##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 For the quarterly period ended March 25, 2006 (12 weeks)
  o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
 For the transition period from  to
 Commission
file number 1-14893
 
 THE PEPSI BOTTLING GROUP, INC.
  Delaware
    
    13-4038356(State or other jurisdiction of
    
    (I.R.S.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
  þ o o
 o þ




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##### 



The Pepsi Bottling Group, Inc.  Index
 Page No.Part I
    
    
    
    Financial InformationItem 1.
    
    Financial StatementsCondensed Consolidated Statements of Operations -
12 weeks ended March 25, 2006 and March 19, 2005
    
    
    2Condensed Consolidated Statements of Cash Flows -
12 weeks ended March 25, 2006 and March 19, 2005
    
    
    3Condensed Consolidated Balance Sheets -
March 25, 2006 and December 31, 2005
    
    
    4Notes to Condensed Consolidated Financial Statements
    
    
    5-15Item 2.
    
    Managements Financial Review
    
    
    16-24Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    25Item 4.
    
    Controls and Procedures
    
    
    25Part II
    
    
    
    Other InformationItem 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    26Item 6.
    
    Exhibits
    
    
    27




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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 EndedMarch
    
    
    March25, 2006
    
    

19, 2005Net revenues
    
    $
    2,367
    
    
    $
    2,147Cost of sales
    
    
    1,253
    
    
    
    1,116Gross profit
    
    
    1,114
    
    
    
    1,031Selling, delivery and administrative expenses
    
    
    993
    
    
    
    911Operating income
    
    
    121
    
    
    
    120Interest expense, net
    
    
    61
    
    
    
    55Minority interest
    
    
    6
    
    
    
    6Income before income taxes
    
    
    54
    
    
    
    59Income tax expense
    
    
    20
    
    
    
    20Net income
    
    $
    34
    
    
    $
    39Basic earnings per share
    
    $
    0.14
    
    
    $
    0.16Weighted-average shares outstanding
    
    
    237
    
    
    
    248Diluted earnings per share
    
    $
    0.14
    
    
    $
    0.15Weighted-average shares outstanding
    
    
    243
    
    
    
    254Dividends declared per common share
    
    $
    0.08
    
    
    $
    0.05
  2




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##### Table of Contents



The Pepsi Bottling Group, Inc.
Condensed Consolidated Statements of Cash Flows
 12 Weeks EndedMarch
    
    
    March25, 2006
    
    
    19, 2005Cash Flows  OperationsNet income
    
    $
    34
    
    
    $
    39Adjustments to reconcile net income to net cash provided by operations:Depreciation
    
    
    136
    
    
    
    130Amortization
    
    
    3
    
    
    
    3Deferred income taxes
    
    
    (17
    )
    
    
    4Stock-based compensation
    
    
    16
    
    
    
    Other non-cash charges and credits, net
    
    
    72
    
    
    
    64Changes in operating working capital, excluding effects of acquisitions:Accounts receivable, net
    
    
    (5
    )
    
    
    Inventories
    
    
    (95
    )
    
    
    (48
    )Prepaid expenses and other current assets
    
    
    (15
    )
    
    
    (45
    )Accounts payable and other current liabilities
    
    
    (35
    )
    
    
    (62
    )Income taxes payable
    
    
    17
    
    
    
    2Net change in operating working capital
    
    
    (133
    )
    
    
    (153
    )Casualty insurance payments
    
    
    (14
    )
    
    
    (17
    )Pension contributions
    
    
    
    
    
    
    (20
    )Other, net
    
    
    (16
    )
    
    
    (15
    )Net Cash Provided by Operations
    
    
    81
    
    
    
    35Cash Flows  InvestmentsCapital expenditures
    
    
    (175
    )
    
    
    (138
    )Acquisitions of bottlers, net of cash acquired
    
    
    
    
    
    
    (1
    )Proceeds from sale of property, plant and equipment
    
    
    3
    
    
    
    1Other investing activities, net
    
    
    4
    
    
    
    Net Cash Used for Investments
    
    
    (168
    )
    
    
    (138
    )Cash Flows  FinancingShort-term borrowings  three months or less, net
    
    
    106
    
    
    
    147Proceeds of long-term debt
    
    
    
    
    
    
    23Payments of long-term debt
    
    
    (61
    )
    
    
    (4
    )Dividends paid
    
    
    (19
    )
    
    
    (13
    )Excess tax benefit from exercise of stock options
    
    
    3
    
    
    
    Proceeds from exercise of stock options
    
    
    15
    
    
    
    13Purchases of treasury stock
    
    
    (125
    )
    
    
    (118
    )Net Cash (Used for) Provided by Financing
    
    
    (81
    )
    
    
    48Effect of Exchange Rate Changes on Cash and Cash Equivalents
    
    
    2
    
    
    
    Net Decrease in Cash and Cash Equivalents
    
    
    (166
    )
    
    
    (55
    )Cash and Cash Equivalents  Beginning of Period
    
    
    502
    
    
    
    305Cash and Cash Equivalents  End of Period
    
    $
    336
    
    
    $
    250Supplemental Cash Flow InformationInterest paid
    
    $
    76
    
    
    $
    66Income taxes paid
    
    $
    17
    
    
    $
    14Changes in accounts payable related to capital expenditures
    
    $
    (35
    )
    
    $
    (45
    )Capital lease additions
    
    $
    7
    
    
    $
    
  3




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##### Table of Contents



The Pepsi Bottling Group, Inc.
Condensed Consolidated Balance Sheets
 (Unaudited)March
    
    
    December25, 2006
    
    

31, 2005ASSETSCurrent AssetsCash and cash equivalents
    
    $
    336
    
    
    $
    502Accounts receivable, less allowance of $49 at March
25, 2006 and $51 at December 31, 2005
    
    
    1,196
    
    
    
    1,186Inventories
    
    
    555
    
    
    
    458Prepaid expenses and other current assets
    
    
    294
    
    
    
    266Total Current Assets
    
    
    2,381
    
    
    
    2,412Property, plant and equipment, net
    
    
    3,667
    
    
    
    3,649Other intangible assets, net
    
    
    3,822
    
    
    
    3,814Goodwill
    
    
    1,519
    
    
    
    1,516Other assets
    
    
    132
    
    
    
    133Total Assets
    
    $
    11,521
    
    
    $
    11,524LIABILITIES AND SHAREHOLDERS EQUITYCurrent LiabilitiesAccounts payable and other current liabilities
    
    $
    1,524
    
    
    $
    1,583Short-term borrowings
    
    
    533
    
    
    
    426Current maturities of long-term debt
    
    
    534
    
    
    
    589Total Current Liabilities
    
    
    2,591
    
    
    
    2,598Long-term debt
    
    
    3,939
    
    
    
    3,939Other liabilities
    
    
    1,072
    
    
    
    1,027Deferred income taxes
    
    
    1,415
    
    
    
    1,421Minority interest
    
    
    504
    
    
    
    496Total Liabilities
    
    
    9,521
    
    
    
    9,481Shareholders EquityCommon stock, par value $0.01 per share:authorized 900 shares, issued 310 shares
    
    
    3
    
    
    
    3Additional paid-in capital
    
    
    1,705
    
    
    
    1,709Retained earnings
    
    
    2,298
    
    
    
    2,283Accumulated other comprehensive loss
    
    
    (230
    )
    
    
    (262
    )Deferred compensation
    
    
    
    
    
    
    (14
    )Treasury stock: 74 shares and 71 shares at March 25,
2006 and December 31, 2005,
respectively, at cost
    
    
    (1,776
    )
    
    
    (1,676
    )Total Shareholders Equity
    
    
    2,000
    
    
    
    2,043Total Liabilities and Shareholders Equity
    
    $
    11,521
    
    
    $
    11,524
  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,17 weeks (FY 2005)
    
    November and December
  5




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Note 2  Seasonality of Business
  Note 3  Earnings per Share
  12 Weeks EndedMarch 25,
    
    
    March 19,2006
    
    
    2005Average number of shares outstanding during
period on which basic earnings per share is based
    
    
    237
    
    
    
    248Add  Incremental shares under stock
compensation plans
    
    
    6
    
    
    
    6Number of shares on which diluted
earnings per share is based
    
    
    243
    
    
    
    254Net earnings applicable to common
shareholders
    
    $
    34
    
    
    $
    39Net earnings on which diluted earnings
per share is based
    
    $
    34
    
    
    $
    39Basic earnings per share
    
    $
    0.14
    
    
    $
    0.16Diluted earnings per share
    
    $
    0.14
    
    
    $
    0.15
  6




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##### Table of Contents



Note 4  Share-Based Compensation
 Share-Based Long-term Incentive Compensation Plans
    Accounting for Share-Based Compensation
     7




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12 Weeks EndedMarch19, 2005Net income:As reported
    
    $
    39Add: Total share-based employee compensation included in
reported net income, net of taxes and minority interest
    
    
    Less: Total share-based employee compensation determined
under fair-value based method for all awards, net of taxes
and minority interest
    
    
    (11
    )Pro forma
    
    $
    28Earnings per share:Basic  as reported
    
    $
    0.16Basic  pro forma
    
    $
    0.11Diluted  as reported
    
    $
    0.15Diluted  pro forma
    
    $
    0.11
   12 Weeks EndedMarch 25,
    
    March 19,2006
    
    2005Risk-free interest rate
    
    
    4.6
    %
    
    
    4.1
    %Expected term (in years)
    
    
    5.7
    
    
    
    5.8Expected volatility
    
    
    27
    %
    
    
    28
    %Expected dividend yield
    
    
    1.5
    %
    
    
    1.1
    %Estimated fair value per option granted
    
    $
    8.62
    
    
    $
    8.68
  8




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##### Table of Contents



Stock Options
   WeightedWeighted
    
    AverageAverage
    
    RemainingExercise
    
    Contractual
    
    AggregateShares in millions
    
    
    
    
    
    Price per
    
    Term
    
    IntrinsicOptions
    
    Shares
    
    Share
    
    (years)
    
    ValueOutstanding at January 1, 2006
    
    
    38.1
    
    
    $
    22.54Granted
    
    
    3.2
    
    
    $
    29.32Exercised
    
    
    (1.1
    )
    
    $
    14.89Forfeited or expired
    
    
    (0.3
    )
    
    $
    26.49Outstanding at March 25, 2006
    
    
    39.9
    
    
    $
    23.27
    
    
    
    6.7
    
    
    $
    298Exercisable at March 25, 2006
    
    
    21.0
    
    
    $
    19.29
    
    
    
    5.2
    
    
    $
    241
   Restricted Stock and Restricted Stock Units
  9




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##### Table of Contents



Shares in millionsRestricted Stocks and
    
    
    
    
    
    Weighted AverageRestricted Stock Units
    
    Shares
    
    Grant-Date Fair ValueNonvested at January 1, 2006
    
    
    0.9
    
    
    $
    26.00Granted
    
    
    1.1
    
    
    $
    29.32Vested
    
    
    
    
    
    $
    24.25Forfeited
    
    
    (0.3
    )
    
    $
    23.50Nonvested at March 25, 2006
    
    
    1.7
    
    
    $
    28.67
  Note 5
 Accounts Receivable
 March
    
    
    December25, 2006
    
    
    31, 2005Trade accounts receivable
    
    $
    1,032
    
    
    $
    1,018Allowance for doubtful accounts
    
    
    (49
    )
    
    
    (51
    )Accounts receivable from PepsiCo
    
    
    166
    
    
    
    143Other receivables
    
    
    47
    
    
    
    76$
    1,196
    
    
    $
    1,186
 Note 6
 Inventories
 March
    
    
    December25, 2006
    
    
    31, 2005Raw materials and supplies
    
    $
    209
    
    
    $
    173Finished goods
    
    
    346
    
    
    
    285$
    555
    
    
    $
    458
 Note 7
 Property, Plant and Equipment, net
 March
    
    
    December25, 2006
    
    
    31, 2005Land
    
    $
    288
    
    
    $
    277Buildings and improvements
    
    
    1,321
    
    
    
    1,299Manufacturing and distribution equipment
    
    
    3,469
    
    
    
    3,425Marketing equipment
    
    
    2,341
    
    
    
    2,334Other
    
    
    192
    
    
    
    1777,611
    
    
    
    7,512Accumulated depreciation
    
    
    (3,944
    )
    
    
    (3,863
    )$
    3,667
    
    
    $
    3,649
 10




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Note 8  Other Intangible Assets, net and Goodwill
 March
    
    
    December25, 2006
    
    

31, 2005Intangibles subject to amortization:Gross carrying amount:Customer relationships and lists
    
    $
    53
    
    
    $
    53Franchise/distribution rights
    
    
    46
    
    
    
    46Other identified intangibles
    
    
    39
    
    
    
    39138
    
    
    
    138Accumulated amortization:Customer relationships and lists
    
    
    (9
    )
    
    
    (9
    )Franchise/distribution rights
    
    
    (24
    )
    
    
    (22
    )Other identified intangibles
    
    
    (20
    )
    
    
    (18
    )(53
    )
    
    
    (49
    )Intangibles subject to amortization, net
    
    
    85
    
    
    
    89Intangibles not subject to amortization:Carrying amount:Franchise rights
    
    
    3,096
    
    
    
    3,093Distribution rights
    
    
    307
    
    
    
    302Trademarks
    
    
    222
    
    
    
    218Other identified intangibles
    
    
    112
    
    
    
    112Intangibles not subject to amortization
    
    
    3,737
    
    
    
    3,725Total other intangible assets, net
    
    $
    3,822
    
    
    $
    3,814
  Estimated Aggregate Amortization Expense to be IncurredWeighted-AverageAmortization
    
    Balance of
    
    
    
    
    
    Fiscal Year EndingPeriod
    

    2006
    
    2007
    
    2008
    
    2009
    
    2010Customer
relationships and
lists
    
    18 years
    
    $
    3
    
    
    $
    3
    
    
    $
    3
    
    
    $
    3
    
    
    $
    3Franchise/distribution rights
    
    7 years
    
    $
    4
    
    
    $
    3
    
    
    $
    2
    
    
    $
    2
    
    
    $
    2Other identified
intangibles
    
    8 years
    
    $
    4
    
    
    $
    4
    
    
    $
    3
    
    
    $
    2
    
    
    $
    1
 11




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##### Table of Contents



U.S. &Canada
    
    
    Europe
    
    
    Mexico
    
    
    TotalBalance at December 31,
2005
    
    $
    1,240
    
    
    $
    16
    
    
    $
    260
    
    
    $
    1,516Impact of foreign currency
translation
    
    
    (1
    )
    
    
    
    
    
    
    4
    
    
    
    3Balance at March 25,
2006
    
    $
    1,239
    
    
    $
    16
    
    
    $
    264
    
    
    $
    1,519
 Note 9
 Accounts Payable and Other Current Liabilities
 March
    
    
    December25, 2006
    
    
    31, 2005Accounts payable
    
    $
    515
    
    
    $
    501Trade incentives
    
    
    139
    
    
    
    185Accrued compensation and benefits
    
    
    168
    
    
    
    211Accounts payable to PepsiCo
    
    
    226
    
    
    
    176Other current liabilities
    
    
    476
    
    
    
    510$
    1,524
    
    
    $
    1,583
 Note 10  Pension and Postretirement Medical Benefit Plans
 Pension Benefits
   12




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12 Weeks EndedMarch
    
    
    March25, 2006
    
    
    19, 2005Service cost
    
    $
    12
    
    
    $
    11Interest cost
    
    
    19
    
    
    
    17Expected return on plan assets
    
    
    (22
    )
    
    
    (21
    )Amortization of prior service cost
    
    
    2
    
    
    
    2Amortization of net loss
    
    
    9
    
    
    
    7Net pension expense for the defined benefit plans
    
    
    20
    
    
    
    16Defined contribution plans expense
    
    
    5
    
    
    
    4Total U.S. pension expense recognized in the
Condensed Consolidated Statements of Operations
    
    $
    25
    
    
    $
    20
  Postretirement Medical Benefits
   12 Weeks EndedMarch
    
    
    March25, 2006
    
    
    19, 2005Service cost
    
    $
    1
    
    
    $
    1Interest cost
    
    
    5
    
    
    
    5Amortization of net loss
    
    
    1
    
    
    
    1U.S. postretirement benefits expense recognized
in the Condensed Consolidated Statements of
Operations
    
    $
    7
    
    
    $
    7
 13




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##### Table of Contents



Note
11  Segment Information
   Net Revenues
    
    12 Weeks EndedMarch
    
    
    March25, 2006
    
    
    19, 2005U.S. & Canada
    
    $
    2,036
    
    
    $
    1,849Europe
    
    
    148
    
    
    
    145Mexico
    
    
    183
    
    
    
    153Worldwide net revenues
    
    $
    2,367
    
    
    $
    2,147
 Operating Income (Loss)
    
    12 Weeks EndedMarch
    
    
    March25, 2006
    
    
    19, 2005U.S. & Canada
    
    $
    141
    
    
    $
    142Europe
    
    
    (22
    )
    
    
    (16
    )Mexico
    
    
    2
    
    
    
    (6
    )Worldwide operating income
    
    
    121
    
    
    
    120Net interest expense
    
    
    61
    
    
    
    55Minority interest
    
    
    6
    
    
    
    6Income before income taxes
    
    $
    54
    
    
    $
    59
  Total Assets
 March
    
    
    December25, 2006
    
    
    31, 2005U.S. & Canada
    
    $
    8,904
    
    
    $
    8,869Europe
    
    
    857
    
    
    
    894Mexico
    
    
    1,760
    
    
    
    1,761Worldwide total assets
    
    $
    11,521
    
    
    $
    11,524
 14




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Note 12  Comprehensive Income
 12 Weeks EndedMarch
    
    March25, 2006
    
    19, 2005Net income
    
    $
    34
    
    
    $
    39Net currency translation adjustment
    
    
    24
    
    
    
    13Cash flow hedge adjustment (a)
    
    
    8
    
    
    
    (1
    )Comprehensive income
    
    $
    66
    
    
    $
    51
 
 (a)
    
    Net of minority interest and taxes of $6 million and $1 million for the 12 weeks ended March 25, 2006 and March 19, 2005, respectively. Note 13  Contingencies
  Note
14  Subsequent Event
    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 SUMMARY
 12 Weeks EndedMarch
    
    March
    
    %25, 2006
    
    19, 2005
    
    ChangeNet revenues
    
    $
    2,367
    
    
    $
    2,147
    
    
    
    10
    %Gross profit
    
    $
    1,114
    
    
    $
    1,031
    
    
    
    8
    %Operating income
    
    $
    121
    
    
    $
    120
    
    
    
    0
    %Net income
    
    $
    34
    
    
    $
    39
    
    
    
    (12
    )%Diluted earnings per
share1
    
    $
    0.14
    
    
    $
    0.15
    
    
    
    (9
    )%
 
 1
    
     Percentage change for diluted earnings per share is calculated by using earnings per share data that is expanded to the fourth decimal place.
  17




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Full-Year 2006 Outlook
 rd
   18




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Forecasted 2006 versus2005 growthWorldwide Volume(1)
    
    
    2%U.S. Volume(1)
    
    Flat to 1%Operating Income(2)
    
    (2%) to (4%)Full-Year Forecasted2006 ResultsWorldwide SD&A (in millions)(2)
    
    $
    4,807 - $4,858Diluted Earnings Per Share(2)
    
    $
    1.76 to $1.84
 
 (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 one percentage point.(2)
    
    The impact of adopting SFAS 123R in 2006 is expected to add approximately $70 million to our SD&A, resulting in a seven-percentage point reduction in our operating income or approximately $0.18 of diluted earnings per share. First Quarter 2006 Results
 Volume
 12 Weeks EndedMarch 25, 2006 vs.March 19, 2005Worldwide
    
    U.S. & Canada
    
    Europe
    
    MexicoBase volume
    
    
    5
    %
    
    
    6
    %
    
    
    4
    %
    
    
    5
    %Acquisitions
    
    
    1
    %
    
    
    1
    %
    
    
    0
    %
    
    
    0
    %Total Volume change
    
    
    6
    %
    
    
    7
    %
    
    
    4
    %
    
    
    5
    %
    Aquafina Lipton Tropicana Frappuccino.
  19




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##### Table of Contents



Aquafina
 Pepsi , Aqua Minerale.
 Epura
 Net Revenues
 12 Weeks EndedMarch 25, 2006 vs.March 19, 2005Worldwide
    
    U.S. & Canada
    
    Europe
    
    MexicoVolume impact
    
    
    5
    %
    
    
    6
    %
    
    
    4
    %
    
    
    5
    %Net price per case impact (rate/mix)
    
    
    3
    %
    
    
    3
    %
    
    
    2
    %
    
    
    7
    %Acquisitions
    
    
    1
    %
    
    
    1
    %
    
    
    0
    %
    
    
    0
    %Currency translation
    
    
    1
    %
    
    
    0
    %
    
    
    (4
    )%
    
    
    7
    %Total Net Revenues change
    
    
    10
    %
    
    
    10
    %
    
    
    2
    %
    
    
    19
    %
     20




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##### Table of Contents



Cost of Sales
 12 Weeks EndedMarch 25, 2006 vsMarch 19, 2005WorldwideVolume impact
    
    
    5
    %Cost per case impact
    
    
    5
    %Acquisitions
    
    
    1
    %Currency translation
    
    
    1
    %Total Cost of Sales change
    
    
    12
    %
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##### Table of Contents



Selling, Delivery and Administrative Expenses
 12 Weeks EndedMarch 25, 2006 vs.March 19, 2005WorldwideCost impact
    
    
    6
    %Adoption of SFAS 123R
    
    
    2
    %Acquisitions
    
    
    0
    %Currency translation
    
    
    1
    %Total SD&A change
    
    
    9
    %
  Operating Income
  Interest Expense, net
  Income Tax Expense
  Liquidity and Financial Condition
 Cash Flows
  22




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##### Table of Contents



Liquidity and Capital Resources
       Contractual Obligations
  23




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##### Table of Contents



Cautionary Statements
  
    
    changes in our relationship with PepsiCo that could have a material adverse effect on our long-term and short-term
business and financial results;
    
    material changes in expected levels of bottler incentive payments from PepsiCo;
    
    restrictions imposed by PepsiCo on our raw material suppliers that could increase our costs;
    
    material changes from expectations in the cost or availability of raw materials, ingredients or packaging
materials;
    
    limitations on the availability of water or obtaining water rights;
    
    an inability to achieve cost savings;
    
    material changes in capital investment for infrastructure and an inability to achieve the expected timing for
returns on cold-drink equipment and related infrastructure expenditures;
    
    decreased demand for our product resulting from changes in consumers preferences;
    
    an inability to achieve volume growth through product and packaging initiatives;
    
    impact of competitive activities on our business;
    
    impact of customer consolidations on our business;
    
    changes in product category consumption;
    
    unfavorable weather conditions in our markets;
    
    an inability to meet projections for performance in newly acquired territories;
    
    loss of business from a significant customer;
    
    failure or inability to comply with laws and regulations;
    
    changes in laws, regulations and industry guidelines governing the manufacture and sale of food and beverages,
including restrictions on the sale of carbonated soft drinks in schools;
    
    litigation, other claims and negative publicity relating to the alleged unhealthy properties of soft drinks;
    
    changes in laws and regulations governing the environment, transportation, employee safety, labor and government
contracts;
    
    changes in accounting standards and taxation requirements (including unfavorable outcomes from audits performed by
various tax authorities);
    
    unforeseen economic and political changes;
    
    possible recalls of our products;
    
    interruptions of operations due to labor disagreements;
    
    changes in our debt ratings;
    
    material changes in expected interest and currency exchange rates and unfavorable market performance of our
pension plan assets; and
    
    an inability to achieve strategic business plan targets that could result in an intangible asset impairment charge.
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##### Table of Contents



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




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 2.
 Unregistered Sales of Equity Securities and Use of Proceeds
 PBG Purchases of Equity Securities
  Total Number of Shares
    
    Maximum Number ofTotal Number of
    
    Average Price
    
    Purchased as Part of Publicly
    
    Shares that May Yet BeShares
    
    Paid per
    
    Announced Plans or
    
    Purchased Under the PlansPeriod
    
    Purchased1
    
    Share2
    
    Programs 3
    
    or Programs 3Period 101/01/06-
01/28/06
    
    
    620,500
    
    
    $
    28.88
    
    
    
    620,500
    
    
    
    23,402,100Period 201/29/06-02/25/06
    
    
    1,704,600
    
    
    $
    28.89
    
    
    
    1,704,600
    
    
    
    21,697,500Period 302/26/06-03/25/06
    
    
    1,958,800
    
    
    $
    29.75
    
    
    
    1,958,800
    
    
    
    19,738,700Total
    
    
    4,283,900
    
    
    $
    29.28
    
    
    
    4,283,900
 
 1Shares have only been repurchased through publicly announced programs.2Average share price excludes brokerage fees.3The 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
    
    
    25,000,000Total shares authorized to be repurchased as of March 25, 2006
    
    
    125,000,000
  26




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##### Table of Contents



Item 6.
 Exhibits
 Exhibit No.4.1
    
    Indenture, dated as of March 30, 2006 by and between Bottling Group,
LLC, as Obligor and JPMorgan Chase Bank, N.A., as Trustee relating to $800,000,000 5.50% Senior Notes due April 1, 2016.4.2
    
    Form of Note for the $800,000,000 5.50% Senior Notes due April 1, 2016.10.1
    
    $450,000,000 5-Year Credit Agreement dated as of March 22, 2006 among,
The Pepsi Bottling Group, Inc., Bottling Group, LLC, Citibank, N.A.,
as Agent, Citigroup Global Markets Inc and HSBC Securities (USA) Inc.,
as joint lead arrangers and joint book managers; HSBC Bank USA, N.A.,
as syndication agent; and Lehman Brothers Bank, FSB, Deutsche Bank AG
New York Branch, and JPMorgan Chase Bank, National Association, as
co-documentation agents.31.1
    
    Certification by the Chief Executive Officer pursuant to Section 302
of the SarbanesOxley Act of 200231.2
    
    Certification by the Chief Financial Officer pursuant to Section 302
of the SarbanesOxley Act of 200232.1
    
    Certification by the Chief Executive Officer pursuant to Section 906
of the SarbanesOxley Act of 200232.2
    
    Certification by the Chief Financial Officer pursuant to
Section 906 of the SarbanesOxley Act of 200299.1
    
    Financial statements of Bottling LLC, which are incorporated
herein by reference to Bottling LLCs Quarterly Report on Form
10-Q for the quarter ended March 25, 2006, as required by the
SEC as a result of Bottling LLCs guarantee of up to
$1,000,000,000 aggregate principal amount of our 7% Senior
Notes due in 2029.
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##### Table of Contents



SIGNATURES
  THE PEPSI BOTTLING GROUP, INC.(Registrant)Date: April 28, 2006
    
    
    
    /s/ Andrea L. ForsterAndrea L. ForsterVice President and ControllerDate: April 28, 2006
    
    
    
    /s/ Alfred H. DrewesAlfred H. DrewesSenior Vice President andChief Financial Officer
 28