##### 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 endedSeptember 9, 2006
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
 For the transition period from  to
 Commission file number 333-80361-01
 BOTTLING GROUP, LLC
  Delaware
    
    13-4042452(State or other jurisdiction of
    
    (I.R.S.employer incorporation or organization)
    
    Identification No.)One Pepsi Way, Somers, New York
    
    10589(Address of principal executive offices)
    
    (Zip Code)
 914-767-6000
 N/A
 þ o
  o o þ
 o þ




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##### 



Bottling Group, LLC  Index
 Page No.Part I Financial InformationItem 1. Financial StatementsCondensed Consolidated Statements of Operations -
12 and 36 weeks ended September 9, 2006 and September 3, 2005
    
    
    2Condensed Consolidated Statements of Cash Flows -
36 weeks ended September 9, 2006 and September 3, 2005
    
    
    3Condensed Consolidated Balance Sheets -
September 9, 2006 and December 31, 2005
    
    
    4Notes to Condensed Consolidated Financial Statements
    
    
    5-15Item 2. Managements Financial Review
    
    
    16-26Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    27Item 4. Controls and Procedures
    
    
    27Part II Other InformationItem 6. Exhibits
    
    
    28




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1.
 Bottling Group, LLC
 
 Condensed Consolidated Statements of Operations
  12 Weeks Ended
    
    
    36 Weeks EndedSeptember
    
    
    September
    
    
    September
    
    
    September9, 2006
    
    
    3, 2005
    
    
    9, 2006
    
    
    3, 2005Net revenues
    
    $
    3,460
    
    
    $
    3,214
    
    
    $
    8,965
    
    
    $
    8,223Cost of sales
    
    
    1,851
    
    
    
    1,695
    
    
    
    4,770
    
    
    
    4,306Gross profit
    
    
    1,609
    
    
    
    1,519
    
    
    
    4,195
    
    
    
    3,917Selling, delivery and administrative expenses.
    
    
    1,228
    
    
    
    1,127
    
    
    
    3,392
    
    
    
    3,113Operating income
    
    
    381
    
    
    
    392
    
    
    
    803
    
    
    
    804Interest expense
    
    
    56
    
    
    
    43
    
    
    
    157
    
    
    
    125Interest income
    
    
    45
    
    
    
    18
    
    
    
    113
    
    
    
    46Other non-operating (income) expenses, net
    
    
    
    
    
    
    (1
    )
    
    
    9
    
    
    
    Income before income taxes
    
    
    370
    
    
    
    368
    
    
    
    750
    
    
    
    725Income tax expense
    
    
    1
    
    
    
    13
    
    
    
    14
    
    
    
    30Net income
    
    $
    369
    
    
    $
    355
    
    
    $
    736
    
    
    $
    695
  2




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##### Table of Contents



Bottling Group, LLC
 
 Condensed Consolidated Statements of Cash Flows
  36 Weeks EndedSeptember
    
    
    September9, 2006
    
    
    3, 2005Cash Flows  OperationsNet income
    
    $
    736
    
    
    $
    695Adjustments to reconcile net income to net cash provided by operations:Depreciation
    
    
    434
    
    
    
    420Amortization
    
    
    9
    
    
    
    10Deferred income taxes
    
    
    (43
    )
    
    
    2Stock-based compensation
    
    
    45
    
    
    
    Other non-cash charges and credits, net
    
    
    132
    
    
    
    121Changes in operating working capital, excluding effects of acquisitions:Accounts receivable, net
    
    
    (532
    )
    
    
    (412
    )Inventories
    
    
    (162
    )
    
    
    (84
    )Prepaid expenses and other current assets
    
    
    (28
    )
    
    
    (7
    )Accounts payable and other current liabilities
    
    
    390
    
    
    
    332Income taxes payable
    
    
    36
    
    
    
    (10
    )Net change in operating working capital
    
    
    (296
    )
    
    
    (181
    )Pension contributions
    
    
    (1
    )
    
    
    (30
    )Other, net
    
    
    (40
    )
    
    
    (51
    )Net Cash Provided by Operations
    
    
    976
    
    
    
    986Cash Flows  InvestmentsCapital expenditures
    
    
    (521
    )
    
    
    (489
    )Proceeds from sale of property, plant and equipment
    
    
    6
    
    
    
    15Acquisitions of bottlers, net of cash acquired
    
    
    (33
    )
    
    
    (1
    )Notes receivable from PBG, net
    
    
    (804
    )
    
    
    (557
    )Other investing activities, net
    
    
    4
    
    
    
    5Net Cash Used for Investments
    
    
    (1,348
    )
    
    
    (1,027
    )Cash Flows  FinancingShort-term borrowings, net
    
    
    77
    
    
    
    17Proceeds from long-term debt
    
    
    793
    
    
    
    36Payments of long-term debt
    
    
    (99
    )
    
    
    (9
    )Excess tax benefit from exercise of stock options
    
    
    1
    
    
    
    Net Cash Provided by Financing
    
    
    772
    
    
    
    44Effect of Exchange Rate Changes on Cash and Cash Equivalents
    
    
    (2
    )
    
    
    (1
    )Net Increase in Cash and Cash Equivalents
    
    
    398
    
    
    
    2Cash and Cash Equivalents  Beginning of Period
    
    
    346
    
    
    
    177Cash and Cash Equivalents  End of Period
    
    $
    744
    
    
    $
    179Supplemental Cash Flow InformationInterest paid
    
    $
    128
    
    
    $
    115Income taxes paid
    
    $
    20
    
    
    $
    37Changes in accounts payable related to capital expenditures
    
    $
    (38
    )
    
    $
    (45
    )Capital lease additions
    
    $
    19
    
    
    $
    2Liabilities incurred and/or assumed in conjunction with acquisitions of bottlers.
    
    $
    20
    
    
    $
    
  3




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Bottling Group, LLC
 
 Condensed Consolidated Balance Sheets
  (Unaudited)September
    
    
    December9, 2006
    
    
    31, 2005ASSETSCurrent AssetsCash and cash equivalents
    
    $
    744
    
    
    $
    346Accounts receivable, less allowance of $56 at
September 9, 2006 and $51 at December 31, 2005
    
    
    1,733
    
    
    
    1,186Inventories
    
    
    638
    
    
    
    458Prepaid expenses and other current assets
    
    
    295
    
    
    
    274Total Current Assets
    
    
    3,410
    
    
    
    2,264Property, plant and equipment, net
    
    
    3,738
    
    
    
    3,643Other intangible assets, net
    
    
    3,804
    
    
    
    3,814Goodwill
    
    
    1,547
    
    
    
    1,516Notes receivable from PBG
    
    
    3,188
    
    
    
    2,384Other assets
    
    
    127
    
    
    
    124Total Assets
    
    $
    15,814
    
    
    $
    13,745LIABILITIES AND OWNERS EQUITYCurrent LiabilitiesAccounts payable and other current liabilities
    
    $
    1,821
    
    
    $
    1,456Short-term borrowings
    
    
    163
    
    
    
    71Current maturities of long-term debt
    
    
    514
    
    
    
    588Total Current Liabilities
    
    
    2,498
    
    
    
    2,115Long-term debt
    
    
    3,745
    
    
    
    2,943Other liabilities
    
    
    762
    
    
    
    681Deferred income taxes
    
    
    384
    
    
    
    422Minority interest
    
    
    19
    
    
    
    3Total Liabilities
    
    
    7,408
    
    
    
    6,164Owners EquityOwners net investment
    
    
    8,758
    
    
    
    7,990Accumulated other comprehensive loss
    
    
    (352
    )
    
    
    (395
    )Deferred compensation
    
    
    
    
    
    
    (14
    )Total Owners Equity
    
    
    8,406
    
    
    
    7,581Total Liabilities and Owners Equity
    
    $
    15,814
    
    
    $
    13,745
  4




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Notes to Condensed Consolidated Financial Statements
 Note 1  Basis of Presentation
      Quarter
    
    U.S. & Canada
    
    Mexico & EuropeFirst Quarter
    
    12 weeks
    
    January and FebruarySecond Quarter
    
    12 weeks
    
    March, April and MayThird Quarter
    
    12 weeks
    
    June, July and AugustFourth Quarter
    
    16 weeks (FY 2006)/
    
    September, October, November17 weeks (FY 2005)
    
    and December
  Note 2  Seasonality of Business
  5




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Note 3  New Accounting Standards
 FASB Interpretation No. 48
  SFAS No. 157
 Fair Value Measurements
 SFAS No. 158
 Employers Accounting for Defined
Benefit Pension and Other Postretirement Plans
 Note 4  Share-Based Compensation
 Accounting for Share-Based Compensation
   6




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12 Weeks Ended
    
    
    36 Weeks EndedSeptember
    
    
    September3, 2005
    
    
    3, 2005Net income:As reported
    
    $
    355
    
    
    $
    695Add: Total
share-based
employee
compensation
included in
reported net
income, net of
taxes
    
    
    
    
    
    
    Less: Total
share-based
employee
compensation
determined under
fair-value based
method for all
awards, net of
taxes
    
    
    (16
    )
    
    
    (48
    )Pro forma
    
    $
    339
    
    
    $
    647
 Share-Based Long-Term Incentive Compensation Plans
     7




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##### Table of Contents



12 Weeks Ended
    
    36 Weeks EndedSeptember
    
    September
    
    September
    
    September9, 2006
    
    3, 2005
    
    9, 2006
    
    3, 2005Risk-free interest rate
    
    
    5.0
    %
    
    
    4.0
    %
    
    
    4.7
    %
    
    
    4.1
    %Expected term (in years)
    
    
    5.7
    
    
    
    5.8
    
    
    
    5.7
    
    
    
    5.8Expected volatility
    
    
    27
    %
    
    
    28
    %
    
    
    27
    %
    
    
    28
    %Expected dividend yield
    
    
    1.5
    %
    
    
    1.1
    %
    
    
    1.5
    %
    
    
    1.1
    %Estimated fair value
per option granted
    
    $
    10.22
    
    
    $
    8.59
    
    
    $
    8.75
    
    
    $
    8.67
    Stock Options
   8




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WeightedWeighted
    
    AverageAverage
    
    RemainingExercise
    
    Contractual
    
    AggregateShares
    
    Price per
    
    Term
    
    IntrinsicOptions
    
    (in millions)
    
    Share
    
    (Years)
    
    ValueOutstanding at January 1, 2006
    
    
    38.1
    
    
    $
    22.54Granted
    
    
    3.1
    
    
    $
    29.67Exercised
    
    
    (7.4
    )
    
    $
    19.19Forfeited or expired
    
    
    (0.6
    )
    
    $
    27.57Outstanding at September 9, 2006
    
    
    33.2
    
    
    $
    24.04
    
    
    
    6.5
    
    
    $
    332Exercisable at September 9, 2006
    
    
    20.5
    
    
    $
    21.22
    
    
    
    5.4
    
    
    $
    263
   Restricted Stock and Restricted Stock Units
   Restricted Stocks and
    
    Shares
    
    Weighted AverageRestricted Stock Units
    
    (in millions)
    
    Grant-Date Fair ValueNonvested at January 1, 2006
    
    
    0.9
    
    
    $
    26.31Granted
    
    
    1.1
    
    
    $
    29.51Vested
    
    
    
    
    
    $
    24.25Forfeited
    
    
    (0.3
    )
    
    $
    23.97Nonvested at September 9, 2006
    
    
    1.7
    
    
    $
    29.03
  Note 5  Accounts Receivable
 September
    
    
    December9, 2006
    
    
    31, 2005Trade accounts receivable
    
    $
    1,540
    
    
    $
    1,018Allowance for doubtful accounts
    
    
    (56
    )
    
    
    (51
    )Accounts receivable from PepsiCo
    
    
    200
    
    
    
    143Other receivables
    
    
    49
    
    
    
    76$
    1,733
    
    
    $
    1,186
 9




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Note 6  Inventories
 September
    
    
    December9, 2006
    
    
    31, 2005Raw materials and supplies
    
    $
    261
    
    
    $
    173Finished goods
    
    
    377
    
    
    
    285$
    638
    
    
    $
    458
 Note 7  Property, Plant and Equipment, net
 September
    
    
    December9, 2006
    
    
    31, 2005Land
    
    $
    288
    
    
    $
    277Buildings and improvements
    
    
    1,383
    
    
    
    1,299Manufacturing and distribution equipment
    
    
    3,594
    
    
    
    3,425Marketing equipment
    
    
    2,426
    
    
    
    2,334Other
    
    
    204
    
    
    
    1717,895
    
    
    
    7,506Accumulated depreciation
    
    
    (4,157
    )
    
    
    (3,863
    )$
    3,738
    
    
    $
    3,643
 10




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Note 8  Other Intangible Assets, net and Goodwill
 September
    
    
    December9, 2006
    
    
    31, 2005Intangibles subject to amortization:Gross carrying amount:Customer relationships and lists
    
    $
    51
    
    
    $
    53Franchise/distribution rights
    
    
    45
    
    
    
    46Other identified intangibles
    
    
    32
    
    
    
    39128
    
    
    
    138Accumulated amortization:Customer relationships and lists
    
    
    (10
    )
    
    
    (9
    )Franchise/distribution rights
    
    
    (26
    )
    
    
    (22
    )Other identified intangibles
    
    
    (14
    )
    
    
    (18
    )(50
    )
    
    
    (49
    )Intangibles subject to amortization, net
    
    
    78
    
    
    
    89Intangibles not subject to amortization:Carrying amount:Franchise rights
    
    
    3,105
    
    
    
    3,093Distribution rights
    
    
    294
    
    
    
    302Trademarks
    
    
    213
    
    
    
    218Other identified intangibles
    
    
    114
    
    
    
    112Intangibles not subject to amortization
    
    
    3,726
    
    
    
    3,725Total other intangible assets, net
    
    $
    3,804
    
    
    $
    3,814
  Weighted-Average
    
    Estimated Aggregate Amortization Expense to be IncurredAmortization
    
    Balance of
    
    Fiscal Year EndingPeriod
    
    2006
    
    2007
    
    2008
    
    2009
    
    2010Customer
relationships and
lists
    
    18 years
    
    $
    1
    
    
    $
    3
    
    
    $
    3
    
    
    $
    3
    
    
    $
    3Franchise/distribution rights
    
    7 years
    
    $
    1
    
    
    $
    3
    
    
    $
    2
    
    
    $
    2
    
    
    $
    2Other identified
intangibles
    
    8 years
    
    $
    1
    
    
    $
    4
    
    
    $
    3
    
    
    $
    2
    
    
    $
    1
 11




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U.S. &Canada
    
    
    Europe
    
    
    Mexico
    
    
    TotalBalance at December
31, 2005
    
    $
    1,240
    
    
    $
    16
    
    
    $
    260
    
    
    $
    1,516Purchase price
allocations relating
to recent
acquisitions
    
    
    
    
    
    
    
    
    
    
    27
    
    
    
    27Impact of foreign
currency
translation
    
    
    13
    
    
    
    
    
    
    
    (9
    )
    
    
    4Balance at September
9, 2006
    
    $
    1,253
    
    
    $
    16
    
    
    $
    278
    
    
    $
    1,547
  Note 9 Accounts Payable and Other Current Liabilities
 September
    
    
    December9, 2006
    
    
    31, 2005Accounts payable
    
    $
    578
    
    
    $
    501Trade incentives
    
    
    199
    
    
    
    185Accrued compensation and benefits
    
    
    227
    
    
    
    211Other accrued taxes
    
    
    120
    
    
    
    123Accounts payable to PepsiCo
    
    
    272
    
    
    
    176Other current liabilities
    
    
    425
    
    
    
    260$
    1,821
    
    
    $
    1,456
 Note 10  Long-Term Debt
   Note 11  Pension and Postretirement Medical Benefit Plans
 Pension Benefits
  12




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##### Table of Contents



12 Weeks Ended
    
    
    36 Weeks EndedSeptember
    
    
    September
    
    
    September
    
    
    September9, 2006
    
    
    3, 2005
    
    
    9, 2006
    
    
    3, 2005Service cost
    
    $
    12
    
    
    $
    11
    
    
    $
    36
    
    
    $
    32Interest cost
    
    
    19
    
    
    
    17
    
    
    
    57
    
    
    
    52Expected return on plan assets
    
    
    (21
    )
    
    
    (21
    )
    
    
    (65
    )
    
    
    (63
    )Amortization of prior service cost
    
    
    2
    
    
    
    2
    
    
    
    6
    
    
    
    5Amortization of net loss
    
    
    9
    
    
    
    7
    
    
    
    27
    
    
    
    21Net pension expense for the defined benefit plans
    
    
    21
    
    
    
    16
    
    
    
    61
    
    
    
    47Defined contribution plans expense
    
    
    5
    
    
    
    4
    
    
    
    15
    
    
    
    13Total U.S. pension expense recognized in the
Condensed Consolidated Statements of Operations
    
    $
    26
    
    
    $
    20
    
    
    $
    76
    
    
    $
    60
  Postretirement Medical Benefits
   12 Weeks Ended
    
    
    36 Weeks EndedSeptember
    
    
    September
    
    
    September
    
    
    September9, 2006
    
    
    3, 2005
    
    
    9, 2006
    
    
    3, 2005Service cost
    
    $
    1
    
    
    $
    1
    
    
    $
    3
    
    
    $
    2Interest cost
    
    
    5
    
    
    
    5
    
    
    
    14
    
    
    
    15Amortization of net loss
    
    
    1
    
    
    
    1
    
    
    
    4
    
    
    
    5U.S. postretirement
benefits expense
recognized in the
Condensed Consolidated
Statements of
Operations
    
    $
    7
    
    
    $
    7
    
    
    $
    21
    
    
    $
    22
 13




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Note 12  Segment Information
   12 Weeks Ended
    
    
    36 Weeks EndedSeptember
    
    
    September
    
    
    September
    
    
    SeptemberNet Revenues
    
    9, 2006
    
    
    3, 2005
    
    
    9, 2006
    
    
    3, 2005U.S. & Canada
    
    $
    2,559
    
    
    $
    2,397
    
    
    $
    7,017
    
    
    $
    6,453Europe
    
    
    554
    
    
    
    487
    
    
    
    1,088
    
    
    
    988Mexico
    
    
    347
    
    
    
    330
    
    
    
    860
    
    
    
    782Worldwide net revenues
    
    $
    3,460
    
    
    $
    3,214
    
    
    $
    8,965
    
    
    $
    8,223
 12 Weeks Ended
    
    
    36 Weeks EndedSeptember
    
    
    September
    
    
    September
    
    
    SeptemberOperating Income
    
    9, 2006
    
    
    3, 2005
    
    
    9, 2006
    
    
    3, 2005U.S. & Canada
    
    $
    279
    
    
    $
    310
    
    
    $
    681
    
    
    $
    716Europe
    
    
    71
    
    
    
    53
    
    
    
    61
    
    
    
    45Mexico
    
    
    31
    
    
    
    29
    
    
    
    61
    
    
    
    43Worldwide operating income
    
    
    381
    
    
    
    392
    
    
    
    803
    
    
    
    804Interest expense
    
    
    56
    
    
    
    43
    
    
    
    157
    
    
    
    125Interest income
    
    
    45
    
    
    
    18
    
    
    
    113
    
    
    
    46Other
non-operating (income) expenses, net
    
    
    
    
    
    
    (1
    )
    
    
    9
    
    
    
    Income before income taxes
    
    $
    370
    
    
    $
    368
    
    
    $
    750
    
    
    $
    725
  September
    
    
    DecemberTotal Assets
    
    9, 2006
    
    
    31, 2005U.S. & Canada
    
    $
    12,927
    
    
    $
    11,090Europe
    
    
    1,114
    
    
    
    894Mexico
    
    
    1,773
    
    
    
    1,761Worldwide total assets
    
    $
    15,814
    
    
    $
    13,745
 14




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Note 13  Comprehensive Income
 12 Weeks Ended
    
    
    36 Weeks EndedSeptember
    
    
    September
    
    
    September
    
    
    September9, 2006
    
    
    3, 2005
    
    

9, 2006
    
    
    3, 2005Net income
    
    $
    369
    
    
    $
    355
    
    
    $
    736
    
    
    $
    695Net currency translation adjustment
    
    
    57
    
    
    
    48
    
    
    
    34
    
    
    
    45Cash flow hedge adjustment (a)(b)
    
    
    (2
    )
    
    
    (6
    )
    
    
    9
    
    
    
    (9
    )Comprehensive income
    
    $
    424
    
    
    $
    397
    
    
    $
    779
    
    
    $
    731
 
 (a)
    
    Net of taxes of $1 million and $(2) million for the 12 weeks ended September 9, 2006 and September 3, 2005, respectively.(b)
    
    Net of taxes of $1 million and $(1) million for the 36 weeks ended September 9, 2006 and September 3, 2005, respectively. Note 14  Contingencies
  Note 15  Guarantees
   15




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##### Table of Contents



Item 2. Managements Financial Review
  OVERVIEW
     CRITICAL ACCOUNTING POLICIES
    16




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##### Table of Contents



Share-Based Compensation
    Financial Performance Results
 12 Weeks Ended
    
    36 Weeks EndedSeptember
    
    September
    
    %
    
    September
    
    September
    
    %9, 2006
    
    3, 2005
    
    Change
    
    9, 2006
    
    3, 2005
    
    ChangeNet revenues
    
    $
    3,460
    
    
    $
    3,214
    
    
    
    8
    %
    
    $
    8,965
    
    
    $
    8,223
    
    
    
    9
    %Gross profit
    
    
    1,609
    
    
    
    1,519
    
    
    
    6
    %
    
    
    4,195
    
    
    
    3,917
    
    
    
    7
    %Operating income
    
    
    381
    
    
    
    392
    
    
    
    (3
    )%
    
    
    803
    
    
    
    804
    
    
    
    0
    %Net income
    
    $
    369
    
    
    $
    355
    
    
    
    4
    %
    
    $
    736
    
    
    $
    695
    
    
    
    6
    %
 17




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##### Table of Contents



Items Affecting Comparability of Our Financial Results
 12 Weeks Ended
    
    36 Weeks EndedSeptember
    
    September
    
    September
    
    September9, 2006
    
    3, 2005
    
    9, 2006
    
    3, 2005Operating incomeImpact of SFAS 123R
    
    $
    (14
    )
    
    
    
    
    
    $
    (45
    )Net gain from HFCS
litigation settlement
    
    
    
    
    
    $
    16
    
    
    
    
    
    
    $
    16
 SFAS 123R
  High Fructose Corn Syrup (HFCS) Litigation Settlement
  Tax Law Changes
  Financial Performance Discussion
    18




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##### Table of Contents



Full-Year 2006 Outlook
   19




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##### Table of Contents



Forecasted 2006versus 2005 growthWorldwide Volume(1)
    
    
    ~ 3%U.S. Volume(1)
    
    
    ~ 2%Worldwide revenue(2)
    
    7% to 8%Worldwide net revenue per case
    
    3% to 4%Worldwide cost of sales per case
    
    
    ~ 5%Operating Income(3)
    
    (1)% to 1%
 
 (1)
    
    The additional week of volume as a result of the 53rd week in 2005 reduced our
worldwide and U.S. volume growth in 2006 by approximately one-percentage point. On a constant
territory basis, worldwide volume and U.S. volume are expected to grow about four percent and
about three percent, respectively.(2)
    
    The additional week of revenue as a result of the 53rd week in 2005 reduced our
worldwide revenue growth by approximately one-percentage point.(3)
    
    The impact of adopting SFAS 123R in 2006 is expected to result in a seven-percentage
point reduction in our operating income. Third Quarter 2006 Results
 Volume
 12 Weeks Ended
    
    36 Weeks EndedSeptember 9, 2006 vs.
    
    September 9, 2006 vs.September 3, 2005
    
    September 3, 2005U.S. &
    
    
    
    
    
    
    
    
    
    
    
    
    
    U.S. &Worldwide
    
    Canada
    
    Europe
    
    Mexico
    
    Worldwide
    
    Canada
    
    Europe
    
    MexicoBase volume
    
    
    3
    %
    
    
    2
    %
    
    
    8
    %
    
    
    (1
    )%
    
    
    4
    %
    
    
    4
    %
    
    
    7
    %
    
    
    2
    %Acquisitions
    
    
    1
    %
    
    
    1
    %
    
    
    0
    %
    
    
    4
    %
    
    
    1
    %
    
    
    1
    %
    
    
    0
    %
    
    
    1
    %Total Volume change
    
    
    4
    %
    
    
    3
    %
    
    
    8
    %
    
    
    3
    %
    
    
    5
    %
    
    
    5
    %
    
    
    7
    %
    
    
    3
    %
    20




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##### Table of Contents



Aquafina Lipton Iced Tea Lipton SoBe Lifewater Aquafina Sparkling Pepsi Tropicana
Twister Mountain Dew
 Aquafina,
 Pepsi
  Net Revenues
 12 Weeks Ended
    
    36 Weeks EndedSeptember 9, 2006 vs.
    
    September 9, 2006 vs.September 3, 2005
    
    September 3, 2005U.S. &
    
    
    
    
    
    
    
    
    
    
    
    
    
    U.S. &Worldwide
    
    Canada
    
    Europe
    
    Mexico
    
    Worldwide
    
    Canada
    
    Europe
    
    MexicoVolume impact
    
    
    3
    %
    
    
    2
    %
    
    
    8
    %
    
    
    (1
    )%
    
    
    4
    %
    
    
    4
    %
    
    
    7
    %
    
    
    2
    %Net price per case impact
(rate/mix)
    
    
    4
    %
    
    
    3
    %
    
    
    5
    %
    
    
    5
    %
    
    
    4
    %
    
    
    3
    %
    
    
    4
    %
    
    
    6
    %Acquisitions
    
    
    1
    %
    
    
    1
    %
    
    
    0
    %
    
    
    4
    %
    
    
    1
    %
    
    
    1
    %
    
    
    0
    %
    
    
    2
    %Currency translation
    
    
    0
    %
    
    
    1
    %
    
    
    1
    %
    
    
    (3
    )%
    
    
    0
    %
    
    
    1
    %
    
    
    (1
    )%
    
    
    0
    %Total Net Revenues change
    
    
    8
    %
    
    
    7
    %
    
    
    14
    %
    
    
    5
    %
    
    
    9
    %
    
    
    9
    %
    
    
    10
    %
    
    
    10
    %
  21




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##### Table of Contents



Cost of Sales
 12 Weeks Ended
    
    36 Weeks EndedSeptember 9, 2006 vs.
    
    September 9, 2006 vs.September 3, 2005
    
    September 3, 2005Worldwide
    
    WorldwideVolume impact
    
    
    3
    %
    
    
    4
    %Cost per case impact
    
    
    5
    %
    
    
    5
    %Acquisitions
    
    
    1
    %
    
    
    1
    %Currency translation
    
    
    0
    %
    
    
    1
    %Total Cost of Sales change
    
    
    9
    %
    
    
    11
    %
     22




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##### Table of Contents



Selling, Delivery and Administrative Expenses
 12 Weeks Ended
    
    36 Weeks EndedSeptember 9, 2006 vs.
    
    September 9, 2006 vs.September 3, 2005
    
    September 3, 2005Worldwide
    
    WorldwideCost impact
    
    
    5
    %
    
    
    6
    %Adoption of SFAS 123R 1
    
    
    1
    %
    
    
    1
    %HFCS Settlement in 2005 1
    
    
    2
    %
    
    
    1
    %Acquisitions
    
    
    1
    %
    
    
    1
    %Currency translation
    
    
    0
    %
    
    
    0
    %Total SD&A change
    
    
    9
    %
    
    
    9
    %
 
 1-
    
    Each of these items was approximately 1.5% in the third quarter. For
third quarter presentation purposes the adoption of SFAS 123R was rounded to 1% and the
impact from the lapping of the HFCS settlement was rounded to 2%.  Operating Income
   23




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##### Table of Contents



Interest Expense
  Interest Income
  Other Non-operating Expenses, net
  Income Tax Expense
  Liquidity and Financial Condition
 Cash Flows
    24




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##### Table of Contents



Liquidity and Capital Resources
       Contractual Obligations
  25




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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 PBGs
pension plan assets; and
 
    
    an inability to achieve strategic business plan targets that could result in an intangible asset impairment charge.
 26




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##### Table of Contents



Item 3.  Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4.  Controls and Procedures
   27




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 6.  Exhibits
 Exhibit No.31.1
    
    Certification by the Principal Executive Officer pursuant to
Section 302 of the SarbanesOxley Act of 200231.2
    
    Certification by the Principal Financial Officer pursuant to
Section 302 of the SarbanesOxley Act of 200232.1
    
    Certification by the Principal Executive Officer pursuant to
Section 906 of the SarbanesOxley Act of 200232.2
    
    Certification by the Principal Financial Officer pursuant to
Section 906 of the SarbanesOxley Act of 200299.1
    
    The Pepsi Bottling Group, Inc. (PBG) Form 10-Q for the
quarterly period ended September 9, 2006, as required by the
SEC as a result of our guarantee of up to $1,000,000,000
aggregate principal amount of PBGs 7% Senior Notes due in
2029.
 28




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##### Table of Contents



SIGNATURES
  BOTTLING
GROUP, LLC.(Registrant)Date: October 17, 2006
    
    
    
    /s/ Andrea L. ForsterAndrea L. ForsterPrincipal Accounting OfficerDate: October 17, 2006
    
    
    
    /s/ Alfred H. DrewesAlfred H. DrewesPrincipal Financial Officer




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##### Table of Contents



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




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##### Table of Contents



5.
    
    The registrants other certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrants auditors and the
audit committee of the registrants board of directors (or persons performing the equivalent
functions):
 a)
    
    All significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to adversely affect
the registrants ability to record, process, summarize and report financial information;
andb)
    
    Any fraud, whether or not material, that involves management or other employees who
have a significant role in the registrants internal control over financial reporting.
 Date: October 17, 2006
    
    
    
    /s/ Eric J. FossEric J. FossPrincipal Executive Officer andManaging Director




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##### Table of Contents



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




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##### Table of Contents



5.
    
    The registrants other certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrants auditors and the
audit committee of the registrants board of directors (or persons performing the equivalent
functions):
 a)
    
    All significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to adversely affect
the registrants ability to record, process, summarize and report financial information;
andb)
    
    Any fraud, whether or not material, that involves management or other employees who
have a significant role in the registrants internal control over financial reporting.
 Date: October 17, 2006
    
    
    
    /s/ Alfred H. DrewesAlfred H. DrewesPrincipal Financial Officer




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##### Table of Contents



Exhibit 32.1
 
  (1)
    
    The Quarterly Report on Form 10-Q of the Company for the quarter ended
September 9, 2006 (the Form 10-Q) fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934 (the Act); and(2)
    
    The information contained in the Form 10-Q fairly presents, in all material
respects, the financial conditions and results of operations of the Company as of the
dates and for the periods referred to in the Form 10-Q.
 /s/ Eric J. FossEric J. FossPrincipal Executive Officer andManaging DirectorOctober 17, 2006




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##### Table of Contents



Exhibit 32.2
 
  (1)
    
    The Quarterly Report on Form 10-Q of the Company for the quarter ended
September 9, 2006 (the Form 10-Q) fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934 (the Act); and(2)
    
    The information contained in the Form 10-Q fairly presents, in all material
respects, the financial conditions and results of operations of the Company as of the
dates and for the periods referred to in the Form 10-Q.
 /s/ Alfred H. DrewesAlfred H. DrewesPrincipal Financial OfficerOctober 17, 2006