##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
 þ
    
    Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the Fiscal Year Ended December 29, 2007
 or
 o
    
    Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
(No Fee Required)
 For the transition period from  to
 Commission file number 333-80361-01
 Bottling Group, LLC
  Organized in Delaware
    
    13-4042452(State or other Jurisdiction of 
Incorporation or Organization)
    
    (I.R.S. Employer
Identification No.)One Pepsi WaySomers, New York
    
    10589(Address of Principal Executive Offices)
    
    (Zip code)
 (914) 767-6000
 Securities registered pursuant to Section 12(b) of the Act: None
 Securities registered pursuant to Section 12(g) of the Act: None
 Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule
405 of the Securities Act. Yes þ No o
 Indicate by check mark if the registrant is not required to file reports pursuant to Section
13 or Section 15(d) of the Act. Yes o No þ
 Indicate by check mark whether the registrant: (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports) and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o
 Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation
S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K . þ
 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,
a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in
Rule 12b-2 of the Exchange Act. (Check one):
 Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act). Yes o No þ
 The aggregate market value of Bottling Group, LLC Capital Stock held by non-affiliates of
Bottling Group, LLC as of June 15, 2007 was $0.




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##### 



TABLE OF CONTENTS
 PART I
    
    
    1Item 1. Business
    
    
    1Item 1A. Risk Factors
    
    
    8Item 1B. Unresolved Staff Comments
    
    
    11Item 2. Properties
    
    
    11Item 3. Legal Proceedings
    
    
    11Item 4. Submission of Matters to a Vote of Security Holders
    
    
    12PART II
    
    
    13Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    13Item 6. Selected Financial Data
    
    
    14Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    15Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    64Item 8. Financial Statements and Supplementary Data
    
    
    64Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
    
    
    64Item 9A. Controls and Procedures
    
    
    64Item 9B. Other Information
    
    
    65PART III
    
    
    66Item 10. Directors, Executive Officers and Corporate Governance
    
    
    66Item 11. Executive Compensation
    
    
    66Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    92Item 13. Certain Relationships and Related Transactions, and Director Independence
    
    
    92Item 14. Principal Accountant Fees and Services
    
    
    95PART IV
    
    
    96Item 15. Exhibits and Financial Statement Schedules
    
    
    96SIGNATURES
    
    
    S-1INDEX TO FINANCIAL STATEMENT SCHEDULES
    
    
    F-1INDEX TO EXHIBITS
    
    
    E-1EX-12: STATEMENT RE COMPUTATION OF RATIOSEX-21: SUBSIDIARIESEX-23: CONSENT OF DELOITTE & TOUCHE LLPEX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATIONEX-32.2: CERTIFICATIONEX-99.1: THE PEPSI BOTTLING GROUP, INC.'S 2007 ANNUAL REPORT




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PART I
 
 Item 1. Business
 Introduction
      Principal Products
 mr
   1




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U.S. & Canada
 Pepsi
    
    Sierra Mist
    
    Trademark Dr PepperDiet Pepsi
    
    Sierra Mist Free
    
    LiptonDiet Pepsi Max
    
    Aquafina
    
    SoBeWild Cherry Pepsi
    
    Aquafina Alive
    
    SoBe No FearPepsi Lime
    
    Aquafina FlavorSplash
    
    SoBe Life WaterPepsi ONE
    
    G2 from Gatorade
    
    Starbucks Frappuccino®Mountain Dew
    
    Propel
    
    DoleDiet Mountain Dew
    
    Tropicana Twister SodaAMP
    
    Tropicana juice drinksMountain Dew Code Red
    
    Mug Root BeerEuropePepsi
    
    Tropicana
    
    FrukoPepsi Light
    
    Aqua Minerale
    
    YedigunPepsi Max
    
    Mirinda
    
    Tamek7UP
    
    IVI
    
    LiptonKAS
    
    FiestaMexicoPepsi
    
    Mirinda
    
    ElectropuraPepsi Light
    
    Manzanita Sol
    
    e-puramr7UP
    
    Squirt
    
    JarritosKAS
    
    Garci CrespoBelight
    
    Aguas Frescas
  Raw Materials and Other Supplies
   Franchise and Venture Agreements
  2




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##### Table of Contents



Terms of the Master Bottling Agreement.
  (1)
    
    maintain such plant and equipment, staff, distribution facilities and vending equipment
that are capable of manufacturing, packaging, and distributing the cola beverages in
sufficient quantities to fully meet the demand for these beverages in our territories;(2)
    
    undertake adequate quality control measures prescribed by PepsiCo;(3)
    
    push vigorously the sale of the cola beverages in our territories;(4)
    
    increase and fully meet the demand for the cola beverages in our territories;(5)
    
    use all approved means and spend such funds on advertising and other forms of marketing
beverages as may be reasonably required to push vigorously the sale of cola beverages in our
territories; and(6)
    
    maintain such financial capacity as may be reasonably necessary to assure performance
under the Master Bottling Agreement by us.
      3




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(1)
    
    PBGs insolvency, bankruptcy, dissolution, receivership or the like;(2)
    
    any disposition of any voting securities of one of our bottling subsidiaries or
substantially all of our bottling assets without the consent of PepsiCo;(3)
    
    PBGs entry into any business other than the business of manufacturing, selling or
distributing non-alcoholic beverages or any business which is directly related and
incidental to such beverage business; and(4)
    
    any material breach under the contract that remains uncured for 120 days after notice by
PepsiCo.
    Terms of the Non-Cola Bottling Agreements.
 Terms of Certain Distribution Agreements.
 4




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Terms of the Master Syrup Agreement.
   Terms of Other U.S. Bottling Agreements. ®
 Terms of the Country-Specific Bottling Agreements.
 Terms of the Russia Venture Agreement.
 Seasonality
  Competition
  5




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Governmental Regulation Applicable to Bottling LLC
   Bottle and Can Legislation
      6




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Soft Drink Excise Tax Legislation
    Trade Regulation
  School Sales Legislation; Industry Guidelines
  California Carcinogen and Reproductive Toxin Legislation
  7




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Mexican Water Regulation
  Employees
  Available Information
 www.pbg.com
 Financial Information on Industry Segments and Geographic Areas
   
 Item 1A. Risk Factors
  We may not be able to respond successfully to consumer trends related to carbonated and
non-carbonated beverages.
   8




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We may not be able to compete successfully within the highly competitive carbonated and
non-carbonated beverage markets.
  We may not be able to respond successfully to the demands of our largest customers.
  Because we depend upon PepsiCo to provide us with concentrate, certain funding and various
services, changes in our relationship with PepsiCo could adversely affect our business and
financial results.
    Our business requires a significant supply of raw materials and energy, the limited availability or
increased costs of which could adversely affect our business and financial results.
  PepsiCos equity ownership of PBG could affect matters concerning us.
  We may have potential conflicts of interest with PepsiCo, which could result in PepsiCos
objectives being favored over our objectives.
  9




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Our acquisition strategy may be limited by our ability to successfully integrate acquired
businesses into ours or our failure to realize our expected return on acquired businesses.
  Our success depends on key members of our management, the loss of whom could disrupt our business
operations.
  If we are unable to fund our substantial capital requirements, it could cause us to reduce our
planned capital expenditures and could result in a material adverse effect on our business and
financial results.
  The level of our indebtedness could adversely affect our financial health.
  Our foreign operations are subject to social, political and economic risks and may be adversely
affected by foreign currency fluctuations.
  If we are unable to maintain brand image and product quality, or if we encounter other product
issues such as product recalls, our business may suffer.
  10




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Changes in the legal and regulatory environment could increase our costs or liabilities or impact
the sale of our products.
  Adverse weather conditions could reduce the demand for our products.
  Catastrophic events in the markets in which we operate could have a material adverse effect on our
financial condition.
  
 Item 1B. Unresolved Staff Comments
  
 Item 2. Properties
  U.S. & Canada
    
    Europe
    
    MexicoManufacturing FacilitiesOwned
    
    
    50
    
    
    
    13
    
    
    
    26Leased
    
    
    3
    
    
    
    1
    
    
    
    3Other
    
    
    4
    
    
    
    0
    
    
    
    0Total
    
    
    57
    
    
    
    14
    
    
    
    29Distribution FacilitiesOwned
    
    
    235
    
    
    
    11
    
    
    
    89Leased
    
    
    55
    
    
    
    53
    
    
    
    86Total
    
    
    290
    
    
    
    64
    
    
    
    175
   
 Item 3. Legal Proceedings
  11




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Item 4. Submission of Matters to a Vote of Security Holders
  Executive Officers of the Registrant
   Eric J. Foss
 Alfred H. Drewes
 Thomas M. Lardieri
 12




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PART II
 
 Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
  13




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Item 6. Selected Financial Data
 SELECTED FINANCIAL AND OPERATING DATA
 in millionsFiscal years ended
    
    2007(1)
    
    
    2006(2)(3)
    
    
    2005(2)(4)
    
    
    2004
    
    
    2003Statement of Operations Data:Net revenues
    
    $
    13,591
    
    
    $
    12,730
    
    
    $
    11,885
    
    
    $
    10,906
    
    
    $
    10,265Cost of sales
    
    
    7,370
    
    
    
    6,900
    
    
    
    6,345
    
    
    
    5,656
    
    
    
    5,215Gross profit
    
    
    6,221
    
    
    
    5,830
    
    
    
    5,540
    
    
    
    5,250
    
    
    
    5,050Selling, delivery and administrative expenses
    
    
    5,167
    
    
    
    4,842
    
    
    
    4,533
    
    
    
    4,285
    
    
    
    4,089Operating income
    
    
    1,054
    
    
    
    988
    
    
    
    1,007
    
    
    
    965
    
    
    
    961Interest expense, net
    
    
    10
    
    
    
    53
    
    
    
    110
    
    
    
    132
    
    
    
    143Other non-operating (income) expenses, net
    
    
    (5
    )
    
    
    10
    
    
    
    1
    
    
    
    1
    
    
    
    7Minority interest
    
    
    28
    
    
    
    (2
    )
    
    
    1
    
    
    
    
    
    
    
    Income before income taxes
    
    
    1,021
    
    
    
    927
    
    
    
    895
    
    
    
    832
    
    
    
    811Income tax expense (5)(6)(7)(8)
    
    
    27
    
    
    
    3
    
    
    
    24
    
    
    
    3
    
    
    
    84Income before cumulative effect of change in accounting
principle
    
    
    994
    
    
    
    924
    
    
    
    871
    
    
    
    829
    
    
    
    727Cumulative effect of change in accounting principle, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6Net income
    
    $
    994
    
    
    $
    924
    
    
    $
    871
    
    
    $
    829
    
    
    $
    721Balance Sheet Data (at period end):Total assets
    
    $
    16,712
    
    
    $
    14,955
    
    
    $
    13,745
    
    
    $
    12,724
    
    
    $
    12,997Long-term debt
    
    $
    3,776
    
    
    $
    3,759
    
    
    $
    2,943
    
    
    $
    3,495
    
    
    $
    3,497Minority interest
    
    $
    379
    
    
    $
    18
    
    
    $
    3
    
    
    $
    3
    
    
    $
    Accumulated other comprehensive loss (9)
    
    $
    (189
    )
    
    $
    (589
    )
    
    $
    (395
    )
    
    $
    (447
    )
    
    $
    (503
    )Owners equity
    
    $
    9,229
    
    
    $
    8,092
    
    
    $
    7,581
    
    
    $
    6,620
    
    
    $
    5,902
 
 (1)
    
    Our fiscal year 2007 results include a $30 million pre-tax charge related to restructuring
charges and a $23 million pre-tax charge related to our Full Service Vending Rationalization
plan. See Items Affecting Comparability of Our Financial Results in Item 7.(2)
    
    We made a classification correction for certain miscellaneous costs incurred from product
losses in the trade. Approximately $90 million and $92 million of costs incurred, which were
incorrectly included in selling, delivery and administrative expenses, were reclassified to
cost of sales in our Consolidated Statements of Operations for the years ended 2006 and 2005,
respectively. We have not reclassified these expenses for the 2004 and 2003 fiscal years.(3)
    
    In fiscal year 2006, we adopted the Statement of Financial Accounting Standard No. 123(R),
Share-Based Payment (SFAS 123R) resulting in a $65 million decrease in operating income.
Results for prior periods have not been restated as provided for under the modified
prospective approach.(4)
    
    Our fiscal year 2005 results include an extra week of activity. The pre-tax income generated
from the extra week was spent back in strategic initiatives within our selling, delivery and
administrative expenses. The 53rd week had no impact on our net income.(5)
    
    Our fiscal year 2003 results include Canada tax law change expense of $11 million.(6)
    
    Our fiscal year 2004 results include Mexico tax law change benefit of $26 million.(7)
    
    Our fiscal year 2006 results include a tax benefit of $12 million from tax law changes in
Canada, Turkey, and in certain U.S. jurisdictions. See Items Affecting Comparability of Our
Financial Results in Item 7.(8)
    
    Our fiscal year 2007 results include a net non-cash benefit of $13 million due to tax law
changes in Canada and Mexico. See Items Affecting Comparability of Our Financial Results in
Item 7.(9)
    
    In fiscal year 2006, we adopted the Employers Accounting for Defined Benefit Pension and
Other Postretirement Plans (SFAS 158) and recorded a $278 million loss, net of taxes, to
accumulated other comprehensive loss. 14




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Item 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND  RESULTS OF OPERATIONS
 TABLE OF CONTENTS
 MANAGEMENTS FINANCIAL REVIEW
    
    15Our Business
    
    15Our Critical Accounting Policies
    
    16Our Relationship with PepsiCo
    
    20Our Financial Results:
    
    21Items Affecting Comparability of Our Financial Results
    
    21Financial Performance Summary and Worldwide Financial Highlights for Fiscal Year 2007
    
    23Results of Operations
    
    23Liquidity and Financial Condition
    
    29Market Risks and Cautionary Statements
    
    31AUDITED CONSOLIDATED FINANCIAL STATEMENTSConsolidated Statements of Operations
    
    34Consolidated Statements of Cash Flows
    
    35Consolidated Balance Sheets
    
    36Consolidated Statements of Changes in Owners Equity
    
    37Notes to Consolidated Financial Statements
    
    38Report of Independent Registered Public Accounting Firm
    
    63
 
 MANAGEMENTS FINANCIAL REVIEW  Tabular dollars in millions
 
 OUR BUSINESS
   
  15




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.
 
 OUR CRITICAL ACCOUNTING POLICIES
  16




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Other Intangible Assets, net and Goodwill
      Pension and Postretirement Medical Benefit Plans
  17




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Assumptions
         18




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Pension
    
    2008(1)
    
    2007(2)Discount rate
    
    
    6.70
    %
    
    
    6.00
    %Expected return on plan assets (net of administrative expenses)
    
    
    8.50
    %
    
    
    8.50
    %Rate of compensation increase
    
    
    3.56
    %
    
    
    3.55
    %
 Postretirement
    
    2008(1)
    
    2007(2)Discount rate
    
    
    6.35
    %
    
    
    5.80
    %Rate of compensation increase
    
    
    3.56
    %
    
    
    3.55
    %Health care cost trend rate
    
    
    9.50
    %
    
    
    8.00
    %
 
 (1)
    
    Our 2008 discount rate was determined as of December 29, 2007 and reflects the
implementation of SFAS 158 Measurement Date provisions.(2)
    
    Our 2007 discount rate was determined as of September 30, 2006.  
    
    An increase in our weighted-average discount rate for our pension and postretirement
medical expense from 6.00 percent and 5.80 percent to 6.70 percent and 6.35 percent,
respectively, reflecting increases in the yields of long-term corporate bonds comprising
the yield curve. This change in assumption will decrease our 2008 defined benefit pension
and postretirement medical expense by approximately $27 million.
    
    A change to our mortality assumption to reflect four years of projected mortality
improvement will increase our 2008 defined benefit pension and postretirement medical
expense by approximately $3 million.
    
    Other factors, including changes in gains and losses resulting from differences between
actual experience and assumptions, will decrease our 2008 defined benefit pension and
postretirement medical expenses by approximately $6 million.
 Sensitivity Analysis
  2007
    
    2006
    
    2005Expected return on plan assets (net of administrative expenses)
    
    
    8.50
    %
    
    
    8.50
    %
    
    
    8.50
    %Actual return on plan assets (net of administrative expenses)
    
    
    12.64
    %
    
    
    9.74
    %
    
    
    13.33
    %
  
    
    Discount rate  A 25-basis point change in the discount rate would increase or decrease
our expense for PBGs pension and postretirement medical benefit plans in 2008 by
approximately $9 million.
    
    Expected return on plan assets  A 25-basis point change in the expected return on plan
assets would increase or decrease our expense for PBGs pension plans in 2008 by
approximately $3 million. The postretirement medical benefit plans have no expected return
on plan assets as they are funded from the general assets of the Company as the payments
come due.
  Income Taxes
 19




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OUR RELATIONSHIP WITH PEPSICO
      20




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OUR FINANCIAL RESULTS
 
 ITEMS AFFECTING COMPARABILITY OF OUR FINANCIAL RESULTS
 Certain reclassifications were made to the prior years Consolidated Financial Statements to
conform to the current year presentation, including a classification correction for certain
miscellaneous costs incurred from product losses in the trade. Approximately $90 million and $92
million of costs incurred, which were incorrectly included in selling, delivery and administrative
expenses, were reclassified to cost of sales in our Consolidated Statements of Operations for the
years ended 2006 and 2005, respectively.
  December
    
    December
    
    DecemberIncome/(Expense)
    
    29, 2007
    
    30, 2006
    
    31, 2005Gross profitPR Beverages
    
    $
    29
    
    
    
    
    
    
    
    Operating incomePR Beverages
    
    
    29
    
    
    
    
    
    
    
    Restructuring Charges
    
    
    (30
    )
    
    
    
    
    
    
    Full Service Vending Rationalization
    
    
    (23
    )
    
    
    
    
    
    
    HFCS Litigation Settlement
    
    
    
    
    
    
    
    
    
    $
    2953rd Week
    
    
    
    
    
    
    
    
    
    
    24Strategic Spending Initiatives
    
    
    
    
    
    
    
    
    
    
    (48
    )
 2007 Items
 PR Beverages
  Restructuring Charges
 Organizational Realignment
    Other Restructuring Charges
  21




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Full Service Vending Rationalization
     Tax Law Changes
  2006 Items
 Tax Law Changes
  2005 Items
 High Fructose Corn Syrup (HFCS) Litigation Settlement
  53 rd Week
 rd rd
 Strategic Spending Initiatives
 rd
 22




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FINANCIAL PERFORMANCE SUMMARY AND WORLDWIDE FINANCIAL HIGHLIGHTS FOR FISCAL YEAR 2007
 December
    
    December
    
    Fiscal Year29, 2007
    
    30, 2006
    
    % ChangeNet revenues
    
    $
    13,591
    
    
    $
    12,730
    
    
    
    7
    %Cost of sales
    
    
    7,370
    
    
    
    6,900
    
    
    
    7Gross profit
    
    
    6,221
    
    
    
    5,830
    
    
    
    7Selling, delivery
and administrative
(SD&A) expenses
    
    
    5,167
    
    
    
    4,842
    
    
    
    7Operating income
    
    
    1,054
    
    
    
    988
    
    
    
    7Net income
    
    
    994
    
    
    
    924
    
    
    
    8
 The impact of foreign currency translation, driven by the strength of the Canadian Dollar, the
Euro, the Turkish Lira and the Russian Ruble, contributed approximately two percentage points of
growth in worldwide net revenues, cost of sales, gross profit, and selling, delivery and
administrative expenses, and contributed approximately one percentage point of growth in worldwide
operating income.
 Net revenues 
 Cost of sales 
 Gross profit 
 SD&A expenses 
 Operating income 
 Net income
 
 RESULTS OF OPERATIONS
 Except where noted, tables and discussion are presented as compared to the prior fiscal year.
Growth rates are rounded to the nearest whole percentage.
 Volume
 2007 vs. 2006
 Worldwide
    
    U.S. & Canada
    
    Europe
    
    MexicoBase volume
    
    
    0
    %
    
    
    0
    %
    
    
    4
    %
    
    
    (2
    )%Acquisitions
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    3Total Volume Change
    
    
    1
    %
    
    
    0
    %
    
    
    4
    %
    
    
    1
    %
  23




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2006 vs. 2005
 Worldwide
    
    U.S. & Canada
    
    Europe
    
    MexicoBase volume
    
    
    3
    %
    
    
    3
    %
    
    
    7
    %
    
    
    1
    %Acquisitions
    
    
    1
    
    
    
    1
    
    
    
    
    
    
    
    3Impact of 53rd week in 2005
    
    
    (1
    )
    
    
    (2
    )
    
    
    
    
    
    
    Total Volume Change
    
    
    3
    %
    
    
    2
    %
    
    
    7
    %
    
    
    4
    %
  rd
 rd
 rd
   24




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Net Revenues
 2007 vs. 2006
 Worldwide
    
    U.S. & Canada
    
    Europe
    
    MexicoVolume impact
    
    
    0
    %
    
    
    0
    %
    
    
    4
    %
    
    
    (2
    )%Net price per case impact (rate/mix)
    
    
    4
    
    
    
    4
    
    
    
    9
    
    
    
    7Acquisitions
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    3Currency translation
    
    
    2
    
    
    
    0
    
    
    
    9
    
    
    
    0Total Net Revenues Change
    
    
    7
    %
    
    
    4
    %
    
    
    22
    %
    
    
    8
    %
     2006 vs. 2005
 Worldwide
    
    U.S. & Canada
    
    Europe
    
    MexicoVolume impact
    
    
    3
    %
    
    
    3
    %
    
    
    7
    %
    
    
    1
    %Net price per case impact (rate/mix)
    
    
    3
    
    
    
    3
    
    
    
    5
    
    
    
    5Acquisitions
    
    
    1
    
    
    
    1
    
    
    
    
    
    
    
    3Currency translation
    
    
    1
    
    
    
    1
    
    
    
    0
    
    
    
    0Impact of 53rd week in 2005
    
    
    (1
    )
    
    
    (2
    )
    
    
    
    
    
    
    Total Net Revenues Change
    
    
    7
    %
    
    
    6
    %
    
    
    12
    %
    
    
    9
    %
 rd
    25




---



##### Table of Contents



Cost of Sales
 2007 vs. 2006
 WorldwideVolume impact
    
    
    0
    %Cost per case impact
    
    
    4Acquisitions
    
    
    1Currency translation
    
    
    2PR Beverages
    
    
    0Total Cost of Sales Change
    
    
    7
    %
     2006 vs. 2005
 WorldwideVolume impact
    
    
    3
    %Cost per case impact
    
    
    5Acquisitions
    
    
    1Currency translation
    
    
    1Impact of 53rd week in 2005
    
    
    (1
    )Total Cost of Sales Change
    
    
    9
    %
 rd
 Selling, Delivery and Administrative Expenses
 2007 vs. 2006
 WorldwideCost impact (without Restructuring Charges and FSV
Rationalization)
    
    
    4
    %Restructuring Charges and FSV Rationalization
    
    
    1Currency translation
    
    
    2Total SD&A Change
    
    
    7
    %
  26




---



##### Table of Contents



2006 vs. 2005
 WorldwideCost impact
    
    
    5
    %Adoption of SFAS 123R in 2006
    
    
    1Acquisitions
    
    
    1HFCS Settlement in 2005
    
    
    1Strategic Spending Initiatives in 2005
    
    
    (1
    )Currency translation
    
    
    1Impact of 53rd week in 2005
    
    
    (1
    )Total SD&A Change
    
    
    7
    %
 rd
  Operating Income
 2007 vs. 2006
     2006 vs. 2005
  rd
 27




---



##### Table of Contents



Interest Expense
 2007 vs. 2006
  2006 vs. 2005
  Interest Income
 2007 vs. 2006
  2006 vs. 2005
  Other Non-Operating (Income) Expenses, net
 2007 vs. 2006
  2006 vs. 2005
  Minority Interest
 2007 vs. 2006
   Income Tax Expense
  2007 vs. 2006
  2006 vs. 2005
  28




---



##### Table of Contents



LIQUIDITY AND FINANCIAL CONDITION
 Cash Flows
 2007 vs. 2006
    2006 vs. 2005
    Capital Expenditures
  Liquidity and Capital Resources
  Long-Term Debt Activities
   Short-Term Debt Activities
  29




---



##### Table of Contents



Debt Covenants and Credit Ratings
   Contractual Obligations
  Payments Due by PeriodContractual Obligations
    
    Total
    
    
    2008
    
    
    2009-2010
    
    
    2011-2012
    
    
    2013 and beyondLong-term debt obligations(1)
    
    $
    3,778
    
    
    $
    2
    
    
    $
    1,326
    
    
    $
    1,000
    
    
    $
    1,450Capital lease obligations(2)
    
    
    11
    
    
    
    4
    
    
    
    3
    
    
    
    2
    
    
    
    2Operating leases(2)
    
    
    272
    
    
    
    54
    
    
    
    71
    
    
    
    32
    
    
    
    115Interest obligations(3)
    
    
    914
    
    
    
    192
    
    
    
    281
    
    
    
    242
    
    
    
    199Purchase obligations:Raw material obligations(4)
    
    
    199
    
    
    
    119
    
    
    
    69
    
    
    
    11
    
    
    
    Capital expenditure obligations(5)
    
    
    81
    
    
    
    81
    
    
    
    
    
    
    
    
    
    
    
    Other obligations(6)
    
    
    371
    
    
    
    150
    
    
    
    110
    
    
    
    53
    
    
    
    58Other long-term liabilities(7)
    
    
    16
    
    
    
    9
    
    
    
    3
    
    
    
    2
    
    
    
    2Total
    
    $
    5,642
    
    
    $
    611
    
    
    $
    1,863
    
    
    $
    1,342
    
    
    $
    1,826
 
 (1)
    
    See Note 6 in the Notes to Consolidated Financial Statements for additional
information relating to our long-term debt obligations.(2)
    
    See Note 7 in the Notes to Consolidated Financial Statements for additional
information relating to our lease obligations.(3)
    
    Represents interest payment obligations related to our long-term fixed-rate debt as
specified in the applicable debt agreements. A portion of our long-term debt has variable
interest rates due to either existing swap agreements or interest arrangements. We estimated
our variable interest payment obligations by using the interest rate forward curve.(4)
    
    Represents obligations to purchase raw materials pursuant to contracts entered into
by PepsiCo on our behalf and international agreements to purchase raw materials.(5)
    
    Represents commitments to suppliers under capital expenditure related contracts or
purchase orders.(6)
    
    Represents non-cancelable agreements that specify fixed or minimum quantities, price
arrangements and timing of payments. Also includes agreements that provide for termination
penalty clauses.(7)
    
    Primarily represents non-compete contracts that resulted from business acquisitions.
The non-current portion of unrecognized tax benefits recorded on the balance sheet as of
December 29, 2007 is not included in the table.
There was no current portion of unrecognized tax benefits as of December, 29 2007. For additional information about our income
taxes see Note 10 in the Notes to Consolidated Financial Statements.  Off-Balance Sheet Arrangements
  30




---



##### Table of Contents



MARKET RISKS AND CAUTIONARY STATEMENTS
 Quantitative and Qualitative Disclosures about Market Risk
    Commodity Price Risk
  Interest Rate Risk
  Foreign Currency Exchange Rate Risk
  31




---



##### Table of Contents



Unfunded Deferred Compensation Liability
  32




---



##### Table of Contents



Cautionary Statements
  
    
    changes in our relationship with PepsiCo;
    
    PepsiCos ability to affect matters concerning us
through its equity ownership of PBG and Bottling LLC,
representation on PBGs Board and approval rights under our Master Bottling Agreement;
    
    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 successfully integrate acquired businesses or to meet projections for
performance in newly acquired territories;
    
    loss of business from a significant customer;
    
    loss of key members of management;
    
    failure or inability to comply with laws and regulations;
    
    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 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 social, economic and political changes;
    
    possible recalls of our products;
    
    interruptions of operations due to labor disagreements;
    
    limitations on our ability to invest in our business as a result of our repayment
obligations under our existing indebtedness;
    
    changes in our debt ratings;
    
    material changes in expected interest and currency exchange rates and unfavorable market
performance of assets in PBG sponsored pension plans; and
    
    an inability to achieve strategic business plan targets that could result in a non-cash
intangible asset impairment charge.
 33




---



##### Table of Contents



Bottling Group, LLC
Consolidated Statements of Operations
 Fiscal years ended December 29, 2007, December 30, 2006 and December 31, 2005
 2007
    
    
    2006
    
    
    2005Net Revenues
    
    $
    13,591
    
    
    $
    12,730
    
    
    $
    11,885Cost of sales
    
    
    7,370
    
    
    
    6,900
    
    
    
    6,345Gross Profit
    
    
    6,221
    
    
    
    5,830
    
    
    
    5,540Selling, delivery and administrative expenses
    
    
    5,167
    
    
    
    4,842
    
    
    
    4,533Operating Income
    
    
    1,054
    
    
    
    988
    
    
    
    1,007Interest expense
    
    
    232
    
    
    
    227
    
    
    
    187Interest income
    
    
    222
    
    
    
    174
    
    
    
    77Other non-operating (income) expenses, net
    
    
    (5
    )
    
    
    10
    
    
    
    1Minority interest expense (income)
    
    
    28
    
    
    
    (2
    )
    
    
    1Income Before Income Taxes
    
    
    1,021
    
    
    
    927
    
    
    
    895Income tax expense
    
    
    27
    
    
    
    3
    
    
    
    24Net Income
    
    $
    994
    
    
    $
    924
    
    
    $
    871
  34




---



##### Table of Contents



Bottling Group, LLC
Consolidated Statements of Cash Flows
 Fiscal years ended December 29, 2007, December 30, 2006 and December 31, 2005
 2007
    
    
    2006
    
    
    2005Cash FlowsOperationsNet income
    
    $
    994
    
    
    $
    924
    
    
    $
    871Adjustments to reconcile net income to net cash provided by operations:Depreciation and amortization
    
    
    668
    
    
    
    648
    
    
    
    630Deferred income taxes
    
    
    (8
    )
    
    
    (41
    )
    
    
    (28
    )Stock-based compensation
    
    
    61
    
    
    
    65
    
    
    
    Other non-cash charges and credits:Defined benefit pension and postretirement expenses
    
    
    121
    
    
    
    119
    
    
    
    109Minority interest expense (income)
    
    
    28
    
    
    
    (2
    )
    
    
    1Other non-cash charges and credits
    
    
    78
    
    
    
    68
    
    
    
    82Net other non-cash charges and credits
    
    
    227
    
    
    
    185
    
    
    
    192Changes in operating working capital, excluding effects of acquisitions:Accounts receivable, net
    
    
    (110
    )
    
    
    (120
    )
    
    
    7Inventories
    
    
    (19
    )
    
    
    (57
    )
    
    
    (29
    )Prepaid expenses and other current assets
    
    
    116
    
    
    
    (75
    )
    
    
    (40
    )Accounts payable and other current liabilities
    
    
    187
    
    
    
    87
    
    
    
    2Income taxes payable
    
    
    5
    
    
    
    25
    
    
    
    8Net change in operating working capital
    
    
    179
    
    
    
    (140
    )
    
    
    (52
    )Pension contributions to funded plans
    
    
    (70
    )
    
    
    (68
    )
    
    
    (77
    )Other, net
    
    
    (73
    )
    
    
    (46
    )
    
    
    (65
    )Net Cash Provided by Operations
    
    
    1,978
    
    
    
    1,527
    
    
    
    1,471Cash FlowsInvestmentsCapital expenditures
    
    
    (854
    )
    
    
    (721
    )
    
    
    (709
    )Acquisitions of bottlers, net of cash acquired
    
    
    (49
    )
    
    
    (33
    )
    
    
    (1
    )Proceeds from sale of property, plant and equipment
    
    
    14
    
    
    
    18
    
    
    
    20Notes receivable from PBG, net
    
    
    (733
    )
    
    
    (763
    )
    
    
    (436
    )Other investing activities, net
    
    
    6
    
    
    
    5
    
    
    
    4Net Cash Used for Investments
    
    
    (1,616
    )
    
    
    (1,494
    )
    
    
    (1,122
    )Cash FlowsFinancingShort-term borrowings, netthree months or less
    
    
    (40
    )
    
    
    133
    
    
    
    (9
    )Proceeds from short-term borrowings  more than three months
    
    
    167
    
    
    
    96
    
    
    
    74Payments of short-term borrowings  more than three months
    
    
    (211
    )
    
    
    (74
    )
    
    
    (68
    )Proceeds from issuances of long-term debt
    
    
    24
    
    
    
    793
    
    
    
    36Payments of long-term debt
    
    
    (41
    )
    
    
    (603
    )
    
    
    (35
    )Distributions to owners
    
    
    (271
    )
    
    
    (284
    )
    
    
    (181
    )Net Cash (Used for)/Provided by Financing
    
    
    (372
    )
    
    
    61
    
    
    
    (183
    )Effect of Exchange Rate Changes on Cash and Cash Equivalents
    
    
    28
    
    
    
    1
    
    
    
    3Net Increase in Cash and Cash Equivalents
    
    
    18
    
    
    
    95
    
    
    
    169Cash and Cash EquivalentsBeginning of Year
    
    
    441
    
    
    
    346
    
    
    
    177Cash and Cash EquivalentsEnd of Year
    
    $
    459
    
    
    $
    441
    
    
    $
    346Supplemental Cash Flow InformationNon-Cash Investing and Financing Activities:Liabilities incurred and/or assumed in conjunction with
acquisitions of bottlers
    
    $
    1
    
    
    $
    20
    
    
    $
    Change in accounts payable related to capital expenditures
    
    $
    15
    
    
    $
    7
    
    
    $
    (6
    )Acquisition of intangible asset
    
    $
    315
    
    
    $
    
    
    
    $
    
  35




---



##### Table of Contents



Bottling Group, LLC
Consolidated Balance Sheets
 December 29, 2007 and December 30, 2006
 2007
    
    
    2006ASSETSCurrent AssetsCash and cash equivalents
    
    $
    459
    
    
    $
    441Accounts receivable, less allowance of $54 in 2007 and $50 in 2006
    
    
    1,520
    
    
    
    1,331Inventories
    
    
    577
    
    
    
    533Prepaid expenses and other current assets
    
    
    308
    
    
    
    355Total Current Assets
    
    
    2,864
    
    
    
    2,660Property, plant and equipment, net
    
    
    4,071
    
    
    
    3,776Other intangible assets, net
    
    
    4,181
    
    
    
    3,768Goodwill
    
    
    1,533
    
    
    
    1,490Notes receivable from PBG
    
    
    3,880
    
    
    
    3,147Other assets
    
    
    183
    
    
    
    114Total Assets
    
    $
    16,712
    
    
    $
    14,955LIABILITIES AND OWNERS EQUITYCurrent LiabilitiesAccounts payable and other current liabilities
    
    $
    1,829
    
    
    $
    1,559Short-term borrowings
    
    
    190
    
    
    
    242Current maturities of long-term debt
    
    
    6
    
    
    
    16Total Current Liabilities
    
    
    2,025
    
    
    
    1,817Long-term debt
    
    
    3,776
    
    
    
    3,759Other liabilities
    
    
    832
    
    
    
    863Deferred income taxes
    
    
    471
    
    
    
    406Minority interest
    
    
    379
    
    
    
    18Total Liabilities
    
    
    7,483
    
    
    
    6,863Owners EquityOwners net investment (includes impact from adopting FIN 48 in
fiscal year 2007 of ($45))
    
    
    9,418
    
    
    
    8,681Accumulated other comprehensive loss
    
    
    (189
    )
    
    
    (589
    )Total Owners Equity
    
    
    9,229
    
    
    
    8,092Total Liabilities and Owners Equity
    
    $
    16,712
    
    
    $
    14,955
  36




---



##### Table of Contents



Bottling Group, LLC
Consolidated Statements of Changes in Owners Equity
 December 29, 2007, December 30, 2006 and December 31, 2005
 AccumulatedOwners
    
    
    
    
    
    
    OtherNet
    
    
    
    
    
    
    Comprehensive
    
    
    
    
    
    
    ComprehensiveInvestment
    
    
    Deferred Compensation
    
    
    Loss
    
    
    Total
    
    
    IncomeBalance at December 25, 2004
    
    $
    7,068
    
    
    $
    (1
    )
    
    $
    (447
    )
    
    $
    6,620Comprehensive income:Net income
    
    
    871
    
    
    
    
    
    
    
    
    
    
    
    871
    
    
    $
    871Currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    70
    
    
    
    70
    
    
    
    70Minimum pension liability adjustment
    
    
    
    
    
    
    
    
    
    
    (8
    )
    
    
    (8
    )
    
    
    (8
    )Cash flow hedge adjustment (net of tax of
$2)
    
    
    
    
    
    
    
    
    
    
    (10
    )
    
    
    (10
    )
    
    
    (10
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    923Cash distributions to owners
    
    
    (181
    )
    
    
    
    
    
    
    
    
    
    
    (181
    )Non-cash contributions from owners
    
    
    216
    
    
    
    
    
    
    
    
    
    
    
    216Stock compensation
    
    
    16
    
    
    
    (13
    )
    
    
    
    
    
    
    3Balance at December 31, 2005
    
    
    7,990
    
    
    
    (14
    )
    
    
    (395
    )
    
    
    7,581Comprehensive income:Net income
    
    
    924
    
    
    
    
    
    
    
    
    
    
    
    924
    
    
    $
    924Currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    26
    
    
    
    26
    
    
    
    26Minimum pension liability adjustment
    
    
    
    
    
    
    
    
    
    
    48
    
    
    
    48
    
    
    
    48FAS 158  pension liability adjustment
(net of tax of $4 )
    
    
    
    
    
    
    
    
    
    
    (278
    )
    
    
    (278
    )
    
    
    Cash flow hedge adjustment (net of tax of
$(3))
    
    
    
    
    
    
    
    
    
    
    10
    
    
    
    10
    
    
    
    10Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,008Cash distributions to owners
    
    
    (284
    )
    
    
    
    
    
    
    
    
    
    
    (284
    )Stock compensation
    
    
    51
    
    
    
    14
    
    
    
    
    
    
    
    65Balance at December 30, 2006
    
    
    8,681
    
    
    
    
    
    
    
    (589
    )
    
    
    8,092Comprehensive income:Net income
    
    
    994
    
    
    
    
    
    
    
    
    
    
    
    994
    
    
    $
    994Currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    235
    
    
    
    235
    
    
    
    235Pension and postretirement medical benefit
plans adjustment (net of tax of $(3))
    
    
    
    
    
    
    
    
    
    
    163
    
    
    
    163
    
    
    
    163Cash flow hedge adjustment (net of tax of
$2)
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    2
    
    
    
    2Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,394Impact from adopting FIN 48
    
    
    (45
    )
    
    
    
    
    
    
    
    
    
    
    (45
    )Cash distributions to owners
    
    
    (271
    )
    
    
    
    
    
    
    
    
    
    
    (271
    )Stock compensation
    
    
    59
    
    
    
    
    
    
    
    
    
    
    
    59Balance at December 29, 2007
    
    $
    9,418
    
    
    $
    
    
    
    $
    (189
    )
    
    $
    9,229
  37




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 1Basis of Presentation
    Note 2Summary of Significant Accounting Policies
  Basis of Consolidation 
   Fiscal Year 
 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/17 weeks (FY 2005)
    
    September, October,
November and December
 Revenue Recognition 
 38




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##### Table of Contents



Advertising and Marketing Costs 
 Bottler Incentives 
 
    
    Direct marketplace support represents PepsiCos and other brand owners agreed-upon
funding to assist us in offering sales and promotional discounts to retailers and is
generally recorded as an adjustment to cost of sales. If the direct marketplace support is
a reimbursement for a specific, incremental and identifiable program, the funding is
recorded as an offset to the cost of the program either in net revenues or selling,
delivery and administrative expenses.
    
    Advertising support represents agreed-upon funding to assist us for the cost of media
time and promotional materials and is generally recorded as an adjustment to cost of sales.
Advertising support that represents reimbursement for a specific, incremental and
identifiable media cost, is recorded as a reduction to advertising and marketing expenses
within selling, delivery and administrative expenses.
  Fiscal Year Ended2007
    
    
    2006
    
    
    2005Net revenues
    
    $
    66
    
    
    $
    67
    
    
    $
    51Cost of sales
    
    
    626
    
    
    
    612
    
    
    
    589Selling, delivery and administrative expenses
    
    
    67
    
    
    
    70
    
    
    
    79Total bottler incentives
    
    $
    759
    
    
    $
    749
    
    
    $
    719
  Share-Based Compensation
 Shipping and Handling Costs
 Foreign Currency Gains and Losses and Currency Translation 
 39




---



##### Table of Contents



Pension and Postretirement Medical Benefit Plans 
    Income Taxes
   Cash and Cash Equivalents 
 Allowance for Doubtful Accounts 
 Inventories 
 Property, Plant and Equipment 
 Other Intangible Assets, net and Goodwill 
 40




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##### Table of Contents



Minority Interest 
 Financial Instruments and Risk Management 
    Commitments and Contingencies 
 New Accounting Standards
 SFAS No. 157
  SFAS No. 158
  41




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##### Table of Contents



SFAS No. 159
  SFAS No. 141(R)
  SFAS No. 160
  EITF Issue No. 06-11
  Note 3Share-Based Compensation
 Accounting for Share-Based Compensation 
    42




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##### Table of Contents



Fiscal Year Ended2005Net income:As reported
    
    $
    871Add: Total share-based employee compensation included in reported net income
    
    
    1Less: Total share-based employee compensation determined under fair-value
based method for all awards
    
    
    (64
    )Pro forma
    
    $
    808
 Share-Based Long-Term Incentive Compensation Plans 
    2007
    
    2006
    
    2005Risk-free interest rate
    
    
    4.5
    %
    
    
    4.7
    %
    
    
    4.1
    %Expected term (in years)
    
    
    5.6
    
    
    
    5.7
    
    
    
    5.8Expected volatility
    
    
    25
    %
    
    
    27
    %
    
    
    28
    %Expected dividend yield
    
    
    1.8
    %
    
    
    1.5
    %
    
    
    1.1
    %
     Stock Options 
 43




---



##### Table of Contents



Weighted-
    
    Weighted-Average
    
    AverageExercise
    
    Remaining
    
    AggregateShares
    
    Price
    
    Contractual
    
    Intrinsic(in millions)
    
    per Share
    
    Term (years)
    
    ValueOutstanding at December 30, 2006
    
    
    31.7
    
    
    $
    24.16Granted
    
    
    3.4
    
    
    
    30.98Exercised
    
    
    (7.2
    )
    
    
    22.15Forfeited
    
    
    (1.4
    )
    
    
    28.74Outstanding at December 29, 2007
    
    
    26.5
    
    
    
    25.32
    
    
    
    5.9
    
    
    $
    388Vested or expected to vest at
December 29, 2007
    
    
    26.2
    
    
    
    25.26
    
    
    
    5.8
    
    
    
    386Exercisable at December 29, 2007
    
    
    18.2
    
    
    
    23.32
    
    
    
    4.8
    
    
    
    303
   Restricted Stock Units 
  Weighted-Weighted-
    
    AverageAverage
    
    Remaining
    
    AggregateShares
    
    Grant-Date
    
    Contractual
    
    Intrinsic(in thousands)
    
    Fair Value
    
    Term (years)
    
    ValueOutstanding at December 30, 2006
    
    
    1,652
    
    
    $
    29.07Granted
    
    
    1,116
    
    
    
    31.01Converted
    
    
    
    
    
    
    Forfeited
    
    
    (429
    )
    
    
    28.86Outstanding at December 29, 2007
    
    
    2,339
    
    
    
    30.04
    
    
    
    1.7
    
    
    $
    93Vested or expected to vest at
December 29, 2007
    
    
    2,246
    
    
    
    30.00
    
    
    
    1.7
    
    
    
    90Convertible at December 29, 2007
    
    
    106
    
    
    
    28.76
    
    
    
    
    
    
    
    4
  Note 4Balance Sheet Details
 Accounts Receivable
    
    2007
    
    
    2006Trade accounts receivable
    
    $
    1,319
    
    
    $
    1,163Allowance for doubtful accounts
    
    
    (54
    )
    
    
    (50
    )Accounts receivable from PepsiCo
    
    
    188
    
    
    
    168Other receivables
    
    
    67
    
    
    
    50$
    1,520
    
    
    $
    1,331
 44




---



##### Table of Contents



Inventories
    
    2007
    
    
    2006Raw materials and supplies
    
    $
    195
    
    
    $
    201Finished goods
    
    
    382
    
    
    
    332$
    577
    
    
    $
    533Prepaid Expenses and Other Current AssetsPrepaid expenses
    
    $
    256
    
    
    $
    314Other current assets
    
    
    52
    
    
    
    41$
    308
    
    
    $
    355Property, Plant and Equipment, netLand
    
    $
    320
    
    
    $
    291Buildings and improvements
    
    
    1,484
    
    
    
    1,404Manufacturing and distribution equipment
    
    
    4,091
    
    
    
    3,705Marketing equipment
    
    
    2,389
    
    
    
    2,425Capital leases
    
    
    36
    
    
    
    60Other
    
    
    154
    
    
    
    1628,474
    
    
    
    8,047Accumulated depreciation
    
    
    (4,403
    )
    
    
    (4,271
    )$
    4,071
    
    
    $
    3,776
   Buildings and improvements
    
    20-33 yearsManufacturing and distribution equipment
    
    2-15 yearsMarketing equipment
    
    2-7 years
 Industrial Revenue Bonds 
 Accounts Payable and Other Current Liabilities
    
    2007
    
    
    2006Accounts payable
    
    $
    615
    
    
    $
    525Accounts payable to PepsiCo
    
    
    255
    
    
    
    234Trade incentives
    
    
    235
    
    
    
    194Accrued compensation and benefits
    
    
    276
    
    
    
    237Other accrued taxes
    
    
    139
    
    
    
    111Accrued interest
    
    
    47
    
    
    
    49Other current liabilities
    
    
    262
    
    
    
    209$
    1,829
    
    
    $
    1,559
 45




---



##### Table of Contents



Note 5Other Intangible Assets, net and Goodwill
  2007
    
    
    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
    
    
    (15
    )
    
    
    (11
    )Franchise/distribution rights
    
    
    (31
    )
    
    
    (27
    )Other identified intangibles
    
    
    (17
    )
    
    
    (16
    )(63
    )
    
    
    (54
    )Intangibles subject to amortization, net
    
    
    67
    
    
    
    77Intangibles not subject to amortization:Carrying amount:Franchise rights
    
    
    3,235
    
    
    
    3,128Licensing rights
    
    
    315
    
    
    
    Distribution rights
    
    
    294
    
    
    
    297Trademarks
    
    
    213
    
    
    
    215Other identified intangibles
    
    
    57
    
    
    
    51Intangibles not subject to amortization
    
    
    4,114
    
    
    
    3,691Total other intangible assets, net
    
    $
    4,181
    
    
    $
    3,768
    Intangible asset amortization
  Goodwill
  U.S. &Canada
    
    
    Europe
    
    
    Mexico
    
    
    TotalBalance at December 31, 2005
    
    $
    1,240
    
    
    $
    16
    
    
    $
    260
    
    
    $
    1,516Purchase price allocations relating to acquisitions
    
    
    (11
    )
    
    
    
    
    
    
    (11
    )
    
    
    (22
    )Impact of foreign currency translation
    
    
    
    
    
    
    
    
    
    
    (4
    )
    
    
    (4
    )Balance at December 30, 2006
    
    
    1,229
    
    
    
    16
    
    
    
    245
    
    
    
    1,490Purchase price allocations relating to acquisitions
    
    
    1
    
    
    
    
    
    
    
    (16
    )
    
    
    (15
    )Impact of foreign currency translation
    
    
    60
    
    
    
    1
    
    
    
    (3
    )
    
    
    58Balance at December 29, 2007
    
    $
    1,290
    
    
    $
    17
    
    
    $
    226
    
    
    $
    1,533
 46




---



##### Table of Contents



Note 6Short-term Borrowings and Long-term Debt
 2007
    
    
    2006Shortterm borrowingsCurrent maturities of long-term debt and capital leases
    
    $
    6
    
    
    $
    16Other short-term borrowings
    
    
    190
    
    
    
    242$
    196
    
    
    $
    258Longterm debt5.63% (6.4% effective rate) (2)(3) senior notes due 2009
    
    $
    1,300
    
    
    $
    1,3004.63% (4.6% effective rate)(3) senior notes due 2012
    
    
    1,000
    
    
    
    1,0005.00% (5.2% effective rate) senior notes due 2013
    
    
    400
    
    
    
    4004.13% (4.4% effective rate) senior notes due 2015
    
    
    250
    
    
    
    2505.50% (5.4% effective rate) senior notes due 2016
    
    
    800
    
    
    
    800Capital leases obligations (Note 7)
    
    
    9
    
    
    
    33Other (average rate 7.0%)
    
    
    28
    
    
    
    113,787
    
    
    
    3,794SFAS 133 adjustment (1)
    
    
    
    
    
    
    (13
    )Unamortized discount, net
    
    
    (5
    )
    
    
    (6
    )Current
maturities of long-term debt and capital leases
    
    
    (6
    )
    
    
    (16
    )$
    3,776
    
    
    $
    3,759
 
 (1)
    
    In accordance with the requirements of SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities (SFAS 133), the portion of our fixed-rate debt obligations that is hedged is reflected in our Consolidated Balance
Sheets as an amount equal to the sum of the debts carrying value plus a SFAS 133 fair value adjustment, representing changes
recorded in the fair value of the hedged debt obligations attributable to movements in market interest rates.(2)
    
    Effective interest rates include the impact of the gain/loss realized on swap instruments and represent the rates
that were achieved in 2007.(3)
    
    These notes are guaranteed by PepsiCo. Aggregate Maturities  Long-term Debt 
 2007 Short-Term Debt Activities 
 Debt Covenants 
 .
 Interest Payments 
 Letters of Credit, Bank Guarantees and Surety Bonds 
 47




---



##### Table of Contents



Note 7Leases
     LeasesCapital
    
    
    Operating2008
    
    $
    4
    
    
    $
    542009
    
    
    2
    
    
    
    392010
    
    
    1
    
    
    
    322011
    
    
    1
    
    
    
    182012
    
    
    1
    
    
    
    14Thereafter
    
    
    2
    
    
    
    115Total
    
    $
    11
    
    
    $
    272Less: Amount representing interest
    
    
    2Present value of net minimum lease payments
    
    
    9Less: current portion of net minimum lease payments
    
    
    4Long-term portion of net minimum lease payments
    
    $
    5
  Components of net rental expense under operating leases:
 2007
    
    
    2006
    
    
    2005Minimum rentals
    
    $
    114
    
    
    $
    99
    
    
    $
    90Sublease rental income
    
    
    (2
    )
    
    
    (3
    )
    
    
    (2
    )Net Rental Expense
    
    $
    112
    
    
    $
    96
    
    
    $
    88
 Note 8Financial Instruments and Risk Management
  Cash Flow Hedges
  48




---



##### Table of Contents



Before Taxes
    
    
    Taxes
    
    
    Net of TaxesAccumulated net gains as of December 25, 2004
    
    $
    17
    
    
    $
    
    
    
    $
    17Net changes in the fair value of cash flow hedges
    
    
    5
    
    
    
    3
    
    
    
    8Net gains reclassified from AOCL into earnings
    
    
    (17
    )
    
    
    (1
    )
    
    
    (18
    )Accumulated net gains as of December 31, 2005
    
    
    5
    
    
    
    2
    
    
    
    7Net changes in the fair value of cash flow hedges
    
    
    14
    
    
    
    (2
    )
    
    
    12Net gains reclassified from AOCL into earnings
    
    
    (1
    )
    
    
    (1
    )
    
    
    (2
    )Accumulated net gains as of December 30, 2006
    
    
    18
    
    
    
    (1
    )
    
    
    17Net changes in the fair value of cash flow hedges
    
    
    (4
    )
    
    
    3
    
    
    
    (1
    )Net losses reclassified from AOCL into earnings
    
    
    4
    
    
    
    (1
    )
    
    
    3Accumulated net gains as of December 29, 2007
    
    $
    18
    
    
    $
    1
    
    
    $
    19
  Fair Value Hedges 
 Foreign Currency Hedges 
 Unfunded Deferred Compensation Liability 
   49




---



##### Table of Contents



Other Financial Assets and Liabilities 
  Note 9Pension and Postretirement Medical Benefit Plans
 Employee Benefit Plans
   Defined Benefit Pension Plans
 Postretirement Medical Plans
 Defined Contribution Benefits 
 50




---



##### Table of Contents



Components of net pension expense and other amounts recognized in other comprehensive income
 Pension2007
    
    
    2006
    
    
    2005Net pension expenseService cost
    
    $
    55
    
    
    $
    53
    
    
    $
    46Interest cost
    
    
    90
    
    
    
    82
    
    
    
    75Expected return on plan assets  (income)
    
    
    (102
    )
    
    
    (94
    )
    
    
    (90
    )Amortization of net loss
    
    
    38
    
    
    
    38
    
    
    
    30Amortization of prior service amendments
    
    
    7
    
    
    
    9
    
    
    
    7Special termination benefits
    
    
    4
    
    
    
    
    
    
    
    9Net pension expense for the defined benefit plans
    
    $
    92
    
    
    $
    88
    
    
    $
    77Other comprehensive incomePrior service cost arising during the year
    
    $
    8
    
    
    
    N/A
    
    
    
    N/ANet (gain) loss arising during the year
    
    
    (114
    )
    
    
    N/A
    
    
    
    N/AAmortization of net loss
    
    
    (38
    )
    
    
    N/A
    
    
    
    N/AAmortization of prior service amendments
    
    
    (7
    )
    
    
    N/A
    
    
    
    N/ATotal recognized in other comprehensive income
    
    $
    (151
    )Total recognized in net pension expense and other comprehensive income
    
    $
    (59
    )
    
    $
    88
    
    
    $
    77
 Components of postretirement medical expense and other amounts recognized in other
comprehensive income
 Postretirement2007
    
    
    2006
    
    
    2005Net postretirement expenseService cost
    
    $
    5
    
    
    $
    4
    
    
    $
    3Interest cost
    
    
    20
    
    
    
    20
    
    
    
    22Amortization of net loss
    
    
    4
    
    
    
    7
    
    
    
    8Amortization of prior service amendments
    
    
    
    
    
    
    
    
    
    
    (1
    )Net postretirement expense
    
    $
    29
    
    
    $
    31
    
    
    $
    32Other comprehensive incomeNet (gain) loss arising during the year
    
    $
    (4
    )
    
    
    N/A
    
    
    
    N/AAmortization of net loss
    
    
    (4
    )
    
    
    N/A
    
    
    
    N/ATotal recognized in other comprehensive income
    
    $
    (8
    )Total recognized in net postretirement expense
and other comprehensive income
    
    $
    21
    
    
    $
    31
    
    
    $
    32
 Changes in Benefit Obligations and Plan Assets
 Pension
    
    
    Postretirement2007
    
    
    2006
    
    
    2007
    
    
    2006Changes in benefit obligationsObligation at beginning of year
    
    $
    1,539
    
    
    $
    1,439
    
    
    $
    354
    
    
    $
    384Service cost
    
    
    55
    
    
    
    53
    
    
    
    5
    
    
    
    4Interest cost
    
    
    90
    
    
    
    82
    
    
    
    20
    
    
    
    20Plan amendments
    
    
    8
    
    
    
    (8
    )
    
    
    
    
    
    
    1Actuarial (gain) / loss
    
    
    (53
    )
    
    
    43
    
    
    
    (4
    )
    
    
    (32
    )Benefit payments
    
    
    (57
    )
    
    
    (69
    )
    
    
    (23
    )
    
    
    (23
    )Special termination benefits
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    Adjustment for Medicare Subsidy
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    Transfers
    
    
    (1
    )
    
    
    (1
    )
    
    
    
    
    
    
    Obligation at end of year
    
    $
    1,585
    
    
    $
    1,539
    
    
    $
    353
    
    
    $
    354
 51




---



##### Table of Contents



Pension
    
    
    Postretirement2007
    
    
    2006
    
    
    2007
    
    
    2006Changes in the fair value of plan assetsFair value of plan assets at beginning of year
    
    $
    1,289
    
    
    $
    1,149
    
    
    $
    
    
    
    $
    Actual return on plan assets
    
    
    163
    
    
    
    114
    
    
    
    
    
    
    
    Transfers
    
    
    (1
    )
    
    
    (1
    )
    
    
    
    
    
    
    Employer contributions
    
    
    61
    
    
    
    96
    
    
    
    22
    
    
    
    23Adjustment for Medicare Subsidy
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    Benefit payments
    
    
    (57
    )
    
    
    (69
    )
    
    
    (23
    )
    
    
    (23
    )Fair value of plan assets at end of year
    
    $
    1,455
    
    
    $
    1,289
    
    
    $
    
    
    
    $
    
 Pension
    
    
    Postretirement2007
    
    
    2006
    
    
    2007
    
    
    2006Amounts included in AOCLPrior Service Cost
    
    $
    48
    
    
    $
    47
    
    
    $
    3
    
    
    $
    3Net Loss
    
    
    308
    
    
    
    460
    
    
    
    90
    
    
    
    98Total
    
    $
    356
    
    
    $
    507
    
    
    $
    93
    
    
    $
    101
 Pension
    
    PostretirementEstimated gross amounts in AOCL to be amortized in 2008Prior Service Cost
    
    $
    8
    
    
    $
    Net Loss
    
    $
    16
    
    
    $
    3
  Pension
    
    Postretirement2007
    
    2006
    
    2007
    
    2006Selected information for plans with liabilities in excess of plan assetsProjected benefit obligation
    
    $
    777
    
    
    $
    1,539
    
    
    $
    353
    
    
    $
    354Accumulated benefit obligation
    
    $
    649
    
    
    $
    1,407
    
    
    $
    353
    
    
    $
    354Fair value of plan assets (1)
    
    $
    598
    
    
    $
    1,299
    
    
    $
    
    
    
    $
    
 
 (1)
    
    Includes fourth quarter employer contributions. Pension
    
    
    Postretirement2007
    
    
    2006
    
    
    2007
    
    
    2006Reconciliation of funded statusFunded status at measurement date
    
    $
    (130
    )
    
    $
    (250
    )
    
    $
    (353
    )
    
    $
    (354
    )Fourth quarter employer contributions/payments
    
    
    23
    
    
    
    10
    
    
    
    4
    
    
    
    5Funded status at end of year
    
    $
    (107
    )
    
    $
    (240
    )
    
    $
    (349
    )
    
    $
    (349
    )Amounts recognizedOther assets
    
    $
    69
    
    
    $
    
    
    
    $
    
    
    
    $
    Accounts payable and other current liabilities
    
    
    (5
    )
    
    
    (1
    )
    
    
    (26
    )
    
    
    (26
    )Other liabilities
    
    
    (171
    )
    
    
    (239
    )
    
    
    (323
    )
    
    
    (323
    )Total liabilities
    
    
    (107
    )
    
    
    (240
    )
    
    
    (349
    )
    
    
    (349
    )Accumulated other comprehensive loss
    
    
    356
    
    
    
    507
    
    
    
    93
    
    
    
    101Net amount recognized
    
    $
    249
    
    
    $
    267
    
    
    $
    (256
    )
    
    $
    (248
    )
 Pension
    
    Postretirement2007
    
    2006
    
    2005
    
    2007
    
    2006
    
    2005Weighted Average AssumptionsExpense discount rate
    
    
    6.00
    %
    
    
    5.80
    %
    
    
    6.15
    %
    
    
    5.80
    %
    
    
    5.55
    %
    
    
    6.15
    %Liability discount rate
    
    
    6.35
    %
    
    
    6.00
    %
    
    
    5.80
    %
    
    
    6.20
    %
    
    
    5.80
    %
    
    
    5.55
    %Expected return on plan assets (1)
    
    
    8.50
    %
    
    
    8.50
    %
    
    
    8.50
    %
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/AExpense rate of compensation increase
    
    
    3.55
    %
    
    
    3.53
    %
    
    
    3.60
    %
    
    
    3.55
    %
    
    
    3.53
    %
    
    
    3.60
    %Liability rate of compensation increase
    
    
    3.56
    %
    
    
    3.55
    %
    
    
    3.53
    %
    
    
    3.56
    %
    
    
    3.55
    %
    
    
    3.53
    %
 
 (1)
    
    Expected return on plan assets is presented after administration expenses.  52




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##### Table of Contents



Allocation PercentageTarget
    
    Actual
    
    Actual2008
    
    2007
    
    2006Funding and Plan AssetsAsset CategoryEquity securities
    
    
    75
    %
    
    
    75
    %
    
    
    76
    %Debt securities
    
    
    25
    %
    
    
    25
    %
    
    
    24
    %
   Health Care Cost Trend Rates
  1% Increase
    
    1% DecreaseEffect on total fiscal year 2007 service and interest cost components
    
    $
    1
    
    
    $
    (1
    )*Effect on the fiscal year 2007 postretirement benefit obligation
    
    $
    5
    
    
    $
    (4
    )
 
 *
    
    Impact was slightly less than $0.5 million. Pension and Postretirement Cash Flow 
 Pension
    
    PostretirementEmployer Contributions2006
    
    $
    66
    
    
    $
    222007
    
    $
    74
    
    
    $
    212008 (expected)
    
    $
    30
    
    
    $
    26
 Expected Benefits 
 PostretirementIncluding
    
    ExcludingMedicare
    
    MedicarePension
    
    Subsidy
    
    SubsidyExpected Benefit Payments2008
    
    $
    67
    
    
    $
    26
    
    
    $
    272009
    
    $
    68
    
    
    $
    26
    
    
    $
    282010
    
    $
    73
    
    
    $
    27
    
    
    $
    282011
    
    $
    80
    
    
    $
    28
    
    
    $
    292012
    
    $
    88
    
    
    $
    28
    
    
    $
    292013 to 2017
    
    $
    563
    
    
    $
    147
    
    
    $
    153
 53




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##### Table of Contents



Note 10Income Taxes
  2007
    
    
    2006
    
    
    2005Current:Federal
    
    $
    6
    
    
    $
    6
    
    
    $
    1Foreign
    
    
    24
    
    
    
    36
    
    
    
    48State
    
    
    5
    
    
    
    2
    
    
    
    335
    
    
    
    44
    
    
    
    52Deferred:Federal
    
    
    (17
    )
    
    
    (5
    )
    
    
    (12
    )Foreign
    
    
    6
    
    
    
    (36
    )
    
    
    (19
    )State
    
    
    3
    
    
    
    
    
    
    
    3(8
    )
    
    
    (41
    )
    
    
    (28
    )$
    27
    
    
    $
    3
    
    
    $
    24
  
    
    Valuation allowances  During 2007, we reversed valuation allowances resulting in an
$11 million tax benefit. These reversals were due to improved profitability trends in
Russia.
    
    Tax rate changes  During 2007, changes to the income tax laws in Canada and Mexico
were enacted. These law changes required us to re-measure our net deferred tax liabilities
which resulted in a net decrease to our income tax expense of approximately $13 million.
  
    
    Valuation allowances  During 2006, we reversed valuation allowances resulting in a $34
million tax benefit. These reversals were due to improved profitability trends and certain
restructurings in Spain, Russia and Turkey.
    
    Tax rate changes  During 2006, changes to the income tax laws in Canada, Turkey and
certain jurisdictions within the U.S. were enacted. These law changes enabled us to
re-measure our net deferred tax liabilities using lower tax rates which decreased our
income tax expense by approximately $12 million.
  
    
    Valuation allowances  During 2005, we reversed valuation allowances resulting in a $19
million tax benefit. This reversal was due to improved profitability trends in Russia and
a change to the Russia tax law that enables us to use a greater amount of our Russian net
operating losses (NOLs).
    
    International legal entity and debt restructuring  During 2005, we completed the
reorganization of our international legal entity and debt structure to allow for more
efficient cash mobilization, to reduce taxable foreign exchange risks and to reduce
potential future tax costs. This reorganization resulted in a $22 million tax charge.
  2007
    
    
    2006
    
    
    2005U.S.
    
    $
    787
    
    
    $
    731
    
    
    $
    770Foreign
    
    
    234
    
    
    
    196
    
    
    
    125$
    1,021
    
    
    $
    927
    
    
    $
    895
 54




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##### Table of Contents



2007
    
    2006
    
    2005Income taxes computed at the U.S. federal statutory rate
    
    
    35.0
    %
    
    
    35.0
    %
    
    
    35.0
    %Income taxable to owners
    
    
    (26.6
    )
    
    
    (31.4
    )
    
    
    (27.9
    )State income tax, net of federal tax benefit
    
    
    0.7
    
    
    
    3.1
    
    
    
    0.7Impact of foreign results
    
    
    (2.8
    )
    
    
    (1.3
    )
    
    
    (3.9
    )Change in valuation allowances, net
    
    
    (2.4
    )
    
    
    (5.5
    )
    
    
    (3.9
    )Nondeductible expenses
    
    
    1.9
    
    
    
    1.4
    
    
    
    1.5Other, net
    
    
    (1.8
    )
    
    
    0.4
    
    
    
    (1.2
    )International legal entity and debt restructuring reserves
    
    
    
    
    
    
    
    
    
    
    2.4Tax rate change benefit
    
    
    (1.3
    )
    
    
    (1.4
    )
    
    
    Total effective income tax rate
    
    
    2.7
    %
    
    
    0.3
    %
    
    
    2.7
    %
  2007
    
    
    2006Intangible assets and property, plant and equipment
    
    $
    438
    
    
    $
    437Investment
    
    
    178
    
    
    
    80Other
    
    
    15
    
    
    
    8Gross deferred tax liabilities
    
    
    631
    
    
    
    525Net operating loss carryforwards
    
    
    (354
    )
    
    
    (262
    )Employee benefit obligations
    
    
    (30
    )
    
    
    (23
    )Bad debts
    
    
    (3
    )
    
    
    (2
    )Various liabilities and other
    
    
    (97
    )
    
    
    (65
    )Gross deferred tax assets
    
    
    (484
    )
    
    
    (352
    )Deferred tax asset valuation allowance
    
    
    240
    
    
    
    189Net deferred tax assets
    
    
    (244
    )
    
    
    (163
    )Net deferred tax liability
    
    $
    387
    
    
    $
    362Consolidated Balance Sheets ClassificationPrepaid expenses and other current assets
    
    $
    (86
    )
    
    $
    (29
    )Other assets
    
    
    
    
    
    
    (21
    )Accounts payable and other current liabilities
    
    
    2
    
    
    
    6Deferred income taxes
    
    
    471
    
    
    
    406$
    387
    
    
    $
    362
     55




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##### Table of Contents



2007Balance at beginning of year
    
    $
    82Increases due to tax positions related to prior years
    
    
    4Increases due to tax positions related to the current year
    
    
    9Decreases due to tax positions related to prior years
    
    
    (5
    )Decreases due to tax positions related to the current year
    
    
    Decreases due to settlements with taxing authorities
    
    
    (2
    )Decreases due to lapse of statute of limitations
    
    
    (9
    )Currency translation adjustment
    
    
    8Balance at end of year
    
    $
    87
      56




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##### Table of Contents



Note 11Segment Information
    Net Revenues2007
    
    
    2006
    
    
    2005U.S. & Canada
    
    $
    10,336
    
    
    $
    9,910
    
    
    $
    9,342Europe
    
    
    1,872
    
    
    
    1,534
    
    
    
    1,366Mexico
    
    
    1,383
    
    
    
    1,286
    
    
    
    1,177Worldwide net revenues
    
    $
    13,591
    
    
    $
    12,730
    
    
    $
    11,885
  Operating Income2007
    
    
    2006
    
    
    2005U.S. & Canada
    
    $
    876
    
    
    $
    849
    
    
    $
    910Europe
    
    
    106
    
    
    
    57
    
    
    
    35Mexico
    
    
    72
    
    
    
    82
    
    
    
    62Worldwide operating income
    
    
    1,054
    
    
    
    988
    
    
    
    1,007Interest expense
    
    
    232
    
    
    
    227
    
    
    
    187Interest income
    
    
    222
    
    
    
    174
    
    
    
    77Other non-operating (income) expenses, net
    
    
    (5
    )
    
    
    10
    
    
    
    1Minority interest
    
    
    28
    
    
    
    (2
    )
    
    
    1Income before income taxes
    
    $
    1,021
    
    
    $
    927
    
    
    $
    895
  57




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##### Table of Contents



Total Assets
    
    
    Long-Lived Assets12007
    
    
    2006
    
    
    2005
    
    
    2007
    
    
    2006
    
    
    2005U.S. & Canada
    
    $
    13,334
    
    
    $
    12,072
    
    
    $
    11,090
    
    
    $
    11,391
    
    
    $
    10,267
    
    
    $
    9,544Europe
    
    
    1,671
    
    
    
    1,072
    
    
    
    894
    
    
    
    1,014
    
    
    
    554
    
    
    
    459Mexico
    
    
    1,707
    
    
    
    1,811
    
    
    
    1,761
    
    
    
    1,443
    
    
    
    1,474
    
    
    
    1,478Worldwide total
    
    $
    16,712
    
    
    $
    14,955
    
    
    $
    13,745
    
    
    $
    13,848
    
    
    $
    12,295
    
    
    $
    11,481
 
 1
    
    Long-lived assets represent property, plant and equipment, other intangible assets, goodwill and other assets.  Capital Expenditures
    
    
    Depreciation and Amortization2007
    
    
    2006
    
    
    2005
    
    
    2007
    
    
    2006
    
    
    2005U.S. & Canada
    
    $
    626
    
    
    $
    554
    
    
    $
    540
    
    
    $
    509
    
    
    $
    513
    
    
    $
    486Europe
    
    
    146
    
    
    
    99
    
    
    
    96
    
    
    
    72
    
    
    
    52
    
    
    
    63Mexico
    
    
    82
    
    
    
    68
    
    
    
    73
    
    
    
    87
    
    
    
    83
    
    
    
    81Worldwide total
    
    $
    854
    
    
    $
    721
    
    
    $
    709
    
    
    $
    668
    
    
    $
    648
    
    
    $
    630
 Note 12Related Party Transactions
  (1)
    
    Master Bottling Agreement for cola beverages bearing the Pepsi-Cola and Pepsi
trademarks in the U.S.; bottling agreements and distribution agreements for non-cola
beverages; and a master fountain syrup agreement in the U.S.;(2)
    
    Agreements similar to the Master Bottling Agreement and the non-cola agreement for each
country in which we operate, as well as a fountain syrup agreement for Canada;(3)
    
    A shared services agreement where we obtain various services from PepsiCo and provide
services to PepsiCo;(4)
    
    Russia Venture Agreement related to the formation of PR Beverages. For further
information about the Russia Venture Agreement see Note 2 and Note 5; and(5)
    
    Transition agreements that provide certain indemnities to the parties, and provide for
the allocation of tax and other assets, liabilities and obligations arising from periods
prior to the initial public offering.
  58




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2007
    
    
    2006
    
    
    2005Net revenues:Bottler incentives and other arrangements (a)
    
    $
    66
    
    
    $
    67
    
    
    $
    51Cost of sales:Purchases of concentrate and finished products,
and royalty fees (b)
    
    $
    (3,406
    )
    
    $
    (3,227
    )
    
    $
    (2,993
    )Bottler incentives and other arrangements (a)
    
    
    582
    
    
    
    570
    
    
    
    544Total cost of sales
    
    $
    (2,824
    )
    
    $
    (2,657
    )
    
    $
    (2,449
    )Selling, delivery and administrative expenses:Bottler incentives and other arrangements (a)
    
    $
    66
    
    
    $
    69
    
    
    $
    78Fountain service fee (c)
    
    
    188
    
    
    
    178
    
    
    
    183Frito-Lay purchases (d)
    
    
    (270
    )
    
    
    (198
    )
    
    
    (144
    )Shared services (e):Shared services expense
    
    
    (57
    )
    
    
    (61
    )
    
    
    (69
    )Shared services revenue
    
    
    8
    
    
    
    8
    
    
    
    8Net shared services
    
    
    (49
    )
    
    
    (53
    )
    
    
    (61
    )HFCS (f)
    
    
    
    
    
    
    
    
    
    
    23Total selling, delivery and administrative expenses
    
    $
    (65
    )
    
    $
    (4
    )
    
    $
    79Income tax benefit: (g)
    
    $
    7
    
    
    $
    6
    
    
    $
    3
 (a) Bottler Incentives and Other Arrangements 
  (b) Purchases of Concentrate and Finished Product 
 (c) Fountain Service Fee 
 (d) Frito-Lay Purchases 
 (e) Shared Services 
 59




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##### Table of Contents



(f) High Fructose Corn Syrup (HFCS) Settlement 
 (g) Income Tax Benefit
 Other Related Party Transactions
 .
          60




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Note 13 Restructuring Charges and Full Service Vending Rationalization
 Restructuring Charges
 Organizational Realignment
    U.S. &Worldwide
    
    
    Canada
    
    
    EuropeCosts incurred through December 29, 2007
    
    $
    26
    
    
    $
    18
    
    
    $
    8
  Severance
    
    
    Enhanced& Related
    
    
    Pension
    
    
    RelocationTotal
    
    
    Benefits
    
    
    Benefits
    
    
    & OtherCosts incurred through December 29, 2007
    
    $
    26
    
    
    $
    15
    
    
    $
    4
    
    
    $
    7Cash payments (pre-tax)
    
    
    (13
    )
    
    
    (7
    )
    
    
    
    
    
    
    (6
    )Non-cash settlements
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    (1
    )Remaining costs accrued at December 29, 2007
    
    $
    12
    
    
    $
    8
    
    
    $
    4
    
    
    $
    
 Other Restructuring Charges
  Full Service Vending Rationalization
    61




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Note 14Contingencies
  Note 15Accumulated Other Comprehensive Loss
  2007
    
    
    2006
    
    
    2005Net currency translation adjustment
    
    $
    242
    
    
    $
    7
    
    
    $
    (19
    )Cash flow hedge adjustment (1)
    
    
    19
    
    
    
    17
    
    
    
    7Minimum pension liability adjustment
    
    
    
    
    
    
    (335
    )
    
    
    (383
    )Adoption of SFAS 158 (2)
    
    
    
    
    
    
    (278
    )
    
    
    Pension and postretirement medical benefit plans adjustment (3)
    
    
    (450
    )
    
    
    
    
    
    
    Accumulated other comprehensive loss
    
    $
    (189
    )
    
    $
    (589
    )
    
    $
    (395
    )
 
 (1)
    
    Net of taxes of $1 million in 2007, $(1) million in 2006 and $2 million in 2005.(2)
    
    Net of taxes of $4 million in 2006.(3)
    
    Net of taxes of $1 million in 2007. Note 16Selected Quarterly Financial Data (unaudited)
  First
    
    Second
    
    Third
    
    Fourth2007(1)
    
    Quarter
    
    Quarter
    
    Quarter
    
    Quarter
    
    Full YearNet revenues
    
    $
    2,466
    
    
    $
    3,360
    
    
    $
    3,729
    
    
    $
    4,036
    
    
    $
    13,591Gross profit
    
    
    1,123
    
    
    
    1,535
    
    
    
    1,726
    
    
    
    1,837
    
    
    
    6,221Operating income
    
    
    119
    
    
    
    320
    
    
    
    430
    
    
    
    185
    
    
    
    1,054Net income
    
    
    102
    
    
    
    301
    
    
    
    401
    
    
    
    190
    
    
    
    994
 First
    
    Second
    
    Third
    
    Fourth2006(1)
    
    Quarter
    
    Quarter
    
    Quarter
    
    Quarter
    
    Full YearNet revenues
    
    $
    2,367
    
    
    $
    3,138
    
    
    $
    3,460
    
    
    $
    3,765
    
    
    $
    12,730Gross profit (2)
    
    
    1,096
    
    
    
    1,453
    
    
    
    1,588
    
    
    
    1,693
    
    
    
    5,830Operating income
    
    
    119
    
    
    
    303
    
    
    
    381
    
    
    
    185
    
    
    
    988Net income
    
    
    98
    
    
    
    269
    
    
    
    369
    
    
    
    188
    
    
    
    924
 
 (1)
    
    For additional unaudited information see Items affecting comparability of our
financial results in Managements Financial Review in Item 7.(2)
    
    We reclassified certain costs in our 2006 Consolidated Statement of Operations
to conform to the 2007 presentation. See Note 1 for further information about this
reclassification. Accordingly, some of the 2006 amounts presented above may vary from the
amounts reported in the quarterly reports filed during 2006. 62




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63




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##### Table of Contents



Item 7A. Quantitative and Qualitative Disclosures About Market Risk
  
 Item 8. Financial Statements and Supplementary Data
   
 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
  
 Item 9A. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  Managements Report on Internal Control Over Financial Reporting
     64




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Changes in Internal Controls
  
 Item 9B. Other Information
  65




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PART III
 
 Item 10. Directors, Executive Officers and Corporate Governance
  Thomas M. Lardieri
 Marie T. Gallagher
 Steven M. Rapp
   
 Item 11. Executive Compensation
 Compensation Discussion and Analysis.
 What are the highlights of PBGs 2007 executive compensation program as described in this CD&A?
 
    
    PBG provides compensation and benefits to the executive officers of Bottling LLC
    
    The primary objectives of PBGs compensation program are to attract, retain, and
motivate talented and diverse domestic and international executives
    
    PBG provides executive officers with the following types of compensation: base salary,
short-term performance-based cash incentives, and long-term performance-based equity
incentive awards
    
    PBG believes that to appropriately motivate senior executives to achieve and sustain
the long-term growth of PBG, a majority of their compensation should be tied to PBG
performance
    
    PBG uses equity-based compensation as a means to align the interests of executives with
those of PBG shareholders
 66




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##### Table of Contents




    
    PBG believes the design of the executive compensation program drives performance in a
financially responsible way that is sensitive to the dilutive impact on PBG shareholders
    
    PBG generally targets total compensation within the third quartile (average of the 50th
and 75th percentile) of companies within PBGs peer group of companies
    
    PBG has never backdated or re-priced equity awards and does not time equity award
grants relative to the release of material non-public information
    
    Executive officers of Bottling LLC do not have employment, severance or
change-in-control agreements
    
    PBG does not provide any gross ups for potential excise taxes that may be incurred in
connection with a change-in-control of PBG
    
    PBG has a policy in place to recoup compensation from an executive who has engaged in misconduct
    
    Bottling LLC executives participate in the same group benefit programs, at the same levels, as all PBG employees
    
    Excellent PBG performance in 2007 resulted in annual cash incentive payouts well above target amounts
 Who oversees PBGs executive compensation program?
  What are the objectives of PBGs executive compensation program?
  
    
    Attract, retain and motivate key executives whose performance is critical to PBGs
success by providing a total compensation program that is appropriately competitive
within our industry and reinforces our short-term and long-term business objectives
by:
 
    
    motivating and rewarding executives for achieving and exceeding business
objectives;
    
    providing financial consequences to executives for failing to achieve
business objectives; and
    
    retaining key performers through meaningful wealth-creation opportunities;
 
    
    Align the interests of PBG shareholders, PBG and executives by placing particular
emphasis on performance-based and equity-based compensation;
    
    Maintain a financially responsible program that is appropriate within PBGs
financial structure and sensitive to the dilutive impact on PBG shareholders; and
    
    Establish and maintain the program in accordance with all applicable laws and
regulations, as well as with corporate governance best practices.
 67




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##### Table of Contents



How does PBG achieve its objectives?
  ObjectiveAlignment withElement of Total
    
    Form of
    
    
    
    
    
    Motivation
    
    
    ShareholderCompensation
    
    Compensation
    
    
    Attraction
    
    
    Short-Term
    
    Long-Term
    
    
    Interests
    
    
    RetentionBase Salary
    
    Cash
    
    
    ü
    
    
    ü
    
    
    
    
    
    
    
    üAnnual 
Performance-Based 
Cash Incentive
    
    Cash
    
    
    ü
    
    
    ü
    
    
    
    
    ü
    
    
    üLong-Term 
Performance-Based 
Equity Incentive
    
    Stock Options
RSUs
    
    
    ü
    
    
    
    
    ü
    
    
    ü
    
    
    ü
 Why does PBG choose to pay a mix of cash and equity-based compensation?
      68




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##### Table of Contents



(PIE CHART)
    

(PIE CHART)
 Why is the compensation of our Named Executive Officers largely performance-based compensation
rather than fixed?
     69




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##### Table of Contents



(PIE CHART)
    

(PIE CHART)
 Why does PBG use earnings per share, volume and cash flow as the criteria for its performance-based
compensation?
   Short-Term Incentive
  Long-Term Incentive
 70




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##### Table of Contents



Why does PBG provide perquisites as an element of compensation?
     What other forms of compensation does PBG provide to employees, including the Named Executive
Officers, and why are they provided?
  Pension.
  401(k) Savings Plan.
 71




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##### Table of Contents



Deferred Income Program.
 Health and Welfare Benefits.
 What policies and practices does PBG utilize in designing its executive compensation program and
setting target levels of total compensation?
  Process of Designing the Executive Compensation Program.
 Target Compensation Use of Peer Group Data. th th
  Anheuser-Busch Companies, Inc
    
    H.J. Heinz CompanyAramark Corporation
    
    Hershey Foods CorporationCampbell Soup Company
    
    Kellogg CompanyClorox Company, Inc.
    
    Kimberly-Clark CorporationCoca-Cola Enterprises Inc.
    
    PepsiAmericas, Inc.Colgate-Palmolive Company
    
    Sara Lee CorporationDean Foods Company
    
    Staples, Inc.FedEx Corporation
    
    Supervalu Inc.General Mills, Inc.
    
    Yum! Brands, Inc.
 72




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##### Table of Contents



Peer Group*
    
    
    PBG*75th
    
    
    PBG
    
    PercentMedian
    
    Percentile
    
    
    Data
    
    RankRevenue
    
    $
    11,541
    
    
    $
    15,988
    
    
    
    $
    12,730
    
    
    
    66
    %Net Income
    
    $
    657
    
    
    $
    1,069
    
    
    
    $
    522
    
    
    
    45
    %Market Capitalization
    
    $
    14,978
    
    
    $
    19,896
    
    
    
    $
    7,295
    
    
    
    17
    %Number of Employees
    
    
    35,350
    
    
    
    72,633
    
    
    
    
    70,400
    
    
    
    73
    %
 
 *
    
    Dollars are in millions. Based on information as of December 31, 2006.   Establishing Target Compensation; Role of the PEO.
   Use of Tally Sheets.
 
    
    Annual direct compensation: Information regarding base salary, annual incentive,
and long-term incentive for the past three years;
    
    Equity awards: Detailed chart of information regarding all PBG equity-based
awards, whether vested, unvested, exercised or unexercised, including total pre-tax
value to the executive and holdings relative to the executives Stock Ownership
Guidelines (discussed below);
    
    Perquisites: Line item summary showing the value of each perquisite as well as
the value of the tax gross-up, if any;
 73




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##### Table of Contents




    
    Pension / Deferred Compensation: Value of pension plan benefits (qualified plan,
non-qualified plan and total) and value of defined-contribution plan accounts (401(k)
and deferred compensation), including the year-over-year change in value in those
accounts;
    
    Life Insurance Benefits (expressed as multiple of cash compensation as well as
actual dollar value);
    
    Description of all compensation and benefits payable upon a termination of
employment.
  Form of Equity-Based Compensation.
   Equity Award Grant Practices.
 Timing of Grants
   Pricing of Stock Options
 What are some other policies and practices that govern the design and structure of PBGs
compensation program?
 74




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##### Table of Contents



Stock Ownership Guidelines.
 Trading Windows / Trading Plans / Hedging.
 Compensation Recovery for Misconduct.
    Employment / Severance Agreements.
  Approved Transfers To / From PepsiCo.
  75




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Change in Control Protections.
 Deductibility of Compensation Expenses.
  What compensation actions were taken in 2007 and why were they taken?
  Base Salary.
 Annual Cash Incentive Award
 Actual Awards.
  76




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##### Table of Contents



2007 Annual Cash Incentive AwardsTarget
    
    
    
    
    
    2007 AwardNamed Executive Officer
    
    
    (% of Salary)
    
    Target ($)
    
    (% of Target)
    
    2007 Award ($)Eric J. Foss
    
    
    
    140
    %
    
    $
    1,260,000
    
    
    
    143
    %
    
    $
    1,805,580Alfred H. Drewes
    
    
    
    85
    %
    
    
    386,750
    
    
    
    143
    %
    
    
    551,120Thomas M. Lardieri
    
    
    
    65
    %
    
    
    119,438
    
    
    
    143
    %
    
    
    170,200Andrea L. Forster
    
    
    
    65
    %
    
    
    188,500
    
    
    
    143
    %
    
    
    268,620
  Long-Term Incentive.
  What noteworthy executive compensation actions took place during the first quarter of 2008 and why
were such actions taken?
   77




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##### Table of Contents



Deleted
    
    AddedColgate Palmolive Company
    
    ConAgra Foods, Inc.Kimberly-Clark Corporation
    
    Newell Rubbermaid Inc.Staples, Inc.
    
    Sysco CorporationYum! Brands, Inc.
  78




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##### Table of Contents



2007 SUMMARY COMPENSATION TABLE
 Change in PensionValue andNonqualifiedNon-Equity
    
    DeferredStock
    
    Option
    
    Incentive Plan
    
    Compensation
    
    All OtherSalary
    
    Awards
    
    Awards
    
    Compensation
    
    Earnings
    
    Compensation
    
    TotalName and Principal Position
    
    Year
    
    ($)
    
    ($)(1)
    
    ($)(1)
    
    ($)
    
    ($)(2)
    
    ($)(3)
    
    ($)Eric J. Foss
    
    
    2007
    
    
    
    892,308
    
    
    
    1,584,557
    
    
    
    1,893,158
    
    
    
    1,805,580
    
    
    
    594,000
    
    
    
    66,680
    (4)
    
    
    6,836,283Principal Executive Officer
    
    
    2006
    
    
    
    754,500
    
    
    
    975,979
    
    
    
    2,025,066
    
    
    
    1,289,000
    
    
    
    387,000
    
    
    
    64,513
    
    
    
    5,496,058Alfred H. Drewes
    
    
    2007
    
    
    
    451,154
    
    
    
    304,747
    
    
    
    664,901
    
    
    
    551,120
    
    
    
    222,000
    
    
    
    81,884
    (5)
    
    
    2,275,806Principal Financial Officer
    
    
    2006
    
    
    
    425,385
    
    
    
    139,141
    
    
    
    899,853
    
    
    
    456,150
    
    
    
    180,000
    
    
    
    69,442
    
    
    
    2,169,971Thomas M. Lardieri(6)
    
    
    2007
    
    
    
    182,942
    
    
    
    48,361
    
    
    
    0
    
    
    
    170,200
    
    
    
    54,000
    
    
    
    16,441
    (7)
    
    
    471,944Principal Accounting Officer
    
    
    2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Andrea L. Forster(8)
    
    
    2007
    
    
    
    283,846
    
    
    
    175,238
    
    
    
    331,380
    
    
    
    268,620
    
    
    
    63,000
    
    
    
    28,632
    (9)
    
    
    1,150,716Principal Accounting Officer
    
    
    2006
    
    
    
    262,692
    
    
    
    80,010
    
    
    
    399,663
    
    
    
    214,980
    
    
    
    65,000
    
    
    
    29,436
    
    
    
    1,051,781
 
 1.
    
    The amount included in this column is the compensation cost
recognized by Bottling LLC in fiscal year
2007 related to the executives outstanding equity awards that were unvested for all or any
part of 2007, calculated in accordance with SFAS 123R without regard to forfeiture estimates.
This amount encompasses equity awards that were granted in 2004, 2005, 2006 and 2007 and was
determined using the assumptions set forth in Note 3,
Share-Based Compensation, to Bottling LLCs
Annual Report on Form 10-K for the fiscal year ended December 29, 2007 (for 2007, 2006 and
2005 awards) and Note 3, Share-Based Compensation, to Bottling LLCs Annual Report on Form 10-K for the
fiscal year ended December 30, 2006 (for 2004 awards).2.
    
    No executive earned above-market or preferential earnings on deferred compensation in 2007
and, therefore, no such earnings are reported in this column. Consequently, this amount
reflects only the aggregate change in 2007 in the actuarial present value of the executives
accumulated benefit under all PBG-sponsored defined benefit pension plans in which the
executive participates calculated based on the material assumptions
set forth in Note 9,
Pension and Postretirement Medical Benefit Plans, to Bottling LLCs Annual Report on Form 10-K for the
fiscal year ended December 29, 2007, and Note 13, Pension and Postretirement Medical Benefit
Plans, to Bottling LLCs Annual Report on Form 10-K for the fiscal year ended December 30, 2006, except
for the generally applicable assumptions regarding retirement age and pre-retirement
mortality.3.
    
    The amount in this column reflects the actual cost of perquisites and personal benefits
provided by PBG to each of the Named Executive Officers as well as the reimbursements paid by
PBG to the executive for his tax liability related to certain of these PBG provided benefits
and the dollar value of insurance premiums paid by the Company for the benefit of the Named
Executive Officers each on the same terms and conditions as all other eligible employees. The
particular benefits provided to each Named Executive Officer are described below in footnotes
4, 5, 7 and 9. In addition, PBG purchases club memberships, season tickets and passes to
various sporting events and other venues for purposes of business entertainment. On limited
occasions, employees (including one or more of the Named Executive Officers) may use such
memberships, tickets or passes for personal use. There is no incremental cost to the Company
in such circumstances. Therefore, no cost of such memberships, tickets and passes is
reflected in the All Other Compensation column.4.
    
    This amount includes: (i) $42,172, which equals the total cost of all perquisites and
personal benefits provided by PBG to Mr. Foss, including a car allowance, financial advisory
services, personal use of corporate transportation and a nominal recognition award; (ii)
$15,158, which equals all tax reimbursements paid to Mr. Foss for the tax liability related to
PBG provided perquisites and personal benefits, including his car allowance, financial
advisory services and a nominal recognition award; (iii) a standard PBG matching contribution
of $9,000 to Mr. Foss 401(k) account; and (iv) $350, which represents the dollar value of
life insurance premiums paid by PBG for the benefit of Mr. Foss.5.
    
    This amount includes: (i) $45,470, which equals the total cost of all perquisites and
personal benefits provided by PBG to Mr. Drewes, including a company car and related car
expenses, financial advisory services, a twenty-five year service anniversary gift and a
nominal recognition award; (ii) $27,237, which equals all tax reimbursements paid to Mr.
Drewes for the tax liability related to PBG provided perquisites and personal benefits,
including his company car, financial advisory services, a twenty-five year service anniversary
gift and a nominal recognition award; (iii) a standard PBG matching contribution of $9,000 to
Mr. 79




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##### Table of Contents



Drewes 401(k) account; and (iv) $177, which represents the dollar value of life insurance
premiums paid by the PBG for the benefit of Mr. Drewes.6.
    
    Mr. Lardieri was appointed as Bottling LLCs Principal Accounting Officer on June 1, 2007.7.
    
    This amount includes: (i) $12,230, which equals the total cost of all perquisites and
personal benefits provided by PBG to Mr. Lardieri, including a company car and related car
expenses and a nominal recognition award; (ii) $4,173, which equals all tax reimbursements
paid to Mr. Lardieri for the tax liability related to PBG provided perquisites and personal
benefits, including a company car and related car expenses and a nominal recognition award;
and (iii) $38, which represents the dollar value of life insurance premiums paid by the PBG
for the benefit of Mr. Lardieri.8.
    
    Ms. Forster became PBGs Vice President of Finance, North America on June 1, 2007. As a
result of this position change, Ms. Forster stepped down as Bottling LLCs Principal
Accounting Officer on June 1, 2007.9.
    
    This amount includes: (i) $13,561, which equals the total cost of all perquisites and
personal benefits provided by PBG to Ms. Forster, including a car allowance and a nominal
recognition award; (ii) $5,975, which equals all tax reimbursements paid to Ms. Forster for
the tax liability related to PBG provided perquisites and personal benefits, including her car
allowance and a nominal recognition award; (iii) a standard PBG matching contribution of
$9,000 to Ms. Forsters 401(k) account; and (iv) $96, which represents the dollar value of
life insurance premiums paid by PBG for the benefit of Ms. Forster. GRANTS OF PLAN-BASED AWARDS IN FISCAL YEAR 2007
 Estimated Possible Payouts Under
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    All Other OptionNon-Equity Incentive Plan
    
    
    Estimated Future Payouts Under Equity
    
    Awards: Number ofAwards(1)
    
    
    Incentive Plan Awards(2)
    
    Securities
    
    Exercise or Base
    
    Closing
    
    Grant Date FairThres-
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Underlying
    
    Price of Option
    
    Market Price on
    
    Value of Stock andGrant
    
    Date of Board
    
    hold
    
    Target
    
    Maximum
    
    
    Thres-
    
    Target
    
    Maximum
    
    Options
    
    Awards
    
    Grant
    
    Option AwardsName
    
    Date
    
    Action
    
    ($)
    
    ($)
    
    ($)
    
    
    hold (#)
    
    (#)
    
    (#)
    
    (#)
    
    ($/Sh)
    
    Date ($)
    
    ($)(3)Eric J.
FossNon-Equity
    
    
    
    
    
    
    
    
    
    
    0
    
    
    
    1,260,000
    
    
    
    2,520,000RSUs
    
    
    03/01/2007
    
    
    
    02/08/2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    64,830
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,000,006Options
    
    
    03/01/2007
    
    
    
    02/08/2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    194,490
    
    
    
    30.85
    
    
    
    31.12
    
    
    
    1,585,094Alfred H.
DrewesNon-Equity
    
    
    
    
    
    
    
    
    
    
    0
    
    
    
    386,750
    
    
    
    773,500RSUs
    
    
    03/01/2007
    
    
    
    02/08/2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,208
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    500,017Options
    
    
    03/01/2007
    
    
    
    02/08/2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    48,623
    
    
    
    30.85
    
    
    
    31.12
    
    
    
    396,277Thomas M.
LardieriNon-Equity
    
    
    
    
    
    
    
    
    
    
    0
    
    
    
    119,438
    
    
    
    238,876RSUs
    
    
    06/01/2007
    
    
    
    
    (4)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,125
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    250,016Options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Andrea L.
ForsterNon-Equity
    
    
    
    
    
    
    
    
    
    
    0
    
    
    
    188,500
    
    
    
    377,000RSUs
    
    
    03/01/2007
    
    
    
    02/08/2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,320
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    287,522Options
    
    
    03/01/2007
    
    
    
    02/08/2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27,958
    
    
    
    30.85
    
    
    
    31.12
    
    
    
    227,858
 
 1.
    
    Amounts shown reflect the threshold, target and maximum payout amounts under PBGs annual
incentive program which is administered under the PBG shareholder-approved 2005 Executive
Incentive Compensation Plan (EICP). The target amount is equal to a percentage of each
executives salary, which for 2007 ranged from 65% to 140%, depending on the executives role
and level of responsibility. The maximum amount equals 200% of the target amount. The actual
payout amount is contingent upon satisfaction of certain performance criteria. Please refer
to the narrative below for more detail regarding each executives target amount, the specific
performance criteria used to determine the actual payout and how such payout is typically the
result of the Committees exercise of negative discretion with respect to separate maximum
payout amounts established for purposes of Section 162(m).2.
    
    The 2007 RSU awards and option awards were made under the LTIP, which was approved by PBG
shareholders in 2005. 80




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##### Table of Contents



3.
    
    The assumptions used in calculating the SFAS 123R grant date fair value of the option awards
and stock awards are set forth in Note 3, Share-Based Compensation, to Bottling LLCs Annual Report on
Form 10-K for the fiscal year ended December 29, 2007.4.
    
    Mr. Lardieris RSU award was granted upon his commencement of employment on June 1, 2007.
His award was authorized on May 31, 2007 by PBGs President and Chief Executive Officer acting
pursuant to a formal delegation from PBGs Compensation and Management Development Committee.
This delegation grants to PBGs President and Chief Executive Officer the authority to approve
awards to newly hired executives on the same terms and conditions as the annual executive
awards. Narrative to the Summary Compensation and Grants of Plan-Based Awards Tables
 Salary
 Stock Awards
  Option Awards.
  81




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##### Table of Contents



Non-Equity Incentive Plan Compensation
 The Section 162(m) Goal and Maximum Payout Amount
 Committee Discretion.
  Name
    
    Target (% of Salary)Eric J. Foss
    
    
    140
    %Alfred H. Drewes
    
    
    85
    %Thomas M. Lardieri
    
    
    65
    %Andrea L. Forster
    
    
    65
    %
 Performance Factors.
 Results and Payouts.
 Change in Pension Value and Nonqualified Deferred Compensation Earnings.
 All Other Compensation.
 82




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##### Table of Contents



Proportion of Salary to Total Compensation
 OUTSTANDING EQUITY AWARDS AT 2007 FISCAL YEAR-END
 Option Awards


    
    Stock AwardsMarketNumber of
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Number of
    
    Value ofSecurities
    
    Number of
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Shares or
    
    SharesUnderlying
    
    Securities
    
    
    
    
    
    
    
    
    
    
    
    
    Units of
    
    or Units ofUnexercised
    
    Underlying
    
    Option
    
    
    
    
    
    
    
    
    
    
    Stock That
    
    StockOptions
    
    Unexercised Options
    
    Exercise
    
    Option
    
    
    
    
    
    
    Have
    
    That HaveStock Option
    
    (#)
    
    (#)
    
    Price
    
    Expiration
    
    
    Stock Award
    
    Not Vested
    
    Not VestedName
    
    Grant Date
    
    Exercisable
    
    Unexercisable
    
    ($)
    
    Date


    
    Grant Date
    
    (#)
    
    ($)(21)E. Foss
    
    
    03/01/2002
    (1)
    
    
    145,743
    
    
    
    0
    
    
    
    25.25
    
    
    
    03/29/2012
    
    
    
    
    10/07/2005
    (8)
    
    
    125,718
    
    
    
    5,023,69103/01/2003
    (2)
    
    
    223,404
    
    
    
    0
    
    
    
    23.50
    
    
    
    03/29/2013
    
    
    
    
    03/01/2006
    (9)
    
    
    34,936
    (14)
    
    
    1,396,04303/01/2004
    (3)
    
    
    182,373
    
    
    
    0
    
    
    
    29.50
    
    
    
    03/29/2014
    
    
    
    
    03/01/2007
    (10)
    
    
    65,567
    (15)
    
    
    2,620,05703/01/2005
    (4)
    
    
    106,195
    
    
    
    106,194
    
    
    
    28.25
    
    
    
    02/28/201503/01/2006
    (5)
    
    
    33,765
    
    
    
    68,554
    
    
    
    29.32
    
    
    
    02/29/201607/24/2006
    (6)
    
    
    0
    
    
    
    200,000
    
    
    
    33.77
    
    
    
    07/23/201603/01/2007
    (7)
    
    
    0
    
    
    
    194,490
    
    
    
    30.85
    
    
    
    02/28/2017A. Drewes
    
    
    03/01/2003
    (2)
    
    
    127,660
    
    
    
    0
    
    
    
    23.50
    
    
    
    03/29/2013
    
    
    
    
    03/01/2006
    (9)
    
    
    17,468
    (16)
    
    
    698,02103/01/2004
    (3)
    
    
    104,407
    
    
    
    0
    
    
    
    29.50
    
    
    
    03/29/2014
    
    
    
    
    03/01/2007
    (10)
    
    
    16,392
    (17)
    
    
    655,02403/01/2005
    (4)
    
    
    56,637
    
    
    
    56,637
    
    
    
    28.25
    
    
    
    02/28/201503/01/2006
    (5)
    
    
    16,882
    
    
    
    34,278
    
    
    
    29.32
    
    
    
    02/29/201603/01/2007
    (7)
    
    
    0
    
    
    
    48,623
    
    
    
    30.85
    
    
    
    02/28/2017T. Lardieri
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    06/01/2007
    (11)
    
    
    7,182
    (18)
    
    
    286,993A. Forster
    
    
    03/01/2002
    (1)
    
    
    29,941
    
    
    
    0
    
    
    
    25.25
    
    
    
    03/29/2012
    
    
    
    
    03/01/2006
    (12)
    
    
    10,045
    (19)
    
    
    401,39803/01/2003
    (2)
    
    
    34,043
    
    
    
    0
    
    
    
    23.50
    
    
    
    03/29/2013
    
    
    
    
    03/01/2007
    (13)
    
    
    9,426
    (20)
    
    
    376,66303/01/2004
    (3)
    
    
    45,763
    
    
    
    0
    
    
    
    29.50
    
    
    
    03/29/201403/01/2005
    (4)
    
    
    25,699
    
    
    
    25,699
    
    
    
    28.25
    
    
    
    02/28/201503/01/2006
    (5)
    
    
    9,707
    
    
    
    19,710
    
    
    
    29.32
    
    
    
    02/29/201603/01/2007
    (7)
    
    
    0
    
    
    
    27,958
    
    
    
    30.85
    
    
    
    02/28/2017
 
 1.
    
    The vesting schedule with respect to this 2002 stock option award is as follows: 25% of the
options vested and became exercisable on March 30, 2003; 25% of the options vested and became
exercisable on March 30, 2004; and the remaining 50% of the options vested and became
exercisable on March 30, 2005.2.
    
    The vesting schedule with respect to this 2003 stock option award is as follows: 25% of the
options vested and became exercisable on March 30, 2004; 25% of the options vested and became
exercisable on March 30, 2005; and the remaining 50% of the options vested and became
exercisable on March 30, 2006.3.
    
    The vesting schedule with respect to this 2004 stock option award is as follows: 25% of the
options vested and became exercisable on March 30, 2005; 25% of the options vested and became
exercisable on March 30, 2006; and the remaining 50% of the options vested and became
exercisable on March 30, 2007.4.
    
    The vesting schedule with respect to this 2005 stock option award is as follows: 25% of the
options vested and became exercisable on March 30, 2006; 25% of the options vested and became
exercisable on March 30, 2007; and the remaining 50% of the options vest and become
exercisable on March 30, 2008, provided the executive remains employed through such date. 83




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##### Table of Contents



5.
    
    The vesting schedule with respect to this 2006 stock option award is as follows: 33% of the
options vested and became exercisable on March 1, 2007; 33% of the options vest and become
exercisable on March 1, 2008; and the remaining 34% of the options vest and become exercisable
on March 1, 2009, provided the executive remains employed through the applicable vesting
dates.6.
    
    This stock option award was granted to Mr. Foss in recognition of his new role and
responsibilities as President and Chief Executive Officer of the Company. The award fully
vests and becomes exercisable on July 24, 2011, provided Mr. Foss remains employed through
such date.7.
    
    The vesting schedule with respect to this 2007 stock option award is as follows: 33% of the
options vest and become exercisable on March 1, 2008; 33% of the options vest and become
exercisable on March 1, 2009; and the remaining 34% of the options vest and become exercisable
on March 1, 2010, provided the executive remains employed through the applicable vesting
dates.8.
    
    Since the pre-established PBG earnings per share performance target was met, these RSUs fully
vest on October 7, 2010, provided the executive remains employed through October 7, 2010.9.
    
    Since the pre-established PBG earnings per share performance target was met, these RSUs fully
vest on March 1, 2009, provided the executive remains employed through March 1, 2009.10.
    
    Since the pre-established PBG earnings per share performance target was met, these RSUs fully
vest on March 1, 2010, provided the executive remains employed through March 1, 2010.11.
    
    These RSUs fully vest on June 1, 2010, provided the executive remains employed through June
1, 2010.12.
    
    These RSUs fully vest on March 1, 2009, provided the executive remains employed through March
1, 2009.13.
    
    These RSUs fully vest on March 1, 2010, provided the executive remains employed through March
1, 2010.14.
    
    This amount includes 830 RSUs accumulated as a result of dividend equivalents credited to the
executive at the same time and in the same amount as dividends were paid to shareholders of
PBG common stock in accordance with the governing RSU agreement.15.
    
    This amount includes 737 RSUs accumulated as a result of dividend equivalents credited to the
executive at the same time and in the same amount as dividends were paid to shareholders of
PBG common stock in accordance with the governing RSU agreement.16.
    
    This amount includes 415 RSUs accumulated as a result of dividend equivalents credited to the
executive at the same time and in the same amount as dividends were paid to shareholders of
PBG common stock in accordance with the governing RSU agreement.17.
    
    This amount includes 184 RSUs accumulated as a result of dividend equivalents credited to the
executive at the same time and in the same amount as dividends were paid to shareholders of
PBG common stock in accordance with the governing RSU agreement.18.
    
    This amount includes 57 RSUs accumulated as a result of dividend equivalents credited to the
executive at the same time and in the same amount as dividends were paid to shareholders of
PBG common stock in accordance with the governing RSU agreement.19.
    
    This amount includes 239 RSUs accumulated as a result of dividend equivalents credited to the
executive at the same time and in the same amount as dividends were paid to shareholders of
PBG common stock in accordance with the governing RSU agreement.20.
    
    This amount includes 106 RSUs accumulated as a result of dividend equivalents credited to the
executive at the same time and in the same amount as dividends were paid to shareholders of
PBG common stock in accordance with the governing RSU agreement.21.
    
    The closing price for a share of PBG common stock on December 28, 2007, the last trading day
of PBGs fiscal year, was $39.96. 84




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##### Table of Contents



OPTION EXERCISES AND STOCK VESTED IN FISCAL YEAR 2007
 Option Awards
    
    
    Stock AwardsNumber of Shares
    
    Value Realized
    
    
    Number of Shares
    
    Value RealizedName
    
    Acquired on Exercise (#)
    
    on Exercise ($)(1)
    
    
    Acquired on Vesting (#)
    
    on Vesting ($)Eric J. Foss
    
    
    220,000
    
    
    
    2,969,341
    
    
    
    
    0
    
    
    
    0Alfred H. Drewes
    
    
    182,867
    
    
    
    2,440,611
    
    
    
    
    0
    
    
    
    0Thomas M. Lardieri
    
    
    0
    
    
    
    0
    
    
    
    
    0
    
    
    
    0Andrea L. Forster
    
    
    78,736
    
    
    
    1,794,055
    
    
    
    
    0
    
    
    
    0
 
 1.
    
    The value realized on exercise reflects the pre-tax amount. PENSION BENEFITS FOR THE 2007 FISCAL YEAR
 Number of Years
    
    Present Value of
    
    Payments DuringCredited Service
    
    Accumulated Benefit
    
    Last Fiscal YearName
    
    Plan Name
    
    (#)(1)
    
    ($)(2)
    
    ($)Eric J. Foss
    
    PBG Salaried Employees Retirement Plan
    
    
    25.3
    
    
    
    384,000
    
    
    
    0PBG Pension Equalization Plan
    
    
    25.3
    
    
    
    2,246,000
    
    
    
    0Alfred H. Drewes
    
    PBG Salaried Employees Retirement Plan
    
    25.3
    (3)
    
    
    473,000
    
    
    
    0PBG Pension Equalization Plan
    
    25.3
    (3)
    
    
    1,348,000
    
    
    
    0Thomas M. Lardieri
    
    PBG Salaried Employees Retirement Plan
    
    18.8
    (4)
    
    
    252,000
    
    
    
    0PBG Pension Equalization Plan
    
    18.8
    (4)
    
    
    295,000
    
    
    
    0Andrea L. Forster
    
    PBG Salaried Employees Retirement Plan
    
    
    20.1
    
    
    
    281,000
    
    
    
    0PBG Pension Equalization Plan
    
    
    20.1
    
    
    
    231,000
    
    
    
    0
 
 1.
    
    The number of years of service shown for each executive includes service with PepsiCo,
PBGs parent company prior to March 31, 1999, at which time PBG became a separate, publicly
traded company. The executives service with PepsiCo prior to March 31, 1999 has not been
separately identified and the benefit attributable to such service has not been separately
quantified for such period. Any benefit amount attributable to the executives service
with PepsiCo after March 31, 1999 has been separately identified and quantified. In this
regard, periods of PepsiCo service that Mr. Drewes and Mr. Lardieri accrued after PBG
became a separate company have been separately identified and quantified in footnotes 3
(for Mr. Drewes) and 4 (for Mr. Lardieri). PBGs policy for granting extra years of
credited service is discussed in more detail in the CD&A and in the narrative that follows
this table.2.
    
    The material assumptions used to quantify the present value of the accumulated benefit
for each executive are set forth in Note 9, Pension and Postretirement Medical Benefit
Plans, to Bottling LLCs Annual Report on Form 10-K for the fiscal year ended December 29, 2007,
except for the generally applicable assumptions regarding retirement age and pre-retirement
mortality. 85




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##### Table of Contents



3.
    
    Mr. Drewes transferred from PepsiCo on June 25, 2001. The years of credited service
shown above include all prior PepsiCo service. However, only the portion of the pension
benefit attributable to Mr. Drewes PepsiCo service that accrued after March 31, 1999 (two
years of service) has been separately quantified as follows: $30,000 under the PBG Salaried
Employees Retirement Plan and $87,000 under the PBG Pension Equalization Plan. PepsiCo
transferred to the PBG Salaried Employees Retirement Plan an amount equal to the present
value of Mr. Drewes pension benefit under the PepsiCo Salaried Employees Retirement Plan
at the time Mr. Drewes transferred to PBG.4.
    
    Mr. Lardieri transferred from PepsiCo on June 1, 2007. The years of credited service
shown above include all prior PepsiCo service. However, only the portion of the pension
benefit attributable to Mr. Lardieris PepsiCo service that accrued after March 31, 1999
(eight years of service) has been separately quantified as follows: $91,000 under the PBG
Salaried Employees Retirement Plan and $108,000 under the PBG Pension Equalization Plan.
PepsiCo transferred to the PBG Salaried Employees Retirement Plan an amount equal to the
present value of Mr. Lardieris pension benefit under the PepsiCo Salaried Employees
Retirement Plan at the time Mr. Lardieri transferred to PBG. Narrative to the Pension Benefits Table
 The PBG Salaried Employees Retirement Plan
       86




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The PBG Pension Equalization Plan.
 87




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NONQUALIFIED DEFERRED COMPENSATION FOR THE 2007 FISCAL YEAR
 AggregateExecutive
    
    Company
    
    Aggregate Earnings
    
    Withdrawals/
    
    AggregateContributions
    
    Contributions
    
    in Last FY
    
    Distributions
    
    Balance atName
    
    in Last FY ($)
    
    in Last FY ($)
    
    ($)
    
    ($)
    
    Last FYE ($)(6)Eric J. Foss
    
    
    0
    
    
    
    0
    
    
    
    534,388
    
    
    
    0
    
    
    
    2,303,373
    (1)Alfred H. Drewes
    
    
    0
    
    
    
    0
    
    
    
    203,232
    
    
    
    0
    
    
    
    2,067,229
    (2)Thomas M. Lardieri
    
    
    29,077
    (3)
    
    
    0
    
    
    
    (2,135
    )
    
    
    0
    
    
    
    26,942
    (4)Andrea L. Forster
    
    
    205,422
    
    
    
    0
    
    
    
    120,459
    
    
    
    0
    
    
    
    1,308,703
    (5)
 
 1.
    
    $1,062,235 of Mr. Foss aggregate balance was previously reported as compensation in
Summary Compensation Tables for prior years. This amount includes an additional $56,123
that was inadvertently omitted from the total reflected in the Aggregate Balance at Last
FYE column in last years Executive Compensation section of Bottling LLCs Annual Report
on Form 10-K for the fiscal year end December 30, 2006 due to a reporting error by the
third party administrator for the nonqualified deferred compensation plan.2.
    
    $139,082 of Mr. Drewes aggregate balance was previously reported as compensation in
Summary Compensation Tables for prior years.3.
    
    This amount is reported as compensation in the Salary column of the Summary
Compensation Table to this Executive Compensation section.4.
    
    Since Mr. Lardieri was not a named executive officer of PBG in any prior year, none of
Mr. Lardieris aggregate balance has been previously reported as compensation in the
Summary Compensation Table for prior years.5.
    
    $205,422 of Ms. Forsters aggregate balance was previously reported as compensation in
Summary Compensation Tables for prior years.6.
    
    The amounts reflected in this column for Mr. Drewes and Ms. Forster include
compensation deferred by the Named Executive Officers over the entirety of their career at
both PepsiCo and PBG. Narrative to the Nonqualified Deferred Compensation Table
   Deferrals of Base Salary and Annual Non-Equity Incentive Award.
 Phantom Investment Options.
 88




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PHANTOM FUND
    
    FYE RETURN RATE (%)The Phantom PBG Stock Fund
    
    29.20The Phantom Security Plus Fund
    
    5.05The Phantom Bond Index Fund
    
    6.94The Phantom Total U.S. Equity Index Fund
    
    5.66The Phantom Large Cap Equity Index Fund
    
    5.70The Phantom Mid Cap Equity Index Fund
    
    8.09The Phantom Small Cap Equity Index Fund
    
    (1.56)The Phantom International Equity Index Fund
    
    11.27
 Time and Form of Payment.
 Deferral Periods. th
 Distribution Rules.
  Deferral Extensions (Second-Look Elections).
 Hardship Withdrawals.
 89




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##### Table of Contents



POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
   Nonqualified Pension Benefits
 Disability
 Death
  Name
    
    Plan Name
    
    Disability
    
    DeathEric J. Foss
    
    PBG Pension Equalization Plan
    
    
    704,600
    
    
    
    176,100Alfred H. Drewes
    
    PBG Pension Equalization Plan
    
    
    298,600
    
    
    
    74,700Thomas M. Lardieri
    
    PBG Pension Equalization Plan
    
    
    135,200
    
    
    
    33,800Andrea L. Forster
    
    PBG Pension Equalization Plan
    
    
    98,500
    
    
    
    24,600
 LTIP
 90




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Disability
 Death.
 Retirement
 Approved Transfer to PepsiCo
 Change in Control
    91




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##### Table of Contents



Approved Transfer
    
    Changeto
    
    InName
    
    Disability
    
    Death
    
    PepsiCo
    
    ControlEric J. Foss
    
    
    6,744,500
    
    
    
    11,234,200
    
    
    
    8,999,000
    
    
    
    14,022,700Alfred H. Drewes
    
    
    1,712,700
    
    
    
    2,824,000
    
    
    
    2,824,000
    
    
    
    2,824,000Thomas M. Lardieri
    
    
    55,000
    
    
    
    287,000
    
    
    
    287,000
    
    
    
    287,000Andrea L. Forster
    
    
    911,000
    
    
    
    1,543,100
    
    
    
    1,543,100
    
    
    
    1,543,100
 Nonqualified Deferred Compensation Plan.
 Severance
 Benefits Generally Available to All PBG Salaried Employees
 Compensation of Managing Directors
 
 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
  
 Item 13. Certain Relationships and Related Transactions, and Director Independence
  Stock Ownership and Director Relationships with PepsiCo.
 92




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##### Table of Contents



Agreements and Transactions with PepsiCo and Affiliates.
  Beverage Agreements and Purchases of Concentrates and Finished Products
  Transactions with Joint Ventures in which PepsiCo holds an equity interest.
    Purchase of Snack Food Products from Frito-Lay, Inc.
 Shared Services
  Rental Payments.
 National Fountain Services
 Bottler Incentives
 93




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##### Table of Contents



PepsiCo Guarantees
 PBG/Bottling LLC Transactions.
     Bottling LLC Distribution.
 Relationships and Transactions with Management and Others.
  94




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##### Table of Contents



Item 14. Principal Accountant Fees and Services
 INDEPENDENT ACCOUNTANTS FEES AND SERVICES
  Audit
and Non-Audit Fees
 2007
    
    2006Audit Fees (1)
    
    $
    5.6
    
    
    $
    5.2Audit-Related Fees (2)
    
    $
    0.7
    
    
    $
    0.9Tax Fees (3)
    
    $
    0.3
    
    
    $
    0.0All Other Fees
    
    $
    0.0
    
    
    $
    0.0Total
    
    $
    6.6
    
    
    $
    6.1
 
 (1)
    
    Represents fees for the audit of our consolidated financial statements, audit of
internal controls, the reviews of interim financial statements included in our Forms 10-Q and
all statutory audits.(2)
    
    Represents fees primarily related to audits of employee benefit plans and other
audit-related services.(3)
    
    Represents fees related primarily to assistance with tax compliance matters. Pre-Approval Policies and Procedures .
 95




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PART IV
 
 Item 15. Exhibits and Financial Statement Schedules
 (a) 1.
    
    
    Financial Statements. The following consolidated financial statements of
Bottling LLC and its subsidiaries are included herein:Consolidated Statements of Operations  Fiscal years ended December 29,
2007, December 30, 2006 and December 31, 2005.Consolidated Statements of Cash Flows  Fiscal years ended December 29,
2007, December 30, 2006 and December 31, 2005.Consolidated Balance Sheets  December 29, 2007 and December 30, 2006.
Consolidated Statements of Changes in Owners Equity  Fiscal years ended
December 29, 2007, December 30, 2006 and December 31, 2005.Notes
to Consolidated Financial Statements.
Report of Independent Registered Public Accounting Firm2.
    
    
    Financial Statement Schedules. The following financial statement schedule of
Bottling LLC and its subsidiaries is included in this Report on the page
indicated:
 PageSchedule II  Valuation
and Qualifying Accounts
for the fiscal years
ended December 29, 2007,
December 30, 2006 and
December 31, 2005
    
    F-2
 3.
    
    
    Exhibits
  96




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SIGNATURES
  Dated: February 25, 2008Bottling Group, LLCBy:
    /s/ Eric J. FossEric J. FossPrincipal Executive Officer  SIGNATURE
    
    TITLE
    
    DATE/s/ Eric J. Foss

Eric J. Foss
    
    Principal Executive Officer
    
    February 25, 2008/s/ Alfred H. Drewes

Alfred H. Drewes
    
    Principal Financial Officer
    
    February 25, 2008/s/ Thomas M. Lardieri

Thomas M. Lardieri
    
    Principal Accounting Officer and
Managing Director
    
    February 25, 2008/s/ Steven M. Rapp

Steven M. Rapp
    
    Managing Director
    
    February 25, 2008/s/ Marie T. Gallagher

Marie T. Gallagher
    
    Managing Director
    
    February 25, 2008
 S-1




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##### Table of Contents



INDEX TO FINANCIAL STATEMENT SCHEDULES
 PageSchedule II  Valuation and Qualifying Accounts for the fiscal years
ended December 29, 2007, December 30, 2006 and December 31, 2005
    
    F-2
 F-1




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SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS
BOTTLING GROUP, LLC
IN MILLIONS
 Balance At
    
    Charges to Cost and
    
    
    
    
    
    
    
    
    
    Foreign Currency
    
    Balance At End OfBeginning Of Period
    
    Expenses
    
    Acquisitions
    
    Accounts Written Off
    
    Translation
    
    PeriodFiscal Year Ended
December 29, 2007Allowance for
losses on trade
accounts
receivable
    
    $
    50
    
    
    $
    11
    
    
    $
    
    
    
    $
    (10
    )
    
    $
    3
    
    
    $
    54Fiscal Year Ended
December 30, 2006Allowance for
losses on trade
accounts
receivable
    
    $
    51
    
    
    $
    5
    
    
    $
    
    
    
    $
    (7
    )
    
    $
    1
    
    
    $
    50Fiscal Year Ended
December 31, 2005Allowance for
losses on trade
accounts
receivable
    
    $
    61
    
    
    $
    3
    
    
    $
    
    
    
    $
    (12
    )
    
    $
    (1
    )
    
    $
    51
 F-2




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##### Table of Contents



INDEX TO EXHIBITS
 Exhibit No.
    
    Description of Exhibit3.1
    
    
    Articles of Formation of Bottling LLC, which is incorporated herein by reference to Exhibit 3.4 to
Bottling LLCs Registration Statement on Form S-4 (Registration No. 333-80361).3.2
    
    
    Amended and Restated Limited Liability Company Agreement of Bottling LLC, which is incorporated herein by
reference to Exhibit 3.5 to Bottling LLCs Registration Statement on Form S-4 (Registration No.
333-80361).4.1
    
    
    Indenture dated as of February 8, 1999 among Pepsi Bottling Holdings, Inc., PepsiCo, Inc., as guarantor,
and The Chase Manhattan Bank, as trustee, relating to $1,300,000,000 5 5/8% Senior Notes due 2009, which
is incorporated herein by reference to Exhibit 10.9 to The Pepsi Bottling Group, Inc. (PBG)s
Registration Statement on Form S-1 (Registration No. 333-70291).4.2
    
    
    First Supplemental Indenture dated as of February 8, 1999 among Pepsi Bottling Holdings, Inc., Bottling
LLC, PepsiCo, Inc. and The Chase Manhattan Bank, as trustee, supplementing the Indenture dated as of
February 8, 1999 among Pepsi Bottling Holdings, Inc., PepsiCo, Inc. and The Chase Manhattan Bank, as
trustee, which is incorporated herein by reference to Exhibit 10.10 to PBGs Registration Statement on
Form S-1 (Registration No. 333-70291).4.3
    
    
    Indenture dated as of March 8, 1999 by and among PBG, as obligor, Bottling LLC, as guarantor, and The
Chase Manhattan Bank, as trustee, relating to $1,000,000,000 7% Series B Senior Notes due 2029, which is
incorporated herein by reference to Exhibit 10.14 to PBGs Registration Statement on Form S-1
(Registration No. 333-70291).4.4
    
    
    Indenture dated as of November 15, 2002 among Bottling LLC, PepsiCo, Inc., as guarantor, and JPMorgan
Chase Bank, as trustee, relating to $1,000,000,000 4 5/8% Senior Notes due November 15, 2012, which is
incorporated herein by reference to Exhibit 4.7 to Bottling LLCs Annual Report on Form 10-K for the year
ended December 28, 2002.4.5
    
    
    Registration Rights Agreement dated as of November 7, 2002 relating to the $1,000,000,000 4 5/8% Senior
Notes due November 15, 2012, which is incorporated herein by reference to Exhibit 4.8 to Bottling Group
LLCs Annual Report on Form 10-K for the year ended December 28, 2002.4.6
    
    
    Indenture, dated as of June 10, 2003 by and between Bottling LLC, as obligor, and JPMorgan Chase Bank, as
trustee, relating to $250,000,000 4 1/8% Senior Notes due June 15, 2015, which is incorporated herein by
reference to Exhibit 4.1 to Bottling LLCs Registration Statement on Form S-4 (Registration No.
333-106285).4.7
    
    
    Registration Rights Agreement dated June 10, 2003 by and among Bottling LLC, J.P. Morgan Securities Inc.,
Lehman Brothers Inc., Banc of America Securities LLC, Citigroup Global Markets Inc, Credit Suisse First
Boston LLC, Deutsche Bank Securities Inc., Blaylock & Partners, L.P. and Fleet Securities, Inc, relating
to $250,000,000 4 1/8% Senior Notes due June 15, 2015, which is incorporated herein by reference to
Exhibit 4.3 to Bottling LLCs Registration Statement on Form S-4 (Registration No. 333-106285).4.8
    
    
    Indenture, dated as of October 1, 2003, by and between Bottling LLC, as obligor, and JPMorgan Chase Bank,
as trustee, which is incorporated herein by reference to Exhibit 4.1 to Bottling LLCs Form 8-K dated
October 3, 2003.4.9
    
    
    Form of Note for the $400,000,000 5.00% Senior Notes due November 15, 2013, which is incorporated herein
by reference to Exhibit 4.1 to Bottling LLCs Form 8-K dated November 13, 2003.4.10
    
    
    Indenture, dated as of March 30, 2006, by and between Bottling LLC, as obligor, and JPMorgan Chase Bank,
N.A., as trustee, which is incorporated herein by reference to Exhibit 4.1 to Bottling LLCs Quarterly
Report on Form 10-Q for the quarter ended March 25, 2006.4.11
    
    
    Form of Note for the $800,000,000 51/2% Senior Notes due April 1, 2016, which is
incorporated herein by reference to Exhibit 4.2 to Bottling LLCs Quarterly Report on Form 10-Q for the
quarter ended March 25, 2006.10.1
    
    
    Settlement Agreement between Bottling LLC and PepsiCo, Inc. dated June 28, 2005, which is incorporated
herein by reference to Exhibit 10.4 to PBGs Quarterly Report on Form 10-Q for the quarter ended June 11,
2005.
 E-1




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Exhibit No.
    
    Description of Exhibit10.2
    
    
    U.S. $1,200,000,000 First Amended and Restated Credit Agreement dated as of October 19, 2007 among The
Pepsi Bottling Group, Inc., as borrower; Bottling LLC, as guarantor; Citigroup Global Markets Inc. and
HSBC Securities (USA) Inc., as joint lead arrangers and book managers; Citibank, N.A., as agent; HSBC Bank
USA, N.A., as syndication agent; and certain other banks identified in the First Amended and Restated
Credit Agreement, which is incorporated herein by reference to Exhibit 10.1 to Bottling LLCs Current
Report on Form 8-K dated October 19, 2007 and filed October 25, 2007.12*
    
    
    Statement re Computation of Ratios.21*
    
    
    Subsidiaries of Bottling LLC.23*
    
    
    Consent of Deloitte & Touche LLP.31.1*
    
    
    Certification by the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2*
    
    
    Certification by the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1*
    
    
    Certification by the Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2*
    
    
    Certification by the Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.99.1*
    
    
    The Pepsi Bottling Group, Inc.s Annual Report on Form 10-K for the fiscal year ended December 29, 2007.
 
 *
    
    Filed herewith E-2