##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 22, 2008 (12 weeks)
 OR
 o
    
    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 1-14893
 
 THE PEPSI BOTTLING GROUP, INC.
  Delaware
    
    13-4038356(State or Other Jurisdiction of
    
    (I.R.S. EmployerIncorporation or Organization)
    
    Identification No.)One Pepsi Way, Somers, New York
    
    10589(Address of Principal Executive Offices)
    
    (Zip Code)
 
 
 þ o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




---



##### 



The Pepsi Bottling Group, Inc.
Index
 Page No.Part I
    
    Financial InformationItem 1.
    
    Financial StatementsCondensed Consolidated Statements of Operations  12 weeks
ended March 22, 2008 and March 24, 2007
    
    
    2Condensed Consolidated Statements of Cash Flows  12 weeks
ended March 22, 2008 and March 24, 2007
    
    
    3Condensed Consolidated Balance Sheets  March 22, 2008 and
December 29, 2007
    
    
    4Notes to Condensed Consolidated Financial Statements
    
    
    5-16Item 2.
    
    Managements Financial Review
    
    
    17-24Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    25Item 4.
    
    Controls and Procedures
    
    
    25Part II
    
    Other InformationItem 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    26Item 6.
    
    Exhibits
    
    
    27EX-10.1: THE PBG DIRECTORS' STOCK PLAN (AS AMENDED AND RESTATED)EX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATIONEX-32.2: CERTIFICATIONEX-99.1: BOTTLING GROUP, LLC FORM 10-Q




---



##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1.
 
 The Pepsi Bottling Group, Inc.
Condensed Consolidated Statements of Operations
 12 Weeks EndedMarch
    
    
    March22, 2008
    
    
    24, 2007Net revenues
    
    $
    2,651
    
    
    $
    2,466Cost of sales
    
    
    1,482
    
    
    
    1,343Gross profit
    
    
    1,169
    
    
    
    1,123Selling, delivery and administrative expenses
    
    
    1,061
    
    
    
    1,003Operating income
    
    
    108
    
    
    
    120Interest expense, net
    
    
    59
    
    
    
    66Other non-operating (income) expenses, net
    
    
    (3
    )
    
    
    1Minority interest
    
    
    3
    
    
    
    8Income before income taxes
    
    
    49
    
    
    
    45Income tax expense
    
    
    21
    
    
    
    16Net income
    
    $
    28
    
    
    $
    29Basic earnings per share
    
    $
    0.13
    
    
    $
    0.13Weighted-average shares outstanding
    
    
    222
    
    
    
    227Diluted earnings per share
    
    $
    0.12
    
    
    $
    0.12Weighted-average shares outstanding
    
    
    229
    
    
    
    233Dividends declared per common share
    
    $
    0.14
    
    
    $
    0.11
  2




---



##### Table of Contents



The Pepsi Bottling Group, Inc.
Condensed Consolidated Statements of Cash Flows
 12 Weeks EndedMarch
    
    
    March22, 2008
    
    
    24, 2007Cash Flows  OperationsNet income
    
    $
    28
    
    
    $
    29Adjustments to reconcile net income to net cash provided by operations:Depreciation and amortization
    
    
    144
    
    
    
    144Deferred income taxes
    
    
    3
    
    
    
    (9
    )Share-based compensation
    
    
    12
    
    
    
    14Net other non-cash charges and credits
    
    
    69
    
    
    
    74Changes in operating working capital:Accounts receivable, net
    
    
    (4
    )
    
    
    (13
    )Inventories
    
    
    (88
    )
    
    
    (125
    )Prepaid expenses and other current assets
    
    
    (14
    )
    
    
    (27
    )Accounts payable and other current liabilities
    
    
    (86
    )
    
    
    (32
    )Income taxes payable
    
    
    12
    
    
    
    1Net change in operating working capital
    
    
    (180
    )
    
    
    (196
    )Casualty insurance payments
    
    
    (16
    )
    
    
    (15
    )Other, net
    
    
    (40
    )
    
    
    (20
    )Net Cash Provided by Operations
    
    
    20
    
    
    
    21Cash Flows  InvestmentsCapital expenditures
    
    
    (185
    )
    
    
    (174
    )Acquisitions
    
    
    (27
    )
    
    
    (49
    )Proceeds from sale of property, plant and equipment
    
    
    2
    
    
    
    4Other investing activities, net
    
    
    
    
    
    
    6Net Cash Used for Investments
    
    
    (210
    )
    
    
    (213
    )Cash Flows  FinancingShort-term borrowings, net
    
    
    341
    
    
    
    265Payments of long-term debt
    
    
    (2
    )
    
    
    (8
    )Dividends paid
    
    
    (31
    )
    
    
    (26
    )Excess tax benefit from the exercise of equity awards
    
    
    1
    
    
    
    1Proceeds from exercise of stock options
    
    
    7
    
    
    
    16Share repurchases
    
    
    (180
    )
    
    
    (141
    )Net Cash Provided by Financing
    
    
    136
    
    
    
    107Effect of Exchange Rate Changes on Cash and Cash Equivalents
    
    
    (3
    )
    
    
    (4
    )Net Decrease in Cash and Cash Equivalents
    
    
    (57
    )
    
    
    (89
    )Cash and Cash Equivalents  Beginning of Period
    
    
    647
    
    
    
    629Cash and Cash Equivalents  End of Period
    
    $
    590
    
    
    $
    540
  3




---



##### Table of Contents



The Pepsi Bottling Group, Inc.
Condensed Consolidated Balance Sheets
 (Unaudited)March
    
    
    December22, 2008
    
    
    29, 2007ASSETSCurrent AssetsCash and cash equivalents
    
    $
    590
    
    
    $
    647Accounts receivable, net
    
    
    1,536
    
    
    
    1,520Inventories
    
    
    666
    
    
    
    577Prepaid expenses and other current assets
    
    
    377
    
    
    
    342Total Current Assets
    
    
    3,169
    
    
    
    3,086Property, plant and equipment, net
    
    
    4,072
    
    
    
    4,080Other intangible assets, net
    
    
    4,178
    
    
    
    4,181Goodwill
    
    
    1,542
    
    
    
    1,533Other assets
    
    
    231
    
    
    
    235Total Assets
    
    $
    13,192
    
    
    $
    13,115LIABILITIES AND SHAREHOLDERS EQUITYCurrent LiabilitiesAccounts payable and other current liabilities
    
    $
    1,857
    
    
    $
    1,968Short-term borrowings
    
    
    577
    
    
    
    240Current maturities of long-term debt
    
    
    1,305
    
    
    
    7Total Current Liabilities
    
    
    3,739
    
    
    
    2,215Long-term debt
    
    
    3,479
    
    
    
    4,770Other liabilities
    
    
    1,206
    
    
    
    1,186Deferred income taxes
    
    
    1,335
    
    
    
    1,356Minority interest
    
    
    989
    
    
    
    973Total Liabilities
    
    
    10,748
    
    
    
    10,500Shareholders EquityCommon stock, par value $0.01 per share: authorized 900 shares, issued 310 shares
    
    
    3
    
    
    
    3Additional paid-in capital
    
    
    1,817
    
    
    
    1,805Retained earnings (includes impact from adopting FIN 48 in fiscal year 2007 of
$5)
    
    
    3,105
    
    
    
    3,124Accumulated other comprehensive loss
    
    
    (42
    )
    
    
    (48
    )Treasury stock: 90 shares and 86 shares at March 22, 2008 and December 29, 2007,
respectively, at cost
    
    
    (2,439
    )
    
    
    (2,269
    )Total Shareholders Equity
    
    
    2,444
    
    
    
    2,615Total Liabilities and Shareholders Equity
    
    $
    13,192
    
    
    $
    13,115
  4




---



##### Table of Contents



Notes to Condensed Consolidated Financial Statements
 
 Note 1Basis of Presentation
    Quarter
    
    U.S. & Canada
    
    Mexico & EuropeFirst Quarter
    
    12 weeks
    
    January and FebruarySecond Quarter
    
    12 weeks
    
    March, April and MayThird Quarter
    
    12 weeks
    
    June, July and AugustFourth Quarter
    
    16 weeks
    
    September, October, November and December
   Note 2Seasonality of Business
  5




---



##### Table of Contents



Note 3New Accounting Standards
 SFAS No. 157
   SFAS No. 158
  SFAS No. 159
  SFAS No. 141(R)
  SFAS No. 160
  6




---



##### Table of Contents



SFAS No. 161
  EITF Issue No. 06-11
  EITF Issue No. 07-1
  7




---



##### Table of Contents



Note 4Earnings per Share
  12 Weeks EndedMarch
    
    
    MarchShares in millions
    
    22, 2008
    
    
    24, 2007Net income
    
    $
    28
    
    
    $
    29Weighted-average shares outstanding during period
on which basic earnings per share is calculated
    
    
    222
    
    
    
    227Effect of dilutive shares:Incremental shares under stock compensation plans
    
    
    7
    
    
    
    6Weighted-average shares outstanding during period
on which diluted earnings per share is calculated
    
    
    229
    
    
    
    233Basic earnings per share
    
    $
    0.13
    
    
    $
    0.13Diluted earnings per share
    
    $
    0.12
    
    
    $
    0.12
  Note 5Share-Based Compensation
    12 Weeks EndedMarch
    
    
    March22, 2008
    
    
    24, 2007Total share-based compensation expense
    
    $
    12
    
    
    $
    14Income tax benefit
    
    
    (4
    )
    
    
    (4
    )Minority interest
    
    
    0
    
    
    
    (1
    )Net income impact
    
    $
    8
    
    
    $
    9
   8




---



##### Table of Contents



Note 6Balance Sheet Details
 March
    
    
    December22, 2008
    
    
    29, 2007Accounts ReceivableTrade accounts receivable
    
    $
    1,341
    
    
    $
    1,319Allowance for doubtful accounts
    
    
    (56
    )
    
    
    (54
    )Accounts receivable from PepsiCo
    
    
    173
    
    
    
    188Other receivables
    
    
    78
    
    
    
    67$
    1,536
    
    
    $
    1,520InventoriesRaw materials and supplies
    
    $
    221
    
    
    $
    195Finished goods
    
    
    445
    
    
    
    382$
    666
    
    
    $
    577Property, Plant and Equipment, netLand
    
    $
    323
    
    
    $
    320Buildings and improvements
    
    
    1,532
    
    
    
    1,484Manufacturing and distribution equipment
    
    
    4,092
    
    
    
    4,091Marketing equipment
    
    
    2,397
    
    
    
    2,389Capital leases
    
    
    36
    
    
    
    36Other
    
    
    158
    
    
    
    1648,538
    
    
    
    8,484Accumulated depreciation
    
    
    (4,466
    )
    
    
    (4,404
    )$
    4,072
    
    
    $
    4,080
 Industrial Revenue Bonds
  March
    
    
    December22, 2008
    
    
    29, 2007Accounts Payable and Other Current LiabilitiesAccounts payable
    
    $
    575
    
    
    $
    615Accounts payable to PepsiCo
    
    
    329
    
    
    
    255Trade incentives
    
    
    183
    
    
    
    235Accrued compensation and benefits
    
    
    203
    
    
    
    276Other accrued taxes
    
    
    111
    
    
    
    140Accrued interest
    
    
    60
    
    
    
    70Other current liabilities
    
    
    396
    
    
    
    377$
    1,857
    
    
    $
    1,968
 9




---



##### Table of Contents



Note 7Other Intangible Assets, net and Goodwill
 Other intangible assets, net
  March
    
    
    December22, 2008
    
    
    29, 2007Intangibles subject to amortization:Gross carrying amount:Customer relationships and lists
    
    $
    55
    
    
    $
    54Franchise and distribution rights
    
    
    46
    
    
    
    46Other identified intangibles
    
    
    30
    
    
    
    30131
    
    
    
    130Accumulated amortization:Customer relationships and lists
    
    
    (15
    )
    
    
    (15
    )Franchise and distribution rights
    
    
    (32
    )
    
    
    (31
    )Other identified intangibles
    
    
    (18
    )
    
    
    (17
    )(65
    )
    
    
    (63
    )Intangibles subject to amortization, net
    
    
    66
    
    
    
    67Intangibles not subject to amortization:Carrying amount:Franchise rights
    
    
    3,223
    
    
    
    3,235Licensing rights
    
    
    315
    
    
    
    315Distribution rights
    
    
    299
    
    
    
    294Trademarks
    
    
    217
    
    
    
    213Other identified intangibles
    
    
    58
    
    
    
    57Intangibles not subject to amortization
    
    
    4,112
    
    
    
    4,114Total other intangible assets, net
    
    $
    4,178
    
    
    $
    4,181
 Intangible asset amortization
  10




---



##### Table of Contents



Goodwill
  U.S. &Canada
    
    
    Europe
    
    
    Mexico
    
    
    TotalBalance at December 29, 2007
    
    $
    1,290
    
    
    $
    17
    
    
    $
    226
    
    
    $
    1,533Unallocated purchase price relating
to acquisition
    
    
    21
    
    
    
    
    
    
    
    
    
    
    
    21Impact of foreign currency translation
    
    
    (17
    )
    
    
    
    
    
    
    5
    
    
    
    (12
    )Balance at March 22, 2008
    
    $
    1,294
    
    
    $
    17
    
    
    $
    231
    
    
    $
    1,542
  Note 8 Fair Value Measurements
   Level 1
 Level 2
 
    
    Quoted prices for identical or similar assets or liabilities in non-active markets
(examples include corporate and municipal bonds which trade infrequently);
    
    Inputs other than quoted prices that are observable for substantially the full term
of the asset or liability (examples include interest rate and currency swaps); and
    
    Inputs that are derived principally from or corroborated by observable market data
for substantially the full term of the asset or liability (examples include certain
securities and derivatives).
 Level 3
 11




---



##### Table of Contents



Level 2Financial Assets:Cash flow hedges
    
    $
    12Interest rate swaps
    
    
    7Prepaid forward contracts
    
    
    21Total
    
    $
    40Financial Liabilities:Unfunded deferred compensation liability
    
    $
    78Foreign currency hedges
    
    
    2Cash flow hedges
    
    
    1Total
    
    $
    81
 Cash Flow Hedges
  Interest Rate Swaps
  Foreign Currency Hedges
  Unfunded Deferred Compensation Liability
   12




---



##### Table of Contents



Note 9 Pension and Postretirement Medical Benefit Plans
 Employee Benefit Plans
   Defined Benefit Pension Plans
  Postretirement Medical Plans
  Components of net pension expense
 12 Weeks EndedMarch
    
    
    March22, 2008
    
    
    24, 2007Service cost
    
    $
    12
    
    
    $
    13Interest cost
    
    
    23
    
    
    
    21Expected return on plan assets  (income)
    
    
    (27
    )
    
    
    (24
    )Amortization of net loss
    
    
    3
    
    
    
    9Amortization of prior service costs
    
    
    2
    
    
    
    1Net pension expense for the defined benefit plans
    
    $
    13
    
    
    $
    20
  Components of postretirement medical expense
 12 Weeks EndedMarch
    
    
    March22, 2008
    
    
    24, 2007Service cost
    
    $
    1
    
    
    $
    1Interest cost
    
    
    5
    
    
    
    5Amortization of net loss
    
    
    1
    
    
    
    1Total postretirement medical expense
    
    $
    7
    
    
    $
    7
 13




---



##### Table of Contents



Defined Contribution Benefits
  Note 10Segment Information
    12 Weeks EndedMarch
    
    
    March22, 2008
    
    
    24, 2007Net RevenuesU.S. & Canada
    
    $
    2,207
    
    
    $
    2,102Europe
    
    
    236
    
    
    
    176Mexico
    
    
    208
    
    
    
    188Worldwide net revenues
    
    $
    2,651
    
    
    $
    2,466Operating Income (Loss)U.S. & Canada
    
    $
    136
    
    
    $
    143Europe
    
    
    (31
    )
    
    
    (25
    )Mexico
    
    
    3
    
    
    
    2Worldwide operating income
    
    
    108
    
    
    
    120Interest expense, net
    
    
    59
    
    
    
    66Other non-operating (income) expenses, net
    
    
    (3
    )
    
    
    1Minority interest
    
    
    3
    
    
    
    8Income before income taxes
    
    $
    49
    
    
    $
    45
 14




---



##### Table of Contents



March
    
    
    December22, 2008
    
    
    29, 2007Total AssetsU.S. & Canada
    
    $
    9,746
    
    
    $
    9,737Europe
    
    
    1,754
    
    
    
    1,671Mexico
    
    
    1,692
    
    
    
    1,707Worldwide total assets
    
    $
    13,192
    
    
    $
    13,115
 Note 11Comprehensive Income
 12 Weeks EndedMarch
    
    
    March22, 2008
    
    
    24, 2007Net income
    
    $
    28
    
    
    $
    29Net currency translation adjustment
    
    
    (21
    )
    
    
    (32
    )Cash flow hedge adjustment (a)
    
    
    4
    
    
    
    1Amortization of prior service cost and net loss in
net periodic pension/postretirement cost to expense
(b)
    
    
    4
    
    
    
    6Pension liability adjustment (c)
    
    
    
    
    
    
    5Comprehensive income
    
    $
    15
    
    
    $
    9
 
 (a)
    
    Net of minority interest and taxes of $2 million and $0 million for the 12 weeks ended March
22, 2008 and March 24, 2007, respectively.(b)
    
    Net of minority interest and taxes of $2 million and $5 million for the 12 weeks ended March
22, 2008 and March 24, 2007, respectively.(c)
    
    Net of minority interest and taxes of $3 million for the 12 weeks ended March 24, 2007. Note 12 Restructuring Charges and Full Service Vending Rationalization
 Restructuring Charges
   15




---



##### Table of Contents



Severance
    
    
    Enhanced& Related
    
    
    Pension
    
    
    RelocationTotal
    
    
    Benefits
    
    
    Benefits
    
    
    & OtherCosts incurred through December 29, 2007
    
    $
    26
    
    
    $
    15
    
    
    $
    4
    
    
    $
    7Cash payments
    
    
    (13
    )
    
    
    (7
    )
    
    
    
    
    
    
    (6
    )Non-cash settlements
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    (1
    )Remaining costs accrued at December 29,
2007
    
    $
    12
    
    
    $
    8
    
    
    $
    4
    
    
    $
    Costs incurred
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    2Cash payments
    
    
    (3
    )
    
    
    (1
    )
    
    
    
    
    
    
    (2
    )Remaining costs accrued at March 22, 2008
    
    $
    11
    
    
    $
    7
    
    
    $
    4
    
    
    $
    
 Full Service Vending Rationalization
   Note 13Contingencies
  Note 14Supplemental Cash Flow Information
  12 Weeks EndedMarch
    
    March22, 2008
    
    24, 2007Interest paid
    
    $
    71
    
    
    $
    77Income taxes paid
    
    
    6
    
    
    
    23Non-cash investing and financing activities:Decrease in accounts payable related to capital
expenditures
    
    
    (49
    )
    
    
    (30
    )Capital lease additions
    
    
    1
    
    
    
    2
 16




---



##### Table of Contents



Item 2.
 MANAGEMENTS FINANCIAL REVIEW
  OUR BUSINESS
    OUR CRITICAL ACCOUNTING POLICIES
   
    
    Other Intangible Assets, net and Goodwill;
 
    
    Pension and Postretirement Medical Benefit Plans;
 
    
    Casualty Insurance Costs; and
 
    
    Income Taxes.
 17




---



##### Table of Contents



OUR FINANCIAL RESULTS
 ITEMS AFFECTING COMPARABILITY OF OUR FINANCIAL RESULTS
  MarchIncome/(Expense)
    
    22, 2008Gross profitPR Beverages
    
    $
    (4
    )Operating incomePR Beverages
    
    
    (4
    )Restructuring and Full Service Vending Rationalization charges
    
    
    (3
    )Net incomeRestructuring and Full Service Vending Rationalization charges
    
    
    (1
    )Diluted earnings per shareRestructuring and Full Service Vending Rationalization charges
    
    $
    (0.01
    )
 2008 Items
 PR Beverages Limited (PR Beverages)
   Restructuring Charges
   Full Service Vending Rationalization
  18




---



##### Table of Contents



FINANCIAL PERFORMANCE SUMMARY AND WORLDWIDE FINANCIAL HIGHLIGHTS
 12 Weeks EndedMarch
    
    March
    
    %22, 2008
    
    24, 2007
    
    ChangeNet revenues
    
    $
    2,651
    
    
    $
    2,466
    
    
    
    7
    %Cost of sales
    
    
    1,482
    
    
    
    1,343
    
    
    
    10Gross profit
    
    
    1,169
    
    
    
    1,123
    
    
    
    4Selling, delivery, and administrative expenses
    
    
    1,061
    
    
    
    1,003
    
    
    
    6Operating income
    
    
    108
    
    
    
    120
    
    
    
    (10
    )Net income
    
    
    28
    
    
    
    29
    
    
    
    (3
    )Diluted earnings per share (1)
    
    $
    0.12
    
    
    $
    0.12
    
    
    
    (2
    )%
 
 (1)
    
    Percentage change for diluted earnings per share is calculated by
using earnings per share data that is expanded to the fourth decimal place. The impact of foreign currency translation, driven by the strength of all our foreign
functional currencies, contributed approximately three percentage points of growth in worldwide net
revenues, cost of sales and selling, delivery and administrative expenses and contributed two
percentage points to gross profit. Foreign currency translation decreased worldwide operating
income by approximately three percentage points.
 Net revenues 
 Cost of sales 
 Gross profit 
 Selling, delivery and administrative (SD&A) expenses 
 Operating income 
 Net income
 19




---



##### Table of Contents



2008 RESULTS OF OPERATIONS
 Tables and discussion are presented as compared to the similar periods in the prior year.
Growth rates are rounded to the nearest whole percentage.
 Volume
 12 Weeks EndedMarch 22, 2008 vs. March 24, 2007U.S. &Worldwide
    
    Canada
    
    Europe
    
    MexicoTotal volume change
    
    
    2
    %
    
    
    2
    %
    
    
    7
    %
    
    
    2
    %
     Net Revenues
 12 Weeks EndedMarch 22, 2008 vs. March 24, 2007U.S. &Worldwide
    
    Canada
    
    Europe
    
    MexicoVolume impact
    
    
    2
    %
    
    
    2
    %
    
    
    7
    %
    
    
    2
    %Net price per case impact
    
    
    2
    
    
    
    1
    
    
    
    12
    
    
    
    7Currency translation
    
    
    3
    
    
    
    2
    
    
    
    15
    
    
    
    1Total Net Revenues change
    
    
    7
    %
    
    
    5
    %
    
    
    34
    %
    
    
    10
    %
    20




---



##### Table of Contents



Cost of Sales
 12 Weeks EndedMarch 22, 2008 vs.March 24, 2007WorldwideVolume impact
    
    
    2
    %Cost per case impact
    
    
    5Currency translation
    
    
    3Total Cost of Sales change
    
    
    10
    %
  Selling, Delivery and Administrative Expenses
 12 Weeks EndedMarch 22, 2008 vs.March 24, 2007WorldwideCost impact
    
    
    3
    %Restructuring and Full Service Vending Rationalization charges
    
    
    0Currency translation
    
    
    3Total SD&A change
    
    
    6
    %
  Operating Income
   21




---



##### Table of Contents



Interest Expense, net
  Other Non-operating Expenses (Income), net
  Minority Interest
  Income Tax Expense
  LIQUIDITY AND FINANCIAL CONDITION
 Cash Flows
    22




---



##### Table of Contents



Liquidity and Capital Resources
      Contractual Obligations
  23




---



##### Table of Contents



CAUTIONARY STATEMENTS
  
    
    changes in our relationship with PepsiCo;
 
    
    PepsiCos ability to affect matters concerning us through its equity ownership of PBG,
representation on our Board and approval rights under our Master Bottling Agreement;
 
    
    material changes in expected levels of bottler incentive payments from PepsiCo;
 
    
    restrictions imposed by PepsiCo on our raw material suppliers that could increase our
costs;
 
    
    material changes from expectations in the cost or availability of raw materials,
ingredients or packaging materials;
 
    
    limitations on the availability of water or obtaining water rights;
 
    
    an inability to achieve cost savings;
 
    
    material changes in capital investment for infrastructure and an inability to achieve the
expected timing for returns on cold-drink equipment and related infrastructure expenditures;
 
    
    decreased demand for our product resulting from changes in consumers preferences;
 
    
    an inability to achieve volume growth through product and packaging initiatives;
 
    
    impact of competitive activities on our business;
 
    
    impact of customer consolidations on our business;
 
    
    changes in product category consumption;
 
    
    unfavorable weather conditions in our markets;
 
    
    an inability to successfully integrate acquired businesses or to meet projections for
performance in newly acquired territories;
 
    
    loss of business from a significant customer;
 
    
    loss of key members of management;
 
    
    failure or inability to comply with laws and regulations;
 
    
    changes in laws, regulations and industry guidelines governing the manufacture and sale of
food and beverages, including restrictions on the sale of carbonated soft drinks in schools;
 
    
    litigation, other claims and negative publicity relating to alleged unhealthy properties of
soft drinks;
 
    
    changes in laws and regulations governing the environment, transportation, employee safety,
labor and government contracts;
 
    
    changes in accounting standards and taxation requirements (including unfavorable outcomes
from audits performed by various tax authorities);
 
    
    unforeseen social, economic and political changes;
 
    
    possible recalls of our products;
 
    
    interruptions of operations due to labor disagreements;
 
    
    limitations on our ability to invest in our business as a result of our repayment
obligations under our existing indebtedness;
 
    
    changes in our debt ratings;
 
    
    material changes in expected interest and currency exchange rates and unfavorable market
performance of assets in our pension plans; and
 
    
    an inability to achieve strategic business plan targets that could result in a non-cash
intangible asset impairment charge.
 24




---



##### Table of Contents



Item 3.
 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 Item 4.
 CONTROLS AND PROCEDURES
   25




---



##### Table of Contents



PART II  OTHER INFORMATION
 Item 2.
 
 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 PBG PURCHASES OF EQUITY SECURITIES
  Total Number of Shares
    
    Maximum Number ofTotal Number
    
    
    
    
    
    Purchased as Part of
    
    Shares that May Yet Beof Shares
    
    Average Price
    
    Publicly Announced Plans
    
    Purchased Under the PlansPeriod
    
    Purchased1
    
    Paid per Share2
    
    or Programs 3
    
    or Programs 3, 4Period 1
12/30/0701/26/08
    
    
    220,000
    
    
    $
    39.60
    
    
    
    220,000
    
    
    
    18,321,400Period 2

01/27/0802/23/08
    
    
    3,974,500
    
    
    $
    34.95
    
    
    
    3,974,500
    
    
    
    14,346,900Period 3

02/24/0803/22/08
    
    
    938,300
    
    
    $
    33.94
    
    
    
    938,300
    
    
    
    13,408,600Total
    
    
    5,132,800
    
    
    $
    34.96
    
    
    
    5,132,800
 1
    
    Shares have only been repurchased through publicly announced programs.2
    
    Average share price excludes brokerage fees.3
    
    The PBG Board has authorized the repurchase of shares of common stock on the open
market and through negotiated transactions as follows:
 Number of SharesAuthorized to beDate Share Repurchase Program was Publicly Announced
    
    Repurchased 4October 14, 1999
    
    
    20,000,000July 13, 2000
    
    
    10,000,000July 11, 2001
    
    
    20,000,000May 28, 2003
    
    
    25,000,000March 25, 2004
    
    
    25,000,000March 24, 2005
    
    
    25,000,000December 15, 2006
    
    
    25,000,000Total shares authorized to be repurchased as of March 22, 2008
    
    
    150,000,000
  
 4
    
    Number of shares does not include an additional 25 million shares of PBG common
stock that was publicly announced for repurchase on March 27, 2008. This brings the total
number of shares authorized for repurchase to 175 million since the Company initiated its
share repurchase program in October 1999.
 26




---



##### Table of Contents



Item 6.
 
 EXHIBITS
 EXHIBIT NO.
    
    DESCRIPTION OF EXHIBIT10.1
    
    The PBG Directors Stock Plan (As Amended and Restated as of
March 27, 2008)31.1
    
    Certification by the Chief Executive Officer pursuant to
Section 302 of the SarbanesOxley Act of 200231.2
    
    Certification by the Chief Financial Officer pursuant to
Section 302 of the SarbanesOxley Act of 200232.1
    
    Certification by the Chief Executive Officer pursuant to
Section 906 of the SarbanesOxley Act of 200232.2
    
    Certification by the Chief Financial Officer pursuant to
Section 906 of the SarbanesOxley Act of 200299.1
    
    Bottling Group, LLC Form 10-Q for the quarterly period ended
March 22, 2008, as required by the SEC as a result of Bottling
Group, LLCs guarantee of up to $1,000,000,000 aggregate
principal amount of our 7% Senior Notes due in 2029
 27




---



##### Table of Contents



SIGNATURES
  THE PEPSI BOTTLING GROUP, INC.
(Registrant)Date: April 28, 2008
    /s/ Thomas M. LardieriThomas M. LardieriVice President and ControllerDate: April 28, 2008
    /s/ Alfred H. DrewesAlfred H. DrewesSenior Vice President and Chief Financial Officer