##### 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 21, 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
 (PBG LOGO)
 THE PEPSI BOTTLING GROUP, INC.
  Delaware
    
    13-4038356(State or Other Jurisdiction of
    
    (I.R.S. EmployerIncorporation or Organization)
    
    Identification No.)One Pepsi Way, Somers, New York
    
    10589(Address of Principal Executive Offices)
    
    (Zip Code)
 (Registrants Telephone Number, Including Area Code)
 (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
 þ o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 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 21, 2009 and March 22, 2008
    
    
    2Condensed Consolidated Statements of Comprehensive (Loss) Income -- 12 weeks ended March 21, 2009 and March 22, 2008
    
    
    3Condensed Consolidated Statements of Cash Flows -- 12 weeks ended March 21, 2009 and March 22, 2008
    
    
    4Condensed Consolidated Balance Sheets -- March 21, 2009 and December 27, 2008
    
    
    5Condensed Consolidated Statements of Changes in Equity -- 12 weeks ended March 21, 2009 and March 22, 2008
    
    
    6Notes to Condensed Consolidated Financial Statements
    
    
    7-20Item 2.
    
    Managements Financial Review
    
    
    21-28Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    29Item 4.
    
    Controls and Procedures
    
    
    29Part II
    
    Other InformationItem 1.
    
    Legal Proceedings
    
    
    29Item 1A.
    
    Risk Factors
    
    
    29Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    30Item 6.
    
    Exhibits
    
    
    31EX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATIONEX-32.2: CERTIFICATION




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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
    
    
    March21, 2009
    
    
    22, 2008Net revenues
    
    $
    2,507
    
    
    $
    2,651Cost of sales
    
    
    1,403
    
    
    
    1,482Gross profit
    
    
    1,104
    
    
    
    1,169Selling, delivery and administrative expenses
    
    
    987
    
    
    
    1,061Operating income
    
    
    117
    
    
    
    108Interest expense, net
    
    
    79
    
    
    
    59Other non-operating expenses (income), net
    
    
    7
    
    
    
    (3
    )Income before income taxes
    
    
    31
    
    
    
    52Income tax (benefit) expense
    
    
    (27
    )
    
    
    21Net income
    
    
    58
    
    
    
    31Less: Net income attributable to noncontrolling interests
    
    
    1
    
    
    
    3Net income attributable to PBG
    
    $
    57
    
    
    $
    28Earnings per share attributable to PBGs common shareholdersBasic earnings per share
    
    $
    0.27
    
    
    $
    0.13Weighted-average shares outstanding
    
    
    212
    
    
    
    222Diluted earnings per share
    
    $
    0.27
    
    
    $
    0.12Weighted-average shares outstanding
    
    
    214
    
    
    
    229Dividends declared per common share
    
    $
    0.17
    
    
    $
    0.14
  2




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##### Table of Contents



The Pepsi Bottling Group, Inc.
 
 Condensed Consolidated Statements of Comprehensive (Loss) Income
  12 Weeks EndedMarch
    
    
    March21, 2009
    
    
    22, 2008Net income
    
    $
    58
    
    
    $
    31Net currency translation adjustment
    
    
    (290
    )
    
    
    (12
    )Cash flow hedge adjustment, net of tax
    
    
    
    
    
    
    4Pension and postretirement medical benefit plans
adjustment, net of tax
    
    
    7
    
    
    
    4Comprehensive (loss) income
    
    
    (225
    )
    
    
    27Less: Comprehensive (loss) income attributable to noncontrolling interests
    
    
    (88
    )
    
    
    12Comprehensive (loss) income attributable to PBG
    
    $
    (137
    )
    
    $
    15
  3




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##### Table of Contents



The Pepsi Bottling Group, Inc.
 
 Condensed Consolidated Statements of Cash Flows
  12 Weeks EndedMarch
    
    
    March21, 2009
    
    
    22, 2008Cash Flows  OperationsNet income
    
    $
    58
    
    
    $
    31Adjustments to reconcile net income to net cash provided by operations:Depreciation and amortization
    
    
    136
    
    
    
    144Deferred income taxes
    
    
    1
    
    
    
    3Share-based compensation
    
    
    12
    
    
    
    12Net other non-cash charges and credits
    
    
    72
    
    
    
    66Changes in operating working capital, excluding effects of acquisitions:Accounts receivable, net
    
    
    (49
    )
    
    
    (4
    )Inventories
    
    
    (103
    )
    
    
    (88
    )Prepaid expenses and other current assets
    
    
    (4
    )
    
    
    (14
    )Accounts payable and other current liabilities
    
    
    32
    
    
    
    (86
    )Income taxes payable
    
    
    (42
    )
    
    
    12Net change in operating working capital
    
    
    (166
    )
    
    
    (180
    )Casualty insurance payments
    
    
    (17
    )
    
    
    (16
    )Other, net
    
    
    (16
    )
    
    
    (40
    )Net Cash Provided by Operations
    
    
    80
    
    
    
    20Cash Flows  InvestmentsCapital expenditures
    
    
    (95
    )
    
    
    (185
    )Acquisitions, net of cash acquired
    
    
    (15
    )
    
    
    (27
    )Proceeds from sale of property, plant and equipment
    
    
    1
    
    
    
    2Note receivable from PepsiCo
    
    
    (92
    )
    
    
    Other investing activities, net
    
    
    (1
    )
    
    
    Net Cash Used for Investments
    
    
    (202
    )
    
    
    (210
    )Cash Flows  FinancingShort-term borrowings, net
    
    
    214
    
    
    
    341Proceeds from long-term debt
    
    
    741
    
    
    
    Payments of long-term debt
    
    
    (1,301
    )
    
    
    (2
    )Dividends paid
    
    
    (36
    )
    
    
    (31
    )Excess tax benefit from the exercise of equity awards
    
    
    1
    
    
    
    1Proceeds from the exercise of stock options
    
    
    10
    
    
    
    7Share repurchases
    
    
    
    
    
    
    (180
    )Contributions from noncontrolling interest holder
    
    
    33
    
    
    
    Other financing activities
    
    
    (7
    )
    
    
    Net Cash (Used for) Provided by Financing
    
    
    (345
    )
    
    
    136Effect of Exchange Rate Changes on Cash and Cash Equivalents
    
    
    (16
    )
    
    
    (3
    )Net Decrease in Cash and Cash Equivalents
    
    
    (483
    )
    
    
    (57
    )Cash and Cash Equivalents  Beginning of Period
    
    
    966
    
    
    
    647Cash and Cash Equivalents  End of Period
    
    $
    483
    
    
    $
    590
  4




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##### Table of Contents



The Pepsi Bottling Group, Inc.
 
 Condensed Consolidated Balance Sheets
  (Unaudited)March
    
    
    December21, 2009
    
    
    27, 2008ASSETSCurrent AssetsCash and cash equivalents
    
    $
    483
    
    
    $
    966Accounts receivable, net
    
    
    1,417
    
    
    
    1,371Inventories
    
    
    619
    
    
    
    528Prepaid expenses and other current assets
    
    
    284
    
    
    
    276Total Current Assets
    
    
    2,803
    
    
    
    3,141Property, plant and equipment, net
    
    
    3,711
    
    
    
    3,882Other intangible assets, net
    
    
    3,758
    
    
    
    3,751Goodwill
    
    
    1,417
    
    
    
    1,434Investments in noncontrolled affiliates
    
    
    511
    
    
    
    619Other assets
    
    
    193
    
    
    
    155Total Assets
    
    $
    12,393
    
    
    $
    12,982LIABILITIES AND EQUITYCurrent LiabilitiesAccounts payable and other current liabilities
    
    $
    1,668
    
    
    $
    1,675Short-term borrowings
    
    
    305
    
    
    
    103Current maturities of long-term debt
    
    
    7
    
    
    
    1,305Total Current Liabilities
    
    
    1,980
    
    
    
    3,083Long-term debt
    
    
    5,521
    
    
    
    4,784Other liabilities
    
    
    1,585
    
    
    
    1,658Deferred income taxes
    
    
    1,010
    
    
    
    966Total Liabilities
    
    
    10,096
    
    
    
    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
    
    
    3,152
    
    
    
    3,130Accumulated other comprehensive loss
    
    
    (1,132
    )
    
    
    (938
    )Treasury stock: 97 shares and 99 shares at March
21, 2009 and December 27, 2008, respectively, at
cost
    
    
    (2,664
    )
    
    
    (2,703
    )Total Shareholders Equity
    
    
    1,189
    
    
    
    1,343Noncontrolling interests
    
    
    1,108
    
    
    
    1,148Total Equity
    
    
    2,297
    
    
    
    2,491Total Liabilities and Equity
    
    $
    12,393
    
    
    $
    12,982
  5




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##### Table of Contents



The Pepsi Bottling Group, Inc.
 
 Condensed Consolidated Statements of Changes in Equity
 12 Weeks Ended March 21, 2009 and March 22, 2008
  AccumulatedOther
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Compre-Additional
    
    
    
    
    
    
    Compre-
    
    
    
    
    
    
    Total
    
    
    Noncon-
    
    
    
    
    
    
    hensiveCommon
    
    
    Paid-In
    
    
    Retained
    
    
    hensive
    
    
    Treasury
    
    
    Shareholders
    
    
    trolling
    
    
    Total
    
    
    IncomeStock
    
    
    Capital
    
    
    Earnings
    
    
    Loss
    
    
    Stock
    
    
    Equity
    
    
    Interests
    
    
    Equity
    
    
    (Loss)Balance at December 29, 2007
    
    $
    3
    
    
    $
    1,805
    
    
    $
    3,124
    
    
    $
    (48
    )
    
    $
    (2,269
    )
    
    $
    2,615
    
    
    $
    973
    
    
    $
    3,588Comprehensive income (loss):Net income
    
    
    
    
    
    
    
    
    
    
    28
    
    
    
    
    
    
    
    
    
    
    
    28
    
    
    
    3
    
    
    
    31
    
    
    $
    31Net currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (21
    )
    
    
    
    
    
    
    (21
    )
    
    
    9
    
    
    
    (12
    )
    
    
    (12
    )Cash flow hedge adjustment, net
of tax of $2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    4
    
    
    
    4Pension and postretirement
medical benefit plans
adjustment, net of tax of $2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    4
    
    
    
    4Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    27SFAS 158  measurement date
adjustment, net of tax of $(5)
    
    
    
    
    
    
    
    
    
    
    (16
    )
    
    
    19
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    3Equity awards exercises: 1 shares
    
    
    
    
    
    
    (3
    )
    
    
    
    
    
    
    
    
    
    
    10
    
    
    
    7
    
    
    
    
    
    
    
    7Tax benefit and withholding tax 
equity awards
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    2Share repurchases: 5 shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (180
    )
    
    
    (180
    )
    
    
    
    
    
    
    (180
    )Share-based compensation
    
    
    
    
    
    
    13
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13
    
    
    
    
    
    
    
    13Cash dividends declared on common
stock (per share: $0.14)
    
    
    
    
    
    
    
    
    
    
    (31
    )
    
    
    
    
    
    
    
    
    
    
    (31
    )
    
    
    
    
    
    
    (31
    )Contributions from noncontrolling
interest holder
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    4Balance at March 22, 2008
    
    $
    3
    
    
    $
    1,817
    
    
    $
    3,105
    
    
    $
    (42
    )
    
    $
    (2,439
    )
    
    $
    2,444
    
    
    $
    989
    
    
    $
    3,433Balance at December 27, 2008
    
    $
    3
    
    
    $
    1,851
    
    
    $
    3,130
    
    
    $
    (938
    )
    
    $
    (2,703
    )
    
    $
    1,343
    
    
    $
    1,148
    
    
    $
    2,491Comprehensive income (loss):Net income
    
    
    
    
    
    
    
    
    
    
    57
    
    
    
    
    
    
    
    
    
    
    
    57
    
    
    
    1
    
    
    
    58
    
    
    $
    58Net currency translation
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (200
    )
    
    
    
    
    
    
    (200
    )
    
    
    (90
    )
    
    
    (290
    )
    
    
    (290
    )Cash flow hedge adjustment, net
of tax of $2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Pension and postretirement
medical benefit plans
adjustment, net of tax of $4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    6
    
    
    
    1
    
    
    
    7
    
    
    
    7Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (225
    )Equity awards exercises: 2 shares
    
    
    
    
    
    
    (29
    )
    
    
    
    
    
    
    
    
    
    
    39
    
    
    
    10
    
    
    
    
    
    
    
    10Tax benefit and withholding tax 
equity awards
    
    
    
    
    
    
    (4
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4
    )
    
    
    
    
    
    
    (4
    )Share-based compensation
    
    
    
    
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12
    
    
    
    
    
    
    
    12Cash dividends declared on common
stock (per share: $0.17)
    
    
    
    
    
    
    
    
    
    
    (35
    )
    
    
    
    
    
    
    
    
    
    
    (35
    )
    
    
    
    
    
    
    (35
    )Contributions from noncontrolling
interest holder
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    48
    
    
    
    48Balance at March 21, 2009
    
    $
    3
    
    
    $
    1,830
    
    
    $
    3,152
    
    
    $
    (1,132
    )
    
    $
    (2,664
    )
    
    $
    1,189
    
    
    $
    1,108
    
    
    $
    2,297
  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
   7




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##### Table of Contents



Note 2Seasonality of Business
  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
  8




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##### Table of Contents



Note 4Earnings per Share
  12 Weeks EndedMarch
    
    
    MarchShares in millions
    
    21, 2009
    
    
    22, 2008Net income attributable to PBG
    
    $
    57
    
    
    $
    28Weighted-average shares outstanding during period on which
basic earnings per share is calculated
    
    
    212
    
    
    
    222Effect of dilutive shares:Incremental shares under share-based compensation plans
    
    
    2
    
    
    
    7Weighted-average shares outstanding during period on which
diluted earnings per share is calculated
    
    
    214
    
    
    
    229Earnings per share attributable to PBGs common shareholdersBasic earnings per share
    
    $
    0.27
    
    
    $
    0.13Diluted earnings per share
    
    $
    0.27
    
    
    $
    0.12
   Note 5Share-Based Compensation
  12 Weeks EndedMarch
    
    
    March21, 2009
    
    
    22, 2008Total share-based compensation expense
    
    $
    12
    
    
    $
    12Income tax benefit
    
    
    (4
    )
    
    
    (4
    )Noncontrolling interest
    
    
    
    
    
    
    Net income attributable to PBG impact
    
    $
    8
    
    
    $
    8
    9




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##### Table of Contents



Note 6Balance Sheet Details
 March
    
    
    December21, 2009
    
    
    27, 2008Accounts Receivable, netTrade accounts receivable
    
    $
    1,207
    
    
    $
    1,208Allowance for doubtful accounts
    
    
    (72
    )
    
    
    (71
    )Accounts receivable from PepsiCo
    
    
    188
    
    
    
    154Note receivable from PepsiCo
    
    
    29
    
    
    
    Other receivables
    
    
    65
    
    
    
    80$
    1,417
    
    
    $
    1,371InventoriesRaw materials and supplies
    
    $
    215
    
    
    $
    185Finished goods
    
    
    404
    
    
    
    343$
    619
    
    
    $
    528Prepaid Expenses and Other Current AssetsPrepaid expenses
    
    $
    257
    
    
    $
    244Other current assets
    
    
    27
    
    
    
    32$
    284
    
    
    $
    276Property, Plant and Equipment, netLand
    
    $
    293
    
    
    $
    300Buildings and improvements
    
    
    1,533
    
    
    
    1,542Manufacturing and distribution equipment
    
    
    3,887
    
    
    
    3,999Marketing equipment
    
    
    2,168
    
    
    
    2,246Capital leases
    
    
    21
    
    
    
    23Other
    
    
    151
    
    
    
    1548,053
    
    
    
    8,264Accumulated depreciation
    
    
    (4,342
    )
    
    
    (4,382
    )$
    3,711
    
    
    $
    3,882Other AssetsNote receivable from PepsiCo
    
    $
    58
    
    
    $
    Other assets
    
    
    135
    
    
    
    155$
    193
    
    
    $
    155
 Note Receivable from PepsiCo
  10




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##### Table of Contents



March
    
    
    December21, 2009
    
    
    27, 2008Accounts Payable and Other Current LiabilitiesAccounts payable
    
    $
    469
    
    
    $
    444Accounts payable to PepsiCo
    
    
    275
    
    
    
    217Trade incentives
    
    
    155
    
    
    
    189Accrued compensation and benefits
    
    
    197
    
    
    
    240Accrued insurance
    
    
    101
    
    
    
    81Other accrued taxes
    
    
    98
    
    
    
    128Accrued interest
    
    
    62
    
    
    
    85Other current liabilities
    
    
    311
    
    
    
    291$
    1,668
    
    
    $
    1,675
 Note 7Other Intangible Assets, net and Goodwill
  March
    
    
    December21, 2009
    
    
    27, 2008Intangibles subject to amortizationGross carrying amountCustomer relationships and lists
    
    $
    42
    
    
    $
    45Franchise and distribution rights
    
    
    74
    
    
    
    41Other identified intangibles
    
    
    21
    
    
    
    34137
    
    
    
    120Accumulated amortizationCustomer relationships and lists
    
    
    (14
    )
    
    
    (15
    )Franchise and distribution rights
    
    
    (31
    )
    
    
    (31
    )Other identified intangibles
    
    
    (8
    )
    
    
    (21
    )(53
    )
    
    
    (67
    )Intangibles subject to amortization, net
    
    
    84
    
    
    
    53Intangibles not subject to amortizationCarrying amountFranchise rights
    
    
    3,231
    
    
    
    3,244Licensing rights
    
    
    315
    
    
    
    315Distribution rights
    
    
    46
    
    
    
    49Brands
    
    
    35
    
    
    
    39Other identified intangibles
    
    
    47
    
    
    
    51Intangibles not subject to amortization
    
    
    3,674
    
    
    
    3,698Total other intangible assets, net
    
    $
    3,758
    
    
    $
    3,751
 Intangible asset amortization
   11




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##### Table of Contents



Goodwill
  U.S. &Canada
    
    
    Europe
    
    
    Mexico
    
    
    TotalBalance at December 27, 2008
    
    $
    1,235
    
    
    $
    26
    
    
    $
    173
    
    
    $
    1,434Purchase price allocations relating
to acquisitions
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    1Impact of foreign currency translation
    
    
    (4
    )
    
    
    
    
    
    
    (14
    )
    
    
    (18
    )Balance at March 21, 2009
    
    $
    1,232
    
    
    $
    26
    
    
    $
    159
    
    
    $
    1,417
 Note 8Fair Value Measurements
  Level 1
 Level 2 
 Level 3
  Level 2March
    
    
    December21, 2009
    
    
    27, 2008Financial AssetsForeign currency (1)
    
    $
    5
    
    
    $
    13Deferred compensation (2)
    
    
    11
    
    
    
    13Interest-rate swaps (3)
    
    
    4
    
    
    
    8Total
    
    $
    20
    
    
    $
    34Financial LiabilitiesCommodity (1)
    
    $
    58
    
    
    $
    57Foreign currency (1)
    
    
    7
    
    
    
    6Interest-rate swaps (3)
    
    
    5
    
    
    
    1Total
    
    $
    70
    
    
    $
    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. 12




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##### Table of Contents



Other Financial Assets and Liabilities
   Note 9 Financial Instruments and Risk Management
   Cash Flow Hedges
      Fair Value Hedges
  13




---



##### Table of Contents



Economic Hedges
     14




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##### Table of Contents



Balance Sheet Classification
  Derivatives Designated as Hedging
    
    
    
    FairInstruments under SFAS 133
    
    Balance Sheet Classification
    
    ValueAssetsForeign currency
    
    Prepaid expenses and other current assets
    
    $
    4Interest-rate swaps
    
    Other assets
    
    
    4Commodity
    
    Accounts payable and other current liabilities
    
    
    1Commodity
    
    Other liabilities
    
    
    2$
    11LiabilitiesForeign currency
    
    Prepaid expenses and other current assets
    
    $
    1Commodity
    
    Accounts payable and other current liabilities
    
    
    51Commodity
    
    Other liabilities
    
    
    10Interest-rate swaps
    
    Other liabilities
    
    
    5$
    67
 Derivatives Not Designated as Hedging
    
    
    
    FairInstruments under SFAS 133
    
    Balance Sheet Classification
    
    ValueAssetsForeign currency
    
    Prepaid expenses and other current assets
    
    $
    3Deferred compensation
    
    Prepaid expenses and other current assets
    
    
    11$
    14LiabilitiesForeign currency
    
    Prepaid expenses and other current assets
    
    $
    1Foreign currency
    
    Accounts payable and other current liabilities
    
    
    5Foreign currency
    
    Other liabilities
    
    
    2$
    8
 Cash Flow Hedge Gains (Losses) Recognition
  Derivatives in SFAS
    
    Amount of
    
    
    
    
    Amount of Gain133 Cash Flow
    
    Gain (Loss)
    
    
    Location of Gain (Loss)
    
    (Loss) ReclassifiedHedging
    
    recognized in
    
    
    Reclassified from AOCL into
    
    from AOCL intoRelationships
    
    OCL
    
    
    Income
    
    IncomeForeign currency
    
    $
    
    
    
    Cost of goods sold
    
    $
    3Commodity
    
    
    (7
    )
    
    Cost of goods sold
    
    
    (3
    )Commodity
    
    
    (5
    )
    
    Selling, delivery and administrative expenses
    
    
    (14
    )Treasury rate lock
    
    
    
    
    
    Interest expense, net
    
    
    $
    (12
    )
    
    
    
    $
    (14
    )
  15




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##### Table of Contents



Other Derivatives Gains (Losses) Recognition
  Amount of Gain(Loss) RecognizedLocation of Gain (Loss) Recognized in
    
    in Income onIncome on Derivative
    
    DerivativeDerivatives in SFAS 133
Fair Value Hedging
RelationshipInterest-rate swaps
    
    Interest expense, net
    
    $
    4Derivatives Not
Designated as Hedging
Instruments under SFAS
133Deferred compensation
    
    Selling, delivery and administrative expenses
    
    $
    (1
    )Foreign currency
    
    Other non-operating expenses (income), net
    
    
    (5
    )$
    (6
    )
  Note 10 Pension and Postretirement Medical Benefit Plans
 Employee Benefit Plans
  Defined Benefit Pension Plans
  Postretirement Medical Plans
  16




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##### Table of Contents



Components of Net Pension Expense
 12 Weeks EndedMarch
    
    
    March21, 2009
    
    
    22, 2008Service cost
    
    $
    14
    
    
    $
    12Interest cost
    
    
    25
    
    
    
    23Expected return on plan assets  (income)
    
    
    (28
    )
    
    
    (27
    )Amortization of net loss
    
    
    8
    
    
    
    3Amortization of prior service costs
    
    
    2
    
    
    
    2Net pension expense for the defined benefit plans
    
    $
    21
    
    
    $
    13
  Components of Postretirement Medical Expense
 12 Weeks EndedMarch
    
    
    March21, 2009
    
    
    22, 2008Service cost
    
    $
    1
    
    
    $
    1Interest cost
    
    
    5
    
    
    
    5Amortization of net loss
    
    
    
    
    
    
    1Total postretirement medical expense
    
    $
    6
    
    
    $
    7
 Defined Contribution Benefits
  Note 11Income Taxes
   17




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##### Table of Contents



Note 12Segment Information
    12 Weeks EndedMarch
    
    
    March21, 2009
    
    
    22, 2008Net RevenuesU.S. & Canada
    
    $
    2,177
    
    
    $
    2,207Europe
    
    
    174
    
    
    
    236Mexico
    
    
    156
    
    
    
    208Worldwide net revenues
    
    $
    2,507
    
    
    $
    2,651Operating Income (Loss)U.S. & Canada
    
    $
    144
    
    
    $
    136Europe
    
    
    (25
    )
    
    
    (31
    )Mexico
    
    
    (2
    )
    
    
    3Worldwide operating income
    
    
    117
    
    
    
    108Interest expense, net
    
    
    79
    
    
    
    59Other non-operating expenses (income), net
    
    
    7
    
    
    
    (3
    )Income before income taxes
    
    $
    31
    
    
    $
    52
 March
    
    
    December21, 2009
    
    
    27, 2008Total AssetsU.S. & Canada
    
    $
    9,545
    
    
    $
    9,815Europe
    
    
    1,999
    
    
    
    2,222Mexico
    
    
    849
    
    
    
    945Worldwide total assets
    
    $
    12,393
    
    
    $
    12,982
 Note 13Restructuring Charges
   18




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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 expected to be incurred through
December 26, 2009
    
    
    52-82
    
    
    
    33-44
    
    
    
    18-33
    
    
    
    1-5Total costs expected to be incurred
    
    $
    140-$170
    
    
    $
    89-$100
    
    
    $
    23-$38
    
    
    $
    28-$32By ActivityAssetPension
    
    
    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
    
    
    $
    
 19




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##### Table of Contents



Note 14Supplemental Cash Flow Information
  12 Weeks EndedMarch
    
    March21, 2009
    
    22, 2008Interest paid
    
    $
    101
    
    
    $
    71Income taxes paid
    
    $
    12
    
    
    $
    6Decrease in accounts payable related to capital expenditures
    
    $
    (10
    )
    
    $
    (49
    )
 Note 15Contingencies
  Note 16Subsequent Event
  20




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##### 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.
 21




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##### Table of Contents



OUR FINANCIAL RESULTS
 ITEMS AFFECTING COMPARABILITY OF OUR FINANCIAL RESULTS
  12 Weeks EndedMarch
    
    
    MarchIncome/(Expense)
    
    21, 2009
    
    
    22, 2008Operating Income2008 Restructuring Charges
    
    $
    (5
    )
    
    $
    2007 Restructuring and Asset Disposal Charges
    
    
    
    
    
    
    (3
    )Total Operating Income Impact
    
    $
    (5
    )
    
    $
    (3
    )Net Income Attributable to PBG2008 Restructuring Charges
    
    $
    (3
    )
    
    $
    2007 Restructuring and Asset Disposal Charges
    
    
    
    
    
    
    (1
    )Tax Audit Settlement
    
    
    39
    
    
    
    Total Net Income Attributable to PBG Impact
    
    $
    36
    
    
    $
    (1
    )Diluted Earnings per Share2008 Restructuring Charges
    
    $
    (0.01
    )
    
    $
    2007 Restructuring and Asset Disposal Charges
    
    
    
    
    
    
    (0.01
    )Tax Audit Settlement
    
    
    0.18
    
    
    
    Total Diluted Earnings per Share Impact
    
    $
    0.17
    
    
    $
    (0.01
    )
 2009 Items
 2008 Restructuring Charges
     22




---



##### Table of Contents



Tax Audit Settlement
  2008 Items
 2007 Restructuring Charges
  Asset Disposal Costs
  FINANCIAL PERFORMANCE SUMMARY AND WORLDWIDE FINANCIAL HIGHLIGHTS
 12 Weeks EndedMarch
    
    March
    
    % Change21, 2009
    
    22, 2008
    
    Better/(Worse)Net revenues
    
    $
    2,507
    
    
    $
    2,651
    
    
    
    (5
    )%Cost of sales
    
    $
    1,403
    
    
    $
    1,482
    
    
    
    5
    %Gross profit
    
    $
    1,104
    
    
    $
    1,169
    
    
    
    (6
    )%Selling, delivery and administrative expenses
    
    $
    987
    
    
    $
    1,061
    
    
    
    7
    %Operating income
    
    $
    117
    
    
    $
    108
    
    
    
    8
    %Net income attributable to PBG
    
    $
    57
    
    
    $
    28
    
    
    
    104
    %Diluted earnings per share (1)
    
    $
    0.27
    
    
    $
    0.12
    
    
    
    118
    %
 
 (1)
    
    Percentage change for diluted earnings per share is calculated using earnings per
share data expanded to the fourth decimal place. Foreign Currency Impact 
  Volume 
 23




---



##### Table of Contents



Net revenues 
 Cost of sales 
 Gross profit 
 Selling, delivery and administrative (SD&A) 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 EndedMarch 21, 2009 vs. March 22, 2008U.S. &Worldwide
    
    Canada
    
    Europe
    
    MexicoBase volume
    
    
    (6
    )%
    
    
    (5
    )%
    
    
    (16
    )%
    
    
    (7
    )%Acquisitions
    
    
    1
    
    
    
    2
    
    
    
    
    
    
    
    Total volume change
    
    
    (5
    )%
    
    
    (3
    )%
    
    
    (16
    )%
    
    
    (7
    )%
 U.S. & Canada
  24




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##### Table of Contents



Europe
  Mexico
  Net Revenues
 12 Weeks EndedMarch 21, 2009 vs. March 22, 2008U.S. &Worldwide
    
    
    Canada
    
    
    Europe
    
    
    Mexico2009 Net revenues
    
    $
    2,507
    
    
    $
    2,177
    
    
    $
    174
    
    
    $
    1562008 Net revenues
    
    $
    2,651
    
    
    $
    2,207
    
    
    $
    236
    
    
    $
    208% Impact of:Volume impact
    
    
    (6
    )%
    
    
    (5
    )%
    
    
    (16
    )%
    
    
    (7
    )%Net price per case impact (rate/mix)
    
    
    5
    
    
    
    4
    
    
    
    10
    
    
    
    5Acquisitions
    
    
    1
    
    
    
    1
    
    
    
    
    
    
    
    Currency translation
    
    
    (5
    )
    
    
    (2
    )
    
    
    (20
    )
    
    
    (23
    )Total net revenues change
    
    
    (5
    )%
    
    
    (1
    )%*
    
    
    (26
    )%
    
    
    (25
    )%
 
 *
    
    Does not add due to rounding to the whole percent. U.S. & Canada
  Europe
  25




---



##### Table of Contents



Mexico
  Operating Income
 12 Weeks EndedMarch 21, 2009 vs. March 22, 2008U.S. &Worldwide
    
    
    Canada
    
    
    Europe
    
    
    Mexico2009 Operating income (loss)
    
    $
    117
    
    
    $
    144
    
    
    $
    (25
    )
    
    $
    (2
    )2008 Operating income (loss)
    
    $
    108
    
    
    $
    136
    
    
    $
    (31
    )
    
    $
    3% Impact of:Operations
    
    
    2
    %
    
    
    6
    %
    
    
    (8
    )%
    
    
    (147
    )%Currency translation
    
    
    5
    
    
    
    (2
    )
    
    
    26
    
    
    
    292008 Restructuring charges
    
    
    (4
    )
    
    
    (2
    )
    
    
    
    
    
    
    (62
    )2007 Restructuring and asset disposal charges
    
    
    2
    
    
    
    2
    
    
    
    
    
    
    
    Acquisitions
    
    
    3
    
    
    
    2
    
    
    
    
    
    
    
    Total operating income change
    
    
    8
    %
    
    
    6
    %
    
    
    17
    %*
    
    
    (180
    )%
 
 *
    
    Does not add due to rounding to the whole percent. U.S. & Canada
    Europe
   26




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##### Table of Contents



Mexico
    Interest Expense, net
  Other Non-operating Expenses (Income), net
  Net Income Attributable to Noncontrolling Interests
  Income Tax Expense
  LIQUIDITY AND FINANCIAL CONDITION
 Cash Flows
 12 Weeks Ended March 21, 2009 vs. March 22, 2008
   27




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##### Table of Contents



Liquidity and Capital Resources
       Contractual Obligations
  CAUTIONARY STATEMENTS
   28




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##### Table of Contents



Item 3.
 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 Item 4.
 CONTROLS AND PROCEDURES
   
 PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  29




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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 YetTotal Number
    
    
    
    
    
    Part of Publicly
    
    Be Purchased Underof Shares
    
    Average Price Paid
    
    Announced Plans or
    
    the Plans orPeriod
    
    Purchased
    
    per Share
    
    Programs
    
    Programs 1Period 1
12/28/0801/24/09
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,540,400Period 2
01/25/0902/21/09
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,540,400Period 3
02/22/0903/21/09
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    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 March 21, 2009
    
    
    175,000,000
  30




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##### Table of Contents



Item 6.
 EXHIBITS
 EXHIBIT NO.
    
    DESCRIPTION OF EXHIBIT31.1
    
    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
 31




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##### Table of Contents



SIGNATURES
  THE PEPSI BOTTLING GROUP, INC.
(Registrant)Date: April 27, 2009
    /s/ Thomas M. LardieriThomas M. LardieriVice President and ControllerDate: April 27, 2009
    /s/ Alfred H. DrewesAlfred H. DrewesSenior Vice President and Chief Financial Officer