##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 For the quarterly period ended June 16, 2007 (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 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)One Pepsi Way, Somers, New York
    
    10589(Address of principal executive offices)
    
    (Zip Code)
 914-767-6000
 N/A
 þ o
  þ o o
 o þ




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##### 



The Pepsi Bottling Group, Inc.  Index
  
 Page No.Part I Financial InformationItem 1. Financial StatementsCondensed Consolidated Statements of Operations 
12 and 24 weeks ended June 16, 2007 and June 17, 2006
    
    
    2Condensed Consolidated Statements of Cash Flows 
24 weeks ended June 16, 2007 and June 17, 2006
    
    
    3Condensed Consolidated Balance Sheets 
June 16, 2007 and December 30, 2006
    
    
    4Notes to Condensed Consolidated Financial Statements
    
    
    5-14Item 2. Managements Financial Review
    
    
    15-22Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    23Item 4. Controls and Procedures
    
    
    23Part II Other InformationItem 1. Legal Proceedings
    
    
    24Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    24Item 4. Submission of Matters to a Vote of Security Holders
    
    
    25Item 6. Exhibits
    
    
    26EX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATIONEX-32.2: CERTIFICATIONEX-99.1: BOTTLING GROUP, LLC FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 16, 2007




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1.
 The Pepsi Bottling Group, Inc.
 
 Condensed Consolidated Statements of Operations
  12 Weeks Ended
    
    
    24 Weeks EndedJune
    
    
    June
    
    
    June
    
    
    June16, 2007
    
    
    17, 2006
    
    
    16, 2007
    
    
    17, 2006Net revenues
    
    $
    3,360
    
    
    $
    3,138
    
    
    $
    5,826
    
    
    $
    5,505Cost of sales
    
    
    1,825
    
    
    
    1,685
    
    
    
    3,168
    
    
    
    2,956Gross profit
    
    
    1,535
    
    
    
    1,453
    
    
    
    2,658
    
    
    
    2,549Selling, delivery and administrative expenses
    
    
    1,197
    
    
    
    1,138
    
    
    
    2,200
    
    
    
    2,113Operating income
    
    
    338
    
    
    
    315
    
    
    
    458
    
    
    
    436Interest expense, net
    
    
    68
    
    
    
    63
    
    
    
    134
    
    
    
    124Other non-operating (income) expenses, net
    
    
    (3
    )
    
    
    10
    
    
    
    (2
    )
    
    
    10Minority interest
    
    
    23
    
    
    
    18
    
    
    
    31
    
    
    
    24Income before income taxes
    
    
    250
    
    
    
    224
    
    
    
    295
    
    
    
    278Income tax expense
    
    
    88
    
    
    
    76
    
    
    
    104
    
    
    
    96Net income
    
    $
    162
    
    
    $
    148
    
    
    $
    191
    
    
    $
    182Basic earnings per share
    
    $
    0.71
    
    
    $
    0.63
    
    
    $
    0.84
    
    
    $
    0.77Weighted-average shares outstanding
    
    
    227
    
    
    
    235
    
    
    
    227
    
    
    
    236Diluted earnings per share
    
    $
    0.70
    
    
    $
    0.61
    
    
    $
    0.82
    
    
    $
    0.75Weighted-average shares outstanding
    
    
    233
    
    
    
    241
    
    
    
    233
    
    
    
    242Dividends declared per common share
    
    $
    0.14
    
    
    $
    0.11
    
    
    $
    0.25
    
    
    $
    0.19
  2




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##### Table of Contents



The Pepsi Bottling Group, Inc.
 
 Condensed Consolidated Statements of Cash Flows
  24 Weeks
    
    
    24 WeeksEnded
    
    
    EndedJune
    
    
    June16, 2007
    
    
    17, 2006Cash Flows  OperationsNet income
    
    $
    191
    
    
    $
    182Adjustments to reconcile net income to net cash provided by operations:Depreciation and amortization
    
    
    300
    
    
    
    291Deferred income taxes
    
    
    (24
    )
    
    
    (28
    )Stock-based compensation
    
    
    30
    
    
    
    32Other non-cash charges and credits, net
    
    
    150
    
    
    
    157Changes in operating working capital, excluding effects of acquisitions:Accounts receivable, net
    
    
    (435
    )
    
    
    (350
    )Inventories
    
    
    (193
    )
    
    
    (190
    )Prepaid expenses and other current assets
    
    
    (26
    )
    
    
    (21
    )Accounts payable and other current liabilities
    
    
    201
    
    
    
    219Income taxes payable
    
    
    28
    
    
    
    35Net change in operating working capital
    
    
    (425
    )
    
    
    (307
    )Casualty insurance payments
    
    
    (32
    )
    
    
    (31
    )Pension contributions
    
    
    (1
    )
    
    
    (1
    )Other, net
    
    
    (31
    )
    
    
    (26
    )Net Cash Provided by Operations
    
    
    158
    
    
    
    269Cash Flows  InvestmentsCapital expenditures
    
    
    (374
    )
    
    
    (359
    )Acquisitions
    
    
    (49
    )
    
    
    Proceeds from sale of property, plant and equipment
    
    
    6
    
    
    
    4Other investing activities, net
    
    
    6
    
    
    
    4Net Cash Used for Investments
    
    
    (411
    )
    
    
    (351
    )Cash Flows  FinancingShort-term borrowings, net
    
    
    321
    
    
    
    (220
    )Proceeds from long-term debt
    
    
    
    
    
    
    793Payments of long-term debt
    
    
    (10
    )
    
    
    (63
    )Dividends paid
    
    
    (51
    )
    
    
    (38
    )Excess tax benefit from exercise of stock options
    
    
    3
    
    
    
    10Proceeds from exercise of stock options
    
    
    57
    
    
    
    66Share repurchases
    
    
    (201
    )
    
    
    (238
    )Net Cash Provided by Financing
    
    
    119
    
    
    
    310Effect of Exchange Rate Changes on Cash and Cash Equivalents
    
    
    4
    
    
    
    (5
    )Net (Decrease) Increase in Cash and Cash Equivalents
    
    
    (130
    )
    
    
    223Cash and Cash Equivalents  Beginning of Period
    
    
    629
    
    
    
    502Cash and Cash Equivalents  End of Period
    
    $
    499
    
    
    $
    725Supplemental Cash Flow InformationInterest paid
    
    $
    153
    
    
    $
    132Income taxes paid
    
    $
    96
    
    
    $
    78Non Cash Transactions:Changes in accounts payable related to capital expenditures
    
    $
    (32
    )
    
    $
    (22
    )Capital lease additions
    
    $
    2
    
    
    $
    8Acquisition of intangible asset
    
    $
    315
    
    
    $
    
  3




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The Pepsi Bottling Group, Inc.
 
 Condensed Consolidated Balance Sheets
  (Unaudited)June
    
    
    December16, 2007
    
    

30, 2006ASSETSCurrent AssetsCash and cash equivalents
    
    $
    499
    
    
    $
    629Accounts receivable, less allowance of $50 at June 16, 2007 and $50 at December
30, 2006
    
    
    1,792
    
    
    
    1,332Inventories
    
    
    738
    
    
    
    533Prepaid expenses and other current assets
    
    
    278
    
    
    
    255Total Current Assets
    
    
    3,307
    
    
    
    2,749Property, plant and equipment, net
    
    
    3,883
    
    
    
    3,785Other intangible assets, net
    
    
    4,149
    
    
    
    3,768Goodwill
    
    
    1,517
    
    
    
    1,490Other assets
    
    
    177
    
    
    
    135Total Assets
    
    $
    13,033
    
    
    $
    11,927LIABILITIES AND SHAREHOLDERS EQUITYCurrent LiabilitiesAccounts payable and other current liabilities
    
    $
    1,891
    
    
    $
    1,677Short-term borrowings
    
    
    692
    
    
    
    357Current maturities of long-term debt
    
    
    11
    
    
    
    17Total Current Liabilities
    
    
    2,594
    
    
    
    2,051Long-term debt
    
    
    4,754
    
    
    
    4,754Other liabilities
    
    
    1,326
    
    
    
    1,205Deferred income taxes
    
    
    1,245
    
    
    
    1,293Minority interest
    
    
    891
    
    
    
    540Total Liabilities
    
    
    10,810
    
    
    
    9,843Shareholders EquityCommon stock, par value $0.01 per share:authorized 900 shares, issued 310 shares
    
    
    3
    
    
    
    3Additional paid-in capital
    
    
    1,774
    
    
    
    1,751Retained earnings (includes impact from adopting FIN 48 in fiscal year 2007 of $5)
    
    
    2,847
    
    
    
    2,708Accumulated other comprehensive loss
    
    
    (251
    )
    
    
    (361
    )Treasury stock: 84 shares and 80 shares at June 16, 2007 and December 30, 2006,
respectively, at cost
    
    
    (2,150
    )
    
    
    (2,017
    )Total Shareholders Equity
    
    
    2,223
    
    
    
    2,084Total Liabilities and Shareholders Equity
    
    $
    13,033
    
    
    $
    11,927
  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
    
    September, October, November and December
   5




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Note 2  Seasonality of Business
  Note 3  New Accounting Standards
 SFAS No. 157
  SFAS No. 158
  SFAS No. 159
  6




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EITF Issue No. 06-11
  Note 4  Earnings per Share
  12 Weeks Ended
    
    
    24 Weeks EndedJune
    
    
    June
    
    
    June
    
    
    JuneShares in millions
    
    16, 2007
    
    
    17, 2006
    
    
    16, 2007
    
    
    17, 2006Average number of shares
outstanding during period
on which basic earnings
per share is based
    
    
    227
    
    
    
    235
    
    
    
    227
    
    
    
    236Add  Incremental shares
under stock compensation
plans
    
    
    6
    
    
    
    6
    
    
    
    6
    
    
    
    6Number of shares on which
diluted earnings per
share is based
    
    
    233
    
    
    
    241
    
    
    
    233
    
    
    
    242Basic and diluted net
income applicable to
common shareholders
    
    $
    162
    
    
    $
    148
    
    
    $
    191
    
    
    $
    182Basic earnings per share
    
    $
    0.71
    
    
    $
    0.63
    
    
    $
    0.84
    
    
    $
    0.77Diluted earnings per share
    
    $
    0.70
    
    
    $
    0.61
    
    
    $
    0.82
    
    
    $
    0.75
   
    
    For the 12 weeks ended June 16, 2007, options to purchase 0.2 million shares. For the 12
weeks ended June 17, 2006, there were no antidilutive options.
    
    For the 24 weeks ended June 16, 2007 and June 17, 2006, options to purchase 0.2 million
shares and 3 million shares, respectively.
 7




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Note 5  Share-Based Compensation
    12 Weeks Ended
    
    
    24 Weeks EndedJune
    
    
    June
    
    
    June
    
    
    June16, 2007
    
    
    17, 2006
    
    
    16, 2007
    
    
    17, 2006Total share-based compensation expense
    
    $
    16
    
    
    $
    17
    
    
    $
    30
    
    
    $
    32Income tax benefit
    
    
    (4
    )
    
    
    (5
    )
    
    
    (8
    )
    
    
    (9
    )Minority interest
    
    
    (1
    )
    
    
    (1
    )
    
    
    (2
    )
    
    
    (2
    )Net income impact
    
    $
    11
    
    
    $
    11
    
    
    $
    20
    
    
    $
    21
    8




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Note 6  Balance Sheet Details
 June
    
    
    December16, 2007
    
    
    30, 2006Accounts ReceivableTrade accounts receivable
    
    $
    1,563
    
    
    $
    1,163Allowance for doubtful accounts
    
    
    (50
    )
    
    
    (50
    )Accounts receivable from PepsiCo
    
    
    208
    
    
    
    168Other receivables
    
    
    71
    
    
    
    51$
    1,792
    
    
    $
    1,332InventoriesRaw materials and supplies
    
    $
    274
    
    
    $
    201Finished goods
    
    
    464
    
    
    
    332$
    738
    
    
    $
    533Property, Plant and Equipment, netLand
    
    $
    312
    
    
    $
    291Buildings and improvements
    
    
    1,417
    
    
    
    1,404Manufacturing and distribution equipment
    
    
    3,773
    
    
    
    3,705Marketing equipment
    
    
    2,400
    
    
    
    2,425Capital leases
    
    
    62
    
    
    
    60Other
    
    
    170
    
    
    
    1728,134
    
    
    
    8,057Accumulated depreciation
    
    
    (4,251
    )
    
    
    (4,272
    )$
    3,883
    
    
    $
    3,785Accounts Payable and Other Current LiabilitiesAccounts payable
    
    $
    613
    
    
    $
    525Accounts payable to PepsiCo
    
    
    323
    
    
    
    234Trade incentives
    
    
    191
    
    
    
    194Accrued compensation and benefits
    
    
    217
    
    
    
    237Other accrued taxes
    
    
    110
    
    
    
    111Accrued interest
    
    
    63
    
    
    
    74Other current liabilities
    
    
    374
    
    
    
    302$
    1,891
    
    
    $
    1,677
 9




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Note 7  Other Intangible Assets, net and Goodwill
  June
    
    
    December16, 2007
    
    
    30, 2006Intangibles subject to amortization:Gross carrying amount:Customer relationships and lists
    
    $
    54
    
    
    $
    54Franchise/distribution rights
    
    
    45
    
    
    
    45Other identified intangibles
    
    
    30
    
    
    
    32129
    
    
    
    131Accumulated amortization:Customer relationships and lists
    
    
    (13
    )
    
    
    (11
    )Franchise/distribution rights
    
    
    (29
    )
    
    
    (27
    )Other identified intangibles
    
    
    (15
    )
    
    
    (16
    )(57
    )
    
    
    (54
    )Intangibles subject to amortization, net
    
    
    72
    
    
    
    77Intangibles not subject to amortization:Carrying amount:Franchise rights
    
    
    3,194
    
    
    
    3,128Licensing rights
    
    
    315
    
    
    
    Distribution rights
    
    
    299
    
    
    
    297Trademarks
    
    
    216
    
    
    
    215Other identified intangibles
    
    
    53
    
    
    
    51Intangibles not subject to amortization
    
    
    4,077
    
    
    
    3,691Total other intangible assets, net
    
    $
    4,149
    
    
    $
    3,768
    10




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U.S. &Canada
    
    
    Europe
    
    
    Mexico
    
    
    TotalBalance at December 30, 2006
    
    $
    1,229
    
    
    $
    16
    
    
    $
    245
    
    
    $
    1,490Purchase price allocations relating to acquisitions
    
    
    1
    
    
    
    
    
    
    
    (4
    )
    
    
    (3
    )Impact of foreign currency translation
    
    
    29
    
    
    
    
    
    
    
    1
    
    
    
    30Balance at June 16, 2007
    
    $
    1,259
    
    
    $
    16
    
    
    $
    242
    
    
    $
    1,517
  Note 8  Pension and Postretirement Medical Benefit Plans
 Employee Benefit Plans
  Defined Benefit Pension Plans
  Defined Contribution Benefits
   11




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12 Weeks Ended
    
    
    24 Weeks EndedJune
    
    
    June
    
    
    June
    
    
    June16, 2007
    
    
    17, 2006
    
    
    16, 2007
    
    
    17, 2006Service cost
    
    $
    12
    
    
    $
    12
    
    
    $
    25
    
    
    $
    24Interest cost
    
    
    21
    
    
    
    19
    
    
    
    42
    
    
    
    38Expected return on plan assets
    
    
    (23
    )
    
    
    (22
    )
    
    
    (47
    )
    
    
    (44
    )Amortization of prior service cost
    
    
    2
    
    
    
    2
    
    
    
    3
    
    
    
    4Amortization of net loss
    
    
    9
    
    
    
    9
    
    
    
    18
    
    
    
    18Net pension expense for the defined benefit plans
    
    
    21
    
    
    
    20
    
    
    
    41
    
    
    
    40Defined contribution plans expense
    
    
    7
    
    
    
    5
    
    
    
    13
    
    
    
    10Total U.S. pension expense recognized in the
Condensed Consolidated Statements of Operations
    
    $
    28
    
    
    $
    25
    
    
    $
    54
    
    
    $
    50
  Postretirement Medical Benefits
   12 Weeks Ended
    
    
    24 Weeks EndedJune
    
    
    June
    
    
    June
    
    
    June16, 2007
    
    
    17, 2006
    
    
    16, 2007
    
    
    17, 2006Service cost
    
    $
    1
    
    
    $
    1
    
    
    $
    2
    
    
    $
    2Interest cost
    
    
    4
    
    
    
    4
    
    
    
    9
    
    
    
    9Amortization of net loss
    
    
    1
    
    
    
    2
    
    
    
    2
    
    
    
    3Total U.S.
postretirement benefits
expense recognized in
the Condensed
Consolidated Statements
of Operations
    
    $
    6
    
    
    $
    7
    
    
    $
    13
    
    
    $
    14
 Note 9  Income Taxes
 ,
  12




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Note 10  Segment Information
   13




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12 Weeks Ended
    
    
    24 Weeks EndedJune
    
    
    June
    
    
    June
    
    
    JuneNet Revenues
    
    16, 2007
    
    
    17, 2006
    
    
    16, 2007
    
    
    17, 2006U.S. & Canada
    
    $
    2,527
    
    
    $
    2,422
    
    
    $
    4,629
    
    
    $
    4,458Europe
    
    
    468
    
    
    
    386
    
    
    
    644
    
    
    
    534Mexico
    
    
    365
    
    
    
    330
    
    
    
    553
    
    
    
    513Worldwide net revenues
    
    $
    3,360
    
    
    $
    3,138
    
    
    $
    5,826
    
    
    $
    5,505
 12 Weeks Ended
    
    
    24 Weeks EndedJune
    
    
    June
    
    
    June
    
    
    JuneOperating Income (Loss)
    
    16, 2007
    
    
    17, 2006
    
    
    16, 2007
    
    
    17, 2006U.S. & Canada
    
    $
    302
    
    
    $
    275
    
    
    $
    445
    
    
    $
    416Europe
    
    
    14
    
    
    
    12
    
    
    
    (11
    )
    
    
    (10
    )Mexico
    
    
    22
    
    
    
    28
    
    
    
    24
    
    
    
    30Worldwide operating income
    
    
    338
    
    
    
    315
    
    
    
    458
    
    
    
    436Interest expense, net
    
    
    68
    
    
    
    63
    
    
    
    134
    
    
    
    124Other non-operating (income) expenses, net
    
    
    (3
    )
    
    
    10
    
    
    
    (2
    )
    
    
    10Minority interest
    
    
    23
    
    
    
    18
    
    
    
    31
    
    
    
    24Income before income taxes
    
    $
    250
    
    
    $
    224
    
    
    $
    295
    
    
    $
    278
 June
    
    
    DecemberTotal Assets
    
    16, 2007
    
    
    30, 2006U.S. & Canada
    
    $
    9,600
    
    
    $
    9,044Europe
    
    
    1,614
    
    
    
    1,072Mexico
    
    
    1,819
    
    
    
    1,811Worldwide total assets
    
    $
    13,033
    
    
    $
    11,927
 Note 11  Comprehensive Income
 12 Weeks Ended
    
    
    24 Weeks EndedJune
    
    
    June
    
    
    June
    
    
    June16, 2007
    
    
    17, 2006
    
    
    16, 2007
    
    
    17, 2006Net income
    
    $
    162
    
    
    $
    148
    
    
    $
    191
    
    
    $
    182Net currency translation adjustment
    
    
    125
    
    
    
    (45
    )
    
    
    93
    
    
    
    (21
    )Cash flow hedge adjustment (a)(b)
    
    
    (2
    )
    
    
    (2
    )
    
    
    (1
    )
    
    
    6Amortization of prior service cost/
net loss in net periodic
pension/postretirement cost to
expense (c)
    
    
    7
    
    
    
    N/A
    
    
    
    13
    
    
    
    N/APension liability adjustment (d)
    
    
    
    
    
    
    N/A
    
    
    
    5
    
    
    
    N/AComprehensive income
    
    $
    292
    
    
    $
    101
    
    
    $
    301
    
    
    $
    167
 
 (a)
    
    Net of minority interest and taxes of $0 million and $(1) million for the 12 weeks ended June 16, 2007 and June 17, 2006, respectively.(b)
    
    Net of minority interest and taxes of $0 million and $5 million for the 24 weeks ended June 16, 2007 and June 17, 2006, respectively.(c)
    
    Net of minority interest and taxes of $5 million and $10 million for the 12 and 24 weeks ended June 16, 2007, respectively.(d)
    
    Net of minority interest and taxes of $3 million for the 24 weeks ended June 16, 2007. Note 12  Contingencies
  14




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##### Table of Contents



Item 2.  Managements Financial Review
 Overview
    Critical Accounting Policies
   
    
    Allowance for Doubtful Accounts;
 
    
    Recoverability of Goodwill and Intangible Assets with Indefinite Lives;
 
    
    Pension and Postretirement Medical Benefit Plans;
 
    
    Casualty Insurance Costs;
 
    
    Share-Based Compensation; and
 
    
    Income Taxes.
 Income Taxes
 ,
 15




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##### Table of Contents



FINANCIAL PERFORMANCE SUMMARY
 12 Weeks Ended
    
    24 Weeks EndedJune
    
    June
    
    %
    
    June
    
    June
    
    %16, 2007
    
    17, 2006
    
    Change
    
    16, 2007
    
    17, 2006
    
    ChangeNet revenues
    
    $
    3,360
    
    
    $
    3,138
    
    
    
    7
    %
    
    $
    5,826
    
    
    $
    5,505
    
    
    
    6
    %Gross profit
    
    
    1,535
    
    
    
    1,453
    
    
    
    6
    %
    
    
    2,658
    
    
    
    2,549
    
    
    
    4
    %Operating income
    
    
    338
    
    
    
    315
    
    
    
    7
    %
    
    
    458
    
    
    
    436
    
    
    
    5
    %Net income
    
    
    162
    
    
    
    148
    
    
    
    9
    %
    
    
    191
    
    
    
    182
    
    
    
    5
    %Diluted earnings
per
share1
    
    $
    0.70
    
    
    $
    0.61
    
    
    
    13
    %
    
    $
    0.82
    
    
    $
    0.75
    
    
    
    9
    %
 
 1
    
     Percentage change for diluted earnings per share is calculated by using earnings per share data that is expanded to the
fourth decimal place.      16




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##### Table of Contents



Full-Year 2007 Outlook
   Second Quarter 2007 Results
 Except where noted, tables and discussion are presented as compared to the similar periods in
the prior year. Growth rates are rounded to the nearest whole percentage. When used in these
tables, N/A describes the transaction categories that did not contribute any impact to the
overall cause of change.
 Volume
 12 Weeks Ended
    
    24 Weeks EndedJune 16, 2007 vs.
    
    June 16, 2007 vs.June 17, 2006
    
    June 17, 2006World
    
    U.S. &
    
    
    
    
    
    
    
    
    
    World
    
    U.S. &wide
    
    Canada
    
    Europe
    
    Mexico
    
    wide
    
    Canada
    
    Europe
    
    MexicoBase volume
    
    
    1
    %
    
    
    0
    %
    
    
    6
    %
    
    
    (2
    )%
    
    
    0
    %
    
    
    0
    %
    
    
    7
    %
    
    
    (2
    )%Acquisitions
    
    
    1
    %
    
    
    N/A
    
    
    
    N/A
    
    
    
    5
    %
    
    
    1
    %
    
    
    N/A
    
    
    
    N/A
    
    
    
    5
    %Total Volume
change
    
    
    2
    %
    
    
    0
    %
    
    
    6
    %
    
    
    3
    %
    
    
    1
    %
    
    
    0
    %
    
    
    7
    %
    
    
    3
    %
   17




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##### Table of Contents



Net Revenues
 12 Weeks Ended
    
    24 Weeks EndedJune 16, 2007 vs.
    
    June 16, 2007 vs.June 17, 2006
    
    June 17, 2006World
    
    U.S. &
    
    
    
    
    
    
    
    
    
    World
    
    U.S. &wide
    
    Canada
    
    Europe
    
    Mexico
    
    wide
    
    Canada
    
    Europe
    
    MexicoVolume impact
    
    
    1
    %
    
    
    0
    %
    
    
    6
    %
    
    
    (2
    )%
    
    
    0
    %
    
    
    0
    %
    
    
    7
    %
    
    
    (2
    )%Net price per case
impact (rate/mix)
    
    
    5
    %
    
    
    4
    %
    
    
    9
    %
    
    
    6
    %
    
    
    4
    %
    
    
    4
    %
    
    
    7
    %
    
    
    5
    %Acquisitions
    
    
    0
    %
    
    
    N/A
    
    
    
    N/A
    
    
    
    6
    %
    
    
    1
    %
    
    
    N/A
    %
    
    
    N/A
    
    
    
    6
    %Currency translation
    
    
    1
    %
    
    
    0
    %
    
    
    6
    %
    
    
    0
    %
    
    
    1
    %
    
    
    0
    %
    
    
    6
    %
    
    
    (1
    )%Total Net Revenues change
    
    
    7
    %
    
    
    4
    %
    
    
    21
    %
    
    
    10
    %
    
    
    6
    %
    
    
    4
    %
    
    
    20
    %
    
    
    8
    %
      18




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##### Table of Contents



Cost of Sales
 12 Weeks Ended
    
    24 Weeks EndedJune 16, 2007 vs.
    
    June 16, 2007 vs.June 17, 2006
    
    June 17, 2006Worldwide
    
    WorldwideVolume impact
    
    
    1
    %
    
    
    0
    %Cost per case impact
    
    
    6
    %
    
    
    6
    %Acquisitions
    
    
    0
    %
    
    
    1
    %Currency translation
    
    
    1
    %
    
    
    0
    %Total Cost of Sales change
    
    
    8
    %
    
    
    7
    %
    Selling, Delivery and Administrative Expenses
 12 Weeks Ended
    
    24 Weeks EndedJune 16, 2007 vs.
    
    June 16, 2007 vs.June 17, 2006
    
    June 17, 2006Worldwide
    
    WorldwideCost impact
    
    
    3
    %
    
    
    3
    %Acquisitions
    
    
    1
    %
    
    
    1
    %Currency translation
    
    
    1
    %
    
    
    0
    %Total SD&A change
    
    
    5
    %
    
    
    4
    %
  19




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##### Table of Contents



Interest Expense, net
  Other Non-operating (Income) Expenses, net
  Income Tax Expense
  Liquidity and Financial Condition
 Cash Flows
 24 Weeks Ended June 16, 2007 vs. June 17, 2006
    Liquidity and Capital Resources
   20




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##### Table of Contents



Contractual Obligations
  21




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##### Table of Contents



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 our
pension plan assets; and
    
    an inability to achieve strategic business plan targets that could result in an intangible asset impairment charge.
 22




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##### Table of Contents



Item 3.  Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4.  Controls and Procedures
   23




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1.  Legal Proceedings
  
 Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds
 PBG Purchases of Equity Securities
  Total Number of Shares
    
    Maximum Number ofTotal Number
    
    Average Price
    
    Purchased as Part of
    
    Shares that May Yet Beof Shares
    
    Paid per
    
    Publicly Announced
    
    Purchased Under thePeriod
    
    Purchased1
    
    Share2
    
    Plans or Programs 3
    
    Plans or Programs 3Period 403/25/0704/21/07
    
    
    359,600
    
    
    $
    31.91
    
    
    
    359,600
    
    
    
    26,530,100Period 504/22/0705/19/07
    
    
    332,900
    
    
    $
    33.09
    
    
    
    332,900
    
    
    
    26,197,200Period 605/20/0706/16/07
    
    
    1,113,700
    
    
    $
    34.11
    
    
    
    1,113,700
    
    
    
    25,083,500Total
    
    
    1,806,200
    
    
    $
    33.48
    
    
    
    1,806,200
 
 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
    
    RepurchasedOctober 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 June 16, 2007
    
    
    150,000,000
  24




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##### Table of Contents



Item 4.  Submission of Matters to a Vote of Security Holders
 (a)
    
    The Annual Meeting of Shareholders of PBG was held on May 23, 2007.(b)
    
    The names of all directors are set forth below. The proxies for the meeting were
solicited pursuant to Regulation 14A under the Securities
Exchange Act of 1934. There were no solicitations in opposition to the nominees as listed in the proxy statement and
all such nominees were elected.(c)
    
    A brief description of each matter voted on and the number of votes cast
are as follows:
 Number of VotesBrokerDescription of Proposals
    
    For
    
    Against
    
    Abstain
    
    Non-Votes1) Election of Directors:Linda G. Alvarado
    
    
    225,923,162
    
    
    
    2,619,820
    
    
    
    730,799
    
    
    
    N/ABarry H. Beracha
    
    
    228,518,813
    
    
    
    75,258
    
    
    
    679,710
    
    
    
    N/AEric J. Foss
    
    
    228,522,734
    
    
    
    80,919
    
    
    
    670,128
    
    
    
    N/AIra D. Hall
    
    
    228,513,945
    
    
    
    84,109
    
    
    
    675,727
    
    
    
    N/AHugh F. Johnston
    
    
    228,198,673
    
    
    
    339,737
    
    
    
    735,371
    
    
    
    N/ASusan D. Kronick
    
    
    223,908,849
    
    
    
    4,689,776
    
    
    
    675,156
    
    
    
    N/ABlythe J. McGarvie
    
    
    228,171,762
    
    
    
    407,293
    
    
    
    694,726
    
    
    
    N/AMargaret D. Moore
    
    
    228,291,478
    
    
    
    305,129
    
    
    
    677,174
    
    
    
    N/AJohn A. Quelch
    
    
    228,182,646
    
    
    
    358,391
    
    
    
    732,744
    
    
    
    N/AJavier G. Teruel
    
    
    228,466,281
    
    
    
    123,602
    
    
    
    683,898
    
    
    
    N/A2) Ratification of
appointment of Deloitte
& Touche LLP as
independent auditors:
    
    
    228,410,558
    
    
    
    71,178
    
    
    
    792,045
    
    
    
    N/A
 25




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##### Table of Contents



Item 6.  Exhibits
 Exhibit No.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
June 16, 2007, 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.
 26




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##### Table of Contents



SIGNATURES
  THE PEPSI BOTTLING GROUP, INC.(Registrant)
 Date: July 24, 2007
    
    /s/ Thomas M. LardieriThomas M. LardieriVice President and ControllerDate: July 24, 2007
    
    /s/ Alfred H. DrewesAlfred H. DrewesSenior Vice President andChief Financial Officer