##### 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 September 8, 2007 (12 weeks)
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
 For the transition period from  to
 Commission file number 333-80361-01
 BOTTLING GROUP, LLC
  Delaware
    
    13-4042452(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)One Pepsi Way, Somers, New York
    
    10589(Address of principal executive offices)
    
    (Zip Code)
  
   
  þ o
  o o 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 8, 2007 and September 9, 2006
    
    
    2Condensed Consolidated Statements of Cash Flows -
36 weeks ended September 8, 2007 and September 9, 2006
    
    
    3Condensed Consolidated Balance Sheets -
September 8, 2007 and December 30, 2006
    
    
    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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PART
I  FINANCIAL INFORMATION
 
 Item 1.
 Bottling Group, LLC
 
 Condensed Consolidated Statements of Operations
  12 Weeks Ended
    
    
    36 Weeks EndedSeptember
    
    
    September
    
    
    September
    
    
    September8, 2007
    
    
    9, 2006
    
    
    8, 2007
    
    
    9, 2006Net revenues
    
    $
    3,729
    
    
    $
    3,460
    
    
    $
    9,555
    
    
    $
    8,965Cost of sales
    
    
    2,003
    
    
    
    1,872
    
    
    
    5,171
    
    
    
    4,828Gross profit
    
    
    1,726
    
    
    
    1,588
    
    
    
    4,384
    
    
    
    4,137Selling, delivery and administrative expenses
    
    
    1,296
    
    
    
    1,207
    
    
    
    3,515
    
    
    
    3,334Operating income
    
    
    430
    
    
    
    381
    
    
    
    869
    
    
    
    803Interest expense
    
    
    56
    
    
    
    56
    
    
    
    164
    
    
    
    157Interest income
    
    
    52
    
    
    
    45
    
    
    
    143
    
    
    
    113Other non-operating (income) expenses, net
    
    
    
    
    
    
    
    
    
    
    (2
    )
    
    
    10Minority interest
    
    
    15
    
    
    
    
    
    
    
    19
    
    
    
    (1
    )Income before income taxes
    
    
    411
    
    
    
    370
    
    
    
    831
    
    
    
    750Income tax expense
    
    
    10
    
    
    
    1
    
    
    
    27
    
    
    
    14Net income
    
    $
    401
    
    
    $
    369
    
    
    $
    804
    
    
    $
    736
  2




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Bottling Group, LLC
 
 Condensed Consolidated Statements of Operations
  36 Weeks EndedSeptember
    
    
    September8, 2007
    
    
    9, 2006Cash Flows  OperationsNet income
    
    $
    804
    
    
    $
    736Adjustments to reconcile net income to net cash provided by operations:Depreciation and amortization
    
    
    457
    
    
    
    443Deferred income taxes
    
    
    (21
    )
    
    
    (43
    )Stock-based compensation
    
    
    43
    
    
    
    45Other non-cash charges and credits, net
    
    
    151
    
    
    
    132Changes in operating working capital, excluding effects of acquisitions:Accounts receivable, net
    
    
    (533
    )
    
    
    (532
    )Inventories
    
    
    (97
    )
    
    
    (162
    )Prepaid expenses and other current assets
    
    
    6
    
    
    
    (28
    )Accounts payable and other current liabilities
    
    
    431
    
    
    
    390Income taxes payable
    
    
    38
    
    
    
    36Net change in operating working capital
    
    
    (155
    )
    
    
    (296
    )Pension contributions
    
    
    (1
    )
    
    
    (1
    )Other, net
    
    
    (44
    )
    
    
    (40
    )Net Cash Provided by Operations
    
    
    1,234
    
    
    
    976Cash Flows  InvestmentsCapital expenditures
    
    
    (563
    )
    
    
    (521
    )Acquisitions, net of cash acquired
    
    
    (49
    )
    
    
    (33
    )Proceeds from sale of property, plant and equipment
    
    
    9
    
    
    
    6Notes receivable from PBG, net
    
    
    (657
    )
    
    
    (804
    )Other investing activities, net
    
    
    6
    
    
    
    4Net Cash Used for Investments
    
    
    (1,254
    )
    
    
    (1,348
    )Cash Flows  FinancingShort-term borrowings, net
    
    
    173
    
    
    
    77Proceeds from long-term debt
    
    
    1
    
    
    
    793Payments of long-term debt
    
    
    (12
    )
    
    
    (99
    )Excess tax benefit from exercise of stock options
    
    
    
    
    
    
    1Net Cash Provided by Financing
    
    
    162
    
    
    
    772Effect of Exchange Rate Changes on Cash and Cash Equivalents
    
    
    3
    
    
    
    (2
    )Net Increase in Cash and Cash Equivalents
    
    
    145
    
    
    
    398Cash and Cash Equivalents  Beginning of Period
    
    
    441
    
    
    
    346Cash and Cash Equivalents  End of Period
    
    $
    586
    
    
    $
    744Supplemental Cash Flow InformationInterest paid
    
    $
    155
    
    
    $
    128Income taxes paid
    
    $
    11
    
    
    $
    20Changes in accounts payable related to capital expenditures
    
    $
    (36
    )
    
    $
    (38
    )Capital lease additions
    
    $
    3
    
    
    $
    19Liabilities incurred and/or assumed in conjunction with acquisitions of bottlers
    
    $
    1
    
    
    $
    20Capital-in-kind contributions
    
    $
    5
    
    
    $
    Acquisition of intangible asset
    
    $
    315
    
    
    $
    
  3




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Bottling Group, LLC
 
 Condensed Consolidated Balance Sheets
  (Unaudited)September
    
    
    December8, 2007
    
    
    30, 2006ASSETSCurrent AssetsCash and cash equivalents
    
    $
    586
    
    
    $
    441Accounts receivable, less allowance of $52 at
September 8, 2007 and $50 at December 30, 2006
    
    
    1,890
    
    
    
    1,331Inventories
    
    
    641
    
    
    
    533Prepaid expenses and other current assets
    
    
    338
    
    
    
    355Total Current Assets
    
    
    3,455
    
    
    
    2,660Property, plant and equipment, net
    
    
    3,891
    
    
    
    3,776Other intangible assets, net
    
    
    4,138
    
    
    
    3,768Goodwill
    
    
    1,503
    
    
    
    1,490Notes receivable from PBG
    
    
    3,804
    
    
    
    3,147Other assets
    
    
    126
    
    
    
    114Total Assets
    
    $
    16,917
    
    
    $
    14,955LIABILITIES AND OWNERS EQUITYCurrent LiabilitiesAccounts payable and other current liabilities
    
    $
    1,997
    
    
    $
    1,559Short-term borrowings
    
    
    430
    
    
    
    242Current maturities of long-term debt
    
    
    10
    
    
    
    16Total Current Liabilities
    
    
    2,437
    
    
    
    1,817Long-term debt
    
    
    3,767
    
    
    
    3,759Other liabilities
    
    
    940
    
    
    
    863Deferred income taxes
    
    
    398
    
    
    
    406Minority interest
    
    
    357
    
    
    
    18Total Liabilities
    
    
    7,899
    
    
    
    6,863Owners EquityOwners net investment (includes impact from
adopting FIN 48 in fiscal year 2007 of ($45))
    
    
    9,481
    
    
    
    8,681Accumulated other comprehensive loss
    
    
    (463
    )
    
    
    (589
    )Total Owners Equity
    
    
    9,018
    
    
    
    8,092Total Liabilities and Owners Equity
    
    $
    16,917
    
    
    $
    14,955
  4




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Notes to Condensed Consolidated Financial Statements
  Note 1  Basis of Presentation
      Quarter
    
    U.S. & Canada
    
    Mexico & EuropeFirst Quarter
    
    12 weeks
    
    January and FebruarySecond Quarter
    
    12 weeks
    
    March, April and MayThird Quarter
    
    12 weeks
    
    June, July and AugustFourth Quarter
    
    16 weeks
    
    September, October, November and December
   5




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




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EITF Issue No. 06-11
  Note 4  Share-Based Compensation
    12 Weeks Ended
    
    36 Weeks EndedSeptember
    
    September
    
    September
    
    September8, 2007
    
    9, 2006
    
    8, 2007
    
    9, 2006Total
share-based
compensation
expense
    
    $
    13
    
    
    $
    14
    
    
    $
    43
    
    
    $
    45
    7




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Note 5  Balance Sheet Details
 September
    
    
    December8, 2007
    
    
    30, 2006Accounts ReceivableTrade accounts receivable
    
    $
    1,701
    
    
    $
    1,163Allowance for doubtful accounts
    
    
    (52
    )
    
    
    (50
    )Accounts receivable from PepsiCo
    
    
    184
    
    
    
    168Other receivables
    
    
    57
    
    
    
    50$
    1,890
    
    
    $
    1,331InventoriesRaw materials and supplies
    
    $
    237
    
    
    $
    201Finished goods
    
    
    404
    
    
    
    332$
    641
    
    
    $
    533Property, Plant and Equipment, netLand
    
    $
    306
    
    
    $
    291Buildings and improvements
    
    
    1,433
    
    
    
    1,404Manufacturing and distribution equipment
    
    
    3,836
    
    
    
    3,705Marketing equipment
    
    
    2,427
    
    
    
    2,425Capital leases
    
    
    62
    
    
    
    60Other
    
    
    159
    
    
    
    1628,223
    
    
    
    8,047Accumulated depreciation
    
    
    (4,332
    )
    
    
    (4,271
    )$
    3,891
    
    
    $
    3,776Accounts Payable and Other Current LiabilitiesAccounts payable
    
    $
    606
    
    
    $
    525Accounts payable to PepsiCo
    
    
    326
    
    
    
    234Trade incentives
    
    
    251
    
    
    
    194Accrued compensation and benefits
    
    
    254
    
    
    
    237Other accrued taxes
    
    
    121
    
    
    
    111Accrued interest
    
    
    53
    
    
    
    49Other current liabilities
    
    
    386
    
    
    
    209$
    1,997
    
    
    $
    1,559
 8




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Note 6  Other Intangible Assets, net and Goodwill
  September
    
    
    December8, 2007
    
    
    30, 2006Intangibles subject to amortization:Gross carrying amount:Customer relationships and lists
    
    $
    54
    
    
    $
    54Franchise/distribution rights
    
    
    46
    
    
    
    45Other identified intangibles
    
    
    30
    
    
    
    32130
    
    
    
    131Accumulated amortization:Customer relationships and lists
    
    
    (14
    )
    
    
    (11
    )Franchise/distribution rights
    
    
    (30
    )
    
    
    (27
    )Other identified intangibles
    
    
    (16
    )
    
    
    (16
    )(60
    )
    
    
    (54
    )Intangibles subject to amortization, net
    
    
    70
    
    
    
    77Intangibles not subject to amortization:Carrying amount:Franchise rights
    
    
    3,198
    
    
    
    3,128Licensing rights
    
    
    315
    
    
    
    Distribution rights
    
    
    291
    
    
    
    297Trademarks
    
    
    211
    
    
    
    215Other identified intangibles
    
    
    53
    
    
    
    51Intangibles not subject to amortization
    
    
    4,068
    
    
    
    3,691Total other intangible assets, net
    
    $
    4,138
    
    
    $
    3,768
   Intangible asset amortization
  9




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Goodwill
  U.S. &Canada
    
    
    Europe
    
    
    Mexico
    
    
    TotalBalance at December 30, 2006
    
    $
    1,229
    
    
    $
    16
    
    
    $
    245
    
    
    $
    1,490Purchase price allocations relating
to acquisitions
    
    
    1
    
    
    
    
    
    
    
    (16
    )
    
    
    (15
    )Impact of foreign currency translation
    
    
    33
    
    
    
    
    
    
    
    (5
    )
    
    
    28Balance at September 8, 2007
    
    $
    1,263
    
    
    $
    16
    
    
    $
    224
    
    
    $
    1,503
  Note 7  Pension and Postretirement Medical Benefit Plans
 Employee Benefit Plans
  Defined Benefit Pension Plans
  Defined Contribution Benefits
   10




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12 Weeks Ended
    
    
    36 Weeks EndedSeptember
    
    
    September
    
    
    September
    
    
    September8, 2007
    
    
    9, 2006
    
    
    8, 2007
    
    
    9, 2006Service cost
    
    $
    13
    
    
    $
    12
    
    
    $
    38
    
    
    $
    36Interest cost
    
    
    21
    
    
    
    19
    
    
    
    63
    
    
    
    57Expected return on plan assets
    
    
    (24
    )
    
    
    (21
    )
    
    
    (71
    )
    
    
    (65
    )Amortization of prior service cost
    
    
    2
    
    
    
    2
    
    
    
    5
    
    
    
    6Amortization of net loss
    
    
    8
    
    
    
    9
    
    
    
    26
    
    
    
    27Special termination benefits
    
    
    4
    
    
    
    
    
    
    
    4
    
    
    
    Net pension expense for the defined benefit plans
    
    
    24
    
    
    
    21
    
    
    
    65
    
    
    
    61Defined contribution plans expense
    
    
    6
    
    
    
    5
    
    
    
    19
    
    
    
    15Total U.S. pension expense recognized in the
Condensed Consolidated Statements of Operations
    
    $
    30
    
    
    $
    26
    
    
    $
    84
    
    
    $
    76
   Postretirement Medical Benefits
   12 Weeks Ended
    
    
    36 Weeks EndedSeptember
    
    
    September
    
    
    September
    
    
    September8, 2007
    
    
    9, 2006
    
    
    8, 2007
    
    
    9, 2006Service cost
    
    $
    1
    
    
    $
    1
    
    
    $
    3
    
    
    $
    3Interest cost
    
    
    5
    
    
    
    5
    
    
    
    14
    
    
    
    14Amortization of net loss
    
    
    1
    
    
    
    1
    
    
    
    3
    
    
    
    4Total U.S.
postretirement benefits
expense recognized in
the Condensed
Consolidated Statements
of Operations
    
    $
    7
    
    
    $
    7
    
    
    $
    20
    
    
    $
    21
 Note 8  Income Taxes
  11




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,
       Note 9  Segment Information
  12




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12 Weeks Ended
    
    
    36 Weeks EndedSeptember
    
    
    September
    
    
    September
    
    
    September8, 2007
    
    
    9, 2006
    
    
    8, 2007
    
    
    9, 2006Net RevenuesU.S. & Canada
    
    $
    2,665
    
    
    $
    2,559
    
    
    $
    7,294
    
    
    $
    7,017Europe
    
    
    683
    
    
    
    554
    
    
    
    1,327
    
    
    
    1,088Mexico
    
    
    381
    
    
    
    347
    
    
    
    934
    
    
    
    860Worldwide net revenues
    
    $
    3,729
    
    
    $
    3,460
    
    
    $
    9,555
    
    
    $
    8,965
 12 Weeks Ended
    
    
    36 Weeks EndedSeptember
    
    
    September
    
    
    September
    
    
    September8, 2007
    
    
    9, 2006
    
    
    8, 2007
    
    
    9, 2006Operating
IncomeU.S. & Canada
    
    $
    297
    
    
    $
    279
    
    
    $
    723
    
    
    $
    681Europe
    
    
    110
    
    
    
    71
    
    
    
    99
    
    
    
    61Mexico
    
    
    23
    
    
    
    31
    
    
    
    47
    
    
    
    61Worldwide operating income
    
    
    430
    
    
    
    381
    
    
    
    869
    
    
    
    803Interest expense
    
    
    56
    
    
    
    56
    
    
    
    164
    
    
    
    157Interest income
    
    
    52
    
    
    
    45
    
    
    
    143
    
    
    
    113Other non-operating (income) expenses, net
    
    
    
    
    
    
    
    
    
    
    (2
    )
    
    
    10Minority interest
    
    
    15
    
    
    
    
    
    
    
    19
    
    
    
    (1
    )Income before income taxes
    
    $
    411
    
    
    $
    370
    
    
    $
    831
    
    
    $
    750
 September
    
    
    December8, 2007
    
    
    30, 2006Total AssetsU.S. & Canada
    
    $
    13,374
    
    
    $
    12,072Europe
    
    
    1,745
    
    
    
    1,072Mexico
    
    
    1,798
    
    
    
    1,811Worldwide total assets
    
    $
    16,917
    
    
    $
    14,955
 13




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Note 10  Comprehensive Income
 12 Weeks Ended
    
    
    36 Weeks EndedSeptember
    
    
    September
    
    
    September
    
    
    September8, 2007
    
    
    9, 2006
    
    
    8, 2007
    
    
    9, 2006Net income
    
    $
    401
    
    
    $
    369
    
    
    $
    804
    
    
    $
    736Currency translation adjustment
    
    
    (10
    )
    
    
    57
    
    
    
    89
    
    
    
    34Cash flow hedge adjustment (a)(b)
    
    
    (3
    )
    
    
    (2
    )
    
    
    (2
    )
    
    
    9Amortization of prior service
cost/ net loss in net periodic
pension/postretirement cost to
expense
    
    
    11
    
    
    
    N/A
    
    
    
    34
    
    
    
    N/APension liability adjustment (c)
    
    
    
    
    
    
    N/A
    
    
    
    5
    
    
    
    N/AComprehensive income
    
    $
    399
    
    
    $
    424
    
    
    $
    930
    
    
    $
    779
 
 (a)
    
    Net of taxes of $0 million and $1 million for the 12 weeks ended September 8, 2007 and
September 9, 2006, respectively.(b)
    
    Net of taxes of $(2) million and $1 million for the 36 weeks ended September
8, 2007 and September 9, 2006.(c)
    
    Net of taxes of $3 million for the 36 weeks ended September 8,
2007. Note 11  Restructuring Charges
  
    
    Reduced the number of business units in the U.S. & Canada from eight to six to
centralize decision making and increase speed to market. This resulted in the elimination
of approximately 190 positions.
    
    Realigned our workforce in select territories in Europe and Mexico to improve
productivity, resulting in the elimination of approximately 660 positions, many of which
are hourly frontline positions in warehouse and production.
   14




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U.S. &Worldwide
    
    
    Canada
    
    
    EuropeTotal costs expected
    
    $
    30-$35
    
    
    $
    22-$27
    
    
    $
    8Costs incurred through September 8, 2007
    
    
    (20
    )
    
    
    (12
    )
    
    
    (8
    )Remaining costs to be incurred
    
    $
    10-$15
    
    
    $
    10-$15
    
    
    $
    
  Severance
    
    
    Enhanced& Related
    
    
    Pension
    
    
    RelocationTotal
    
    
    Benefits
    
    
    Benefits
    
    
    & OtherCosts incurred through September
8, 2007
    
    $
    20
    
    
    $
    15
    
    
    $
    4
    
    
    $
    1Cash payments
    
    
    (1
    )
    
    
    (1
    )
    
    
    
    
    
    
    Non-cash settlements
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    (1
    )Costs accrued at September 8, 2007
    
    $
    18
    
    
    $
    14
    
    
    $
    4
    
    
    $
    
 Note 12  Contingencies
  15




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Item 2.  Managements Financial Review
  Overview
    Critical Accounting Policies
   
    
    Allowance for Doubtful Accounts;
 
    
    Recoverability of Goodwill and Intangible Assets with Indefinite Lives;
 
    
    Pension and Postretirement Medical Benefit Plans;
 
    
    Share-Based Compensation; and
 
    
    Income Taxes.
 16




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Critical Accounting Policy Update  Income Taxes
 ,
  Items Affecting Comparability of our Financial Results
  12 weeks endedSeptember
    
    SeptemberIncome/(Expense)
    
    8, 2007
    
    9, 2006Gross profitPR Beverages
    
    $
    26
    
    
    $
    Operating incomePR Beverages
    
    
    26
    
    
    
    Organizational Realignment
    
    
    (20
    )
    
    
    
 2007 Items
 PR Beverages Limited (PR Beverages)
   Organizational Realignment
  17




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##### Table of Contents



Financial Performance Summary
 12 Weeks Ended
    
    36 Weeks EndedSeptember
    
    September
    
    %
    
    September
    
    September
    
    %8, 2007
    
    9, 2006
    
    Change
    
    8, 2007
    
    9, 2006
    
    ChangeNet revenues
    
    $
    3,729
    
    
    $
    3,460
    
    
    
    8
    %
    
    $
    9,555
    
    
    $
    8,965
    
    
    
    7
    %Cost of sales
    
    
    2,003
    
    
    
    1,872
    
    
    
    7
    %
    
    
    5,171
    
    
    
    4,828
    
    
    
    7
    %Gross profit
    
    
    1,726
    
    
    
    1,588
    
    
    
    9
    %
    
    
    4,384
    
    
    
    4,137
    
    
    
    6
    %Selling, delivery,
and administrative
expenses
    
    
    1,296
    
    
    
    1,207
    
    
    
    7
    %
    
    
    3,515
    
    
    
    3,334
    
    
    
    5
    %Operating income
    
    
    430
    
    
    
    381
    
    
    
    13
    %
    
    
    869
    
    
    
    803
    
    
    
    8
    %Net income
    
    
    401
    
    
    
    369
    
    
    
    9
    %
    
    
    804
    
    
    
    736
    
    
    
    9
    %
 Worldwide Financial Highlights for the 12 weeks ended September 8, 2007
 The impact of foreign currency translation contributed approximately two percentage points of
growth in net revenues, cost of sales, gross profit, and selling, delivery and administrative
expenses, and contributed three percentage points of growth in operating income.
 Net revenues 
 Cost of sales 
 Gross profit 
 Selling, delivery and administrative (SD&A) expenses 
 Operating income 
 Net
income
 2007 Financial Performance Discussion
 Except where noted, tables and discussion are presented as compared to the similar periods in
the prior year. Growth rates are rounded to the nearest whole percentage. When used in these
tables, N/A describes the transaction categories that did not contribute any impact to the
overall cause of change.
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##### Table of Contents



Volume
 12 Weeks Ended
    
    36 Weeks EndedSeptember 8, 2007 vs.
    
    September 8, 2007 vs.September 9, 2006
    
    September 9, 2006World
    
    U.S. &
    
    
    
    
    
    
    
    
    
    World
    
    U.S. &wide
    
    Canada
    
    Europe
    
    Mexico
    
    wide
    
    Canada
    
    Europe
    
    MexicoBase volume
    
    
    1
    %
    
    
    0
    %
    
    
    4
    %
    
    
    (1
    )%
    
    
    0
    %
    
    
    0
    %
    
    
    5
    %
    
    
    (2
    )%Acquisitions
    
    
    0
    %
    
    
    N/A
    
    
    
    N/A
    
    
    
    2
    %
    
    
    1
    %
    
    
    N/A
    
    
    
    N/A
    
    
    
    4
    %Total volume change
    
    
    1
    %
    
    
    0
    %
    
    
    4
    %
    
    
    1
    %
    
    
    1
    %
    
    
    0
    %
    
    
    5
    %
    
    
    2
    %
        19




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##### Table of Contents



Net Revenues
 12 Weeks Ended
    
    36 Weeks EndedSeptember 8, 2007 vs.
    
    September 8, 2007 vs.September 9, 2006
    
    September 9, 2006World
    
    U.S. &
    
    
    
    
    
    
    
    
    
    World
    
    U.S. &wide
    
    Canada
    
    Europe
    
    Mexico
    
    wide
    
    Canada
    
    Europe
    
    MexicoVolume impact
    
    
    1
    %
    
    
    0
    %
    
    
    4
    %
    
    
    (1
    )%
    
    
    0
    %
    
    
    0
    %
    
    
    5
    %
    
    
    (2
    )%Net price per case impact
(rate/mix)
    
    
    5
    %
    
    
    3
    %
    
    
    10
    %
    
    
    7
    %
    
    
    5
    %
    
    
    4
    %
    
    
    9
    %
    
    
    6
    %Acquisitions
    
    
    0
    %
    
    
    N/A
    
    
    
    N/A
    
    
    
    2
    %
    
    
    1
    %
    
    
    N/A
    
    
    
    N/A
    
    
    
    5
    %Currency translation
    
    
    2
    %
    
    
    1
    %
    
    
    9
    %
    
    
    2
    %
    
    
    1
    %
    
    
    0
    %
    
    
    8
    %
    
    
    0
    %Total Net Revenues change
    
    
    8
    %
    
    
    4
    %
    
    
    23
    %
    
    
    10
    %
    
    
    7
    %
    
    
    4
    %
    
    
    22
    %
    
    
    9
    %
      20




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##### Table of Contents



Cost of Sales
 12 Weeks Ended
    
    36 Weeks EndedSeptember 8, 2007 vs.
    
    September 8, 2007 vs.September 9, 2006
    
    September 9, 2006Worldwide
    
    WorldwideVolume impact
    
    
    1
    %
    
    
    0
    %Cost per case impact
    
    
    5
    %
    
    
    6
    %Acquisitions
    
    
    0
    %
    
    
    1
    %PR Beverages
    
    
    (1
    )%
    
    
    (1
    )%Currency translation
    
    
    2
    %
    
    
    1
    %Total Cost of Sales change
    
    
    7
    %
    
    
    7
    %
     Selling, Delivery and Administrative Expenses
 12 Weeks Ended
    
    36 Weeks EndedSeptember 8, 2007 vs.
    
    September 8, 2007 vs.September 9, 2006
    
    September 9, 2006Worldwide
    
    WorldwideCost impact
    
    
    3
    %
    
    
    3
    %Organizational Realignment
    
    
    2
    %
    
    
    1
    %Currency translation
    
    
    2
    %
    
    
    1
    %Total SD&A change
    
    
    7
    %
    
    
    5
    %
  21




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##### Table of Contents



Operating Income
 12 Weeks Ended
    
    36 Weeks EndedSeptember 8, 2007 vs.
    
    September 8, 2007 vs.September 9, 2006
    
    September 9, 2006Worldwide
    
    WorldwideVolume
    
    
    2
    %
    
    
    2
    %Net price per case impact (rate/mix)
    
    
    43
    %
    
    
    51
    %Cost per case impact
    
    
    (27
    )%
    
    
    (34
    )%SD&A expenses
    
    
    (10
    )%
    
    
    (14
    )%PR Beverages
    
    
    7
    %
    
    
    4
    %Organizational Realignment
    
    
    (5
    )%
    
    
    (2
    )%Currency translation
    
    
    3
    %
    
    
    1
    %Total Operating Income change
    
    
    13
    %
    
    
    8
    %
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##### Table of Contents



Interest Expense
  Interest Income
  Other Non-operating (Income) Expenses, net
  Income Tax Expense
   Restructuring Charges
 Organizational Realignment
  
    
    Reduced the number of business units in the U.S. & Canada from eight to six, to
centralize decision making and increase speed to market. This resulted in the elimination
of approximately 190 positions.
    
    Realigned our workforce to improve productivity in select territories in Europe and
Mexico, resulting in the elimination of approximately 660 positions, many of which are
hourly frontline positions in warehouse and production.
    
    Will recognize annual cost savings of approximately $30 million.
  23




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##### Table of Contents



Full Service Vending Rationalization
   Liquidity and Financial Condition
 Cash Flows
 36 Weeks Ended September 8, 2007 vs. September 9, 2006
    Liquidity and Capital Resources
  Contractual Obligations
  24




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##### Table of Contents



Off-Balance Sheet Arrangements
    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.
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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. Form 10-Q for the quarterly
period ended September 8, 2007, 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.
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##### Table of Contents



SIGNATURES
  BOTTLING GROUP, LLC.(Registrant)Date: October 12, 2007
    
    /s/ Thomas M. LardieriThomas M. LardieriPrincipal Accounting Officer and
Managing DirectorDate: October 12, 2007
    
    /s/ Alfred H. DrewesAlfred H. DrewesPrincipal Financial Officer