##### 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 13, 2009 (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)
  
  
 þ o
 o o
  Large
accelerated filer þAccelerated filer oNon-accelerated filer o(Do not check if a smaller reporting company)Smaller reporting company 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 13, 2009 and June 14, 2008
    
    
    2Condensed Consolidated Statements of Cash Flows  24 weeks ended June 13, 2009 and June 14, 2008
    
    
    3Condensed
Consolidated Balance Sheets  June 13, 2009 and December 27, 2008
    
    
    4Condensed Consolidated Statements of Changes in Equity  24 weeks ended June 13, 2009 and June 14, 2008
    
    
    5Condensed Consolidated Statements of Comprehensive Income  12 and 24 weeks ended June 13, 2009 and June 14, 2008
    
    
    6Notes to Condensed Consolidated Financial Statements
    
    
    7-22Item 2.
    
    Managements Financial Review
    
    
    23-34Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    34Item 4.
    
    Controls and Procedures
    
    
    34Part II
    
    Other InformationItem 1.
    
    Legal Proceedings
    
    
    35Item 1A.
    
    Risk Factors
    
    
    35Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    36Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    37Item 6.
    
    Exhibits
    
    
    38EX-4.1EX-4.2EX-31.1EX-31.2EX-32.1EX-32.2




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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
    
    
    June13, 2009
    
    
    14, 2008
    
    
    13, 2009
    
    
    14, 2008Net revenues
    
    $
    3,274
    
    
    $
    3,522
    
    
    $
    5,781
    
    
    $
    6,173Cost of sales
    
    
    1,830
    
    
    
    1,916
    
    
    
    3,233
    
    
    
    3,398Gross profit
    
    
    1,444
    
    
    
    1,606
    
    
    
    2,548
    
    
    
    2,775Selling, delivery and administrative expenses
    
    
    1,135
    
    
    
    1,256
    
    
    
    2,122
    
    
    
    2,317Operating income
    
    
    309
    
    
    
    350
    
    
    
    426
    
    
    
    458Interest expense, net
    
    
    69
    
    
    
    63
    
    
    
    148
    
    
    
    122Other non-operating income, net
    
    
    (11
    )
    
    
    (3
    )
    
    
    (4
    )
    
    
    (6
    )Income before income taxes
    
    
    251
    
    
    
    290
    
    
    
    282
    
    
    
    342Income tax expense (benefit)
    
    
    13
    
    
    
    86
    
    
    
    (14
    )
    
    
    107Net income
    
    
    238
    
    
    
    204
    
    
    
    296
    
    
    
    235Less: Net income attributable to
noncontrolling interests
    
    
    27
    
    
    
    30
    
    
    
    28
    
    
    
    33Net income attributable to PBG
    
    $
    211
    
    
    $
    174
    
    
    $
    268
    
    
    $
    202Earnings per share attributable to PBGs
common shareholdersBasic earnings per share
    
    $
    0.98
    
    
    $
    0.80
    
    
    $
    1.26
    
    
    $
    0.92Weighted-average shares outstanding
    
    
    214
    
    
    
    218
    
    
    
    213
    
    
    
    220Diluted earnings per share
    
    $
    0.96
    
    
    $
    0.78
    
    
    $
    1.24
    
    
    $
    0.89Weighted-average shares outstanding
    
    
    219
    
    
    
    224
    
    
    
    217
    
    
    
    227Dividends declared per common share
    
    $
    0.18
    
    
    $
    0.17
    
    
    $
    0.35
    
    
    $
    0.31
  2




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##### Table of Contents



The Pepsi Bottling Group, Inc.
Condensed Consolidated Statements of Cash Flows
 24 Weeks EndedJune
    
    
    June13, 2009
    
    
    14, 2008Cash
Flows  OperationsNet income
    
    $
    296
    
    
    $
    235Adjustments to reconcile net income to net cash provided by operations:Depreciation and amortization
    
    
    285
    
    
    
    306Deferred income taxes
    
    
    3
    
    
    
    14Share-based compensation
    
    
    27
    
    
    
    28Net other non-cash charges and credits
    
    
    97
    
    
    
    122Changes in operating working capital, excluding effects of acquisitions:Accounts receivable, net
    
    
    (435
    )
    
    
    (410
    )Inventories
    
    
    (188
    )
    
    
    (191
    )Prepaid expenses and other current assets
    
    
    (15
    )
    
    
    (37
    )Accounts payable and other current liabilities
    
    
    332
    
    
    
    82Income taxes payable
    
    
    (27
    )
    
    
    54Net change in operating working capital
    
    
    (333
    )
    
    
    (502
    )Casualty insurance payments
    
    
    (38
    )
    
    
    (35
    )Pension contributions
    
    
    (88
    )
    
    
    Other, net
    
    
    (34
    )
    
    
    (79
    )Net Cash Provided by Operations
    
    
    215
    
    
    
    89Cash Flows  InvestmentsCapital expenditures
    
    
    (226
    )
    
    
    (398
    )Acquisitions, net of cash acquired
    
    
    (82
    )
    
    
    (44
    )Proceeds from sale of property, plant and equipment
    
    
    5
    
    
    
    10Issuance of note receivable from noncontrolled affiliate
    
    
    (92
    )
    
    
    Repayments of note receivable from noncontrolled affiliate
    
    
    8
    
    
    
    Other investing activities, net
    
    
    (1
    )
    
    
    4Net Cash Used for Investments
    
    
    (388
    )
    
    
    (428
    )Cash Flows  FinancingShort-term borrowings, net
    
    
    274
    
    
    
    626Proceeds from long-term debt
    
    
    741
    
    
    
    Payments of long-term debt
    
    
    (1,304
    )
    
    
    (6
    )Dividends paid
    
    
    (72
    )
    
    
    (62
    )Excess tax benefit from the exercise of equity awards
    
    
    3
    
    
    
    2Proceeds from the exercise of stock options
    
    
    49
    
    
    
    32Share repurchases
    
    
    
    
    
    
    (388
    )Contributions from noncontrolling interest holder
    
    
    33
    
    
    
    8Other financing activities
    
    
    (9
    )
    
    
    Net Cash (Used for) Provided by Financing
    
    
    (285
    )
    
    
    212Effect of Exchange Rate Changes on Cash and Cash Equivalents
    
    
    2
    
    
    
    (3
    )Net Decrease in Cash and Cash Equivalents
    
    
    (456
    )
    
    
    (130
    )Cash and Cash Equivalents  Beginning of Period
    
    
    966
    
    
    
    647Cash and Cash Equivalents  End of Period
    
    $
    510
    
    
    $
    517
  3




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##### Table of Contents



The Pepsi Bottling Group, Inc.
Condensed Consolidated Balance Sheets
 (Unaudited)June
    
    
    December13, 2009
    
    
    27, 2008ASSETSCurrent AssetsCash and cash equivalents
    
    $
    510
    
    
    $
    966Accounts receivable, net
    
    
    1,836
    
    
    
    1,371Inventories
    
    
    732
    
    
    
    528Prepaid expenses and other current assets
    
    
    345
    
    
    
    276Total Current Assets
    
    
    3,423
    
    
    
    3,141Property, plant and equipment, net
    
    
    3,879
    
    
    
    3,882Other intangible assets, net
    
    
    3,891
    
    
    
    3,751Goodwill
    
    
    1,471
    
    
    
    1,434Investments in noncontrolled affiliates
    
    
    593
    
    
    
    619Other assets
    
    
    198
    
    
    
    155Total Assets
    
    $
    13,455
    
    
    $
    12,982LIABILITIES AND EQUITYCurrent LiabilitiesAccounts payable and other current liabilities
    
    $
    2,089
    
    
    $
    1,675Short-term borrowings
    
    
    385
    
    
    
    103Current maturities of long-term debt
    
    
    10
    
    
    
    1,305Total Current Liabilities
    
    
    2,484
    
    
    
    3,083Long-term debt
    
    
    5,451
    
    
    
    4,784Other liabilities
    
    
    1,546
    
    
    
    1,658Deferred income taxes
    
    
    1,054
    
    
    
    966Total Liabilities
    
    
    10,535
    
    
    
    10,491EquityCommon stock, par value $0.01 per share: authorized 900 shares, issued 310 shares
    
    
    3
    
    
    
    3Additional paid-in capital
    
    
    1,830
    
    
    
    1,851Retained earnings
    
    
    3,322
    
    
    
    3,130Accumulated other comprehensive loss
    
    
    (842
    )
    
    
    (938
    )Treasury stock: 95 shares and 99 shares at June 13, 2009 and December 27, 2008,
respectively, at cost
    
    
    (2,603
    )
    
    
    (2,703
    )Total PBG Shareholders Equity
    
    
    1,710
    
    
    
    1,343Noncontrolling interests
    
    
    1,210
    
    
    
    1,148Total Equity
    
    
    2,920
    
    
    
    2,491Total Liabilities and Equity
    
    $
    13,455
    
    
    $
    12,982
  4




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##### Table of Contents



The Pepsi Bottling Group, Inc.
Condensed Consolidated Statements of Changes in Equity
24 Weeks Ended June 13, 2009 and June 14, 2008
 AccumulatedOtherAdditional
    
    
    
    
    
    
    Compre-
    
    
    
    
    
    
    Total PBGCommon
    
    
    Paid-In
    
    
    Retained
    
    
    hensive (Loss)
    
    
    Treasury
    
    
    Shareholders
    
    
    Noncontrolling
    
    
    
    
    
    
    ComprehensiveStock
    
    
    Capital
    
    
    Earnings
    
    
    Income
    
    
    Stock
    
    
    Equity
    
    
    Interests
    
    
    Total Equity
    
    
    IncomeBalance at December 29, 2007
    
    $
    3
    
    
    $
    1,805
    
    
    $
    3,124
    
    
    $
    (48
    )
    
    $
    (2,269
    )
    
    $
    2,615
    
    
    $
    973
    
    
    $
    3,588Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    202
    
    
    
    
    
    
    
    
    
    
    
    202
    
    
    
    33
    
    
    
    235
    
    
    $
    235Net currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19
    
    
    
    
    
    
    
    19
    
    
    
    13
    
    
    
    32
    
    
    
    32Cash flow hedge adjustment, net of
tax of $(5)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8
    
    
    
    
    
    
    
    8
    
    
    
    
    
    
    
    8
    
    
    
    8Pension and postretirement medical
benefit plans adjustment, net of
tax of $(5)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7
    
    
    
    
    
    
    
    7
    
    
    
    1
    
    
    
    8
    
    
    
    8Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    283SFAS 158  measurement date
adjustment, net of tax of $(5)
    
    
    
    
    
    
    
    
    
    
    (16
    )
    
    
    20
    
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    4Equity awards exercises: 1 shares
    
    
    
    
    
    
    (6
    )
    
    
    
    
    
    
    
    
    
    
    38
    
    
    
    32
    
    
    
    
    
    
    
    32Tax benefit and withholding tax 
equity awards
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    3Share repurchases: 11 shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (388
    )
    
    
    (388
    )
    
    
    
    
    
    
    (388
    )Share-based compensation
    
    
    
    
    
    
    28
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28
    
    
    
    
    
    
    
    28Cash dividends declared on common
stock (per share: $0.31)
    
    
    
    
    
    
    
    
    
    
    (67
    )
    
    
    
    
    
    
    
    
    
    
    (67
    )
    
    
    
    
    
    
    (67
    )Contributions from noncontrolling
interest holder
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32
    
    
    
    32Balance at June 14, 2008
    
    $
    3
    
    
    $
    1,830
    
    
    $
    3,243
    
    
    $
    6
    
    
    $
    (2,619
    )
    
    $
    2,463
    
    
    $
    1,052
    
    
    $
    3,515Balance at December 27, 2008
    
    $
    3
    
    
    $
    1,851
    
    
    $
    3,130
    
    
    $
    (938
    )
    
    $
    (2,703
    )
    
    $
    1,343
    
    
    $
    1,148
    
    
    $
    2,491Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    268
    
    
    
    
    
    
    
    
    
    
    
    268
    
    
    
    28
    
    
    
    296
    
    
    $
    296Net currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    63
    
    
    
    
    
    
    
    63
    
    
    
    (15
    )
    
    
    48
    
    
    
    48Cash flow hedge adjustment, net of
tax of $(17)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21
    
    
    
    
    
    
    
    21
    
    
    
    
    
    
    
    21
    
    
    
    21Pension and postretirement medical
benefit plans adjustment, net of
tax of $(8)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12
    
    
    
    
    
    
    
    12
    
    
    
    1
    
    
    
    13
    
    
    
    13Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    378Equity awards exercises: 4 shares
    
    
    
    
    
    
    (51
    )
    
    
    
    
    
    
    
    
    
    
    100
    
    
    
    49
    
    
    
    
    
    
    
    49Tax benefit  equity awards
    
    
    
    
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7
    
    
    
    
    
    
    
    7Withholding tax  equity awards
    
    
    
    
    
    
    (6
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6
    )
    
    
    
    
    
    
    (6
    )Share-based compensation
    
    
    
    
    
    
    25
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25
    
    
    
    
    
    
    
    25Dividends declared on common stock
(per share: $0.35)
    
    
    
    
    
    
    4
    
    
    
    (76
    )
    
    
    
    
    
    
    
    
    
    
    (72
    )
    
    
    
    
    
    
    (72
    )Contributions from noncontrolling
interest holder
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    48
    
    
    
    48Balance at June 13, 2009
    
    $
    3
    
    
    $
    1,830
    
    
    $
    3,322
    
    
    $
    (842
    )
    
    $
    (2,603
    )
    
    $
    1,710
    
    
    $
    1,210
    
    
    $
    2,920
 
 5




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##### Table of Contents



The Pepsi Bottling Group, Inc.
Condensed Consolidated Statements of Comprehensive Income
 12 Weeks Ended
    
    
    24 Weeks EndedJune
    
    
    June
    
    
    June
    
    
    June13, 2009
    
    
    14, 2008
    
    
    13, 2009
    
    
    14, 2008Net income
    
    $
    238
    
    
    $
    204
    
    
    $
    296
    
    
    $
    235Net currency translation adjustment
    
    
    338
    
    
    
    44
    
    
    
    48
    
    
    
    32Cash flow hedge adjustment, net of tax
    
    
    21
    
    
    
    4
    
    
    
    21
    
    
    
    8Pension and postretirement medical
benefit plans adjustment, net of tax
    
    
    6
    
    
    
    4
    
    
    
    13
    
    
    
    8Comprehensive income
    
    
    603
    
    
    
    256
    
    
    
    378
    
    
    
    283Less: Comprehensive income
attributable to noncontrolling
interests
    
    
    102
    
    
    
    35
    
    
    
    14
    
    
    
    47Comprehensive income attributable
to PBG
    
    $
    501
    
    
    $
    221
    
    
    $
    364
    
    
    $
    236
  6




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##### 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
  7




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##### Table of Contents



Note 3New Accounting Standards
 SFAS No. 141(R) as amended
  SFAS No. 160
  SFAS No. 161
  FSP FAS 132(R)-1
  FSP FAS 107-1 and APB 28-1
  SFAS No. 165
  8




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##### Table of Contents



SFAS No. 167
  SFAS No. 168
 FASB Accounting Standards
Codification TM
 Note 4Earnings per Share
  12 Weeks Ended
    
    
    24 Weeks EndedJune
    
    
    June
    
    
    June
    
    
    JuneShares in millions
    
    13, 2009
    
    
    14, 2008
    
    
    13, 2009
    
    
    14, 2008Net income attributable to PBG
    
    $
    211
    
    
    $
    174
    
    
    $
    268
    
    
    $
    202Weighted-average shares
outstanding during period on
which basic earnings per
share is calculated
    
    
    214
    
    
    
    218
    
    
    
    213
    
    
    
    220Effect of dilutive shares:Incremental shares under
share-based compensation
plans
    
    
    5
    
    
    
    6
    
    
    
    4
    
    
    
    7Weighted-average shares
outstanding during period on
which diluted earnings per
share is calculated
    
    
    219
    
    
    
    224
    
    
    
    217
    
    
    
    227Earnings per share
attributable to PBGs common
shareholdersBasic earnings per share
    
    $
    0.98
    
    
    $
    0.80
    
    
    $
    1.26
    
    
    $
    0.92Diluted earnings per share
    
    $
    0.96
    
    
    $
    0.78
    
    
    $
    1.24
    
    
    $
    0.89
   9




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##### Table of Contents




    
    For the 12 weeks ended June 13, 2009 and June 14, 2008, options to purchase 12 million
shares and 3.5 million shares, respectively.
 
    
    For the 24 weeks ended June 13, 2009 and June 14, 2008, options to purchase 18 million
shares and 3.2 million shares, respectively.
 Note 5Share-Based Compensation
  12 Weeks Ended
    
    
    24 Weeks EndedJune
    
    
    June
    
    
    June
    
    
    June13, 2009
    
    
    14, 2008
    
    
    13, 2009
    
    
    14, 2008Total share-based compensation expense
    
    $
    14
    
    
    $
    16
    
    
    $
    27
    
    
    $
    28Income tax benefit
    
    
    (4
    )
    
    
    (4
    )
    
    
    (8
    )
    
    
    (8
    )Noncontrolling interest
    
    
    (1
    )
    
    
    (2
    )
    
    
    (2
    )
    
    
    (2
    )Net income attributable to PBG impact
    
    $
    9
    
    
    $
    10
    
    
    $
    17
    
    
    $
    18
    Note 6Balance Sheet Details
 June
    
    
    December13, 2009
    
    
    27, 2008Accounts Receivable, netTrade accounts receivable
    
    $
    1,626
    
    
    $
    1,208Allowance for doubtful accounts
    
    
    (73
    )
    
    
    (71
    )Accounts receivable from PepsiCo
    
    
    198
    
    
    
    154Other receivables
    
    
    85
    
    
    
    80$
    1,836
    
    
    $
    1,371InventoriesRaw materials and supplies
    
    $
    234
    
    
    $
    185Finished goods
    
    
    498
    
    
    
    343$
    732
    
    
    $
    528Prepaid Expenses and Other Current AssetsPrepaid expenses
    
    $
    293
    
    
    $
    244Other current assets
    
    
    52
    
    
    
    32$
    345
    
    
    $
    276
 10




---



##### Table of Contents



June
    
    
    December13, 2009
    
    
    27, 2008Property, Plant and Equipment, netLand
    
    $
    304
    
    
    $
    300Buildings and improvements
    
    
    1,644
    
    
    
    1,542Manufacturing and distribution equipment
    
    
    4,047
    
    
    
    3,999Marketing equipment
    
    
    2,228
    
    
    
    2,246Capital leases
    
    
    45
    
    
    
    23Other
    
    
    154
    
    
    
    1548,422
    
    
    
    8,264Accumulated depreciation
    
    
    (4,543
    )
    
    
    (4,382
    )$
    3,879
    
    
    $
    3,882Other AssetsNote receivable from noncontrolled affiliate
    
    $
    92
    
    
    $
    Other assets
    
    
    106
    
    
    
    155$
    198
    
    
    $
    155
 Note Receivable from Noncontrolled Affiliate
  June
    
    
    December13, 2009
    
    
    27, 2008Accounts Payable and Other Current LiabilitiesAccounts payable
    
    $
    614
    
    
    $
    444Accounts payable to PepsiCo
    
    
    336
    
    
    
    217Trade incentives
    
    
    208
    
    
    
    189Accrued compensation and benefits
    
    
    235
    
    
    
    240Other accrued taxes
    
    
    124
    
    
    
    128Accrued interest
    
    
    79
    
    
    
    85Other current liabilities
    
    
    493
    
    
    
    372$
    2,089
    
    
    $
    1,675
 11




---



##### Table of Contents



Note 7Other Intangible Assets, net and Goodwill
  June
    
    
    December13, 2009
    
    
    27, 2008Intangibles subject to amortizationGross carrying amountCustomer relationships and lists
    
    $
    47
    
    
    $
    45Franchise and distribution rights
    
    
    78
    
    
    
    41Other identified intangibles
    
    
    29
    
    
    
    34154
    
    
    
    120Accumulated amortizationCustomer relationships and lists
    
    
    (16
    )
    
    
    (15
    )Franchise and distribution rights
    
    
    (33
    )
    
    
    (31
    )Other identified intangibles
    
    
    (9
    )
    
    
    (21
    )(58
    )
    
    
    (67
    )Intangibles subject to amortization, net
    
    
    96
    
    
    
    53Intangibles not subject to amortizationCarrying amountFranchise rights
    
    
    3,336
    
    
    
    3,244Licensing rights
    
    
    315
    
    
    
    315Distribution rights
    
    
    51
    
    
    
    49Brands
    
    
    41
    
    
    
    39Other identified intangibles
    
    
    52
    
    
    
    51Intangibles not subject to amortization
    
    
    3,795
    
    
    
    3,698Total other intangible assets, net
    
    $
    3,891
    
    
    $
    3,751
   Intangible asset amortization
  12




---



##### Table of Contents



Goodwill
  U.S. &Total
    
    
    Canada
    
    
    Europe
    
    
    MexicoBalance at December 27, 2008
    
    $
    1,434
    
    
    $
    1,235
    
    
    $
    26
    
    
    $
    173Purchase price allocations relating
to acquisitions
    
    
    3
    
    
    
    1
    
    
    
    2
    
    
    
    Impact of foreign currency translation
    
    
    34
    
    
    
    26
    
    
    
    (1
    )
    
    
    9Balance at June 13, 2009
    
    $
    1,471
    
    
    $
    1,262
    
    
    $
    27
    
    
    $
    182
 Note 8Fair Value Measurements
  Level 1
 Level 2 
 Level 3
  Level 2June
    
    
    December13, 2009
    
    
    27, 2008Financial AssetsCommodity (1)
    
    $
    24
    
    
    $
    Foreign currency contracts(1)
    
    
    3
    
    
    
    13Prepaid forward contract (2)
    
    
    20
    
    
    
    13Interest rate swaps (3)
    
    
    
    
    
    
    8Total
    
    $
    47
    
    
    $
    34Financial LiabilitiesCommodity (1)
    
    $
    22
    
    
    $
    57Foreign currency contracts (1)
    
    
    18
    
    
    
    6Interest rate swaps (3)
    
    
    89
    
    
    
    1Total
    
    $
    129
    
    
    $
    64
 
 (1)
    
    Based primarily on the forward rates of the specific indices upon which the
contract settlement is based.(2)
    
    Based primarily on the value of our stock price.(3)
    
    Based primarily on the London Inter-Bank Offer Rate (LIBOR) index. 13




---



##### Table of Contents



Other Financial Assets and Liabilities
   Note 9 Financial Instruments and Risk Management
   Credit Risk Associated with Derivatives
  Cash Flow Hedges
      14




---



##### Table of Contents



Fair Value Hedges
  Economic Hedges
     15




---



##### Table of Contents



Balance Sheet Classification
  Derivatives Designated as HedgingInstruments under SFAS 133
    
    Balance Sheet Classification
    
    Fair ValueAssetsCommodity
    
    Prepaid expenses and other current assets
    
    $
    14Commodity
    
    Other assets
    
    
    10$
    24LiabilitiesForeign currency
    
    Accounts payable and other current liabilities
    
    $
    13Commodity
    
    Accounts payable and other current liabilities
    
    
    19Commodity
    
    Other liabilities
    
    
    3Interest rate swaps
    
    Other liabilities
    
    
    89$
    124
 Derivatives Not Designated as HedgingInstruments under SFAS 133
    
    Balance Sheet Classification
    
    Fair ValueAssetsForeign currency
    
    Prepaid expenses and other current assets
    
    $
    3Prepaid forward contract
    
    Prepaid expenses and other current assets
    
    
    20$
    23LiabilitiesForeign currency
    
    Accounts payable and other current liabilities
    
    $
    3Foreign currency
    
    Other liabilities
    
    
    2$
    5
 Cash Flow Hedge Gains (Losses) Recognition
  Amount of Gain (Loss)Amount of Gain (Loss)
    
    
    
    
    Reclassified from AOCLRecognized in OCI
    
    
    
    
    into IncomeDerivatives in SFAS
    
    12 Weeks
    
    
    24 Weeks
    
    
    Location of Gain
    
    12 Weeks
    
    
    24 Weeks133 Cash Flow
    
    Ended
    
    
    Ended
    
    
    (Loss) Reclassified
    
    Ended
    
    
    EndedHedging
    
    June
    
    
    June
    
    
    from AOCL into
    
    June
    
    
    JuneRelationships
    
    13, 2009
    
    
    13, 2009
    
    
    Income
    
    13, 2009
    
    
    13, 2009Foreign currency
    
    $
    (15
    )
    
    $
    (15
    )
    
    Cost of sales
    
    $
    2
    
    
    $
    5Commodity
    
    
    26
    
    
    
    19
    
    
    Cost of sales
    
    
    
    
    
    
    (3
    )Commodity
    
    
    15
    
    
    
    10
    
    

Selling,
delivery and administrative expenses
    
    
    (12
    )
    
    
    (26
    )$
    26
    
    
    $
    14
    
    
    
    
    $
    (10
    )
    
    $
    (24
    )
  16




---



##### Table of Contents



Other Derivatives Gains (Losses) Recognition
  Amount of Gain (Loss)Recognized in Income onDerivative12 Weeks
    
    
    24 WeeksLocation of Gain (Loss)
    
    Ended
    
    
    EndedRecognized in Income on
    
    June
    
    
    JuneDerivative
    
    13, 2009
    
    
    13, 2009Derivatives in SFAS 133
Fair Value Hedging
RelationshipInterest rate swaps
    
    Interest expense, net
    
    $
    5
    
    
    $
    9Derivatives Not Designated
as Hedging Instruments
under SFAS 133Prepaid forward contract
    
    Selling, delivery and
administrative expenses
    
    $
    8
    
    
    $
    7Foreign currency
    
    Other non-operating
income, net
    
    
    1
    
    
    
    (4
    )$
    9
    
    
    $
    3
  Note 10Pension and Postretirement Medical Benefit Plans
   Components of Net Pension Expense
 12 Weeks Ended
    
    
    24 Weeks EndedJune
    
    
    June
    
    
    June
    
    
    June13, 2009
    
    
    14, 2008
    
    
    13, 2009
    
    
    14, 2008Service cost
    
    $
    10
    
    
    $
    11
    
    
    $
    23
    
    
    $
    23Interest cost
    
    
    24
    
    
    
    23
    
    
    
    49
    
    
    
    46Expected return on plan assets  (income)
    
    
    (28
    )
    
    
    (26
    )
    
    
    (55
    )
    
    
    (53
    )Amortization of net loss
    
    
    8
    
    
    
    4
    
    
    
    16
    
    
    
    7Amortization of prior service costs
    
    
    2
    
    
    
    2
    
    
    
    4
    
    
    
    4Net pension expense for the defined
benefit plans
    
    $
    16
    
    
    $
    14
    
    
    $
    37
    
    
    $
    27
  17




---



##### Table of Contents



Components of Postretirement Medical Expense
 12 Weeks Ended
    
    
    24 Weeks EndedJune
    
    
    June
    
    
    June
    
    
    June13, 2009
    
    
    14, 2008
    
    
    13, 2009
    
    
    14, 2008Service cost
    
    $
    1
    
    
    $
    1
    
    
    $
    2
    
    
    $
    2Interest cost
    
    
    5
    
    
    
    5
    
    
    
    9
    
    
    
    10Amortization of net loss
    
    
    
    
    
    
    1
    
    
    
    1
    
    
    
    2Total postretirement medical expense
    
    $
    6
    
    
    $
    7
    
    
    $
    12
    
    
    $
    14
 Defined Contribution Benefits
  Note 11Income Taxes
    Note 12Segment Information
   18




---



##### Table of Contents



12 Weeks Ended
    
    
    24 Weeks EndedJune
    
    
    June
    
    
    June
    
    
    June13, 2009
    
    
    14, 2008
    
    
    13, 2009
    
    
    14, 2008Net RevenuesU.S. & Canada
    
    $
    2,551
    
    
    $
    2,536
    
    
    $
    4,728
    
    
    $
    4,743Europe
    
    
    424
    
    
    
    592
    
    
    
    598
    
    
    
    828Mexico
    
    
    299
    
    
    
    394
    
    
    
    455
    
    
    
    602Worldwide net revenues
    
    $
    3,274
    
    
    $
    3,522
    
    
    $
    5,781
    
    
    $
    6,173Operating Income (Loss)U.S. & Canada
    
    $
    273
    
    
    $
    276
    
    
    $
    417
    
    
    $
    412Europe
    
    
    19
    
    
    
    45
    
    
    
    (6
    )
    
    
    14Mexico
    
    
    17
    
    
    
    29
    
    
    
    15
    
    
    
    32Worldwide operating income
    
    
    309
    
    
    
    350
    
    
    
    426
    
    
    
    458Interest expense, net
    
    
    69
    
    
    
    63
    
    
    
    148
    
    
    
    122Other non-operating income, net
    
    
    (11
    )
    
    
    (3
    )
    
    
    (4
    )
    
    
    (6
    )Income before income taxes
    
    $
    251
    
    
    $
    290
    
    
    $
    282
    
    
    $
    342
 June
    
    
    December13, 2009
    
    
    27, 2008Total AssetsU.S. & Canada
    
    $
    10,094
    
    
    $
    9,815Europe
    
    
    2,388
    
    
    
    2,222Mexico
    
    
    973
    
    
    
    945Worldwide total assets
    
    $
    13,455
    
    
    $
    12,982
 Note 13Restructuring Charges
     19




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##### Table of Contents



By Reportable Segment
 U.S. &Worldwide
    
    
    Canada
    
    
    Mexico
    
    
    EuropeCosts incurred through December 27, 2008
    
    $
    83
    
    
    $
    53
    
    
    $
    3
    
    
    $
    27Costs incurred during the first quarter
ended March 21, 2009
    
    
    5
    
    
    
    3
    
    
    
    2
    
    
    
    Costs incurred during the second
quarter ended June 13, 2009
    
    
    9
    
    
    
    4
    
    
    
    4
    
    
    
    1Costs expected to be incurred through
December 26, 2009
    
    
    43-73
    
    
    
    29-40
    
    
    
    14-29
    
    
    
    0-4Total costs expected to be incurred
    
    $
    140-$170
    
    
    $
    89-$100
    
    
    $
    23-$38
    
    
    $
    28-$32
 By Activity
 AssetPension
    
    
    Disposal,Severance
    
    
    & Other
    
    
    Employee& Related
    
    
    Related
    
    
    RelocationTotal
    
    
    Benefits
    
    
    Costs
    
    
    & OtherCosts incurred through December 27, 2008
    
    $
    83
    
    
    $
    47
    
    
    $
    29
    
    
    $
    7Cash payments
    
    
    (11
    )
    
    
    (10
    )
    
    
    
    
    
    
    (1
    )Non-cash settlements
    
    
    (30
    )
    
    
    (1
    )
    
    
    (23
    )
    
    
    (6
    )Remaining costs accrued at December 27,
2008
    
    
    42
    
    
    
    36
    
    
    
    6
    
    
    
    Costs incurred during the first quarter
ended March 21, 2009
    
    
    5
    
    
    
    1
    
    
    
    1
    
    
    
    3Cash payments
    
    
    (22
    )
    
    
    (18
    )
    
    
    (2
    )
    
    
    (2
    )Non-cash settlements
    
    
    (2
    )
    
    
    
    
    
    
    (1
    )
    
    
    (1
    )Remaining costs accrued at March 21, 2009
    
    
    23
    
    
    
    19
    
    
    
    4
    
    
    
    Costs incurred during the second quarter
ended June 13, 2009
    
    
    9
    
    
    
    4
    
    
    
    
    
    
    
    5Cash payments
    
    
    (14
    )
    
    
    (11
    )
    
    
    
    
    
    
    (3
    )Non-cash settlements
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    (1
    )Remaining costs accrued at June 13, 2009
    
    $
    17
    
    
    $
    12
    
    
    $
    4
    
    
    $
    1
 Note 14Supplemental Cash Flow Information
  24 Weeks EndedJune
    
    June13, 2009
    
    14, 2008Interest paid
    
    $
    159
    
    
    $
    137Income taxes paid
    
    $
    7
    
    
    $
    37Increase (decrease) in accounts payable related to
capital expenditures
    
    $
    8
    
    
    $
    (44
    )
 20




---



##### Table of Contents



Note 15Contingencies
  Litigation Related to PepsiCo Proposal
      21




---



##### Table of Contents



Note 16  Stockholders Rights Agreement
 th
  ths
  22




---



##### 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.
 23




---



##### Table of Contents



OUR FINANCIAL RESULTS
 ITEMS AFFECTING COMPARABILITY OF OUR FINANCIAL RESULTS
  12 Weeks Ended
    
    24 Weeks EndedJune
    
    June
    
    June
    
    JuneIncome/(Expense)
    
    13, 2009
    
    14, 2008
    
    13, 2009
    
    14, 2008Operating Income2008 Restructuring Charges
    
    $
    (9
    )
    
    $
    
    
    
    $
    (14
    )
    
    $
    2007 Restructuring and Asset Disposal Charges
    
    
    
    
    
    
    (2
    )
    
    
    
    
    
    
    (5
    )Acquisition Proposal Advisory Fees
    
    
    (15
    )
    
    
    
    
    
    
    (15
    )
    
    
    Total Operating Income Impact
    
    $
    (24
    )
    
    $
    (2
    )
    
    $
    (29
    )
    
    $
    (5
    )Net Income Attributable to PBG2008 Restructuring Charges
    
    $
    (6
    )
    
    $
    
    
    
    $
    (9
    )
    
    $
    2007 Restructuring and Asset Disposal Charges
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    (3
    )Acquisition Proposal Advisory Fees
    
    
    (9
    )
    
    
    
    
    
    
    (9
    )
    
    
    Tax Audit Settlements
    
    
    54
    
    
    
    
    
    
    
    93
    
    
    
    Total Net Income Attributable to PBG Impact
    
    $
    39
    
    
    $
    (1
    )
    
    $
    75
    
    
    $
    (3
    )Diluted Earnings per Share2008 Restructuring Charges
    
    $
    (0.03
    )
    
    $
    
    
    
    $
    (0.04
    )
    
    $
    2007 Restructuring and Asset Disposal Charges
    
    
    
    
    
    
    (0.01
    )
    
    
    
    
    
    
    (0.01
    )Acquisition Proposal Advisory Fees
    
    
    (0.04
    )
    
    
    
    
    
    
    (0.04
    )
    
    
    Tax Audit Settlements
    
    
    0.25
    
    
    
    
    
    
    
    0.43
    
    
    
    Total Diluted Earnings per Share Impact
    
    $
    0.18
    
    
    $
    (0.01
    )
    
    $
    0.35
    
    
    $
    (0.01
    )
 2009 Items
 2008 Restructuring Charges
    24




---



##### Table of Contents



Acquisition Proposal Advisory Fees
   Tax Audit Settlements
    2008 Items
 2007 Restructuring Charges
  Asset Disposal Costs
  25




---



##### Table of Contents



FINANCIAL PERFORMANCE SUMMARY AND WORLDWIDE FINANCIAL HIGHLIGHTS
 12 Weeks Ended
    
    24 Weeks Ended% Change
    
    
    
    
    
    
    
    
    
    % ChangeJune
    
    June
    
    Better/
    
    June
    
    June
    
    Better/13, 2009
    
    14, 2008
    
    (Worse)
    
    13, 2009
    
    14, 2008
    
    (Worse)Net revenues
    
    $
    3,274
    
    
    $
    3,522
    
    
    
    (7
    )%
    
    $
    5,781
    
    
    $
    6,173
    
    
    
    (6
    )%Cost of sales
    
    $
    1,830
    
    
    $
    1,916
    
    
    
    5
    %
    
    $
    3,233
    
    
    $
    3,398
    
    
    
    5
    %Gross profit
    
    $
    1,444
    
    
    $
    1,606
    
    
    
    (10
    )%
    
    $
    2,548
    
    
    $
    2,775
    
    
    
    (8
    )%Selling, delivery and administrative
expenses
    
    $
    1,135
    
    
    $
    1,256
    
    
    
    10
    %
    
    $
    2,122
    
    
    $
    2,317
    
    
    
    8
    %Operating income
    
    $
    309
    
    
    $
    350
    
    
    
    (12
    )%
    
    $
    426
    
    
    $
    458
    
    
    
    (7
    )%Net income attributable to PBG
    
    $
    211
    
    
    $
    174
    
    
    
    21
    %
    
    $
    268
    
    
    $
    202
    
    
    
    32
    %Diluted earnings per share (1)
    
    $
    0.96
    
    
    $
    0.78
    
    
    
    24
    %
    
    $
    1.24
    
    
    $
    0.89
    
    
    
    38
    %
 
 (1)
    
    Percentage change for diluted earnings per share is calculated using earnings
per share data expanded to the fourth decimal place. Worldwide Financial Highlights for the 12 and 24 Weeks Ended June 13, 2009
 Foreign Currency Impact 
   Volume 
 Net revenues 
 Cost of sales 
 Gross profit 
 26




---



##### Table of Contents



Selling, delivery and administrative expenses 
 Operating income 
 Net income attributable to PBG
  2009 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 EndedJune 13, 2009 vs.June 14, 2008U.S. &Worldwide
    
    Canada
    
    Europe
    
    MexicoBase volume
    
    
    (5
    )%
    
    
    (2
    )%
    
    
    (15
    )%
    
    
    (7
    )%Acquisitions
    
    
    1
    
    
    
    1
    
    
    
    
    
    
    
    Total volume change
    
    
    (4
    )%
    
    
    (1
    )%
    
    
    (15
    )%
    
    
    (7
    )%
 27




---



##### Table of Contents



24 Weeks EndedJune 13, 2009 vs.June 14, 2008U.S. &Worldwide
    
    Canada
    
    Europe
    
    MexicoBase volume
    
    
    (6
    )%
    
    
    (3
    )%
    
    
    (15
    )%
    
    
    (7
    )%Acquisitions
    
    
    1
    
    
    
    1
    
    
    
    
    
    
    
    Total volume change
    
    
    (5
    )%
    
    
    (2
    )%
    
    
    (15
    )%
    
    
    (7
    )%
 U.S. & Canada
    Europe
  Mexico
  28




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##### Table of Contents



Net Revenues
 12 Weeks EndedJune 13, 2009 vs.June 14, 2008U.S. &Worldwide
    
    
    Canada
    
    
    Europe
    
    
    Mexico2009 Net revenues
    
    $
    3,274
    
    
    $
    2,551
    
    
    $
    424
    
    
    $
    2992008 Net revenues
    
    $
    3,522
    
    
    $
    2,536
    
    
    $
    592
    
    
    $
    394% Impact of:Volume impact
    
    
    (5
    )%
    
    
    (2
    )%
    
    
    (15
    )%
    
    
    (7
    )%Net price impact (rate/mix)
    
    
    4
    
    
    
    3
    
    
    
    7
    
    
    
    5Acquisitions
    
    
    1
    
    
    
    1
    
    
    
    
    
    
    
    Currency translation
    
    
    (7
    )
    
    
    (1
    )
    
    
    (21
    )
    
    
    (23
    )Total net revenues change
    
    
    (7
    )%
    
    
    1
    %
    
    
    (28)
    %*
    
    
    (24)
    %*
 
 *
    
    Does not add due to rounding to the whole percent. 24 Weeks EndedJune 13, 2009 vs.June 14, 2008U.S. &Worldwide
    
    
    Canada
    
    
    Europe
    
    
    Mexico2009 Net revenues
    
    $
    5,781
    
    
    $
    4,728
    
    
    $
    598
    
    
    $
    4552008 Net revenues
    
    $
    6,173
    
    
    $
    4,743
    
    
    $
    828
    
    
    $
    602% Impact of:Volume impact
    
    
    (6
    )%
    
    
    (3
    )%
    
    
    (15
    )%
    
    
    (7
    )%Net price impact (rate/mix)
    
    
    5
    
    
    
    4
    
    
    
    8
    
    
    
    5Acquisitions
    
    
    1
    
    
    
    1
    
    
    
    
    
    
    
    Currency translation
    
    
    (6
    )
    
    
    (2
    )
    
    
    (21
    )
    
    
    (23
    )Total net revenues change
    
    
    (6
    )%
    
    
    
    %
    
    
    (28
    )%
    
    
    (24)
    %*
 
 *
    
    Does not add due to rounding to the whole percent. U.S. & Canada
  Europe
  29




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##### Table of Contents



Mexico
  Operating Income
 12 Weeks EndedJune 13, 2009 vs.June 14, 2008U.S. &Worldwide
    
    
    Canada
    
    
    Europe
    
    
    Mexico2009 Operating income
    
    $
    309
    
    
    $
    273
    
    
    $
    19
    
    
    $
    172008 Operating income
    
    $
    350
    
    
    $
    276
    
    
    $
    45
    
    
    $
    29% Impact of:Operations
    
    
    (3
    )%
    
    
    5
    %
    
    
    (53
    )%
    
    
    (8
    )%Currency translation
    
    
    (4
    )
    
    
    (2
    )
    
    
    (4
    )
    
    
    (17
    )2008 Restructuring charges
    
    
    (3
    )
    
    
    (2
    )
    
    
    (1
    )
    
    
    (15
    )2007 Restructuring and asset disposal charges
    
    
    1
    
    
    
    1
    
    
    
    
    
    
    
    Acquisition proposal advisory fees
    
    
    (4
    )
    
    
    (5
    )
    
    
    
    
    
    
    Acquisitions
    
    
    1
    
    
    
    2
    
    
    
    
    
    
    
    Total operating income change
    
    
    (12
    )%
    
    
    (1
    )%
    
    
    (58
    )%
    
    
    (40
    )%
 24 Weeks EndedJune 13, 2009 vs.June 14, 2008U.S. &Worldwide
    
    
    Canada
    
    
    Europe
    
    
    Mexico2009 Operating income (loss)
    
    $
    426
    
    
    $
    417
    
    
    $
    (6
    )
    
    $
    152008 Operating income
    
    $
    458
    
    
    $
    412
    
    
    $
    14
    
    
    $
    32% Impact of:Operations
    
    
    (2
    )%
    
    
    6
    %
    
    
    (186
    )%
    
    
    (20
    )%Currency translation
    
    
    (2
    )
    
    
    (2
    )
    
    
    44
    
    
    
    (13
    )2008 Restructuring charges
    
    
    (3
    )
    
    
    (2
    )
    
    
    (4
    )
    
    
    (19
    )2007 Restructuring and asset disposal charges
    
    
    1
    
    
    
    1
    
    
    
    
    
    
    
    Acquisition proposal advisory fees
    
    
    (3
    )
    
    
    (4
    )
    
    
    
    
    
    
    Acquisitions
    
    
    2
    
    
    
    2
    
    
    
    
    
    
    
    Total operating income change
    
    
    (7)
    %
    
    
    1
    %
    
    
    (146
    )%
    
    
    (52)
    %
 U.S. & Canada
  30




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##### Table of Contents



Europe
    Mexico
    31




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##### Table of Contents



Interest Expense, net
  Other Non-operating Income, net
  Net Income Attributable to Noncontrolling Interests
  Income Tax Expense
  LIQUIDITY AND FINANCIAL CONDITION
 Cash Flows
 24 Weeks Ended June 13, 2009 vs. June 14, 2008
    Liquidity and Capital Resources
    32




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##### Table of Contents



Contractual Obligations
  CAUTIONARY STATEMENTS
  
    
    the outcome of, expenses associated with, or developments concerning, PepsiCos unsolicited proposal to purchase
all outstanding shares of the Company that it does not already own or any litigation related to the proposal;
    
    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;
    
    material changes from expectations in the cost or availability of ingredients, packaging
materials, other raw materials or energy including changes resulting from restrictions on our suppliers required by PepsiCo;
    
    limitations on the availability of water or obtaining water rights;
    
    an inability to achieve strategic business plan targets;
    
    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;
    
    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;
    
    litigation, other claims and negative publicity relating to alleged unhealthy properties
or environmental impact of our products;
    
    changes in laws and regulations governing the manufacture and sale of food and
beverages, the environment, transportation, employee safety, labor and government
contracts;
 33




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##### Table of Contents




    
    changes in accounting standards and taxation requirements (including unfavorable
outcomes from audits performed by various tax authorities);
    
    an increase in costs of pension, medical and other employee benefit costs;
    
    unfavorable market performance of assets in our pension plans or material changes in key
assumptions used to calculate the liability of our pension plans, such as discount rate;
    
    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, an increase in financing costs or limitations on our
ability to obtain credit; and
    
    material changes in expected interest and currency exchange rates.
  
 Item 3.
 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 Item 4.
 CONTROLS AND PROCEDURES
   34




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  Uncertainty resulting from PepsiCos unsolicited proposal to purchase all outstanding shares
of the Company that it does not already own and related matters could adversely affect our business
and financial results.
  35




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##### Table of Contents



Item 2.
 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 PBG PURCHASES OF EQUITY SECURITIES
  Total Number of
    
    Maximum Number ofShares Purchased as
    
    Shares that May YetPart of Publicly
    
    Be Purchased UnderTotal Number of
    
    Average Price Paid
    
    Announced Plans or
    
    the Plans orPeriod
    
    Shares Purchased
    
    per Share
    
    Programs
    
    Programs 1Period 4
03/22/0904/18/09
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,540,400Period 5
04/19/0905/16/09
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,540,400Period 6
05/17/0906/13/09
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,540,400Total
    
    
    
    
    
    
    
    
    
    
    
 1
    
    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
    
    
    25,000,000March 27, 2008
    
    
    25,000,000Total shares
authorized to be repurchased as of June 13, 2009
    
    
    175,000,000
  36




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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 27, 2009.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
    
    
    95,870,996
    
    
    
    19,113,138
    
    
    
    95,261,021
    
    
    
    N/ABarry H. Beracha
    
    
    100,711,329
    
    
    
    14,274,525
    
    
    
    95,259,301
    
    
    
    N/AJohn C. Compton
    
    
    206,841,350
    
    
    
    3,359,128
    
    
    
    44,677
    
    
    
    N/AEric J. Foss
    
    
    99,458,798
    
    
    
    15,531,115
    
    
    
    95,255,242
    
    
    
    N/AIra D. Hall
    
    
    93,125,925
    
    
    
    21,895,487
    
    
    
    95,223,743
    
    
    
    N/ASusan D. Kronick
    
    
    89,283,537
    
    
    
    25,708,875
    
    
    
    95,252,743
    
    
    
    N/ABlythe J. McGarvie
    
    
    100,591,813
    
    
    
    14,384,523
    
    
    
    95,268,819
    
    
    
    N/AJohn A. Quelch
    
    
    89,296,541
    
    
    
    25,732,118
    
    
    
    95,216,496
    
    
    
    N/AJavier G. Teruel
    
    
    100,892,560
    
    
    
    14,138,313
    
    
    
    95,214,282
    
    
    
    N/ACynthia M. Trudell
    
    
    206,809,767
    
    
    
    3,376,525
    
    
    
    58,863
    
    
    
    N/A2) Proposal to approve
an amendment and
restatement of The PBG
Directors Stock Plan
    
    
    46,918,828
    
    
    
    153,427,788
    
    
    
    50,479
    
    
    
    9,848,0603) Ratification of
appointment of Deloitte
& Touche LLP as
independent auditors
    
    
    210,119,722
    
    
    
    85,431
    
    
    
    40,002
    
    
    
    N/A
 37




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##### Table of Contents



Item 6.
 EXHIBITS
 EXHIBIT NO.
    
    DESCRIPTION OF EXHIBIT4.1
    
    Amendment No. 1, dated May 18, 2009, to Rights Agreement dated
May 4, 2009 between The Pepsi Bottling Group, Inc. and Mellon
Investor Services LLC4.2
    
    Rights Agreement, dated May 18, 2009, between The Pepsi
Bottling Group, Inc. and Mellon Investor Services LLC31.1
    
    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 2002
 38




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##### Table of Contents



SIGNATURES
  THE PEPSI BOTTLING GROUP, INC.(Registrant)Date: July 14, 2009
    /s/ Thomas M. LardieriThomas M. LardieriVice President and ControllerDate: July 14, 2009
    /s/ Alfred H. DrewesAlfred H. DrewesSenior Vice President and Chief Financial Officer