##### 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 June 17, 2006
 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 333-80361-01
 BOTTLING GROUP, LLC
  Delaware
    
    13-4042452(State or other jurisdiction of
    
    (I.R.S.employer incorporation or organization)
    
    Identification No.)One Pepsi Way, Somers, New York
    
    10589(Address of principal executive offices)
    
    (Zip Code)
 914-767-6000
 N/A
 þ o
  o o þ
  o þ




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##### 



Bottling Group, LLC  Index
 Page No.Part I
    
    Financial InformationItem 1.
    
    Financial StatementsCondensed Consolidated Statements of Operations - 12 and 24 weeks ended June 17, 2006 and June 11, 2005
    
    
    2Condensed Consolidated Statements of Cash Flows - 24 weeks ended June 17, 2006 and June 11, 2005
    
    
    3Condensed Consolidated Balance Sheets - June 17, 2006 and December 31, 2005
    
    
    4Notes to Condensed Consolidated Financial Statements
    
    
    5-14Item 2.
    
    Management's Financial Review
    
    
    15-24Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    25Item 4.
    
    Controls and Procedures
    
    
    25Part II
    
    Other InformationItem 1.
    
    Legal Proceedings
    
    
    26Item 6.
    
    Exhibits
    
    
    26SIGNATURES




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1.
 Bottling Group, LLC
 
 Condensed Consolidated Statements of Operations
  12 Weeks Ended
    
    
    24 Weeks EndedJune
    
    
    June
    
    
    June
    
    
    June17, 2006
    
    
    11, 2005
    
    
    17, 2006
    
    
    11, 2005Net revenues
    
    $
    3,138
    
    
    $
    2,862
    
    
    $
    5,505
    
    
    $
    5,009Cost of sales
    
    
    1,666
    
    
    
    1,495
    
    
    
    2,919
    
    
    
    2,611Gross profit
    
    
    1,472
    
    
    
    1,367
    
    
    
    2,586
    
    
    
    2,398Selling, delivery and administrative expenses
    
    
    1,169
    
    
    
    1,074
    
    
    
    2,164
    
    
    
    1,986Operating income
    
    
    303
    
    
    
    293
    
    
    
    422
    
    
    
    412Interest expense
    
    
    56
    
    
    
    42
    
    
    
    101
    
    
    
    82Interest income
    
    
    39
    
    
    
    15
    
    
    
    68
    
    
    
    28Other non-operating expenses, net
    
    
    9
    
    
    
    1
    
    
    
    9
    
    
    
    1Income before income taxes
    
    
    277
    
    
    
    265
    
    
    
    380
    
    
    
    357Income tax expense
    
    
    8
    
    
    
    13
    
    
    
    13
    
    
    
    17Net income
    
    $
    269
    
    
    $
    252
    
    
    $
    367
    
    
    $
    340
  2




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##### Table of Contents



Bottling Group, LLC
 
 Condensed Consolidated Statements of Cash Flows
  24 Weeks EndedJune
    
    
    June17, 2006
    
    
    11, 2005Cash Flows  OperationsNet income
    
    $
    367
    
    
    $
    340Adjustments to reconcile net income to net cash provided by operations:Depreciation
    
    
    285
    
    
    
    274Amortization
    
    
    6
    
    
    
    7Deferred income taxes
    
    
    (12
    )
    
    
    8Stock-based compensation
    
    
    32
    
    
    
    Other non-cash charges and credits, net
    
    
    97
    
    
    
    77Changes in operating working capital, excluding effects of acquisitions:Accounts receivable, net
    
    
    (350
    )
    
    
    (320
    )Inventories
    
    
    (190
    )
    
    
    (92
    )Prepaid expenses and other current assets
    
    
    (6
    )
    
    
    (40
    )Accounts payable and other current liabilities
    
    
    276
    
    
    
    191Income taxes payable
    
    
    3
    
    
    
    (24
    )Net change in operating working capital
    
    
    (267
    )
    
    
    (285
    )Pension contributions
    
    
    (1
    )
    
    
    (20
    )Other, net
    
    
    (26
    )
    
    
    (32
    )Net Cash Provided by Operations
    
    
    481
    
    
    
    369Cash Flows  InvestmentsCapital expenditures
    
    
    (355
    )
    
    
    (316
    )Proceeds from sale of property, plant and equipment
    
    
    4
    
    
    
    12Acquisitions of bottlers, net of cash acquired
    
    
    
    
    
    
    (1
    )Notes receivable from PBG, net
    
    
    (738
    )
    
    
    (242
    )Other investing activities, net
    
    
    
    
    
    
    6Net Cash Used for Investments
    
    
    (1,089
    )
    
    
    (541
    )Cash Flows  FinancingShort-term borrowings  three months or less, net
    
    
    136
    
    
    
    75Proceeds from long-term debt
    
    
    793
    
    
    
    37Payments of long-term debt
    
    
    (63
    )
    
    
    (6
    )Net Cash Provided by Financing
    
    
    866
    
    
    
    106Effect of Exchange Rate Changes on Cash and Cash Equivalents
    
    
    (5
    )
    
    
    1Net Increase (Decrease) in Cash and Cash Equivalents
    
    
    253
    
    
    
    (65
    )Cash and Cash Equivalents  Beginning of Period
    
    
    346
    
    
    
    177Cash and Cash Equivalents  End of Period
    
    $
    599
    
    
    $
    112Supplemental Cash Flow InformationInterest paid
    
    $
    92
    
    
    $
    86Income taxes paid
    
    $
    21
    
    
    $
    32Changes in accounts payable related to capital expenditures
    
    $
    (22
    )
    
    $
    (45
    )Capital lease additions
    
    $
    8
    
    
    $
    
 See accompanying notes to
Condensed Consolidated Financial Statements. 3




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Bottling Group, LLC
 
 Condensed Consolidated Balance Sheets
  (Unaudited)June
    
    
    December17, 2006
    
    

31, 2005ASSETSCurrent AssetsCash and cash equivalents
    
    $
    599
    
    
    $
    346Accounts receivable, less allowance of $53 at June
17, 2006 and $51 at December 31, 2005
    
    
    1,538
    
    
    
    1,186Inventories
    
    
    647
    
    
    
    458Prepaid expenses and other current assets
    
    
    270
    
    
    
    274Total Current Assets
    
    
    3,054
    
    
    
    2,264Property, plant and equipment, net
    
    
    3,681
    
    
    
    3,643Other intangible assets, net
    
    
    3,780
    
    
    
    3,814Goodwill
    
    
    1,513
    
    
    
    1,516Notes receivable from PBG
    
    
    3,123
    
    
    
    2,384Other assets
    
    
    128
    
    
    
    124Total Assets
    
    $
    15,279
    
    
    $
    13,745LIABILITIES AND OWNERS EQUITYCurrent LiabilitiesAccounts payable and other current liabilities
    
    $
    1,679
    
    
    $
    1,456Short-term borrowings
    
    
    215
    
    
    
    71Current maturities of long-term debt
    
    
    533
    
    
    
    588Total Current Liabilities
    
    
    2,427
    
    
    
    2,115Long-term debt
    
    
    3,736
    
    
    
    2,943Other liabilities
    
    
    737
    
    
    
    681Deferred income taxes
    
    
    408
    
    
    
    422Minority interest
    
    
    3
    
    
    
    3Total Liabilities
    
    
    7,311
    
    
    
    6,164Owners EquityOwners net investment
    
    
    8,375
    
    
    
    7,990Accumulated other comprehensive loss
    
    
    (407
    )
    
    
    (395
    )Deferred compensation
    
    
    
    
    
    
    (14
    )Total Owners Equity
    
    
    7,968
    
    
    
    7,581Total Liabilities and Owners Equity
    
    $
    15,279
    
    
    $
    13,745
  4




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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 (FY 2006)/17 weeks (FY 2005)
    
    September, October,
November and December
  Note 2  Seasonality of Business
  5




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Note 3  New Accounting Standards
 FASB Interpretation No. 48
 Accounting for Income Taxes
 Note 4  Share-Based Compensation
 Accounting for Share-Based Compensation
     6




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12 Weeks Ended
    
    
    24 Weeks EndedJune
    
    
    June11, 2005
    
    
    11, 2005Net income:As reported
    
    $
    252
    
    
    $
    340Add: Total
share-based
employee
compensation
included in
reported net
income, net of
taxes
    
    
    
    
    
    
    Less: Total
share-based
employee
compensation
determined under
fair-value based
method for all
awards, net of
taxes
    
    
    (15
    )
    
    
    (32
    )Pro forma
    
    $
    237
    
    
    $
    308
 Share-Based Long-term Incentive Compensation Plans
     12 Weeks Ended
    
    24 Weeks EndedJune
    
    June
    
    June
    
    June17, 2006
    
    11, 2005
    
    17, 2006
    
    11, 2005Risk-free interest rate
    
    
    4.8
    %
    
    
    4.4
    %
    
    
    4.6
    %
    
    
    4.1
    %Expected term (in years)
    
    
    5.7
    
    
    
    5.8
    
    
    
    5.7
    
    
    
    5.8Expected volatility
    
    
    27
    %
    
    
    28
    %
    
    
    27
    %
    
    
    28
    %Expected dividend yield
    
    
    1.5
    %
    
    
    1.1
    %
    
    
    1.5
    %
    
    
    1.1
    %Estimated fair value per option granted
    
    $
    9.10
    
    
    $
    8.79
    
    
    $
    8.65
    
    
    $
    8.69
   7




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Stock Options
   Shares in millions
 WeightedWeighted
    
    AverageAverage
    
    RemainingExercise
    
    Contractual
    
    AggregatePrice per
    
    Term
    
    IntrinsicOptions
    
    Shares
    
    Share
    
    (years)
    
    ValueOutstanding at January 1, 2006
    
    
    38.1
    
    
    $
    22.54Granted
    
    
    3.0
    
    
    $
    29.38Exercised
    
    
    (3.8
    )
    
    $
    17.20Forfeited or expired
    
    
    (0.4
    )
    
    $
    26.95Outstanding at June 17, 2006
    
    
    36.9
    
    
    $
    23.71
    
    
    
    6.6
    
    
    $
    273Exercisable at June 17, 2006
    
    
    24.0
    
    
    $
    21.14
    
    
    
    5.6
    
    
    $
    239
   Restricted Stock and Restricted Stock Units
  8




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Shares in millions
 Restricted Stocks and
    
    
    
    
    
    Weighted AverageRestricted Stock Units
    
    Shares
    
    Grant-Date Fair ValueNonvested at January 1, 2006
    
    
    0.9
    
    
    $
    26.31Granted
    
    
    1.1
    
    
    $
    29.32Vested
    
    
    
    
    
    $
    24.25Forfeited
    
    
    (0.3
    )
    
    $
    23.65Nonvested at June 17, 2006
    
    
    1.7
    
    
    $
    28.89
  Note 5  Accounts Receivable
 June
    
    
    December17, 2006
    
    
    31, 2005Trade accounts receivable
    
    $
    1,365
    
    
    $
    1,018Allowance for doubtful accounts
    
    
    (53
    )
    
    
    (51
    )Accounts receivable from PepsiCo
    
    
    177
    
    
    
    143Other receivables
    
    
    49
    
    
    
    76$
    1,538
    
    
    $
    1,186
 Note 6  Inventories
 June
    
    
    December17, 2006
    
    
    31, 2005Raw materials and supplies
    
    $
    247
    
    
    $
    173Finished goods
    
    
    400
    
    
    
    285$
    647
    
    
    $
    458
 Note 7  Property, Plant and Equipment, net
 June
    
    
    December17, 2006
    
    
    31, 2005Land
    
    $
    282
    
    
    $
    277Buildings and improvements
    
    
    1,344
    
    
    
    1,299Manufacturing and distribution equipment
    
    
    3,532
    
    
    
    3,425Marketing equipment
    
    
    2,394
    
    
    
    2,334Other
    
    
    183
    
    
    
    1717,735
    
    
    
    7,506Accumulated depreciation
    
    
    (4,054
    )
    
    
    (3,863
    )$
    3,681
    
    
    $
    3,643
 9




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Note 8  Other Intangible Assets, net and Goodwill
 June
    
    
    December17, 2006
    
    
    31, 2005Intangibles subject to amortization:Gross carrying amount:Customer relationships and lists
    
    $
    50
    
    
    $
    53Franchise/distribution rights
    
    
    44
    
    
    
    46Other identified intangibles
    
    
    36
    
    
    
    39130
    
    
    
    138Accumulated amortization:Customer relationships and lists
    
    
    (9
    )
    
    
    (9
    )Franchise/distribution rights
    
    
    (25
    )
    
    
    (22
    )Other identified intangibles
    
    
    (17
    )
    
    
    (18
    )(51
    )
    
    
    (49
    )Intangibles subject to amortization, net
    
    
    79
    
    
    
    89Intangibles not subject to amortization:Carrying amount:Franchise rights
    
    
    3,099
    
    
    
    3,093Distribution rights
    
    
    283
    
    
    
    302Trademarks
    
    
    205
    
    
    
    218Other identified intangibles
    
    
    114
    
    
    
    112Intangibles not subject to amortization
    
    
    3,701
    
    
    
    3,725Total other intangible assets, net
    
    $
    3,780
    
    
    $
    3,814
  Weighted-Average
    
    Estimated Aggregate Amortization Expense to be IncurredAmortization
    
    Balance of
    
    Fiscal Year EndingPeriod
    
    2006
    
    2007
    
    2008
    
    2009
    
    2010Customer
relationships and
lists
    
    18 years
    
    $
    2
    
    
    $
    3
    
    
    $
    3
    
    
    $
    3
    
    
    $
    3Franchise/distribution rights
    
    7 years
    
    $
    3
    
    
    $
    3
    
    
    $
    2
    
    
    $
    2
    
    
    $
    2Other identified
intangibles
    
    8 years
    
    $
    3
    
    
    $
    4
    
    
    $
    3
    
    
    $
    2
    
    
    $
    1
 10




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##### Table of Contents



U.S. &Canada
    
    
    Europe
    
    
    Mexico
    
    
    TotalBalance at December 31,
2005
    
    $
    1,240
    
    
    $
    16
    
    
    $
    260
    
    
    $
    1,516Impact of foreign currency
translation
    
    
    13
    
    
    
    
    
    
    
    (16
    )
    
    
    (3
    )Balance at June 17,
2006
    
    $
    1,253
    
    
    $
    16
    
    
    $
    244
    
    
    $
    1,513
 Note 9 Accounts Payable and Other Current Liabilities
 June
    
    
    December17, 2006
    
    
    31, 2005Accounts payable
    
    $
    592
    
    
    $
    501Trade incentives
    
    
    164
    
    
    
    185Accrued compensation and benefits
    
    
    195
    
    
    
    211Other accrued taxes
    
    
    109
    
    
    
    123Accounts payable to PepsiCo
    
    
    284
    
    
    
    176Other current liabilities
    
    
    335
    
    
    
    260$
    1,679
    
    
    $
    1,456
 Note 10  Long-Term Debt
   Note 11  Pension and Postretirement Medical Benefit Plans
 Pension Benefits
   11




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##### Table of Contents



12 Weeks Ended
    
    
    24 Weeks EndedJune
    
    
    June
    
    
    June
    
    
    June17, 2006
    
    
    11, 2005
    
    
    17, 2006
    
    
    11, 2005Service cost
    
    $
    12
    
    
    $
    10
    
    
    $
    24
    
    
    $
    21Interest cost
    
    
    19
    
    
    
    18
    
    
    
    38
    
    
    
    35Expected return on plan assets
    
    
    (22
    )
    
    
    (21
    )
    
    
    (44
    )
    
    
    (42
    )Amortization of prior service cost
    
    
    2
    
    
    
    1
    
    
    
    4
    
    
    
    3Amortization of net loss
    
    
    9
    
    
    
    7
    
    
    
    18
    
    
    
    14Net pension expense for the defined benefit plans
    
    
    20
    
    
    
    15
    
    
    
    40
    
    
    
    31Defined contribution plans expense
    
    
    5
    
    
    
    4
    
    
    
    10
    
    
    
    8Total U.S. pension expense recognized in the
Condensed Consolidated Statements of Operations
    
    $
    25
    
    
    $
    19
    
    
    $
    50
    
    
    $
    39
  Postretirement Medical Benefits
   12 Weeks Ended
    
    
    24 Weeks EndedJune
    
    
    June
    
    
    June
    
    
    June17, 2006
    
    
    11, 2005
    
    
    17, 2006
    
    
    11, 2005Service cost
    
    $
    1
    
    
    $
    1
    
    
    $
    2
    
    
    $
    2Interest cost
    
    
    4
    
    
    
    5
    
    
    
    9
    
    
    
    10Amortization of net loss
    
    
    2
    
    
    
    2
    
    
    
    3
    
    
    
    3U.S. postretirement
benefits expense
recognized in the
Condensed Consolidated
Statements of
Operations
    
    $
    7
    
    
    $
    8
    
    
    $
    14
    
    
    $
    15
 Note 12  Segment Information
   12 Weeks Ended
    
    
    24 Weeks EndedJune
    
    
    June
    
    
    June
    
    
    JuneNet Revenues
    
    17, 2006
    
    
    11, 2005
    
    
    17, 2006
    
    
    11, 2005U.S. & Canada
    
    $
    2,422
    
    
    $
    2,207
    
    
    $
    4,458
    
    
    $
    4,056Europe
    
    
    386
    
    
    
    356
    
    
    
    534
    
    
    
    501Mexico
    
    
    330
    
    
    
    299
    
    
    
    513
    
    
    
    452Worldwide net
revenues
    
    $
    3,138
    
    
    $
    2,862
    
    
    $
    5,505
    
    
    $
    5,009
 12




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12 Weeks Ended
    
    
    24 Weeks EndedJune
    
    
    June
    
    
    June
    
    
    JuneOperating Income (Loss)
    
    17, 2006
    
    
    11, 2005
    
    
    17, 2006
    
    
    11, 2005U.S. & Canada
    
    $
    263
    
    
    $
    265
    
    
    $
    402
    
    
    $
    406Europe
    
    
    12
    
    
    
    8
    
    
    
    (10
    )
    
    
    (8
    )Mexico
    
    
    28
    
    
    
    20
    
    
    
    30
    
    
    
    14Worldwide operating
income
    
    
    303
    
    
    
    293
    
    
    
    422
    
    
    
    412Interest expense
    
    
    56
    
    
    
    42
    
    
    
    101
    
    
    
    82Interest income
    
    
    39
    
    
    
    15
    
    
    
    68
    
    
    
    28Other non-operating expenses, net
    
    
    9
    
    
    
    1
    
    
    
    9
    
    
    
    1Income before income
taxes
    
    $
    277
    
    
    $
    265
    
    
    $
    380
    
    
    $
    357
  Total Assets
 June
    
    
    December17, 2006
    
    
    31, 2005U.S. & Canada
    
    $
    12,598
    
    
    $
    11,090Europe
    
    
    1,017
    
    
    
    894Mexico
    
    
    1,664
    
    
    
    1,761Worldwide total assets
    
    $
    15,279
    
    
    $
    13,745
 Note 13  Comprehensive Income
 12 Weeks Ended
    
    
    24 Weeks EndedJune
    
    
    June
    
    
    June
    
    
    June17, 2006
    
    
    11, 2005
    
    
    17, 2006
    
    
    11, 2005Net income
    
    $
    269
    
    
    $
    252
    
    
    $
    367
    
    
    $
    340Currency translation adjustment
    
    
    (49
    )
    
    
    (18
    )
    
    
    (23
    )
    
    
    (3
    )Cash flow hedge adjustment (a)
    
    
    (2
    )
    
    
    (1
    )
    
    
    11
    
    
    
    (3
    )Comprehensive income
    
    $
    218
    
    
    $
    233
    
    
    $
    355
    
    
    $
    334
 
 (a)
    
    Net of taxes of $0 million for the 12 and 24 weeks ended June 17, 2006 and June 11, 2005, respectively. Note 14  Contingencies
  Note 15  Guarantees
  13




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Note
16  Subsequent Event
   14




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Item 2.
 Managements Financial Review
  OVERVIEW
     CRITICAL ACCOUNTING POLICIES
    15




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Share-Based Compensation
    FINANCIAL PERFORMANCE SUMMARY
 12 Weeks Ended
    
    24 Weeks EndedJune
    
    June
    
    %
    
    June
    
    June
    
    %17, 2006
    
    11, 2005
    
    Change
    
    17, 2006
    
    11, 2005
    
    ChangeNet revenues
    
    $
    3,138
    
    
    $
    2,862
    
    
    
    10
    %
    
    $
    5,505
    
    
    $
    5,009
    
    
    
    10
    %Gross profit
    
    
    1,472
    
    
    
    1,367
    
    
    
    8
    %
    
    
    2,586
    
    
    
    2,398
    
    
    
    8
    %Operating income
    
    
    303
    
    
    
    293
    
    
    
    3
    %
    
    
    422
    
    
    
    412
    
    
    
    2
    %Net income
    
    
    269
    
    
    
    252
    
    
    
    7
    %
    
    
    367
    
    
    
    340
    
    
    
    8
    %
  16




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Full-Year 2006 Outlook
   17




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Forecasted 2006 vs.2005 growthWorldwide Volume(1)
    
    
    ~ 3
    %U.S. Volume(1)
    
    
    ~ 2
    %Worldwide net revenue per case
    
    3% to 4%Worldwide cost of sales per case
    
    
    ~ 5
    %Operating Income(2)
    
    (1)% to 1%
 
 (1)
    
    The additional week of volume as a result of the 53rd week in 2005 reduced our
worldwide and U.S. volume growth in 2006 by approximately one percentage point. On a constant territory basis,
worldwide volume and U.S. volume are expected to grow about four percent and about three percent,
respectively.(2)
    
    The impact of adopting SFAS 123R in 2006 is expected to result in a seven-percentage point
reduction in our operating income.
 Second Quarter 2006 Results
 Volume Change
 12 Weeks Ended
    
    
    24 Weeks EndedJune 17, 2006 vs.
    
    
    June 17, 2006 vs.June 11, 2005
    
    
    June 11, 2005World-wide
    

U.S.
& Canada
    
    Europe
    
    Mexico
    
    

World-wide
    

U.S.
& Canada
    
    Europe
    
    MexicoBase volume
    
    
    4
    %
    
    
    5
    %
    
    
    6
    %
    
    
    2
    %
    
    
    
    5
    %
    
    
    5
    %
    
    
    5
    %
    
    
    3
    %Acquisitions
    
    
    1
    %
    
    
    1
    %
    
    
    0
    %
    
    
    0
    %
    
    
    
    1
    %
    
    
    1
    %
    
    
    0
    %
    
    
    0
    %Total Volume change
    
    
    5
    %
    
    
    6
    %
    
    
    6
    %
    
    
    2
    %
    
    
    
    6
    %
    
    
    6
    %
    
    
    5
    %
    
    
    3
    %
    Aquafina Tropicana Lipton Iced Tea Lipton Mountain Dew
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##### Table of Contents



Aquafina
 Pepsi
  Net Revenues Change
 12 Weeks Ended
    
    
    24 Weeks EndedJune 17, 2006 vs.
    
    
    June 17, 2006 vs.June 11, 2005
    
    
    June 11, 2005World
    
    U.S. &
    
    
    
    
    
    
    
    
    
    
    World
    
    U.S. &-wide
    
    Canada
    
    Europe
    
    Mexico
    
    
    -wide
    
    Canada
    
    Europe
    
    MexicoVolume impact
    
    
    4
    %
    
    
    5
    %
    
    
    6
    %
    
    
    2
    %
    
    
    
    5
    %
    
    
    5
    %
    
    
    5
    %
    
    
    3
    %Net price per case impact
(rate/mix)
    
    
    4
    %
    
    
    3
    %
    
    
    4
    %
    
    
    7
    %
    
    
    
    3
    %
    
    
    3
    %
    
    
    4
    %
    
    
    7
    %Acquisitions
    
    
    1
    %
    
    
    1
    %
    
    
    0
    %
    
    
    0
    %
    
    
    
    1
    %
    
    
    1
    %
    
    
    0
    %
    
    
    0
    %Currency translation
    
    
    1
    %
    
    
    1
    %
    
    
    (2
    )%
    
    
    1
    %
    
    
    
    1
    %
    
    
    1
    %
    
    
    (2
    )%
    
    
    3
    %Total Net Revenues change
    
    
    10
    %
    
    
    10
    %
    
    
    8
    %
    
    
    10
    %
    
    
    
    10
    %
    
    
    10
    %
    
    
    7
    %
    
    
    13
    %
    19




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##### Table of Contents



Cost of Sales Change
 12 Weeks Ended
    
    
    24 Weeks EndedJune 17, 2006 vs.
    
    
    June 17, 2006 vs.June 11, 2005
    
    
    June 11, 2005Worldwide
    
    
    WorldwideVolume impact
    
    
    4
    %
    
    
    
    5
    %Cost per case impact
    
    
    5
    %
    
    
    
    5
    %Acquisitions
    
    
    1
    %
    
    
    
    1
    %Currency translation
    
    
    1
    %
    
    
    
    1
    %Total Cost of Sales change
    
    
    11
    %
    
    
    
    12
    %
     20




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Selling, Delivery and Administrative Expenses Change
 12 Weeks Ended
    
    
    24 Weeks EndedJune 17, 2006 vs.
    
    
    June 17, 2006 vs.June 11, 2005
    
    
    June 11, 2005Worldwide
    
    
    WorldwideCost impact
    
    
    6
    %
    
    
    
    6
    %Adoption of SFAS 123R
    
    
    1
    %
    
    
    
    1
    %Acquisitions
    
    
    1
    %
    
    
    
    1
    %Currency translation
    
    
    1
    %
    
    
    
    1
    %Total SD&A change
    
    
    9
    %
    
    
    
    9
    %
  Operating Income
  Interest Expense
  Interest Income
  Other Non-operating Expenses, net
  21




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Income Tax Expense
  Liquidity and Financial Condition
 Cash Flows
    Liquidity and Capital Resources
     22




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Contractual Obligations
  23




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Cautionary Statements
  
    
    changes in our relationship with PepsiCo that could have a material adverse effect on our long-term and short-term
business and financial results;
    
    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 meet projections for performance in newly acquired territories;
    
    loss of business from a significant customer;
    
    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 the 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 economic and political changes;
    
    possible recalls of our products;
    
    interruptions of operations due to labor disagreements;
    
    changes in our debt ratings;
    
    material changes in expected interest and currency exchange rates and unfavorable market performance of PBGs
pension plan assets; and
    
    an inability to achieve strategic business plan targets that could result in an intangible asset impairment charge.
 
 24




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Item 3.
 Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4.
 Controls and Procedures
   25




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1.
 Legal Proceedings
  
 Item 6.
 Exhibits
 Exhibit No.31.1
    
    Certification by the Principal Executive Officer pursuant to
Section 302 of the SarbanesOxley Act of 200231.2
    
    Certification by the Principal Financial Officer pursuant to
Section 302 of the SarbanesOxley Act of 200232.1
    
    Certification by the Principal Executive Officer pursuant to
Section 906 of the SarbanesOxley Act of 200232.2
    
    Certification by the Principal Financial Officer pursuant to
Section 906 of the SarbanesOxley Act of 200299.1
    
    Financial statements of PBG for the quarter ended June 17,
2006, as required by the SEC as a result of our guarantee of
up to $1,000,000,000 aggregate principal amount of PBGs 7%
Senior Notes due in 2029.
 26




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##### Table of Contents



SIGNATURES
  BOTTLING GROUP, LLC(Registrant)
 Date:
July 24, 2006
    
    /s/ Andrea L. ForsterAndrea L. ForsterPrincipal Accounting OfficerDate:
July 24, 2006
    
    /s/ Alfred H. DrewesAlfred H. DrewesPrincipal Financial Officer




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##### Table of Contents



Exhibit 31.1
 
  1.
    
    I have reviewed this quarterly report on Form 10-Q of Bottling Group, LLC;
 2.
    
    Based on my knowledge, this report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period
covered by this report;
 3.
    
    Based on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this
report;
 4.
    
    The registrants other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and we have:
 a)
    
    Designed such disclosure controls and procedures, or caused such disclosure controls
and procedures to be designed under our supervision, to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which this report is
being prepared;b)
    
    Designed such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally accepted
accounting principles;c)
    
    Evaluated the effectiveness of the registrants disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by this report based on such
evaluation; andd)
    
    Disclosed in this report any change in the registrants internal control over
financial reporting that occurred during the registrants most recent fiscal quarter (the
registrants fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrants internal control
over financial reporting; and




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##### Table of Contents



5.
    
    The registrants other certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrants auditors and the
audit committee of the registrants board of directors (or persons performing the equivalent
functions):
 a)
    
    All significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to adversely affect
the registrants ability to record, process, summarize and report financial information;
andb)
    
    Any fraud, whether or not material, that involves management or other employees who
have a significant role in the registrants internal control over financial reporting.
 Date:
July 24, 2006
    
    /s/ Eric J. FossEric J. FossPrincipal Executive Officer




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##### Table of Contents



Exhibit 31.2
 
  1.
    
    I have reviewed this quarterly report on Form 10-Q of Bottling Group, LLC;
 2.
    
    Based on my knowledge, this report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period
covered by this report;
 3.
    
    Based on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this
report;
 4.
    
    The registrants other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and we have:
 a)
    
    Designed such disclosure controls and procedures, or caused such disclosure controls
and procedures to be designed under our supervision, to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which this report is
being prepared;b)
    
    Designed such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally accepted
accounting principles;c)
    
    Evaluated the effectiveness of the registrants disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by this report based on such
evaluation; andd)
    
    Disclosed in this report any change in the registrants internal control over
financial reporting that occurred during the registrants most recent fiscal quarter (the
registrants fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrants internal control
over financial reporting; and




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##### Table of Contents



5.
    
    The registrants other certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrants auditors and the
audit committee of the registrants board of directors (or persons performing the equivalent
functions):
 a)
    
    All significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to adversely affect
the registrants ability to record, process, summarize and report financial information;
andb)
    
    Any fraud, whether or not material, that involves management or other employees who
have a significant role in the registrants internal control over financial reporting.
 Date:
July 24, 2006
    
    /s/ Alfred H. DrewesAlfred H. DrewesPrincipal Financial Officer




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Exhibit 32.1
 
  (1)
    
    The Quarterly Report on Form 10-Q of the Company for the quarter ended June
17, 2006 (the Form 10-Q) fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934 (the Act); and(2)
    
    The information contained in the Form 10-Q fairly presents, in all material
respects, the financial conditions and results of operations of the Company as of the
dates and for the periods referred to in the Form 10-Q.
 /s/ Eric J. FossEric J. FossPrincipal Executive OfficerJuly 24, 2006




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Exhibit 32.2
 
  (1)
    
    The Quarterly Report on Form 10-Q of the Company for the quarter ended June
17, 2006 (the Form 10-Q) fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934 (the Act); and(2)
    
    The information contained in the Form 10-Q fairly presents, in all material
respects, the financial conditions and results of operations of the Company as of the
dates and for the periods referred to in the Form 10-Q.
 /s/ Alfred H. DrewesAlfred H. DrewesPrincipal Financial OfficerJuly 24, 2006