##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-K
 þ
    
    Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the Fiscal Year Ended December 31, 2005
 or
 o
    
    Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 (No Fee Required)
 For the transition period from  to
 Commission file number 333-80361-01
 Bottling Group, LLC
  Organized in Delaware
    
    13-4042452(State or other Jurisdiction of
    
    (I.R.S. EmployerIncorporation or organization)
    
    Identification No.)One Pepsi Way
Somers, New York
(Address of Principal Executive Offices)
    
    10589
(Zip code)
 (914) 767-6000
 
 Securities registered pursuant to Section 12(b) of the Act: None
 Securities registered pursuant to Section 12(g) of the Act: None
 Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule
405 of the Securities Act. Yes þ No o
 Indicate by check mark if the registrant is not required to file reports pursuant to Section
13 or Section 15(d) of the Act. Yes o No þ
 Indicate by check mark whether the registrant: (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports) and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o
 Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation
S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K . þ
 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):
 Large accelerated filer o Accelerated filer o Non-accelerated filer þ
 Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act). Yes o No þ
 The aggregate market value of Bottling Group, LLC Capital Stock held by non-affiliates of
Bottling Group, LLC as of June 11, 2005 was $0.




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TABLE OF CONTENTS  PART IItem 1.   BusinessItem 1A.   Risk FactorsItem 1B.   Unresolved Staff CommentsItem 2.   PropertiesItem 3.   Legal ProceedingsItem 4.  Submission of Matters to a Vote of ShareholdersPART IIItem 5.   Market for Registrants Common Equity, Related Shareholder Matters and Issuer Purchases of Equity SecuritiesItem 6.   Selected Financial DataItem 7.   Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 7A.   Quantitative and Qualitative Disclosures About Market RiskItem 8.   Financial Statements and Supplementary DataItem 9.   Changes in and Disagreements With Accountants on Accounting and Financial DisclosureItem 9A.   Controls and ProceduresItem 9B.   Other InformationPART IIIItem 10.   Directors and Executive Officers of Bottling LLCItem 11.   Executive CompensationItem 12.  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersItem 13.   Certain Relationships and Related TransactionsItem 14.   Principal Accountant Fees and ServicesPART IVItem 15.   Exhibits and Financial Statement SchedulesSIGNATURESINDEX TO EXHIBITS    Table of Contents  
 PART I
 
 Item 1.   Business
 Introduction
    http://www.pbg.com
 Principal Products
 Pepsi-Cola Diet Pepsi Mountain Dew Aquafina, Lipton Brisk, Sierra Mist, Diet Mountain Dew, Tropicana juice drinks, SoBe, Starbucks Frappuccino. I up, Kas, Aqua Minerale, Mirinda Manzanita sol. Dr Pepper Squirt lectropura pura arci Crespo
  1




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Raw Materials and Other Supplies
   Patents, Trademarks and Licenses
 Pepsi-Cola Diet Pepsi Mountain Dew Aquafina,
Lipton Brisk, Sierra Mist, Diet Mountain Dew, tropicana Juice Drinks, SoBe, Starbucks Frappuccino. I   up, Kas, Aqua Minerale, Mirinda Manzanita Sol. Dr Pepper Squirt lectropura pura arci Crespo
   Terms of the Master Bottling Agreement. Pepsi-Cola Pepsi
  (1)
    
    maintain such plant and equipment, staff, and distribution facilities and vending
equipment that are capable of manufacturing, packaging and distributing the cola beverages
in sufficient quantities to fully meet the demand for these beverages in our territories;(2)
    
    undertake adequate quality control measures prescribed by PepsiCo;(3)
    
    push vigorously the sale of the cola beverages in our territories;
 2




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(4)
    
    increase and fully meet the demand for the cola beverages in our territories;(5)
    
    use all approved means and spend such funds on advertising and other forms of
marketing beverages as may be reasonably required to push vigorously the sale of cola
beverages in our territories; and(6)
    
    maintain such financial capacity as may be reasonably necessary to assure performance
under the Master Bottling Agreement by us.
      Pepsi-Cola
  Pepsi
 3




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Pepsi
  (1)
    
    PBGs insolvency, bankruptcy, dissolution, receivership or the like;(2)
    
    any disposition of any voting securities of one of our bottling subsidiaries or
substantially all of our bottling assets without the consent of PepsiCo;(3)
    
    PBGs entry into any business other than the business of manufacturing, selling
or distributing non-alcoholic beverages or any business which is directly related and
incidental to such beverage business; and(4)
    
    any material breach under the contract that remains uncured for 120 days after
notice by PepsiCo.
    Terms of the Non-Cola Bottling Agreements. Mountain Dew,
Aquafina, Sierra Mist, Diet Mountain Dew, Mug Mountain Dew Code
Red Slice
 Terms of Certain Distribution Agreements. Amp Dole SoBe Gatorade Tropicana Juice Drinks Tropicana
Juices
 4




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##### Table of Contents



Terms of the Master Syrup Agreement.
   Terms of Other U.S. Bottling Agreements. Dr Pepper, Schweppes, Canada Dry, Hawaiian Punch Squirt, Lipton Brisk Liptons Iced Tea,  Starbucks Frappuccino
 Terms of the Country Specific Bottling Agreements.
 Seasonality
  Competition
  5




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ivi
  Governmental Regulation Applicable to Bottling LLC
   Bottle and Can Legislation
     6




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




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Mexican Water Regulation
  Employees
  Financial Information on Industry Segments and Geographic Areas
  8




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Item 1A.   Risk Factors
  We may not be able to respond successfully to consumer trends related to carbonated and
non-carbonated beverages.
 .
 We may not be able to respond successfully to the demands of our largest customers.
  We may not be able to compete successfully within the highly competitive carbonated and
non-carbonated beverage markets.
  Because we depend upon PepsiCo to provide us with concentrate, certain funding and various
services, changes in our relationship with PepsiCo could adversely affect our business and
financial results.
    Our business requires a significant supply of raw materials, the limited availability or increased
costs of which could adversely affect our business and financial results.
  9




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PepsiCos equity ownership of PBG could affect matters concerning us.
  We may have potential conflicts of interest with PepsiCo, which could result in PepsiCos
objectives being favored over our objectives.
    Our acquisition strategy may be limited by our ability to successfully integrate acquired
businesses into ours or our failure to realize our expected return on acquired businesses.
  Our success depends on key members of our management, the loss of whom could disrupt our business
operations.
  If we are unable to fund our substantial capital requirements, it could cause us to reduce our
planned capital expenditures and could result in a material adverse effect on our business and
financial results.
  Our substantial indebtedness could adversely affect our financial health.
  10




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Our foreign operations are subject to social, political and economic risks and may be adversely
affected by foreign currency fluctuations.
  We may incur material losses and costs as a result of product liability claims that may be brought
against us or any product recalls we have to make.
  Newly adopted governmental regulations could increase our costs or liabilities or impact the sale
of our products.
  
 Item 1B.   Unresolved Staff Comments
  
 Item 2.   Properties
   11




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Item 3.   Legal Proceedings
    
 Item 4.  Submission of Matters to a Vote of Shareholders
  Executive Officers of the Registrant
   John T. Cahill ,
 Alfred H. Drewes
 12




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




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Item 6.   Selected Financial Data
     SELECTED FINANCIAL AND OPERATING DATA
 in millionsFiscal years ended
    

2005(1)
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001Statement of Operations Data:Net revenues
    
    $
    11,885
    
    
    $
    10,906
    
    
    $
    10,265
    
    
    $
    9,216
    
    
    $
    8,443Cost of sales
    
    
    6,253
    
    
    
    5,656
    
    
    
    5,215
    
    
    
    5,001
    
    
    
    4,580Gross profit
    
    
    5,632
    
    
    
    5,250
    
    
    
    5,050
    
    
    
    4,215
    
    
    
    3,863Selling, delivery and administrative expenses
    
    
    4,625
    
    
    
    4,285
    
    
    
    4,089
    
    
    
    3,318
    
    
    
    3,185Operating income
    
    
    1,007
    
    
    
    965
    
    
    
    961
    
    
    
    897
    
    
    
    678Interest expense, net
    
    
    110
    
    
    
    132
    
    
    
    143
    
    
    
    98
    
    
    
    78Other non-operating expenses, net
    
    
    1
    
    
    
    1
    
    
    
    7
    
    
    
    7
    
    
    
    Minority interest
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    9
    
    
    
    14Income before income taxes
    
    
    895
    
    
    
    832
    
    
    
    811
    
    
    
    783
    
    
    
    586Income tax expense (2)(3)(4)
    
    
    24
    
    
    
    3
    
    
    
    84
    
    
    
    49
    
    
    
    (1
    )Income before cumulative effect of change in
accounting principle
    
    
    871
    
    
    
    829
    
    
    
    727
    
    
    
    734
    
    
    
    587Cumulative effect of change in accounting
principle, net of tax
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    Net income
    
    $
    871
    
    
    $
    829
    
    
    $
    721
    
    
    $
    734
    
    
    $
    587Balance Sheet Data (at period end):Total
assets (5)
    
    $
    13,745
    
    
    $
    12,724
    
    
    $
    12,997
    
    
    $
    11,015
    
    
    $
    8,762Long-term debt
    
    $
    2,943
    
    
    $
    3,495
    
    
    $
    3,497
    
    
    $
    3,541
    
    
    $
    2,299Minority interest
    
    $
    3
    
    
    $
    3
    
    
    $
    
    
    
    $
    
    
    
    $
    154Accumulated other comprehensive loss
    
    $
    (395
    )
    
    $
    (447
    )
    
    $
    (503
    )
    
    $
    (596
    )
    
    $
    (416
    )Owners equity
    
    $
    7,581
    
    
    $
    6,620
    
    
    $
    5,902
    
    
    $
    5,186
    
    
    $
    4,596
 
 (1)
    
    Our fiscal year 2005 results included an extra week of
activity. The pre-tax income generated from the extra week was spent back in strategic initiatives within our selling,
delivery and administrative expenses. The 53rd week had no material impact on our
net income.(2)
    
    Fiscal year 2001 includes Canada tax law change benefits of $25 million.(3)
    
    Fiscal year 2003 includes Canada tax law change expense of $11 million.(4)
    
    Fiscal year 2004 includes Mexico tax law change benefit of $26 million.(5)
    
    Certain reclassifications were made in our Consolidated
Financial Statements to prior year amounts to conform to the 2005
presentation. 
 14




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Item 7.   Managements Discussion and Analysis of Financial Condition and Results of Operations
 MANAGEMENTS FINANCIAL REVIEW  Tabular dollars in millions
 OVERVIEW
   
 Pepsi-Cola, Diet Pepsi, Mountain Dew, Aquafina, Lipton Brisk,
Sierra Mist, Diet Mountain Dew, Tropicana Juice Drinks, SoBe Starbucks
Frappuccino 7 up, Kas, Aqua Minerale, Mirinda Manzanita Sol Dr Pepper Squirt Electropura, Epura Garci Crespo
    15




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
    
    Items that affect historical or future comparability
    
    Financial performance summary
    
    Critical accounting policies
    
    Related party transactions
    
    Results of operations
    
    Liquidity and financial condition and
    
    Market risks and cautionary statements.
 .
 16




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ITEMS THAT AFFECT HISTORICAL OR FUTURE COMPARABILITY
 High Fructose Corn Syrup (HFCS) Settlement
  53 rd Week
 rd rd
 Strategic Spending Initiatives
 rd
 Non-GAAP Measurements and Adjusted Results
 rd
 17




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SpendingReported
    
    

HFCS
Settlement
    
    

53rdWeek
    
    

Initiatives
    
    

Adjusted Results *Revenue
    
    $
    11,885
    
    
    $
    0
    
    
    $
    (139
    )
    
    $
    0
    
    
    $
    11,746Cost of sales
    
    
    6,253
    
    
    
    0
    
    
    
    (72
    )
    
    
    0
    
    
    
    6,181Gross profit
    
    
    5,632
    
    
    
    0
    
    
    
    (67
    )
    
    
    0
    
    
    
    5,565Selling, delivery
and administrative
expenses
    
    
    4,625
    
    
    
    29
    
    
    
    (43
    )
    
    
    (48
    )
    
    
    4,563Operating
income/(loss)
    
    
    1,007
    
    
    
    (29
    )
    
    
    (24
    )
    
    
    48
    
    
    
    1,002Interest expense, net
    
    
    110
    
    
    
    0
    
    
    
    (2
    )
    
    
    0
    
    
    
    108Other non-operating expense, net
    
    
    1
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    1Minority interest
    
    
    1
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    1Income before taxes
    
    
    895
    
    
    
    (29
    )
    
    
    (22
    )
    
    
    48
    
    
    
    892Income taxes
    
    
    24
    
    
    
    (1
    )
    
    
    0
    
    
    
    1
    
    
    
    24Net income
    
    $
    871
    
    
    $
    (28
    )
    
    $
    (22
    )
    
    $
    47
    
    
    $
    868
     Operating Income Growth Rates
    
    FY 2005Reported Operating Income
    
    
    4
    %HFCS Settlement
    
    
    (3
    %)53rd Week Impact
    
    
    (2
    %)Strategic Spending Initiatives
    
    
    4
    %Adjusted Operating Income *
    
    
    3
    %
 
 *
    
    See Non-GAAP Measurements and Adjusted Results for further information. 18




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FINANCIAL PERFORMANCE SUMMARY
 (in millions)
    
    December
    
    
    December
    
    
    Fiscal Year31, 2005
    
    
    25, 2004
    
    
    % ChangeNet revenues
    
    $
    11,885
    
    
    $
    10,906
    
    
    
    9
    %Gross profit
    
    $
    5,632
    
    
    $
    5,250
    
    
    
    7
    %Operating income
    
    $
    1,007
    
    
    $
    965
    
    
    
    4
    %Net income
    
    $
    871
    
    
    $
    829
    
    
    
    5
    %
 rd
 rd rd
 rd
 rd
   19




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rd
 rd
   2006 Outlook
 rd
 rd rd
 rd
 Impact of
    
    
    
    Adjusted ForecastedForecasted 2006 vs.
    
    53rd
    
    
    
    2006 vs. 20052005 growth
    
    week in 2005
    
    Impact of SFAS 123R
    
    growth *Worldwide Volume
    
    2%
    
    1%
    
    
    
    3%U.S. Volume
    
    Flat to 1%
    
    1%
    
    
    
    1% to 2%Worldwide Operating
Income (in dollars)
    
    (2%) to (4%)
    
    
    
    7%
    
    3% to 5%
 
 *
    
    See Non-GAAP Measurements and Adjusted Results in Items that Affect Historical or Future
Comparability for further information. 20




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CRITICAL ACCOUNTING POLICIES
  Allowance for Doubtful Accounts
    Allowance for DoubtfulAccounts2005
    
    
    2004
    
    
    2003Beginning of the year
    
    $
    61
    
    
    $
    72
    
    
    $
    67Bad debt expense
    
    
    3
    
    
    
    (5
    )
    
    
    12Accounts written off
    
    
    (12
    )
    
    
    (7
    )
    
    
    (8
    )Foreign currency translation
    
    
    (1
    )
    
    
    1
    
    
    
    1End of the year
    
    $
    51
    
    
    $
    61
    
    
    $
    72
 21




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Recoverability of Goodwill and Intangible Assets with Indefinite Lives
         22




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Pension and Postretirement Medical Benefit Plans
   Key Assumptions
 th
   Pension and Postretirement Medical Plans Accounting
  23




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Pension
    
    2006
    
    
    2005Discount rate
    
    
    5.80
    %
    
    
    6.15
    %Expected return on plan assets (net of administrative expenses)
    
    
    8.50
    %
    
    
    8.50
    %Rate of compensation increase
    
    
    3.53
    %
    
    
    3.60
    %
 Postretirement
    
    2006
    
    
    2005Discount rate
    
    
    5.55
    %
    
    
    6.15
    %Rate of compensation increase
    
    
    3.53
    %
    
    
    3.60
    %Health care cost trend rate
    
    
    9.00
    %
    
    
    10.00
    %
  
    
    A decrease in our weighted-average discount rate for our pension and postretirement
medical expense from 6.15 percent and 6.15 percent to 5.80 percent and 5.55 percent,
respectively, reflecting declines in the yields of long-term corporate bonds comprising the
yield curve. This change in assumption will increase our 2006 defined benefit pension and
postretirement medical expense by approximately $12 million.
    
    Certain benefit plan enhancements and demographic changes will increase our 2006 defined
benefit pension and postretirement medical expense by approximately $7 million.
 Sensitivity Analysis
  2005
    
    
    2004
    
    
    2003Expected return on plan assets (net of administrative expenses)
    
    
    8.50
    %
    
    
    8.50
    %
    
    
    8.50
    %Actual return on plan assets (net of administrative expenses)
    
    
    13.33
    %
    
    
    11.61
    %
    
    
    19.79
    %
  
    
    Discount rate  A 25-basis point change in the discount rate would increase or decrease
our expense for PBGs pension and postretirement medical benefit plans in 2006 by
approximately $9 million.
    
    Expected return on plan assets  A 25-basis point change in the expected return on plan
assets would increase or decrease our expense for PBGs pension plans in 2006 by
approximately $3 million. The postretirement medical benefit plans have no expected return
on plan assets as they are funded from the general assets of the Company as the payments come
due.
  Income
Taxes
 24




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RELATED PARTY TRANSACTIONS
    25




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2005
    
    
    2004
    
    
    2003Net revenues:Bottler incentives (a)
    
    $
    51
    
    
    $
    22
    
    
    $
    21Cost of sales:Purchases of concentrate and finished products,
and Aquafina royalty fees (b)
    
    $
    (2,993
    )
    
    $
    (2,741
    )
    
    $
    (2,527
    )Bottler incentives (a)
    
    
    559
    
    
    
    522
    
    
    
    527Manufacturing and distribution service reimbursements (c)
    
    
    
    
    
    
    
    
    
    
    6$
    (2,434
    )
    
    $
    (2,219
    )
    
    $
    (1,994
    )Selling, delivery and administrative expenses:Bottler incentives (a)
    
    $
    78
    
    
    $
    82
    
    
    $
    98Fountain service fee (d)
    
    
    183
    
    
    
    180
    
    
    
    200Frito-Lay purchases (e)
    
    
    (144
    )
    
    
    (75
    )
    
    
    (51
    )Shared services (f):Shared services expense
    
    
    (69
    )
    
    
    (68
    )
    
    
    (72
    )Shared services revenue
    
    
    8
    
    
    
    10
    
    
    
    10Net shared services
    
    
    (61
    )
    
    
    (58
    )
    
    
    (62
    )HFCS (h)
    
    
    23
    
    
    
    
    
    
    
    $
    79
    
    
    $
    129
    
    
    $
    185Income tax benefit (g)
    
    $
    3
    
    
    $
    10
    
    
    $
    7
 (a) Bottler Incentives and Other Arrangements 
 (b) Purchase of Concentrate and Finished Product 
 (c) Manufacturing
and Distribution Service Reimbursements 
 (d) Fountain Service Fee
 26




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##### Table of Contents



(e) Frito-Lay Purchases  .
 (f) Shared
Services
 (g) Income Tax Benefit
 (h) High Fructose Corn Syrup (HFCS) Settlement
   RESULTS
OF OPERATIONS  2005
 Volume
 Fiscal Year EndedDecember 31, 2005 vs.December 25, 2004World-
    
    
    
    
    
    Outsidewide

    
    U.S.
    
    the U.S.Base volume
    
    
    3
    %
    
    
    2
    %
    
    
    5
    %Acquisitions
    
    
    1
    %
    
    
    1
    %
    
    
    0
    %Impact of 53rd week
    
    
    1
    %
    
    
    2
    %
    
    
    1
    %Total Volume Change
    
    
    5
    %
    
    
    5
    %
    
    
    6
    %
  rd Aquafina Aquafina Flavor Splash,
 27




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Starbucks . Pepsi Pepsi Lime, Wild Cherry Pepsi,
 rd
 Pepsi Aqua
Minerale Tropicana Juice, Lipton Iced Tea rd Pepsi Yedigun
  Net Revenues
 Fiscal Year EndedDecember 31, 2005 vs.December 25, 2004World-
    
    
    
    
    
    Outsidewide
    
    U.S.
    
    the U.S.Volume impact
    
    
    3
    %
    
    
    2
    %
    
    
    5
    %Net price per case impact (rate/mix)
    
    
    3
    %
    
    
    3
    %
    
    
    2
    %Acquisitions
    
    
    1
    %
    
    
    1
    %
    
    
    1
    %Currency translation
    
    
    1
    %
    
    
    0
    %
    
    
    4
    %Impact of 53rd week
    
    
    1
    %
    
    
    2
    %
    
    
    0
    %Total Net Revenues Change
    
    
    9
    %
    
    
    8
    %
    
    
    12
    %
 rd
 rd
  28




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Cost of Sales
 Fiscal Year EndedDecember 31, 2005 vs.December 25, 2004World-
    
    
    
    
    
    Outsidewide
    
    U.S.
    
    the U.S.Volume impact
    
    
    4
    %
    
    
    2
    %
    
    
    5
    %Cost per case impact
    
    
    4
    %
    
    
    4
    %
    
    
    4
    %Acquisitions
    
    
    1
    %
    
    
    1
    %
    
    
    1
    %Currency translation
    
    
    1
    %
    
    
    0
    %
    
    
    4
    %Impact of 53rd week
    
    
    1
    %
    
    
    2
    %
    
    
    0
    %Total Cost of Sales Change
    
    
    11
    %
    
    
    9
    %
    
    
    14
    %
 rd
 rd
  Selling, Delivery and Administrative Expenses
 Fiscal Year EndedDecember 31, 2005 vs.December 25, 2004World-
    
    
    
    
    
    Outsidewide
    
    U.S.
    
    the U.S.Cost impact
    
    
    5
    %
    
    
    5
    %
    
    
    5
    %HFCS Settlement
    
    
    (1
    )%
    
    
    (1
    )%
    
    
    0
    %Strategic Spending Initiatives
    
    
    1
    %
    
    
    1
    %
    
    
    1
    %Acquisitions
    
    
    1
    %
    
    
    1
    %
    
    
    1
    %Currency translation
    
    
    1
    %
    
    
    0
    %
    
    
    4
    %Impact of 53rd week
    
    
    1
    %
    
    
    1
    %
    
    
    0
    %Total SD&A Change
    
    
    8
    %
    
    
    7
    %
    
    
    11
    %
 rd rd
 29




---



##### Table of Contents



rd
 Squirt
 Interest Expense
  Interest Income
  Income Tax Expense
  RESULTS
OF OPERATIONS  2004
 Volume
 52 Weeks EndedDecember 25, 2004 vs.December 27, 2003World-
    
    
    
    
    
    Outsidewide
    
    U.S.
    
    the U.S.Base volume
    
    
    2
    %
    
    
    2
    %
    
    
    3
    %Acquisitions
    
    
    1
    %
    
    
    0
    %
    
    
    1
    %Total Volume Change
    
    
    3
    %
    
    
    2
    %
    
    
    4
    %
  30




---



##### Table of Contents



Pepsi Pepsi Pepsi Twist Tropicana Juice Drinks Aquafina
 Tropicana Juice Lipton Iced Tea Pepsi Aquafina
  Net Revenues
 52 Weeks EndedDecember 25, 2004 vs.December 27, 2003World-
    
    
    
    
    
    Outsidewide
    
    U.S.
    
    the U.S.Volume impact
    
    
    2
    %
    
    
    2
    %
    
    
    3
    %Net price per case impact (rate/mix)
    
    
    3
    %
    
    
    3
    %
    
    
    1
    %Acquisitions
    
    
    0
    %
    
    
    0
    %
    
    
    1
    %Currency translation
    
    
    1
    %
    
    
    0
    %
    
    
    3
    %Total Net Revenues Change
    
    
    6
    %
    
    
    5
    %
    
    
    8
    %
    Cost of Sales
 52 Weeks EndedDecember 25, 2004 vs.December 27, 2003World-
    
    
    
    
    
    Outsidewide
    
    U.S.
    
    the U.S.Volume impact
    
    
    2
    %
    
    
    2
    %
    
    
    3
    %Cost per case impact
    
    
    5
    %
    
    
    5
    %
    
    
    4
    %Acquisitions
    
    
    0
    %
    
    
    0
    %
    
    
    1
    %Currency translation
    
    
    1
    %
    
    
    0
    %
    
    
    3
    %Total Cost of Sales Change
    
    
    8
    %
    
    
    7
    %
    
    
    11
    %
 31




---



##### Table of Contents



Selling, Delivery and Administrative Expenses
 52 Weeks EndedDecember 25, 2004 vs.December 27, 2003World-
    
    
    
    
    
    Outsidewide
    
    U.S.
    
    the U.S.Cost impact
    
    
    4
    %
    
    
    4
    %
    
    
    3
    %Acquisitions
    
    
    0
    %
    
    
    0
    %
    
    
    1
    %Currency translation
    
    
    1
    %
    
    
    0
    %
    
    
    2
    %Total SD&A Change
    
    
    5
    %
    
    
    4
    %
    
    
    6
    %
   Squirt
 Interest Expense
  Interest Income
  Income Tax Expense
  32




---



##### Table of Contents




    
    Mexico tax rate change  In December 2004, legislation was enacted changing the Mexican
statutory income tax rate. This rate change decreased our net deferred tax liabilities and
resulted in a $26 million tax benefit in the fourth quarter.
    
    Tax reserves  During 2004, we adjusted previously established liabilities for tax
exposures due largely to the settlement of certain international tax audits. The
adjustment of these liabilities resulted in an $18 million tax benefit for the year.
 LIQUIDITY AND FINANCIAL CONDITION
 Cash Flows
 Fiscal 2005 Compared with Fiscal 2004
    Fiscal 2004 Compared with Fiscal 2003
    Liquidity and Capital Resources
    33




---



##### Table of Contents



.
  Contractual Obligations
  Payments Due by PeriodLess than 1
    
    
    
    
    
    
    
    
    
    
    More thanContractual Obligations
    
    Total
    
    
    year
    
    
    1-3 years
    
    
    3-5 years
    
    
    5 yearsLong-term debt obligations (1)
    
    $
    3,552
    
    
    $
    592
    
    
    $
    10
    
    
    $
    1,300
    
    
    $
    1,650Capital lease obligations (2)
    
    
    5
    
    
    
    1
    
    
    
    1
    
    
    
    
    
    
    
    3Operating leases (2)
    
    
    230
    
    
    
    50
    
    
    
    73
    
    
    
    43
    
    
    
    64Interest obligations (3)
    
    
    876
    
    
    
    175
    
    
    
    310
    
    
    
    192
    
    
    
    199Purchase obligations:Raw material obligations (4)
    
    
    212
    
    
    
    84
    
    
    
    120
    
    
    
    8
    
    
    
    Capital expenditure
obligations (5)
    
    
    58
    
    
    
    58
    
    
    
    
    
    
    
    
    
    
    
    Other obligations (6)
    
    
    362
    
    
    
    171
    
    
    
    100
    
    
    
    37
    
    
    
    54Other long-term liabilities (7)
    
    
    20
    
    
    
    6
    
    
    
    8
    
    
    
    3
    
    
    
    3Total
    
    $
    5,315
    
    
    $
    1,137
    
    
    $
    622
    
    
    $
    1,583
    
    
    $
    1,973
 
 (1)
    
    See Note 9 in Notes to Consolidated Financial Statements for additional information relating
to our long-term debt obligations.(2)
    
    See Note 10 in Notes to Consolidated Financial Statements for additional information relating
to our lease obligations.(3)
    
    Represents interest payment obligations related to our long-term fixed-rate debt as specified
in the applicable debt agreements. Additionally, a portion of our long-term debt has
variable interest rates due to either existing swap agreements or interest arrangements. We
estimated our variable interest payment obligations by using the interest rate forward curve.(4)
    
    Represents obligations to purchase raw materials pursuant to contracts entered into by
PepsiCo on our behalf and international agreements to purchase raw materials.(5)
    
    Represents commitments to suppliers under capital expenditure related contracts or purchase
orders.(6)
    
    Represents non-cancelable agreements that specify fixed or minimum quantities, price
arrangements and timing of payments. Also includes agreements that provide for termination
penalty clauses.(7)
    
    Primarily relates to contractual obligations associated with non-compete contracts that
resulted from business acquisitions. The table excludes other long-term liabilities included
in our Consolidated Financial Statements, such as pension, postretirement and other
non-contractual obligations. See Note 12 in Notes to Consolidated Financial Statements for a
discussion of our future pension and postretirement contributions and corresponding expected
benefit payments for years 2006 through 2015. Off-Balance Sheet Arrangements
   34




---



##### Table of Contents



Capital Expenditures
  Acquisitions
 .
   
    
    Gaseosas, S.A. de C.V. of Mexicali, Mexico in March
    
    Seltzer and Rydholm, Inc. of Auburn, Maine in October
    
    Phil Gaudreault et Fils Ltee of Quebec, Canada in November
    
    Bebidas Purificada, S.A. de C.V. of Juarez, Mexico in November
  SoBe
  MARKET RISKS AND CAUTIONARY STATEMENTS
 Quantitative and Qualitative Disclosures about Market Risk
    35




---



##### Table of Contents



Commodity Price Risk
  Interest Rate Risk
   Foreign Currency Exchange Rate Risk
      Unfunded Deferred Compensation Liability
  36




---



##### Table of Contents



Cautionary Statements
  
    
    changes in our relationship with PepsiCo that could have a material adverse effect on our long-term and short-term
business and financial results;
    
    material changes in expected levels of bottler incentive payments from PepsiCo;
    
    restrictions imposed by PepsiCo on our raw material suppliers that could increase our costs;
    
    material changes from expectations in the cost or availability of raw materials, ingredients or packaging materials;
    
    limitations on the availability of water or obtaining water rights;
    
    an inability to achieve cost savings;
    
    material changes in capital investment for infrastructure and an inability to achieve the expected timing for returns
on cold-drink equipment and related infrastructure expenditures;
    
    decreased demand for our product resulting from changes in consumers preferences;
    
    an inability to achieve volume growth through product and packaging initiatives;
    
    impact of competitive activities on our business;
    
    impact of customer consolidations on our business;
    
    changes in product category consumption;
    
    unfavorable weather conditions in our markets;
    
    an inability to meet projections for performance in newly acquired territories;
    
    loss of business from a significant customer;
    
    failure or inability to comply with laws and regulations;
    
    changes in laws, regulations and industry guidelines governing the manufacture and sale of food and beverages,
including restrictions on the sale of carbonated soft drinks in schools;
    
    litigation, other claims and negative publicity relating to alleged unhealthy properties of soft drinks;
    
    changes in laws and regulations governing the environment, transportation, employee safety, labor and government
contracts;
    
    changes in accounting standards and taxation requirements (including unfavorable outcomes from audits performed by
various tax authorities);
    
    unforeseen economic and political changes;
    
    possible recalls of our products;
    
    interruptions of operations due to labor disagreements;
    
    changes in our debt ratings;
    
    material changes in expected interest and currency exchange rates and unfavorable market performance of PBGs pension
plan assets; and
    
    an inability to achieve strategic business plan targets that could result in an intangible asset impairment charge.
 37




---



##### Table of Contents



Bottling Group, LLC
Consolidated Statements of Operations
 Fiscal years ended December 31, 2005, December 25, 2004 and December 27, 2003
 2005
    
    
    2004
    
    
    2003Net Revenues
    
    $
    11,885
    
    
    $
    10,906
    
    
    $
    10,265Cost of sales
    
    
    6,253
    
    
    
    5,656
    
    
    
    5,215Gross Profit
    
    
    5,632
    
    
    
    5,250
    
    
    
    5,050Selling, delivery and administrative expenses
    
    
    4,625
    
    
    
    4,285
    
    
    
    4,089Operating Income
    
    
    1,007
    
    
    
    965
    
    
    
    961Interest expense
    
    
    187
    
    
    
    166
    
    
    
    177Interest income
    
    
    77
    
    
    
    34
    
    
    
    34Other non-operating expenses, net
    
    
    1
    
    
    
    1
    
    
    
    7Minority interest
    
    
    1
    
    
    
    
    
    
    
    Income Before Income Taxes
    
    
    895
    
    
    
    832
    
    
    
    811Income tax expense
    
    
    24
    
    
    
    3
    
    
    
    84Income Before Cumulative Effect of Change in Accounting
Principle
    
    
    871
    
    
    
    829
    
    
    
    727Cumulative effect of change in accounting principle, net of tax
    
    
    
    
    
    
    
    
    
    
    6Net Income
    
    $
    871
    
    
    $
    829
    
    
    $
    721
  38




---



##### Table of Contents



Bottling Group, LLC  Consolidated Statements of Cash Flows
  Fiscal years ended December 31, 2005, December 25, 2004, and December 27, 2003
 2005
    
    
    2004
    
    
    2003Cash FlowsOperationsNet income
    
    $
    871
    
    
    $
    829
    
    
    $
    721Adjustments to reconcile net income to net cash provided by operations:Depreciation
    
    
    615
    
    
    
    580
    
    
    
    556Amortization
    
    
    15
    
    
    
    13
    
    
    
    12Deferred income taxes
    
    
    (28
    )
    
    
    (52
    )
    
    
    63Cumulative effect of change in accounting principle
    
    
    
    
    
    
    
    
    
    
    6Other non-cash charges and credits:Defined benefit pension and postretirement expenses
    
    
    109
    
    
    
    88
    
    
    
    77Other non-cash charges and credits
    
    
    83
    
    
    
    62
    
    
    
    78Net other non-cash charges and credits
    
    
    192
    
    
    
    150
    
    
    
    155Changes in operating working capital, excluding effects of acquisitions:Accounts receivable, net
    
    
    7
    
    
    
    (53
    )
    
    
    (23
    )Inventories
    
    
    (29
    )
    
    
    (38
    )
    
    
    4Prepaid expenses and other current assets
    
    
    (40
    )
    
    
    (22
    )
    
    
    6Accounts payable and other current liabilities
    
    
    2
    
    
    
    97
    
    
    
    (82
    )Income taxes payable
    
    
    8
    
    
    
    (7
    )
    
    
    (17
    )Net change in operating working capital
    
    
    (52
    )
    
    
    (23
    )
    
    
    (112
    )Pension contributions
    
    
    (77
    )
    
    
    (83
    )
    
    
    (162
    )Other, net
    
    
    (65
    )
    
    
    (42
    )
    
    
    (45
    )Net Cash Provided by Operations
    
    
    1,471
    
    
    
    1,372
    
    
    
    1,194Cash FlowsInvestmentsCapital expenditures
    
    
    (709
    )
    
    
    (688
    )
    
    
    (635
    )Acquisitions of bottlers, net of cash acquired
    
    
    (1
    )
    
    
    (96
    )
    
    
    (100
    )Proceeds from sale of property, plant and equipment
    
    
    20
    
    
    
    22
    
    
    
    10Notes receivable from PBG, Inc., net
    
    
    (436
    )
    
    
    (442
    )
    
    
    (552
    )Other investing activities, net
    
    
    4
    
    
    
    
    
    
    
    Net Cash Used for Investments
    
    
    (1,122
    )
    
    
    (1,204
    )
    
    
    (1,277
    )Cash FlowsFinancingShort-term borrowings, netthree months or less
    
    
    (3
    )
    
    
    26
    
    
    
    8Proceeds from issuances of long-term debt
    
    
    36
    
    
    
    22
    
    
    
    1,141Payments of long-term debt
    
    
    (35
    )
    
    
    (1,013
    )
    
    
    (27
    )Distributions to owners
    
    
    (181
    )
    
    
    (185
    )
    
    
    (97
    )Net Cash (Used for) Provided by Financing
    
    
    (183
    )
    
    
    (1,150
    )
    
    
    1,025Effect of Exchange Rate Changes on Cash and Cash Equivalents
    
    
    3
    
    
    
    5
    
    
    
    10Net Increase (Decrease) in Cash and Cash Equivalents
    
    
    169
    
    
    
    (977
    )
    
    
    952Cash and Cash EquivalentsBeginning of Year
    
    
    177
    
    
    
    1,154
    
    
    
    202Cash and Cash EquivalentsEnd of Year
    
    $
    346
    
    
    $
    177
    
    
    $
    1,154Supplemental Cash Flow InformationNon-Cash Investing and Financing Activities:Liabilities incurred and/or assumed in conjunction with acquisitions of
bottlers
    
    $
    
    
    
    $
    20
    
    
    $
    146Change in accounts payable related to
capital expenditures
    
    $
    (6
    )
    
    $
    29
    
    
    $
    10
  39




---



##### Table of Contents



Bottling Group, LLC  Consolidated Balance Sheets
  December 31, 2005 and December 25, 2004
 2005
    
    
    2004ASSETSCurrent AssetsCash and cash equivalents
    
    $
    346
    
    
    $
    177Accounts receivable, less allowance of $51 in 2005 and $61 in 2004
    
    
    1,186
    
    
    
    1,204Inventories
    
    
    458
    
    
    
    427Prepaid expenses and other current assets
    
    
    274
    
    
    
    223Total Current Assets
    
    
    2,264
    
    
    
    2,031Property, plant and equipment, net
    
    
    3,643
    
    
    
    3,581Other intangible assets, net
    
    
    3,814
    
    
    
    3,639Goodwill
    
    
    1,516
    
    
    
    1,416Notes receivable from PBG
    
    
    2,384
    
    
    
    1,948Other assets
    
    
    124
    
    
    
    109Total Assets
    
    $
    13,745
    
    
    $
    12,724LIABILITIES AND OWNERS EQUITYCurrent LiabilitiesAccounts payable and other current liabilities
    
    $
    1,456
    
    
    $
    1,423Short-term borrowings
    
    
    71
    
    
    
    77Current maturities of long-term debt
    
    
    588
    
    
    
    52Total Current Liabilities
    
    
    2,115
    
    
    
    1,552Long-term debt
    
    
    2,943
    
    
    
    3,495Other liabilities
    
    
    681
    
    
    
    618Deferred income taxes
    
    
    422
    
    
    
    436Minority interest
    
    
    3
    
    
    
    3Total Liabilities
    
    
    6,164
    
    
    
    6,104Owners EquityOwners net investment
    
    
    7,990
    
    
    
    7,068Accumulated other comprehensive loss
    
    
    (395
    )
    
    
    (447
    )Deferred compensation
    
    
    (14
    )
    
    
    (1
    )Total Owners Equity
    
    
    7,581
    
    
    
    6,620Total Liabilities and Owners Equity
    
    $
    13,745
    
    
    $
    12,724
  40




---



##### Table of Contents



Bottling Group, LLC
Consolidated Statements of Changes in Owners Equity   Fiscal years ended December 31, 2005, December 25, 2004 and December 27, 2003
 AccumulatedOwners
    
    
    
    
    
    
    OtherNet
    
    
    Deferred
    
    
    Comprehensive
    
    
    
    
    
    
    ComprehensiveInvestment
    
    
    Compensation
    
    
    Loss
    
    
    Total
    
    
    IncomeBalance at December 28, 2002
    
    $
    5,782
    
    
    $
    
    
    
    $
    (596
    )
    
    $
    5,186Comprehensive income:Net income
    
    
    721
    
    
    
    
    
    
    
    
    
    
    
    721
    
    
    $
    721Currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    96
    
    
    
    96
    
    
    
    96Minimum pension liability adjustment
    
    
    
    
    
    
    
    
    
    
    (34
    )
    
    
    (34
    )
    
    
    (34
    )Cash flow hedge adjustment
    
    
    
    
    
    
    
    
    
    
    31
    
    
    
    31
    
    
    
    31Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    814Cash distributions to owners
    
    
    (97
    )
    
    
    
    
    
    
    
    
    
    
    (97
    )Non-cash distributions to owners
    
    
    (4
    )
    
    
    
    
    
    
    
    
    
    
    (4
    )Stock compensation
    
    
    7
    
    
    
    (4
    )
    
    
    
    
    
    
    3Balance at December 27, 2003
    
    
    6,409
    
    
    
    (4
    )
    
    
    (503
    )
    
    
    5,902Comprehensive income:Net income
    
    
    829
    
    
    
    
    
    
    
    
    
    
    
    829
    
    
    $
    829Currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    91
    
    
    
    91
    
    
    
    91Minimum pension liability adjustment
    
    
    
    
    
    
    
    
    
    
    (29
    )
    
    
    (29
    )
    
    
    (29
    )Cash flow hedge adjustment
    
    
    
    
    
    
    
    
    
    
    (6
    )
    
    
    (6
    )
    
    
    (6
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    885Cash distributions to owners
    
    
    (185
    )
    
    
    
    
    
    
    
    
    
    
    (185
    )Non-cash contributions from owners
    
    
    17
    
    
    
    
    
    
    
    
    
    
    
    17Stock compensation
    
    
    (2
    )
    
    
    3
    
    
    
    
    
    
    
    1Balance at December 25, 2004
    
    
    7,068
    
    
    
    (1
    )
    
    
    (447
    )
    
    
    6,620Comprehensive income:Net income
    
    
    871
    
    
    
    
    
    
    
    
    
    
    
    871
    
    
    $
    871Currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    70
    
    
    
    70
    
    
    
    70Minimum pension liability adjustment
    
    
    
    
    
    
    
    
    
    
    (8
    )
    
    
    (8
    )
    
    
    (8
    )Cash flow hedge adjustment
    
    
    
    
    
    
    
    
    
    
    (10
    )
    
    
    (10
    )
    
    
    (10
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    923Cash distributions to owners
    
    
    (181
    )
    
    
    
    
    
    
    
    
    
    
    (181
    )Non-cash contributions from owners
    
    
    216
    
    
    
    
    
    
    
    
    
    
    
    216Stock compensation
    
    
    16
    
    
    
    (13
    )
    
    
    
    
    
    
    3Balance at December 31, 2005
    
    $
    7,990
    
    
    $
    (14
    )
    
    $
    (395
    )
    
    $
    7,581
  41




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##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Note 1Basis of Presentation
    Note 2Summary of Significant Accounting Policies
 Basis of Consolidation
 Fiscal
Year
 Quarter
    
    U.S. & Canada
    
    Mexico & EuropeFirst Quarter
    
    12 weeks
    
    January and FebruarySecond Quarter
    
    12 weeks
    
    March, April and MayThird Quarter
    
    12 weeks
    
    June, July and AugustFourth Quarter
    
    16 weeks/17 weeks (FY 2005)
    
    September, October, November and December
 Revenue Recognition
  Advertising and Marketing Costs
 42




---



##### Table of Contents



Bottler Incentives
 
    
    Direct marketplace support represents PepsiCos and other brand
owners agreed-upon funding to assist us in offering sales and
promotional discounts to retailers and is generally recorded as an
adjustment to cost of sales. If the direct marketplace support is
a reimbursement for a specific, incremental and identifiable
program, the funding is recorded as an adjustment to net revenues.
 
    
    Advertising support represents agreed-upon funding to assist us
for the cost of media time and promotional materials and is
generally recorded as an adjustment to cost of sales. Advertising
support that represents reimbursement for a specific, incremental
and identifiable media cost, is recorded as a reduction to
advertising and marketing expenses within selling, delivery and
administrative expenses.
  Fiscal Year Ended2005
    
    
    2004
    
    
    2003Net revenues
    
    $
    51
    
    
    $
    22
    
    
    $
    21Cost of sales
    
    
    604
    
    
    
    559
    
    
    
    561Selling, delivery and administrative expenses
    
    
    79
    
    
    
    84
    
    
    
    108Total bottler incentives
    
    $
    734
    
    
    $
    665
    
    
    $
    690
 Shipping and Handling Costs
 Foreign Currency Gains and Losses
 Pension
and Postretirement Medical Benefit Plans 
  43




---



##### Table of Contents



Income
Taxes
 Cash Equivalents
 Allowance for Doubtful Accounts 
 Inventories
 Property, Plant and Equipment
 Goodwill and Other Intangible Assets, net 
    Financial Instruments and Risk Management
 44




---



##### Table of Contents



Stock-Based Employee Compensation
 Fiscal Year Ended2005
    
    
    2004
    
    
    2003Net income:As reported
    
    $
    871
    
    
    $
    829
    
    
    $
    721Add: Total stock-based employee compensation expense
included in reported net income
    
    
    1
    
    
    
    
    
    
    
    4Less: Total stock-based employee compensation
expense determined
under fair value-based method for all awards
    
    
    (64
    )
    
    
    (65
    )
    
    
    (74
    )Pro forma
    
    $
    808
    
    
    $
    764
    
    
    $
    651
   2005
    
    2004
    
    2003Risk-free interest rate
    
    
    4.1
    %
    
    
    3.2
    %
    
    
    2.9
    %Expected life
    
    5.8 years
    
    6.0 years
    
    6.0 yearsExpected volatility
    
    
    28
    %
    
    
    35
    %
    
    
    37
    %Expected dividend yield
    
    
    1.10
    %
    
    
    0.68
    %
    
    
    0.17
    %
 45




---



##### Table of Contents



SFAS No. 123R
    Commitments and Contingencies 
 New Accounting Standards
 SFAS No. 123R
  FASB Interpretation No. 47
  SFAS No. 151
  46




---



##### Table of Contents



Emerging
Issues Task Force (EITF) Issue No. 02-16
Accounting by a Customer (including a Reseller) for Certain
Consideration Received from a Vendor
   Fiscal Year EndedDecember
    
    December
    
    December31, 2005
    
    25, 2004
    
    27, 2003Net income:As reported
    
    $
    871
    
    
    $
    829
    
    
    $
    721Pro forma
    
    $
    871
    
    
    $
    829
    
    
    $
    727
 Note 3Inventories
 2005
    
    
    2004Raw materials and supplies
    
    $
    173
    
    
    $
    159Finished goods
    
    
    285
    
    
    
    268$
    458
    
    
    $
    427
 Note 4Prepaid Expenses and Other Current Assets
 2005
    
    
    2004Prepaid expenses
    
    $
    226
    
    
    $
    183Other assets
    
    
    48
    
    
    
    40$
    274
    
    
    $
    223
 Note 5Accounts Receivable
 2005
    
    
    2004Trade accounts receivable
    
    $
    1,018
    
    
    $
    1,056Allowance for doubtful accounts
    
    
    (51
    )
    
    
    (61
    )Accounts receivable from PepsiCo
    
    
    143
    
    
    
    150Other receivables
    
    
    76
    
    
    
    59$
    1,186
    
    
    $
    1,204
 Note 6Property, Plant and Equipment, net
 2005
    
    
    2004Land
    
    $
    277
    
    
    $
    257Buildings and improvements
    
    
    1,299
    
    
    
    1,263Manufacturing and distribution equipment
    
    
    3,425
    
    
    
    3,289Marketing equipment
    
    
    2,334
    
    
    
    2,237Other
    
    
    171
    
    
    
    1777,506
    
    
    
    7,223Accumulated depreciation
    
    
    (3,863
    )
    
    
    (3,642
    )$
    3,643
    
    
    $
    3,581
 47




---



##### Table of Contents



Buildings and improvements
    20-33 yearsManufacturing and distribution equipment
    2-15 yearsMarketing equipment
    3-7 years
 Note 7
 Other Intangible Assets, net and Goodwill
 2005
    
    
    2004Intangibles subject to amortization:Gross carrying amount:Customer relationships and lists
    
    $
    53
    
    
    $
    46Franchise/distribution rights
    
    
    46
    
    
    
    44Other identified intangibles
    
    
    39
    
    
    
    30138
    
    
    
    120Accumulated amortization:Customer relationships and lists
    
    
    (9
    )
    
    
    (6
    )Franchise/distribution rights
    
    
    (22
    )
    
    
    (15
    )Other identified intangibles
    
    
    (18
    )
    
    
    (16
    )(49
    )
    
    
    (37
    )Intangibles subject to amortization, net
    
    
    89
    
    
    
    83Intangibles not subject to amortization:Carrying amount:Franchise rights
    
    
    3,093
    
    
    
    2,958Distribution rights
    
    
    302
    
    
    
    288Trademarks
    
    
    218
    
    
    
    208Other identified intangibles
    
    
    112
    
    
    
    102Intangibles not subject to amortization
    
    
    3,725
    
    
    
    3,556Total other intangible assets, net
    
    $
    3,814
    
    
    $
    3,639Goodwill
    
    $
    1,516
    
    
    $
    1,416
 48




---



##### Table of Contents



OtherIntangibleGoodwill
    
    
    Assets, net
    
    
    TotalBalance at December 25,
2004
    
    $
    1,416
    
    
    $
    3,639
    
    
    $
    5,055Purchase price allocations
relating to recent
acquisitions
    
    
    72
    
    
    
    127
    
    
    
    199Impact of foreign currency
translation
    
    
    28
    
    
    
    49
    
    
    
    77Increase in pension
asset
    
    
    
    
    
    
    14
    
    
    
    14Amortization of intangible
assets
    
    
    
    
    
    
    (15
    )
    
    
    (15
    )Balance at December 31,
2005
    
    $
    1,516
    
    
    $
    3,814
    
    
    $
    5,330
  OtherIntangibleGoodwill
    
    
    Assets, net
    
    
    TotalBalance at December 27,
2003
    
    $
    1,386
    
    
    $
    3,562
    
    
    $
    4,948Purchase price allocations
relating to recent
acquisitions
    
    
    9
    
    
    
    65
    
    
    
    74Impact of foreign currency
translation
    
    
    21
    
    
    
    31
    
    
    
    52Intangible asset impairment
charge
    
    
    
    
    
    
    (9
    )
    
    
    (9
    )Increase in pension
asset
    
    
    
    
    
    
    3
    
    
    
    3Amortization of intangible
assets
    
    
    
    
    
    
    (13
    )
    
    
    (13
    )Balance at December 25,
2004
    
    $
    1,416
    
    
    $
    3,639
    
    
    $
    5,055
 Squirt Squirt Squirt Squirt Squirt Squirt Squirt Squirt
 Squirt
 49




---



##### Table of Contents



Squirt Squirt
  Weighted-
    
    
    Estimated Aggregate Amortization Expense to be IncurredAverageAmortization
    
    
    Fiscal Year EndingPeriod
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010Customer relationships and
lists
    
    18 years
    
    $
    3
    
    
    $
    3
    
    
    $
    3
    
    
    $
    3
    
    
    $
    3Franchise/distribution rights
    
    7  years
    
    $
    5
    
    
    $
    3
    
    
    $
    2
    
    
    $
    2
    
    
    $
    2Other identified intangibles
    
    8  years
    
    $
    5
    
    
    $
    4
    
    
    $
    3
    
    
    $
    2
    
    
    $
    1
 Note 8Accounts Payable and Other Current Liabilities
 2005
    
    
    2004Accounts payable
    
    $
    501
    
    
    $
    493Trade incentives
    
    
    185
    
    
    
    201Accrued compensation and benefits
    
    
    211
    
    
    
    222Other accrued taxes
    
    
    123
    
    
    
    117Accrued interest
    
    
    42
    
    
    
    38Accounts payable to PepsiCo
    
    
    176
    
    
    
    144Other current liabilities
    
    
    218
    
    
    
    208$
    1,456
    
    
    $
    1,423
 50




---



##### Table of Contents



Note 9Short-term Borrowings and Long-term Debt
 2005
    
    
    2004Short-term borrowingsCurrent maturities of long-term debt
    
    $
    593
    
    
    $
    52SFAS No. 133 adjustment (1)
    
    
    (4
    )
    
    
    Unamortized discount, net
    
    
    (1
    )
    
    
    Current maturities of long-term debt, net
    
    
    588
    
    
    
    52Other short-term borrowings
    
    
    71
    
    
    
    77$
    659
    
    
    $
    129Long-term debt2.45% (3.28% effective rate) (2) senior notes due 2006
    
    $
    500
    
    
    $
    5005.63% (5.68% effective rate) (2) senior notes due 2009
    
    
    1,300
    
    
    
    1,3004.63% (4.57% effective rate) senior notes due 2012
    
    
    1,000
    
    
    
    1,0005.00% (5.15% effective rate) senior notes due 2013
    
    
    400
    
    
    
    4004.13% (4.35% effective rate) senior notes due 2015
    
    
    250
    
    
    
    250Other (average rate 4.29%)
    
    
    107
    
    
    
    1073,557
    
    
    
    3,557SFAS No. 133 adjustment (1)
    
    
    (19
    )
    
    
    (4
    )Unamortized discount, net
    
    
    (7
    )
    
    
    (6
    )Current maturities of long-term debt, net
    
    
    (588
    )
    
    
    (52
    )$
    2,943
    
    
    $
    3,495
 
 (1)
    
    In accordance with the requirements of SFAS No. 133, the portion of our
fixed-rate debt obligations that is hedged is reflected in our Consolidated Balance Sheets as an
amount equal to the sum of the debts carrying value plus a SFAS No. 133 fair value adjustment
representing changes recorded in the fair value of the hedged debt obligations attributable to
movements in market interest rates.(2)
    
    Effective interest rates include the impact of the gain/loss realized on swap
instruments and represent the rates that were achieved in 2005.     .
  51




---



##### Table of Contents



Note 10Leases
    LeasesFuture Minimum Rental Payments
    
    Capital
    
    
    Operating2006
    
    $
    1
    
    
    $
    502007
    
    
    1
    
    
    
    422008
    
    
    
    
    
    
    312009
    
    
    
    
    
    
    242010
    
    
    
    
    
    
    19Thereafter
    
    
    3
    
    
    
    64Total
    
    $
    5
    
    
    $
    230
  Rental Expense
    
    2005
    
    
    2004
    
    
    2003Minimum rentals
    
    $
    90
    
    
    $
    77
    
    
    $
    71Sublease rental income
    
    
    (2
    )
    
    
    (2
    )
    
    
    (2
    )Total
    
    $
    88
    
    
    $
    75
    
    
    $
    69
 Note 11Financial Instruments and Risk Management
 Cash Flow Hedges 
  52




---



##### Table of Contents



BeforeYear ended December 31, 2005
    
    TaxesAccumulated net gains as of December 25, 2004
    
    $
    17Net changes in the fair value of cash flow hedges
    
    
    5Net gains reclassified from AOCL into earnings
    
    
    (17
    )Accumulated net gains as of December 31, 2005
    
    $
    5
 BeforeYear ended December 25, 2004
    
    TaxesAccumulated net gains as of December 27, 2003
    
    $
    23Net changes in the fair value of cash flow hedges
    
    
    29Net gains reclassified from AOCL into earnings
    
    
    (35
    )Accumulated net gains as of December 25, 2004
    
    $
    17
  Fair
Value Hedges
 Unfunded
Deferred Compensation Liability
 53




---



##### Table of Contents



Other
Financial Assets and Liabilities
  Note 12Pension and Postretirement Medical Benefit Plans
 Pension Benefits
   54




---



##### Table of Contents



PensionComponents of U.S. pension expense:
    
    2005
    
    
    2004
    
    
    2003Service cost
    
    $
    46
    
    
    $
    43
    
    
    $
    37Interest cost
    
    
    75
    
    
    
    69
    
    
    
    63Expected return on plan assets  (income)
    
    
    (90
    )
    
    
    (83
    )
    
    
    (67
    )Amortization of prior service amendments
    
    
    7
    
    
    
    7
    
    
    
    6Amortization of net loss
    
    
    30
    
    
    
    25
    
    
    
    13Special termination benefits
    
    
    9
    
    
    
    
    
    
    
    Net pension expense for the defined benefit plans
    
    $
    77
    
    
    $
    61
    
    
    $
    52Defined contribution plans expense
    
    $
    20
    
    
    $
    19
    
    
    $
    19Total pension expense recognized in the
Consolidated Statements of Operations
    
    $
    97
    
    
    $
    80
    
    
    $
    71
 Postretirement Medical Benefits
  PostretirementComponents of U.S. postretirement benefits expense:
    
    2005
    
    
    2004
    
    
    2003Service cost
    
    $
    3
    
    
    $
    4
    
    
    $
    3Interest cost
    
    
    22
    
    
    
    18
    
    
    
    19Amortization of net loss
    
    
    8
    
    
    
    6
    
    
    
    5Amortization of prior service amendments
    
    
    (1
    )
    
    
    (1
    )
    
    
    (2
    )Net postretirement benefits expense recognized
in the Consolidated Statements of Operations
    
    $
    32
    
    
    $
    27
    
    
    $
    25
 Changes in the Projected Benefit Obligations
 Pension
    
    
    Postretirement2005
    
    
    2004
    
    
    2005
    
    
    2004Obligation at beginning of year
    
    $
    1,252
    
    
    $
    1,129
    
    
    $
    379
    
    
    $
    312Service cost
    
    
    46
    
    
    
    43
    
    
    
    3
    
    
    
    4Interest cost
    
    
    75
    
    
    
    69
    
    
    
    22
    
    
    
    18Plan amendments
    
    
    21
    
    
    
    11
    
    
    
    8
    
    
    
    Actuarial (gain)/loss
    
    
    91
    
    
    
    48
    
    
    
    (1
    )
    
    
    19Benefit payments
    
    
    (54
    )
    
    
    (46
    )
    
    
    (27
    )
    
    
    (22
    )Special termination benefits
    
    
    9
    
    
    
    
    
    
    
    
    
    
    
    LTD medical merger
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    62Gain due to Medicare subsidy
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14
    )Transfers
    
    
    (1
    )
    
    
    (2
    )
    
    
    
    
    
    
    Obligation at end of year
    
    $
    1,439
    
    
    $
    1,252
    
    
    $
    384
    
    
    $
    379
 55




---



##### Table of Contents



Changes in the Fair Value of Assets
 Pension
    
    
    Postretirement2005
    
    
    2004
    
    
    2005
    
    
    2004Fair value at beginning of year
    
    $
    1,025
    
    
    $
    809
    
    
    $
    
    
    
    $
    Actual return on plan assets
    
    
    135
    
    
    
    101
    
    
    
    
    
    
    
    Transfers
    
    
    (1
    )
    
    
    (2
    )
    
    
    
    
    
    
    Employer contributions
    
    
    44
    
    
    
    163
    
    
    
    27
    
    
    
    22Benefit payments
    
    
    (54
    )
    
    
    (46
    )
    
    
    (27
    )
    
    
    (22
    )Fair value at end of year
    
    $
    1,149
    
    
    $
    1,025
    
    
    $
    
    
    
    $
    
 Additional Plan Information
 Pension
    
    
    Postretirement2005
    
    
    2004
    
    
    2005
    
    
    2004Projected benefit obligation
    
    $
    1,439
    
    
    $
    1,252
    
    
    $
    384
    
    
    $
    379Accumulated benefit obligation
    
    $
    1,330
    
    
    $
    1,150
    
    
    $
    384
    
    
    $
    379Fair value of plan assets (1)
    
    $
    1,190
    
    
    $
    1,033
    
    
    $
    
    
    
    $
    
 
 (1)
    
    Includes fourth quarter employer contributions.  Funded Status Recognized on the Consolidated Balance Sheets
 Pension
    
    
    Postretirement2005
    
    
    2004
    
    
    2005
    
    
    2004Funded status at end of year
    
    $
    (290
    )
    
    $
    (227
    )
    
    $
    (384
    )
    
    $
    (379
    )Unrecognized prior service cost
    
    
    64
    
    
    
    50
    
    
    
    2
    
    
    
    (6
    )Unrecognized loss
    
    
    474
    
    
    
    458
    
    
    
    137
    
    
    
    145Fourth quarter employer contribution
    
    
    41
    
    
    
    8
    
    
    
    6
    
    
    
    8Net amounts recognized
    
    $
    289
    
    
    $
    289
    
    
    $
    (239
    )
    
    $
    (232
    )
 Net Amounts Recognized in the Consolidated Balance Sheets
 Pension
    
    
    Postretirement2005
    
    
    2004
    
    
    2005
    
    
    2004Other liabilities
    
    $
    (158
    )
    
    $
    (136
    )
    
    $
    (239
    )
    
    $
    (232
    )Intangible assets
    
    
    64
    
    
    
    50
    
    
    
    
    
    
    
    Accumulated other comprehensive loss
    
    
    383
    
    
    
    375
    
    
    
    
    
    
    
    Net amounts recognized
    
    $
    289
    
    
    $
    289
    
    
    $
    (239
    )
    
    $
    (232
    )Increase in minimum liability
included in accumulated other
comprehensive loss in Owners
Equity
    
    $
    8
    
    
    $
    29
    
    
    $
    
    
    
    $
    
  56




---



##### Table of Contents



Assumptions
  Pension
    
    
    Postretirement2005
    
    
    2004
    
    
    2003
    
    
    2005
    
    
    2004
    
    
    2003Discount rate
    
    
    6.15
    %
    
    
    6.25
    %
    
    
    6.75
    %
    
    
    6.15
    %
    
    
    6.25
    %
    
    
    6.75
    %Expected return on plan assets (1)
    
    
    8.50
    %
    
    
    8.50
    %
    
    
    8.50
    %
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/ARate of compensation increase
    
    
    3.60
    %
    
    
    4.20
    %
    
    
    4.34
    %
    
    
    3.60
    %
    
    
    4.20
    %
    
    
    4.34
    %
 
 (1)
    
    Expected return on plan assets is presented after administration expenses.  Pension
    
    
    Postretirement2005
    
    
    2004
    
    
    2005
    
    
    2004Discount rate
    
    
    5.80
    %
    
    
    6.15
    %
    
    
    5.55
    %
    
    
    6.15
    %Rate of compensation increase
    
    
    3.53
    %
    
    
    3.60
    %
    
    
    3.53
    %
    
    
    3.60
    %
  Funding and Plan Assets
 Asset
Category
    
    Allocation PercentageTarget
    
    
    Actual
    
    
    Actual2006
    
    
    2005
    
    
    2004Equity securities
    
    
    75
    %
    
    
    76
    %
    
    
    75
    %Debt securities
    
    
    25
    %
    
    
    24
    %
    
    
    25
    %
   Health Care Cost Trend Rates
   57




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##### Table of Contents



1%
    
    1%Increase
    
    DecreaseEffect on total fiscal year 2005 service and interest cost components
    
    $
    
    1
    
    $
    
    (1
    )Effect on the fiscal year 2005 accumulated postretirement benefit obligation
    
    $
    
    7
    
    $
    
    (7
    )
     Pension and Postretirement Cash Flow
  Employer Contributions to U.S. Plans
    
    Pension
    
    
    Postretirement2004
    
    $
    81
    
    
    $
    222005
    
    $
    77
    
    
    $
    272006 (expected)
    
    $
    56
    
    
    $
    28
  Expected Benefit Payments
  Pension
    
    PostretirementIncluding
    
    ExcludingMedicare
    
    MedicareExpected Benefit Payments
    
    
    
    
    
    Subsidy
    
    Subsidy2006
    
    $
    55
    
    
    $
    27
    
    
    $
    282007
    
    $
    60
    
    
    $
    26
    
    
    $
    272008
    
    $
    65
    
    
    $
    26
    
    
    $
    282009
    
    $
    69
    
    
    $
    27
    
    
    $
    282010
    
    $
    75
    
    
    $
    27
    
    
    $
    282011 to 2015
    
    $
    483
    
    
    $
    136
    
    
    $
    142
 58




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##### Table of Contents



Note 13Stock-Based Compensation Plans
   Restricted Stock and Restricted Stock Units
    Restricted Stock
    
    Restricted Stock UnitsGranted
    
    Weighted
    
    Outstanding
    
    Granted
    
    Weighted
    
    Outstandingduring the
    
    -Average
    
    at year
    
    during the
    
    -Average
    
    at yearyear
    
    Grant Price
    
    end
    
    year
    
    Grant Price
    
    end2005
    
    
    
    
    
    
    
    
    
    
    352,000
    
    
    
    533,000
    
    
    $
    28.12
    
    
    
    533,0002004
    
    
    45,000
    
    
    $
    24.25
    
    
    
    394,000
    
    
    
    
    
    
    
    
    
    
    
    2003
    
    
    349,000
    
    
    $
    23.48
    
    
    
    349,000
    
    
    
    
    
    
    
    
    
    
    
    
 Stock Options
   Weighted-AverageExerciseOptions in millions
    
    Options
    
    
    PriceOutstanding at beginning of year
    
    
    38.4
    
    
    $
    20.35Granted
    
    
    7.9
    
    
    $
    28.24Exercised
    
    
    (6.8
    )
    
    $
    15.93Forfeited
    
    
    (1.4
    )
    
    $
    26.61Outstanding at end of year
    
    
    38.1
    
    
    $
    22.54Exercisable at end of year
    
    
    22.7
    
    
    $
    19.08Weighted-average fair value of options granted during the year
    
    
    
    
    
    $
    8.68
 59




---



##### Table of Contents



Weighted-AverageExerciseOptions in millions
    
    Options
    
    
    PriceOutstanding at beginning of year
    
    
    41.3
    
    
    $
    17.19Granted
    
    
    7.1
    
    
    $
    29.54Exercised
    
    
    (9.3
    )
    
    $
    12.86Forfeited
    
    
    (0.7
    )
    
    $
    25.38Outstanding at end of year
    
    
    38.4
    
    
    $
    20.35Exercisable at end of year
    
    
    23.4
    
    
    $
    16.43Weighted-average fair value of options granted during the year
    
    
    
    
    
    $
    10.81
  Weighted-AverageExerciseOptions in millions
    
    Options
    
    
    PriceOutstanding at beginning of year
    
    
    37.4
    
    
    $
    15.53Granted
    
    
    8.1
    
    
    $
    23.27Exercised
    
    
    (3.1
    )
    
    $
    11.27Forfeited
    
    
    (1.1
    )
    
    $
    22.44Outstanding at end of year
    
    
    41.3
    
    
    $
    17.19Exercisable at end of year
    
    
    26.9
    
    
    $
    13.93Weighted-average fair value of options granted during the year
    
    
    
    
    
    $
    9.29
  Options Outstanding
    
    
    Options ExercisableOptions in millionsWeighted-Average
    
    
    Weighted-
    
    
    
    
    
    
    Weighted-Remaining
    
    
    Average
    
    
    
    
    
    
    AverageContractual
    
    
    Exercise
    
    
    
    
    
    
    ExerciseRange of Exercise Price
    
    Options
    
    
    Life In Years
    
    
    Price
    
    
    Options
    
    
    Price$9.38-$11.49
    
    
    3.1
    
    
    
    4.25
    
    
    $
    9.39
    
    
    
    3.1
    
    
    $
    9.39$11.50-$15.88
    
    
    4.9
    
    
    
    3.36
    
    
    $
    11.75
    
    
    
    4.9
    
    
    $
    11.75$15.89-$22.50
    
    
    5.9
    
    
    
    5.37
    
    
    $
    20.52
    
    
    
    5.7
    
    
    $
    20.57$22.51-$28.24
    
    
    10.6
    
    
    
    6.90
    
    
    $
    24.38
    
    
    
    7.4
    
    
    $
    24.57$28.25-$30.25
    
    
    13.6
    
    
    
    8.78
    
    
    $
    28.85
    
    
    
    1.6
    
    
    $
    29.5138.1
    
    
    
    6.66
    
    
    $
    22.54
    
    
    
    22.7
    
    
    $
    19.08
 60




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##### Table of Contents



Note 14Income Taxes
   2005
    
    
    2004
    
    
    2003Current:Federal
    
    $
    1
    
    
    $
    17
    
    
    $
    7Foreign
    
    
    26
    
    
    
    35
    
    
    
    12State
    
    
    3
    
    
    
    2
    
    
    
    130
    
    
    
    54
    
    
    
    20Deferred:Federal
    
    
    (12
    )
    
    
    (3
    )
    
    
    25Foreign
    
    
    (19
    )
    
    
    (22
    )
    
    
    26State
    
    
    3
    
    
    
    
    
    
    
    2(28
    )
    
    
    (25
    )
    
    
    532
    
    
    
    29
    
    
    
    73International legal entity/debt restructuring
    
    
    22
    
    
    
    
    
    
    
    Rate change (benefit)/expense
    
    
    
    
    
    
    (26
    )
    
    
    11Cumulative effect of change in accounting
principle
    
    
    
    
    
    
    
    
    
    
    (1
    )$
    24
    
    
    $
    3
    
    
    $
    83
  
    
    Valuation allowances  In the fourth quarter, we reversed valuation allowances resulting
in a $19 million tax benefit. This reversal was due to improved profitability trends in
Russia and a change to the Russia tax law that enables us to use a greater amount of our
Russian net operating losses (NOLs).
    
    International legal entity/debt restructuring  In the fourth quarter, we completed the
reorganization of our international legal entity and debt structure to allow for more
efficient cash mobilization, to reduce taxable foreign exchange risks and to reduce
potential future tax costs. This reorganization resulted in a $22 million tax charge.
  
    
    Mexico tax rate change  In December 2004, legislation was enacted changing the Mexican
statutory income tax rate. This rate change decreased our net deferred tax liabilities and
resulted in a $26 million tax benefit in the fourth quarter.
 61




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##### Table of Contents




    
    Tax reserves  During 2004, we adjusted previously established liabilities for tax
exposures due largely to the settlement of certain international tax audits. The
adjustment of these liabilities resulted in an $18 million tax benefit for the year.
   2005
    
    
    2004
    
    
    2003U.S.
    
    $
    770
    
    
    $
    693
    
    
    $
    684Foreign
    
    
    125
    
    
    
    139
    
    
    
    127Income before income taxes and cumulative
effect of change in accounting
principle
    
    $
    895
    
    
    $
    832
    
    
    $
    811Cumulative effect of change in accounting
principle
    
    
    
    
    
    
    
    
    
    
    (7
    )$
    895
    
    
    $
    832
    
    
    $
    804
  2005
    
    
    2004
    
    
    2003Income taxes computed at the U.S. federal statutory rate
    
    
    35.0
    %
    
    
    35.0
    %
    
    
    35.0
    %Income taxable to owners
    
    
    (27.9
    )
    
    
    (25.4
    )
    
    
    (23.4
    )State income tax, net of federal tax benefit
    
    
    0.7
    
    
    
    0.2
    
    
    
    0.3Impact of foreign results
    
    
    (3.9
    )
    
    
    (8.6
    )
    
    
    (10.1
    )Change in valuation allowances, net
    
    
    (3.9
    )
    
    
    2.9
    
    
    
    4.5Nondeductible expenses
    
    
    1.5
    
    
    
    1.6
    
    
    
    1.5International tax audit settlements, net
    
    
    
    
    
    
    (2.2
    )
    
    
    Other, net
    
    
    (1.2
    )
    
    
    (0.1
    )
    
    
    1.20.3
    
    
    
    3.4
    
    
    
    9.0Rate change (benefit)/expense
    
    
    
    
    
    
    (3.0
    )
    
    
    1.4International legal entity/debt restructuring
reserve
    
    
    2.4
    
    
    
    
    
    
    
    Total effective income tax rate before cumulative effect of
change in accounting principle
    
    
    2.7
    %
    
    
    0.4
    %
    
    
    10.4
    %Total effective income tax rate
    
    
    2.7
    %
    
    
    0.4
    %
    
    
    10.4
    %
 62




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##### Table of Contents



2005
    
    
    2004Intangible assets and property, plant and equipment
    
    $
    447
    
    
    $
    437Other
    
    
    82
    
    
    
    98Gross deferred tax liabilities
    
    
    529
    
    
    
    535NOL carryforwards
    
    
    (276
    )
    
    
    (342
    )Employee benefit obligations
    
    
    (19
    )
    
    
    (12
    )Bad debt
    
    
    (2
    )
    
    
    Various liabilities and other
    
    
    (46
    )
    
    
    (61
    )Gross deferred tax assets
    
    
    (343
    )
    
    
    (415
    )Deferred tax asset valuation allowance
    
    
    222
    
    
    
    305Net deferred tax assets
    
    
    (121
    )
    
    
    (110
    )Net deferred tax liability
    
    $
    408
    
    
    $
    425Consolidated Balance Sheets ClassificationPrepaid expenses and other current assets
    
    $
    (17
    )
    
    $
    (11
    )Other assets
    
    
    (14
    )
    
    
    Accounts payable and other current liabilities
    
    
    17
    
    
    
    Deferred income taxes
    
    
    422
    
    
    
    436$
    408
    
    
    $
    425
       63




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##### Table of Contents



Note 15Geographic Data
  Net Revenues2005
    
    
    2004
    
    
    2003U.S.
    
    $
    8,438
    
    
    $
    7,818
    
    
    $
    7,406Mexico
    
    
    1,177
    
    
    
    1,071
    
    
    
    1,105Other countries
    
    
    2,270
    
    
    
    2,017
    
    
    
    1,754$
    11,885
    
    
    $
    10,906
    
    
    $
    10,265
 Long-Lived Assets2005
    
    
    2004U.S.
    
    $
    8,498
    
    
    $
    7,814Mexico
    
    
    1,478
    
    
    
    1,435Other countries
    
    
    1,505
    
    
    
    1,444$
    11,481
    
    
    $
    10,693
 Note 16Related Party Transactions
   (1)
    
    The master bottling agreement for cola beverages bearing the Pepsi-Cola and
Pepsi trademarks in the United States; master bottling agreements and
distribution agreements for non-cola products in the United States; 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 country in which we operate, including Canada, Spain, Russia, Greece, Turkey and
Mexico, as well as a fountain syrup agreement for Canada, similar to the master syrup
agreement;(3)
    
    A shared services agreement where we obtain various services from PepsiCo, which
includes services for information technology maintenance and the procurement of raw
materials. We also provide services to PepsiCo, including facility and credit and
collection support. The amounts paid or received under this contract are equal to the
actual costs incurred by the company providing the service; 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 ended on or before the date of our initial public offering.
  64




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##### Table of Contents



2005
    
    
    2004
    
    
    2003Net revenues:Bottler incentives (a)
    
    $
    51
    
    
    $
    22
    
    
    $
    21Cost of sales:Purchases of concentrate and finished products,
and Aquafina royalty fees (b)
    
    $
    (2,993
    )
    
    $
    (2,741
    )
    
    $
    (2,527
    )Bottler incentives (a)
    
    
    559
    
    
    
    522
    
    
    
    527Manufacturing and distribution service reimbursements (c)
    
    
    
    
    
    
    
    
    
    
    6$
    (2,434
    )
    
    $
    (2,219
    )
    
    $
    (1,994
    )Selling, delivery and administrative expenses:Bottler incentives (a)
    
    $
    78
    
    
    $
    82
    
    
    $
    98Fountain service fee (d)
    
    
    183
    
    
    
    180
    
    
    
    200Frito-Lay purchases (e)
    
    
    (144
    )
    
    
    (75
    )
    
    
    (51
    )Shared services (f):Shared services expense
    
    
    (69
    )
    
    
    (68
    )
    
    
    (72
    )Shared services revenue
    
    
    8
    
    
    
    10
    
    
    
    10Net shared services
    
    
    (61
    )
    
    
    (58
    )
    
    
    (62
    )HFCS (h)
    
    
    23
    
    
    
    
    
    
    
    $
    79
    
    
    $
    129
    
    
    $
    185Income tax benefit (g)
    
    $
    3
    
    
    $
    10
    
    
    $
    7
 (a) Bottler Incentives and Other Arrangements 
 (b) Purchase of Concentrate and Finished Product 
 (c) Manufacturing
and Distribution Service Reimbursements 
 (d) Fountain
Service Fee
 65




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##### Table of Contents



(e) Frito-Lay Purchases 
 (f) Shared
Services
 (g) Income Tax Benefit
 (h) High Fructose Corn Syrup (HFCS) Settlement 
  SoBe
        66




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##### Table of Contents



Note 17Contingencies
  Note 18Acquisitions
 .
   
    
    Gaseosas, S.A. de C.V. of Mexicali, Mexico in March
    
    Seltzer and Rydholm, Inc. of Auburn, Maine in October
    
    Phil Gaudreault et Fils Ltee of Quebec, Canada in November
    
    Bebidas Purificada, S.A. de C.V. of Juarez, Mexico in November
  SoBe
 67




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##### Table of Contents



Note
19  Accumulated Other Comprehensive Loss
  2005
    
    
    2004
    
    
    2003Net currency translation adjustment
    
    $
    (19
    )
    
    $
    (89
    )
    
    $
    (180
    )Cash flow hedge adjustment (1)
    
    
    7
    
    
    
    17
    
    
    
    23Minimum pension liability adjustment
    
    
    (383
    )
    
    
    (375)
    
    
    
    (346
    )Accumulated other comprehensive loss
    
    $
    (395
    )
    
    $
    (447
    )
    
    $
    (503
    )
 
 (1)
    
    Net of taxes of $2 million in 2005 and $0 million in 2004 and 2003. Note 20Selected Quarterly Financial Data (unaudited)
 First
    
    Second
    
    Third
    
    Fourth2005
    
    Quarter
    
    Quarter
    
    Quarter
    

Quarter
    
    Full YearNet revenues
    
    $
    2,147
    
    
    $
    2,862
    
    
    $
    3,214
    
    
    $
    3,662
    
    
    $
    11,885Gross profit
    
    
    1,031
    
    
    
    1,367
    
    
    
    1,519
    
    
    
    1,715
    
    
    
    5,632Operating income
    
    
    119
    
    
    
    293
    
    
    
    392
    
    
    
    203
    
    
    
    1,007Net income
    
    
    88
    
    
    
    252
    
    
    
    355
    
    
    
    176
    
    
    
    871
 First
    
    Second
    
    Third
    
    Fourth2004
    
    Quarter
    
    Quarter
    
    Quarter
    

Quarter(1), (2)
    
    Full YearNet revenues
    
    $
    2,067
    
    
    $
    2,675
    
    
    $
    2,934
    
    
    $
    3,230
    
    
    $
    10,906Gross profit
    
    
    1,016
    
    
    
    1,297
    
    
    
    1,412
    
    
    
    1,525
    
    
    
    5,250Operating income
    
    
    136
    
    
    
    273
    
    
    
    360
    
    
    
    196
    
    
    
    965Net income
    
    
    97
    
    
    
    225
    
    
    
    324
    
    
    
    183
    
    
    
    829
 
 (1)
    
    Includes Mexico tax law change benefit of $26 million.(2)
    
    Includes a $9 million non-cash impairment charge ($6 million net of tax) relating to
our re-evaluation of the fair value of our franchise licensing agreement for the Squirttrademark in Mexico. 68




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
    
 69




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm
     
 70




---



##### Table of Contents



Item 7A.   Quantitative and Qualitative Disclosures About Market Risk
  
 Item 8.   Financial Statements and Supplementary Data
   
 Item 9.   Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
  
 Item 9A.   Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  
 Item 9B.   Other Information
  
 PART III
 
 Item 10.   Directors and Executive Officers of Bottling LLC
  John T. Cahill
 Steven M. Rapp
 71




---



##### Table of Contents



Matthew M. McKenna
  72




---



##### Table of Contents



Item 11.   Executive Compensation
 Summary of Cash and Certain Other Compensation.
 Summary Compensation Table
 Long Term CompensationAnnual Compensation
    
    Awards
    
    PayoutsRestricted
    
    Securities
    
    
    
    
    
    All OtherName and
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other Annual
    
    Stock
    
    Underlying
    
    LTIP
    
    CompensationPrincipal Position
    
    Year
    
    Salary($)
    
    Bonus($)
    
    Compensation ($)
    
    Awards/ Units ($)
    
    Options (#)
    
    Payouts ($)
    
    ($)John T. Cahill
    
    
    2005
    
    
    $
    984,135
    
    
    $
    1,828,125
    
    
    $
    52,228
    (1)
    
    $
    5,000,000
    (2)
    
    
    621,239
    
    
    $
    0
    
    
    $
    8,589
    (3)Principal
    
    
    2004
    
    
    
    871,154
    
    
    
    1,531,250
    
    
    
    19,139
    
    
    
    0
    
    
    
    444,915
    
    
    
    0
    
    
    
    8,362Executive Officer
    
    
    2003
    
    
    
    817,692
    
    
    
    515,630
    
    
    
    26,409
    
    
    
    1,500,000
    (4)
    
    
    526,596
    
    
    
    0
    
    
    
    8,141Alfred H. Drewes
    
    
    2005
    
    
    
    405,385
    
    
    
    375,600
    
    
    
    39,711
    (5)
    
    
    0
    
    
    
    113,274
    
    
    
    0
    
    
    
    8,400
    (6)Principal Financial
    
    
    2004
    
    
    
    383,462
    
    
    
    404,250
    
    
    
    19,171
    
    
    
    0
    
    
    
    97,356
    
    
    
    0
    
    
    
    8,200Officer
    
    
    2003
    
    
    
    372,231
    
    
    
    140,630
    
    
    
    14,475
    
    
    
    1,500,000
    (4)
    
    
    127,660
    
    
    
    241,050
    
    
    
    8,000Andrea L. Forster
    
    
    2005
    
    
    
    247,269
    
    
    
    172,600
    
    
    
    21,157
    (7)
    
    
    0
    
    
    
    51,398
    
    
    
    0
    
    
    
    8,400
    (6)Principal
    
    
    2004
    
    
    
    221,154
    
    
    
    170,250
    
    
    
    4,695
    
    
    
    0
    
    
    
    45,763
    
    
    
    0
    
    
    
    8,200Accounting Officer
    
    
    2003
    
    
    
    193,307
    
    
    
    50,000
    
    
    
    4,695
    
    
    
    0
    
    
    
    34,043
    
    
    
    0
    
    
    
    7,624
 
 (1)
    
    For 2005, this amount includes (i) $33,674, which equals the total incremental cost to the
Company of all perquisites and personal benefits provided to Mr. Cahill (including a car
allowance, financial advisory services, personal use of corporate transportation, and an
annual physical), and (ii) $18,554, which equals the amount paid to gross-up Mr. Cahill for
the tax liability related to the car allowance, financial advisory services and annual
physical. Mr. Cahills personal use of corporate transportation is not grossed-up. For 2003
and 2004, this amount reflects (i) benefits from the personal use of corporate transportation
and (ii) the total tax gross-up payment with respect to perquisites and personal benefits
provided to Mr. Cahill.(2)
    
    This amount reflects the dollar value of 179,598 performance-based restricted stock units
(RSUs) granted to Mr. Cahill on October 7, 2005 by the Compensation and Management
Development Committee. The dollar value was calculated by multiplying the number of RSUs
granted by the average of the high and low trading prices of PBG Common Stock on the grant
date. Mr. Cahill is eligible to vest in the RSUs only if a 2006 earnings per share goal is
achieved. If such goal is achieved, one-third of the RSUs will vest on each of December 31,
2006, December 31, 2007 and December 31, 2008, provided that Mr. Cahill is actively employed
by PBG on each such date. RSUs that vest will be settled in an equal number of shares of PBG
Common Stock, which must be deferred for a minimum of two years after vesting. During the
vesting period, with respect to the RSUs, Mr. Cahill will accrue amounts equal to the
dividends that are declared and paid on PBG Common Stock. Such amounts will be paid only if,
and at the same time, the underlying RSUs vest and are paid. The dollar value of the unvested
RSUs as of the close of the 2005 fiscal year was $5,138,299 (determined by multiplying the
number of RSUs by $28.61, the closing price of PBG Common Stock on December 30, 2005, the last
trading day of PBGs fiscal year).(3)
    
    This amount reflects (i) a standard PBG matching contribution in PBG Common Stock to Mr.
Cahills 401(k) account and (ii) $189 in imputed income, based on tables used for income
imputation, attributable to the annual cost of life insurance coverage equal to that purchased
under the following arrangement. In 2001, Mr. Cahill waived his right to a portion of his
deferred compensation. In exchange, the Company made a loan to Mr. Cahills family trust to
pay the premium on a life insurance policy on the life of Mr. Cahill and his spouse. The loan
bears interest at a rate of 4.99%, which rate was established under IRS regulations, and the
loan (with interest) will be repaid to the Company upon payment of the proceeds from the life
insurance policy. Although 73




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the loan amount was greater than the amount of deferred compensation waived, the loan was
determined to be cost neutral to the Company. Under the Sarbanes-Oxley Act of 2002, this loan
may remain outstanding, so long as its terms are not materially modified.(4)
    
    This amount reflects a performance-based restricted stock award granted in 2003 that was
scheduled to vest only if certain cumulative performance targets were achieved in fiscal years
2003, 2004 and 2005. The Compensation and Management Development Committee has certified that
the cumulative performance targets were not achieved. Accordingly, the executive has forfeited
the restricted shares reflected in the table. Upon forfeiture of the restricted shares, the
accrued dividends payable with respect to such restricted shares were also forfeited. The
amount set out in the table was calculated by multiplying the number of restricted shares
granted to the executive by the fair market value of PBG Common Stock on March 1, 2003, the
grant date. While the executive will not recognize any value from this award, SEC regulations
require PBG to state the dollar value of the unvested restricted shares as of the close of the
2005 fiscal year, which was $1,826,176 (determined by multiplying the number of restricted
shares awarded by $28.61, the closing price of PBGs Common Stock on December 30, 2005, the
last trading day of PBGs fiscal year).(5)
    
    For 2005, this amount includes (i) $22,737, which equals the total incremental cost to the
Company of all perquisites and personal benefits provided to Mr. Drewes (including a car
allowance and financial advisory services), and (ii) $16,951, which equals the amount paid to
gross-up Mr. Drewes for the tax liability related to the car allowance and financial advisory
services. For 2003 and 2004, this amount reflects the total tax gross-up payment with respect
to perquisites and personal benefits provided to Mr. Drewes.(6)
    
    This amount reflects a standard PBG matching contribution in PBG Common Stock to the
executives 401(k) account.(7)
    
    For 2005, this amount includes (i) $14,365, which equals the total incremental cost to the
Company of all perquisites and personal benefits provided to Ms. Forster (including a car
allowance), and (ii) $6,792, which equals the amount paid to gross-up Ms. Forster for the tax
liability related to the car allowance. For 2003 and 2004, this amount reflects the total tax
gross-up payment with respect to perquisites and personal benefits provided to Ms. Forster. 
 Item 12.  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
  
 Item 13.   Certain Relationships and Related Transactions
  Stock Ownership and Director Relationships with PepsiCo.
 Agreements and Transactions with PepsiCo and Affiliates.
  74




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Beverage Agreements and Purchases of Concentrates and Finished Products
  Transactions with Joint Ventures in which PepsiCo holds an equity interest.
   Purchase of Snack Food Products from Frito-Lay, Inc.
 Shared Services
  Rental Payments.
 National Fountain Services
 Bottler Incentives
 PepsiCo Guarantees
 PBG/Bottling LLC Transactions.
 75




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Bottling Group, LLC Distribution.
 Relationships and Transactions with Management and Others
 76




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Item
14.   Principal Accountant Fees and Services
 INDEPENDENT AUDITORS FEES
  
 2005
    
    
    
    
    
    
    2004Deloitte & Touche
    
    
    KPMG
    
    
    Total
    
    
    KPMGAudit Fees(1)
    
    $
    4.4
    
    
    $
    0.7
    
    
    $
    5.1
    
    
    $
    5,4Audit-Related Fees (2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.1Tax Fees (3)
    
    
    
    
    
    
    0.1
    
    
    
    0.1
    
    
    
    0.2All Other
Fees
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    4.4
    
    
    $
    0.8
    
    
    $
    5.2
    
    
    $
    5.7
 
 1.
    
    Represents fees for the audit of Bottling LLCs consolidated financial statements,
audit of internal controls, the reviews of interim financial statements included in Bottling LLCs Forms 10-Q and all statutory audits.2.
    
    Represents fees primarily related to audits of employee benefit plans and
other audit related services.3.
    
    Represents fees related primarily to assistance with tax compliance matters. Pre-Approval Policies and Procedures.
 77




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PART IV
 
 Item 15.   Exhibits and Financial Statement Schedules
         78




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PageIndependent
Auditors Report on Schedule (Deloitte & Touche LLP)
    
    F-2Independent Auditors Report on Schedule and Consent (KPMG LLP)
    
    F-3Schedule II  Valuation and Qualifying Accounts for the fiscal years ended
December 31, 2005, December 25, 2004 and December 27, 2003
    
    F-4
   79




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SIGNATURES
   Bottling Group, LLCBy:
    /s/ John T. CahillJohn T. CahillPrincipal Executive Officer  SIGNATURE
    
    TITLE
    
    DATE/s/ John T. Cahill
    
    Principal Executive Officer andJohn T. Cahill
    
    Managing Director
    
    February 23, 2006/s/ Alfred H. Drewes
    
    Principal Financial Officer
    
    February 23, 2006Alfred H. Drewes/s/ Andrea L. Forster
    
    Principal Accounting Officer
    
    February 23, 2006Andrea L. Forster/s/ Steven M. Rapp
    
    Managing Director
    
    February 23, 2006Steven M. Rapp/s/ Matthew M. McKenna
    
    Managing Director
    
    February 23, 2006Matthew M. McKenna
 80




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INDEX TO FINANCIAL STATEMENT SCHEDULES
 PageIndependent Auditors Report on Schedule (Deloitte & Touche LLP)
    
    F-2Independent Auditors Report on Schedule and Consent (KPMG LLP)
    
    F-3Schedule II  Valuation and Qualifying Accounts for the fiscal years ended December 31, 2005, December 25, 2004 and December 27, 2003
    
    F-4
 F-1




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F-2




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Consent of Independent Registered Public Accounting Firm
 
    
 F-3




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BalanceAt
    
    Charged to
    
    
    
    
    
    Accounts
    
    Foreign
    
    Balance AtBeginning
    
    Cost and
    
    
    
    
    
    Written
    
    Currency
    
    End OfOf Period
    
    Expenses
    
    Acquisitions
    
    Off
    
    Translation
    
    PeriodDescriptionFiscal Year
Ended
December 31, 2005Allowance
for losses
on trade
accounts
receivable
    
    $
    61
    
    
    $
    3
    
    
    $
    
    
    
    $
    (12
    )
    
    $
    (1
    )
    
    $
    51Fiscal Year
Ended
December 25, 2004Allowance
for losses
on trade
accounts
receivable
    
    $
    72
    
    
    $
    (5
    )
    
    $
    
    
    
    $
    (7
    )
    
    $
    1
    
    
    $
    61Fiscal Year
Ended
December 27, 2003Allowance
for losses
on trade
accounts
receivable
    
    $
    67
    
    
    $
    12
    
    
    $
    
    
    
    $
    (8
    )
    
    $
    1
    
    
    $
    72
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INDEX TO EXHIBITS
 EXHIBIT
 3.1
    
    Articles of Formation of Bottling Group, LLC (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, which is incorporated herein by
reference to Exhibit 10.9 to PBGs Registration Statement on Form S-1 (Registration No.
333-70291).4.2
    
    First Supplemental Indenture dated as of February 8, 1999 among Pepsi Bottling Holdings,
Inc., Bottling 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, which is incorporated herein by
reference to Exhibit 10.10 to PBGs Registration Statement on Form S-1 (Registration No.
333-70291).4.3
    
    Indenture, dated as of March 8, 1999, by and among The Pepsi Bottling Group, Inc. (PBG), 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 (Registration No. 333-70291).4.5
    
    U.S. $250,000,000 364-Day Second Amended and Restated Credit Agreement, dated as of May 1,
2002 among PBG, Bottling Group, LLC, JPMorgan Chase Bank, Citibank, N.A., Bank of America,
N.A., Deutsche Bank AG New York Branch and/or Cayman Islands Branch, Credit Suisse First
Boston, The Northern Trust Company, Lehman Commercial Paper Inc., Royal Bank of Canada, Banco
Bilbao Vizcaya, The Bank of New York, Fleet National Bank, State Street Bank and Trust
Company, JPMorgan Chase Bank, as Agent, Banc of America Securities LLC and J.P. Morgan
Securities Inc. as Co-Lead Arrangers and Joint Book Managers and Bank of America, N.A. and
Citibank, N.A., as Co-Syndication Agents, which is incorporated herein by reference to Exhibit
4.6 to Bottling LLCs Annual Report on Form 10-K for the year ended December 28, 2002.4.6
    
    U.S. $250,000,000 5-Year Credit Agreement, dated as of April 30, 2003 among The Pepsi
Bottling Group, Inc., Bottling Group, LLC, Citibank, N.A., Bank of America, N.A., Credit
Suisse First Boston, Cayman Islands Branch, Deutsche Bank AG New York Branch, JPMorgan Chase
Bank, The Northern Trust Company, Lehman Brothers Bank, FSB, Banco Bilbao Vizcaya Argentaria,
HSBC Bank USA, Fleet National Bank, The Bank of New York, State Street Bank and Trust Company,
Comerica Bank, Wells Fargo Bank, N.A., JPMorgan Chase Bank, as Agent, Citigroup Global Markets
Inc. and Banc of America Securities LLC, as Joint Lead Arrangers and Book Managers and
Citibank, N.A., Bank of America, N.A., Credit Suisse First Boston, and Deutsche Bank
Securities Inc. as Syndication Agents, which is
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incorporated herein by reference to Exhibit 4.7 to Bottling LLCs registration
statement on Form S-4/A (Registration No. 333-102035).4.7
    
    U.S. $250,000,000 364-Day Credit Agreement, dated as of April 30, 2003 among The Pepsi
Bottling Group, Inc., Bottling Group, LLC, Citibank, N.A., Bank of America, N.A., Credit
Suisse First Boston, Cayman Islands Branch, Deutsche Bank AG New York Branch, JPMorgan Chase
Bank, The Northern Trust Company, Lehman Brothers Bank, FSB, Banco Bilbao Vizcaya Argentaria,
HSBC Bank USA, Fleet National Bank, The Bank of New York, State Street Bank and Trust Company,
Comerica Bank, Wells Fargo Bank, N.A., JPMorgan Chase Bank, as Agent, Citigroup Global Markets
Inc. and Banc of America Securities LLC, as Joint Lead Arrangers and Book Managers and
Citibank, N.A., Bank of America, N.A., Credit Suisse First Boston, and Deutsche Bank
Securities Inc. as Syndication Agents, which is incorporated herein by reference to Exhibit
4.8 to Bottling LLCs registration statement on Form S-4/A (Registration No. 333-102035).4.8
    
    Indenture, dated as of November 15, 2002, among Bottling Group, LLC, PepsiCo, Inc., as
Guarantor, and JPMorgan Chase Bank, as Trustee, relating to $1 Billion 4- 5/8 % Senior
Notes due November 15, 2012, which is incorporated herein by reference to Exhibit 4.7 to
Bottling LLCs Annual Report on Form 10-K for the year ended December 28, 2002.4.9
    
    Registration Rights Agreement, dated as of November 7, 2002 relating to the $1 Billion
4-5/8% Senior Notes due November 15, 2012, which is incorporated herein by reference
to Exhibit 4.8 to Bottling LLCs Annual Report on Form 10-K for the year ended December 28,
2002.4.10
    
    Indenture, dated as of June 10, 2003 by and between Bottling Group, LLC, as Obligor, and
JPMorgan Chase Bank, as Trustee, relating to $250,000,000 4- 1/8 % Senior Notes due
June 15, 2015, which is incorporated herein by reference to Exhibit 4.1 to Bottling LLCs
registration statement on Form S-4 (Registration No. 333-106285).4.11
    
    Registration Rights Agreement dated June 10, 2003 by and among Bottling Group, LLC, J.P.
Morgan Securities Inc., Lehman Brothers Inc., Banc of America Securities LLC, Citigroup Global
Markets Inc, Credit Suisse First Boston LLC, Deutsche Bank Securities Inc., Blaylock &
Partners, L.P. and Fleet Securities, Inc, relating to $250,000,000 4- 1/8 % Senior
Notes due June 15, 2015, which is incorporated herein by reference to Exhibit 4.3 to Bottling
LLCs registration statement on Form S-4 (Registration No. 333-106285).4.12
    
    Indenture, dated as of October 1, 2003, by and between Bottling Group, LLC, as Obligor, and
JPMorgan Chase Bank, as Trustee, which is incorporated herein by reference to Exhibit 4.1 to
Bottling LLCs Form 8-K dated October 3, 2003.4.13
    
    Form of Note for the $500,000,000 2.45% Senior Notes due October 16, 2006, which is
incorporated herein by reference to Exhibit 4.2 to Bottling LLCs Form 8-K dated October 3,
2003.4.14
    
    Form of Note for the $400,000,000 5.00% Senior Notes due November 15, 2013, which is
incorporated herein by reference to Exhibit 4.1 to Bottling LLCs Form 8-K dated November 13,
2003.
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10.1
    
    Settlement Agreement between Bottling Group, LLC and PepsiCo, Inc. dated June
28, 2005, which is incorporated herein by reference to
Exhibit 10.1 to Bottling LLCs Form 10-Q for the quarter ended June 11, 2005.12*
    
    Statement re Computation of Ratios.21*
    
    Subsidiaries of Bottling LLC.23.1*
    
    Report and Consent of KPMG LLP.23.2 *
    
    Consent of Deloitte & Touche LLP31.1*
    
    Certification by the Principal Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.31.2*
    
    Certification by the Principal Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.32.1*
    
    Certification by the Principal Executive Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.32.2*
    
    Certification by the Principal Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
 
 *
    
    Filed herewith E-3