated other comprehensive income
(loss). We expect to reclassify a majority of the deferred heating oil hedging gains
as of the end of the third quarter of 2005 into cost of goods sold during the next 4
months.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|11
|--

---

| | In
anticipation of a long-term debt issuance in January 2005, we had entered into treasury
rate lock instruments with an aggregate notional amount of $300.0 million. We accounted
for these treasury rate lock instruments as cash flow hedges, as the treasury rate lock
instruments hedged against the variability of interest payments attributable to changes in
interest rates on the forecasted issuance of fixed-rate debt. These treasury rate locks
are considered highly effective in eliminating the variability of cash flows associated
with the forecasted debt issuance. Concurrent with the debt issuance in the first quarter
of 2005, we received $2.7 million upon settlement of the treasury rate locks. As of the
end of the third quarter of 2005 and fiscal year end 2004, we had deferred approximately
$1.5 million (net of $0.9 million in deferred income taxes) and $1.6 million (net of $1.0
million in deferred income taxes) of treasury rate lock gains, respectively, in
Accumulated other comprehensive income (loss). Amounts included in
Accumulated other comprehensive income (loss) will be reclassified into
earnings commensurate with the recognition of interest expense related to the debt issued
in January 2005.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
anticipation of a long-term debt issuance in May 2005, we had entered into treasury rate
lock instruments during the second quarter of 2005 with an aggregate notional amount of
$200.0 million. We accounted for these treasury rate lock instruments as cash flow hedges,
as the treasury rate lock instruments hedged against the variability of interest payments
attributable to changes in interest rates on the forecasted issuance of fixed-rate debt.
These treasury rate locks are considered highly effective in eliminating the variability
of cash flows associated with the forecasted debt issuance. Concurrent with the debt
issuance in the second quarter of 2005, we paid $0.7 million upon settlement of the
treasury rate locks. As of the end of the third quarter of 2005, we had deferred
approximately $0.4 million (net of $0.3 million in deferred income taxes) of treasury rate
lock lossesin Accumulated other comprehensive income (loss). Amounts
included in Accumulated other comprehensive income (loss) will be reclassified
into earnings commensurate with the recognition of interest expense related to the debt
issued in May 2005.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
anticipation of a long-term debt issuance in February 2006, we entered into a forward
starting swap agreement with an aggregate notional amount of $300.0 million in fiscal year
2004. We accounted for this forward starting swap as a cash flow hedge, as the swap hedges
against the variability of interest payments attributable to changes in interest rates on
the forecasted issuance of fixed-rate debt. We accelerated the timing of the debt issuance
to May 2005 and we paid $6.1 million upon settlement of the forward starting swap. As of
the end of the third quarter of 2005 and fiscal year end 2004, we had deferred $3.8
million (net of $2.3 million in deferred income taxes) and $0.9 million (net of $0.6
million in deferred income taxes) of forward starting swap losses, respectively, in
Accumulated other comprehensive income (loss), as this forward starting swap
agreement was considered highly effective in eliminating the variability of interest
payments on the forecasted fixed-rate debt issuance. The amount included in
Accumulated other comprehensive income (loss) will be reclassified into
earnings commensurate with the recognition of interest expense related to the debt issued
in May 2005 for the period between February 2006 and February 2016, the designated hedge
period, as these interest payments are deemed to be highly probable.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
anticipation of the long-term debt issuance in the first quarter of 2003, we entered into
a treasury rate lock agreement with an aggregate notional amount of $150.0 million. We
accounted for this treasury rate lock as a cash flow hedge, as the treasury rate lock
hedged against the variability of interest payments attributable to changes in interest
rates on the forecasted issuance of fixed-rate debt. We settled the treasury rate lock for
$1.2 million concurrent with our debt issuance in the first quarter of 2003. We consider
this treasury rate lock agreement to be highly effective in eliminating the variability of
interest payments on the forecasted debt issuance. At the end of the third quarter of 2005
and fiscal year 2004, we had deferred approximately $0.6 million (net of $0.4 million in
deferred income taxes) and $1.4 million (net of $0.9 million in deferred income taxes) of
losses, respectively, in Accumulated other comprehensive income (loss)". These
amounts also include the deferred losses of the treasury rate lock settled in fiscal year
2002. The remaining amounts for the 2002 and 2003 treasury rate locks included in
Accumulated other comprehensive income (loss) are reclassified into earnings
commensurate with the recognition of the interest expense on the issued debt.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|12
|--

---

| | Fair
Value Hedges  Periodically, we enter into interest rate swap contracts to
convert a portion of our fixed rate debt to floating rate debt, with the objective of
reducing overall borrowing costs. We account for these swaps as fair value hedges, since
they hedge against the change in fair value of fixed rate debt resulting from fluctuations
in interest rates. In the third quarter of 2004, we terminated all outstanding interest
rate swap contracts and received $14.4 million for the fair value of the interest rate
swap contracts. Amounts included in the cumulative fair value adjustment to long-term debt
will be reclassified into earnings commensurate with the recognition of the related
interest expense. At the end of the third quarter of 2005 and fiscal year end 2004, the
cumulative fair value adjustments to long-term debt were $9.4 million and $12.0 million,
respectively.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|12. | Pension and Other
Postretirement Benefit Plans
|--- | ----------------------------------------------

| | Third Quarter                      |  | First Nine Months
| | ---------------------------------- |  | -----------------
|
| | Service cost                       |  |                  
| | Interest cost                      |  |                  
| | Expected return on plan assets     |  |                  
| | Amortization of prior service cost |  |                  
| | Amortization of net loss           |  |                  
| |                                    |  |                  
| | Net periodic pension cost          |  |                  
| |                                    |  |                  

| | As
of the end of the third quarter of 2005, we have contributed $6.7 million to the plans. We
expect to make approximately $10 million of additional contributions in the fourth quarter
of 2005. We anticipate contributing approximately $10 million in fiscal year 2006.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|13. | Stock Awards
|--- | ------------

| | In
the first nine months of 2005, we granted 881,359 restricted shares at a weighted-average
fair value (at the date of grant) of $22.55 to key members of management and members of
our Board of Directors under our 2000 Stock Incentive Plan (the Plan). We
recognized compensation expense of $2.6 million and $2.1 million in the third quarter of
2005 and 2004, respectively, and $7.8 million and $6.1 million in the first nine months of
2005 and 2004, respectively, related to grants made in 2005 and previous years. At the end
of the third quarter 2005, there were 1,654,197 unvested restricted shares outstanding
under the Plan.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|14. | Supplemental Cash
Flow Information
|--- | ----------------------------------

| | Net
cash provided by operating activities reflected cash payments and receipts for interest
and income taxes as follows (in millions):
| | --------------------------------------------------------------------------------------------------------------------------------------

| | First Nine Months                 | 
| | --------------------------------- | 
|
| | Interest paid                     | 
| | Interest received                 | 
| | Income taxes paid, net of refunds | 

| | Income
taxes paid, net of refunds includes $12.8 million of tax refunds received in the first
nine months of 2005 relating to a the utilization of a portion of our net operating loss
carryforwards for tax returns filed through fiscal year 2002.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|15. | Environmental and
Other Commitments and Contingencies
|--- | -----------------------------------------------------

| | Current
Operations. We facilitate compliance with federal,
state and local laws and regulations relating to materials used in production and to the
discharge or emission of wastes, and such other laws and regulations relating to the
protection of the environment. The capital costs of such management and compliance,
including the modification of existing plants and the installation of new manufacturing
processes, are not material to our continuing operations.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|13
|--

---

| | We
are defendants in lawsuits that arise in the ordinary course of business, none of which is
expected to have a material adverse effect on our financial condition, although amounts
recorded in any given period could be material to the result of operations or cash flows
for that period.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | We
participate in a number of trustee-managed multi-employer pension and health and welfare
plans for employees covered under collective bargaining agreements. Several factors,
including unfavorable investment performance, changes in demographics and increased
benefits to participants could result in potential funding deficiencies, which could cause
us to make higher future contributions to these plans.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Discontinued
OperationsRemediation. Under the agreement pursuant to which we sold
our subsidiaries Abex Corporation and Pneumo Abex Corporation (collectively, Pneumo
Abex) in 1988 and a subsequent settlement agreement entered into in September 1991,
we have assumed indemnification obligations for certain environmental liabilities of
Pneumo Abex, after any insurance recoveries. Pneumo Abex has been and is subject to a
number of environmental cleanup proceedings, including proceedings under the Comprehensive
Environmental Response, Compensation and Liability Act regarding release or disposal of
wastes at on-site and off-site locations. In some proceedings, federal, state and local
government agencies are involved and other major corporations have been named as
potentially responsible parties. Pneumo Abex also is subject to private claims and
lawsuits for remediation of properties previously owned by Pneumo Abex and its
subsidiaries.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | There
is an inherent uncertainty in assessing the total cost of investigating and remediating a
given site. This is because of the evolving and varying nature of the remediation and
allocation process. Any assessment of expenses is more speculative in the early stages of
an investigation or remediation and is dependent upon a number of variables beyond the
control of any party. Furthermore, there are often timing considerations in that a portion
of the expense incurred by Pneumo Abex, and any resulting obligation of ours to indemnify
Pneumo Abex, may not occur for a number of years.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
the latter part of 2001, we investigated the use of insurance products to mitigate risks
related to indemnification obligations under the 1988 agreement, as amended. The insurance
carriers required that we employ an outside consultant to perform a comprehensive review
of the former facilities operated or impacted by Pneumo Abex. Advances in the techniques
of retrospective risk evaluation and increased experience (and therefore available data)
at our former facilities made this comprehensive review possible. The consultants
review was completed in the fourth quarter of 2001. It provided a contingent
indemnification liability for all known claims arising from sites operated or impacted by
Pneumo Abex and resulted in the $111.0 million charge, or $71.2 million net of tax,
recorded in the fourth quarter of 2001.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | At
the end of the third quarter of 2005, we had $93.9 million accrued to cover potential
indemnification obligations, compared to $106.8 million recorded at the end of fiscal year
2004. Of the total amount accrued, $20.0 million was classified as current liabilities at
the end of the third quarter of 2005 and at the end of fiscal year 2004. The amounts
exclude possible insurance recoveries and are determined on an undiscounted cash flow
basis. The estimated indemnification liabilities include expenses for the investigation
and remediation of identified sites, payments to third parties for claims and expenses
(including product liability and toxic tort claims), administrative expenses, and the
expenses of on-going evaluations and litigation. We expect a significant portion of the
accrued liabilities will be disbursed during the next 10 years. All estimated costs for
the known claims arising from sites for which we are responsible are included in the $93.9
million accrued as of the end of the third quarter of 2005.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Although
we have certain indemnification obligations for environmental liabilities at a number of
sites, including Superfund sites, it is not anticipated that additional expense at any
specific site will have a material effect on us. In the case of some of the sites, the
volumetric contribution for which we have an obligation has been estimated and other
large, financially viable parties are responsible for substantial portions of the
remainder. In our opinion, based upon information currently available, the ultimate
resolution of these claims and litigation, including potential environmental exposures,
and considering amounts already accrued, should not have a material effect on our
financial condition, although amounts recorded in a given period could be material to the
results of operations or cash flows for that period.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Discontinued
OperationsInsurance. During the second quarter of 2002, as part of a
comprehensive program concerning environmental liabilities related to the former Whitman
Corporation subsidiaries, we purchased new insurance coverage related to the sites
previously owned and operated or impacted by Pneumo Abex and its subsidiaries. In
addition, a trust, which was established in 2000 with the proceeds from an insurance
settlement (the Trust), purchased insurance coverage and funded coverage for
remedial and other costs (Finite Funding) related to the sites previously
owned and operated or impacted by Pneumo Abex and its subsidiaries. In conjunction with
the purchase of the insurance policy, we recorded a charge to discontinued operations of
$9.8 million, or $6.0 million after tax. This charge represented amounts expended by us as
well as a reduction of funds in the Trust available to pay expenses related to sites for
which we have indemnification obligations.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|14
|--

---

| | Essentially
all of the assets of the trust were expended by the Trust in connection with the purchase
of the insurance coverage, the Finite Funding and related expenses. These actions have
been taken to fund remediation and related costs associated with the sites previously
owned and operated or impacted by Pneumo Abex and its subsidiaries and to protect against
additional future costs in excess of our self-insured retention. The original amount of
self-insured retention (the amount we must pay before the insurance carrier is obligated
to begin payments) was $114.0 million of which $30.6 million has been eroded, leaving a
remaining self-insured retention of $83.4 million at the end of the third quarter of 2005.
The estimated range of aggregate exposure related only to the remediation costs of such
environmental liabilities is approximately $40 million to $75 million. We had accrued
$60.4 million at the end of the third quarter of 2005 for remediation costs, which is our
best estimate of the contingent liabilities related to these environmental matters. The
Finite Funding may be used to pay a portion of the $60.4 million and thus reduces our
future cash obligations. The Finite Funding amounts recorded were $20.1 million and $21.9
million at the end of the third quarter of 2005 and the end of fiscal year 2004,
respectively, and are recorded in Other assets, net of $1.5 million recorded
in Other current assets in each respective period.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
May 31, 2005, Cooper Industries, LLC (Cooper) filed and later served us with a
Cook County, Illinois lawsuit against us, Pneumo Abex, LLC, and the Trustee of the Trust
(the Trustee), captioned Cooper Industries, LLC v. PepsiAmericas,
Inc., et al., Case No. 05 CH 09214 (Cook Cty. Cir. Ct.). The claims involve the Trust
and insurance policy described above. Cooper asserts that it was
entitled to access monies that previously were in the Trust and that were spent to
purchase the insurance policy. Cooper claims that Trust funds should not have been
distributed for environmental expenses and instead claims that  the monies should have
been distributed for underlying Pneumo Abex asbestos claims indemnified by Cooper. Cooper
complains that we deprived it of access to money in the Trust because of the
Trustees decision to use money in the Trust to purchase the insurance policy described above.
Coopers lawsuit also names Pneumo
Abex as a defendant.  We
have not filed a response to the complaint, but we will deny  and vigorously contest the claim. Pneumo Abex, LLC,
the corporate successor to our prior subsidiary, has previously filed papers that deny
the claim. Pneumo Abex, LLC also has filed papers and otherwise asserted that Cooper is
not a beneficiary of the Trust and that Coopers claims lack merit.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
addition, we had recorded other receivables of $12.3 million at the end of the third
quarter of 2005 and at the end of fiscal year 2004 for future probable amounts to be
received from insurance companies and other responsible parties. These amounts were
recorded in Other assets in the Condensed Consolidated Balance Sheets as of
the end of each respective period.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Discontinued
OperationsProduct Liability and Toxic Tort Claims. We also have
certain indemnification obligations related to product liability and toxic tort claims
that might emanate out of the 1988 agreement with Pneumo Abex. Other companies not owned
by or associated with us also are responsible to Pneumo Abex for the financial burden of
all asbestos product liability claims filed against Pneumo Abex after a certain date in
1998, except for certain claims indemnified by us. The sites and product liability and
toxic tort claims included in the aggregate accrued liabilities we have recorded are
described more fully in our Annual Report on Form 10-K for the fiscal year 2004. No
significant changes in the status of those sites or claims occurred and we were not
notified of any significant new sites or claims during the first nine months of 2005.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|15
|--

---

|16. | Segment Reporting
|--- | -----------------

| | We
operate in three geographic areas  the U.S., Central Europe and the Caribbean. We
operate in 19 states in the U.S., and, outside the U.S., we operate in Poland, Hungary,
the Czech Republic, Republic of Slovakia, Puerto Rico, Jamaica, Barbados, the Bahamas and
Trinidad and Tobago.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
following tables present net sales and operating income of our geographic segments for the
third quarter and first nine months of 2005 and 2004 (in millions):
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                | Third Quarter | 
| | -------------- | ------------- | 
|
|
| | U.S.           |               | 
| | Central Europe |               | 
| | Caribbean      |               | 
| |                |               | 
| | Total          |               | 
| |                |               | 

| |                | First Nine Months | 
| | -------------- | ----------------- | 
|
|
| | U.S.           |                   | 
| | Central Europe |                   | 
| | Caribbean      |                   | 
| |                |                   | 
| | Total          |                   | 
| |                |                   | 

| | Except for the impact of the acquisition of CIC, which is more fully described in Notes 8 and 9, there
were no material changes in total assets by geographic segment since the end of fiscal
year 2004.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|17. | Related Party
Transactions
|--- | --------------------------

| | We
are a licensed producer and distributor of Pepsi carbonated and non-carbonated soft drinks
and other non-alcoholic beverages in the U.S., Central Europe and the Caribbean. We
operate under exclusive franchise agreements with soft drink concentrate producers,
including master bottling and fountain syrup agreements with PepsiCo, Inc.
(PepsiCo) for the manufacture, packaging, sale and distribution of PepsiCo
branded products. The franchise agreements exist in perpetuity and contain operating and
marketing commitments and conditions for termination. As of the end of the third quarter
of 2005, PepsiCo beneficially owned 42.6 percent of PepsiAmericas common stock.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | We
purchase concentrate from PepsiCo to be used in the production of Pepsi carbonated soft
drinks and other non-alcoholic beverages. PepsiCo also provides us with various forms of
bottler incentives (marketing support programs) to promote Pepsis brands. These
bottler incentives cover a variety of initiatives, including direct marketplace, shared
media and advertising, to support volume and market share growth. There are no conditions
or requirements that could result in the repayment of any support payments we have
received.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | We
manufacture and distribute fountain products and provide fountain equipment service to
PepsiCo customers in certain territories in accordance with various agreements. There are
other products that we produce and/or distribute through various arrangements with PepsiCo
or partners of PepsiCo. We also purchase finished beverage products from PepsiCo and
certain of its affiliates including tea, concentrate and finished beverage products from a
Pepsi/Lipton partnership, as well as finished beverage products from a Pepsi/Starbucks
partnership.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | PepsiCo
provides various procurement services under a shared services agreement. Under such
agreement, PepsiCo negotiates with various suppliers the cost of certain raw materials by
entering into raw material contracts on our behalf. PepsiCo also collects and remits to us
certain rebates from the various suppliers related to our procurement volume. In addition,
PepsiCo acts as our agent for the execution of derivative contracts associated with
certain anticipated raw material purchases.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|16
|--

---

| | In
the third quarter of 2005, we received from PepsiCo a portion of the fructose settlement
(see Note 2 for further discussion) related to the Heartland territories purchased from
PepsiCo in 1999 totaling $1.8 million. We expect to receive an additional distribution of
approximately $0.2 million in the fourth quarter of 2005.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
September 6, 2005, we entered into a second amended and restated shareholder
agreement with PepsiCo.  The new agreement provides that PepsiCo and its
affiliates may not own more than 49% of our outstanding common stock.  Under the
former agreement, PepsiCos and its affiliates ownership of our common stock
was similarly limited to a maximum ownership percentage of 49% of our outstanding common
stock, but the combined ownership of PepsiCo and its affiliates, together with Robert C.
Pohlad, his affiliates and his family, was also limited to a maximum ownership percentage
of 49.9% of our outstanding common stock.  The primary purpose of this new agreement
was to decouple the ownership limitations that previously applied to the aggregate
ownership of PepsiCo and Mr. Pohlad, his affiliates and his family.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | We
have an existing arrangement with a subsidiary of the Pohlad Companies related to the
joint ownership of an aircraft. This transaction is not material to our Condensed
Consolidated Financial Statements. Robert C. Pohlad, our Chairman and Chief Executive
Officer, is the President and owner of approximately 33 percent of the capital stock of
Pohlad Companies.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On September 6, 2005, we entered into an amended
and restated shareholder agreement with Pohlad Companies and
Robert C. Pohlad.  The new agreement no longer limits the amount of our outstanding common stock that may be
owned by Pohlad Companies, Dakota Holdings, LLC and Mr. Pohlad.  However, any additional acquisition of our
common stock by Mr. Pohlad, his affiliates or his family (excluding compensatory awards to Mr. Pohlad) now
requires approval of our Affiliated Transaction Committee.  The primary purpose of this new agreement was to
decouple the ownership limitations that previously applied to the aggregate ownership of PepsiCo and Mr. Pohlad,
his affiliates and his family.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | See
additional discussion of our related party transactions in our Annual Report on Form 10-K
for the fiscal year 2004.
| | -----------------------------------------------------------------------------------------------------------------------

|Item 2.    
Management's Discussion and Analysis of Financial Condition and Results of Operations.
|--------------------------------------------------------------------------------------------------

|CRITICAL ACCOUNTING
POLICIES


The
preparation of the Condensed Consolidated Financial Statements in conformity with United
States generally accepted accounting principles requires management to use estimates.
These estimates are made using managements best judgment and the information
available at the time these estimates are made, including the advice of outside experts.
For a better understanding of our significant accounting policies used in preparation of
the Condensed Consolidated Financial Statements, please refer to our Annual Report on Form
10-K for the fiscal year 2004. We focus your attention on the following critical
accounting policies:
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Goodwill
Impairment. Goodwill is tested for impairment at least annually, using a two-step
approach at the reporting unit level: U.S., Central Europe and the Caribbean. First, we
estimate the fair value of the reporting units primarily using discounted estimated future
cash flows. If the carrying value exceeds the fair value of the reporting unit, the second
step of the goodwill impairment test is performed to measure the amount of the potential
loss. Goodwill impairment is measured by comparing the implied fair value of
goodwill with its carrying amount. The impairment evaluation requires the use of
considerable management judgment to determine the fair value of the reporting units using
discounted future cash flows, including estimates and assumptions regarding the amount and
timing of cash flows, cost of capital and growth rates.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Environmental
Liabilities. We continue to be subject to certain indemnification obligations under
agreements related to previously sold subsidiaries, including potential environmental
liabilities (see Note 15 to the Condensed Consolidated Financial Statements). We have
recorded our best estimate of our probable liability under those indemnification
obligations, with the assistance of outside consultants and other professionals. Such
estimates and the recorded liabilities are subject to various factors, including possible
insurance recoveries, the allocation of liabilities among other potentially responsible
parties, the advancement of technology for means of remediation, possible changes in the
scope of work at the contaminated sites, as well as possible changes in related laws,
regulations, and agency requirements.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Income
Taxes. Our effective income tax rate is based on income, statutory tax rates and tax
planning opportunities available to us in the various jurisdictions in which we operate.
We have established valuation allowances against substantially all of the nonU.S.
net operating losses to reflect the uncertainty of our ability to fully utilize these
benefits given the limited carryforward periods permitted by the various jurisdictions.
The evaluation of the realizability of our net operating losses requires the use of
considerable management judgment to estimate the future taxable income for the various
jurisdictions, for which the ultimate amounts and timing of such estimates may differ. The
valuation allowance can also be impacted by changes in the tax regulations.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|17
|--

---

| | Significant
judgment is required in determining our contingent tax liabilities. We have established
contingent tax liabilities using managements best judgment and adjust these
liabilities as warranted by changing facts and circumstances. A change in our tax
liabilities in any given period could have a significant impact on our results of
operations and cash flows for that period.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Casualty
Insurance Costs. Due to the nature of our business, we require insurance coverage for
certain casualty risks. We are self-insured for workers compensation, product and
general liability up to $1 million per occurrence and automobile liability up to $2
million per occurrence. The casualty insurance costs for our self-insurance program
represent the ultimate net cost of all reported and estimated unreported losses incurred
during the period. We do not discount insurance liabilities.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Our
liability for casualty costs is estimated using individual case-based valuations and
statistical analyses and is based upon historical experience, actuarial assumptions and
professional judgment. These estimates are subject to the effects of trends in loss
severity and frequency and are based on the best data available to us. These estimates,
however, are also subject to a significant degree of inherent variability, including the
relatively recent increases in medical costs. We evaluate these estimates with our
actuarial advisors on an annual basis and we believe that they are appropriate and within
acceptable industry ranges, although an increase or decrease in the estimates or economic
events outside our control could have a material impact on our results of operations and
cash flows. Accordingly, the ultimate settlement of these costs may vary significantly
from the estimates included in our Condensed Consolidated Financial Statements.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|RESULTS OF OPERATIONS 2005
THIRD QUARTER COMPARED WITH 2004 THIRD QUARTER


In
the discussions of our results of operations below, the number of cases sold is referred
to as volume. Constant territory refers to the results of operations
excluding the acquisition of Central Investment Corporation (CIC) and is used
only in the discussion of volume. Net pricing is net sales divided by the number of
cases and gallons sold for our core businesses, which include bottles and cans (including
bottle and can volume from vending equipment sales) as well as food service. Changes in
net pricing include the impact of sales price (or rate) changes, as well as the impact of
foreign currency translation and brand, package and geographic mix. Net pricing and
reported volume amounts exclude contract, commissary, private label, concentrate, and
vending (other than bottles and cans) revenue and volume. Contract sales represent sales
of manufactured product to other franchise bottlers and typically decline as excess
manufacturing capacity is utilized. Net pricing and volume also exclude activity
associated with beer and snack food products. Cost of goods sold per unit is the
cost of goods sold for our core business divided by the related number of cases and
gallons sold.


Our
business is highly seasonal; accordingly, the operating results of any individual quarter
may not be indicative of a full years operating results.


Volume


Sales
volume growth (decline) for the third quarter of 2005 and 2004 were as follows:
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                |  |  | 2005 |  | 2004  |   | 
| | -------------- |  |  | ---- |  | ----- | - | 
| |                |  |  |      |  |       |   | 
| | U.S.           |  |  |      |  | 7.9%  |   | 
| | Central Europe |  |  |      |  | 4.3%  |   | 
| | Caribbean      |  |  |      |  | (0.4% | ) | 
| |                |  |  |      |  |       |   | 
| | Worldwide      |  |  |      |  | 6.7%  |   | 

|In
the third quarter of 2005, worldwide volume increased 6.7 percent compared to the prior
year third quarter. The increase in worldwide volume was attributed to volume growth in
the U.S. and Central Europe of 7.9 percent and 4.3 percent, respectively, offset partly by
a volume decline of 0.4 percent in the Caribbean.


The
increase in U.S. volume of 7.9 percent in the third quarter of 2005 reflected the
incremental volume generated by the CIC acquisition completed in January 2005. The
addition of the CIC territories increased U.S. volume by 7.5 percent. On a constant
territory basis, U.S. volume grew 0.4 percent. The double-digit growth in our
non-carbonated beverages was offset by volume declines in our carbonated soft drink
category. The growth in non-carbonated beverages was driven by 36 percent volume growth in
Aquafina water, which included the Aquafina product extensions in the first quarter of
2005. Lipton Iced Tea and Frappuccino both grew at strong double-digit rates. The Energy
category, which includes the brands AMP, Adrenaline Rush and No Fear, grew nearly 25
percent. In addition, non-carbonated soft drinks have become a larger part of our
portfolio, representing approximately 16 percent in the third quarter of 2005. Carbonated
soft drink declines were driven by mid single-digit declines in both Trademark Pepsi and
Trademark Mountain Dew, offset partly by contributions from Wild Cherry Pepsi, Pepsi One
and Pepsi Lime and growth in our diet category. Our single-serve volume grew at a low
single-digit rate in the third quarter of 2005 as we continue to execute our initiative to
grow volume in this package. Our volume growth in the U.S. was negatively impacted by a polyethylene terephthalate ("PET")
bottle supply shortage in the U.S. We expect this PET bottle supply issue will continue
through the balance of fiscal year 2005 and early part of fiscal year 2006.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|18
|--

---

|Total
volume in Central Europe grew 4.3 percent in the third quarter of 2005. Volume trends have
become more normalized in Central Europe as we are now lapping the first full quarter
after the European Union (EU) accession in May 2004. Volume growth was driven
by double-digit growth in Poland, mainly due to double-digit growth in carbonated soft
drinks and Lipton Tea, the introduction of Slice in 2005, and high single-digit growth in
the water category. Volume growth in the Czech Republic and Republic of Slovakia was
driven by growth in the carbonated soft drink category and the introduction of Slice in
these markets in 2005. This volume growth was partly offset by a high single-digit volume
decline in Hungary caused by the changing trade and channel dynamics. We continue to
operate in a very competitive pricing environment in both the carbonated soft drink and
water categories.


Volume
in the Caribbean decreased 0.4 percent in the third quarter of 2005 compared to the same
period last year. The volume decline reflected an adverse business climate in Puerto Rico
as a result of a local truckers strike against the government that limited raw
material supply into the market. The Caribbean volume decline also reflected adverse
weather conditions as hurricane flooding impacted Jamaica and precautionary hurricane
measures in Trinidad and Tobago limited sales. Despite these challenges, the
non-carbonated soft drink category experienced volume growth led by further expansion of
our portfolio of non-carbonated products.


Net Sales


Net
sales and net pricing statistics for the third quarter of 2005 and 2004 were as follows
(dollar amounts in millions):
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Net Sales          | 2005 |       | 2004 |   | Change |  | 
| | ------------------ | ---- | ----- | ---- | - | ------ |  | 
| |                    |      |       |      |   |        |  | 
| | U.S.               | $    | 822.8 |      | $ | 735.4  |  | 
| | Central Europe     |      | 99.6  |      |   | 90.7   |  | 
| | Caribbean          |      | 60.5  |      |   | 57.2   |  | 
| |                    |      |       |      |   |        |  | 
| | Worldwide          | $    | 982.9 |      | $ | 883.3  |  | 
| |                    |      |       |      |   |        |  | 
| |                    |      |       |      |   |        |  | 
| | Net Pricing Growth | 2005 |       | 2004 |   |        |  | 
| |                    |      |       |      |   |        |  | 
| | U.S.               |      | 3.2%  |      |   | 4.9%   |  | 
| | Central Europe     |      | 2.5%  |      |   | 18.0%  |  | 
| | Caribbean          |      | 6.2%  |      |   | 4.8%   |  | 
| |                    |      |       |      |   |        |  | 
| | Worldwide          |      | 3.6%  |      |   | 7.1%   |  | 

|Net
sales increased $99.6 million, or 11.3 percent, to $982.9 million in the third quarter of
2005 compared to $883.3 million in the third quarter of 2004. The increase was due to
increased worldwide net pricing of 3.6 percent and volume growth in the U.S. and Central
Europe.


Net
sales in the U.S. for the third quarter of 2005 increased $87.4 million, or 11.9 percent,
to $822.8 million from $735.4 million in the prior year third quarter. The increase was
primarily the result of the incremental net sales contributed by CIC, which represented
approximately two-thirds of the increase in net sales in the U.S. The remainder of the
increase in net sales was primarily due to the 3.2 percent increase in net pricing and the
0.4 percent growth in volume on a constant territory basis. The improvement in net pricing
was driven equally by price increases and package mix contribution. The increase in
pricing reflected our initiative to grow the single-serve business. Additionally,
continued innovation with the reformulation of Wild Cherry Pepsi, Cherry Vanilla Dr Pepper
and Pepsi One, and the Aquafina product extensions drove the net sales increase.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|19
|--

---

|Net
sales in Central Europe for the third quarter of 2005 increased $8.9 million, or 9.8
percent, to $99.6 million from $90.7 million in the prior year third quarter. Net sales
increased as volume grew by 4.3 percent and net pricing increased 2.5 percent. Net pricing
was favorably impacted by foreign currency translation as net pricing in local currencies
declined during the third quarter of 2005. Favorable foreign currency translation
contributed approximately $5.7 million to net sales in the third quarter of 2005.


Net
sales in the Caribbean increased 5.8 percent in the third quarter of 2005 to $60.5 million
from $57.2 million in the prior year third quarter. The increase in net sales primarily
resulted from an increase in net pricing of 6.2 percent, offset partly by a volume decline
of 0.4 percent. The increase in net pricing was driven by favorable price increases and
mix shifts to single-serve and non-carbonated beverages. This increase was partly offset
by the decrease in the contribution of the two-liter package resulting from an increase in
can volume due to promotional activities in Puerto Rico.


Cost of Goods Sold


Cost
of goods sold for the third quarter of 2005 and 2004 was as follows (dollar amounts in
millions):
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                | 2005 |       | 2004 |   | Change |  | 
| | -------------- | ---- | ----- | ---- | - | ------ |  | 
| |                |      |       |      |   |        |  | 
| | U.S.           | $    | 467.1 |      | $ | 415.0  |  | 
| | Central Europe |      | 58.6  |      |   | 49.9   |  | 
| | Caribbean      |      | 44.1  |      |   | 41.6   |  | 
| |                |      |       |      |   |        |  | 
| | Worldwide      | $    | 569.8 |      | $ | 506.5  |  | 
| |                |      |       |      |   |        |  | 

|Cost
of goods sold increased $63.3 million, or 12.5 percent, to $569.8 million in the third
quarter of 2005 from $506.5 million in the prior year third quarter. This increase was
driven primarily by higher volume and higher raw material costs, including aluminum, resin
and fuel in all geographic segments and higher sugar costs in the Caribbean. The addition
of the CIC territories also contributed to the increase in cost of goods sold. Cost of
goods sold per unit increased 3.8 percent in the third quarter of 2005 compared to the
same period in 2004.


In
the U.S., cost of goods sold increased $52.1 million, or 12.6 percent, to $467.1 million
in the third quarter of 2005 from $415.0 million in the prior year third quarter. This
increase was primarily driven by the incremental cost of goods sold contributed by CIC,
higher cost of goods sold per unit and volume growth of 0.4 percent on a constant
territory basis. CIC contributed approximately 60 percent of the cost of goods sold
increase in the U.S. We realized the full benefit of procurement savings associated with
CICs full integration into our procurement program, which reduced our can costs by
$2.6 million in the third quarter of 2005. Cost of goods sold per unit increased 3.3
percent in the U.S., primarily driven by price increases in aluminum, resin and fuel.


In
Central Europe, cost of goods sold increased $8.7 million, or 17.4 percent, to $58.6
million in the third quarter of 2005, compared to $49.9 million in the prior year third
quarter. Cost of goods sold increased mainly due to volume growth of 4.3 percent and an
increase in cost of goods sold per unit of 6.8 percent. The increase in cost of goods sold
per unit was due to the impact of higher raw material costs, driven mostly by higher resin
costs, and the impact of foreign currency translation of $1.8 million. Sugar prices in
Central Europe have stabilized in comparison to the third quarter of 2004 as we have
lapped the significant sugar price increases we experienced after the May 2004 EU
accession.


In
the Caribbean, cost of goods sold increased $2.5 million, or 6.0 percent, to $44.1 million
in the third quarter of 2005, compared to $41.6 million in the third quarter of 2004. This
increase was due to a higher cost of goods sold per unit of 3.6 percent, partly offset by
a volume decline of 0.4 percent. The cost of goods sold per unit increased due primarily
to increases in the prices for aluminum, resin, fuel and utilities in all countries, as
well as increased prices for sugar in Jamaica, Trinidad and Tobago, and the Bahamas.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|20
|--

---

|Selling, Delivery and
Administrative Expenses


Selling,
delivery and administrative expenses for the third quarter of 2005 and 2004 were as
follows (dollar amounts in millions):
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                | 2005 |       | 2004 |   | Change |  | 
| | -------------- | ---- | ----- | ---- | - | ------ |  | 
| |                |      |       |      |   |        |  | 
| | U.S.           | $    | 246.0 |      | $ | 222.6  |  | 
| | Central Europe |      | 33.2  |      |   | 33.2   |  | 
| | Caribbean      |      | 14.4  |      |   | 13.4   |  | 
| |                |      |       |      |   |        |  | 
| | Worldwide      | $    | 293.6 |      | $ | 269.2  |  | 
| |                |      |       |      |   |        |  | 

|In
the third quarter of 2005, selling, delivery and administrative (SD&A)
expenses increased $24.4 million, or 9.1 percent, to $293.6 million from $269.2 million in
the comparable period of the previous year. As a percentage of net sales, SD&A
expenses decreased to 29.9 percent in the third quarter of 2005, compared to 30.5 percent
in the prior year third quarter. The decline in SD&A expenses as a percentage of net
sales was primarily attributed to lower operating costs achieved in Central Europe
associated with cost reduction programs implemented during fiscal year 2004 and the first
quarter of 2005.


In
the U.S., SD&A expenses increased $23.4 million to $246.0 million in the third quarter
of 2005, compared to $222.6 million in the prior year third quarter. The increase in
SD&A expenses in the third quarter of 2005 was attributed to the impact of the CIC
acquisition, which contributed approximately three-fourths of the increase in SD&A.
SD&A expenses as a percentage of net sales declined to 29.9 percent in the third
quarter of 2005 compared to 30.3 percent in the prior year third quarter. This decline
represented the benefit of our cost management initiatives.


SD&A
expenses in Central Europe were $33.2 million in both the third quarters of 2005 and 2004.
On a local currency basis, SD&A expenses in 2005 were lower, driven by lower operating
costs associated with our cost reduction programs implemented in fiscal year 2004 and the
first quarter of 2005. These reductions were offset by the unfavorable impact of foreign
currency translation of $1.3 million.


In
the Caribbean, SD&A expenses increased $1.0 million, or 7.5 percent, to $14.4 million
from $13.4 million in the prior year third quarter due to increased fuel costs and higher
compensation and benefits costs. The higher compensation costs were incurred, in part, to
recover from the impacts of the local truckers strike against the government in
Puerto Rico.


Fructose Settlement


In
the third quarter of 2005, we recorded a gain of $1.8 million related to an additional
distribution from the settlement of a class action lawsuit. The lawsuit alleged price
fixing related to high fructose corn syrup purchased from July 1, 1991 through June 30,
1995. The amount received in the third quarter of 2005 related to the Heartland
territories purchased from PepsiCo in 1999.


Special Charges


In
the third quarter of 2004, we recorded special charges of $0.5 million in Central Europe.
The special charges primarily related to a reduction in the workforce in Central Europe as
we continued to rationalize the cost structure. These special charges were primarily for
severance costs and related benefits. No special charges were recorded in the third
quarter of 2005.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|21
|--

---

|Operating Income


Operating
income for the third quarter of 2005 and 2004 was as follows (dollar amounts in millions):
|-----------------------------------------------------------------------------------------------------------------------

| |                | 2005 |       | 2004 |   | Change |  | 
| | -------------- | ---- | ----- | ---- | - | ------ |  | 
| |                |      |       |      |   |        |  | 
| | U.S.           | $    | 111.5 |      | $ | 97.8   |  | 
| | Central Europe |      | 7.8   |      |   | 7.1    |  | 
| | Caribbean      |      | 2.0   |      |   | 2.2    |  | 
| |                |      |       |      |   |        |  | 
| | Worldwide      | $    | 121.3 |      | $ | 107.1  |  | 
| |                |      |       |      |   |        |  | 

|Operating income
increased $14.2 million, or 13.3 percent, to $121.3 million in the third quarter of 2005,
compared to $107.1 million in the prior year third quarter, driven by a $13.7 million
increase in the U.S. and $0.7 million increase in Central Europe. The increase in
operating income in the U.S. benefited from the operating income contributed by the CIC
acquisition, which accounted for almost two-thirds of the operating income growth
in the U.S. The remaining growth in operating income in the U.S. was attributed to higher
net pricing of 3.2 percent and the fructose settlement.


Operating
income in Central Europe increased $0.7 million to $7.8 million in the third quarter of
2005, compared to $7.1 million in the prior year third quarter, due primarily to the
benefit of foreign currency translation of $2.7 million and volume growth. This increase
was partly offset by higher cost of goods sold.


The
operating performance in the Caribbean declined by $0.2 million with operating income of
$2.0 million during the third quarter of 2005 compared to $2.2 million during the prior
year third quarter, due to relatively flat volume and higher operating and raw material
costs.


Interest Expense and
Other Income (Expense)


Interest
expense, net, increased $9.3 million in the third quarter of 2005 to $22.3 million,
compared to $13.0 million in the third quarter of 2004. This increase was due to
additional interest expense resulting from the issuances of fixed-rate debt in January
2005 and May 2005, and higher interest rates on our variable-rate debt. Included in the
third quarter of 2004 was $1.9 million of interest income related to a state income tax
refund and other tax-related items.


We
recorded other expense, net, of $1.9 million in the third quarter of 2005 compared to
other income, net, of $0.1 million reported in the third quarter of 2004. The third
quarter of 2005 included foreign currency transaction losses of $0.1 million compared to
foreign currency transaction gains of $1.0 million in the prior year third quarter.


Income Taxes


The
effective income tax rate, which is income tax expense expressed as a percentage of income
from continuing operations before income taxes and equity in net income (loss) of
nonconsolidated companies, was 37.7 percent in the third quarter of 2005 compared to 31.7
percent in the third quarter of 2004. Several items impacted our effective tax rate for
the third quarter of 2004. In the third quarter of 2004, we recorded a $2.8 million
benefit relating to the reversal of certain tax liabilities due to the settlement of
income tax audits through the 2002 tax year. In addition, we recorded a $2.6 million
benefit, net of taxes, relating to a state income tax refund. In the aggregate, these
significant items for the third quarter of 2004 reduced our effective income tax rate by
approximately 5.8 percent.


Equity in Net Income
(Loss) of Nonconsolidated Companies


In
the second quarter of 2005, we acquired a 49 percent minority interest in Quadrant-Amroq
Bottling Company Limited (QABCL), a holding company that, through its
subsidiaries, produces, sells and distributes Pepsi and other beverages throughout Romania
and Moldova. Equity in net income of nonconsolidated companies for the third quarter of
2005 was $3.2 million.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|22
|--

---

|Net Income


Net
income decreased $0.6 million to $63.7 million in the third quarter of 2005, compared to
$64.3 million in the third quarter of 2004. The decrease was primarily attributed to the
significant tax benefits recorded in the third quarter of 2004 and the operational factors
previously discussed, offset partly by the fructose settlement.


RESULTS OF OPERATIONS 2005
FIRST NINE MONTHS COMPARED WITH 2004 FIRST NINE MONTHS


Volume


Sales
volume growth (decline) for the first nine months of 2005 and 2004 were as follows:
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                |  |  | 2005 |  | 2004 |  | 
| | -------------- |  |  | ---- |  | ---- |  | 
| |                |  |  |      |  |      |  | 
| | U.S.           |  |  |      |  | 7.5% |  | 
| | Central Europe |  |  |      |  | 2.8% |  | 
| | Caribbean      |  |  |      |  | 8.5% |  | 
| |                |  |  |      |  |      |  | 
| | Worldwide      |  |  |      |  | 6.8% |  | 

|Worldwide
volume for the first nine months of 2005 increased 6.8 percent compared to the same period
in 2004. The increase in worldwide volume was attributed to volume increases in all three
geographic segments: 7.5 percent in the U.S., 2.8 percent in Central Europe and 8.5
percent in the Caribbean. We anticipate worldwide volume growth for the full year to trend
consistent with the volume performance experienced during the first nine months of 2005.


The
increase in U.S. volume of 7.5 percent in the first nine months of 2005 reflected the
incremental volume generated by the CIC acquisition completed in January 2005. The
addition of the CIC territories increased U.S. sales volume by 7.3 percent. The remaining
volume growth in the U.S. reflected contributions from non-carbonated beverages, which
grew at a double-digit rate during the first nine months of 2005. This growth was driven
by growth in Aquafina volume, which included the introduction of Aquafina Flavor Splash
and Aquafina Sparkling in the first quarter of 2005. In addition, double-digit growth in
Lipton Iced Tea and Frappuccino contributed to the overall growth of the non-carbonated
beverage category. The growth in non-carbonated beverages was partly offset by the decline
in our carbonated soft drink volume. We experienced single-digit growth in our diet
category and low double-digit growth in brand Dr Pepper, offset by volume declines in
brand Pepsi and brand Mountain Dew. Our single-serve category grew at a single-digit rate
in the nine months of 2005. The growth in single-serve was driven, in part, by the
reformulation of Wild Cherry Pepsi, Cherry Vanilla Dr Pepper and Pepsi One and the
introduction of Pepsi Lime. We believe that product innovation and further expansion of
the non-carbonated business will continue to contribute to volume growth for the balance
of fiscal year 2005.


Total
volume in Central Europe increased 2.8 percent in the first nine months of 2005. The
growth in volume resulted from the lapping of the accession of our markets into the EU in
May 2004 and the lapping of cold weather conditions in the late spring and early summer of
2004 that negatively impacted volume. Overall volume also grew despite lapping successful
promotional efforts in the first quarter of 2004. The volume growth was driven by
double-digit growth in carbonated soft drinks and the introduction of Slice in all markets
in the first quarter of 2005. We experienced double-digit declines in our water category.
We anticipate volume growth for the balance of fiscal year 2005 as we lap the soft results
of fiscal year 2004.


Volume
in the Caribbean increased 8.5 percent in the first nine months of 2005 compared to the
same period last year. The volume increase reflected volume growth across all markets as
well as the two months of incremental volume provided by the Bahamas in the first nine
months of 2005 due to its consolidation into the financial statements in March 2004.
Volume increases were driven by mid single-digit growth in carbonated soft drinks and low
single-digit growth in the water and other non-carbonated beverage categories.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|23
|--

---

|Net Sales


Net
sales and net pricing statistics for the first nine months of 2005 and 2004 were as
follows (dollar amounts in millions):
|-----------------------------------------------------------------------------------------------------------------------------------------

| | Net Sales          | 2005 |         | 2004 |   | Change  |  | 
| | ------------------ | ---- | ------- | ---- | - | ------- |  | 
| |                    |      |         |      |   |         |  | 
| | U.S.               | $    | 2,397.4 |      | $ | 2,146.4 |  | 
| | Central Europe     |      | 266.7   |      |   | 235.3   |  | 
| | Caribbean          |      | 167.6   |      |   | 148.9   |  | 
| |                    |      |         |      |   |         |  | 
| | Worldwide          | $    | 2,831.7 |      | $ | 2,530.6 |  | 
| |                    |      |         |      |   |         |  | 
| |                    |      |         |      |   |         |  | 
| | Net Pricing Growth | 2005 |         | 2004 |   |         |  | 
| |                    |      |         |      |   |         |  | 
| | U.S.               |      | 3.4%    |      |   | 4.7%    |  | 
| | Central Europe     |      | 7.4%    |      |   | 14.0%   |  | 
| | Caribbean          |      | 3.8%    |      |   | 6.7%    |  | 
| |                    |      |         |      |   |         |  | 
| | Worldwide          |      | 4.1%    |      |   | 6.8%    |  | 

|Net
sales increased $301.1 million, or 11.9 percent, to $2,831.7 million in the first nine
months of 2005 compared to $2,530.6 million the first nine months of 2004. The increase
was primarily due to increased worldwide net pricing of 4.1 percent and volume growth in
all three geographic segments. We anticipate an increase of worldwide net pricing at the
high end of the range of three to four percent for fiscal year 2005 as compared to the
prior year.


Net
sales in the U.S. for the first nine months of 2005 increased $251.0 million, or 11.7
percent, to $2,397.4 million from $2,146.4 million in the first nine months of 2004. The
increase was primarily the result of the incremental net sales contributed by CIC, which
represented approximately two-thirds of the increase in net sales in the U.S. The
remainder of the increase in net sales was primarily due to the 3.4 percent increase in
net pricing along with a 0.2 percent increase in volume on a constant territory basis. The
improvement in net pricing was driven by price increases of 2.1 percent and a package mix
contribution of 1.3 percent. The increase in pricing reflected our initiative to grow the
single-serve category. Successful promotional efforts during the first nine months 2005,
including holiday activity and continued product innovation with the reformulation of Wild
Cherry Pepsi, Cherry Vanilla Dr Pepper and Pepsi One, the introduction of Pepsi Lime and
the Aquafina product extension, drove the net sales increase.


Net
sales in Central Europe for the first nine months of 2005 increased $31.4 million, or 13.3
percent, to $266.7 million from $235.3 million in the first nine months of 2004. The
increase was primarily the result of the impact of foreign currency translation, which
contributed $26.3 million to net sales. The remainder of the increase resulted from volume
growth of 2.8 percent, offset partly by a decline in net pricing on a local currency
basis. The decrease in our pricing on a local currency basis was in response to our
competitors aggressive pricing on water in these territories in the first half of
2005 and lower net pricing on our multi-serve packaging in Hungary and Republic of
Slovakia.


Net
sales in the Caribbean increased 12.6 percent in the first nine months of 2005 to $167.6
million from $148.9 million in the prior year first nine months. The increase was driven
by an increase in net pricing of 3.8 percent and volume growth of 8.5 percent. In
addition, the Bahamas contributed two months of incremental benefit to net sales in the
first nine months of 2005 due to its consolidation starting in March 2004.


Cost of Goods Sold


Cost
of goods sold for the first nine months of 2005 and 2004 was as follows (dollar amounts in
millions):
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                | 2005 |         | 2004 |   | Change  |  | 
| | -------------- | ---- | ------- | ---- | - | ------- |  | 
| |                |      |         |      |   |         |  | 
| | U.S.           | $    | 1,352.1 |      | $ | 1,210.2 |  | 
| | Central Europe |      | 161.3   |      |   | 130.4   |  | 
| | Caribbean      |      | 124.1   |      |   | 109.0   |  | 
| |                |      |         |      |   |         |  | 
| | Worldwide      | $    | 1,637.5 |      | $ | 1,449.6 |  | 
| |                |      |         |      |   |         |  | 

|24
|--

---

|Cost
of goods sold increased $187.9 million, or 13.0 percent, to $1,637.5 million in the first
nine months of 2005 from $1,449.6 million in the first nine months of 2004. This increase
was driven primarily by volume growth across all geographic segments and an increase in
cost of goods sold per unit of 4.5 percent in the first nine months of 2005. The higher
cost of goods sold per unit was driven by higher costs for raw materials, including
aluminum, resin and fuel worldwide, sugar in Central Europe in the first half of 2005 and
sugar in the Caribbean in the third quarter of 2005. Overall, we expect that cost of goods
sold per unit will grow in the high end of the range of four to five percent during fiscal
year 2005 as compared to the prior fiscal year.


In
the U.S., cost of goods sold increased $141.9 million, or 11.7 percent, to $1,352.1
million in the first nine months of 2005 from $1,210.2 million in the prior year first
nine months. The increase was primarily driven by the incremental cost of goods sold
contributed by CIC, which was approximately two-thirds of the cost of goods sold increase,
and a higher cost of goods sold per unit. Cost of goods sold per unit increased 3.1
percent in the U.S., primarily driven by price increases in aluminum, resin and fuel.


In
Central Europe, cost of goods sold increased $30.9 million, or 23.7 percent, to $161.3
million in the first nine months of 2005, compared to $130.4 million in the first nine
months of 2004. Cost of goods sold increased mainly due to the increase in cost of goods
sold per unit of 14.9 percent driven by higher sugar and resin prices, the unfavorable
impact of foreign currency translation of $9.1 million, and volume growth of 2.8 percent.


In
the Caribbean, cost of goods sold increased $15.1 million, or 13.9 percent, to $124.1
million in the first nine months of 2005, compared to $109.0 million in the first nine
months of 2004. The increase was driven mainly by volume growth of 8.5 percent, an
increase in cost of goods sold per unit of 4.6 percent and the two months of incremental
volume provided by the Bahamas in the first nine months of 2005 due to its consolidation
beginning in March 2004. The cost of goods sold per unit increased due to increases in the
prices for aluminum, resin, fuel and utilities.


Selling, Delivery and
Administrative Expenses


Selling,
delivery and administrative expenses for the first nine months of 2005 and 2004 were as
follows (dollar amounts in millions):
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                | 2005 |       | 2004 |   | Change |  | 
| | -------------- | ---- | ----- | ---- | - | ------ |  | 
| |                |      |       |      |   |        |  | 
| | U.S.           | $    | 749.1 |      | $ | 672.1  |  | 
| | Central Europe |      | 99.3  |      |   | 99.8   |  | 
| | Caribbean      |      | 42.1  |      |   | 38.6   |  | 
| |                |      |       |      |   |        |  | 
| | Worldwide      | $    | 890.5 |      | $ | 810.5  |  | 
| |                |      |       |      |   |        |  | 

|In
the first nine months of 2005, SD&A expenses increased $80.0 million, or 9.9 percent,
to $890.5 million from $810.5 million in the comparable period of the previous year. As a
percentage of net sales, SD&A expenses decreased to 31.4 percent in the first nine
months of 2005, compared to 32.0 percent in the prior year nine months. The decrease in
SD&A expenses as a percentage of net sales was primarily attributed to lower operating
costs achieved in Central Europe associated with the cost reduction programs implemented
during fiscal year 2004 and the first quarter of 2005. We expect an increase of
approximately eleven to twelve percent in SD&A expenses for fiscal year 2005, compared
to fiscal year 2004.


In
the U.S., SD&A expenses increased $77.0 million, or 11.5 percent, to $749.1 million in
the first nine months of 2005, compared to $672.1 million in the prior year nine months.
The increase in SD&A expenses in the first nine months of 2005 was due, in part, to
the impact of the CIC acquisition, which represented almost two-thirds of the increase.
The remainder of the increase was due to increases in insurance, employee benefits and
fuel costs, as well as $1.4 million of expense recorded in the second quarter of 2005 due
to the early termination of the building lease for our corporate offices in Rolling
Meadows, Illinois. We anticipate an additional charge of approximately $6 to $7 million in
the fourth quarter of 2005 for remaining lease payments and other related costs when we
vacate the facility. SD&A expenses as a percentage of net sales were essentially
unchanged at 31.2 percent in the first nine months of 2005 compared to 31.3 percent in the
first nine months of 2004.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|25
|--

---

|In
Central Europe, SD&A expenses decreased $0.5 million, or 0.5 percent, to $99.3 million
from $99.8 million in the prior year first nine months. The decrease in SD&A expenses
was driven by lower operating costs associated with our cost reduction programs
implemented in fiscal year 2004 and the first quarter of 2005 and a $1.1 million gain from
the sale of a facility in Hungary, which were partly offset by the impact of unfavorable
foreign currency translation of $7.6 million.


In
the Caribbean, SD&A expenses increased $3.5 million, or 9.1 percent, to $42.1 million
from $38.6 million in the prior year first nine months due mainly to an 8.5 percent
increase in volume during the first nine months of 2005 and increased fuel costs.


Fructose Settlement


In
the first nine months of 2005, we recorded a gain of $15.1 million related to
distributions from the settlement of a class action lawsuit. The lawsuit alleged price
fixing related to high fructose corn syrup purchased from July 1, 1991 through June 30,
1995. We expect to receive additional distributions in the fourth quarter of 2005, which
are estimated to be approximately $1.7 million.


Special Charges


In
the first nine months of 2005, we recorded special charges of $2.5 million in Central
Europe primarily for a reduction in workforce and the consolidation of certain production
facilities as we continue to rationalize our cost structure. These special charges were
primarily for severance costs and related benefits and asset write-downs.


We
recorded special charges of $2.3 million in the first nine months of 2004 in Central
Europe. These special charges included $1.7 million of severance costs and related
benefits related to a reduction in the workforce as we continued to rationalize our cost
structure in Central Europe. In addition, we recorded special charges of $0.6 million in
Hungary related to the continued modification of our distribution strategy to utilize
third party distributors in more remote areas. These special charges in Hungary were
primarily for severance costs and related benefits.


Operating Income


Operating
income for the first nine months of 2005 and 2004 was as follows (dollar amounts in
millions):
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                | 2005 |       | 2004 |   | Change |  | 
| | -------------- | ---- | ----- | ---- | - | ------ |  | 
| |                |      |       |      |   |        |  | 
| | U.S.           | $    | 311.3 |      | $ | 264.1  |  | 
| | Central Europe |      | 3.6   |      |   | 2.8    |  | 
| | Caribbean      |      | 1.4   |      |   | 1.3    |  | 
| |                |      |       |      |   |        |  | 
| | Worldwide      | $    | 316.3 |      | $ | 268.2  |  | 
| |                |      |       |      |   |        |  | 

|Operating
income increased $48.1 million, or 17.9 percent, to $316.3 million in the first nine
months of 2005, compared to $268.2 million in the prior year first nine months, driven by
a $47.2 million increase in operating income in the U.S. and a $0.9 million improvement in
our international operations. The increase in operating income in the U.S. benefited from
the operating income contributed by the CIC acquisition, which accounted for approximately
44 percent of the operating income growth in the U.S. The remaining growth in operating
income in the U.S. was attributed to higher net pricing of 3.4 percent and the fructose
settlement.


Operating
income in Central Europe improved $0.8 million to $3.6 million in the first nine months of
2005, from $2.8 million in the prior year first nine months. The improvement was due
mainly to increased net pricing, volume growth and lower SD&A costs, partly offset by
higher cost of goods sold. The impact of foreign currency translation benefited operating
results in Central Europe by approximately $9.6 million.


The
operating performance in the Caribbean improved by $0.1 million with operating income of
$1.4 million in the first nine months of 2005 compared to $1.3 million in the prior year
as volume growth and increases in net pricing were partly offset by higher production and
operating costs.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|26
|--

---

|Interest Expense and
Other Income (Expense)


Interest
expense, net, increased $22.4 million in the first nine months of 2005 to $67.5 million,
compared to $45.1 million in the first nine months of 2004. The overall increase was due
mainly to an increase in total debt of approximately $400 million since the end of fiscal
year 2004, used primarily to finance our acquisitions of CIC and QABCL, and a $5.6 million
charge related to the early extinguishment of debt. The extinguished debt was refinanced
with new debt maturing in 2017 and 2035. Interest expense related to variable-rate debt
also contributed to the increase due to higher short-term interest rates in the first nine
months of 2005. The additional expense in the first nine months of 2005 was offset partly
by $1.5 million of interest income related to a real estate tax appeals refund on a
previously sold parcel of land in downtown Chicago. The 2004 amount includes $1.9 million
of interest income related to a state income tax refund and the settlement of various
income tax audits.


We
recorded other expense, net, of $3.3 million in the first nine months of 2005 compared to
other income, net, of $2.6 million reported in the first nine months of 2004. The first
nine months of 2005 included foreign currency transaction losses of $2.9 million compared
to foreign currency transaction gains of $1.3 million for the comparable period in the
prior year. Additionally, the benefit attributed to the non-operating real estate
activities was lower by $1.1 million in the first nine months of 2005 compared to the
same period in 2004.


Income Taxes


The
effective income tax rate was 37.3 percent for the first nine months of 2005 compared to
35.1 percent for the first nine months of 2004. Several items impacted our effective rate
for the first nine months of 2005 and 2004. For the first nine months of 2005, we recorded
a $0.9 million benefit from a state income tax law change in Ohio, which reduced our
effective income tax rate by approximately 0.4 percent.


For
the first nine months of 2004, we recorded a $2.8 million benefit relating to the reversal
of certain tax liabilities due to the settlement of income tax audits through the 2002 tax
year. In addition, we recorded a $2.6 million benefit, net of taxes, relating to a state
income tax refund. In the aggregate, these significant items for the first nine months of
2004 reduced our effective income tax rate by approximately 2.4 percent.


Equity in Net Income
(Loss) of Nonconsolidated Companies


In
the second quarter of 2005, we acquired a 49 percent minority interest in QABCL. Equity in
net income of nonconsolidated companies for the first nine months of 2005 was $3.2
million.


Prior
to increasing our ownership in the Bahamas to 70 percent in March 2004, we owned a 30
percent minority interest investment in the operations. We previously accounted for the
investment under the equity method. For the first nine months of 2004, we recorded $0.1
million in equity in net loss of nonconsolidated companies related to this investment.


Net Income


Net
income increased $10.6 million to $157.1 million in the first nine months of 2005,
compared to $146.5 million in the first nine months of 2004. The increase in net income
was attributed mainly to improved worldwide net pricing, volume growth, the benefit of
foreign currency translation, the cost savings experienced in Central Europe and an
after-tax gain of $9.4 million related to the fructose settlement, offset by higher cost
of goods sold per unit. Other operational factors impacting net income were previously
discussed.


LIQUIDITY AND CAPITAL
RESOURCES


Operating
Activities. Net cash provided by operating activities decreased by $50.6 million to
$306.4 million in the first nine months of 2005, compared to $357.0 million in the first
nine months of 2004. This decrease was primarily attributed to the benefit experienced in
the first nine months of 2004 from our securitization program totaling $100.0 million and
the unfavorable year-over-year change in the impact from deferred taxes of $21.8 million.
The unfavorable items impacting cash from operations were offset, in part, by a favorable
year-over-year change from primary working capital of $18.2 million and the benefit of the
fructose settlement included in net income. Primary working capital is comprised of
accounts receivable, inventory and accounts payable, excluding the impact of the
securitization program. The first nine months of 2005 showed improvement in our U.S.
primary working capital measures, including days sales outstanding, inventory turns and
days payable outstanding, compared to the same period a year ago.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|27
|--

---

|Investing
Activities. Investing activities in the first nine months of 2005 included capital
investments of $98.4 million, compared to $79.9 million in the first nine months of 2004.
The increase in capital expenditures was in line with our expectations, as we anticipate
our capital spending to return to normalized levels in the range of $160 million to $170
million in fiscal year 2005, compared to capital investments of $121.8 million for fiscal
year 2004.


In
January 2005, we completed the acquisition of CIC. We agreed to acquire the capital stock
of CIC for a purchase price of $339.3 million plus $13.1 million related to an adjustment
for working capital. We also acquired the capital stock of FM Vending for $2.2 million,
net of cash acquired.


In
June 2005, we completed the purchase of a 49 percent equity investment in QABCL. We
acquired capital stock of QABCL for $51.0 million.


Financing
Activities. Our total debt increased $402.0 million to $1,550.6 million at the end of
the first nine months of 2005, from $1,148.6 million at the end of fiscal year 2004. In
January 2005, we issued $300 million of notes due January 2015 with a coupon rate of 4.875
percent. Net proceeds from the transaction were $297.0 million, which reflected the
reduction for discount and issuance costs. The proceeds from this issuance were used to
fund the acquisition of CIC.


In
May 2005, we issued two long-term notes. We issued $250 million of notes due May 2017 with
a coupon rate of 5.0 percent and $250 million of notes due May 2035 with a coupon rate of
5.5 percent. Net proceeds from these issuances were $246.2 million for each respective
issuance, which reflected the reduction for discount and issuance costs. The proceeds from
these issuances were used, in part, to fund the debt tender offer in May 2005.


In
May 2005, we completed a cash tender offer related to $550 million of our outstanding
debt. The total amount of securities tendered was $388.0 million. As a result of the
tender offer we recorded a loss on the early extinguishment of debt in the first nine
months of 2005 of $5.6 million ($3.5 million after taxes), which is recorded in
Interest expense, net on our Condensed Consolidated Statement of Income.


We
have a revolving credit facility under which we can borrow up to an aggregate of $500
million. This credit facility serves as a back up for our commercial paper program, and it
is required by our credit rating agencies. Accordingly, we have a total of $500 million
available under the commercial paper program and revolving credit facility combined. We
had $121.5 million of commercial paper borrowings at the end of the first nine months of
2005, compared to $59.5 million at the end of fiscal year 2004. The increase in commercial
paper borrowings was due to the funding of general operating expenses.


During
the first nine months of 2005, we repurchased 8.3 million shares of our common stock, of
which $196.1 million was paid in the first nine months of 2005; however at the end of the
third quarter of 2005, $3.4 million of treasury stock purchases were unsettled and
recorded in Other current liabilities in our Condensed Consolidated Balance
Sheet. During the first nine months of 2004, we executed an accelerated stock repurchase
program in which we repurchased 10 million shares of our common stock for $200.6 million.
The issuance of common stock, including treasury shares for the exercise of stock options
resulted in cash inflows of $59.6 million in the first nine months of 2005, compared to
$59.5 million in the first nine months of 2004. On July 21, 2005, we announced our Board
of Directors authorized the repurchase of 20 million additional shares under a previously
authorized repurchase program.


Our
Board of Directors has declared quarterly dividends of $0.085 per share on PepsiAmericas
common stock for the each of the first three quarters of 2005. Our Board of Directors
reviews dividend declarations on a quarterly basis. We paid cash dividends of $23.6
million in the first nine months of 2005 based on this quarterly cash dividend rate;
however, at the end of the third quarter of 2005, $11.4 million of dividends were declared
and not yet paid. As a result, this amount is included in Payables in the
Condensed Consolidated Balance Sheet. In the first nine months of 2004, we paid cash
dividends of $31.6 million based on a quarterly dividend rate of $0.075 per share.


See
the Annual Report on Form 10-K for fiscal year 2004 for a summary of our contractual
obligations as of the end of fiscal year 2004. There were no significant changes to such
contractual obligations in the first ninemonths of 2005 except for new debt issued
as discussed in Note 10 to the Condensed Consolidated Financial Statements and increased
borrowing under our commercial paper program as discussed above.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|28
|--

---

|We
believe that our operating cash flows are sufficient to fund our existing operations for
the foreseeable future. In addition, we believe that with our operating cash flows,
available lines of credit, and the potential for additional debt and equity offerings, we
will have sufficient resources to fund our future growth and expansion opportunities.
There are a number of options available to us and we continue to examine the optimal uses
of our cash, including repurchasing our stock, reinvesting in our existing business and
acquisitions with an appropriate economic return. Our primary focus is to continue to
increase shareholder value through improving our adjusted return on invested capital.


Discontinued
operations. We continue to be subject to certain indemnification obligations, net of
insurance, under agreements related to previously sold subsidiaries, including
indemnification expenses for potential environmental and tort liabilities of these prior
subsidiaries. There is significant uncertainty in assessing our potential expenses for
complying with our indemnification obligations, as the determination of such amounts is
subject to various factors, including possible insurance recoveries and the allocation of
liabilities among other potentially responsible and financially viable parties.
Accordingly, the ultimate settlement and timing of cash requirements related to such
indemnification obligations may vary significantly from the estimates included in our
financial statements. At the end of the first nine months of 2005,we had recorded
$93.9 million in liabilities for future remediation and other related costs arising out of
our indemnification obligations. This amount excludes possible insurance recoveries and is
determined on an undiscounted cash flow basis. In addition, we have funded coverage
pursuant to an insurance policy purchased in fiscal year 2002 (see Note 15 to the
Condensed Consolidated Financial Statements), which reduces the cash required to be paid
by us for certain environmental sites pursuant to our indemnification obligations. The
Finite Funding amount recorded was $20.1 million at the end of the first nine months of
2005, of which $1.5 million is expected to be recovered in 2005 based on our expenditures,
and thus, is included as a current asset.


During
the first nine months of 2005 and 2004, we paid, net of taxes, $6.9 million and $4.4
million, respectively, related to such indemnification obligations, net of pretax insurance
settlements of $2.0 million and $7.0 million, respectively. We expect to spend approximately
$15 million on a pretax basis in fiscal year 2005 related to our
indemnification obligations, excluding possible insurance recoveries (see Note 15
to the Condensed Consolidated Financial Statements for further discussion of discontinued
operations and related environmental liabilities).


RECENTLY ISSUED
ACCOUNTING PRONOUNCEMENTS


In
May 2005, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 154, Accounting for Changes
and Error Corrections. SFAS No. 154 replaces Accounting Principles Board
(APB) Opinion No. 20, Accounting Changes, and SFAS No. 3,
Reporting Accounting Changes in Interim Financial Statements, and is effective
for accounting changes and error corrections made after December 31, 2005. Early adoption
is also permitted. SFAS No. 154 requires that voluntary changes in accounting principles
be applied retrospectively to all periods presented so that those financial statements
contain a consistent application of the accounting principle. APB Opinion No. 20
previously required that most voluntary changes in accounting principles be reflected in
the financial statements by showing the cumulative effect of the change for all periods
prior to the change. The guidance in APB Opinion No. 20 regarding the correction of an
error in previously issued financial statements and a change in accounting estimates was
carried forward in SFAS No. 154. We plan to adopt this standard in fiscal year 2005.


In
December 2004, the FASB issued a revised SFAS No. 123, Share-Based
Payment. Among its provisions, SFAS No. 123R will require us to measure the cost of
employee services in exchange for an award of equity instruments based on the grant-date
fair value of the award and to recognize the cost over the requisite service period. As
issued, SFAS No. 123R would have become effective for us beginning in the third quarter of
2005. However, on April 14, 2005, the Securities and Exchange Commission adopted a rule
that deferred the effective date to fiscal years beginning after June 15, 2005, which will
make SFAS No. 123R effective for us beginning in fiscal year 2006. We currently use the
intrinsic value method to account for stock-based employee compensation. As a result, the
adoption of SFAS No. 123R is expected to reduce our net income in interim and annual
periods after adoption. We believe the best indication of the approximate impact on net
income of adopting the provisions of this revised Statement may be determined by reviewing
the table set forth in Note 1 to the Condensed Consolidated Financial Statements under the
heading Stock-based compensation, which shows that net income would have
decreased by $0.6 million and $0.9 million for the third quarters of 2005 and 2004,
respectively, and $0.01 per diluted share for the third quarter of 2005 with no impact on
diluted earnings per share for the third quarter of 2004. For the first nine months of
2005 and 2004, net income would have decreased by $1.9 million and $2.7 million,
respectively, and $0.02 per diluted share for each respective period. Also, upon adoption,
we will be allowed to restate prior interim periods or prior years in accordance with a
modified retrospective method. The modified retrospective treatment is not required and we
have not yet determined whether we will restate prior periods. We are currently evaluating
the impact of this proposed standard on our Consolidated Financial Statements.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|29
|--

---

|RELATED PARTY
TRANSACTIONS


We
are a licensed producer and distributor of Pepsi carbonated and non-carbonated soft drinks
and other non-alcoholic beverages in the U.S., Central Europe and the Caribbean. We
operate under exclusive franchise agreements with soft drink concentrate producers,
including master bottling and fountain syrup agreements with PepsiCo, Inc.
(PepsiCo) for the manufacture, packaging, sale and distribution of PepsiCo
branded products. The franchise agreements exist in perpetuity and contain operating and
marketing commitments and conditions for termination. As of the end of the third quarter
of 2005, PepsiCo beneficially owned 42.6 percent of PepsiAmericas common stock.


We
purchase concentrate from PepsiCo to be used in the production of Pepsi carbonated soft
drinks and other non-alcoholic beverages. PepsiCo also provides us with various forms of
bottler incentives (marketing support programs) to promote Pepsis brands. These
bottler incentives cover a variety of initiatives, including direct marketplace, shared
media and advertising, to support volume and market share growth. There are no conditions
or requirements that could result in the repayment of any support payments we have
received.


We
manufacture and distribute fountain products and provide fountain equipment service to
PepsiCo customers in certain territories in accordance with various agreements. There are
other products that we produce and/or distribute through various arrangements with PepsiCo
or partners of PepsiCo. We also purchase finished beverage products from PepsiCo and
certain of its affiliates including tea, concentrate and finished beverage products from a
Pepsi/Lipton partnership, as well as finished beverage products from a Pepsi/Starbucks
partnership.


PepsiCo
provides various procurement services under a shared services agreement. Under such
agreement, PepsiCo negotiates with various suppliers the cost of certain raw materials by
entering into raw material contracts on our behalf. PepsiCo also collects and remits to us
certain rebates from the various suppliers related to our procurement volume. In addition,
PepsiCo acts as our agent for the execution of derivative contracts associated with
certain anticipated raw material purchases.


In
the third quarter of 2005, we received from PepsiCo a portion of the fructose settlement
(see Note 2 to the Condensed Consolidated Financial Statements) related to the Heartland
territories purchased from PepsiCo in 1999 totaling $1.8 million. We expect to receive an
additional distribution of approximately $0.2 million in the fourth quarter of 2005.


On
September 6, 2005, we entered into a second amended and restated shareholder
agreement with PepsiCo.  The new agreement provides that PepsiCo and its
affiliates may not own more than 49% of our outstanding common stock.  Under the
former agreement, PepsiCos and its affiliates ownership of our common stock
was similarly limited to a maximum ownership percentage of 49% of our outstanding common
stock, but the combined ownership of PepsiCo and its affiliates, together with Robert C.
Pohlad, his affiliates and his family, was also limited to a maximum ownership percentage
of 49.9% of our outstanding common stock.  The primary purpose of this new agreement
was to decouple the ownership limitations that previously applied to the aggregate
ownership of PepsiCo and Mr. Pohlad, his affiliates and his family.


We
have an existing arrangement with a subsidiary of the Pohlad Companies related to the
joint ownership of an aircraft. This transaction is not material to our Condensed
Consolidated Financial Statements. Robert C. Pohlad, our Chairman and Chief Executive
Officer, is the President and owner of approximately 33 percent of the capital stock of
Pohlad Companies.


On September 6, 2005, we
entered into an amended and
restated shareholder agreement with Pohlad Companies and
Robert C. Pohlad.  The new agreement no longer limits the amount of our outstanding common stock that may be
owned by Pohlad Companies, Dakota Holdings, LLC and Mr. Pohlad.  However, any additional acquisition of our
common stock by Mr. Pohlad, his affiliates or his family (excluding compensatory awards to Mr. Pohlad) now
requires approval of our Affiliated Transaction Committee.  The primary purpose of this new agreement was to
decouple the ownership limitations that previously applied to the aggregate ownership of PepsiCo and Mr. Pohlad,
his affiliates and his family.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|See
additional discussion of our related party transactions in our Annual Report on Form 10-K
for the fiscal year 2004.
|-----------------------------------------------------------------------------------------------------------------------

|30
|--

---

|FORWARD-LOOKING
STATEMENTS


This
quarterly report on Form 10-Q contains certain forward-looking statements of expected
future developments, as defined in the Private Securities Litigation Reform Act of 1995.
The forward-looking statements in this Form 10-Q refer to the expectations regarding
continuing operating improvement and other matters. These forward-looking statements
reflect our expectations and are based on currently available data; however, actual
results are subject to future risks and uncertainties, which could materially affect
actual performance. Risks and uncertainties that could affect such future performance
include, but are not limited to, the following: competition, including product and pricing
pressures; changing trends in consumer tastes; changes in our relationship and/or support
programs with PepsiCo and other brand owners; market acceptance of new product and package
offerings; weather conditions; cost and availability of raw materials; changing
legislation; outcomes of environmental claims and litigation; availability of capital
including changes in our debt ratings; labor and employee benefit costs; unfavorable
interest rate and currency fluctuations; costs of legal proceedings; and general economic,
business and political conditions in the countries and territories where we operate.


These
events and uncertainties are difficult or impossible to predict accurately and many are
beyond our control. We assume no obligation to publicly release the result of any
revisions that may be made to any forward-looking statements to reflect events or
circumstances after the date of such statements or to reflect the occurrence of
anticipated or unanticipated events.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Item 3.    
Quantitative and Qualitative Disclosures About Market Risk.
|-----------------------------------------------------------------------

|We
are subject to various market risks, including risks from changes in commodity prices,
interest rates and currency exchange rates, which are addressed below. In addition, please
see Note 11 to the Condensed Consolidated Financial Statements.


Commodity Prices


The
risk from commodity price changes relates to our ability to recover higher product costs
through price increases to customers, which may be limited due to the competitive pricing
environment that exists in the soft drink business. We use derivative financial
instruments to hedge price fluctuations for a portion of anticipated purchases of certain
commodities used in our operations, including aluminum, natural gas, and diesel fuel.
Because of the high correlation between such commodity prices and our cost of these
products, we consider these hedges to be highly effective. As of the end of the third
quarter of 2005, we have hedged a portion of our anticipated aluminum purchases through
November 2006, a portion of our natural gas purchases through November 2007, and we have
hedged a portion of our anticipated diesel fuel purchases through December 2005.


Interest Rates


In
the third quarter of 2005, the risk from changes in interest rates was not material to our
operations because a significant portion of our debt issues represented fixed rate
obligations. Our floating rate exposure relates to changes in the six-month London
Interbank Offered Rank (LIBOR) rate and the overnight Federal Funds rate.
Assuming consistent levels of floating rate debt with those held at the end of the third
quarter of 2005, a 50 basis point (0.5 percent) change in each of these rates would not
have had a significant impact on our third quarter and first nine months of 2005 interest
expense. We had cash equivalents throughout the third quarter and first nine months of
2005, principally invested in money market funds, which were most closely tied to
overnight Federal Funds rates. Assuming a 50 basis-point change in the rate of interest
associated with our cash equivalents at the end of the third quarter of 2005, interest
income for the third quarter and first nine months of 2005 would not have changed by a
significant amount.


Currency Exchange Rates


Because
we operate in non-U.S. franchise territories, we are subject to risk resulting from
changes in currency exchange rates. Currency exchange rates are influenced by a variety of
economic factors including local inflation, growth, interest rates and governmental
actions, as well as other factors. We currently do not hedge the translation risks of
investments in our non-U.S. operations. Any positive cash flows generated have been
reinvested in the operations, excluding repayments of intercompany loans and interest from
the manufacturing operations in Poland.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|31
|--

---

|Based
on net sales, non-U.S. operations represented approximately 16 percent and 15 percent of
our total operations in the third quarter and first nine months of 2005, respectively.
Changes in currency exchange rates impact the translation of the non-U.S. operations
results from their local currencies into U.S. dollars. If the currency exchange rates had
changed by ten percent in the third quarter and first nine months of 2005, we estimate the
impact on reported operating income for those periods would not have been significant. Our
estimate reflects the fact that a portion of the non-U.S. operations costs are denominated
in U.S. dollars, including concentrate purchases. This estimate does not take into account
the possibility that rates can move in opposite directions and that gains in one category
may or may not be offset by losses from another category.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Item 4.    
Controls and Procedures.
|------------------------------------

|Disclosure Controls and
Procedures


We
maintain a system of disclosure controls and procedures that are designed to provide
reasonable assurance that information, which is required to be disclosed in our periodic
SEC filings, is accumulated and timely communicated to management. At the end of the
period covered by this report, we carried out an evaluation, under the supervision and
with the participation of our management team, including our Chief Executive Officer and
Chief Financial Officer, of the effectiveness of the design and operation of our
disclosure controls and procedures pursuant to Exchange Act Rule 13a-15. Based upon that
evaluation, at the end of the period covered by this report, our Chief Executive Officer
and Chief Financial Officer concluded that our disclosure controls and procedures are
effective.


During
the third quarter of 2005, there were no significant changes in our internal control over
financial reporting or in other factors that have materially affected, or are reasonably
likely to materially affect, our internal control over financial reporting.


On
January 10, 2005, we completed the purchase of Central Investment Corporation
(CIC), and we are currently in the process of integrating the CIC activities.
The impact of the purchase of CIC has not materially affected and is not likely to
materially affect our internal control over financial reporting. However, as a result of
our integration activities, controls will be periodically changed. We believe we will be
able to maintain sufficient controls over the substantive results of our financial
reporting throughout the integration process. In addition, we expect the scope of
managements assessment as of the end of our fiscal year to exclude our purchase of
CIC, as permitted under Frequently Asked Question No. 3 (October 6, 2004) regarding
Release No. 34-47986, Managements Report on Internal Control Over Financial
Reporting and Certification of Disclosure in Exchange Act Periodic Reports (June 5,
2003).
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|32
|--

---

|PART II-OTHER
INFORMATION
|-------------------------

|Item 1. | Legal Proceedings.
|------- | ------------------

| | No new legal proceedings and no material changes to previously reported legal proceedings to be
reported for the third quarter of 2005.
| | ---------------------------------------------------------------------------------------------------------------------------------------

|Item 2. | Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities
|------- | --------------------------------------------------------------------------------

| | (c)  
Our
share repurchase program activity for each of the three months and the quarter ended October, 2005 was as
follows:
| | ----------------------------------------------------------------------------------------------------------------------------

|Period                                | Total Number of Shares Purchased (1) | Average Price Paid per Share (2) | Total Number of Share Purchased as Part of Publicly
        Announced Plans or Programs (3) | Maximum Number of Shares that May Yet Be Purchased Under
        the Plans or Programs(3)(4)
|------------------------------------- | ------------------------------------ | -------------------------------- | ------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------
|                                      |                                      |                                  |                                                                                             |                                                                                             
|July 3 - July 30, 2005                |                                      | 623,000                          |                                                                                             | $26.04                                                                                      
|July 31 - August 27, 2005             |                                      | 888,200                          |                                                                                             | $24.95                                                                                      
|August 28 - October 1, 2005           |                                      | 1,201,700                        |                                                                                             | $23.92                                                                                      
|                                      |                                      |                                  |                                                                                             |                                                                                             
|For the Quarter Ended October 1, 2005 |                                      | 2,712,900                        |                                                                                             | $24.74                                                                                      
|                                      |                                      |                                  |                                                                                             |                                                                                             

| | (1)   Represents shares purchased in open-market transactions pursuant to our publicly
announced repurchase program
| | -------------------------------------------------------------------------------------------------------------------

| | (2)   Includes commissions of $0.02 per share.
| | ----------------------------------------------

| | (3)   On December 19, 2002, we announced that our Board of Directors authorized
the repurchase of 20 million shares under a previously authorized repurchased program.  As of July 19, 2005, there were no shares remaining
under this authorization.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (3)   On July 21, 2005, we announced that our Board of Directors authorized the repurchase of
20 million additional shares under a previously authorized repurchase program.  This repurchase authorization
does not have a scheduled expiration date.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Item 6. | Exhibits
|------- | --------

| | See "Exhibit Index."
| | --------------------

|33
|--

---

|SIGNATURE


Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Date:    November 7, 2005 | PEPSIAMERICAS, INC.
|------------------------- | -------------------

| | By:   /s/ ALEXANDER H. WARE
| | ---------------------------

| | Alexander H. Ware.
                                                                      Executive Vice President and Chief Financial Officer
                                                                      (As Chief Accounting Officer and Duly
                                                                      Authorized Officer of PepsiAmericas, Inc.)
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|34
|--

---

|EXHIBIT INDEX
|-------------

|ExhibitNumber | Description of Exhibit
|------------- | ----------------------

|10.1 | Second Amended and Restated Shareholder Agreement
by and between PepsiAmericas, Inc. and PepsiCo., dated September 6, 2005 (incorporated by reference to the Company's Current Report
on Form 8-K (File No. 000-15019) filed September 7, 2005).
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.2 | Amended and Restated Shareholder Agreement by
and between PepsiAmericas, Inc., Pohlad Companies and Robert C. Pohlad, dated September 6, 2005 (incorporated by reference to the
Company's Current Report on Form 8-K (File No. 000-15019) filed September 7, 2005).
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.3 | Rule 10b5-1 Trading Plan between PepsiAmericas, Inc.
and Citigroup Global Markets, Inc., dated September 6, 2005 (incorporated by reference to the Company's Current Report on Form 8-K
(File No. 000-15019) filed September 7, 2005).
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|31.1 | Chief Executive Officer Certification pursuant to
Exchange Act Rule 13a-14, as adopted pursuant to
              Section 302 of the Sarbanes-Oxley Act of 2002.
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

|31.2 | Chief Financial Officer Certification pursuant to
Exchange Act Rule 13a-14, as adopted pursuant to
              Section 302 of the Sarbanes-Oxley Act of 2002.
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

|32.1 | Chief Executive Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
              Section 906 of the Sarbanes-Oxley Act of 2002.
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------

|32.2 | Chief Financial Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
              Section 906 of the Sarbanes-Oxley Act of 2002.
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------

|35
|--

---