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                                                                    NO. 1
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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K
                                  ANNUAL REPORT
          Pursuant to Section 13 of the Securities Exchange Act of 1934
                   For the Fiscal Year Ended December 29, 2001

                               BOTTLING GROUP, LLC
                                  ONE PEPSI WAY
                             SOMERS, NEW YORK 10589
                                 (914) 767-6000

      INCORPORATED IN DELAWARE                      13-4042452
   (JURISDICTION OF INCORPORATION)     (I.R.S. EMPLOYER IDENTIFICATION NO.)

                            -------------------------

       SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE SECURITIES
                           EXCHANGE ACT OF 1934: NONE

        SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE SECURITIES
                           EXCHANGE ACT OF 1934: NONE

      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  [X]       NO [_]

      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 THE 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. [X]
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                                     PART I

ITEM 1. BUSINESS

INTRODUCTION

      Bottling Group, LLC ("Bottling LLC") is the principal operating subsidiary
of The Pepsi Bottling Group, Inc. ("PBG") and consists of substantially all of
the operations and assets of PBG. Bottling LLC, which is fully consolidated by
PBG, consists of bottling operations located in the United States, Canada,
Spain, Greece and Russia. Prior to its formation, Bottling LLC was an operating
unit of PepsiCo, Inc. ("PepsiCo"). When used in this Report, "Bottling LLC,"
"we," "us" and "our" each refers to Bottling Group, LLC.

      PBG was incorporated in Delaware in January, 1999 as a wholly-owned
subsidiary of PepsiCo to effect the separation of most of PepsiCo's
company-owned bottling businesses. PBG became a publicly traded company on March
31, 1999. As of February 21, 2002, PepsiCo's ownership represented 37.9% of the
outstanding common stock and 100% of the outstanding Class B common stock,
together representing 42.9% of the voting power of all classes of PBG's voting
stock.

      PepsiCo and PBG contributed bottling businesses and assets used in the
bottling business to Bottling LLC in connection with the formation of Bottling
LLC. As a result of the contributions of assets, PBG owns 93% and PepsiCo owns
the remaining 7%.

RECENT ACQUISITION

      On March 13, 2002, we acquired the operations and exclusive right to
manufacture, sell and distribute Pepsi-Cola's international beverages in Turkey
for a purchase price of approximately $100 million in cash and assumed debt.

PRINCIPAL PRODUCTS

      We are the world's largest manufacturer, seller and distributor of
Pepsi-Cola beverages. Pepsi-Cola beverages sold by us include PEPSI-COLA, DIET
PEPSI, PEPSI ONE, PEPSI TWIST, MOUNTAIN DEW, MOUNTAIN DEW CODE RED, AMP, LIPTON
BRISK, LIPTON'S ICED TEA, SLICE, MUG, AQUAFINA, STARBUCKS FRAPPUCCINO,
FRUITWORKS, SIERRA MIST, DOLE and SOBE and, outside the U.S., 7UP, PEPSI MAX,
MIRINDA and KAS. We have the exclusive right to manufacture, sell and distribute
Pepsi-Cola beverages in all or a portion of 41 states, the District of Columbia,
eight Canadian provinces, Spain, Greece and Russia. In some of our territories,
we also have the right to manufacture, sell and distribute soft drink products
of other companies, including DR PEPPER, 7UP and ALL SPORT in the U.S.
Approximately 79% of our volume is sold in the United States, and the remaining
21% is sold in Canada, Spain, Greece and Russia. We have an extensive
distribution system in the United States and Canada. In Russia, Spain and
Greece, we use a combination of direct store distribution and distribution
through wholesalers, depending on local marketplace considerations.

RAW MATERIALS AND OTHER SUPPLIES

      We purchase the concentrates to manufacture Pepsi-Cola beverages and other
soft drink products from PepsiCo and other soft-drink companies.

      In addition to concentrates, we purchase sweeteners, glass and plastic
bottles, cans, closures, syrup containers, other packaging materials and carbon
dioxide. We generally purchase our raw materials, other than concentrates, from
multiple suppliers. PepsiCo acts as our agent for the purchase of such raw
materials. The Pepsi beverage agreements provide that, with respect to the soft
drink


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products of PepsiCo, all authorized containers, closures, cases, cartons and
other packages and labels may be purchased only from manufacturers approved by
PepsiCo. There are no materials or supplies used by us that are currently in
short supply. The supply or cost of specific materials could be adversely
affected by price changes, strikes, weather conditions, governmental controls or
other factors.

PATENTS, TRADEMARKS, LICENSES AND FRANCHISES

      Our portfolio of beverage products includes some of the best recognized
trademarks in the world and includes PEPSI-COLA, DIET PEPSI, PEPSI ONE, PEPSI
TWIST, MOUNTAIN DEW, MOUNTAIN DEW CODE RED, AMP, LIPTON BRISK, LIPTON'S ICED
TEA, SLICE, MUG, AQUAFINA, STARBUCKS FRAPPUCCINO, FRUITWORKS, SIERRA MIST, DOLE,
SOBE and outside the U.S., 7UP, PEPSI MAX, MIRINDA and KAS. The majority of our
volume is derived from brands licensed from PepsiCo or PepsiCo joint ventures.
In some of our territories, we also have the right to manufacture, sell and
distribute soft drink products of other companies, including DR PEPPER, 7UP and
ALL SPORT in the U.S.

      We conduct our business primarily pursuant to PBG's beverage agreements
with PepsiCo. Although Bottling LLC is not a direct party to these agreements,
as the principal operating subsidiary of PBG, it enjoys certain rights and is
subject to certain obligations as described below. These agreements give us the
exclusive right to market, distribute, and produce beverage products of PepsiCo
in authorized containers in specified territories.

      Set forth below is a description of the Pepsi beverage agreements and
other bottling agreements from which we benefit and under which we are obligated
as the principal operating subsidiary of PBG.

      Terms of the Master Bottling Agreement. The Master Bottling Agreement
under which we manufacture, package, sell and distribute the cola beverages
bearing the PEPSI-COLA and PEPSI trademarks was entered into in March of 1999.
The Master Bottling Agreement gives us the exclusive and perpetual right to
distribute cola beverages for sale in specified territories in authorized
containers of the nature currently used by us. The Master Bottling Agreement
provides that we will purchase our entire requirements of concentrates for the
cola beverages from PepsiCo at prices, and on terms and conditions, determined
from time to time by PepsiCo. PepsiCo may determine from time to time what types
of containers to authorize for use by us. PepsiCo has no rights under the Master
Bottling Agreement with respect to the prices at which we sell our products.

      Under the Master Bottling Agreement we are obligated to:

      (1)   maintain such plant and equipment, staff, and distribution and
            vending facilities 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 meet
            the objective; and

      (6)   maintain such financial capacity as may be reasonably necessary to
            assure performance under the Master Bottling Agreement by us.


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      The Master Bottling Agreement requires us to meet annually with PepsiCo to
discuss plans for the ensuing year and the following two years. At such
meetings, we are obligated to present plans that set out in reasonable detail
our marketing plan, our management plan and advertising plan with respect to the
cola beverages for the year. We must also present a financial plan showing that
we have the financial capacity to perform our duties and obligations under the
Master Bottling Agreement for that year, as well as sales, marketing,
advertising and capital expenditure plans for the two years following such year.
PepsiCo has the right to approve such plans, which approval shall not be
unreasonably withheld. In 2001, PepsiCo approved our annual plan.

      If we carry out our annual plan in all material respects, we will be
deemed to have satisfied our obligations to push vigorously the sale of the cola
beverages, increase and fully meet the demand for the cola beverages in our
territories and maintain the financial capacity required under the Master
Bottling Agreement. Failure to present a plan or carry out approved plans in all
material respects would constitute an event of default that, if not cured within
120 days of notice of the failure, would give PepsiCo the right to terminate the
Master Bottling Agreement.

      If we present a plan that PepsiCo does not approve, such failure shall
constitute a primary consideration for determining whether we have satisfied our
obligations to maintain our financial capacity, push vigorously the sale of the
cola beverages and increase and fully meet the demand for the cola beverages in
our territories.

      If we fail to carry out our annual plan in all material respects in any
segment of our territory, whether defined geographically or by type of market or
outlet, and if such failure is not cured within six months of notice of the
failure, PepsiCo may reduce the territory covered by the Master Bottling
Agreement by eliminating the territory, market or outlet with respect to which
such failure has occurred.

      PepsiCo has no obligation to participate with us in advertising and
marketing spending, but it may contribute to such expenditures and undertake
independent advertising and marketing activities, as well as cooperative
advertising and sales promotion programs that would require our cooperation and
support. Although PepsiCo has advised us that it intends to continue to provide
cooperative advertising funds, it is not obligated to do so under the Master
Bottling Agreement.

      The Master Bottling Agreement provides that PepsiCo may in its sole
discretion reformulate any of the cola beverages or discontinue them, with some
limitations, so long as all cola beverages are not discontinued. PepsiCo may
also introduce new beverages under the PEPSI-COLA trademarks or any modification
thereof. If that occurs, we will be obligated to manufacture, package,
distribute and sell such new beverages with the same obligations as then exist
with respect to other cola beverages. We are prohibited from producing or
handling cola products, other than those of PepsiCo, or products or packages
that imitate, infringe or cause confusion with the products, containers or
trademarks of PepsiCo. The Master Bottling Agreement also imposes requirements
with respect to the use of PepsiCo's trademarks, authorized containers,
packaging and labeling.

      If we acquire control, directly or indirectly, of any bottler of cola
beverages, we must cause the acquired bottler to amend its bottling appointments
for the cola beverages to conform to the terms of the Master Bottling Agreement.

      Under the Master Bottling Agreement, PepsiCo has agreed not to withhold
approval for any acquisition of rights to manufacture and sell PEPSI trademarked
cola beverages within a specific area -- currently representing approximately
13.2% of PepsiCo's U.S. bottling system in terms of volume -- if we have
successfully negotiated the acquisition and, in PepsiCo's reasonable judgment,
satisfactorily performed our obligations under the Master Bottling Agreement. We
have agreed not to


                                       4
<PAGE>
acquire or attempt to acquire any rights to manufacture and sell PEPSI
trademarked cola beverages outside of that specific area without PepsiCo's prior
written approval.

      The Master Bottling Agreement is perpetual, but may be terminated by
PepsiCo in the event of our default. Events of default include:

      (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.

      An event of default will also occur if any person or affiliated group
acquires any contract, option, conversion privilege, or other right to acquire,
directly or indirectly, beneficial ownership of more than 15% of any class or
series of PBG's voting securities without the consent of PepsiCo. As of February
21, 2002, no shareholder of PBG, other than PepsiCo, holds more than 7.0% of
PBG's Common Stock.

      PBG is prohibited from assigning, transferring or pledging the Master
Bottling Agreement, or any interest therein, whether voluntarily, or by
operation of law, including by merger or liquidation, without the prior consent
of PepsiCo.

      The Master Bottling Agreement was entered into by PBG in the context of
its separation from PepsiCo and, therefore, its provisions were not the result
of arm's-length negotiations. Consequently, the agreement contains provisions
that are less favorable to us than the exclusive bottling appointments for cola
beverages currently in effect for independent bottlers in the United States.

      Terms of the Non-Cola Bottling Agreements. The beverage products covered
by the non-cola bottling agreements are beverages licensed to PBG by PepsiCo,
consisting of MOUNTAIN DEW, DIET MOUNTAIN DEW, MOUNTAIN DEW CODE RED, SLICE,
SIERRA MIST, AQUAFINA, FRUITWORKS, MUG root beer and cream soda. The non-cola
bottling agreements contain provisions that are similar to those contained in
the Master Bottling Agreement with respect to pricing, territorial restrictions,
authorized containers, planning, quality control, transfer restrictions, term,
and related matters. PBG's non-cola bottling agreements will terminate if
PepsiCo terminates PBG's Master Bottling Agreement. The exclusivity provisions
contained in the non-cola bottling agreements would prevent us from
manufacturing, selling or distributing beverage products which imitate, infringe
upon, or cause confusion with, the beverage products covered by the non-cola
bottling agreements. PepsiCo may also elect to discontinue the manufacture, sale
or distribution of a non-cola beverage and terminate the applicable non-cola
bottling agreement upon six months notice to PBG.

      PBG also has agreements with PepsiCo granting PBG exclusive rights to
distribute AMP and DOLE in all of PBG's territories and SOBE in certain
specified territories. The distribution agreements contain provisions generally
similar to those in the Master Bottling Agreement as to use of trademarks, trade
names, approved containers and labels and causes for termination. Some of these
beverage agreements have limited terms and, in most instances, prohibit us from
dealing in similar beverage products.


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      Terms of the Master Syrup Agreement. The Master Syrup Agreement grants PBG
the exclusive right to manufacture, sell and distribute fountain syrup to local
customers in PBG territories. The Master Syrup Agreement also grants us the
right to act as a manufacturing and delivery agent for national accounts within
our territories that specifically request direct delivery without using a
middleman. In addition, PepsiCo may appoint PBG to manufacture and deliver
fountain syrup to national accounts that elect delivery through independent
distributors. Under the Master Syrup Agreement, PBG will have the exclusive
right to service fountain equipment for all of the national account customers
within PBG's territories. The Master Syrup Agreement provides that the
determination of whether an account is local or national is at the sole
discretion of PepsiCo.

      The Master Syrup Agreement contains provisions that are similar to those
contained in the Master Bottling Agreement with respect to pricing, territorial
restrictions with respect to local customers and national customers electing
direct-to-store delivery only, planning, quality control, transfer restrictions
and related matters. The Master Syrup Agreement has an initial term of five
years and is automatically renewable for additional five-year periods unless
PepsiCo terminates it for cause. PepsiCo has the right to terminate the Master
Syrup Agreement without cause at the conclusion of the initial five-year period
or at any time during a renewal term upon twenty-four months notice. In the
event PepsiCo terminates the Master Syrup Agreement without cause, PepsiCo is
required to pay PBG the fair market value of our rights thereunder.

      PBG's Master Syrup Agreement will terminate if PepsiCo terminates PBG's
Master Bottling Agreement.

      Terms of Other U.S. Bottling Agreements. The bottling agreements between
PBG and other licensors of beverage products, including Cadbury Schweppes plc --
for DR PEPPER, 7UP, SCHWEPPES and CANADA DRY, the Pepsi/Lipton Tea Partnership
-- for LIPTON BRISK and LIPTON'S ICED TEA, the North American Coffee Partnership
-- for STARBUCKS FRAPPUCCINO, and Monarch Company -- for ALL SPORT, contain
provisions generally similar to those in the Master Bottling Agreement as to use
of trademarks, trade names, approved containers and labels, sales of imitations,
and causes for termination. Some of these beverage agreements have limited terms
and, in most instances, prohibit us from dealing in similar beverage products.

      Terms of the Country Specific Bottling Agreements. The country specific
bottling agreements contain provisions similar to those contained in the Master
Bottling Agreement and the non-cola bottling agreements and, in Canada, the
Master Syrup Agreement with respect to authorized containers, planning, quality
control, transfer restrictions, causes for termination and related matters.
These bottling agreements differ from the Master Bottling Agreement because,
except for Canada, they include both fountain syrup and non-fountain beverages.
These bottling agreements also differ from the Master Bottling Agreement with
respect to term and contain certain provisions that have been modified to
reflect the laws and regulations of the applicable country. For example, the
bottling agreements in Spain do not contain a restriction on the sale and
shipment of Pepsi-Cola beverages into our territory by others in response to
unsolicited orders.


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SEASONALITY

      Our peak season is the warm summer months beginning with Memorial Day and
ending with Labor Day. Approximately 75% of our operating income is typically
earned during the second and third quarters. Over 80% of cash flow from
operations is typically generated in the third and fourth quarters.

COMPETITION

      The carbonated soft drink market and the non-carbonated beverage market
are highly competitive. Our competitors in these markets include bottlers and
distributors of nationally advertised and marketed products, bottlers and
distributors of regionally advertised and marketed products, as well as bottlers
of private label soft drinks sold in chain stores. We compete primarily on the
basis of advertising and marketing programs to create brand awareness, price and
promotions, retail space management, customer service, consumer points of
access, new products, packaging innovations and distribution methods. We believe
that brand recognition, availability and consumer and customer goodwill are
primary factors affecting our competitive position.

GOVERNMENTAL REGULATION APPLICABLE TO BOTTLING LLC

      Our operations and properties are subject to regulation by various
federal, state and local governmental entities and agencies as well as foreign
government entities. As a producer of food products, we are subject to
production, packaging, quality, labeling and distribution standards in each of
the countries where we have operations, including, in the United States, those
of the federal Food, Drug and Cosmetic Act. The operations of our production and
distribution facilities are subject to the laws and regulations of, among other
agencies, the Department of Transportation, and various federal, state and local
occupational and environmental laws. These laws and regulations include, in the
United States, the Occupational Safety and Health Act, the Clean Air Act, the
Clean Water Act and laws relating to the operation, maintenance of and financial
responsibility for, fuel storage tanks. We believe that our current legal,
operational and environmental compliance programs adequately address such
concerns and that we are in substantial compliance with applicable laws and
regulations. We do not anticipate making any material expenditures in connection
with environmental remediation and compliance. However, compliance with, or any
violation of, future laws or regulations could require material expenditures by
us or otherwise have a material adverse effect on our business, financial
condition and results of operations.

      Bottle and Can Legislation

      In all but a few of our United States and Canadian markets, we offer our
bottle and can beverage products in non-refillable containers. Legislation has
been enacted in certain states and Canadian provinces where we operate that
generally prohibits the sale of certain beverages unless a deposit or levy is
charged for the container. These include Connecticut, Delaware, Maine,
Massachusetts, Michigan, New York, Oregon, California, British Columbia,
Alberta, Saskatchewan, Manitoba, New Brunswick, Nova Scotia and Quebec.

      Maine, Massachusetts and Michigan have statutes that require us to pay all
or a portion of unclaimed container deposits to the state and California imposes
a levy on beverage containers to fund a waste recovery system.

      In addition to the Canadian deposit legislation described above, Ontario,
Canada, currently has a regulation requiring that 30% of all soft drinks sold in
Ontario be bottled in refillable containers. This regulation is currently being
reviewed by the Canadian Ministry of the Environment.


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      The European Commission issued a packaging and packing waste directive
that was incorporated into the national legislation of most member states. This
has resulted in targets being set for the recovery and recycling of household,
commercial and industrial packaging waste and imposes substantial
responsibilities upon bottlers and retailers for implementation.

      We are not aware of similar material legislation being proposed or enacted
in any other areas served by us. We are unable to predict, however, whether such
legislation will be enacted or what impact its enactment would have on our
business, financial condition or results of operations.

      Soft Drink Excise Tax Legislation

      Specific soft drink excise taxes have been in place in certain states for
several years. The states in which we operate that currently impose such a tax
are West Virginia, Arkansas and Tennessee and, with respect to fountain syrup
only, Washington. Value-added taxes on soft drinks vary in our territories
located in Canada, Spain, Greece and Russia, but are consistent with the
value-added tax rate for other consumer products.

      We are not aware of any material soft drink taxes that have been enacted
in any other market served by us. We are unable to predict, however, whether
such legislation will be enacted or what impact its enactment would have on our
business, financial condition or results of operations.

      Trade Regulation

      As a manufacturer, seller and distributor of bottled and canned soft drink
products of PepsiCo and other soft drink manufacturers in exclusive territories
in the United States and internationally, we are subject to antitrust laws.
Under the Soft Drink Interbrand Competition Act, soft drink bottlers operating
in the United States, such as us, may have an exclusive right to manufacture,
distribute and sell a soft drink product in a geographic territory if the soft
drink product is in substantial and effective competition with other products of
the same class in the same market or markets. We believe that there is such
substantial and effective competition in each of the exclusive geographic
territories in which we operate.

      California Carcinogen and Reproductive Toxin Legislation

      A California law requires that any person who exposes another to a
carcinogen or a reproductive toxin must provide a warning to that effect.
Because the law does not define quantitative thresholds below which a warning is
not required, virtually all manufacturers of food products are confronted with
the possibility of having to provide warnings due to the presence of trace
amounts of defined substances. Regulations implementing the law exempt
manufacturers from providing the required warning if it can be demonstrated that
the defined substances occur naturally in the product or are present in
municipal water used to manufacture the product. We have assessed the impact of
the law and its implementing regulations on our beverage products and have
concluded that none of our products currently require a warning under the law.
We cannot predict whether or to what extent food industry efforts to minimize
the law's impact on food products will succeed. We also cannot predict what
impact, either in terms of direct costs or diminished sales, imposition of the
law may have.

EMPLOYEES

      As of December 29, 2001, we employed approximately 37,000 full-time
workers, of whom approximately 30,000 were employed in the United States.
Approximately 8,800 of our full-time workers in the United States are union
members. We consider relations with our employees to be good and have not
experienced significant interruptions of operations due to labor disagreements
with the exception of a labor dispute at certain of our New Jersey facilities,
which was successfully resolved on July 22, 2001.


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FINANCIAL INFORMATION ON INDUSTRY SEGMENTS AND GEOGRAPHIC AREAS

      See Note 16 to Bottling LLC's Consolidated Financial Statements set forth
in Item 8 below.

ITEM 2.  PROPERTIES

      We operate 70 soft drink production facilities worldwide, of which 62 are
owned and 8 are leased. Of our 328 distribution facilities, 264 are owned and 64
are leased. We believe that our bottling, canning and syrup filling lines and
our distribution facilities are sufficient to meet present needs. We also lease
headquarters office space in Somers, New York.

      We also own or lease and operate approximately 28,000 vehicles, including
delivery trucks, delivery and transport tractors and trailers and other trucks
and vans used in the sale and distribution of our soft drink products. We also
own more than 1.2 million soft drink dispensing and vending machines.

      With a few exceptions, leases of plants in the United States and Canada
are on a long-term basis, expiring at various times, with options to renew for
additional periods. Most international plants are leased for varying and usually
shorter periods, with or without renewal options. We believe that our properties
are in good operating condition and are adequate to serve our current
operational needs.

ITEM 3. LEGAL PROCEEDINGS

      From time to time we are a party to various litigation matters incidental
to the conduct of our business. There is no pending or, to Bottling LLC's best
knowledge, threatened legal proceeding to which we are a party that, in the
opinion of management, is likely to have a material adverse effect on our future
financial results.


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS

      None.


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EXECUTIVE OFFICERS OF THE REGISTRANT

      Set forth below is information pertaining to the executive officers of
Bottling LLC as of February 21, 2002:

JOHN T. CAHILL, 44, is the Principal Executive Officer of Bottling LLC. Mr.
Cahill is currently the Chief Executive Officer of PBG. Previously, Mr. Cahill
served as PBG's President and Chief Operating Officer from August 2000 to
September 2001. Mr. Cahill has been a member of PBG's Board of Directors since
January 1999 and served as PBG's Executive Vice President and Chief Financial
Officer prior to becoming President and Chief Operating Officer in August 2000.
He was Executive Vice President and Chief Financial Officer of the Pepsi-Cola
Company from April 1998 until November 1998. Prior to that, Mr. Cahill was
Senior Vice President and Treasurer of PepsiCo, having been appointed to that
position in April 1997. In 1996, he became Senior Vice President and Chief
Financial Officer of Pepsi-Cola North America. Mr. Cahill joined PepsiCo in 1989
where he held several other senior financial positions through 1996.

ALFRED H. DREWES, 46, is the Principal Financial Officer of Bottling LLC. He is
also the Senior Vice President and Chief Financial Officer of PBG. Appointed to
this position in June 2001, Mr. Drewes previously served as Senior Vice
President and Chief Financial Officer of Pepsi Beverages International ("PBI").
Mr. Drewes joined PepsiCo in 1982 as a financial analyst in New Jersey. During
the next nine years, he rose through increasingly responsible finance positions
within Pepsi-Cola North America in field operations and headquarters. In 1991,
Mr. Drewes joined PBI as Vice President of Manufacturing Operations, with
responsibility for the global concentrate supply organization.

ANDREA L. FORSTER, 42, is the Principal Accounting Officer of Bottling LLC. She
is also Vice President and Controller of PBG. In September 2000, Ms. Forster was
also named Corporate Compliance Officer for PBG. Following several years with
Deloitte Haskins and Sells, Ms. Forster joined PepsiCo in 1987 as a Senior
Analyst in External Reporting. She progressed through a number of positions in
the accounting and reporting functions and, in 1998, was appointed Assistant
Controller of the Pepsi-Cola Company. She was named Assistant Controller of PBG
in 1999.

                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

      There is no public trading market for the ownership interest of Bottling
LLC.


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      ITEM 6. SELECTED FINANCIAL DATA

      SELECTED FINANCIAL AND OPERATING DATA



<TABLE>
<CAPTION>
in millions

FISCAL YEARS ENDED                                           2001      2000(1)         1999        1998        1997        1996
                                                           -------     -------        -------     -------     -------     -------
<S>                                                        <C>         <C>            <C>         <C>         <C>         <C>
STATEMENT OF OPERATIONS DATA:
   Net revenues                                            $ 8,443     $ 7,982        $ 7,505     $ 7,041     $ 6,592     $ 6,603
   Cost of sales                                             4,580       4,405          4,296       4,181       3,832       3,844
                                                           -------     -------        -------     -------     -------     -------
   Gross profit                                              3,863       3,577          3,209       2,860       2,760       2,759
   Selling, delivery and administrative expenses             3,185       2,986          2,813       2,583       2,425       2,392
   Unusual impairment and other charges and credits (2)         --          --            (16)        222          --          --
                                                           -------     -------        -------     -------     -------     -------
   Operating income                                            678         591            412          55         335         367
   Interest expense, net                                        78          89            129         157         160         163
   Foreign currency loss (gain)                                 --           1              1          26          (2)          4
   Minority interest                                            14           8              5           4           4           7
                                                           -------     -------        -------     -------     -------     -------
   Income (loss) before income taxes                           586         493            277        (132)        173         193
   Income tax (benefit) expense (3)                             (1)         22              4          (1)          1           6
                                                           -------     -------        -------     -------     -------     -------
   Net income (loss)                                       $   587     $   471        $   273     $  (131)    $   172     $   187
                                                           =======     =======        =======     =======     =======     =======

BALANCE SHEET DATA (AT PERIOD END):
   Total assets                                            $ 8,677     $ 8,228        $ 7,799     $ 7,227     $ 7,095     $ 6,947
   Long-term debt:
      Allocation of PepsiCo long-term debt                      --          --             --       2,300       2,300       2,300
      Due to third parties                                   2,299       2,286          2,284          61          96         127
                                                           -------     -------        -------     -------     -------     -------
        Total long-term debt                                 2,299       2,286          2,284       2,361       2,396       2,427
   Minority interest                                           154         147            141         112          93         102
   Accumulated other comprehensive loss                       (416)       (253)          (222)       (238)       (184)       (102)
   Owners' equity                                            4,596       4,321          3,928       3,283       3,336       3,128
</TABLE>


      (1)   Our fiscal year 2000 results were impacted by the inclusion of an
            extra week in our fiscal year. The extra week increased net income
            by $12 million.

      (2)   Unusual impairment and other charges and credits comprises of the
            following:

      -     $45 million non-cash compensation charge in the second quarter of
            1999.

      -     $53 million vacation accrual reversal in the fourth quarter of 1999.

      -     $8 million restructuring reserve reversal in the fourth quarter of
            1999.

      -     $222 million charge related to the restructuring of our Russian
            bottling operations and the separation of Pepsi-Cola North America's
            concentrate and bottling organizations in the fourth quarter of
            1998.

      (3)   Fiscal Year 2001 includes Canada tax law change benefits of $25
            million.


                                       11
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

See "Management's Financial Review" set forth in Item 8 below.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

See "Management's Financial Review" set forth in Item 8 below.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

MANAGEMENT'S FINANCIAL REVIEW
-----------------------------
OVERVIEW
--------

      Bottling Group, LLC (collectively referred to as "Bottling LLC," "we,"
"our" and "us") is the principal operating subsidiary of The Pepsi Bottling
Group, Inc. ("PBG") and consists of substantially all of the operations and
assets of PBG. Bottling LLC, which is 93% owned by PBG and is fully
consolidated, consists of bottling operations located in the United States,
Canada, Spain, Greece and Russia. Prior to our formation, we were an operating
unit of PepsiCo, Inc. ("PepsiCo").


      The following discussion and analysis covers the key drivers behind our
success in 2001 and is broken down into six major sections. The first three
sections provide an overview, discuss related party transactions, and focus on
items that affect the comparability of historical or future results. The next
two sections provide an analysis of our results of operations and liquidity and
financial condition. The last section contains a discussion of our market risks
and cautionary statements. The discussion and analysis throughout Management's
Financial Review should be read in conjunction with the Consolidated Financial
Statements and the related accompanying notes.

Constant Territory

      We believe that constant territory performance results are the most
appropriate indicators of operating trends and performance, particularly in
light of our stated intention of acquiring additional bottling territories, and
are consistent with industry practice. Constant territory operating results are
derived by adjusting current year results to exclude significant current year
acquisitions and adjusting prior year results to include the results of
significant prior year acquisitions, as if they had occurred on the first day of
the prior fiscal year. In addition, 2000 constant territory results exclude the
impact from an additional week in our fiscal year ("53rd week"), which occurs
every five or six years, as our fiscal year ends on the last Saturday in
December. Constant territory results also exclude any unusual impairment and
other charges and credits discussed below and in Note 4 to the Consolidated
Financial Statements.

Use of EBITDA

      EBITDA, which is computed as operating income plus the sum of depreciation
and amortization, is a key indicator management and the industry use to evaluate
operating performance. It is not, however, required under accounting principles
generally accepted in the United States of America ("GAAP"), and should not be
considered an alternative to measurements required by GAAP such as net income or
cash flows. In addition, EBITDA excludes the impact of the non-cash portion of
the unusual impairment and other charges and credits discussed below and in Note
4 to the Consolidated Financial Statements.


                                       12
<PAGE>
Critical Accounting Policies

      The preparation of our Consolidated Financial Statements in conformity
with GAAP requires us to make estimates and assumptions that affect the reported
amounts in our Consolidated Financial Statements and the related accompanying
notes. We use our best judgment based on our knowledge of existing facts and
circumstances and actions that we may undertake in the future, as well as advice
of external experts, in determining the estimates that affect our Consolidated
Financial Statements. We have policies and procedures in place to ensure
conformity with GAAP and we focus your attention on the following:

      REVENUE RECOGNITION We recognize revenue when our products are delivered
to customers. Sales terms do not allow a right of return unless product
freshness dating has expired.

      ALLOWANCE FOR DOUBTFUL ACCOUNTS We determine our allowance for doubtful
accounts based on an evaluation of the aging of our receivable portfolio. Our
reserve contemplates our historical loss rate on receivables and the economic
environment in which we operate.

      RECOVERABILITY OF LONG-LIVED ASSETS We review all long-lived assets,
including intangible assets, when facts and circumstances indicate that the
carrying value of the asset may not be recoverable. When necessary, we write
down an impaired asset to its estimated fair value based on the best information
available. Estimated fair value is generally based on either appraised value or
measured by discounting estimated future cash flows. Considerable management
judgment is necessary to estimate discounted future cash flows, which are
discounted based on our weighted-average cost of capital.

      FINANCIAL INSTRUMENTS AND RISK MANAGEMENT We use derivative instruments to
hedge against the risk of adverse movements in the price of certain commodities
and fuel used in our operations. Our use of derivative instruments is limited to
interest rate swaps, forward contracts, futures and options on futures
contracts. Our company policy prohibits the use of derivative instruments for
trading or speculative purposes, and we have procedures in place to monitor and
control their use. All derivative instruments are recorded at fair value as
either assets or liabilities in our Consolidated Balance Sheets. The fair value
of our derivatives is generally based on quoted market prices. The evaluation of
hedge effectiveness is subject to assumptions based on terms and timing of
underlying exposures.

      COMMITMENTS AND CONTINGENCIES We are subject to various claims and
contingencies related to lawsuits, taxes, environmental and other matters
arising out of the normal course of business. Liabilities related to commitments
and contingencies are recognized when a loss is probable and reasonably
estimable.

      For a more detailed discussion of our significant accounting policies,
refer to Note 2 of our Consolidated Financial Statements.

RELATED PARTY TRANSACTIONS

      At the time of PBG's initial public offering we entered into a number of
agreements with PepsiCo. Although we are not a direct party to these contracts,
as the principal operating subsidiary of PBG, we derive direct benefit from
them. Accordingly, set forth below are the most significant agreements that
govern our relationship with PepsiCo:

      (1)   the master bottling agreement for cola beverages bearing the
            "Pepsi-Cola" and "Pepsi" trademark in the United States; bottling
            and distribution agreements for non-cola products in


                                       13
<PAGE>
            the United States, including Mountain Dew; and a master fountain
            syrup agreement in the United States;

      (2)   agreements similar to the master bottling agreement and the non-cola
            agreements for each specific country, including Canada, Spain,
            Greece and Russia, as well as a fountain syrup agreement similar to
            the master syrup agreement for Canada;

      (3)   a shared services agreement whereby PepsiCo provides us or we
            provide PepsiCo with certain administrative support, including
            procurement of raw materials, transaction processing, such as
            accounts payable and credit and collection, certain tax and treasury
            services, and information technology maintenance and systems
            development. The amounts paid or received under this contract are
            equal to the actual costs incurred by the company providing the
            service. From 1998 through 2001, a PepsiCo affiliate provided
            casualty insurance to us; and

      (4)   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. Under our tax separation agreement, PepsiCo
            maintains full control and absolute discretion for any combined or
            consolidated tax filings for tax periods ending on or before the
            initial public offering. PepsiCo has contractually agreed to act in
            good faith with respect to all tax audit matters affecting us. In
            addition, PepsiCo has agreed to use their best efforts to settle all
            joint interests in any common audit issue on a basis consistent with
            prior practice.

      We purchase concentrate from PepsiCo that is used in the production of
carbonated soft drinks and other ready-to-drink beverages. The price of
concentrate is determined annually by PepsiCo at its sole discretion. We also
produce or distribute other products and purchase finished goods and concentrate
through various arrangements with PepsiCo or PepsiCo joint ventures. We reflect
such purchases in cost of sales.

      We share a business objective with PepsiCo of increasing the availability
and consumption of Pepsi-Cola beverages. Accordingly, PepsiCo, at its sole
discretion, provides us with various forms of marketing support to promote its
beverages. This support covers a variety of initiatives, including marketplace
support, marketing programs, capital equipment investment, and shared media
expense. Based on the objective of the programs and initiatives, we record
marketing support as an adjustment to net revenues or as a reduction of selling,
delivery and administrative expense. There are no conditions or other
requirements that could result in a repayment of marketing support received.

      We manufacture and distribute fountain products and provide fountain
equipment service to PepsiCo customers in some territories in accordance with
the Pepsi beverage agreements. Amounts received from PepsiCo for these
transactions are offset by the cost to provide these services and are reflected
in selling, delivery and administrative expenses. We pay a royalty fee to
PepsiCo for the Aquafina trademark.

      Refer to the Items That Affect Historical or Future Comparability section
of Management's Financial Review for further discussions of concentrate supply
and bottler incentives. In addition, refer to Note 2 of our Consolidated
Financial Statements for further discussions on accounting for bottler
incentives and Note 17 for further discussions on our relationship with PepsiCo.

ITEMS THAT AFFECT HISTORICAL OR FUTURE COMPARABILITY
----------------------------------------------------

New Accounting Standards


                                       14
<PAGE>
      During 2001, the Financial Accounting Standards Board ("FASB") issued SFAS
141, "Business Combinations," which requires that the purchase method of
accounting be used for all business combinations initiated or completed after
June 30, 2001, and SFAS 142, "Goodwill and Other Intangible Assets," which
requires that goodwill and intangible assets with indefinite useful lives no
longer be amortized, but instead tested for impairment. Effective the first day
of fiscal year 2002 we will no longer amortize goodwill and certain franchise
rights, but will evaluate them for impairment annually. We have completed the
initial impairment review required by SFAS 142 and have determined that our
intangible assets are not impaired. The adoption of SFAS 142 will reduce our
fiscal year 2002 amortization expense by approximately $128 million.

      In addition, during 2001 the FASB also issued SFAS 143, "Accounting for
Asset Retirement Obligations" and SFAS 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets." SFAS 143 addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. It requires that we recognize
the fair value of a liability for an asset retirement obligation in the period
in which it is incurred if a reasonable estimate of fair value can be made. SFAS
144 superseded SFAS 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of," and Accounting Principles Board
Opinion 30, "Reporting the Results of Operations - Reporting the Effects of a
Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions." SFAS 144 establishes a single accounting
model for the impairment of long-lived assets and broadens the presentation of
discontinued operations to include more disposal transactions. SFAS 143 is
effective for fiscal year 2003 and SFAS 144 is effective for fiscal year 2002
and we do not anticipate that the adoption of these statements will have a
material impact on our Consolidated Financial Statements.

      During 2000 and 2001, the Emerging Issues Task Force ("EITF") addressed
various issues related to the income statement classification of certain
promotional payments. In May 2000, the EITF reached a consensus on Issue 00-14,
"Accounting for Certain Sales Incentives," addressing the recognition and income
statement classification of various sales incentives. Among its requirements,
the consensus will require the costs related to consumer coupons currently
classified as marketing costs to be classified as a reduction of revenue. In
January 2001, the EITF reached a consensus on Issue 00-22, "Accounting for
`Points' and Certain Other Time-Based or Volume-Based Sales Incentive Offers,
and Offers for Free Products or Services to Be Delivered in the Future." EITF
00-22 requires that certain volume-based cash rebates to customers currently
recognized as marketing costs be classified as a reduction of revenue. In April
2001, the EITF reached a consensus on Issue 00-25, "Vendor Income Statement
Characterization of Consideration Paid to a Reseller of the Vendor's Products."
EITF 00-25 addresses the income statement classification of consideration, other
than that directly addressed in EITF 00-14, from a vendor to a reseller or
another party that purchases the vendor's products. In November 2001, the EITF
codified Issues 00-14, 00-22 and 00-25 as Issue 01-9, "Accounting for
Consideration Given by a Vendor to a Customer or a Reseller of the Vendor's
Products." EITF 00-22 was effective for the first quarter of 2001 and was not
material to our Consolidated Financial Statements. The remainder of EITF 01-9 is
effective for 2002 and we do not anticipate that the adoption will have a
material impact on our Consolidated Financial Statements.

      Our Consolidated Financial Statements reflect the implementation of SFAS
133, "Accounting for Derivative Instruments and Hedging Activities," as amended
by SFAS 138, on the first day of fiscal year 2001. SFAS 133, which was issued in
1998, establishes accounting and reporting standards for hedging activities and
derivative instruments, including certain derivative instruments embedded in
other contracts, which are collectively referred to as derivatives. It requires
that an entity recognize all derivatives as either assets or liabilities in the
consolidated balance sheet and measure those instruments at fair value.


                                       15
<PAGE>
Asset Lives

      At the beginning of fiscal year 2000, we changed the estimated useful
lives of certain categories of assets primarily to reflect the success of our
preventive maintenance programs in extending the useful lives of these assets.
The changes, which are detailed in Note 3 to the Consolidated Financial
Statements, lowered total depreciation cost by approximately $69 million in 2000
as compared to 1999. The estimated useful lives of our assets were the same in
2001 and 2000.

Fiscal Year

      Our fiscal year ends on the last Saturday in December and, as a result, a
53rd week is added every five or six years. Fiscal years 2001 and 1999 consisted
of 52 weeks while fiscal year 2000 consisted of 53 weeks. The following table
illustrates the approximate dollar and percentage point impacts that the extra
week had on our operating results:


<TABLE>
<CAPTION>
      (dollars in millions)                            PERCENTAGE POINTS
                                                --------------------------------
                                 DOLLARS        2001 VS. 2000      2000 VS. 1999
                                 -------        -------------      -------------
<S>                              <C>            <C>                <C>
      Volume                       N/A                (2)                2
      Net Revenues                $113                (1)                2
      Net Income                  $ 12                (3)                4
      EBITDA                      $ 14                (2)                2
</TABLE>

PBG's Initial Public Offering


      PBG was incorporated in Delaware in January 1999 and, prior to its
formation, PBG was an operating unit of PepsiCo. PBG became a public company
through an initial public offering on March 31, 1999. PBG's initial public
offering consisted of 100 million shares of common stock sold to the public,
equivalent to 65% of its outstanding common stock, leaving PepsiCo the owner of
the remaining 35% of outstanding common stock. As a result of PBG's share
repurchase program, PepsiCo's ownership has increased to 37.7% of the
outstanding common stock and 100% of PBG's Class B common stock, together
representing 42.8% of the voting power of all classes of PBG's voting stock at
December 29, 2001. In addition, PepsiCo owns 7% of the equity of Bottling LLC,
as of December 29, 2001. We are fully consolidated by PBG.

      For the period prior to PBG's initial public offering and the formation of
Bottling LLC, we prepared our Consolidated Financial Statements as a "carve-out"
from the financial statements of PepsiCo using the historical results of
operations and assets and liabilities of our business. Certain costs reflected
in the Consolidated Financial Statements may not necessarily be indicative of
the costs that we would have incurred had we operated as an independent,
stand-alone entity from the first day of fiscal year 1999. These costs include
an allocation of PepsiCo's corporate overhead and interest expense:

-     We included overhead related to PepsiCo's corporate administrative
      functions based on a specific identification of PepsiCo's administrative
      costs relating to the bottling operations and, to the extent that such
      identification was not practicable, based upon the percentage of our
      revenues to PepsiCo's consolidated net revenues. These costs are included
      in selling, delivery and administrative expenses in our Consolidated
      Statements of Operations.

-     We allocated $2.3 billion of PepsiCo's debt to our business and charged
      interest expense on this debt using PepsiCo's weighted-average interest
      rate. Once we issued $2.3 billion of third-party debt in the first quarter
      of 1999, our actual interest rates were used to determine interest expense
      for the remainder of the year.

The amounts of the historical allocations described above are as follows:


                                       16
<PAGE>
<TABLE>
<CAPTION>
      (dollars in millions)                                    1999
                                                               ----
<S>                                                          <C>
      Corporate overhead expense                             $   3
      Interest expense                                       $  16
      PepsiCo's weighted-average interest rate                 5.8%
</TABLE>


Unusual Impairment and Other Charges and Credits

      Our operating results were affected by the following unusual charges and
credits:

<TABLE>
<CAPTION>
      (dollars in millions)                            1999
                                                       ----
<S>                                                    <C>
      Non-cash compensation charge                     $ 45
      Vacation policy change                            (53)
      Asset impairment and restructuring charges         (8)
                                                       ----
                                                       $(16)
                                                       ====
</TABLE>

      -     Non-cash Compensation Charge

            In connection with the completion of PBG's initial public offering,
            PepsiCo vested substantially all non-vested PepsiCo stock options
            held by our employees. As a result, we incurred a $45 million
            non-cash compensation charge in the second quarter of 1999, equal to
            the difference between the market price of the PepsiCo capital stock
            and the exercise price of these options at the vesting date.

      -     Vacation Policy Change

            As a result of changes to our employee benefit and compensation
            plans in 1999, employees now earn vacation time evenly throughout
            the year based upon service rendered. Previously, employees were
            fully vested at the beginning of each year. As a result of this
            change, we reversed an accrual of $53 million into income in 1999.

      -     Asset Impairment and Restructuring Charge

            In the fourth quarter of 1999, $8 million of the remaining
            restructuring reserve recorded in 1998 relating to an asset
            impairment and restructuring in our Russian operations, was reversed
            into income. The reversal was necessitated as actual costs incurred
            to renegotiate manufacturing and leasing contracts in Russia and to
            reduce the number of employees were less than the amounts originally
            estimated.

Comparability of our operating results may also be affected by the following:

Concentrate Supply

      We buy concentrate, the critical flavor ingredient for our products, from
PepsiCo, its affiliates and other brand owners who are the sole authorized
suppliers. Concentrate prices are typically determined annually.

      In February 2001, PepsiCo announced an increase of approximately 3% in the
price of U.S. concentrate. PepsiCo has recently announced a further increase of
approximately 3%, effective February 2002. Amounts paid or payable to PepsiCo
and its affiliates for concentrate were $1,584 million, $1,507 million and
$1,418 million in 2001, 2000 and 1999, respectively.

Bottler Incentives

      PepsiCo and other brand owners provide us with various forms of marketing
support. The level of this support is negotiated annually and can be increased
or decreased at the discretion of the brand owners. This marketing support is
intended to cover a variety of programs and initiatives, including direct
marketplace support, capital equipment funding and shared media, and advertising
support. Direct marketplace support is primarily funding by PepsiCo and other
brand owners of sales discounts


                                       17
<PAGE>
and similar programs, and is recorded as an adjustment to net revenues. Capital
equipment funding is designed to support the purchase and placement of marketing
equipment and is recorded as a reduction to selling, delivery and administrative
expenses. Shared media and advertising support is recorded as a reduction to
advertising and marketing expense within selling, delivery and administrative
expenses. There are no conditions or other requirements that could result in a
repayment of marketing support received.

      The total bottler incentives we received from PepsiCo and other brand
owners were $598 million, $566 million and $563 million for 2001, 2000 and 1999,
respectively. Of these amounts, we recorded $293 million, $277 million and $263
million for 2001, 2000 and 1999, respectively, in net revenues, and the
remainder as a reduction of selling, delivery and administrative expenses. The
amount of our bottler incentives received from PepsiCo was more than 90% of our
total bottler incentives in each of the three years, with the balance received
from the other brand owners.

Employee Benefit Plan Changes

      We made several changes to our employee benefit plans that took effect in
fiscal year 2000. The changes were made to our vacation policy, pension and
retiree medical plans and included some benefit enhancements as well as cost
containment provisions. These changes did not have a significant impact on our
financial results in 2001 or 2000.

      In 1999, we implemented a matching company contribution to our 401(k) plan
that began in 2000. The match is dependent upon the employee's contribution and
years of service. The matching company contribution was approximately $17
million and $15 million in 2001 and 2000, respectively.

      In the fourth quarter of 1999 we recognized a $16 million compensation
charge related to full-year 1999 performance. This expense was one-time in
nature and was for the benefit of our management employees, reflecting our
successful operating results as well as providing certain incentive-related
features.


                                       18
<PAGE>
BOTTLING GROUP, LLC
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions)

FISCAL YEARS ENDED DECEMBER 29, 2001, DECEMBER 30, 2000 AND DECEMBER 25, 1999


<TABLE>
<CAPTION>
                                                         2001          2000          1999
                                                       -------        ------       -------
<S>                                                    <C>            <C>          <C>
NET REVENUES ...................................       $ 8,443        $7,982       $ 7,505
Cost of sales ..................................         4,580         4,405         4,296
                                                       -------        ------       -------
GROSS PROFIT ...................................         3,863         3,577         3,209

Selling, delivery and administrative expenses ..         3,185         2,986         2,813
Unusual impairment and other charges and credits            --            --           (16)
                                                       -------        ------       -------
OPERATING INCOME ...............................           678           591           412

Interest expense ...............................           132           136           140
Interest income ................................            54            47            11
Foreign currency loss ..........................            --             1             1
Minority interest ..............................            14             8             5
                                                       -------        ------       -------

INCOME BEFORE INCOME TAXES .....................           586           493           277
Income tax expense before rate change                       24            22             4
Income tax rate change benefit .................           (25)           --            --
                                                       -------        ------       -------

NET INCOME .....................................       $   587        $  471       $   273
                                                       =======        ======       =======
</TABLE>


      See accompanying notes to Consolidated Financial Statements.



                                       19
<PAGE>
MANAGEMENT'S FINANCIAL REVIEW

RESULTS OF OPERATIONS
---------------------

<TABLE>
<CAPTION>
                                  FISCAL 2001 VS. 2000*     FISCAL 2000 VS. 1999*
                                  --------------------    -----------------------
                                              CONSTANT                   CONSTANT
                                  REPORTED   TERRITORY     REPORTED     TERRITORY
                                   CHANGE      CHANGE       CHANGE        CHANGE
                                   ------      ------       ------        ------
<S>                               <C>        <C>           <C>          <C>
      EBITDA .............          12%          13%          18%          16%
      Volume .............           2%           3%           3%           1%
      Net Revenue per Case           3%           3%           3%           3%
</TABLE>

      * Fiscal years 2001 and 1999 consisted of 52 weeks while fiscal year
        2000 consisted of 53 weeks.

EBITDA

      On a reported basis, EBITDA was $1,192 million in 2001, representing a 12%
increase over 2000, including an approximate 2 percentage point negative impact
from the 53rd week in 2000. Constant territory growth of 13% for 2001 was a
reflection of higher pricing, an increased mix of higher margin cold drink
volume, and solid volume growth in the U.S., as well as continued growth in our
operations outside the U.S., particularly in Russia. These increases were
partially offset by investments in our cold drink infrastructure.

      In 2000, reported EBITDA was $1,062 million, representing an 18% increase
over 1999, with the 53rd week contributing approximately 2 percentage points of
the growth. Constant territory EBITDA was 16% higher than 1999, driven by
continued pricing improvements in our take-home segment, mix shifts to
higher-margin cold drink volume, favorable cost of sales trends, and improved
results outside the United States.

VOLUME

      Our worldwide physical case volume grew 2% in 2001, including an
approximate 2 percentage point negative impact from the 53rd week in 2000.
Constant territory volume growth was 3% in 2001, reflecting U.S. growth of more
than 1% and 10% growth outside the United States. U.S. growth was led by the
introductions of Mountain Dew Code Red and Pepsi Twist, expanded distribution of
Sierra Mist, strong growth in Aquafina, as well as the integration of SoBe in
the majority of our markets. This growth was partially offset by declines in
brand Pepsi. New product innovation and consistent in-store execution resulted
in positive cold drink and take-home volume growth in the United States. In
addition, take-home volume growth in the U.S. benefited from significant growth
in mass merchandiser volume. Outside the U.S., all countries delivered solid
volume growth in 2001, led by our operations in Russia. Volume growth in Russia
was driven by the introduction of Mountain Dew and continued growth of Aqua
Minerale, our water product, and Fiesta, our value brand beverage.

      Our reported worldwide physical case volume grew 3% in 2000, with the 53rd
week contributing approximately 2 percentage points of the growth. Worldwide
constant territory volume grew 1% in 2000 with flat volume growth from our U.S.
operations and 7% growth from our operations outside the United States. In the
U.S., volume results reflected growth in our cold drink segment and the
favorable impact of the launch of Sierra Mist in the fourth quarter of 2000,
offset by declines in our take-home business. Our cold drink trends reflected
our successful placement of additional cold drink equipment in the United
States. Take-home volume remained lower for the year reflecting the effect of
our price increases in that segment. Our volume growth outside the U.S. was led
by Russia where we have reestablished brand Pepsi, introduced Fiesta, and
continued to increase distribution of Aqua Minerale. Partially offsetting the
growth in Russia were volume declines in Canada resulting from significant
take-home price increases in that country.


                                       20
<PAGE>
NET REVENUES

      Reported net revenues were $8,443 million in 2001, representing a 6%
increase over the prior year, including an approximate 1 percentage point
negative impact from the 53rd week in 2000. On a constant territory basis, net
revenues increased by 6%, reflecting 3% volume growth and 3% growth in net
revenue per case. Constant territory U.S. net revenues grew 6% consisting of 5%
growth in net revenue per case and volume growth of more than 1%. U.S. net
revenue per case results reflect higher pricing, primarily in foodstores, and an
increased mix of higher-revenue cold drink volume from new product innovation
and double-digit Aquafina growth. Constant territory net revenues outside the
U.S. grew 7%, reflecting volume growth of 10%, offset by declines in net revenue
per case of 3%. Excluding the negative impact from currency translations, net
revenue per case growth was flat outside the U.S. and increased 4% worldwide.

      Reported net revenues were $7,982 million in 2000, a 6% increase over the
prior year, with the 53rd week contributing approximately 2 percentage points of
the growth. On a constant territory basis, worldwide net revenues grew more than
4%, driven by a 1% volume increase and a 3% increase in net revenue per case.
Constant territory net revenue per case growth was driven by the U.S., which
grew 6%, reflecting higher pricing, particularly in our take-home segment, and
an increased mix of higher-revenue cold drink volume. These results were
partially offset by account level investment spending aimed at sustainable
Aquafina and cold drink inventory gains in the marketplace. Outside the U.S.,
constant territory net revenues were down 1%, reflecting a 7% increase in
volume, offset by an 8% decrease in net revenue per case. Excluding the negative
impact from currency translations, net revenue per case decreased 1% outside the
U.S. and increased 4% worldwide.

COST OF SALES

      Cost of sales increased $175 million, or 4% in 2001, including an
approximate 2 percentage point favorable impact from the 53rd week in 2000. On a
constant territory basis, cost of sales increased 5% driven by a 3% increase in
volume and a more than 1% increase in cost of sales per case. The increase in
cost of sales per case reflects higher U.S. concentrate costs and mix shifts
into higher cost packages and products, offset by country mix and favorable
currency translations.

      Cost of sales increased $109 million, or 3% in 2000, with the 53rd week
contributing approximately 2 percentage points of the growth. On a per case
basis, cost of sales was essentially flat in 2000. Included in cost of sales in
2000 were the favorable impacts from the change in our estimated useful lives of
manufacturing assets, which totaled $34 million in 2000 and an approximate 1
percentage point favorable impact from currency translations. Excluding the
effects of the change in asset lives and currency translations, cost of sales on
a per case basis was more than 1% higher, as higher U.S. concentrate costs were
partially offset by favorable packaging and sweetener costs, favorable country
mix, and efficiencies in production.


SELLING, DELIVERY AND ADMINISTRATIVE EXPENSES

      Selling, delivery and administrative expenses grew $199 million, or 7%,
over the comparable period in 2000, including an approximate 1 percentage point
favorable impact from the 53rd week in 2000. Approximately half of the increase
came from higher selling and delivery costs, specifically our continued
investments in our U.S. and Canadian cold drink strategy including people,
routes and equipment. Also contributing to the growth in selling, delivery and
administrative expenses are higher advertising and marketing costs and higher
costs associated with investments in our information technology systems.

      Selling, delivery and administrative expenses increased $173 million, or
6% in 2000, with the 53rd week contributing approximately 1 percentage point of
the growth. Included in selling, delivery and administrative expenses are the
favorable impacts from the change in estimated useful lives of


                                       21
<PAGE>
certain selling and delivery assets, which lowered depreciation expense by $35
million, and currency translations, which lowered selling, delivery and
administrative expense growth by approximately 1 percentage point in 2000.
Excluding the effects of the change in asset lives, currency translations and
the inclusion of the 53rd week, selling, delivery and administrative expenses
were approximately 7% higher in 2000. Driving this increase were higher selling
and delivery costs primarily reflecting our significant investment in our U.S.
cold drink infrastructure that began in 1999 and continued through 2000. In
addition, higher performance-related compensation costs contributed to the cost
growth. Growth in administrative costs associated with the company matching
contribution for our new 401(k) plan in 2000 was offset by a one-time, $16
million compensation charge in 1999.

INTEREST EXPENSE

      Fiscal year 2001 interest expense was $4 million lower than in 2000 due to
a lower effective interest rate on our debt, which resulted from decreasing
market interest rates in 2001. Fiscal year 2000 interest expense was $4 million
lower than 1999 reflecting lower external debt outside the U.S.

INTEREST INCOME

      Fiscal year 2001 interest income was $7 million higher than 2000 while
2000 interest income was $36 million higher than 1999. The increase in interest
income for both years primarily reflects additional loans to PBG, which were
used by PBG to pay for interest, taxes and share repurchases.

MINORITY INTEREST

      PBG has a direct minority ownership in one of our subsidiaries.
Accordingly, our Consolidated Financial Statements reflect PBG's share of
consolidated net income as minority interest in our Consolidated Statements of
Operations. The growth in minority interest expense over the last three years is
due to higher earnings by our subsidiary over the same periods.

INCOME TAX EXPENSE BEFORE RATE CHANGE

      Bottling LLC is a limited liability company, taxable as a partnership for
U.S. tax purposes and, as such, generally pays no U.S. federal or state income
taxes. The federal and state distributable share of income, deductions and
credits of Bottling LLC are allocated to Bottling LLC's owners based on
percentage ownership. However, certain domestic and foreign affiliates pay
income taxes in their respective jurisdictions. Such amounts are reflected in
our Consolidated Statements of Operations.

INCOME TAX RATE CHANGE BENEFIT

      During 2001, the Canadian Government enacted legislation reducing federal
and certain provincial corporate income tax rates. These rate changes reduced
deferred tax liabilities associated with our operations in Canada, and resulted
in one-time gains totaling $25 million in 2001.


                                       22
<PAGE>
BOTTLING GROUP, LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in millions)
FISCAL YEARS ENDED DECEMBER 29, 2001, DECEMBER 30, 2000 AND DECEMBER 25, 1999
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                                                                       2001              2000              1999
                                                                                     -------           -------           -------
<S>                                                                                  <C>               <C>               <C>
CASH FLOWS--OPERATIONS
Net income ................................................................          $   587           $   471           $   273
Adjustments to reconcile net income to net cash provided by operations:
   Depreciation ...........................................................              379               340               374
   Amortization ...........................................................              135               131               131
   Non-cash unusual impairment and other charges and credits ..............               --                --               (16)
   Other non-cash charges and credits, net ................................              146               145               124
   Changes in operating working capital, excluding effects of acquisitions:
      Accounts receivable .................................................              (28)                8               (30)
      Inventories .........................................................              (50)               11                 3
      Prepaid expenses and other current assets ...........................              (29)             (102)                3
      Accounts payable and other current liabilities ......................               56                22                45
                                                                                     -------           -------           -------
        Net change in operating working capital ...........................              (51)              (61)               21
                                                                                     -------           -------           -------
NET CASH PROVIDED BY OPERATIONS ...........................................            1,196             1,026               907
                                                                                     -------           -------           -------
CASH FLOWS--INVESTMENTS
Capital expenditures ......................................................             (593)             (515)             (560)
Acquisitions of bottlers ..................................................              (52)              (26)             (176)
Sales of property, plant and equipment ....................................                6                 9                22
Notes receivable from PBG, Inc. ...........................................             (310)             (268)             (259)
Other, net ................................................................             (123)              (52)              (19)
                                                                                     -------           -------           -------
NET CASH USED FOR INVESTMENTS .............................................           (1,072)             (852)             (992)
                                                                                     -------           -------           -------
CASH FLOWS--FINANCING
Short-term borrowings--three months or less ...............................               50                12               (58)
Proceeds from long-term debt ..............................................               --                --             2,276
Replacement of PepsiCo allocated debt .....................................               --                --            (2,300)
Payments of long-term debt ................................................               --                (9)              (90)
(Distributions to)/contributions from owners ..............................             (223)              (45)              416
                                                                                     -------           -------           -------
NET CASH (USED FOR) PROVIDED BY FINANCING .................................             (173)              (42)              244
                                                                                     -------           -------           -------
Effect of Exchange Rate Changes on Cash and Cash Equivalents ..............               (7)               (4)               (5)
                                                                                     -------           -------           -------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ......................              (56)              128               154
CASH AND CASH EQUIVALENTS--BEGINNING OF YEAR ..............................              318               190                36
                                                                                     -------           -------           -------
CASH AND CASH EQUIVALENTS--END OF YEAR ....................................          $   262           $   318           $   190
                                                                                     =======           =======           =======
</TABLE>


See accompanying notes to Consolidated Financial Statements.


                                       23
<PAGE>
BOTTLING GROUP, LLC
CONSOLIDATED BALANCE SHEETS

(in millions)
DECEMBER 29, 2001 AND DECEMBER 30, 2000
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                       2001              2000
                                                                     -------           -------
<S>                                                                  <C>               <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents .................................          $   262           $   318
Accounts receivable, less allowance of $42 in 2001 and 2000              823               796
Inventories ...............................................              331               281
Prepaid expenses and other current assets .................              115               154
                                                                     -------           -------
   TOTAL CURRENT ASSETS ...................................            1,531             1,549
Property, plant and equipment, net ........................            2,543             2,358
Intangible assets, net ....................................            3,684             3,694
Notes receivable from PBG, Inc. ...........................              837               527
Other assets ..............................................               82               100
                                                                     -------           -------
   TOTAL ASSETS ...........................................          $ 8,677           $ 8,228
                                                                     =======           =======

LIABILITIES AND OWNERS' EQUITY
CURRENT LIABILITIES
Accounts payable and other current liabilities ............          $   977           $   915
Short-term borrowings .....................................               77                26
                                                                     -------           -------
   TOTAL CURRENT LIABILITIES ..............................            1,054               941

Long-term debt ............................................            2,299             2,286
Other liabilities .........................................              406               346
Deferred income taxes .....................................              168               187
Minority interest .........................................              154               147
                                                                     -------           -------
   TOTAL LIABILITIES ......................................            4,081             3,907
OWNERS' EQUITY
Owners' net investment ....................................            5,012             4,574
Accumulated other comprehensive loss ......................             (416)             (253)
                                                                     -------           -------
   TOTAL OWNERS' EQUITY ...................................            4,596             4,321
                                                                     -------           -------
      TOTAL LIABILITIES AND OWNERS' EQUITY ................          $ 8,677           $ 8,228
                                                                     =======           =======
</TABLE>


See accompanying notes to Consolidated Financial Statements.


                                       24
<PAGE>
LIQUIDITY AND FINANCIAL CONDITION
---------------------------------

LIQUIDITY AND CAPITAL RESOURCES

      Liquidity Prior to our Separation from PepsiCo and PBG's Initial Public
Offering

      We financed our capital investments and acquisitions through cash flow
from operations and advances from PepsiCo prior to our separation from PepsiCo
and PBG's initial public offering. Under PepsiCo's centralized cash management
system, PepsiCo deposited sufficient cash in our bank accounts to meet our daily
obligations, and withdrew excess funds from those accounts. These transactions
are included in (distributions to)/contributions from owners in our Consolidated
Statements of Cash Flows.

      Liquidity After PBG's Initial Public Offering

      Subsequent to PBG's initial public offering, we have financed our capital
investments and acquisitions primarily through cash flow from operations. We
believe that our future cash flow from operations and borrowing capacity will be
sufficient to fund capital expenditures, acquisitions, dividends and working
capital requirements.

      Financing Transactions

      On February 9, 1999, $1.3 billion of 5 5/8% senior notes and $1.0 billion
of 5 3/8% senior notes which are guaranteed by PepsiCo. During the second
quarter of 1999, we executed an interest rate swap converting 4% of our
fixed-rate debt to floating-rate debt.

      The proceeds from the above financing transactions were used to repay
obligations to PepsiCo and fund acquisitions.

      Capital Expenditures

      We have incurred and will continue to incur capital costs to maintain and
grow our infrastructure, including acquisitions and investments in developing
market opportunities.

      -     Our business requires substantial infrastructure investments to
            maintain our existing level of operations and to fund investments
            targeted at growing our business. Capital infrastructure
            expenditures totaled $593 million, $515 million and $560 million
            during 2001, 2000 and 1999, respectively. We believe that capital
            infrastructure spending will continue to be significant, driven by
            our investments in the cold drink segment and capacity needs.

      -     We intend to continue to pursue acquisitions of independent PepsiCo
            bottlers in the U.S. and Canada, particularly in territories
            contiguous to our own, where they create shareholder value. These
            acquisitions will enable us to provide better service to our large
            retail customers, as well as to reduce costs through economies of
            scale. We also plan to evaluate international acquisition
            opportunities as they become available. Cash spending on
            acquisitions was $52 million, $26 million and $176 million in 2001,
            2000 and 1999, respectively. In addition, PBG contributed $74
            million of net assets relating to the acquisition of Pepsi-Cola
            Bottling of Northern California to us in 2001.

CASH FLOWS

      Fiscal 2001 Compared to Fiscal 2000

      Net cash provided by operating activities increased $170 million to $1,196
million in 2001, driven by strong EBITDA growth and the timing of casualty
insurance payments, partially offset by higher working capital due to growth in
our business.

      Net cash used for investments increased by $220 million from $852 million
in 2000 to $1,072 million in 2001, driven by increased loans made to PBG,
increased capital expenditures and acquisition spending.


                                       25
<PAGE>
      Net cash used for financing increased by $131 million to $173 million in
2001. This increase is primarily due to increased distributions to the owners.

      Fiscal 2000 Compared to Fiscal 1999

      Net cash provided by operating activities increased $119 million to $1,026
million in 2000 driven by strong EBITDA growth partially offset by the timing of
casualty insurance payments in 2000, which significantly contributed to our
unfavorable change in operating working capital.

      Net cash used by investments decreased by $140 million from $992 million
in 1999 to $852 million in 2000, primarily due to acquisition spending, which
was $150 million lower in 2000. Capital expenditures decreased by $45 million,
or 8%, as increases in the U.S. associated with our cold drink strategy were
offset by decreases outside the United States.

      Net cash (used for) provided by financing decreased from a source of cash
of $244 million in 1999 to a use of cash of $42 million in 2000. The decrease
reflects $45 million of owners' distributions in 2000 as compared to owner
contributions of $461 million in 1999, which were used in 1999 to fund
acquisitions and pay down debt.

MARKET RISKS AND CAUTIONARY STATEMENTS
--------------------------------------

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      In the normal course of business, the financial position of the company
routinely is subject to a variety of risks. These risks include the risk
associated with the price of commodities purchased and used in our business,
interest rate on outstanding debt and currency movements of non-U.S. dollar
denominated assets and liabilities. We are also subject to the risks associated
with the business environment in which we operate, including the collectibility
of accounts receivable. We regularly assess all of these risks and have policies
and procedures in place to protect against the adverse effects of these
exposures.

      Our objective in managing our exposure to fluctuations in commodity
prices, interest rates, and foreign currency exchange rates is to minimize the
volatility of earnings and cash flows associated with changes in the applicable
rates and prices. To achieve this objective, we primarily enter into commodity
forward contracts, commodity futures and options on futures contracts and
interest rate swaps. Our company policy prohibits the use of derivative
instruments for trading or speculative purposes, and we have procedures in place
to monitor and control their use.

      A sensitivity analysis has been prepared to determine the effects that
market risk exposures may have on the fair values of our debt and other
financial instruments. To perform the sensitivity analysis, we assessed the risk
of loss in fair values from the hypothetical changes in commodity prices,
interest rates, and foreign currency exchange rates on market-sensitive
instruments. Information provided by this sensitivity analysis does not
necessarily represent the actual changes in fair value that we would incur under
normal market conditions because, due to practical limitations, all variables
other than the specific market risk factor were held constant. In addition, the
results of the analysis are constrained by the fact that certain items are
specifically excluded from the analysis, while the financial instruments that
relate to the financing or hedging of those items are included. As a result, the
reported changes in the values of some financial instruments that affect the
results of the sensitivity analysis are not matched with the offsetting changes
in the values of the items that those instruments are designed to finance or
hedge.

      The results of the sensitivity analysis at December 29, 2001 are as
follows:

      Commodity Price Risk

      We are subject to market risks with respect to commodities because our
ability to recover increased costs through higher pricing may be limited by the
competitive environment in which we operate. We use futures contracts and
options on futures in the normal course of business to hedge


                                       26
<PAGE>
anticipated purchases of aluminum and fuel used in our operations. With respect
to commodity price risk, we currently have various contracts outstanding for
aluminum and fuel oil purchases in 2002, which establish our purchase price
within defined ranges. These contracts have notional amounts of $573 million and
$557 million at December 29, 2001 and December 30, 2000, respectively. These
notional amounts do not represent amounts exchanged by the parties and thus are
not a measure of our exposure; rather, they are used as a basis to calculate the
amounts due under the agreements. We estimate that a 10% decrease in commodity
prices with all other variables held constant would have resulted in a decrease
in the fair value of our financial instruments of $15 million and $18 million at
December 29, 2001 and December 30, 2000, respectively.

      Interest Rate Risk

      The fair value of our fixed-rate long-term debt is sensitive to changes in
interest rates. Interest rate changes would result in gains or losses in the
fair market value of our debt representing differences between market interest
rates and the fixed rate on the debt. With respect to this market risk, we
currently have an interest rate swap converting 4% of our fixed-rate debt to
floating-rate debt. This interest rate swap has a notional value of $100 million
at December 29, 2001 and December 30, 2000. We estimate that a 10% decrease in
interest rates with all other variables held constant would have resulted in a
net increase in the fair value of our financial instruments, both our fixed rate
debt and our interest rate swap, of $52 million and $66 million at December 29,
2001 and December 30, 2000, respectively.

      Foreign Currency Exchange Rate Risk

      In 2001, approximately 15% of our net revenues came from Canada, Spain,
Greece and Russia. Social, economic, and political conditions in these
international markets may adversely affect our results of operations, cash
flows, and financial condition. The overall risks to our international
businesses include changes in foreign governmental policies, and other political
or economic developments. These developments may lead to new product pricing,
tax or other policies, and monetary fluctuations that may adversely impact our
business. In addition, our results of operations and the value of the foreign
assets are affected by fluctuations in foreign currency exchange rates.

      As currency exchange rates change, translation of the statements of
operations of our businesses outside the U.S. into U.S. dollars affects
year-over-year comparability. We have not hedged currency risks because cash
flows from international operations have generally been reinvested locally, nor
historically have we entered into hedges to minimize the volatility of reported
earnings. We estimate that a 10% change in foreign exchange rates with all other
variables held constant would have affected reported income before income taxes
by less than $30 million in 2001 and 2000.

      Foreign currency gains and losses reflect translation gains and losses
arising from the re-measurement into U.S. dollars of the net monetary assets of
businesses in highly inflationary countries and transaction gains and losses.
Russia is considered a highly inflationary economy for accounting purposes.

EURO

      We have successfully executed our plans to address the issues raised by
the Euro currency conversion. These issues include, among others, the need to
adapt computer and financial systems, business processes and equipment, such as
vending machines, to accommodate Euro-denominated transactions and the impact of
one common currency on cross-border pricing. We have experienced no business
interruption as a result of the issuance and circulation of Euro-denominated
bills and coins beginning January 1, 2002. Our financial systems and processes
have been successfully converted to accommodate the Euro. Due to numerous
uncertainties, we cannot reasonably estimate the long-term effects one common
currency may have on pricing, costs and the resulting impact, if any, on the
financial condition or results of operations.


                                       27
<PAGE>
      CAUTIONARY STATEMENTS


      Except for the historical information and discussions contained herein,
statements contained in this annual report on Form 10-K may constitute
forward-looking statements as defined by the Private Securities Litigation
Reform Act of 1995. These forward-looking statements are based on currently
available competitive, financial and economic data and Bottling Group, LLC's
operating plans. These statements involve a number of risks, uncertainties and
other factors that could cause actual results to be materially different. Among
the events and uncertainties that could adversely affect future periods are
lower-than-expected net pricing resulting from marketplace competition, material
changes from expectations in the cost of raw materials and ingredients, an
inability to achieve the expected timing for returns on cold drink equipment and
related infrastructure expenditures, material changes in expected levels of
marketing support payments from PepsiCo, an inability to meet projections for
performance in newly acquired territories, and unfavorable interest rate and
currency fluctuations.


                                       28
<PAGE>
BOTTLING GROUP, LLC
CONSOLIDATED STATEMENTS OF CHANGES IN OWNERS' EQUITY

(in millions)

FISCAL YEARS ENDED DECEMBER 29, 2001, DECEMBER 30, 2000 AND DECEMBER 25, 1999
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                                         ACCUMULATED
                                         OWNERS'            OTHER
                                           NET           COMPREHENSIVE                  COMPREHENSIVE
                                        INVESTMENT           LOSS            TOTAL       INCOME/(LOSS)
                                        ----------           ----            -----       -------------
<S>                                     <C>              <C>                <C>         <C>
BALANCE AT DECEMBER 26, 1998 ...          $ 3,521           $(238)          $ 3,283
  Comprehensive income:
    Net income .................              273              --               273           $ 273
    Currency translation
      adjustment ...............               --              (3)               (3)             (3)
    Minimum pension liability
      adjustment ...............               --              19                19              19
                                                                                              -----
  Total comprehensive income ...                                                              $ 289
                                                                                              =====
  Owner contributions ..........              356              --               356
                                          -------           -----           -------


BALANCE AT DECEMBER 25, 1999 ...            4,150            (222)            3,928
  Comprehensive income:
    Net income .................              471              --               471           $ 471
    Currency translation
      adjustment ...............               --             (31)              (31)            (31)
                                                                                              -----
  Total comprehensive income ...                                                              $ 440
                                                                                              =====
  Cash distributions to owners .              (45)             --               (45)
  Non-cash distribution to owner               (2)             --                (2)
                                          -------           -----           -------

BALANCE AT DECEMBER 30, 2000 ...            4,574            (253)            4,321
  Comprehensive income:
    Net income .................              587              --               587           $ 587
    Currency translation
      adjustment ...............               --             (48)              (48)            (48)
    Minimum pension liability ..               --             (96)              (96)            (96)
      adjustment
    FAS 133 adjustment .........               --             (19)              (19)            (19)
                                                                                              -----
  Total comprehensive income ...                                                              $ 424
                                                                                              =====
  Cash distributions to owners .             (223)             --              (223)
  Non-cash contribution from
      owner ....................               74              --                74
                                          -------           -----           -------

BALANCE AT DECEMBER 29, 2001 ...          $ 5,012           $(416)          $ 4,596
                                          =======           =====           =======
</TABLE>


See accompanying notes to Consolidated Financial Statements.


                                       29
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Tabular dollars in millions
--------------------------------------------------------------------------------

NOTE 1 -- BASIS OF PRESENTATION

      Bottling Group, LLC (collectively referred to as "Bottling LLC," "we,"
"our" and "us") is the principal operating subsidiary of The Pepsi Bottling
Group, Inc. ("PBG") and consists of substantially all of the operations and
assets of PBG. Bottling LLC, which is consolidated by PBG, consists of bottling
operations located in the United States, Canada, Spain, Greece and Russia. For
the periods presented prior to our formation, we were an operating unit of
PepsiCo, Inc. ("PepsiCo").

      PBG was incorporated in Delaware in January 1999 and, prior to its
formation, PBG was an operating unit of PepsiCo. PBG's initial public offering
consisted of 100 million shares of common stock sold to the public on March 31,
1999, equivalent to 65% of its outstanding common stock, leaving PepsiCo the
owner of the remaining 35% of outstanding common stock. As a result of PBG's
share repurchase program, PepsiCo's ownership has increased to 37.7% of the
outstanding common stock and 100% of the outstanding Class B common stock,
together representing 42.8% of the voting power of all classes of our voting
stock at December 29, 2001.

      In addition, in conjunction with its initial public offering, PBG and
PepsiCo contributed bottling businesses and assets used in the bottling
businesses to Bottling LLC. As a result of the contribution of these assets, PBG
owns 93% of Bottling LLC and PepsiCo owns the remaining 7%.

      The accompanying Consolidated Financial Statements include information
that has been presented on a "carve-out" basis for the periods prior to PBG's
initial public offering and our formation. This information includes the
historical results of operations and assets and liabilities directly related to
Bottling LLC, and has been prepared from PepsiCo's historical accounting
records. Certain estimates, assumptions and allocations were made in determining
such financial statement information. Therefore, these Consolidated Financial
Statements may not necessarily be indicative of the results of operations,
financial position or cash flows that would have existed had we been a separate,
independent company from the first day of fiscal year 1999.

      On March 8, 1999, PBG issued $1 billion of 7% senior notes due 2029, which
are guaranteed by us. We also guarantee that to the extent there is available
cash, we will distribute pro rata to all owners sufficient cash such that
aggregate cash distributed to PBG will enable PBG to pay its taxes and make
interest payments on the $1 billion 7% senior notes due 2029. During 2001 and
2000, we made cash distributions to our owners totaling $223 million and $45
million, respectively. Any amounts in excess of taxes and interest payments were
used by PBG to repay loans to us.

NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      The preparation of our consolidated financial statements in conformity
with accounting principles generally accepted in the United States of America
("GAAP") requires us to make estimates and assumptions that affect reported
amounts of assets, liabilities, revenues, expenses and disclosure of contingent
assets and liabilities. Actual results could differ from these estimates.

      NEW ACCOUNTING STANDARDS During 2001, the Financial Accounting Standards
Board ("FASB") issued Statement of Financial Accounting Standard ("SFAS") 141,
"Business Combinations," which requires that the purchase method of accounting
be used for all business combinations initiated or completed after June 30,
2001, and SFAS 142, "Goodwill and Other Intangible Assets," which requires that
goodwill and intangible assets with indefinite useful lives no longer be
amortized, but instead tested for impairment. Effective the first day of fiscal
year 2002, we will no longer amortize goodwill and certain franchise rights, but
will evaluate them for impairment annually. We have completed the initial
impairment review required by SFAS 142 and have determined that our intangible
assets are not impaired. The adoption of SFAS 142 will reduce our fiscal year
2002 amortization expense by approximately $128 million.


                                       30
<PAGE>
      In addition, during 2001 the FASB also issued SFAS 143, "Accounting for
Asset Retirement Obligations" and SFAS 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets." SFAS 143 addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. It requires that we recognize
the fair value of a liability for an asset retirement obligation in the period
in which it is incurred if a reasonable estimate of fair value can be made. SFAS
144 superseded SFAS 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of." and Accounting Principles Board
Opinion 30, "Reporting the Results of Operations - Reporting the Effects of a
Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions." SFAS 144 establishes a single accounting
model for the impairment of long-lived assets and broadens the presentation of
discontinued operations to include more disposal transactions. SFAS 143 is
effective for fiscal year 2003 and SFAS 144 is effective for fiscal year 2002
and we do not anticipate that the adoption of these statements will have a
material impact on our Consolidated Financial Statements.

      During 2000 and 2001, the Emerging Issues Task Force ("EITF") addressed
various issues related to the income statement classification of certain
promotional payments. In May 2000, the EITF reached a consensus on Issue 00-14,
"Accounting for Certain Sales Incentives," addressing the recognition and income
statement classification of various sales incentives. Among its requirements,
the consensus will require the costs related to consumer coupons currently
classified as marketing costs to be classified as a reduction of revenue. In
January 2001, the EITF reached a consensus on Issue 00-22, "Accounting for
`Points' and Certain Other Time-Based or Volume-Based Sales Incentive Offers,
and Offers for Free Products or Services to Be Delivered in the Future." EITF
00-22 requires that certain volume-based cash rebates to customers currently
recognized as marketing costs be classified as a reduction of revenue. In April
2001, the EITF reached a consensus on Issue 00-25, "Vendor Income Statement
Characterization of Consideration Paid to a Reseller of the Vendor's Products."
EITF 00-25 addresses the income statement classification of consideration, other
than that directly addressed in EITF 00-14, from a vendor to a reseller or
another party that purchases the vendor's products. In November 2001, the EITF
codified Issues 00-14, 00-22 and 00-25 as Issue 01-9, "Accounting for
Consideration Given by a Vendor to a Customer or a Reseller of the Vendor's
Products." EITF 00-22 was effective for the first quarter of 2001 and was not
material to our Consolidated Financial Statements. The remainder of EITF 01-9 is
effective for 2002 and we do not anticipate that the adoption will have a
material impact on our Consolidated Financial Statements.

      Our Consolidated Financial Statements reflect the implementation of SFAS
133, "Accounting for Derivative Instruments and Hedging Activities," as amended
by SFAS 138, on the first day of fiscal year 2001. SFAS 133, which was issued in
1998, establishes accounting and reporting standards for hedging activities and
derivative instruments, including certain derivative instruments embedded in
other contracts, which are collectively referred to as derivatives. It requires
that an entity recognize all derivatives as either assets or liabilities in the
Consolidated Balance Sheets and measure those instruments at fair value.

      BASIS OF CONSOLIDATION The accounts of all of our wholly and
majority-owned subsidiaries are included in the accompanying Consolidated
Financial Statements. We have eliminated intercompany accounts and transactions
in consolidation.

      FISCAL YEAR Our fiscal year ends on the last Saturday in December and, as
a result, a 53rd week is added every five or six years. Fiscal years 2001 and
1999 consisted of 52 weeks while fiscal year 2000 consisted of 53 weeks.

      REVENUE RECOGNITION We recognize revenue when our products are delivered
to customers. Sales terms do not allow a right of return unless product
freshness dating has expired. Reserves for returned product were $4 million, $3
million and $2 million at fiscal years ended 2001, 2000 and 1999, respectively.


                                       31
<PAGE>
      ADVERTISING AND MARKETING COSTS We are involved in a variety of programs
to promote our products. We include advertising and marketing costs in selling,
delivery and administrative expenses and expense such costs in the year
incurred. Advertising and marketing costs were $389 million, $350 million and
$342 million in 2001, 2000 and 1999, respectively.

      BOTTLER INCENTIVES PepsiCo and other brand owners, at their sole
discretion, provide us with various forms of marketing support. This marketing
support is intended to cover a variety of programs and initiatives, including
direct marketplace support, capital equipment funding and shared media, and
advertising support. Based on the objective of the programs and initiatives, we
record marketing support as an adjustment to net revenues or as a reduction of
selling, delivery and administrative expenses. Direct marketplace support is
primarily funding by PepsiCo and other brand owners of sales discounts and
similar programs and is recorded as an adjustment to net revenues. Capital
equipment funding is designed to support the purchase and placement of marketing
equipment and is recorded as a reduction of selling, delivery and administrative
expenses. Shared media and advertising support is recorded as a reduction to
advertising and marketing expense within selling, delivery and administrative
expenses. There are no conditions or other requirements that could result in a
repayment of marketing support received.

      The total bottler incentives we received from PepsiCo and other brand
owners were $598 million, $566 million and $563 million for 2001, 2000 and 1999,
respectively. Of these amounts, we recorded $293 million, $277 million and $263
million for 2001, 2000 and 1999, respectively, in net revenues, and the
remainder as a reduction of selling, delivery and administrative expenses. The
amount of our bottler incentives received from PepsiCo was more than 90% of our
bottler incentives in each of the three years, with the balance received from
the other brand owners.

      SHIPPING AND HANDLING COSTS We record shipping and handling costs within
selling, delivery and administrative expenses. Such costs totaled $947 million,
$925 million and $915 million in 2001, 2000 and 1999, respectively.

      FOREIGN CURRENCY GAINS AND LOSSES We translate the balance sheets of our
foreign subsidiaries that do not operate in highly inflationary economies at the
exchange rates in effect at the balance sheet date, while we translate the
statements of operations at the average rates of exchange during the year. The
resulting translation adjustments of our foreign subsidiaries are recorded
directly to accumulated other comprehensive loss. Foreign currency gains and
losses reflect translation gains and losses arising from the re-measurement into
U.S. dollars of the net monetary assets of businesses in highly inflationary
countries and transaction gains and losses. Russia is considered a highly
inflationary economy for accounting purposes.

      INCOME TAXES We are a limited liability company, taxable as a partnership
for U.S. tax purposes and, as such, generally will pay no U.S. federal or state
income taxes. Our federal and state distributable share of income, deductions
and credits will be allocated to our owners based on their percentage of
ownership. However, certain domestic and foreign affiliates pay taxes in their
respective jurisdictions and record related deferred income tax assets and
liabilities. Deferred income taxes reflect the impact of temporary differences
between assets and liabilities recognized for financial reporting purposes and
such amounts recognized for income tax purposes. In accordance with SFAS 109,
"Accounting for Income Taxes," these deferred taxes are measured by applying
currently enacted tax laws. With the exception of certain of our subsidiaries
for which we have recorded deferred taxes in our Consolidated Financial
Statements, deferred taxes associated with our U.S. operations are recorded
directly by our owners.

      CASH EQUIVALENTS Cash equivalents represent funds we have temporarily
invested with original maturities not exceeding three months.

      ALLOWANCE FOR DOUBTFUL ACCOUNTS We determine our allowance for doubtful
accounts based on an evaluation of the aging of our receivable portfolio. Our
reserve contemplates our historical loss rate on receivables and the economic
environment in which we operate.


                                       32
<PAGE>
      INVENTORIES We value our inventories at the lower of cost computed on the
first-in, first-out method or net realizable value.

      PROPERTY, PLANT AND EQUIPMENT We state property, plant and equipment
("PP&E") at cost, except for PP&E that has been impaired, for which we write
down the carrying amount to estimated fair-market value, which then becomes the
new cost basis.

      INTANGIBLE ASSETS Identifiable intangible assets arise principally from
the allocation of the purchase price of businesses acquired, and consist
primarily of territorial franchise rights. Our franchise rights are typically
perpetual in duration, subject to compliance with the underlying franchise
agreement. We assign amounts to such identifiable intangibles based on their
estimated fair value at the date of acquisition. Goodwill represents the
residual purchase price after allocation to all identifiable net assets.
Identifiable intangible assets are evaluated at the date of acquisition and
amortized on a straight-line basis over their estimated useful lives, which in
most cases is from 20-40 years the maximum period permitted by GAAP.

      RECOVERABILITY OF LONG-LIVED ASSETS We review all long-lived assets,
including intangible assets, when facts and circumstances indicate that the
carrying value of the asset may not be recoverable. When necessary, we write
down an impaired asset to its estimated fair value based on the best information
available. Estimated fair value is generally based on either appraised value or
measured by discounting estimated future cash flows. Considerable management
judgment is necessary to estimate discounted future cash flows, which are
discounted based on our weighted-average cost of capital. Accordingly, actual
results could vary significantly from such estimates.

      MINORITY INTEREST PBG has a direct minority ownership in one of our
subsidiaries. PBG's share of combined income or loss and assets and liabilities
in the subsidiary is accounted for as minority interest.

      FINANCIAL INSTRUMENTS AND RISK MANAGEMENT We use derivative instruments to
hedge against the risk of adverse movements in the price of certain commodities
and fuel used in our operations. Our use of derivative instruments is limited to
interest rate swaps, forward contracts, futures and options on futures
contracts. Our corporate policy prohibits the use of derivative instruments for
trading or speculative purposes, and we have procedures in place to monitor and
control their use.

      All derivative instruments are recorded at fair value as either assets or
liabilities in our Consolidated Balance Sheets. Derivative instruments are
designated and accounted for as either a hedge of a recognized asset or
liability ("fair value hedge") or a hedge of a forecasted transaction ("cash
flow hedge"). For a fair value hedge, both the effective and ineffective
portions of the change in fair value of the derivative instrument, along with an
adjustment to the carrying amount of the hedged item for fair value changes
attributable to the hedged risk, are recognized in earnings. For a cash flow
hedge, changes in the fair value of the derivative instrument that are highly
effective are deferred in accumulated other comprehensive loss until the
underlying hedged item is recognized in earnings. The ineffective portion of
fair value changes on qualifying hedges is recognized in earnings immediately
and is recorded consistent with the expense classification of the underlying
hedged item. If a fair value or cash flow hedge were to cease to qualify for
hedge accounting or be terminated, it would continue to be carried on the
balance sheet at fair value until settled but hedge accounting would be
discontinued prospectively. If a forecasted transaction were no longer probable
of occurring, amounts previously deferred in accumulated other comprehensive
loss would be recognized immediately in earnings.

      On occasion, we may enter into a derivative instrument for which hedge
accounting is not required because it is entered into to offset changes in the
fair value of an underlying transaction recognized in earnings ("natural
hedge"). These instruments are reflected in the Consolidated Balance Sheets at
fair value with changes in fair value recognized in earnings.


                                       33
<PAGE>
      STOCK-BASED EMPLOYEE COMPENSATION We measure stock-based compensation
expense in accordance with Accounting Principles Board Opinion 25, "Accounting
for Stock Issued to Employees," and its related interpretations. Accordingly,
compensation expense for PBG stock options granted to our employees is measured
as the excess of the quoted market price of common stock at the grant date over
the amount the employee must pay for the stock. Our policy is to grant PBG stock
options at fair value on the date of grant.

      COMMITMENTS AND CONTINGENCIES We are subject to various claims and
contingencies related to lawsuits, taxes, environmental and other matters
arising out of the normal course of business. Liabilities related to commitments
and contingencies are recognized when a loss is probable and reasonably
estimable.

      RECLASSIFICATIONS Certain reclassifications were made in our Consolidated
Financial Statements to 2000 and 1999 amounts to conform with the 2001
presentation.

NOTE 3 -- COMPARABILITY OF RESULTS

Asset Lives


      At the beginning of fiscal year 2000, we changed the estimated useful
lives of certain categories of assets primarily to reflect the success of our
preventive maintenance programs in extending the useful lives of these assets.
The changes, which are detailed in the table below, lowered total depreciation
cost by approximately $69 million. In 2001 we are utilizing the same asset lives
as in 2000.

<TABLE>
<CAPTION>
      (in years)
                                                                      ESTIMATED USEFUL LIVES
                                                                      ----------------------
                                                                            2000      1999
                                                                            ----      ----
<S>                                                                   <C>             <C>
      Manufacturing equipment.......................................         15           10
      Heavy fleet ..................................................         10            8
      Fountain dispensing equipment.................................          7            5
      Small specialty coolers and specialty marketing equipment.....          3       5 to 7
</TABLE>


Fiscal Year

      Our fiscal year ends on the last Saturday in December and, as a result, a
53rd week is added every five or six years. Fiscal years 2001 and 1999 consisted
of 52 weeks while fiscal year 2000 consisted of 53 weeks. The extra week in 2000
contributed approximately $12 million of additional net income to our 2000
operating results.

PBG's Initial Public Offering

     For the period prior to PBG's initial public offering and the formation of
Bottling LLC, we prepared our Consolidated Financial Statements as a "carve-out"
from the financial statements of PepsiCo using the historical results of
operations and assets and liabilities of our business. Certain costs reflected
in the Consolidated Financial Statements may not necessarily be indicative of
the costs that we would have incurred had we operated as an independent,
stand-alone entity from the first day of fiscal year 1999. These costs include
an allocation of PepsiCo's corporate overhead and interest expense:

      -     We included overhead related to PepsiCo's corporate administrative
            functions based on a specific identification of PepsiCo's
            administrative costs relating to the bottling operations and, to the
            extent that such identification was not practicable, based upon the
            percentage of our revenues to PepsiCo's consolidated net revenues.
            These costs are included in selling, delivery and administrative
            expenses in our Consolidated Statements of Operations.


                                       34
<PAGE>
      -     We allocated $2.3 billion of PepsiCo's debt to our business and
            charged interest expense on this debt using PepsiCo's
            weighted-average interest rate. Once we issued $2.3 billion of
            third-party debt in the first quarter of 1999, our actual interest
            rates were used to determine interest expense for the remainder of
            the year.

      The amounts of the historical allocations described above are as follows:

<TABLE>
<CAPTION>
                                                       1999
                                                       ----
<S>                                                     <C>
      Corporate overhead expense .............          $ 3
      Interest expense .......................          $16
      PepsiCo's weighted-average interest rate          5.8%
</TABLE>


NOTE 4 -- UNUSUAL IMPAIRMENT AND OTHER CHARGES AND CREDITS

      Our operating results were affected by the following unusual charges and
credits:

<TABLE>
<CAPTION>
                                                          1999
                                                          ----
<S>                                                       <C>
      Non-cash compensation charge .............          $ 45
      Vacation policy change ...................           (53)
      Asset impairment and restructuring charges            (8)
                                                          ----
                                                          $(16)
                                                          ====
</TABLE>


      -     Non-cash Compensation Charge

            In connection with the completion of PBG's initial public offering,
            PepsiCo vested substantially all non-vested PepsiCo stock options
            held by our employees. As a result, we incurred a $45 million
            non-cash compensation charge in the second quarter of 1999, equal to
            the difference between the market price of the PepsiCo capital stock
            and the exercise price of these options at the vesting date.

      -     Vacation Policy Change

            As a result of changes to our employee benefit and compensation
            plans in 1999, employees now earn vacation time evenly throughout
            the year based upon service rendered. Previously, employees were
            fully vested at the beginning of each year. As a result of this
            change, we reversed an accrual of $53 million into income in 1999.

      -     Asset Impairment and Restructuring Charges

            In the fourth quarter of 1999, $8 million of the remaining
            restructuring reserve recorded in 1998, relating to an asset
            impairment and restructuring in our Russian operations, was reversed
            into income. The reversal was necessitated as actual costs incurred
            to renegotiate manufacturing and leasing contracts in Russia and to
            reduce the number of employees were less than the amounts originally
            estimated.

NOTE 5 -- INVENTORIES


<TABLE>
<CAPTION>
                                                      2001            2000
                                                      ----            ----
<S>                                                   <C>             <C>
      Raw materials and supplies .........            $117            $107
      Finished goods .....................             214             174
                                                      ----            ----
                                                      $331            $281
                                                      ====            ====
</TABLE>


                                       35
<PAGE>
NOTE 6 -- PROPERTY, PLANT AND EQUIPMENT, NET

<TABLE>
<CAPTION>
                                                          2001              2000
                                                        -------           -------
<S>                                                     <C>               <C>
      Land ...................................          $   145           $   145
      Buildings and improvements .............              925               903
      Manufacturing and distribution equipment            2,308             2,169
      Marketing equipment ....................            1,846             1,745
      Other ..................................              121               106
                                                        -------           -------
                                                          5,345             5,068
      Accumulated depreciation ...............           (2,802)           (2,710)
                                                        -------           -------
                                                        $ 2,543           $ 2,358
                                                        =======           =======
</TABLE>


      We calculate depreciation on a straight-line basis over the estimated
lives of the assets as follows:


<TABLE>
<S>                                                 <C>
        Buildings and improvements.............     20-33 years
        Production equipment...................     15 years
        Distribution equipment.................     5-10 years
        Marketing equipment....................     3-7 years
</TABLE>


NOTE 7 -- INTANGIBLE ASSETS, NET


<TABLE>
<CAPTION>
                                                                    2001              2000
                                                                   -------           -------
<S>                                                                <C>               <C>
      Franchise rights and other identifiable intangibles          $ 3,636           $ 3,557
      Goodwill ..........................................            1,574             1,591
                                                                   -------           -------
                                                                     5,210             5,148
      Accumulated amortization ..........................           (1,526)           (1,454)
                                                                   -------           -------
                                                                   $ 3,684           $ 3,694
                                                                   =======           =======
</TABLE>

NOTE 8 -- NOTES RECEIVABLE FROM PBG

      We have loaned PBG $310 million and $268 million during 2001 and 2000,
respectively, net of repayments. These loans were made through a series of
5-year notes, with interest rates ranging from 2.4% and 8.0%. The proceeds were
used by PBG to pay for interest, taxes, dividends, share repurchases and in
2001, for acquisitions. Accrued interest receivable from PBG on these notes
totaled $44 million and $26 million at December 29, 2001 and December 30, 2000,
respectively, and is recorded within prepaid expenses and other current assets
in our Consolidated Balance Sheets.

NOTE 9 -- ACCOUNTS PAYABLE AND OTHER CURRENT LIABILITIES


<TABLE>
<CAPTION>
                                                       2001           2000
                                                       ----           ----
<S>                                                    <C>            <C>
      Accounts payable .....................           $362           $344
      Trade incentives .....................            205            206
      Accrued compensation and benefits ....            141            147
      Accrued interest .....................             47             48
      Accounts payable to PepsiCo ..........             17             --
      Other current liabilities ............            205            170
                                                       ----           ----
                                                       $977           $915
                                                       ====           ====
</TABLE>


                                       36
<PAGE>
NOTE 10 -- SHORT-TERM BORROWINGS AND LONG-TERM DEBT


<TABLE>
<CAPTION>
                                                                 2001            2000
                                                                ------          ------
<S>                                                             <C>             <C>
      Short-term borrowings
         Current maturities of long-term debt ........          $    3          $    1
         Other short-term borrowings .................              74              25
                                                                ------          ------
                                                                $   77          $   26
                                                                ======          ======
      Long-term debt
         5 5/8% senior notes due 2009 ................          $1,300          $1,300
         5 3/8% senior notes due 2004 ................           1,000           1,000
         Other .......................................              18               6
                                                                ------          ------

                                                                 2,318           2,306
         Less: Unamortized discount ...................             16              19
               Current maturities of long-term debt ...              3               1
                                                                ------          ------
                                                                $2,299          $2,286
                                                                ======          ======
</TABLE>

      Maturities of long-term debt as of December 29, 2001 are 2002: $3 million,
2003: $3 million, 2004: $1,008 million, 2005: $0, 2006: $0 and thereafter,
$1,304 million.

      The $1.3 billion of 5 5/8% senior notes and the $1.0 billion of 5 3/8%
senior notes were issued on February 9, 1999 and are guaranteed by PepsiCo.
During the second quarter of 1999 we executed an interest rate swap converting
4% of our fixed-rate debt to floating-rate debt.

      We allocated $2.3 billion of PepsiCo's long-term debt in our financial
statements prior to issuing the senior notes referred to above. Our interest
expense includes the related allocated interest expense of $16 million in 1999,
and is based on PepsiCo's weighted-average interest rate of 5.8% in 1999.

      We have available short-term bank credit lines of approximately $177
million and $135 million at December 29, 2001 and December 30, 2000,
respectively. These lines are used to support general operating needs of our
business outside the United States. The weighted-average interest rate for these
lines of credit outstanding at December 29, 2001 and December 30, 2000 was 4.3%
and 8.9%, respectively.

      On March 8, 1999, PBG issued $1 billion of 7% senior notes due 2029, which
are guaranteed by us.

      Amounts paid to third parties for interest were $121 million, $131 million
and $74 million in 2001, 2000 and 1999, respectively. In 1999, allocated
interest expense was deemed to have been paid to PepsiCo, in cash, in the period
in which the cost was incurred.


                                       37
<PAGE>
NOTE 11 -- LEASES

    We have noncancellable commitments under both capital and long-term
operating leases. Capital and operating lease commitments expire at various
dates through 2021. Most leases require payment of related executory costs,
which include property taxes, maintenance and insurance.

    Our future minimum commitments under noncancellable leases are set forth
below:


<TABLE>
<CAPTION>
                                                        COMMITMENTS
                                                 ----------------------------
                                                 CAPITAL            OPERATING
                                                 -------            ---------
<S>                                              <C>                <C>
      2002 .......................                $ --                $ 22
      2003 .......................                  --                  20
      2004 .......................                  --                  17
      2005 .......................                  --                  16
      2006 .......................                  --                  14
      Later years ................                   3                  82
                                                  ----                ----
                                                  $  3                $171
                                                  ====                ====
</TABLE>

      At December 29, 2001, the present value of minimum payments under capital
leases was $1 million, after deducting $2 million for imputed interest. Our
rental expense was $40 million, $42 million and $55 million for 2001, 2000 and
1999, respectively.

NOTE 12 -- FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

      These Consolidated Financial Statements reflect the implementation of SFAS
133, as amended by SFAS 138, on the first day of fiscal year 2001. In June 1998,
the FASB issued SFAS 133, "Accounting for Derivative Instruments and Hedging
Activities." This statement establishes accounting and reporting standards for
hedging activities and derivative instruments, including certain derivative
instruments embedded in other contracts, which are collectively referred to as
derivatives. It requires that an entity recognize all derivatives as either
assets or liabilities in the consolidated balance sheet and measure those
instruments at fair value. In June 2000, the FASB issued SFAS 138, amending the
accounting and reporting standards of SFAS 133. Prior to the adoption of SFAS
133, there were no deferred gains or losses from our hedging activities recorded
in our Consolidated Financial Statements. The adoption of these statements
resulted in the recording of a deferred gain in our Consolidated Balance Sheets,
which was recorded as an increase to current assets of $4 million and a
reduction of accumulated other comprehensive loss of $4 million. Furthermore,
the adoption had no impact on our Consolidated Statement of Operations.

      As of December 29, 2001, our use of derivative instruments is limited to
an interest rate swap, forward contracts, futures and options on futures
contracts. Our corporate policy prohibits the use of derivative instruments for
trading or speculative purposes, and we have procedures in place to monitor and
control their use.

      CASH FLOW HEDGE We are subject to market risk with respect to the cost of
commodities because our ability to recover increased costs through higher
pricing may be limited by the competitive environment in which we operate. We
use futures contracts and options on futures in the normal course of business to
hedge the risk of adverse movements in commodity prices related to anticipated
purchases of aluminum and fuel used in our operations. These contracts, which
generally range from 1 to 12 months in duration, establish our commodity
purchase prices within defined ranges in an attempt to limit our purchase price
risk resulting from adverse commodity price movements and are designated as and
qualify for cash flow hedge accounting treatment.


                                       38
<PAGE>
      In 2001, the amount of deferred losses from our commodity hedging that we
recognized into income was $4 million. At December 29, 2001 a $19 million
deferred loss remained in accumulated other comprehensive loss in our
Consolidated Balance Sheets resulting from our commodity hedges. We anticipate
that this loss will be recognized in cost of sales in our Consolidated
Statements of Operations over the next 12 months. The ineffective portion of the
change in fair value of these contracts was not material to our results of
operations in 2001.

      FAIR VALUE HEDGES We finance a portion of our operations through
fixed-rate debt instruments. At December 29, 2001 our debt instruments primarily
consisted of $2.3 billion of fixed-rate long-term senior notes, 4% of which we
converted to floating rate debt through the use of an interest rate swap with
the objective of reducing our overall borrowing costs. This interest rate swap,
which expires in 2004, is designated as and qualifies for fair value hedge
accounting and is 100% effective in eliminating the interest rate risk inherent
in our long-term debt as the notional amount, interest payment, and maturity
date of the swap matches the notional amount, interest payment and maturity date
of the related debt. Accordingly, any market risk or opportunity associated with
this swap is fully offset by the opposite market impact on the related debt. The
change in fair value of the interest rate swap was a gain of $7 million in 2001.
The fair value change was recorded in interest expense in our Consolidated
Statements of Operations and in prepaid expenses and other current assets in our
Consolidated Balance Sheets. An offsetting adjustment was recorded in interest
expense in our Consolidated Statements of Operations and in long-term debt in
our Consolidated Balance Sheets representing the change in fair value in
long-term debt.

      EQUITY DERIVATIVES We use equity derivative contracts with financial
institutions to hedge a portion of our deferred compensation liability, which is
based on PBG's stock price. These prepaid forward contracts for the purchase of
PBG common stock are accounted for as natural hedges. The earnings impact from
these hedges is classified as selling, delivery and administrative expenses
consistent with the expense classification of the underlying hedged item.

      FAIR VALUE Financial assets with carrying values approximating fair value
include cash and cash equivalents and accounts receivable. Financial liabilities
with carrying values approximating fair value include accounts payable and other
accrued liabilities and short-term debt. The carrying value of these financial
assets and liabilities approximates fair value due to the short maturity of our
financial assets and liabilities, and since interest rates approximate fair
value for short-term debt.

      Long-term debt at December 29, 2001 had a carrying value and fair value of
$2.3 billion, and at December 30, 2000 had a carrying value and fair value of
$2.3 billion and $2.2 billion, respectively.

NOTE 13 -- PENSION AND POSTRETIREMENT BENEFIT PLANS

PENSION BENEFITS

      Our U.S. employees participate in noncontributory defined benefit pension
plans, which cover substantially all full-time salaried employees, as well as
most hourly employees. Benefits generally are based on years of service and
compensation, or stated amounts for each year of service. All of our qualified
plans are funded and contributions are made in amounts not less than minimum
statutory funding requirements and not more than the maximum amount that can be
deducted for U.S. income tax purposes. Our net pension expense for the defined
benefit pension plans for our operations outside the U.S. was not significant.


                                       39
<PAGE>
POSTRETIREMENT BENEFITS

      Our postretirement plans provide medical and life insurance benefits
principally to U.S. retirees and their dependents. Employees are eligible for
benefits if they meet age and service requirements and qualify for retirement
benefits. The plans are not funded and since 1993 have included retiree cost
sharing.

<TABLE>
<CAPTION>
                                                                 PENSION
                                                    ----------------------------------
Components of net periodic benefit costs:           2001           2000           1999
------------------------------------------          ----           ----           ----
<S>                                                 <C>            <C>            <C>
  Service cost ...........................          $ 28           $ 27           $ 30
  Interest cost ..........................            50             49             42
  Expected return on plan assets .........           (60)           (56)           (49)
  Amortization of net loss ...............            --             --              4
  Amortization of prior service amendments             4              5              5
                                                    ----           ----           ----
  Net periodic benefit costs .............          $ 22           $ 25           $ 32
                                                    ====           ====           ====
</TABLE>


<TABLE>
<CAPTION>
                                                              POSTRETIREMENT
                                                    ----------------------------------
Components of net periodic benefit costs:           2001           2000           1999
------------------------------------------          ----           ----           ----
<S>                                                 <C>            <C>            <C>
  Service cost ...........................          $  3           $  3           $  4
  Interest cost ..........................            16             14             12
  Amortization of net loss ...............             1              1             --
  Amortization of prior service amendments            (6)            (6)            (5)
                                                    ----           ----           ----
  Net periodic benefit costs .............          $ 14           $ 12           $ 11
                                                    ====           ====           ====
</TABLE>

      We amortize prior service costs on a straight-line basis over the average
remaining service period of employees expected to receive benefits.

<TABLE>
<CAPTION>
                                                   PENSION                     POSTRETIREMENT
                                            ---------------------           ---------------------
Changes in the benefit obligation:           2001            2000            2001            2000
----------------------------------          -----           -----           -----           -----
<S>                                         <C>             <C>             <C>             <C>
  Obligation at beginning of year           $ 664           $ 647           $ 212           $ 206
  Service cost ...................             28              27               3               3
  Interest cost ..................             50              49              16              14
  Plan amendments ................             10               4              --             (10)
  Actuarial loss/(gain) ..........             48             (19)             14              11
  Benefit payments ...............            (40)            (40)            (17)            (12)
  Acquisitions and other .........             --              (4)             --              --
                                            -----           -----           -----           -----
  Obligation at end of year ......          $ 760           $ 664           $ 228           $ 212
                                            =====           =====           =====           =====
</TABLE>


<TABLE>
<CAPTION>
                                                     PENSION                    POSTRETIREMENT
                                              ---------------------           -------------------
Changes in the fair value of assets:           2001            2000           2001           2000
------------------------------------          -----           -----           ----           ----
<S>                                           <C>             <C>             <C>            <C>
  Fair value at beginning of year ..          $ 665           $ 597           $ --           $ --
  Actual (loss)/gain on plan assets            (117)             96             --             --
  Employer contributions ...........             70              16             17             12
  Benefit payments .................            (40)            (40)           (17)           (12)
  Acquisitions and other ...........             --              (4)            --             --
                                              -----           -----           ----           ----
  Fair value at end of year ........          $ 578           $ 665           $ --           $ --
                                              =====           =====           ====           ====
</TABLE>


      Selected information for the plans with accumulated benefit obligations in
excess of plan assets:

                                       40
<PAGE>
<TABLE>
<CAPTION>
                                             PENSION                  POSTRETIREMENT
                                        -----------------          ------------------
                                        2001         2000          2001          2000
                                        ----          ---          ----          ----
<S>                                    <C>           <C>          <C>           <C>
Projected benefit obligation .          $760          $31          $228          $212
Accumulated benefit obligation           690           14           228           212
Fair value of plan assets ....           604           --            --            --
</TABLE>



                                       41
<PAGE>
      Funded status recognized on the Consolidated Balance Sheets:


<TABLE>
<CAPTION>
                                                     PENSION                      POSTRETIREMENT
                                               --------------------           ---------------------
                                                2001           2000            2001            2000
                                               -----           ----           -----           -----
<S>                                            <C>             <C>            <C>             <C>
Funded status at end of year ........          $(182)          $  1           $(228)          $(212)
Unrecognized prior service cost .....             36             31             (16)            (21)
Unrecognized loss/(gain) ............            153            (73)             57              45
Unrecognized transition asset .......             (1)            (1)             --              --
Fourth quarter employer contributions             26             10               5               7
                                               -----           ----           -----           -----
Net amounts recognized ..............          $  32           $(32)          $(182)          $(181)
                                               =====           ====           =====           =====
</TABLE>

      Net amounts recognized in the Consolidated Balance Sheets:

<TABLE>
<CAPTION>
                                                     PENSION                    POSTRETIREMENT
                                              --------------------           ---------------------
                                               2001           2000            2001            2000
                                              -----           ----           -----           -----
<S>                                           <C>             <C>            <C>             <C>
Prepaid expenses ...................          $  --           $ 31           $  --           $  --
Other liabilities ..................           (101)           (63)           (182)           (181)
Intangible assets, net .............             37             --              --              --
Accumulated other comprehensive loss             96             --              --              --
                                              -----           ----           -----           -----
Net amounts recognized .............          $  32           $(32)          $(182)          $(181)
                                              =====           ====           =====           =====
</TABLE>


      At December 29, 2001, the accumulated benefit obligation of certain PBG
pension plans exceeded the fair market value of the plan assets resulting in the
recognition of an additional unfunded liability as a minimum balance sheet
liability. As a result of this additional liability, an intangible asset of $37
million and an increase to accumulated other comprehensive loss of $96 million
were recognized.

      The weighted-average assumptions used to compute the above information are
set forth below:


<TABLE>
<CAPTION>
                                                               PENSION
                                              ----------------------------------------
                                               2001             2000             1999
                                              ------           ------           ------
<S>                                           <C>              <C>              <C>
Discount rate for benefit obligation             7.5%             7.8%             7.8%
Expected return on plan assets .....            10.0%            10.0%            10.0%
Rate of compensation increase ......             4.3%             4.6%             4.3%
</TABLE>

<TABLE>
<CAPTION>
                                                              POSTRETIREMENT
                                                           2001          2000           1999
                                                           ----          ----           ----
<S>                                                        <C>           <C>            <C>
Discount rate for benefit obligation ............          7.5%          7.8%           7.8%
</TABLE>

COMPONENTS OF PENSION ASSETS

      The pension plan assets are principally invested in stocks and bonds. None
of the assets are invested directly in PBG stock.


                                       42
<PAGE>
HEALTH CARE COST TREND RATES

    We have assumed an average increase of 8.0% in 2002 in the cost of
postretirement medical benefits for employees who retired before cost sharing
was introduced. This average increase is then projected to decline gradually to
4.5% in 2009 and thereafter.

    Assumed health care cost trend rates have an impact on the amounts reported
for postretirement medical plans. A one-percentage point change in assumed
health care costs would have the following effects:

<TABLE>
<CAPTION>
                                                                                       1%            1%
                                                                                   Increase       Decrease
                                                                                   --------       --------
<S>                                                                                <C>            <C>
Effect on total fiscal year 2001 service and interest cost components ......          $ --          $ --

Effect on the fiscal year 2001 accumulated postretirement benefit obligation             7            (6)
</TABLE>


OTHER EMPLOYEE BENEFIT PLANS

      We made several changes to our employee benefit plans that took effect in
fiscal year 2000. The changes were made to our vacation policy, pension and
retiree medical plans and included some benefit enhancements as well as cost
containment provisions. These changes did not have a significant impact on our
financial results in 2001 or 2000.

      In 1999, we implemented a matching company contribution to our 401(k) plan
that began in 2000. The match is dependent upon the employee's contribution and
years of service. The matching company contribution was approximately $17
million and $15 million in 2001 and 2000, respectively.

      In the fourth quarter of 1999 we recognized a $16 million compensation
charge related to full-year 1999 performance. This expense was one-time in
nature and was for the benefit of our management employees, reflecting our
successful operating results as well as providing certain incentive-related
features.

NOTE 14 -- EMPLOYEE STOCK OPTION PLANS

      Under our long-term incentive plan, PBG stock options are issued to middle
and senior management employees and vary according to salary and level. The
following discussion of PBG stock options has been adjusted to reflect PBG's
2001 two-for-one stock split. Except as noted below, options granted in 2001 and
2000 had exercise prices ranging from $18.88 per share to $22.50 per share, and
$9.38 per share to $15.88 per share, respectively, expire in 10 years and become
exercisable 25% after the first year, 25% after the second year and the
remainder after the third year. Options granted in 1999 had exercise prices
ranging from $9.63 per share to $11.50 per share and, with the exception of our
chairman's options, are exercisable after three years and expire in 10 years.
PBG's chairman's 1999 options are exercisable ratably over the three years
following PBG's initial public offering date.

      In 2001, two additional option grants were made to certain senior
management employees. One grant had an exercise price of $19.50 per share,
expires in 10 years and became exercisable on the grant date. The other grant
had an exercise price of $22.50 per share, expires in 10 years and becomes
exercisable in 5 years.

      In conjunction with PBG's initial public offering and our formation, PBG
issued a one-time founders' grant of options to all full-time non-management
employees in 1999 to purchase 200 shares of PBG stock. These options have an
exercise price equal to the initial public offering price of $11.50 per share,
are exercisable after three years and expire in 10 years.


                                       43
<PAGE>

     In connection with the completion of PBG's initial public offering and our
formation, PepsiCo vested substantially all non-vested PepsiCo stock options
held by our employees. As a result, we incurred a $45 million non-cash
compensation charge in the second quarter of 1999, equal to the difference
between the market price of the PepsiCo capital stock and the exercise price of
these options at the vesting date.

     The following table summarizes option activity during 2001:

<TABLE>
<CAPTION>
                                                                                                      WEIGHTED-
                                                                                                  AVERAGE EXERCISE
                                                                                     OPTIONS           PRICE
                                                                                     -------           -----
<S>                                                                                  <C>          <C>
(Options in millions)
Outstanding at beginning of year ...............................................        33.2           $10.75
   Granted .....................................................................        10.2            20.47
   Exercised ...................................................................        (1.8)           10.84
   Forfeited ...................................................................        (1.9)           12.01
                                                                                      ------           ------
Outstanding at end of year .....................................................        39.7           $13.20
                                                                                      ======           ======
Exercisable at end of year .....................................................         6.6           $13.38
                                                                                      ======           ======
Weighted-average fair value of options granted during the year .................                       $ 8.55
                                                                                                       ======
</TABLE>


   The following table summarizes option activity during 2000:

<TABLE>
<CAPTION>
                                                                                                      WEIGHTED-
                                                                                                  AVERAGE EXERCISE
(Options in millions)                                                                OPTIONS           PRICE
                                                                                     -------           -----
<S>                                                                                  <C>          <C>
Outstanding at beginning of year ...............................................        22.4           $11.49
   Granted .....................................................................        13.2             9.57
   Exercised ...................................................................        (0.2)           10.53
   Forfeited ...................................................................        (2.2)           11.20
                                                                                      ------           ------
Outstanding at end of year .....................................................        33.2           $10.75
                                                                                      ======           ======
Exercisable at end of year .....................................................         1.8           $11.11
                                                                                      ======           ======
Weighted-average fair value of options granted during the year .................                       $ 4.68
                                                                                                       ======
</TABLE>


   The following table summarizes option activity during 1999:

<TABLE>
<CAPTION>
                                                                                                      WEIGHTED-
                                                                                                  AVERAGE EXERCISE
                                                                                     OPTIONS           PRICE
                                                                                     -------           -----
<S>                                                                                  <C>          <C>
Outstanding at beginning of year ...............................................          --           $   --
   Granted .....................................................................        24.2            11.49
   Exercised ...................................................................          --               --
   Forfeited ...................................................................        (1.8)           11.50
                                                                                      ------           ------
Outstanding at end of year .....................................................        22.4           $11.49
                                                                                      ======           ======
Exercisable at end of year .....................................................          --           $   --
                                                                                      ======           ======
Weighted-average fair value of options granted during the year .................                       $ 5.15
                                                                                                       ======
</TABLE>


                                       44
<PAGE>
     Stock options outstanding and exercisable at December 29, 2001:

<TABLE>
<CAPTION>
                                            OPTIONS OUTSTANDING                                  OPTIONS EXERCISABLE
                                            -------------------                                  -------------------
                                                 WEIGHTED-
                                                 AVERAGE
                                                REMAINING           WEIGHTED-
                                               CONTRACTUAL           AVERAGE                                   WEIGHTED-
(Options in millions)                              LIFE              EXERCISE                                   AVERAGE
RANGE OF EXERCISE PRICE       OPTIONS            IN YEARS             PRICE                  OPTIONS        EXERCISE PRICE
-----------------------       -------            --------             -----                  -------        --------------

                           <C>           <C>                     <C>                      <C>            <C>
$9.38-$11.49 ............      10.4                7.99              $  9.38                   2.2              $  9.40
$11.50-$15.88 ...........      19.5                7.02              $ 11.55                   2.3              $ 11.57
$15.89-$22.50 ..........        9.8                9.00              $ 20.47                   2.1              $ 19.59
                               ----                ----              -------                   ---              -------
                               39.7                7.77              $ 13.20                   6.6              $ 13.38
                               ====                ====              =======                   ===              =======
</TABLE>

     We adopted the disclosure provisions of SFAS 123, "Accounting for
Stock-Based Compensation," but continue to measure stock-based compensation cost
in accordance with the Accounting Principles Board Opinion 25 and its related
interpretations. If we had measured compensation cost for the stock options
granted to our employees under the fair value based method prescribed by SFAS
123, net income would have been changed to the pro forma amounts set forth
below:

<TABLE>
<CAPTION>
                                                                                  2001        2000        1999
                                                                                 -----       -----       -----
<S>                                                                              <C>         <C>         <C>
Net Income
   Reported.................................................................     $ 587       $ 471       $ 273
   Pro forma................................................................       523         425         244
</TABLE>

     The fair value of PBG stock options used to compute pro forma net income
disclosures was estimated on the date of grant using the Black-Scholes
option-pricing model based on the following weighted-average assumptions:

<TABLE>
<CAPTION>
                                                                                      2001       2000       1999
                                                                                     -------    -------     -------
<S>                                                                                  <C>        <C>         <C>
Risk-free interest rate.........................................................        4.6%       6.7%        5.8%
Expected life...................................................................     6 years    7 years     7 years
Expected volatility.............................................................         35%        35%         30%
Expected dividend yield.........................................................       0.20%      0.43%       0.35%
</TABLE>

NOTE 15 -- INCOME TAXES

     We are a limited liability company, taxable as a partnership for U.S. tax
purposes and, as such, generally pay no U.S. federal or state income taxes. Our
federal and state distributable share of income, deductions and credits are
allocated to our owners based on their percentage of ownership. However, certain
domestic and foreign affiliates pay income taxes in their respective
jurisdictions. We had an income tax benefit of $1 million in 2001, and income
tax expense of $22 million and $4 million in 2000 and 1999, respectively. These
amounts were comprised of current income tax expense of $8 million, $27 million
and $4 million and deferred income tax benefit of $9 million, $5 million and $0
in 2001, 2000 and 1999, respectively.


                                       45
<PAGE>
     Our 2001 deferred income tax benefit includes a nonrecurring benefit of $25
million due to enacted tax rate changes in Canada during the year.

     The details of our 2001 and 2000 deferred tax liabilities (assets) are set
forth below:

<TABLE>
<CAPTION>
                                                        2001       2000
                                                        -----      -----

<S>                                                     <C>        <C>
Intangible assets and property, plant and equipment     $ 175      $ 185
Other .............................................        36          7
                                                        -----      -----
Gross deferred tax liabilities ....................       211        192
                                                        -----      -----

Net operating loss carryforwards ..................      (121)      (139)
Various liabilities and other .....................       (49)       (27)
                                                        -----      -----
Gross deferred tax assets .........................      (170)      (166)
Deferred tax asset valuation allowance ............       122        148
                                                        -----      -----
Net deferred tax assets ...........................       (48)       (18)
                                                        -----      -----

Net deferred tax liability ........................     $ 163      $ 174
                                                        =====      =====

Included in:
Prepaid expenses and other current assets .........     $  (5)     $ (13)
Deferred income taxes .............................       168        187
                                                        -----      -----
                                                        $ 163      $ 174
                                                        =====      =====
</TABLE>

     We have net operating loss carryforwards totaling $370 million at December
29, 2001, which are available to reduce future taxes in the U.S., Spain, Greece
and Russia. Of these carryforwards, $2 million expire in 2002 and $368 million
expire at various times between 2003 and 2021. We have established a full
valuation allowance for the net operating loss carryforwards attributable to
Spain, Greece and Russia based upon our projection that it is more likely than
not that these losses will not be realized. In addition, at December 29, 2001 we
have a tax credit carryforward in the U.S. of $7 million with an indefinite
carryforward period.

     Our valuation allowances, which reduce deferred tax assets to an amount
that will more likely than not be realized, have decreased by $26 million and
increased by $1 million in 2001 and 2000, respectively.

     Deferred taxes are not recognized for temporary differences related to
investments in foreign subsidiaries that are essentially permanent in duration.
Determination of the amount of unrecognized deferred taxes related to these
investments is not practicable.

     Income taxes receivable were $10 million and $7 million at December 29,
2001 and December 30, 2000, respectively. Such amounts are recorded within
prepaid expenses and other current assets in our Consolidated Balance Sheets.
Amounts paid to taxing authorities for income taxes were $11 million, $34
million and $3 million in 2001, 2000 and 1999 respectively.


                                       46
<PAGE>
NOTE 16 -- GEOGRAPHIC DATA

     We operate in one industry, carbonated soft drinks and other ready-to-drink
beverages. We conduct business in 41 states and the District of Columbia in the
United States. Outside the U.S., we conduct business in eight Canadian
provinces, Spain, Greece and Russia.

<TABLE>
<CAPTION>
                                                                                      NET REVENUES
                                                                            ----------------------------------
                                                                             2001          2000          1999
                                                                            ------        ------        ------
<S>                                                                         <C>           <C>           <C>
     U.S...........................................................         $7,197        $6,830        $6,352
     Other countries...............................................          1,246         1,152         1,153
                                                                            ------        ------        ------
                                                                            $8,443        $7,982        $7,505
                                                                            ======        ======        ======
</TABLE>

<TABLE>
<CAPTION>
                                                                                    LONG-LIVED ASSETS
                                                                            ----------------------------------
                                                                              2001          2000          1999
                                                                            ------        ------        ------
<S>                                                                         <C>           <C>           <C>
     U.S...........................................................         $6,232        $5,719        $5,398
     Other countries...............................................            914           960           987
                                                                            ------        ------        ------
                                                                            $7,146        $6,679        $6,385
                                                                            ======        ======        ======
</TABLE>

NOTE 17 -- RELATIONSHIP WITH PEPSICO

     At the time of PBG's initial public offering we entered into a number of
agreements with PepsiCo. Although we are not a direct party to these contracts,
as the principal operating subsidiary of PBG, we derive direct benefit from
them. Accordingly, set forth below are the most significant agreements that
govern our relationship with PepsiCo:

     (1)  the master bottling agreement for cola beverages bearing the
          "Pepsi-Cola" and "Pepsi" trademark in the United States; bottling and
          distribution agreements for non-cola products in the United States,
          including Mountain Dew; and a master fountain syrup agreement in the
          United States;

     (2)  agreements similar to the master bottling agreement and the non-cola
          agreements for each specific country, including Canada, Spain, Greece
          and Russia, as well as a fountain syrup agreement similar to the
          master syrup agreement for Canada;

     (3)  a shared services agreement whereby PepsiCo provides us or we provide
          PepsiCo with certain administrative support, including procurement of
          raw materials, transaction processing, such as accounts payable and
          credit and collection, certain tax and treasury services, and
          information technology maintenance and systems development. The
          amounts paid or received under this contract are equal to the actual
          costs incurred by the company providing the service. From 1998 through
          2001, a PepsiCo affiliate provided casualty insurance to us; and

     (4)  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. Under our tax separation agreement, PepsiCo maintains full
          control and absolute discretion for any combined or consolidated tax
          filings for tax periods ending on or before the initial public
          offering. PepsiCo has contractually agreed to act in good faith with
          respect to all tax audit matters affecting us. In addition, PepsiCo
          has agreed to use their best efforts to settle all joint interests in
          any common audit issue on a basis consistent with prior practice.

     We purchase concentrate from PepsiCo that is used in the production of
carbonated soft drinks and other ready-to-drink beverages. The price of
concentrate is determined annually by PepsiCo at


                                       47
<PAGE>
their discretion. We also produce or distribute other products and purchase
finished goods and concentrate through various arrangements with PepsiCo or
PepsiCo joint ventures. We reflect such purchases in cost of sales.

     We share a business objective with PepsiCo of increasing the availability
and consumption of Pepsi-Cola beverages. Accordingly, PepsiCo, at its sole
discretion, provides us with various forms of marketing support to promote its
beverages. This support covers a variety of initiatives, including marketplace
support, marketing programs, capital equipment investment, and shared media
expense. Based on the objective of the programs and initiatives, we record
marketing support as an adjustment to net revenues or as a reduction of selling,
delivery and administrative expense.

     We manufacture and distribute fountain products and provide fountain
equipment service to PepsiCo customers in some territories in accordance with
the Pepsi beverage agreements. Amounts received from PepsiCo for these
transactions are offset by the cost to provide these services and are reflected
in selling, delivery and administrative expenses. We pay a royalty fee to
PepsiCo for the Aquafina trademark.

     The Consolidated Statements of Operations include the following income
(expense) amounts as a result of transactions with PepsiCo and its affiliates:

<TABLE>
<CAPTION>
                                                                           2001           2000           1999
                                                                          ------         ------         ------
<S>                                                                       <C>            <C>            <C>
     Net revenues................................................        $   262        $   244        $   236
     Cost of sales...............................................         (1,927)        (1,626)        (1,488)
     Selling, delivery and administrative expenses...............            259            266            285
</TABLE>

     We are not required to pay any minimum fees to PepsiCo, nor are we
obligated to PepsiCo under any minimum purchase requirements. There are no
conditions or requirements that could result in the repayment of any marketing
support payments received by us from PepsiCo.

     We distributed $16 million and $3 million in cash in 2001 and 2000,
respectively to PepsiCo in accordance with our ownership agreement. Net amounts
payable to PepsiCo and its affiliates were $17 million at December 29, 2001 and
net amounts receivable from PepsiCo and its affiliates were $8 million at
December 30, 2000. Such amounts are recorded within accounts payable and other
current liabilities and accounts receivable in our Consolidated Balance Sheets,
respectively.

NOTE 18 -- CONTINGENCIES

     We are involved in a lawsuit with current and former employees concerning
wage and hour issues in New Jersey. We are unable to predict the amount of any
costs or implications of this case at this time as legal proceedings are
ongoing.

     We are subject to various claims and contingencies related to lawsuits,
taxes, environmental and other matters arising out of the normal course of
business. We believe that the ultimate liability arising from such claims or
contingencies, if any, in excess of amounts already recognized is not likely to
have a material adverse effect on our results of operations, financial condition
or liquidity.

NOTE 19 -- ACQUISITIONS

     In May 2001, PBG acquired the Pepsi-Cola bottling operations along with the
exclusive right to manufacture, sell and distribute Pepsi-Cola beverages from
Pepsi-Cola Bottling of Northern California. In connection with the acquisition,
PBG contributed certain net assets acquired totaling $74 million to Bottling LLC
increasing its ownership of us from 92.9% to 93.0%. In August 2001, we acquired
the operations and exclusive right to manufacture, sell and distribute
Pepsi-Cola beverages from Pepsi-Cola Elmira Bottling Co. Inc. for $46 million in
cash and assumed debt. These


                                       48
<PAGE>
acquisitions were made to enable us to provide better service to our large
retail customers as well as reduce costs through economies of scale. In December
2001, PBG signed a letter of intent to purchase the Pepsi-Cola Bottling Company
of Macon, Inc. The transaction is expected to close in the first quarter of
2002, and, as PBG's principal operating subsidiary, we expect that the majority
of the net assets acquired will be contributed to us. During 2000, we acquired
two territories in Canada for an aggregate purchase price of $26 million in
cash.

     These acquisitions were accounted for by the purchase method of accounting.
The aggregate purchase price exceeded the fair value of net tangible assets
acquired, in both 2001 and 2000, including the resulting tax effect, by
approximately $108 million and $14 million, respectively. The excess was
recorded in intangible assets. In addition, liabilities incurred and/or assumed
in connection with these acquisitions totaled $20 million and $9 million in 2001
and 2000, respectively.

NOTE 20 -- SUBSEQUENT EVENTS (UNAUDITED)

     During the first quarter of 2002, we acquired the operations and exclusive
right to manufacture, sell and distribute Pepsi-Cola's international beverages
in Turkey for a purchase price of approximately $100 million in cash and assumed
debt.

NOTE 21 -- SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>
                                        FIRST        SECOND        THIRD          FOURTH
2001                                   QUARTER      QUARTER        QUARTER        QUARTER      FULL YEAR
                                       ------        ------        ------         ------        ------
<S>                                    <C>          <C>            <C>            <C>          <C>
Net revenues..................         $1,647        $2,060        $2,274         $2,462        $8,443
Gross profit..................            765           952         1,052          1,094         3,863
Operating income..............             90           218           285             85           678
Net income (1)................             67           201           260             59           587
</TABLE>

<TABLE>
<CAPTION>

                                        FIRST        SECOND        THIRD          FOURTH
2000                                   QUARTER      QUARTER        QUARTER        QUARTER      FULL YEAR
                                       ------        ------        ------         ------        ------
<S>                                    <C>          <C>            <C>            <C>          <C>
Net revenues..................         $1,545        $1,913        $2,125         $2,399        $7,982
Gross profit..................            700           880           962          1,035         3,577
Operating income.............              75           191           257             68           591
Net income...................              51           158           227             35           471
</TABLE>

     (1) During 2001, the Canadian Government passed laws reducing federal and
     certain provincial corporate income tax rates. These rate changes resulted
     in one-time gains of $16 million and $9 million in the second and third
     quarters of 2001, respectively.

     The first, second and third quarters of each year consisted of 12 weeks,
     while the fourth quarter consisted of 16 weeks in 2001 and 17 weeks in
     2000. The extra week in fiscal year 2000 contributed $12 million of
     additional net income to our fourth quarter and fiscal year 2000 results.


                                       49
<PAGE>
                         REPORT OF INDEPENDENT AUDITORS

The Owners of
Bottling Group, LLC:

     We have audited the accompanying Consolidated Balance Sheets of Bottling
Group, LLC as of December 29, 2001 and December 30, 2000, and the related
Consolidated Statements of Operations, Cash Flows and Changes in Owners' Equity
for each of the fiscal years in the three-year period ended December 29, 2001.
These Consolidated Financial Statements are the responsibility of management of
Bottling Group, LLC. Our responsibility is to express an opinion on these
Consolidated Financial Statements based on our audits.

     We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

     In our opinion, the Consolidated Financial Statements referred to above
present fairly, in all material respects, the financial position of Bottling
Group, LLC as of December 29, 2001 and December 30, 2000, and the results of its
operations and its cash flows for each of the fiscal years in the three-year
period ended December 29, 2001, in conformity with accounting principles
generally accepted in the United States of America.

/s/ KPMG LLP

New York, New York
January 24, 2002


                                       50
<PAGE>
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure

Not applicable.

                                    PART III

Item 10.   Managing Directors and Executive Officers of Bottling LLC

The name, age and background of each of the Bottling LLC's Managing Directors is
set forth below:

JOHN T. CAHILL, 44, is a Managing Director of Bottling LLC. Mr. Cahill is
currently the Chief Executive Officer of PBG. Previously, Mr. Cahill served as
PBG's President and Chief Operating Officer from August 2000 to September 2001.
Mr. Cahill has been a member of PBG's Board of Directors since January 1999 and
served as PBG's Executive Vice President and Chief Financial Officer prior to
becoming President and Chief Operating Officer in August 2000. He was Executive
Vice President and Chief Financial Officer of the Pepsi-Cola Company from April
1998 until November 1998. Prior to that, Mr. Cahill was Senior Vice President
and Treasurer of PepsiCo, having been appointed to that position in April 1997.
In 1996, he became Senior Vice President and Chief Financial Officer of
Pepsi-Cola North America. Mr. Cahill joined PepsiCo in 1989 where he held
several other senior financial positions through 1996.

PAMELA C. MCGUIRE, 54, is a Managing Director of Bottling LLC. She is also the
Senior Vice President, General Counsel and Secretary of PBG. She was the Vice
President and Division Counsel of the Pepsi-Cola Company from 1989 to March
1998, at which time she was named its Vice President and Associate General
Counsel. Ms. McGuire joined PepsiCo in 1977 and held several other positions in
its legal department through 1989.

MATTHEW M. MCKENNA, 51, is a Managing Director of Bottling LLC. He is also the
Senior Vice President of Finance of PepsiCo. Previously he was Senior Vice
President and Treasurer and before that, Senior Vice President, Taxes. Prior to
joining PepsiCo in 1993 as Vice President, Taxes, he was a partner with the law
firm of Winthrop, Stimson, Putnam & Roberts in New York.

Pursuant to Item 401(b) of Regulation S-K, the executive officers of Bottling
LLC are reported in Part I of this Report. Executive officers are elected by the
Managing Directors of Bottling LLC, and their terms of office continue until
their successors are appointed and qualified or until their earlier resignation
or removal. There are no family relationships among our executive officers.
Managing Directors are elected by a majority of Members of Bottling LLC and
their terms of office continue until their successors are appointed and
qualified or until their earlier resignation or removal, death or disability.


                                       51
<PAGE>
ITEM 11.   EXECUTIVE COMPENSATION

     Summary of Cash and Certain Other Compensation. The following table
provides information on compensation earned and stock options awarded for the
years indicated by PBG to Bottling LLC's Principal Executive Officer and the two
other executive officers of Bottling LLC as of the end of the 2001 fiscal year
in accordance with the rules of the Securities and Exchange Commission. These
three individuals are referred to as the named executive officers.

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                         ANNUAL COMPENSATION                                        LONG TERM
                                                                                                  COMPENSATION
                                                                                                   Securities
                                                                                                     Under-
                                                                             Other Annual             Lying         All Other
Name and Principal                                                           Compensation        Options (1)(2)   Compensation
Position                   Year       Salary($)            Bonus($)                 $                  (#)              ($)
--------                   ----       ----------          ----------          ----------             -------        ----------
<S>                        <C>        <C>                 <C>                <C>                 <C>              <C>
John T. Cahill             2001       $  636,712          $  870,000          $   12,566(3)          739,300(4)     $    6,821(5)(6)
   Principal               2000          539,904             811,320              14,139             240,000             6,800
   Executive Officer       1999          468,077             531,250               7,608             264,130         1,000,000

Alfred H. Drewes           2001          175,000(7)          268,090(7)            7,522(3)          135,758                 0
Principal Financial        2000               --                  --                  --                  --                --
  Officer                  1999               --                  --                  --                  --                --


Andrea L. Forster          2001          180,154             106,920               4,695(3)           43,622             6,800(6)
Principal Accounting       2000          163,857             126,990               4,695              33,707             6,800
   Officer                 1999          135,565              74,180               4,695              17,557           100,000
</TABLE>

---------------------------
(1)  Amounts include (i) a standard annual stock option award and (ii) a
     one-time variable award granted prior to PBG's IPO ("Variable Award") that
     was payable in cash or stock options at the election of the executive.
     These Variable Awards are based on PBG performance targets as
     pre-established by the Compensation Subcommittee. The stock options granted
     pursuant to the Variable Awards became exercisable on February 1, 2001.

(2)  Stock options granted in 2001 are adjusted to reflect the 2-for-1 split of
     PBG Common Stock effective November 27, 2001; stock options granted in 2000
     and 1999 are presented on a pre-split basis.

(3)  This amount represents payment of executive's tax liability with respect to
     certain Company provided perquisites.

(4)  This amount includes a special stock option award granted in September 2001
     in recognition of new roles and responsibilities as a result of senior
     management succession. These stock options become exercisable on September
     30, 2006.

(5)  In 2001, Mr. Cahill waived his right to receive certain future compensation
     payments under PBG's executive income deferral plan. In connection with
     this waiver, PBG entered into an arrangement by which such waived amount
     was used for the purpose of purchasing insurance for his benefit and the
     benefit of his designated beneficiaries. The cost of the insurance policy
     will


                                       52
<PAGE>
     not exceed the cost PBG would have incurred with respect to the
     compensation payment waived by Mr. Cahill. The premium amount of $21.00
     included for Mr. Cahill is based on coverage being effective for 4 days in
     2001.

(6)  This amount includes a standard Company matching contribution of $6,800 in
     PBG Common Stock to the executive's 401(k) account.

(7)  Mr. Drewes' salary reflects his employment with PBG effective June 25,
     2001. Mr. Drewes' bonus reflects a full year payout based on PBG and
     PepsiCo Beverages International performance results.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     PBG holds 93% and PepsiCo indirectly holds 7.0% of the ownership in
Bottling LLC.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Although Bottling LLC is not a direct party to the following transactions,
as the principal operating subsidiary of PBG, it derives certain benefits from
them. Accordingly, set forth below is information relating to certain
transactions between PBG and PepsiCo.

     STOCK OWNERSHIP AND DIRECTOR RELATIONSHIPS WITH PEPSICO. PBG was initially
incorporated in January 1999 as a wholly owned subsidiary of PepsiCo to effect
the separation of most of PepsiCo's company-owned bottling businesses. PBG
became a publicly traded company on March 31, 1999. As of February 21, 2002,
PepsiCo's ownership represented 37.9% of the outstanding Common Stock and 100%
of the outstanding Class B Common Stock together representing 42.9% of the
voting power of all classes of PBG's voting stock. PepsiCo also owns 7.0% of the
equity of Bottling Group, LLC, PBG's principal operating subsidiary.

     AGREEMENTS AND TRANSACTIONS WITH PEPSICO AND AFFILIATES. PBG and PepsiCo
(and certain of its affiliates) have entered into transactions and agreements
with one another, incident to their respective businesses, and PBG and PepsiCo
are expected to enter into material transactions and agreements from time to
time in the future. As used in this section, "PBG" includes the Company and its
subsidiaries.

     Material agreements and transactions between PBG and PepsiCo (and certain
of its affiliates) during 2001 are described below.

     Beverage Agreements and Purchases of Concentrates and Finished Products.
PBG purchases concentrates from PepsiCo and manufactures, packages, distributes
and sells carbonated and non-carbonated beverages under license agreements with
PepsiCo. These agreements give PBG the right to manufacture, sell and distribute
beverage products of PepsiCo in both bottles and cans and fountain syrup in
specified territories. The agreements also provide PepsiCo with the ability to
set prices of such concentrates, as well as the terms of payment and other terms
and conditions under which PBG purchases such concentrates. In addition, PBG
bottles water under the Aquafina trademark pursuant to an agreement with
PepsiCo, which provides for the payment of a royalty fee to PepsiCo. In certain
instances, PBG purchases finished beverage products from PepsiCo.

     During 2001, total payments by PBG to PepsiCo for concentrates, royalties
and finished beverage products were approximately $1.7 billion.

     PBG Manufacturing Services. PBG provides manufacturing services to PepsiCo
in connection with the production of certain finished beverage products. In
2001, amounts paid or payable by PepsiCo to PBG for these services were
approximately $13.8 million.


                                       53
<PAGE>
     Purchase of Distribution Rights. During 2001, PBG paid PepsiCo $9.1 million
for distribution rights relating to the SoBe brand in certain PBG-owned
territories in the United States.

     Transactions with Joint Ventures in which PepsiCo holds an equity interest.
PBG purchases tea concentrate and finished beverage products from the
Pepsi/Lipton Tea Partnership, a joint venture of Pepsi-Cola North America, a
division of PepsiCo, and Lipton (the "Partnership"). During 2001, total amounts
paid or payable to PepsiCo for the benefit of the Partnership were approximately
$116.7 million. In addition, PBG provides certain manufacturing services in
connection with the hot-filled tea products of the Partnership to PepsiCo for
the benefit of the Partnership. In 2001, amounts paid or payable by PepsiCo to
PBG for these services were approximately $18.4 million.

     PBG purchases finished beverage products from the North American Coffee
Partnership, a joint venture of Pepsi-Cola North America and Starbucks. During
2001, amounts paid or payable to the North American Coffee Partnership by PBG
were approximately $108.3 million.

     In addition to the amounts described above, PBG received approximately $4.2
million from an international joint venture, in which PepsiCo holds an equity
interest in 2001.

     Purchase of Snack Food Products from Frito-Lay, Inc. PBG purchases snack
food products from Frito-Lay, Inc., a subsidiary of PepsiCo, for sale and
distribution through all of Russia except for Moscow. In 2001, amounts paid or
payable by PBG to Frito-Lay, Inc. were approximately $27.1 million.

     Shared Services. PepsiCo provides various services to PBG pursuant to a
shared services agreement, including procurement of raw materials, processing of
accounts payable and credit and collection, certain tax and treasury services
and information technology maintenance and systems development. During 2001,
amounts paid or payable to PepsiCo for shared services totaled approximately
$178.9 million.

     Pursuant to the shared services agreements, PBG provides certain employee
benefit and international tax and accounting services to PepsiCo. During 2001,
payments to PBG from PepsiCo for these services totaled approximately $598,000.

     Rental Payments. Amounts paid or payable by PepsiCo to PBG for rental of
office space at certain PBG facilities were approximately $11.6 million in 2001.

     Insurance Services. Hillbrook Insurance Company, Inc., a subsidiary of
PepsiCo, provides insurance and risk management services to PBG pursuant to a
contractual arrangement. Costs associated with such services in 2001 totaled
approximately $57.8 million.

     National Fountain Services. PBG provides certain manufacturing, delivery
and equipment maintenance services to PepsiCo's national fountain customers. In
2001, net amounts paid or payable by PepsiCo to PBG for these services were
approximately $184.6 million.

     Marketing and Other Support Arrangements. PepsiCo provides PBG with various
forms of marketing support. The level of this support is negotiated annually and
can be increased or decreased at the discretion of PepsiCo. This marketing
support is intended to cover a variety of programs and initiatives, including
direct marketplace support (including point-of-sale materials), capital
equipment funding and shared media and advertising support. For 2001, total
direct marketing support funding paid or payable to PBG by PepsiCo approximated
$553.8 million.

     Transactions with Bottlers in which PepsiCo holds an Equity Interest. PBG
and PepsiAmericas,


                                       54
<PAGE>

Inc., a bottler in which PepsiCo owns an equity interest, and PBG and Pepsi
Bottling Ventures LLC, a bottler in which PepsiCo owns an equity interest,
bought from and sold to each other finished beverage products. These
transactions occurred in instances where the proximity of one party's production
facilities to the other party's markets or lack of manufacturing capability, as
well as other economic considerations, made it more efficient or desirable for
one bottler to buy finished product from another. In 2001, PBG's sales to those
bottlers totaled approximately $774,000 and purchases were approximately
$40,000.

     PBG provides certain administrative support services to PepsiAmericas, Inc.
and Pepsi Bottling Ventures LLC. In 2001, amounts paid or payable by
PepsiAmericas, Inc. and Pepsi Bottling Ventures LLC to PBG for these services
were approximately $650,000.

     In connection with PBG's acquisition of Pepsi-Cola Bottling of Northern
California ("Northern California") in 2001, PBG paid $10.3 million to PepsiCo
for its equity interest in Northern California.

     On March 13, 2002, PBG acquired the operations and exclusive right to
manufacture, sell and distribute Pepsi-Cola's international beverages in Turkey.
As part of this acquisition, PBG paid PepsiCo $7.3 million, subject to certain
purchase price adjustments, for its equity interest in the acquired entity and
received $16.4 million from PepsiCo for the sale of the acquired entity's local
brands to PepsiCo.

     Bottling Group, LLC Distribution. PepsiCo has a 7.0% ownership interest in
Bottling Group, LLC, our principal operating subsidiary. In accordance with the
Bottling Group, LLC's Limited Liability Company Agreement, PepsiCo received a
$15.8 million distribution from Bottling Group, LLC in 2001.

     Relationships and Transactions with Management and Others. Linda G.
Alvarado, a member of PBG's Board of Directors, together with her husband and
children, own and operate Taco Bell and Pizza Hut restaurant companies that
purchase beverage products from PBG. In 2001, the total amount of these
purchases was approximately $382,521.


                                       55
<PAGE>




                                     PART IV

ITEM 14.   EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K

     (a) 1. Financial Statements. The following consolidated financial
statements of Bottling LLC and its subsidiaries, are incorporated by reference
into Part II, Item 8 of this report:

     Consolidated Statements of Operations - Fiscal years ended December 29,
     2001, December 30, 2000 and December 25, 1999.

     Consolidated Statements of Cash Flows - Fiscal years ended December 29,
     2001, December 30, 2000 and December 25, 1999.


     Consolidated Balance Sheets - December 29, 2001 and December 30, 2000.

     Consolidated Statements of Changes in Shareholders' Equity - Fiscal years
     ended December 29, 2001, December 30, 2000 and December 25, 1999.

     Notes to Consolidated Financial Statements.

     Report of Independent Auditors.

         2. Financial Statement Schedule. The following financial statement
schedule of Bottling LLC and its subsidiaries is included in this report on the
page indicated: Page

Independent Auditors' Report on Schedule and Consent........................F-2

Schedule II - Valuation and Qualifying Accounts for the fiscal years ended
              December 29, 2001, December 30, 2000 and December 25, 1999....F-3

         3. Exhibits

                    See Index to Exhibits on pages E-1 - E-3.

         (b)      Reports on Form 8-K

                           None.



                                       56
<PAGE>









                                   SIGNATURES

         Pursuant to the requirements of Section 13 of the Securities Exchange
Act of 1934, The Pepsi Bottling Group, Inc. has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.

Dated:  March 28, 2002
                               Bottling Group, LLC

                               By:  /s/ John T. Cahill
                                   ------------------------------
                                    John T. Cahill
                                    Principal Executive Officer

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of Bottling
Group, LLC and in the capacities and on the date indicated.

<TABLE>
<CAPTION>
SIGNATURE                  TITLE                                DATE


<S>                        <C>                                  <C>
/s/ John T. Cahill         Principal Executive Officer and      March 28, 2002
---------------------
John T. Cahill             Managing Director

/s/ Alfred H. Drewes       Principal Financial Officer          March 28, 2002
---------------------
Alfred H. Drewes

/s/ Andrea L. Forster      Principal Accounting Officer         March 28, 2002
---------------------
/s/ Andrea L. Forster

/s/ Pamela C. McGuire      Managing Director                    March 28, 2002
---------------------
Pamela C. McGuire

/s/ Matthew M. McKenna     Managing Director                    March 28, 2002
---------------------
Matthew M. McKenna
</TABLE>


                                      S-1
<PAGE>
                      INDEX TO FINANCIAL STATEMENT SCHEDULE

                                                                            PAGE
                                                                            ----

Independent Auditors' Report on Schedule and Consent.............           F-2
Schedule II - Valuation and Qualifying Accounts for the fiscal
     years ended December 29, 2001 December 30, 2000 and December
     25, 1999....................................................           F-3


                                      F-1
<PAGE>




                    INDEPENDENT AUDITORS' REPORT

Owners of
Bottling Group, LLC:

Under date of January 24, 2002 we reported on the Consolidated Balance Sheets of
Bottling Group, LLC as of December 29, 2001 and December 30, 2000, and the
related Consolidated Statements of Operations, Cash Flows and Changes in Owners'
Equity for each of the fiscal years in the three-year period ended December 29,
2001, which are included in this Form 10-K. In connection with our audits of the
aforementioned Consolidated Financial Statements, we also audited the related
consolidated financial statement schedule included in this Form 10-K. This
consolidated financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion on this consolidated
financial statement schedule based on our audits.

In our opinion, such consolidated financial statement schedule, when considered
in relation to the basic Consolidated Financial Statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.


/s/ KPMG LLP

New York, New York
January 24, 2002

                                      F-2
<PAGE>



                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
                              BOTTLING GROUP, LLC
                                   IN MILLIONS


<TABLE>
<CAPTION>
                                                   ADDITIONS
                                         ----------------------------
                             Balance At   Charged To     Charged To
                             Beginning     Cost And        Other                             Balance At
       DESCRIPTION           Of Period     Expenses      Accounts (a)     Deductions (b)   End Of Period
       -----------           ---------     --------      ------------     --------------   -------------

<S>                          <C>          <C>            <C>              <C>              <C>
FISCAL YEAR ENDED
DECEMBER 29, 2001
    Allowance for
      losses on trade
      accounts
        receivable ........    $42           $ 9              $--              $ 9               $42

DECEMBER 30, 2000
   Allowance for losses
        on trade accounts
        receivable ........    $48           $ 2              $--              $ 8               $42

DECEMBER 25, 1999
   Allowance for losses
      on trade accounts
        receivable ........    $46           $ 6              $ 3              $ 7               $48
</TABLE>

------------------------
(a)      Represents recoveries of amounts previously written off.
(b)      Charge off of uncollectable accounts.


                                      F-3
<PAGE>



                                INDEX TO EXHIBITS
                                  ITEM 14(A)(3)

EXHIBIT

3.1      Articles of Formation of Bottling LLC which is incorporated herein by
         reference from 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 from 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. and The Chase Manhattan Bank, as trustee, relating
         to $1,000,000,000 5 3/8% Senior Notes due 2004 and $1,300,000,000 5
         5/8% Senior Notes due 2009 incorporated herein by reference to Exhibit
         10.9 to PBG's Registration Statement on Form S-1/A (Registration No.
         333-70291).

4.2      First Supplemental Indenture dated as of February 8, 1999 among Pepsi
         Bottling Holdings, Inc., Bottling Group, 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 is incorporated herein by
         reference to Exhibit 10.10 to PBG's Registration Statement on Form
         S-1/A (Registration No. 333-70291).

4.3      Indenture, dated as of March 8, 1999, by and among The Pepsi Bottling
         Group, Inc., as obligor, Bottling Group, 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/A
         (Registration No. 333-70291).

4.4      U.S. $250,000,000 364 Day Credit Agreement, dated as of April 22, 1999
         among PBG, Bottling LLC, The Chase Manhattan Bank, Bank of America
         National Trust and Savings Association, , Citibank, N.A., Credit Suisse
         First Boston, UBS AG, Lehman Commercial Paper Inc., Royal Bank of
         Canada, Banco Bilbao Vizcaya, Deutsche Bank AG New York Branch and/or
         Cayman Islands Branch, Fleet National Bank, Hong Kong & Shanghai
         Banking Corp., The Bank of New York, The Northern Trust Company, The
         Chase Manhattan Bank, as Agent, Chase Securities Inc. as Arranger and
         Nationsbanc Montgomery Securities LLC and Solomon Smith Barney Inc. as
         Co-Syndication Agents which is incorporated herein by reference from
         Exhibit 4.5 to PBG's Annual Report on Form 10-K for the fiscal year
         ended December 25, 1999.


                                      E-1
<PAGE>




4.5      U.S. $250,000,000 5 Year Credit Agreement, dated as of April 22, 1999
         among PBG, Bottling LLC, The Chase Manhattan Bank, Bank of America
         National Trust and Savings Association, , Citibank, N.A., Credit Suisse
         First Boston, UBS AG, Lehman Commercial Paper Inc., Royal Bank of
         Canada, Banco Bilbao Vizcaya, Deutsche Bank AG New York Branch and/or
         Cayman Islands Branch, Fleet National Bank, Hong Kong & Shanghai
         Banking Corp., The Bank of New York, The Northern Trust Company, The
         Chase Manhattan Bank, as Agent, Chase Securities Inc. as Arranger and
         Nationsbanc Montgomery Securities LLC and Solomon Smith Barney Inc. as
         Co-Syndication Agents which is incorporated herein by reference from
         Exhibit 4.6 to PBG's Annual Report on Form 10-K for the fiscal year
         ended December 25, 1999.

4.6      U.S. $250,000,000 364 Day Credit Agreement, dated as of May 3, 2000
         among PBG, Bottling Group, LLC, The Chase Manhattan Bank, Bank of
         America, N. A., Citibank, N.A., Credit Suisse First Boston, UBS AG,
         Lehman Commercial Paper Inc., The Northern Trust Company, Deutsche Bank
         AG New York Branch and/or Cayman Islands Branch, Royal Bank of Canada,
         Banco Bilbao Vizcaya, Fleet National Bank, The Bank of New York, The
         Chase Manhattan Bank, as Agent, Solomon Smith Barney Inc and Banc of
         America Securities LLC as Co-Lead Arrangers and Book Managers and
         Citibank, N.A. and Bank of America, N.A. as Co-Syndication Agents which
         is incorporated by reference from Exhibit 4.7 to PBG's Annual Report on
         Form 10-K for the fiscal year ended December 30, 2000.

4.7      U.S. $250,000,000 Amended and Restated 364 Day Credit Agreement, dated
         as of May 2, 2001 among PBG, Bottling Group, LLC, The Chase Manhattan
         Bank, Bank of America, N. A., Citibank, N.A., Credit Suisse First
         Boston, Lehman Commercial Paper Inc., The Northern Trust Company,
         Deutsche Bank AG New York Branch and/or Cayman Islands Branch, Royal
         Bank of Canada, Banco Bilbao Vizcaya, Fleet National Bank, The Bank of
         New York, State Street Bank and Trust Company, The Chase Manhattan
         Bank, as Agent, Salomon Smith Barney Inc and JP Morgan as Co-Lead
         Arrangers and Book Managers and Citibank, N.A. and Bank of America,
         N.A., as Co-Syndication Agents.

21       Subsidiaries of Bottling Group LLC.



                                      E-2