|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 April 1, 2006


/ /   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 a large accelerated filer, an accelerated filer or a non-accelerated filer.  See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Large accelerated filer | /x/ | Accelerated filer | / / | Non-accelerated filer | / /
| | ----------------------- | --- | ----------------- | --- | --------------------- | ---

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

| | Yes | / / | No | /x/ |  | 
| | --- | --- | -- | --- |  | 

|As of April 28, 2006 the Registrant
had 130,283,595 outstanding  shares
of common  stock,  par value  $0.01 per  share,  the
Registrant's only class of common stock.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

|PEPSIAMERICAS, INC.FORM 10-QFIRST QUARTER 2006
|----------------------------------------------

|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 | 16  
|             
|              |  | Item 3.               | Quantitative and Qualitative Disclosures About Market Risk                            | 25  
|             
|              |  | Item 4.               | Controls and Procedures                                                               | 26  
|             
|PART II       |  | OTHER INFORMATION    
|             
|              |  | Item 1.               | Legal Proceedings                                                                     | 27  
|             
|              |  | Item 1A.              | Risk Factors                                                                          | 27  
|             
|              |  | Item 2.               | Unregistered Sales of Equity Securities and Use of Proceeds                           | 27  
|             
|              |  | Item 5.               | Other Information                                                                     | 27  
|             
|              |  | Item 6.               | Exhibits                                                                              | 27  
|             
|SIGNATURE     |  |                       |                                                                                       | 28  
|             
|EXHIBIT INDEX |  |                       |                                                                                       | 29  

|1
|-

---

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

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

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

|                                                                                                        | First Quarter |      
|------------------------------------------------------------------------------------------------------- | ------------- | -----
|                                                                                                        |               |      
|                                                                                                        |               | 2006 
|                                                                                                        |               |      
|Net sales                                                                                               | $             | 848.5
|Cost of goods sold                                                                                      |               | 500.7
|                                                                                                        |               |      
|Gross profit                                                                                            |               | 347.8
|Selling, delivery and administrative
                expenses                                           |               | 299.9
|Special charges, net                                                                                    |               | 2.2  
|                                                                                                        |               |      
|Operating income                                                                                        |               | 45.7 
|Interest expense, net                                                                                   |               | 23.1 
|Other expense, net                                                                                      |               | 1.8  
|                                                                                                        |               |      
|Income before income
                taxes and equity in net earnings of      nonconsolidated companies |               | 20.8 
|Income taxes                                                                                            |               | 7.9  
|Equity in net earnings of nonconsolidated companies                                                     |               | 1.2  
|                                                                                                        |               |      
|Net income                                                                                              | $             | 14.1 
|                                                                                                        |               |      
|Weighted average common shares:                                                                         |               |      
|Basic                                                                                                   |               | 130.3
|Incremental effect
                of stock options and awards                                          |               | 2.1  
|                                                                                                        |               |      
|Diluted                                                                                                 |               | 132.4
|                                                                                                        |               |      
|                                                                                                        |               |      
|Earnings per share:                                                                                     |               |      
|Basic                                                                                                   | $             | 0.11 
|Diluted                                                                                                 |               | 0.11 
|                                                                                                        |               |      
|Cash dividends per share                                                                                | $             | 0.125

|The accompanying notes are an integral part
of these Condensed Consolidated Financial Statements.
|-------------------------------------------------------------------------------------------------

|2
|-

---

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

|                                                                                                                                 |   | End ofFirst Quarter2006 |   |   | End ofFiscal Year2005 |  
|-------------------------------------------------------------------------------------------------------------------------------- | - | ----------------------- | - | - | --------------------- | -
|                                                                                                                                 |   |                         |   |  
|ASSETS:                                                                                                                          |   |                         |   |   |                       |  
|Current assets:                                                                                                                  |   |                         |   |   |                       |  
|Cash and cash equivalents                                                                                                        | $ | 110.7                   |   | $ | 116.0                 |  
|Receivables, net                                                                                                                 |   | 215.8                   |   |   | 213.8                 |  
|Inventories:                                                                                                                     |   |                         |   |   |                       |  
|Raw materials and supplies                                                                                                       |   | 93.4                    |   |   | 88.2                  |  
|Finished goods                                                                                                                   |   | 124.2                   |   |   | 106.0                 |  
|                                                                                                                                 |   |                         |   |  
|Total inventories                                                                                                                |   | 217.6                   |   |   | 194.2                 |  
|Other current assets                                                                                                             |   | 79.9                    |   |   | 74.2                  |  
|                                                                                                                                 |   |                         |   |  
|Total current assets                                                                                                             |   | 624.0                   |   |   | 598.2                 |  
|Property and equipment                                                                                                           |   | 2,418.0                 |   |   | 2,387.0               |  
|Accumulated depreciation                                                                                                         |   | ( 1,310.1               | ) |   | ( 1,272.9             | )
|                                                                                                                                 |   |                         |   |  
|Net property and equipment                                                                                                       |   | 1,107.9                 |   |   | 1,114.1               |  
|Goodwill                                                                                                                         |   | 1,866.2                 |   |   | 1,859.0               |  
|Intangible assets, net                                                                                                           |   | 300.9                   |   |   | 301.1                 |  
|Other assets                                                                                                                     |   | 173.3                   |   |   | 181.4                 |  
|                                                                                                                                 |   |                         |   |  
|Total assets                                                                                                                     | $ | 4,072.3                 |   | $ | 4,053.8               |  
|                                                                                                                                 |   |                         |   |  
|                                                                                                                                 |   |                         |   |   |                       |  
|LIABILITIES AND SHAREHOLDERS'
                EQUITY:                                                                            |   |                         |   |   |                       |  
|Current liabilities:                                                                                                             |   |                         |   |   |                       |  
|Short-term debt, including current maturities of long-term debt                                                                  | $ | 419.1                   |   | $ | 290.4                 |  
|Payables                                                                                                                         |   | 203.7                   |   |   | 208.4                 |  
|Other current liabilities                                                                                                        |   | 200.6                   |   |   | 223.2                 |  
|                                                                                                                                 |   |                         |   |  
|Total current liabilities                                                                                                        |   | 823.4                   |   |   | 722.0                 |  
|Long-term debt                                                                                                                   |   | 1,273.8                 |   |   | 1,285.9               |  
|Deferred income taxes                                                                                                            |   | 242.2                   |   |   | 245.1                 |  
|Other liabilities                                                                                                                |   | 228.0                   |   |   | 231.5                 |  
|                                                                                                                                 |   |                         |   |  
|Total liabilities                                                                                                                |   | 2,567.4                 |   |   | 2,484.5               |  
|                                                                                                                                 |   |                         |   |  
|Shareholders' equity:                                                                                                            |   |                         |   |   |                       |  
|Preferred stock ($0.01 par value, 12.5 million shares authorized      no shares issues)                                          |   |                        |   |   |                      |  
|Common stock ($0.01 par value, 350 million shares authorized;      
                137.6 million shares issued - 2006 and 2005) |   | 1,274.3                 |   |   | 1,267.1               |  
|Retained income                                                                                                                  |   | 429.6                   |   |   | 432.0                 |  
|Unearned stock-based compensation                                                                                                |   |                        |   |   | ( 16.5                | )
|Accumulated other comprehensive loss                                                                                             |   | ( 25.4                  | ) |   | ( 25.1                | )
|Treasury stock, at cost (8.4 million shares - 2006 and 4.6 million      
                shares - 2005)                          |   | ( 173.6                 | ) |   | ( 88.2                | )
|                                                                                                                                 |   |                         |   |  
|Total shareholders' equity                                                                                                       |   | 1,504.9                 |   |   | 1,569.3               |  
|                                                                                                                                 |   |                         |   |  
|Total liabilities and shareholders' equity                                                                                       | $ | 4,072.3                 |   | $ | 4,053.8               |  
|                                                                                                                                 |   |                         |   |  

|The accompanying notes are an integral
part of these Condensed Consolidated Financial Statements.
|-------------------------------------------------------------------------------------------------

|3
|-

|Contents
|--------

|PEPSIAMERICAS, INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited and in millions)
|----------------------------------------------------------------------------------------------

|                                                                                                           | First Quarter |        
|---------------------------------------------------------------------------------------------------------- | ------------- | -------
|                                                                                                           |               |        
|                                                                                                           |               | 2006   
|                                                                                                           |               |        
|                                                                                                           |               |        
|CASH FLOW FROM OPERATING
                ACTIVITIES:                                                       |               |        
|Income from continuing operations                                                                          | $             | 14.1   
|Adjustments to reconcile to net cash provided by operating activities of
           continuing operations: |               |        
|Depreciation and amortization                                                                              |               | 47.1   
|Deferred income taxes                                                                                      |               | ( 5.0  
|Special charges, net                                                                                       |               | 2.2    
|Cash outlays related to special charges                                                                    |               | ( 0.7  
|Pension contributions                                                                                      |               | ( 10.0 
|Equity in net earnings of nonconsolidated companies                                                        |               | ( 1.2  
|Excess tax benefits from share-based payment arrangements                                                  |               | ( 4.0  
|Other                                                                                                      |               | 6.6    
|Changes in assets and liabilities,
                exclusive of acquisitions:                              |               |        
|Decrease in securitized receivables                                                                        |               |       
|Increase in remaining receivables                                                                          |               | ( 1.3  
|Increase in inventories                                                                                    |               | ( 23.1 
|Increase in payables                                                                                       |               | 6.4    
|Net change in other assets and liabilities                                                                 |               | ( 16.2 
|                                                                                                           |               |        
|Net cash provided by operating activities of continuing operations                                         |               | 14.9   
|                                                                                                           |               |        
|                                                                                                           |               |        
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                                      |               |        
|Franchises and companies acquired, net of cash acquired                                                    |               | ( 6.6  
|Capital investments                                                                                        |               | ( 41.8 
|Proceeds from sales of property                                                                            |               | 2.5    
|                                                                                                           |               |        
|Net cash used in investing activities                                                                      |               | ( 45.9 
|                                                                                                           |               |        
|                                                                                                           |               |        
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                                      |               |        
|Net borrowings of short-term debt                                                                          |               | 251.7  
|Proceeds from issuance of long-term debt                                                                   |               |       
|Repayment of long-term debt                                                                                |               | ( 134.7
|Treasury stock purchases                                                                                   |               | ( 74.6 
|Excess tax benefits from share-based payment arrangements                                                  |               | 4.0    
|Issuance of common stock                                                                                   |               | 11.0   
|Cash dividends                                                                                             |               | ( 27.7 
|                                                                                                           |               |        
|Net cash provided by financing activities                                                                  |               | 29.7   
|                                                                                                           |               |        
|                                                                                                           |               |        
|Net operating cash flows used in discontinued operations                                                   |               | ( 3.7  
|Effects of exchange rate changes
                on cash and cash equivalents                              |               | ( 0.3  
|                                                                                                           |               |        
|Change in cash and cash equivalents                                                                        |               | ( 5.3  
|Cash and cash equivalents at
                beginning of fiscal year                                      |               | 116.0  
|                                                                                                           |               |        
|Cash and cash equivalents at end
                of first quarter                                          | $             | 110.7  
|                                                                                                           |               |        

|The accompanying notes are an integral part of
these Condensed Consolidated Financial Statements.
|-------------------------------------------------------------------------------------------------

|4
|-

|Contents
|--------

|PEPSIAMERICAS, INC.NOTES TO THE 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 and 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 are adequate to make the information presented not misleading. The
year-end Condensed Consolidated Balance Sheet data was derived from audited financial
statements, but does not include all disclosures required by United States generally
accepted accounting principles. 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 2005. 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 2005 fiscal year contained 52 weeks and ended December 31, 2005. Our
first quarters of 2006 and 2005 were based on the thirteen weeks ended April 1, 2006 and
April 2, 2005, respectively. Our business is seasonal; accordingly, the operating results
of any individual quarter may not be indicative of a full years operating results.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Earnings
per share.   Basic earnings per share is based upon the weighted-average number of
common shares outstanding. Diluted earnings per share includes dilutive common stock equivalents,
using the treasury stock method.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
following options and restricted stock awards were not included in the computation of
diluted earnings per share because they were antidilutive:
| | ----------------------------------------------------------------------------------------------------------------------------------------------------

| |                                                        |  |  | First Quarter | 
| | ------------------------------------------------------ |  |  | ------------- | 
| |                                                        |  |  |               | 
| |                                                        |  |  |               | 
| |                                                        |  |  |               | 
| |                                                        |  |  |               | 
| | Shares under options outstanding                       |  |  |               | 
| | Weighted-average exercise price per share              |  |  |               | 
| |                                                        |  |  |               | 
| | Shares under nonvested restricted
        stock awards |  |  |               | 
| | Weighted-average grant date fair value per share       |  |  |               | 

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

|2. | Special Charges
|-- | ---------------

| | In
the first quarter of 2006, we recorded special charges of $2.2 million in Central Europe,
primarily related to a reduction in the workforce. These special charges were primarily
for severance costs and related benefits.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
the first quarter of 2005, we recorded special charges of $2.5 million in Central Europe.
These special charges were primarily for severance costs and related benefits and asset
write-downs.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|5
|-

|Contents
|--------

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

| |                                    | Beginning of
        Fiscal Year 2006 |   | Special Charges,Net |   | Application of
        Special Charges |  | End of the First
        Quarter of 2006 |      
| | ---------------------------------- | ------------------------------------- | - | ------------------- | - | -------------------------------------- |  | ---------------------------------------- | -----
| |                                    |                                       |   |                     |   |                                        |  |                                          |      
| | 2006 Charges                       |                                       |   |                     |   |                                        |  |                                          |      
| | Employee related costs             | $                                     |  |                     | $ | 2.0                                    |  | $                                        | ( 0.7
| | Lease terminations and other costs |                                       |  |                     |   | 0.1                                    |  |                                          |     
| | Asset write-downs                  |                                       |  |                     |   | 0.1                                    |  |                                          | ( 0.1
| |                                    |                                       |   |                     |   |                                        |  |                                          |      
| | Total accrued liabilities          | $                                     |  |                     | $ | 2.2                                    |  | $                                        | ( 0.8
| |                                    |                                       |   |                     |   |                                        |  |                                          |      

| | The
total accrued liabilities remaining at the end of the first quarter of 2006 were comprised
of deferred severance payments and certain employee benefits, lease obligations and other
costs. We expect the remaining special charge liability of $1.4 million to be paid using
cash from operations during the next twelve months; accordingly, such amounts are
classified as Other current liabilities in the Condensed Consolidated Balance
Sheet.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3. | Interest Expense, Net
|-- | ---------------------

| | Interest
expense, net, was comprised of the following (in millions):
| | --------------------------------------------------------------------

| |                       |  |  | First Quarter | 
| | --------------------- |  |  | ------------- | 
| |                       |  |  |               | 
| |                       |  |  |               | 
| |                       |  |  |               | 
| |                       |  |  |               | 
| | Interest expense      |  |  |               | 
| | Interest income       |  |  |               | 
| |                       |  |  |               | 
| | Interest expense, net |  |  |               | 
| |                       |  |  |               | 

|4. | Income Taxes
|-- | ------------

| | The
effective income tax rate, which is income tax expense expressed as a percentage of income
before income taxes, was 38.0 percent for the first quarter of 2006, compared to 37.5
percent in the first quarter of 2005. The effective income tax rate increased primarily
due to the impact of the mix of our international operations on our rate.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|5. | Comprehensive Income
|-- | --------------------

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

| |                                              |  |  | First Quarter | 
| | -------------------------------------------- |  |  | ------------- | 
| |                                              |  |  |               | 
| |                                              |  |  |               | 
| |                                              |  |  |               | 
| |                                              |  |  |               | 
| | Net income                                   |  |  |               | 
| | Foreign currency translation adjustment      |  |  |               | 
| | Net unrealized investment and hedging losses |  |  |               | 
| |                                              |  |  |               | 
| | Comprehensive income                         |  |  |               | 
| |                                              |  |  |               | 

| | Net
unrealized investment and hedging losses are presented net of income tax benefit of $2.1
million and $4.5 million in the first quarter of 2006 and 2005, respectively.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|6
|-

|Contents
|--------

|6. | Goodwill and Intangible Assets
|-- | ------------------------------

| | The
changes in the carrying value of goodwill by geographic segment for the first quarter of
2006 were as follows (in millions):
| | --------------------------------------------------------------------------------------------------------------------------------

| |                                                         | U.S. |         | CentralEurope |   | Caribbean |  | Total |     
| | ------------------------------------------------------- | ---- | ------- | ------------- | - | --------- |  | ----- | ----
| |                                                         |      |         |               |   |           |  |       |     
| |                                                         |      |         |               |   |           |  |       |     
| | Balance at end of fiscal year
                2005      | $    | 1,821.3 |               | $ | 21.2      |  | $     | 16.5
| | Acquisitions                                            |      | 6.4     |               |   |          |  |       |    
| | Purchase accounting adjustments                         |      | 0.2     |               |   |          |  |       |    
| | Foreign currency translation adjustment                 |      |        |               |   | 0.6       |  |       |    
| |                                                         |      |         |               |   |           |  |       |     
| | Balance at end of first
                quarter of 2006 | $    | 1,827.9 |               | $ | 21.8      |  | $     | 16.5
| |                                                         |      |         |               |   |           |  |       |     

| |                                                        | End of First Quarter 2006 |       | End of Fiscal Year 2005 |   |       |   |  |  |  | 
| | ------------------------------------------------------ | ------------------------- | ----- | ----------------------- | - | ----- | - |  |  |  | 
| |                                                        |                           |       |                         |   |       |   |  |  |  | 
| | Intangible assets
        subject to amortization      |                           |       |                         |   |       |   |  |  |  | 
| | Gross carrying amount                                  |                           |       |                         |   |       |   |  |  |  | 
| | Franchise and distribution agreements                  | $                         | 3.6   |                         | $ | 3.6   |   |  |  |  | 
| | Customer relationships and lists                       |                           | 8.0   |                         |   | 8.0   |   |  |  |  | 
| | Non-compete agreements                                 |                           | 0.5   |                         |   | 0.5   |   |  |  |  | 
| |                                                        |                           |       |                         |   |       |   |  |  |  | 
| | Total                                                  | $                         | 12.1  |                         | $ | 12.1  |   |  |  |  | 
| | Accumulated amortization                               |                           |       |                         |   |       |   |  |  |  | 
| | Franchise and distribution agreements                  | $                         | ( 1.0 | )                       | $ | ( 1.0 | ) |  |  |  | 
| | Customer relationships and lists                       |                           | ( 0.8 | )                       |   | ( 0.7 | ) |  |  |  | 
| | Non-compete agreements                                 |                           | ( 0.4 | )                       |   | ( 0.3 | ) |  |  |  | 
| |                                                        |                           |       |                         |   |       |   |  |  |  | 
| | Total                                                  | $                         | ( 2.2 | )                       | $ | ( 2.0 | ) |  |  |  | 
| |                                                        |                           |       |                         |   |       |   |  |  |  | 
| | Intangible assets subject
        to amortization, net | $                         | 9.9   |                         | $ | 10.1  |   |  |  |  | 
| |                                                        |                           |       |                         |   |       |   |  |  |  | 
| | Intangible assets
        not subject to amortization: |                           |       |                         |   |       |   |  |  |  | 
| | Franchise and distribution agreements                  | $                         | 288.5 |                         | $ | 288.5 |   |  |  |  | 
| | Pension intangible asset                               |                           | 2.5   |                         |   | 2.5   |   |  |  |  | 
| |                                                        |                           |       |                         |   |       |   |  |  |  | 
| | Intangible assets
        not subject to amortization  | $                         | 291.0 |                         | $ | 291.0 |   |  |  |  | 
| |                                                        |                           |       |                         |   |       |   |  |  |  | 
| |                                                        |                           |       |                         |   |       |   |  |  |  | 
| | Total intangible
        assets, net                   | $                         | 300.9 |                         | $ | 301.1 |   |  |  |  | 
| |                                                        |                           |       |                         |   |       |   |  |  |  | 

| | Total
amortization expense was $0.2 million and $0.1 million in the first quarter of 2006 and
2005, respectively.
| | -----------------------------------------------------------------------------------------------------------------

| | In
the first quarter of 2006, we acquired Ardea Beverage Co., resulting in a preliminary
allocation of $6.4 million to goodwill. We are in the process of valuing the assets,
liabilities and intangibles acquired in connection with the Ardea acquisition and we
expect to complete that valuation in the second quarter of 2006.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|7. | Acquisitions
|-- | ------------

| | On
January 23, 2006, we completed the acquisition of Ardea Beverage Co., the maker of the
airforce Nutrisoda line of soft drinks.
| | ---------------------------------------------------------------------------------------------------------------------------------

| | In
the first quarter of fiscal year 2005, we completed the acquisition of the capital stock
of Central Investment Corporation (CIC) and the capital stock of FM Vending.
CIC had bottling operations in southeast Florida and central Ohio, and was the seventh
largest Pepsi bottler in the U.S.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
results of operations for the acquisitions described above are included in the Condensed
Consolidated Statements of Income since the date of acquisition. These acquisitions are
not material to our consolidated results of operations; therefore, pro forma financial
information is not included in this note.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|7
|-

|Contents
|--------

|8. | Debt
|-- | ----

| | In
the first quarter of 2006, we paid $134.7 million at maturity of the 6.5 percent notes and
5.95 percent notes, both due February 2006. We had $391.0 million of commercial paper
borrowings at the end of the first quarter of 2006, compared to $141.5 million at the end
of fiscal year 2005. The increase in commercial paper borrowings was primarily due to
funding maturing debt.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|9. | 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 and diesel fuel
purchases, the prices of which are indexed to their respective market prices. We consider
these hedges to be highly effective, because of the high correlation between the commodity
prices and our contractual costs.  There were no significant changes in our derivative financial
instrument position for aluminum and bulk diesel fuel in the first quarter of 2006.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
anticipation of a long-term debt issuance, we had entered into treasury rate lock
instruments and a forward starting swap agreement. We accounted for these treasury rate
lock instruments and forward starting swap agreement as cash flow hedges, as each 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 and forward starting
swap agreement are considered highly effective in eliminating the variability of cash
flows associated with the forecasted debt issuance.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
following table summarizes the net derivative gains or losses deferred in
Accumulated other comprehensive loss and reclassified to earnings in the first
quarter of 2006 and 2005 (in millions):
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                                                                            |   | First Quarter2006 |   |   | First Quarter2005 | 
| | -------------------------------------------------------------------------- | - | ----------------- | - | - | ----------------- | 
| |                                                                            |   |                   |   |  
| | Unrealized (losses) gains on derivatives at beginning of fiscal year       | $ | ( 2.4             | ) |   | 1.2               | 
| | Deferral of net derivative gains in accumulated other   comprehensive loss |   | 0.2               |   |   | 2.2               | 
| | Reclassification of net derivative (losses) gains to income                |   | ( 0.5             | ) |   | 1.3               | 
| |                                                                            |   |                   |   |  
| | Unrealized (losses) gains on derivatives at end of first quarter           | $ | ( 2.7             | ) | $ | 4.7               | 
| |                                                                            |   |                   |   |  

| | 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 from accumulated other comprehensive loss to earnings commensurate
with the recognition of the related interest expense. At the end of the first quarter of
2006 and the end of fiscal year 2005, the cumulative fair value adjustments to long-term debt
were $8.0 million and $8.7 million, respectively.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|8
|-

|Contents
|--------

| | Amounts
recorded for all derivatives on the Condensed
Consolidated Balance Sheets are as follows (in millions):
| | ---------------------------------------------------------------------------------------------------------------

| |                           | End of FirstQuarter 2006 |       | End of Fiscal Year 2005 |   |       |   |  |  |  | 
| | ------------------------- | ------------------------ | ----- | ----------------------- | - | ----- | - |  |  |  | 
| |                           |                          |       |                         |   |       |   |  |  |  | 
| | Unrealized gains:         |                          |       |                         |   |       |   |  |  |  | 
| | Commodities               | $                        | 0.9   |                         | $ | 1.4   |   |  |  |  | 
| | Interest rate instruments |                          | 10.3  |                         |   | 11.1  |   |  |  |  | 
| | Unrealized losses:        |                          |       |                         |   |       |   |  |  |  | 
| | Commodities               | $                        | ( 0.1 | )                       | $ | ( 0.1 | ) |  |  |  | 
| | Interest rate instruments |                          | ( 7.5 | )                       |   | ( 7.7 | ) |  |  |  | 

|10. | Pension and Other Postretirement
Benefit Plans
|--- | ----------------------------------------------

| |                                    | First Quarter |      
| | ---------------------------------- | ------------- | -----
| |                                    |               |      
| |                                    | 2006          |      
| |                                    |               |      
| |                                    |               |      
| | Service cost                       | $             | 0.9  
| | Interest cost                      |               | 2.5  
| | Expected return on plan assets     |               | ( 3.5
| | Amortization of prior service cost |               | 0.1  
| | Amortization of net loss           |               | 1.0  
| |                                    |               |      
| | Net periodic pension cost          | $             | 1.0  
| |                                    |               |      

| | We
previously disclosed in our financial statements for fiscal year 2005 that we contributed
$10.0 million to our plans during the first quarter of 2006, and that we did not expect to
make any additional contributions in the remainder of 2006. As of the end of the first
quarter of 2006, we have contributed $10.0 million to the plans. We will continue to
evaluate the plans funding requirements throughout the balance of fiscal year 2006
and will fund to levels deemed necessary for the plans.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|11. | Share-Based Compensation
|--- | ------------------------

| | Our
2000 Stock Incentive Plan (the 2000 Plan), originally approved by shareholders
in fiscal year 2000, provides for granting incentive stock options, nonqualified stock
options, related stock appreciation rights (SARs), restricted stock awards,
performance awards or any combination of the foregoing. Generally, outstanding
nonqualified stock options are exercisable during a ten-year period beginning one to three
years after the date of grant. The exercise price of all options is equal to the fair
market value on the date of grant. We generally use shares from treasury to satisfy option exercises. There are no
outstanding stock appreciation rights under the 2000 Plan as of the end of the first
quarter of 2006.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Restricted
stock awards are granted to key members of our U.S. and Caribbean based management teams
and members of our Board of Directors under the 2000 Plan. Restricted stock awards granted
to employees beginning with shares granted in 2004 vest in their entirety on the third
anniversary of the award. Restricted stock awards granted to employees before 2004 vest
ratably on an annual basis over a three-year period. Employees must complete the requisite
service period in order for their awards to vest. Restricted stock awards granted to
directors vest immediately upon grant. Dividends are paid to the holders of restricted
stock awards either at the dividend payment date or upon vesting, depending on the terms
of the restricted stock award. We have a policy of using shares from treasury to satisfy
restricted share award vesting. We measure the fair value of restricted stock based upon
the market price of the underlying common stock at the date of grant.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Restricted
stock units are granted to key members of our Central European based management team. The
restricted stock units are payable to these employees in cash upon vesting at the
prevailing market value of PepsiAmericas common stock plus accrued dividends. Restricted stock
units vest after three years, equal to the employees requisite service period. We
measure the fair value of restricted stock units based upon the market price of the
underlying common stock at the date of grant and each subsequent reporting date.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|9
|-

|Contents
|--------

| | Under
the 2000 Plan, 14,000,000 shares were originally reserved for share-based awards.
As of the end of the first
quarter of 2006, there were 4,969,785 shares available for future grants.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Our
Stock Incentive Plan (the 1982 Plan), originally established and approved by
the shareholders in 1982, has been subsequently amended from time to time, most recently
in 1999 when the shareholders approved an allocation of additional shares to this plan.
The types of awards and terms of the 1982 Plan are similar to the 2000 Plan. There are no
outstanding stock appreciation rights under the 1982 Plan as of the end of the first
quarter of 2006.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Effective
January 1, 2006, we adopted the provisions of Statement of Financial Accounting Standards
("SFAS") No. 123(R), "Share-Based Payments".  We elected to
adopt the modified prospective application method as provided by SFAS No. 123(R).
Accordingly, financial statement amounts for the prior periods presented in this Quarterly
Report on Form 10-Q have not been restated.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Changes
in options outstanding are summarized as follows:
| | ---------------------------------------------------------

| |                                                  |           |  |                 |       | Weighted-
| | ------------------------------------------------ | --------- |  | --------------- | ----- | ---------
| |                                                  |           |  |                 |       | Average  
| |                                                  |           |  | Range of        |       | Exercise 
| | Options                                          | Shares    |  | Exercise Prices |       | Price    
| |                                                  |           |  |                 |       |          
| | Balance, end of fiscal
                year 2005 | 6,941,495 |  | $               | 10.81 |         
| | Exercised or surrendered                         | (756,827) |  |                 | 10.81 |         
| | Recaptured or terminated                         | (6,886)   |  |                 | 12.01 |         
| |                                                  |           |  |                 |       |          
| | Balance, end of first quarter of 2006            | 6,177,782 |  |                 | 10.81 |         
| |                                                  |           |  |                 |       |          
| |                                                  |           |  |                 |       |          
| | Exercisable, end of first quarter
of 2006        | 5,745,685 |  |                 | 10.81 |         

| | The
Black-Scholes model was used to estimate the grant date fair values of options. There were
no options granted during the first quarters of 2006 and 2005. We recorded $0.8 million
($0.5 million net of tax) of compensation expense related to options in Sales,
delivery and administrative expenses in the Condensed Consolidated Statement of
Income in the first quarter of 2006. The total intrinsic value of options exercised during
the first quarter of 2006 and 2005 was $6.2 million and $10.8 million, respectively.  The total
intrinsic value of options expected to vest as of the end of the first quarter of 2006 was
$45.2 million.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
following table summarizes information regarding stock options outstanding and exercisable
as of the end of the first quarter of 2006:
| | ------------------------------------------------------------------------------------------------------------------------------------------

|                |       | Options Outstanding |   | Options Exercisable
|--------------- | ----- | ------------------- | - | -------------------
|                |       |                     |   |                    
|                |       |                     |   | Weighted-          
|                |       |                     |   | Average            
|Range of        |       | Options             |   | Remaining Life     
|Exercise Prices |       | Outstanding         |   | (in years)         
|                |       |                     |   |                    
|$               | 10.81 |                    | $ | 13.01              
|                | 14.37 |                    |   | 18.06              
|                | 18.48 |                    |   | 22.63              
|                |       |                     |   |                    
|Total Options   |       | 6,177,782           |   | 4.8                
|                |       |                     |   |                    

|10
|--

|Contents
|--------

| | Changes in nonvested restricted stock awards are summarized as follows:
| | -----------------------------------------------------------------------

| | Nonvested Shares                               | Shares    |  | Range of Grant-Date Fair Value |       | Weighted-Average Exercise Grant-Date Fair Value
| | ---------------------------------------------- | --------- |  | ------------------------------ | ----- | -----------------------------------------------
| |                                                |           |  |                                |       |                                                
| | Nonvested at the end of fiscal year 2005       | 1,645,292 |  | $                              | 12.01 |                                               
| | Granted                                        | 970,877   |  |                                |       |                                                
| | Vested                                         | (404,776) |  |                                | 12.01 |                                               
| | Forfeited                                      | (5,702)   |  |                                | 18.92 |                                               
| |                                                |           |  |                                |       |                                                
| | Nonvested at the end of the first quarter 2006 | 2,205,691 |  |                                | 18.92 |                                               

| | The
weighted-average fair value (at the date of grant) for restricted stock awards granted in
the first quarter 2006 and 2005 was $24.31 and $22.52, respectively. We recognized
compensation expense of $3.7 million ($2.3 million net of tax) and $2.7 million ($1.7
million net of tax) in the first quarter of 2006 and 2005, respectively, related to
restricted stock award grants made in fiscal year 2006 and previous years. The fair value
of restricted stock awards that vested during the first quarter of 2006 and 2005 was $9.3
million and $12.0 million, respectively.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
February 2006, we granted 72,900 restricted stock units at a weighted average fair value
of $24.31 on the date of grant to key members of management. In the first quarter of 2005,
we granted 78,440 restricted stock units at a weighted-average fair value of $22.52 on the
date of grant. We recognized compensation expense of $0.2 million and $0.1 million in the
first quarter of 2006 and 2005, respectively, related to restricted stock unit grants made
in fiscal year 2006 and 2005. There are currently 144,090 restricted stock units
outstanding and no restricted stock units vested during the first quarter of 2006 or 2005.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Upon
the adoption of SFAS No. 123(R), cash retained as a result of excess tax benefits relating
to stock-based compensation is presented in cash flows from financing activities on the
Condensed Consolidated Statement of Cash Flows. Previously, cash retained as a result of
excess tax benefits was presented in cash flows from operating activities. Tax benefits
resulting from stock-based compensation deductions in excess of amounts reported for
financial reporting purposes were $4.0 million during the first quarter of 2006.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | At
the end of the first quarter of 2006, there was $37.4 million of total unrecognized
compensation cost, net of estimated forfeitures of $4.4 million, related to nonvested
stock-based compensation arrangements. This compensation cost is expected to be recognized
over the next 2.3 years.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
periods prior to the adoption of SFAS No. 123(R) we used 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 was 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 and restricted stock units was reflected in net income, and this expense was
recognized ratably over the awards vesting period. The following table illustrates
the effect on net income and net income per share if we had applied the fair value
recognition provisions of SFAS No. 123, Accounting for Stock-Based
Compensation, to stock-based employee compensation. 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.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                                                                                                                                          |  |  |  |  | FirstQuarter2005 | 
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  |  |  | ---------------- | 
|                                                                                                                                                                                          |  |  |  |  |                  | 
|Net income, as reported                                                                                                                                                                   |  |  |  |  |                  | 
|Add:  Total stock-based compensation expense included 
                             in net income as reported, net of tax                                                                 |  |  |  |  |                  | 
|Deduct:  Total stock-based compensation expense determined under
        fair             value based method for all options and
        restricted stock awards,              net of tax |  |  |  |  |                  | 
|                                                                                                                                                                                          |  |  |  |  |                  | 
|Pro forma net income                                                                                                                                                                      |  |  |  |  |                  | 
|                                                                                                                                                                                          |  |  |  |  |                  | 
|Basic:     As reported                                                                                                                                                                    |  |  |  |  |                  | 
|                                                                                                                                                                                          |  |  |  |  |                  | 
|Pro forma                                                                                                                                                                                 |  |  |  |  |                  | 
|                                                                                                                                                                                          |  |  |  |  |                  | 
|Diluted:  As reported                                                                                                                                                                     |  |  |  |  |                  | 
|                                                                                                                                                                                          |  |  |  |  |                  | 
|Pro forma                                                                                                                                                                                 |  |  |  |  |                  | 
|                                                                                                                                                                                          |  |  |  |  |                  | 

|11
|--

|Contents
|--------

|12. | 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 Quarter |     
| | ----------------------------------------------------------- | ------------- | ----
| |                                                             |               |     
| |                                                             | 2006          |     
| |                                                             |               |     
| |                                                             |               |     
| | Interest paid                                               | $             | 26.3
| | Interest received                                           |               | 0.7 
| | Income taxes paid (received), inclusive of refunds received |               | 1.2 

|13. | Environmental and Other Commitments and Contingencies
|--- | -----------------------------------------------------

| | Current
Operations. We maintain compliance with federal, state and local laws and
regulations relating to materials used in production and to the discharge or emission of
wastes, and 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.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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 results 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 responsibilities under
the Comprehensive Environmental Response, Compensation and Liability Act and other related
federal and state laws 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 is also 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 to investigate and remediate 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 an early stage of
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
fiscal year 2001, we investigated the use of insurance products to mitigate risks related
to our 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 fiscal year 2001 and was updated in the fourth quarter of 2005. We
have recorded our best estimate of our probable liability under our indemnification
obligations using this consultants review and the assistance of other professionals.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|12
|--

|Contents
|--------

| | At
the end of the first quarter of 2006, we had $79.2 million accrued to cover potential
indemnification obligations, compared to $87.5 million recorded at the end of fiscal year
2005. This indemnification obligation includes costs associated with approximately 20
sites in various stages of remediation. At the present time, the most significant
remaining indemnification obligation is associated with the Willits site, as discussed
below, while no other single site has significant estimated remaining costs associated
with it. Of the total amount accrued, $30.5 million was classified as a current liability
at the end of the first quarter of 2006 and at the end of fiscal year 2005. 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 resolved during the next 10 years.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Included
in our indemnification obligations is financial exposure related to certain remedial
actions required at a facility that manufactured hydraulic and related equipment in
Willits, California. Various chemicals and metals contaminate this site. In August 1997, a
final consent decree was issued in the case of the People of the State of California and
the City of Willits, California v. Remco Hydraulics, Inc. This final consent decree was
amended in December 2000 and established a trust which is obligated to investigate and
clean up this site. We are currently funding the investigation and interim remediation
costs on a year-to-year basis according to the final consent decree. We have accrued $24.3
million for future remediation and trust administration costs, with the majority of this
amount to be spent over the next several years.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Although
we have certain indemnification obligations for environmental liabilities at a number of
sites other than the site discussed above, including Superfund sites, it is not
anticipated that additional expense at any specific site will have a material effect on
us. At some 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
our 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.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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 $35.4 million has been eroded, leaving a
remaining self-insured retention of $78.6 million at the end of the first quarter of 2006.
The estimated range of aggregate exposure related only to the remediation costs of such
environmental liabilities is approximately $33 million to $53 million. We had accrued
$35.1 million at the end of the first quarter of 2006 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 $35.1 million and thus reduces our
future cash obligations. Amounts recorded in our Condensed Consolidated Balance Sheets
related to Finite Funding were $17.5 million and $19.6 million at the end of the first
quarter of 2006 and the end of fiscal year 2005, respectively, and are recorded in
Other assets, net of $5.4 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 $34
million that previously was in the Trust and that was 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 named
Pneumo Abex as a defendant. We have not filed an answer to the complaint, but we will deny
and vigorously contest the claim. We have joined a motion by the Trustee to dismiss the
lawsuit on the grounds that Cooper lacks standing to pursue its claims because it is not a
beneficiary under the Trust. 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. We expect to receive a ruling on this motion during the
second quarter of 2006.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|13
|--

|Contents
|--------

| | In
addition, we had recorded other receivables of $11.1 million and $11.4 million at the end
of the first quarter of 2006 and at the end of fiscal year 2005, respectively, 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. Of this total, no portion of the
receivable was reflected as current as of the first quarter of 2006 and at the end of
fiscal year 2005.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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 2005. 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 quarter of 2006.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|14. | Segment Reporting
|--- | -----------------

| | We
operate in one industry located in three geographic areas  the U.S., Central Europe
and the Caribbean. We operate in 19 states in the U.S. 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 operating income of the Central Europe geographic
segment excludes the results of our nonconsolidated investment in Quadrant-Amroq Bottling
Company Limited, the Pepsi bottler in Romania and Moldova.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
following tables present net sales and operating income (loss) of our geographic segments
for the first quarter of 2006 and 2005 (in millions):
| | ---------------------------------------------------------------------------------------------------------------------------------------------------

| |                | First Quarter
| | -------------- | -------------
| |                |              
| |                | Net Sales    
| |                |              
| |                | 2006         
| |                |              
| |                |              
| | U.S.           | $            
| | Central Europe |              
| | Caribbean      |              
| |                |              
| | Total          | $            
| |                |              

|15. | Related Party Transactions
|--- | --------------------------

| | We
are a licensed producer and distributor of PepsiCo branded 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
first quarter of 2006, PepsiCo beneficially owned approximately 44 percent of
PepsiAmericas outstanding common stock.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | We
purchase concentrate from PepsiCo to be used in the production of PepsiCo branded
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.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|14
|--

|Contents
|--------

| | 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.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | See
additional discussion of our related party transactions in our Annual Report on Form 10-K
for the fiscal year 2005.
| | -----------------------------------------------------------------------------------------------------------------------

|16. | Subsequent Event
|--- | ----------------

| | On
May 1, 2006, we provided notice of exercise of our option to purchase the remaining 51 percent interest in
Quandrant-Amroq Bottling Company Limited.  Subject to Romanian government approval, the purchase is
expected to close in the third quarter of 2006.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|15
|--

|Contents
|--------

|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 fiscal year 2005. 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 13 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. The
estimated indemnification liabilities include expenses for the remediation of identified
sites, payments to third parties for claims and expenses (including product liability and
toxic tort claims), administrative expenses, and the expense of on-going evaluations and
litigation. 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. We do not discount
environmental liabilities.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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 a portion 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.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|16
|--

|Contents
|--------

| | 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.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|17
|--

|Contents
|--------

|RESULTS OF OPERATIONS2006
FIRST QUARTER COMPARED WITH 2005 FIRST QUARTER


In
the discussions of our results of operations below, the number of cases sold is referred
to as 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 seasonal; accordingly, the operating results of any individual quarter may not
be indicative of a full years operating results.


Volume


Sales
volume growth (declines) for the first quarter of 2006 and 2005 were as follows:
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                |  |  | 2006 |  | 2005  |   | 
| | -------------- |  |  | ---- |  | ----- | - | 
| |                |  |  |      |  |       |   | 
| | U.S.           |  |  |      |  | (2.0% | ) | 
| | Central Europe |  |  |      |  | 2.0%  |   | 
| | Caribbean      |  |  |      |  | 4.6%  |   | 
| | Worldwide      |  |  |      |  | (1.1% | ) | 

|In
the first quarter of 2006, worldwide volume decreased 1.1 percent compared to the prior
year first quarter. The decrease in worldwide volume was attributed to a volume decline in
the U.S. of 2.0 percent, offset partly by volume growth of 2.0 percent in Central Europe
and 4.6 percent in the Caribbean. The current quarters volume includes the benefit
of an additional nine days of sales for the Central Investment Corporation
(CIC) territories acquired on January 10, 2005. We anticipate worldwide volume
growth for fiscal year 2006 to be approximately 2 to 3 percent.


In
the first quarter of 2006, U.S volume decreased 2.0 percent compared to the first quarter
of 2005 due primarily to the shift in the Easter holiday coupled with a
strong competitive environment. Excluding the negative impact of the Easter holiday shift and the beneficial
impact of the additional days of sales for the CIC territories on the current quarters performance, volume was
essentially flat in the U.S. In anticipation of higher raw material costs, net selling
price increases were taken at the end of fiscal year 2005 and carried through the majority of the
first quarter. These pricing adjustments were not in alignment with pricing in the
marketplace, and in turn, adversely impacted volume in various channels and packages.
Additionally, volume was unfavorably affected by increased competitor promotional
activity. In response to these market conditions, we adjusted our pricing toward the end
of the first quarter. We have also adjusted our promotional calendar for the remainder of
the year and have added incremental PepsiAmericas initiated programs that we believe will
benefit volumes. Our continued shift into non-carbonated drinks and product line
expansions and innovation are also anticipated to drive volume during the balance of
fiscal year 2006. We believe that through increased promotional activity, adjusted
pricing, and continued focus on growth channels during the balance of fiscal year 2006, we
will be able to maintain the 1 to 2 percent domestic volume growth targets that we
anticipated at the beginning of the year.


We
continue to focus on growing the non-carbonated beverage category and the single-serve package.
Non-carbonated soft drink volume grew approximately 23 percent, driven by the strong
performance of Trademark Aquafina. All other non-carbonated soft drinks excluding Aquafina
grew almost 14 percent. This includes products such as Lipton Iced Tea, Starbucks
Frappuccino and Tropicana juice drinks. The growth in non-carbonated beverages was offset
by the decline in our carbonated soft drink portfolio. We experienced mid single-digit
volume declines in our regular and diet carbonated soft drink categories. This was driven
by a high single-digit volume decline in Trademark Pepsi and a low single-digit volume
decline in Trademark Mountain Dew.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|18
|--

|Contents
|--------

|Total
volume in Central Europe increased 2.0 percent in the first quarter of 2006 compared to
the first quarter of 2005. The increase in volume was driven by growth of approximately 7
percent in carbonated soft drinks driven mainly by Slice, which doubled when compared to
volume in the first quarter of 2005. This growth was offset by a volume decline of
approximately 3 percent for non-carbonated soft drinks, due mainly to double-digit volume
decline in the water category. Despite the overall decline in the water category, Lipton products and the
juice category, driven by Toma and Tropicana, experienced double-digit
volume growth during the first quarter of 2006. Additionally, we have managed through all
of the challenges associated with the accession of the markets in which we operate to the
European Union and do not believe that this will have any additional impact on our
results.


Total
volume in the Caribbean increased 4.6 percent in the first quarter of 2006 compared to the
same period last year. Volume growth was primarily driven by contributions from carbonated
soft drinks. Trademark Pepsi grew approximately 3 percent compared to the prior year first quarter,
while non-carbonated soft drinks grew approximately 23 percent. Trademark Pepsi accounts for
approximately 55 percent
of our business in the Caribbean, while the remainder of our business is mainly comprised
of flavored carbonated soft drinks and non-carbonated beverages. We continue to seek
opportunities to expand our diet and non-carbonated beverage offerings to complement our
existing portfolio of regular and flavored carbonated soft drinks.


Net Sales


Net
sales and net pricing statistics for the first quarter of 2006 and 2005 were as follows
(dollar amounts in millions):
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Net Sales                    | 2006 |       | 2005 |   | Change |  | 
| | ---------------------------- | ---- | ----- | ---- | - | ------ |  | 
| |                              |      |       |      |   |        |  | 
| | U.S.                         | $    | 728.4 |      | $ | 712.0  |  | 
| | Central Europe               |      | 68.4  |      |   | 70.1   |  | 
| | Caribbean                    |      | 51.7  |      |   | 47.3   |  | 
| |                              |      |       |      |   |        |  | 
| | Worldwide                    | $    | 848.5 |      | $ | 829.4  |  | 
| |                              |      |       |      |   |        |  | 
| |                              |      |       |      |   |        |  | 
| | Net Pricing Growth (Decline) | 2006 |       | 2005 |   |        |  | 
| |                              |      |       |      |   |        |  | 
| | U.S.                         |      | 3.6%  |      |   | 3.0%   |  | 
| | Central Europe               |      | (4.6% | )    |   | 18.9%  |  | 
| | Caribbean                    |      | 5.3%  |      |   | 3.5%   |  | 
| | Worldwide                    |      | 2.8%  |      |   | 5.1%   |  | 

|Net
sales increased $19.1 million, or 2.3 percent, to $848.5 million in the first quarter of
2006 compared to $829.4 million the first quarter of 2005. The increase was driven
primarily by increased worldwide net pricing of 2.8 percent and volume growth in Central
Europe and the Caribbean, offset, in part, by volume declines in the U.S. We anticipate
that worldwide net pricing will grow 2.5 to 3.5 percent in fiscal year 2006.


Net
sales in the U.S. for the first quarter of 2006 increased $16.4 million, or 2.3 percent,
to $728.4 million from $712.0 million in the prior year first quarter. The increase in net
sales was primarily due to the 3.6 percent increase in net pricing offset, in part, by the
2.0 percent decline in volume. Mix contributed approximately one-fourth of the net pricing
improvement and the remainder came from rate. Unfavorable market reaction to higher net
pricing drove a decline in the sales volume. Net pricing was decreased toward the end of
the first quarter of 2006 and we anticipate that net pricing will moderate during the
balance of the year. For the full year, we expect our net selling price increase to be
within the 2.5 to 3.5 percent range.


Net
sales in Central Europe for the first quarter of 2006 decreased $1.7 million, or 2.4
percent, to $68.4 million from $70.1 million in the prior year first quarter. The decrease
was primarily due to the impact of foreign currency translation, which negatively impacted
net sales by $4.9 million. This decrease was partially offset by an increase in volume of
2.0 percent and an increase in net pricing on a local currency basis of 2.9 percent.


Net
sales in the Caribbean increased $4.4 million, or 9.3 percent in the first quarter of 2006
to $51.7 million from $47.3 million in the prior year first quarter. The increase was a
result of both volume growth of 4.6 percent and an increase in net pricing of 5.3 percent,
reflecting a broadbased pricing increase on most packages in our carbonated soft drink
portfolio. In addition, net pricing increased in Jamaica in anticipation of higher sugar
prices during the balance of fiscal year 2006.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|19
|--

|Contents
|--------

|Cost of Goods Sold


Cost
of goods sold and cost of goods sold per unit statistics for the first quarter of 2006 and
2005 were as follows (dollar amounts in millions):
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Cost of Goods Sold | 2006 |       | 2005 |   | Change |  | 
| | ------------------ | ---- | ----- | ---- | - | ------ |  | 
| |                    |      |       |      |   |        |  | 
| | U.S.               | $    | 417.8 |      | $ | 398.8  |  | 
| | Central Europe     |      | 44.2  |      |   | 44.9   |  | 
| | Caribbean          |      | 38.7  |      |   | 35.4   |  | 
| |                    |      |       |      |   |        |  | 
| | Worldwide          | $    | 500.7 |      | $ | 479.1  |  | 
| |                    |      |       |      |   |        |  | 

| | Cost of Goods Sold per Unit | 2006 |       | 2005 |  |       |  | 
| | --------------------------- | ---- | ----- | ---- |  | ----- |  | 
| | Increase (Decrease)         |      |       |      |  |       |  | 
| |                             |      |       |      |  |       |  | 
| | U.S.                        |      | 5.6%  |      |  | 1.8%  |  | 
| | Central Europe              |      | (4.5% | )    |  | 30.6% |  | 
| | Caribbean                   |      | 5.6%  |      |  | 1.9%  |  | 
| | Worldwide                   |      | 4.6%  |      |  | 4.9%  |  | 

|Cost
of goods sold increased $21.6 million, or 4.5 percent, to $500.7 million in the first
quarter of 2006 from $479.1 million in the prior year first quarter. This increase was
driven primarily by higher raw material costs, higher concentrate costs and a shift into
our higher cost non-carbonated beverage portfolio. Cost of goods sold per unit increased 4.6
percent in the first quarter of 2006 compared to the same period in 2005. Overall, we
expect that cost of goods sold per unit will grow approximately 3.5 percent during fiscal
year 2006 as compared to the prior fiscal year.


In
the U.S., cost of goods sold increased $19.0 million, or 4.8 percent, to $417.8 million in
the first quarter of 2006 from $398.8 million in the prior year first quarter. Cost of
goods sold per unit increased 5.6 percent in the U.S., primarily driven by price increases
in concentrate and packaging, including aluminum and resin, and our shift to more
expensive non-carbonated beverages. In addition, we lapped very favorable cost levels in
the first quarter of 2005, which had increased only 1.8 percent per unit during that
period.


In
Central Europe, cost of goods sold decreased $0.7 million, or 1.6 percent, to $44.2
million in the first quarter of 2006, compared to $44.9 million in the prior year first
quarter. Cost of goods sold decreased due to the favorable impact of foreign currency
translation of $2.5 million, partly offset by a higher cost of goods sold per unit on a
local currency basis and volume growth of 2.0 percent.


In
the Caribbean, cost of goods sold increased $3.3 million, or 9.3 percent, to $38.7 million
in the first quarter of 2006, compared to $35.4 million in the first quarter of 2005. The
increase was mainly driven by volume growth of 4.6 percent and an increase in cost of
goods sold per unit of 5.6 percent. The cost of goods sold per unit increased due to
increases in the prices for aluminum and ingredients, including concentrate and
sweeteners.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|20
|--

|Contents
|--------

|Selling, Delivery and
Administrative Expenses


Selling,
delivery and administrative (SD&A) expenses for the first quarter of 2006
and 2005 were as follows (dollar amounts in millions):
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | SD&A Expenses  | 2006 |       | 2005 |   | Change |  | 
| | -------------- | ---- | ----- | ---- | - | ------ |  | 
| |                |      |       |      |   |        |  | 
| | U.S.           | $    | 252.9 |      | $ | 246.1  |  | 
| | Central Europe |      | 33.0  |      |   | 33.0   |  | 
| | Caribbean      |      | 14.0  |      |   | 13.6   |  | 
| |                |      |       |      |   |        |  | 
| | Worldwide      | $    | 299.9 |      | $ | 292.7  |  | 
| |                |      |       |      |   |        |  | 

| | SD&A as Percent of Net Sales | 2006 |       | 2005 |  |       |  | 
| | ---------------------------- | ---- | ----- | ---- |  | ----- |  | 
| |                              |      |       |      |  |       |  | 
| | U.S.                         |      | 34.7% |      |  | 34.6% |  | 
| | Central Europe               |      | 48.2% |      |  | 47.1% |  | 
| | Caribbean                    |      | 27.1% |      |  | 28.8% |  | 
| | Worldwide                    |      | 35.3% |      |  | 35.3% |  | 

|In
the first quarter of 2006, SD&A increased $7.2
million, or 2.5 percent, to $299.9 million from $292.7 million in the comparable period of
the previous year. As a percentage of net sales, SD&A expenses remained flat at 35.3
percent in the first quarter of 2006, compared to the prior year first quarter. We expect
increases of 4.5 to 5.5 percent in SD&A expenses for fiscal year 2006 compared to
fiscal year 2005.


In
the U.S., SD&A expenses increased $6.8 million, or 2.8 percent, to $252.9 million in
the first quarter of 2006, compared to $246.1 million in the prior year first quarter. The
increase in SD&A expenses in the first quarter of 2006 was due to higher fuel costs
and higher employee related costs, including costs relating to staffing and brand
investment in airforce Nutrisoda, and stock option expense related to the adoption of SFAS
No. 123(R). These higher costs were partially offset by lower insurance costs.


In
Central Europe, SD&A expenses remained flat at $33.0 million in the first quarter of
2006 compared to the prior year first quarter. Foreign currency translation had a
favorable impact of $1.9 million, offset by higher costs for transportation driven by
higher volume and fuel costs as well as higher advertising and marketing costs to support
sales volume growth.


In
the Caribbean, SD&A expenses increased $0.4 million, or 2.9 percent, to $14.0 million
in the first quarter of 2006 from $13.6 million in the prior year first quarter. SD&A
expenses as a percentage of net sales decreased to 27.1 percent in the first quarter of
2006 compared to 28.8 percent in the prior year first quarter, which reflected an emphasis
on cost control and the leverage of our infrastructure provided by our volume growth.


Special Charges


In
the first quarter of 2006, we recorded special charges of $2.2 million in Central Europe
primarily related to a reduction in the workforce. These special charges were primarily
for severance costs and related benefits. Special charges of $2.5 million were recorded in
the first quarter of 2005 in Central Europe primarily for severance costs and related
benefits and asset write-downs.


Operating Income (Loss)


Operating
income (loss) for the first quarter of 2006 and 2005 was as follows (dollar amounts in
millions):
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                | 2006 |       | 2006 |   | Change |   | 
| | -------------- | ---- | ----- | ---- | - | ------ | - | 
| |                |      |       |      |   |        |   | 
| | U.S.           | $    | 57.7  |      | $ | 67.1   |   | 
| | Central Europe |      | (11.0 | )    |   | (10.3  | ) | 
| | Caribbean      |      | (1.0  | )    |   | (1.7   | ) | 
| |                |      |       |      |   |        |   | 
| | Worldwide      | $    | 45.7  |      | $ | 55.1   |   | 
| |                |      |       |      |   |        |   | 

|21
|--

|Contents
|--------

|Operating
income decreased $9.4 million, or 17.1 percent, to $45.7 million in the first quarter of
2006, compared to $55.1 million in the prior year first quarter, driven by a $9.4 million
decrease in operating income in the U.S. The decrease in operating income in the U.S. was
due primarily to a decline in volume and higher raw material and SD&A expenses.


Operating
losses in Central Europe increased $0.7 million to $11.0 million in the first quarter of
2006, compared to an operating loss of $10.3 million in the prior year first quarter, due
primarily to the decrease in net pricing and the negative impact of foreign currency
translation of approximately $0.5 million.


The
operating performance in the Caribbean improved, as operating losses in the Caribbean of
$1.0 million in the first quarter of 2006 were $0.7 million lower than the operating
losses of $1.7 million in the prior year first quarter. Volume growth and increases in net
pricing contributed to this improvement.


Interest Expense and
Other Expenses


Net
interest expense increased $4.0 million in the first quarter of 2006 to $23.1 million,
compared to $19.1 million in the first quarter of 2005, due primarily to higher interest
rates on floating rate debt and higher overall debt levels related to our acquisitions in
fiscal year 2005.


We
recorded other expense, net, of $1.8 million in the first quarter of 2006 compared to
other expense, net, of $2.7 million reported in the first quarter of 2005. The decrease in
other expense, net, was due primarily to foreign currency transaction losses of $0.3
million in the current quarter compared to foreign currency transaction losses of $1.3
million in the previous years first quarter.


Income Taxes


The
effective income tax rate, which is income tax expense expressed as a percentage of income
before income taxes, was 38.0 percent for the first quarter of 2006, compared to 37.5
percent in the first quarter of 2005. The effective income tax rate increased primarily
due to the impact of the mix of our international operations on our rate.


Equity in Net Earnings of
Nonconsolidated Companies


In
the second quarter of 2005, we acquired a 49 percent minority interest in Quadrant-Amroq
Bottling Company, Limited, the Pepsi bottler in Romania and Moldova. Equity in net earnings
of nonconsolidated companies was $1.2 million in the first quarter of 2006.


Net Income


Net
income decreased $6.7 million to $14.1 million in the first quarter of 2006, compared to
$20.8 million in the first quarter of 2005. The discussion of our operating results,
included above, explains the decrease in net income.


LIQUIDITY AND CAPITAL
RESOURCES


Operating
Activities. Net cash provided by operating activities decreased by $19.9 million to
$14.9 million in the first quarter of 2006, compared to $34.8 million in the first quarter
of 2005. This decrease can mainly be attributed to the unfavorable year-over-year impact
of the timing of payments to our pension plans, the receipt of a federal income tax refund
of $13.3 million in the first quarter of 2005, the impact of excess tax benefits for
share-based compensation arrangements and a lower benefit from changes in primary working
capital due to the timing of the Easter holiday in the second quarter of 2006. The
unfavorable items impacting net cash provided by operations were offset, in part, by the
favorable year-over-year impact of payments made to our securitization program in the
first quarter of 2005. Primary working capital is comprised of inventory, accounts payable
and accounts receivable, excluding securitized receivables. The changes in primary working
capital are expected to reverse in the second quarter of 2006 and benefit our cash flow
from operating activities.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|22
|--

|Contents
|--------

|Investing
Activities. Investing activities in the first quarter of 2006 included capital
investments of $41.8 million which were $16.5 million higher than the prior year period
primarily due to the timing of capital investments. Spending in the U.S., primarily on
fleet and machinery, drove the increase. The increase in capital investments was in line
with our expectations, as we anticipate our capital spending to be in the range of $170
million to $180 million in fiscal year 2006, compared to capital investments of $180.3
million for fiscal year 2005. Capital spending is expected to be consistent during all
four quarters of fiscal year 2006, which differs from fiscal year 2005 when a large
portion of capital spending occurred in the fourth quarter.


Financing
Activities. Our total debt increased $116.6 million to $1,692.9 million at the end of
the first quarter of 2006, from $1,576.3 million at the end of fiscal year 2005. In the
first quarter of 2006, we paid $134.7 million at maturity of the 6.5 percent notes and
5.95 percent notes, both due February 2006. The increase in commercial paper borrowings described below
was primarily due to funding maturing debt.


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 $391.0 million of commercial paper borrowings at the end of the first quarter of 2006,
compared to $141.5 million at the end of fiscal year 2005.


During
the first quarter of 2006, we repurchased 3.3 million shares of our common stock for
$79.1 million; however, at the end of the first quarter of 2006, $4.5 million of treasury
stock purchases were unsettled and recorded in Other current liabilities in
our Condensed Consolidated Balance Sheet. During the first quarter of 2005, we repurchased
2.7 million shares. The issuance of common stock, including treasury shares, for the
exercise of stock options resulted in cash inflows of $11.0 million in the first quarter
of 2006, compared to $22.5 million in the first quarter of 2005.


On
February 24, 2006, we announced that our Board of Directors declared a quarterly dividend
of $0.125 per share on PepsiAmericas common stock for the first quarter of 2006. The
dividend was payable April 3, 2006 to shareholders of record on March 15, 2006. We paid
cash dividends of $16.5 million in the first quarter 2006 based on this quarterly cash
dividend rate, and this payment occurred prior to the end of the first quarter. We also
paid $11.2 million in the first quarter of 2006 related to dividends that were declared in
the fourth quarter of 2005, but not paid until 2006. Therefore, a total of $27.7 million
was paid to shareholders during the first quarter of 2006 related to dividend
declarations. In the first quarter of 2005, we paid cash dividends of $11.7 million based
on a dividend rate of $0.085 per share.


See
the Annual Report on Form 10-K for fiscal year 2005 for a summary of our contractual
obligations as of the end of fiscal year 2005. There were no significant changes to such
contractual obligations in the first quarter of 2006. We believe that our operating cash
flows are sufficient to fund our existing operations and contractual obligations for the
foreseeable future. In addition, we believe that our operating cash flows, available lines
of credit, and the potential for additional debt and equity offerings will provide
sufficient resources to fund our future growth and expansion. There are a number of
options available to us and we continue to examine the optimal uses of our cash, including
reinvesting in our existing business, acquisitions with an appropriate economic return and
repurchasing our stock.


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 former
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 quarter of 2006, we had recorded $79.2
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 13 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 $17.5 million at the end of the first quarter of 2006,
of which $5.4 million is expected to be recovered in 2006 based on our expenditures, and
thus, is included as a current asset.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|23
|--

|Contents
|--------

|During
the first quarters of 2006 and 2005, we paid approximately $3.7 million and $2.4 million,
respectively, related to such indemnification obligations, net of insurance settlements of
$2.3 million and $0.6 million, respectively, as well as the benefit of taxes. We expect to
spend approximately $30 million in fiscal year 2006 for remediation and other related
costs, excluding possible insurance recoveries and the benefit of income taxes (see Note
13 to the Condensed Consolidated Financial Statements for further discussion of
discontinued operations and related environmental liabilities).


RELATED PARTY
TRANSACTIONS


We
are a licensed producer and distributor of PepsiCo branded 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. 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 first quarter of 2006,
PepsiCo beneficially owned approximately 44 percent of PepsiAmericas outstanding
common stock.


We
purchase concentrate from PepsiCo to be used in the production of PepsiCo branded 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.


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.


See
additional discussion of our related party transactions in our Annual Report on Form 10-K
for the fiscal year 2005.


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 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. See
Risk Factors in Item 1A. of our Annual Report on Form 10-K for the fiscal year
2005 for additional information.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|24
|--

|Contents
|--------

|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 9 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 and diesel fuel. Due to 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 first quarter of 2006, we have
hedged a portion of our anticipated aluminum purchases through November 2006, and we have
hedged a portion of our anticipated bulk diesel fuel purchases through December 2006.


Interest Rates


In
the first quarter of 2006, 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. At the end of the first quarter of 2006, approximately thirty percent of our
debt issues were variable 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 first quarter of 2006, a 50 basis-point (0.5 percent) change in each of
these rates would not have had a significant impact on our first quarter of 2006 interest
expense. We had cash equivalents throughout the first quarter of 2006, 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 first quarter of 2006, interest income for the first quarter
of 2006 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 from the
manufacturing operations in Poland.


Based
on net sales, non-U.S. operations represented approximately 14 percent of our total
operations in the first quarter of 2006. 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 first quarter of
2006, 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.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|25
|--

|Contents
|--------

|Item 4.    Controls and
Procedures


Disclosure Controls and
Procedures


We
maintain a system of disclosure controls and procedures that is designed to ensure that
information required to be disclosed in our Exchange Act reports is recorded, processed,
summarized and reported within the time periods specified in the SECs rules and
forms, and that such information is accumulated and communicated to our management,
including our Chief Executive Officer and Chief Financial Officer, as appropriate, to
allow timely decisions regarding required disclosures.


Under
the supervision and with the participation of our management, including our Chief
Executive Officer and Chief Financial Officer, we conducted an evaluation of our
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)). Based on this evaluation, our Chief Executive Officer and our Chief Financial
Officer concluded that, as of April 1, 2006, our disclosure controls and procedures were
effective.


Internal Control over
Financial Reporting


There
were no changes in our internal control over financial reporting that occurred during the
quarter ended April 1, 2006 that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|26
|--

|Contents
|--------

|PART II-OTHER
INFORMATION


Item 1.    Legal Proceedings


No
new material legal proceedings and no material changes to previously reported legal
proceedings to be reported for the first quarter of 2006.


Item 1A.    Risk Factors


There
have been no material changes with respect to the risk factors disclosed in Item 1A. of our
Annual Report on Form 10-K for the fiscal year ended December 31, 2005.


Item 2.    Unregistered
Sales of Equity Securities and Use of Proceeds


     (c).       
          Our share repurchase program activity for each of the three months and the
          quarter ended April 1, 2006 was as follows:
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Period                              | Total
        Number ofSharesPurchased(1) |           | Average
        Price Paidper Share(2) |   | Total Number of Share
        Purchased as Part ofPublicly AnnouncedPlans or Programs |  | Maximum Number
        of Shares that MayYet Be PurchasedUnder the Plans orPrograms (3) |           
| | ----------------------------------- | ----------------------------------------- | --------- | -------------------------------------- | - | ------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------- | ----------
| |                                     |                                           |           |                                        |   |                                                                                       |  |                                                                                         |           
| |                                     |                                           |           |                                        |   |                                                                                       |  |                                                                                         |           
| | January 1 - January 28, 2006        |                                           | 753,100   |                                        | $ | 24.07                                                                                 |  |                                                                                         | 24,579,200
| | January 29 - February 25, 2006      |                                           | 1,034,500 |                                        |   | 24.36                                                                                 |  |                                                                                         | 25,613,700
| | February 26 - April 1, 2006         |                                           | 1,471,900 |                                        |   | 24.31                                                                                 |  |                                                                                         | 27,085,600
| |                                     |                                           |           |                                        |   |                                                                                       |  |                                                                                         |           
| | For the Quarter Ended April 1, 2006 |                                           | 3,259,500 |                                        |   | 24.27                                                                                 |  |                                                                                         |           
| |                                     |                                           |           |                                        |   |                                                                                       |  |                                                                                         |           

| | (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 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 5.    
Other Information


     (a).   Item 8.01. Other Events.  On April
27, 2006, our Board of Directors declared a dividend of $0.125 per share on PepsiAmericas common stock.  The dividend is payable
July 3, 2006 to shareholders of record on June 15, 2006.  Our Board of Directors review the dividend policy on a quarterly basis.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Item 6.    Exhibits


     (a).    See "Exhibit Index."
|-------------------------------------------------------

|26
|--

|Contents
|--------

|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.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | PEPSIAMERICAS, INC.
| |  | -------------------

|Dated: | May 8, 2006 | 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.)          

|28
|--

|Contents
|--------

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

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

|10.1 | 10b5-1 Rephase Plan between PepsiAmericas, Inc. and Banc of America
Securities LLC, dated February 28, 2006 (incorporated by reference to the Company's Current Report on Form 8-K (File No. 001-15019) filed March 1, 2006).
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|31.1 | Chief Executive Officer Certification pursuant to Exchange Act Rule 13a-14(a), 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(a), 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.
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------

|29
|--