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                                                                   NO. 333-80361
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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   ----------
                                    FORM 10-K
                                  ANNUAL REPORT
          Pursuant to Section 13 of the Securities Exchange Act of 1934
                   For the Fiscal Year Ended December 30, 2000

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

  INCORPORATED IN DELAWARE                         13-4042452
  (JURISDICTION OF INCORPORATION)          (I.R.S. EMPLOYER IDENTIFICATION NO.)
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE SECURITIES EXCHANGE ACT
OF 1934: NONE

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

        INDICATE BY CHECK MARK WHETHER THE REGISTRANT: (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS) AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO
                                             ---  ---

        INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO
ITEM 405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED,
TO THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION
STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY
AMENDMENT TO THIS FORM 10-K. [ X ]


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                                     PART I

ITEM 1. BUSINESS

INTRODUCTION

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

    PBG was incorporated in Delaware in January, 1999 as a wholly-owned
subsidiary of PepsiCo to effect the separation of most of PepsiCo's
company-owned bottling businesses. PBG became a publicly traded company on March
31, 1999. As of February 21, 2001, PepsiCo's ownership represented 37.9% of the
outstanding common stock and 100% of the outstanding Class B common stock,
together representing 46.2% of the voting power of all classes of PBG's voting
stock.

    PepsiCo and PBG contributed bottling businesses and assets used in the
bottling business to Bottling LLC in connection with the formation of Bottling
LLC. As a result of the contributions of assets, PBG owns 92.9% of Bottling LLC
and PepsiCo owns the remaining 7.1%.

PRINCIPAL PRODUCTS

    We are the world's largest manufacturer, seller and distributor of
Pepsi-Cola beverages. Pepsi-Cola beverages sold by us include PEPSI-COLA, DIET
PEPSI, MOUNTAIN DEW, LIPTON BRISK, LIPTON'S ICED TEA, PEPSI One, SLICE, MUG,
AQUAFINA, STARBUCKS FRAPPUCCINO, FRUITWORKS, SIERRA MIST and, outside the U.S.,
7UP, PEPSI MAX, MIRINDA and KAS. We have the exclusive right to manufacture,
sell and distribute Pepsi-Cola beverages in all or a portion of 41 states, the
District of Columbia, eight Canadian provinces, Spain, Greece and Russia. In
some of our territories, we also have the right to manufacture, sell and
distribute soft drink products of other companies, including DR PEPPER and 7UP
in the U.S. Approximately 80% of our volume is sold in the United States, and
the remaining 20% is sold in Canada, Spain, Greece and Russia. We have an
extensive distribution system in the United States and Canada. In Russia, Spain
and Greece, we use a combination of direct store distribution and distribution
through wholesalers, depending on local marketplace considerations.

RAW MATERIALS AND OTHER SUPPLIES

    We purchase the concentrates to manufacture Pepsi-Cola beverages and other
soft drink products from PepsiCo and other soft-drink companies pursuant to
PBG's contractual arrangements with PepsiCo and other soft-drink companies.

    In addition to concentrates, we purchase sweeteners, glass and plastic
bottles, cans, closures, syrup containers, other packaging materials and carbon
dioxide. We generally purchase our raw materials, other than concentrates, from
multiple suppliers. PepsiCo acts as our agent for the purchase of such raw
materials. The Pepsi beverage agreements provide that, with respect to the soft
drink products of PepsiCo, all authorized containers, closures, cases, cartons
and other packages and labels may be purchased only from manufacturers approved
by PepsiCo. There are no materials or supplies used by us that are currently in
short supply. The supply or cost of specific materials could be adversely
affected by price changes, strikes, weather conditions, governmental controls or
other factors.


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PATENTS, TRADEMARKS, LICENSES AND FRANCHISES

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

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

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

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

    Under the Master Bottling Agreement we are obligated to:

    (1) maintain such plant and equipment, staff, and distribution and vending
        facilities that are capable of manufacturing, packaging and distributing
        the cola beverages in sufficient quantities to fully meet the demand for
        these beverages in our territories;

    (2) undertake adequate quality control measures prescribed by PepsiCo;

    (3) push vigorously the sale of the cola beverages in our territories;

    (4) increase and fully meet the demand for the cola beverages in our
        territories;

    (5) use all approved means and spend such funds on advertising and other
        forms of marketing beverages as may be reasonably required to meet the
        objective; and

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

    The Master Bottling Agreement requires us to meet annually with PepsiCo to
discuss plans for the ensuing year and the following two years. At such
meetings, we are obligated to present plans that set out in reasonable detail
our marketing plan, our management plan and advertising plan with respect to the
cola beverages for the year. We must also present a financial plan showing that
we have the financial capacity to perform our duties and obligations under the
Master Bottling Agreement for that year, as well as sales, marketing,
advertising and capital expenditure plans for the two years following such year.
PepsiCo has the right to approve such plans, which approval shall not be
unreasonably withheld. In 2000, PepsiCo approved our annual plan.


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

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

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

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

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

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

    Under the Master Bottling Agreement, PepsiCo has agreed not to withhold
approval for any acquisition of rights to manufacture and sell PEPSI trademarked
cola beverages within a specific area--currently representing approximately
13.66% of PepsiCo's U.S. bottling system in terms of volume--if we have
successfully negotiated the acquisition and, in PepsiCo's reasonable judgment,
satisfactorily performed our obligations under the Master Bottling Agreement. We
have agreed not to acquire or attempt to acquire any rights to manufacture and
sell PEPSI trademarked cola beverages outside of that specific area without
PepsiCo's prior written approval.

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

    (1) PBG's insolvency, bankruptcy, dissolution, receivership or the like;

    (2) any disposition of any voting securities of one of our bottling
        subsidiaries or substantially all of our bottling assets without the
        consent of PepsiCo;


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    (3) PBG's entry into any business other than the business of manufacturing,
        selling or distributing non-alcoholic beverages or any business which is
        directly related and incidental to such beverage business; and

    (4) any material breach under the contract that remains uncured for 120 days
        after notice by PepsiCo.

    An event of default will also occur if any person or affiliated group
acquires any contract, option, conversion privilege, or other right to acquire,
directly or indirectly, beneficial ownership of more than 15% of any class or
series of PBG's voting securities without the consent of PepsiCo. As of February
21, 2001, no shareholder of PBG, other than PepsiCo, holds more than 7.1% of
PBG's Common Stock.

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

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

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

    PBG also has an agreement with PepsiCo granting PBG the exclusive right to
distribute AQUAFINA in PBG's territories. PBG has the right to manufacture
AQUAFINA in certain locations depending on the availability of appropriate
equipment. The distribution agreement contains provisions generally similar to
those in the Master Bottling Agreement as to use of trademarks, trade names,
approved containers and labels and causes for termination. However, the
distribution agreement does not prevent PBG from distributing other bottled
waters. The distribution agreement is for a limited term. Prior to the
expiration of this term, PepsiCo and PBG will negotiate a renewal agreement.

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

    The Master Syrup Agreement contains provisions that are similar to those
contained in the Master Bottling Agreement with respect to pricing, territorial
restrictions with respect to local customers and national customers


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electing direct-to-store delivery only, planning, quality control, transfer
restrictions and related matters. The Master Syrup Agreement has an initial term
of five years and is automatically renewable for additional five-year periods
unless PepsiCo terminates it for cause. PepsiCo has the right to terminate the
Master Syrup Agreement without cause at the conclusion of the initial five-year
period or at any time during a renewal term upon twenty-four months notice. In
the event PepsiCo terminates the Master Syrup Agreement without cause, PepsiCo
is required to pay PBG the fair market value of our rights under such agreement.

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

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

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

SEASONALITY

    Our peak season is the warm summer months beginning with Memorial Day and
ending with Labor Day. Approximately 80% of our operating income is typically
earned during the second and third quarters. Over 70% of cash flow from
operations is typically generated in the third and fourth quarters.

COMPETITION

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

GOVERNMENTAL REGULATION APPLICABLE TO BOTTLING LLC

    Our operations and properties are subject to regulation by various federal,
state and local governmental entities and agencies as well as foreign government
entities. As a producer of food products, we are subject to production,
packaging, quality, labeling and distribution standards in each of the countries
where we have operations, including, in the United States, those of the federal
Food, Drug and Cosmetic Act. The operations of our production and distribution
facilities are subject to the laws and regulations of, among other agencies, the
Department of Transportation, and various federal, state and local occupational
and environmental laws. These laws and regulations include, in the United
States, the Occupational Safety and Health Act, the Clean Air Act,


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the Clean Water Act and laws relating to the operation, maintenance of and
financial responsibility for, fuel storage tanks. We believe that our current
legal, operational and environmental compliance programs adequately address such
concerns and that we are in substantial compliance with applicable laws and
regulations. We do not anticipate making any material expenditures in connection
with environmental remediation and compliance. However, compliance with, or any
violation of, current and future laws or regulations could require material
expenditures by us or otherwise have a material adverse effect on our business,
financial condition and results of operations.

    Bottle and Can Legislation

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

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

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

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

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

    Soft Drink Excise Tax Legislation

    Specific soft drink excise taxes have been in place in certain states for
several years. The states in which we operate that currently impose such a tax
are West Virginia, Arkansas, South Carolina, Tennessee and, with respect to
fountain syrup only, Washington. Although soft drink excise tax is currently in
effect in South Carolina, new legislation has been enacted that phases out such
taxes by the end of July 2002.

    Value-added taxes on soft drinks vary in our territories located in Canada,
Spain, Greece and Russia, but are consistent with the value-added tax rate for
other consumer products.

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

    Trade Regulation

    As a manufacturer, seller and distributor of bottled and canned soft drink
products of PepsiCo and other soft drink manufacturers in exclusive territories
in the United States and internationally, we are subject to antitrust laws.
Under the Soft Drink Interbrand Competition Act, soft drink bottlers operating
in the United States, such as us, may have an exclusive right to manufacture,
distribute and sell a soft drink product in a geographic


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territory if the soft drink product is in substantial and effective competition
with other products of the same class in the same market or markets. We believe
that there is such substantial and effective competition in each of the
exclusive geographic territories in which we operate.

    California Carcinogen and Reproductive Toxin Legislation

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

EMPLOYEES

    As of December 30, 2000, we employed approximately 35,700 full-time workers,
of whom approximately 29,000 were employed in the United States. Approximately
8,500 of our full-time workers in the United States are union members. We
consider relations with our employees to be good and have not experienced
significant interruptions of operations due to labor disagreements with the
exception of a labor dispute at our facility located in Burnsville, Minnesota,
which was successfully resolved on August 28, 2000.

FINANCIAL INFORMATION ON INDUSTRY SEGMENTS AND GEOGRAPHIC AREAS

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

ITEM 2. PROPERTIES

    We operate 67 soft drink production facilities worldwide, of which 60 are
owned and 7 are leased. Of our 320 distribution facilities, 258 are owned and 62
are leased. We believe that our bottling, canning and syrup filling lines and
our distribution facilities are sufficient to meet present needs.

    We also own or lease and operate approximately 20,000 vehicles, including
delivery trucks, delivery and transport tractors and trailers and other trucks
and vans used in the sale and distribution of our soft drink products. We also
own more than 1.1 million soft drink dispensing and vending machines.

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

ITEM 3. LEGAL PROCEEDINGS

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

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS

        None.


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EXECUTIVE OFFICERS OF THE REGISTRANT

        Set forth below is information pertaining to the executive officers of
Bottling LLC as of February 21, 2001:

CRAIG E. WEATHERUP, 55, is the Principal Executive Officer of Bottling LLC. Mr.
Weatherup is also Chairman and Chief Executive Officer of PBG. Mr. Weatherup
served on the Board of Directors of PepsiCo from 1996 until March 1999. Prior to
becoming PBG's Chairman and Chief Executive Officer, he served as Chairman and
Chief Executive Officer of the Pepsi-Cola Company since July 1996. He was
appointed President of the Pepsi-Cola Company in 1988, President and Chief
Executive Officer of Pepsi-Cola North America in 1991, and served as PepsiCo's
President in 1996. Mr. Weatherup is also a director of Federated Department
Stores, Inc. and Starbucks Corporation. We expect that later in 2001, Mr. Cahill
will be elected as PBG's new Chief Executive Officer, while Mr. Weatherup will
continue to serve as PBG's Chairman.

LIONEL L. NOWELL, III, 45, is the Principal Financial Officer of Bottling LLC.
He is also Executive Vice President and Chief Financial Officer of PBG. In
August 2000, Mr. Nowell joined PBG from PepsiCo, where he served as Senior Vice
President and Controller since 1999. Prior to joining PepsiCo, Mr. Nowell held
senior finance, control and strategy positions at several major consumer
products companies. At RJR Nabisco, he served as Senior Vice President, Strategy
and Business Development. From 1991 to 1998, Mr. Nowell held a variety of senior
financial positions at the Pillsbury division of Diageo PLC, including Chief
Financial Officer of its Pillsbury North America, Pillsbury Foodservice and
Haagen-Dazs units. In addition, Mr. Nowell held several finance positions at
Pizza Hut, a former subsidiary of PepsiCo, from 1983 through 1991.

ANDREA L. FORSTER, 41, is the Principal Accounting Officer of Bottling LLC. She
is also Vice President and Controller of PBG. In September 2000, Ms. Forster was
also named Corporate Compliance Officer for PBG. Following several years with
Deloitte Haskins and Sells, Ms. Forster joined PepsiCo in 1987 as a Senior
Analyst in External Reporting. She progressed through a number of positions in
the accounting and reporting functions and, in 1998, was appointed Assistant
Controller of the Pepsi-Cola Company. She was named Assistant Controller of PBG
in 1999.

                                     PART II

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

    There is no public trading market for the ownership interests in Bottling
LLC.


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ITEM 6. SELECTED FINANCIAL DATA

                      SELECTED FINANCIAL AND OPERATING DATA


(in millions)

<TABLE>
<CAPTION>
                                                    2000(1)         1999        1998        1997        1996        1995
                                                    -------        -------     -------     -------     -------     -------
<S>                                                 <C>            <C>         <C>         <C>         <C>         <C>
FISCAL YEARS ENDED
STATEMENT OF OPERATIONS DATA:
   Net revenues                                     $ 7,982        $ 7,505     $ 7,041     $ 6,592     $ 6,603     $ 6,393
   Cost of sales                                      4,405          4,296       4,181       3,832       3,844       3,771
                                                    -------        -------     -------     -------     -------     -------
   Gross profit                                       3,577          3,209       2,860       2,760       2,759       2,622
   Selling, delivery and administrative expenses      2,986          2,813       2,583       2,425       2,392       2,273
   Unusual impairment and other charges and
     credits (2)                                         --            (16)        222          --          --          --
                                                    -------        -------     -------     -------     -------     -------
   Operating income                                     591            412          55         335         367         349
   Interest expense, net                                 89            129         157         160         163         173
   Foreign currency loss (gain)                           1              1          26          (2)          4          --
   Minority interest                                      8              5           4           4           7           3
                                                    -------        -------     -------     -------     -------     -------
   Income (loss) before income taxes                    493            277        (132)        173         193         173
   Income tax expense (benefit)                          22              4          (1)          1           6           8
                                                    -------        -------     -------     -------     -------     -------
   Net income (loss)                                $   471        $   273     $  (131)    $   172     $   187     $   165
                                                    =======        =======     =======     =======     =======     =======

BALANCE SHEET DATA (AT PERIOD END):
   Total assets                                     $ 8,228        $ 7,799     $ 7,227     $ 7,095     $ 6,947     $ 6,957
   Long-term debt:
     Allocation of PepsiCo long-term debt                --             --       2,300       2,300       2,300       2,300
     Due to third parties                             2,286          2,284          61          96         127         131
                                                    -------        -------     -------     -------     -------     -------
       Total long-term debt                           2,286          2,284       2,361       2,396       2,427       2,431
   Minority interest                                    147            141         112          93         102         105
   Accumulated other comprehensive loss                (253)          (222)       (238)       (184)       (102)        (66)
   Owners' equity                                     4,321          3,928       3,283       3,336       3,128       3,186
</TABLE>

(1) Our fiscal year 2000 results were impacted by a change in estimated useful
    lives of certain categories of assets and the inclusion of an extra week in
    our fiscal year. The favorable impact of the change in asset lives increased
    operating income by $69 million and the extra week increased net income by
    $12 million.

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

-   $45 million non-cash compensation charge in the second quarter of 1999.
-   $53 million vacation accrual reversal in the fourth quarter of 1999.
-   $8 million restructuring reserve reversal in the fourth quarter of 1999.
-   $222 million charge related to the restructuring of our Russian bottling
    operations and the separation of Pepsi-Cola North America's concentrate and
    bottling organizations in the fourth quarter of 1998.


                                       10
<PAGE>   11

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

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

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

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

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

MANAGEMENT'S FINANCIAL REVIEW

OVERVIEW
--------

    Bottling Group, LLC (collectively referred to as "Bottling LLC," "we," "our"
and "us") is the principal operating subsidiary of The Pepsi Bottling Group,
Inc. ("PBG") and consists of substantially all of the operations and assets of
PBG. Bottling LLC, which is 92.9% owned by PBG and is fully consolidated,
consists of bottling operations located in the United States, Canada, Spain,
Greece and Russia. Prior to our formation, we were an operating unit of PepsiCo,
Inc. ("PepsiCo").


    The following discussion and analysis covers the key drivers behind our
success in 2000 and is broken down into five major sections. The first two
sections provide an overview and focus on items that affect the comparability of
historical or future results. The next two sections provide an analysis of our
results of operations and liquidity and financial condition. The last section
contains a discussion of our market risks and cautionary statements. The
discussion and analysis throughout management's financial review should be read
in conjunction with the Consolidated Financial Statements and the related
accompanying notes.

Constant Territory

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

Use of EBITDA

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


                                       11
<PAGE>   12

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

Asset Lives

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

Fiscal Year

    Our fiscal year ends on the last Saturday in December and, as a result, a
53rd week is added every five or six years. Fiscal year 2000 consisted of 53
weeks while fiscal years 1999 and 1998 consisted of 52 weeks. The following
table illustrates the approximate dollars and percentage points of growth that
the extra week contributed to our 2000 operating results:

<TABLE>
<CAPTION>
                                                                         PERCENTAGE
                                                                         ----------
    (dollars in millions)                                      DOLLARS     POINTS
                                                               -------     ------
    <S>                                                        <C>       <C>
    Volume...................................................     N/A          2
    Net Revenues.............................................   $ 113          2
    EBITDA...................................................   $  14          2
</TABLE>

PBG's Initial Public Offering

    PBG was incorporated in Delaware in January 1999 and, prior to its
formation, PBG was an operating unit of PepsiCo, Inc. ("PepsiCo"). PBG became a
public company through an initial public offering on March 31, 1999. PBG's
initial public offering consisted of 100,000,000 shares of common stock sold to
the public, equivalent to 65% of its outstanding common stock, leaving PepsiCo
the owner of the remaining 35% of outstanding common stock. PepsiCo's ownership
has increased to 37.8% of PBG's outstanding common stock at December 30, 2000 as
a result of net repurchases of approximately 10 million shares under PBG's share
repurchase program, which began in October 1999. In addition, PepsiCo owns 7.1%
of the equity of Bottling LLC giving PepsiCo economic ownership of 42.2% of
PBG's combined operations at December 30, 2000. We are fully consolidated by
PBG.

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

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

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


                                       12
<PAGE>   13

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

<TABLE>
<CAPTION>
    (dollars in millions)                                            1999*     1998
                                                                     -----     ----
    <S>                                                              <C>       <C>
    Corporate overhead expense....................................   $  3      $ 40
    Interest expense..............................................   $ 16      $147
    PepsiCo's weighted-average interest rate......................    5.8%      6.4%
    *Prior to PBG's initial public offering.
</TABLE>

Unusual Impairment and Other Charges and Credits

Our operating results were affected by the following unusual charges and credits
in 1999 and 1998:

<TABLE>
<CAPTION>
    (dollars in millions)                              1999       1998
                                                       -----      -----
<S>                                                    <C>        <C>
    Non-cash compensation charge .................     $  45      $  --
    Vacation policy change .......................       (53)        --
    Asset impairment and restructuring charges ...        (8)       222
                                                       -----      -----
                                                       $ (16)     $ 222
                                                       =====      =====
</TABLE>

-   Non-cash Compensation Charge

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

-   Vacation Policy Change

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

-   Asset Impairment and Restructuring Charges

    In the fourth quarter of 1998, we recorded $222 million of charges relating
to the following:

    >>  A charge of $212 million for asset impairment of $194 million and other
        charges of $18 million related to restructuring our Russian operations.

    >>  A charge of $10 million for employee-related and other costs, mainly
        relocation and severance, resulting from the separation of Pepsi-Cola
        bottling and concentrate organizations.

    In the fourth quarter of 1999, $8 million of the remaining 1998
    restructuring reserves was reversed into income, as actual costs incurred to
    renegotiate manufacturing and leasing contracts in Russia and to reduce the
    number of employees were less than the amounts originally estimated.

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

Concentrate Supply

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


                                       13
<PAGE>   14

    In February 2000, PepsiCo announced an increase of approximately 7% in the
price of U.S. concentrate. PepsiCo has recently announced a further increase of
approximately 3%, effective February 2001. Amounts paid or payable to PepsiCo
and its affiliates for concentrate were $1,507 million, $1,418 million and
$1,283 million in 2000, 1999 and 1998, respectively.

Bottler Incentives

    PepsiCo and other brand owners provide us with various forms of marketing
support. The level of this support is negotiated annually and can be increased
or decreased at the discretion of the brand owners. This marketing support is
intended to cover a variety of programs and initiatives, including direct
marketplace support, capital equipment funding and shared media and advertising
support. Direct marketplace support is primarily funding by PepsiCo and other
brand owners of sales discounts and similar programs, and is recorded as an
adjustment to net revenues. Capital equipment funding is designed to support the
purchase and placement of marketing equipment and is recorded as a reduction to
selling, delivery and administrative expenses. Shared media and advertising
support is recorded as a reduction to advertising and marketing expense within
selling, delivery and administrative expenses.

    The total bottler incentives we received from PepsiCo and other brand owners
were $566 million, $563 million and $536 million for 2000, 1999 and 1998,
respectively. Of these amounts, we recorded $277 million, $263 million and $247
million for 2000, 1999 and 1998, respectively, in net revenues, and the
remainder as a reduction of selling, delivery and administrative expenses. The
amount of our bottler incentives received from PepsiCo was more than 90% of our
total bottler incentives in each of the three years, with the balance received
from the other brand owners.

Our Investment in Russia

    In recent years, we have invested in Russia to build infrastructure and to
fund start-up manufacturing and distribution costs. During the first half of
1998, our volumes were growing at approximately 50% over 1997 levels. However,
following the August 1998 devaluation of the ruble, we experienced a significant
drop in demand, resulting in lower net revenues and increased operating losses.
As a result of the economic crisis and the under-utilization of assets, we
incurred a charge of $212 million in the fourth quarter of 1998 to write down
our assets and reduce our fixed-cost structure.

    The economic conditions in 2000 and 1999 have been more stable, with 2000
volumes and revenues exceeding levels achieved immediately prior to the
devaluation. We have focused on developing alternative means of leveraging our
existing asset base while significantly reducing costs. In this regard, we have
increased distribution of Frito-Lay(R) snack products, which we began in 1999,
throughout all of Russia, except Moscow. We have also grown our value brand
beverage business (Fiesta), which was introduced in 1999, and increased
distribution of our water products.

    We anticipate that our Russian operations will continue to incur losses and
require cash to fund operations for at least the fiscal year 2001. However,
capital requirements will be minimal because our existing infrastructure is
adequate for current operations. Cash requirements for investing activities and
to fund operations were $17 million, $45 million and $156 million in 2000, 1999
and 1998, respectively. Volume in Russia accounted for 2%, 1% and 2% of our
total volume in 2000, 1999 and 1998, respectively. We will continue to review
our Russian operations on a regular basis and to consider changes in our
distribution systems and other operations as circumstances dictate.

Employee Benefit Plan Changes

    We made several changes to our employee benefit plans that took effect in
fiscal year 2000. The changes were made to our vacation policy, pension and
retiree medical plans and included some benefit enhancements as


                                       14
<PAGE>   15

well as cost containment provisions. These changes did not have a significant
impact on our financial results in 2000.

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

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


                                       15
<PAGE>   16
BOTTLING GROUP, LLC
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions)

FISCAL YEARS ENDED DECEMBER 30, 2000, DECEMBER 25, 1999 AND DECEMBER 26, 1998

<TABLE>
<CAPTION>
                                                          2000        1999         1998
                                                         -------     -------      -------
<S>                                                      <C>         <C>          <C>
NET REVENUES .......................................     $ 7,982     $ 7,505      $ 7,041
Cost of sales ......................................       4,405       4,296        4,181
                                                         -------     -------      -------
GROSS PROFIT .......................................       3,577       3,209        2,860

Selling, delivery and administrative expenses ......       2,986       2,813        2,583
Unusual impairment and other charges and credits ...          --         (16)         222
                                                         -------     -------      -------
OPERATING INCOME ...................................         591         412           55

Interest expense ...................................         136         140          166
Interest income ....................................          47          11            9
Foreign currency loss ..............................           1           1           26
Minority interest ..................................           8           5            4
                                                         -------     -------      -------

INCOME (LOSS) BEFORE INCOME TAXES ..................         493         277         (132)
Income tax expense (benefit) .......................          22           4           (1)
                                                         -------     -------      -------

NET INCOME (LOSS) ..................................     $   471     $   273      $  (131)
                                                         =======     =======      =======
</TABLE>

See accompanying notes to Consolidated Financial Statements.


                                       16
<PAGE>   17

MANAGEMENT'S FINANCIAL REVIEW

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

<TABLE>
<CAPTION>
                                              FISCAL 2000 VS. 1999*   FISCAL 1999 VS. 1998*
                                              ---------------------   ---------------------

                                                          CONSTANT               CONSTANT
                                              REPORTED    TERRITORY   REPORTED   TERRITORY
                                               CHANGE      CHANGE      CHANGE     CHANGE
                                               ------      ------      ------     ------
  <S>                                         <C>         <C>         <C>        <C>
  EBITDA.................................        18%          16%        25%        13%
  Volume.................................         3%           1%         4%         0%
  Net Revenue per Case...................         3%           3%         3%         3%

  * Fiscal year 2000 consisted of 53 weeks while fiscal years 1999 and 1998 consisted of 52 weeks.
</TABLE>

EBITDA

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

    Reported EBITDA was $901 million in 1999, representing a 25% increase over
1998. On a constant territory basis, EBITDA growth of 13% was driven by a strong
pricing environment particularly in the U.S. take-home segment, solid volume
growth in our higher-margin cold drink segment and reduced operating losses in
Russia.

VOLUME

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

    Our worldwide raw case volume grew 4% on a reported basis in 1999, and was
flat on a constant territory basis. In the U.S., constant territory volume
improved 1% as growth in our cold drink segment was offset by declines in the
take-home business as we raised prices in the take-home segment. Outside the
U.S., our constant territory volumes declined 3%, driven by the continued impact
of the economic conditions in Russia that began to deteriorate in August 1998
with the devaluation of the ruble, partially offset by improved volumes in Spain
and Canada.

NET REVENUES

    Reported net revenues were $7,982 million in 2000, a 6% increase over the
prior year, with the 53rd week contributing approximately 2 percentage points of
the growth. On a constant territory basis, worldwide net


                                       17
<PAGE>   18

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

    On a reported basis, net revenues were $7,505 million in 1999, representing
a 7% increase over 1998. On a constant territory basis, net revenues increased
3%, with increases in the U.S. offsetting a revenue decline outside the United
States. U.S. constant territory growth of 4% was driven by a 1% increase in
volume and a 3% increase in net revenue per case. The net revenue per case
increase reflects strong pricing, led by advances in the take-home segment and
an increased mix of higher-revenue cold drink volume. Volume declines partially
offset the revenue impact of higher take-home pricing. Outside the U.S., revenue
declines of 5% were driven by the impact of the August 1998 ruble devaluation in
Russia. On a worldwide basis, constant territory net revenue per case was up 3%.

COST OF SALES

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

    Cost of sales increased $115 million, or 3% in 1999, but was essentially
flat on a per case basis as higher concentrate prices were offset by lower
packaging costs and the favorable effect of renegotiating our raw material
contracts in Russia to a ruble denomination instead of U.S. dollars.

SELLING, DELIVERY AND ADMINISTRATIVE EXPENSES

    Selling, delivery and administrative expenses increased $173 million, or 6%
in 2000, with the 53rd week contributing approximately 1 percentage point of the
growth. Included in selling, delivery and administrative expenses are the
favorable impacts from the change in estimated useful lives of certain selling
and delivery assets, which lowered depreciation expense by $35 million, and
currency translations, which lowered selling, delivery and administrative
expense growth by approximately 1 percentage point in 2000. Excluding the
effects of the change in asset lives, currency translations and the inclusion of
the 53rd week, selling, delivery and administrative expenses were approximately
7% higher in 2000. Driving this increase were higher selling and delivery costs
primarily reflecting our significant investment in our U.S. cold drink
infrastructure that began in 1999 and continued through 2000. Additional
headcount, delivery routes and depreciation expense resulted from this
initiative. In addition, higher performance-related compensation costs
contributed to the cost growth. Growth in administrative costs associated with
the company matching contribution for our new 401(k) plan in 2000 was offset by
a one-time, $16 million compensation charge in 1999.

    Selling, delivery and administrative expenses grew $230 million, or 9% in
1999, driven by acquisitions and higher selling and delivery costs, which
resulted from our significant investment in our U.S. and Canadian cold drink
infrastructure. Higher advertising and marketing spending was offset by reduced
operating costs in Russia, as our cost structure benefited from our fourth
quarter 1998 restructuring actions. Administrative costs were impacted by
increased performance-related compensation due to our stronger operating results
in 1999 compared


                                       18
<PAGE>   19

to 1998 including a $16 million one-time compensation charge, which was related
to full-year 1999 performance. Excluding the impact of performance-related
compensation, our administrative costs were relatively flat year-over-year.

INTEREST EXPENSE

    Fiscal year 2000 interest expense decreased $4 million from $140 million in
1999 to $136 million in 2000 primarily driven by lower external debt outside the
U.S. Fiscal year 1999 interest expense decreased by $26 million from $166
million in 1998 to $140 million in 1999, due primarily to a lower average
interest rate on our $2.3 billion of long-term debt. Our average interest rate
decreased from 6.4% in 1998, when we used PepsiCo's average interest rate, to
5.7% in 1999 when we issued our own debt in the first quarter of 1999. Our lower
1999 interest rates reflect market conditions at the time we issued our debt. In
addition, we had reduced levels of external debt outside the U.S.

INTEREST INCOME

    Fiscal year 2000 interest income was $36 million higher than in 1999
reflecting additional loans to PBG, which were used by PBG to pay for interest,
taxes, dividends and share repurchases. Similarly, fiscal year 1999 interest
income was $2 million higher than in 1998 also reflecting higher loans to PBG.

FOREIGN CURRENCY LOSSES

    Our foreign currency losses primarily arise from our operations in Russia.
Since Russia is considered a highly inflationary economy for accounting
purposes, we are required to remeasure the net monetary assets of our Russian
operations in U.S. dollars and reflect any resulting gain or loss in the
Consolidated Statements of Operations. The August 1998 devaluation of the
Russian ruble resulted in significant foreign currency losses in 1998. In 2000
and 1999, foreign currency losses have been minimized due to a more stable ruble
exchange rate.

MINORITY INTEREST

    PBG has a direct minority ownership in one of our subsidiaries. Accordingly,
our Consolidated Financial Statements reflect PBG's share of consolidated net
income as minority interest in our Consolidated Statements of Operations. The
increased minority interest in 2000 reflects higher earnings by our subsidiary.

INCOME TAX EXPENSE (BENEFIT)

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


                                       19
<PAGE>   20
BOTTLING GROUP, LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in millions)

FISCAL YEARS ENDED DECEMBER 30, 2000, DECEMBER 25, 1999 AND DECEMBER 26, 1998

<TABLE>
<CAPTION>
                                                                                       2000        1999        1998
                                                                                      -------     -------     -------

<S>                                                                                   <C>         <C>         <C>
CASH FLOWS--OPERATIONS
Net income (loss) ................................................................    $   471     $   273     $  (131)
Adjustments to reconcile net income (loss) to net cash provided by operations:
   Depreciation ..................................................................        340         374         351
   Amortization ..................................................................        131         131         121
   Non-cash unusual impairment and other charges and credits .....................         --         (16)        194
   Other non-cash charges and credits, net .......................................        145         124         102
   Changes in operating working capital, excluding effects of acquisitions:
     Accounts receivable .........................................................          8         (30)         46
     Inventories .................................................................         11           3         (25)
     Prepaid expenses and other current assets ...................................       (102)          3          10
     Accounts payable and other current liabilities ..............................         22          45          64
                                                                                      -------     -------     -------
       Net change in operating working capital ...................................        (61)         21          95
                                                                                      -------     -------     -------
NET CASH PROVIDED BY OPERATIONS ..................................................      1,026         907         732
                                                                                      -------     -------     -------
CASH FLOWS--INVESTMENTS
Capital expenditures .............................................................       (515)       (560)       (507)
Acquisitions of bottlers .........................................................        (26)       (176)       (546)
Sales of property, plant and equipment ...........................................          9          22          31
Notes receivable from PBG...... ..................................................       (268)       (259)         --
Other, net .......................................................................        (52)        (19)         (5)
                                                                                      -------     -------     -------
NET CASH USED FOR INVESTMENTS ....................................................       (852)       (992)     (1,027)
                                                                                      -------     -------     -------
CASH FLOWS--FINANCING
Short-term borrowings--three months or less ......................................         12         (58)         52
Proceeds from third-party debt ...................................................         --       2,276          50
Replacement of PepsiCo allocated debt ............................................         --      (2,300)         --
Payments of third-party debt .....................................................         (9)        (90)        (72)
Increase (decrease) in owner's net investment ....................................        (45)        416         214
                                                                                      -------     -------     -------
NET CASH (USED FOR) PROVIDED BY FINANCING ........................................        (42)        244         244
                                                                                      -------     -------     -------
Effect of Exchange Rate Changes on Cash and Cash Equivalents .....................         (4)         (5)          1
                                                                                      -------     -------     -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS .............................        128         154         (50)
Cash and Cash Equivalents--Beginning of Year .....................................        190          36          86
                                                                                      -------     -------     -------
CASH AND CASH EQUIVALENTS--END OF YEAR ...........................................    $   318     $   190     $    36
                                                                                      =======     =======     =======

SUPPLEMENTAL CASH FLOW INFORMATION

Non-Cash Investing and Financing Activities:
     Liabilities incurred and/or assumed in conjunction with
       acquisitions of bottlers ..................................................    $     9     $    65     $   161
</TABLE>

See accompanying notes to Consolidated Financial Statements.


                                       20
<PAGE>   21
BOTTLING GROUP, LLC
CONSOLIDATED BALANCE SHEETS

(in millions)

DECEMBER 30, 2000 AND DECEMBER 25, 1999

<TABLE>
<CAPTION>
                                                                             2000        1999
                                                                            -------     -------
<S>                                                                         <C>         <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents ..............................................    $   318     $   190
Accounts receivable, less allowance of $42 and $48 in 2000 and 1999,
   respectively ........................................................        796         827
Inventories ............................................................        281         293
Prepaid expenses and other current assets ..............................        154         104
                                                                            -------     -------
   TOTAL CURRENT ASSETS ................................................      1,549       1,414
Property, plant and equipment, net .....................................      2,358       2,218
Intangible assets, net .................................................      3,694       3,819
Notes receivable from PBG ..............................................        527         259
Other assets ...........................................................        100          89
                                                                            -------     -------
          TOTAL ASSETS .................................................    $ 8,228     $ 7,799
                                                                            =======     =======

LIABILITIES AND OWNERS' EQUITY
CURRENT LIABILITIES
Accounts payable and other current liabilities .........................    $   915     $   908
Short-term borrowings ..................................................         26          23
                                                                            -------     -------
   TOTAL CURRENT LIABILITIES ...........................................        941         931

Long-term debt .........................................................      2,286       2,284
Other liabilities ......................................................        346         315
Deferred income taxes ..................................................        187         200
Minority interest ......................................................        147         141
                                                                            -------     -------
   TOTAL LIABILITIES ...................................................      3,907       3,871

OWNERS' EQUITY
Owners' net investment .................................................      4,574       4,150
Accumulated other comprehensive loss ...................................       (253)       (222)
                                                                            -------     -------
   TOTAL OWNERS' EQUITY ................................................      4,321       3,928
                                                                            -------     -------
          TOTAL LIABILITIES AND OWNERS' EQUITY .........................    $ 8,228     $ 7,799
                                                                            =======     =======
</TABLE>

See accompanying notes to Consolidated Financial Statements.


                                       21
<PAGE>   22


LIQUIDITY AND FINANCIAL CONDITION
---------------------------------

LIQUIDITY AND CAPITAL RESOURCES

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

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

    Liquidity After PBG's Initial Public Offering

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

    Financing Transactions

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

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

    Capital Expenditures

    We have incurred and will require capital for ongoing infrastructure,
including acquisitions and investments in developing market opportunities.

    -   Our business requires substantial infrastructure investments to maintain
        our existing level of operations and to fund investments targeted at
        growing our business. Capital infrastructure expenditures totaled $515
        million, $560 million and $507 million during 2000, 1999 and 1998,
        respectively. We believe that capital infrastructure spending will
        continue to be significant, driven by our investments in the cold drink
        segment and capacity needs.

    -   We intend to continue to pursue acquisitions of independent PepsiCo
        bottlers in the U.S. and Canada, particularly in territories contiguous
        to our own. These acquisitions will enable us to provide better service
        to our large retail customers, as well as to reduce costs through
        economies of scale. We also plan to evaluate international acquisition
        opportunities as they become available. Cash spending on acquisitions
        was $26 million, $176 million and $546 million in 2000, 1999 and 1998,
        respectively.

CASH FLOWS

    Fiscal 2000 Compared to Fiscal 1999

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


                                       22
<PAGE>   23

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

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

    Fiscal 1999 Compared to Fiscal 1998

    Net cash provided by operations in 1999 improved to $907 million from $732
million in 1998, due primarily to strong growth in EBITDA and favorable working
capital cash flows resulting from the timing of cash payments and our continued
focus on working capital management.

    Net cash used for investments was $992 million in 1999 compared to $1,027
million in 1998. In 1999, $176 million was utilized for the acquisition of
bottlers in the U.S., Canada and Russia, compared to $546 million in 1998. In
addition, we continued to invest heavily in cold drink equipment in the U.S. and
Canada, resulting in increased capital spending from $507 million in 1998 to
$560 million in 1999. Cash used for investments in 1999 also includes $259
million of loans to PBG, which were used by PBG to pay interest, taxes,
dividends and share repurchases.

    Net cash provided by financing was $244 million in both 1999 and 1998. In
1999, an increase of owner contributions of $202 million was offset by the net
pay-down of $58 million of short-term borrowings and the payment in the first
quarter of 1999 of borrowings in Russia related to the purchase of Pepsi
International Bottlers, LLC. The proceeds from the issuance of third-party debt
of $2.3 billion were used to repay obligations to PepsiCo and fund acquisitions.

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

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

    We are exposed to various market risks including commodity prices, interest
rates on our debt and foreign currency exchange rates.

    Commodity Price Risk

    We are subject to market risks with respect to commodities because our
ability to recover increased costs through higher pricing may be limited by the
competitive environment in which we operate.

    We use futures contracts and options on futures in the normal course of
business to hedge anticipated purchases of certain raw materials and fuel used
in our operations. Currently we have various contracts outstanding for aluminum
and oil purchases in 2001, which establish our purchase price within defined
ranges.

    Interest Rate Risk

    We manage our interest rate exposure on our debt using financial
instruments. We currently have an interest rate swap converting 4% of our
fixed-rate debt to floating-rate debt.


                                       23
<PAGE>   24
    Foreign Currency Exchange Rate Risk

    Operating in international markets involves exposure to movements in
currency exchange rates. Currency exchange rate movements typically also affect
economic growth, inflation, interest rates, government actions and other
factors. These changes can cause us to adjust our financing and operating
strategies. The discussion below of changes in currency exchange rates does not
incorporate these other economic factors. For example, the sensitivity analysis
presented in the foreign currency discussion below does not take into account
the possibility that the impact of an exchange rate movement may or may not be
offset by the impact of changes in other categories.

    Operations outside the U.S. constitute approximately 15% of our net
revenues. As currency exchange rates change, translation of the statements of
operations of our businesses outside the U.S. into U.S. dollars affects
year-over-year comparability. We have not hedged currency risks because cash
flows from international operations have generally been reinvested locally, nor
historically have we entered into hedges to minimize the volatility of reported
earnings. We estimate that a 10% change in foreign currency exchange rates would
affect reported operating income by less than $15 million.

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

    The table below presents information on contracts outstanding at December
30, 2000:

<TABLE>
<CAPTION>
      (dollars in millions)
                                      NOTIONAL     CARRYING      FAIR
                                       AMOUNT       AMOUNT       VALUE
                                       ------       ------       -----
     <S>                              <C>          <C>           <C>
     Commodity futures contracts....    $109        $ --         $ 3
     Commodity options..............     448           5           6
     Interest rate swap.............     100          --          --
</TABLE>

     The table below presents information on contracts outstanding at December
25, 1999:


<TABLE>
<CAPTION>

      (dollars in millions)
                                      NOTIONAL     CARRYING      FAIR
                                       AMOUNT       AMOUNT       VALUE
                                       ------       ------       -----
     <S>                              <C>          <C>           <C>
     Commodity futures contracts....    $ 91        $ --          $ 6
     Commodity options..............      61           1           12
     Interest rate swap.............     100          --           (2)
</TABLE>


                                       24
<PAGE>   25

EURO

    On January 1, 1999, eleven member countries of the European Union
established fixed conversion rates between existing currencies and one common
currency, the Euro. Beginning in January 2002, new Euro-denominated bills and
coins will be issued, and existing currencies will be withdrawn from
circulation. Spain is one of the original member countries that instituted the
Euro and, in June 2000, Greece also elected to institute the Euro effective
January 1, 2001. We have established plans to address the issues raised by the
Euro currency conversion. These issues include, among others, the need to adapt
computer and financial systems, business processes and equipment such as vending
machines to accommodate Euro-denominated transactions and the impact of one
common currency on cross-border pricing. Since financial systems and processes
currently accommodate multiple currencies, we do not expect the system and
equipment conversion costs to be material. Due to numerous uncertainties, we
cannot reasonably estimate the long-term effects one common currency may have on
pricing, costs and the resulting impact, if any, on our financial condition or
results of operations.

CAUTIONARY STATEMENTS

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


                                       25
<PAGE>   26
BOTTLING GROUP, LLC
CONSOLIDATED STATEMENTS OF CHANGES IN OWNERS' EQUITY

(in millions)

FISCAL YEARS ENDED DECEMBER 30, 2000, DECEMBER 25, 1999 AND DECEMBER 26, 1998

<TABLE>
<CAPTION>
                                                               ACCUMULATED
                                                   OWNERS'        OTHER
                                                     NET       COMPREHENSIVE              COMPREHENSIVE
                                                  INVESTMENT       LOSS         TOTAL     INCOME/(LOSS)
                                                  ----------       ----         -----     -------------
<S>                                               <C>          <C>             <C>        <C>
BALANCE AT DECEMBER 27, 1997 ................       $3,520       $  (184)       $3,336
   Comprehensive loss:
     Net loss ...............................         (131)           --          (131)        $(131)
     Owner contributions ....................          132            --           132            --
     Currency translation adjustment ........           --           (35)          (35)          (35)
     Minimum pension liability adjustment ...           --           (19)          (19)          (19)
                                                   -------       -------       -------       -------
   Total comprehensive loss .................                                                  $(185)
                                                                                             =======

BALANCE AT DECEMBER 26, 1998 ................        3,521          (238)        3,283
   Comprehensive income:
     Net income .............................          273            --           273         $ 273
     Owner contributions ....................          356            --           356            --
     Currency translation adjustment ........           --            (3)           (3)           (3)
     Minimum pension liability adjustment ...           --            19            19            19
                                                   -------       -------       -------       -------
   Total comprehensive income ...............                                                  $ 289
                                                                                             =======

BALANCE AT DECEMBER 25, 1999 ................        4,150          (222)        3,928
   Comprehensive income:
     Net income .............................          471            --           471         $ 471
     Cash distributions to owners ...........          (45)           --           (45)           --
     Non-cash distributions to owners .......           (2)           --            (2)           (2)
     Currency translation adjustment ........           --           (31)          (31)          (31)
                                                   -------       -------       -------       -------
   Total comprehensive income ...............                                                  $ 438
                                                                                             =======

BALANCE AT DECEMBER 30, 2000 ................       $4,574       $  (253)       $4,321
                                                   =======       =======       =======
</TABLE>

See accompanying notes to Consolidated Financial Statements.


                                       26
<PAGE>   27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Tabular dollars in millions

NOTE 1--BASIS OF PRESENTATION

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

    PBG was incorporated in Delaware in January 1999 and, prior to its
formation, PBG was an operating unit of PepsiCo. PBG's initial public offering
consisted of 100,000,000 shares of common stock sold to the public on March 31,
1999, equivalent to 65% of its outstanding common stock, leaving PepsiCo the
owner of the remaining 35% of outstanding common stock. PepsiCo's ownership has
increased to 37.8% at December 30, 2000 as a result of net repurchases of
approximately 10 million shares under PBG's share repurchase program.

    In addition, in conjunction with its initial public offering, PBG and
PepsiCo contributed bottling businesses and assets used in the bottling
businesses to Bottling LLC. As a result of the contribution of these assets, PBG
owns 92.9% of Bottling LLC and PepsiCo owns the remaining 7.1%, giving PepsiCo
economic ownership of 42.2% of PBG's combined operations.

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

    On March 8, 1999, PBG issued $1 billion of 7% senior notes due 2029, which
are guaranteed by us. We also guarantee that to the extent there is available
cash, we will distribute pro rata to all owners sufficient cash such that
aggregate cash distributed to PBG will enable PBG to pay its taxes and make
interest payments on the $1 billion 7% senior notes due 2029.

NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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


                                       27
<PAGE>   28

    FISCAL YEAR Our fiscal year ends on the last Saturday in December and, as a
result, a 53rd week is added every five or six years. Fiscal year 2000 consisted
of 53 weeks while fiscal years 1999 and 1998 consisted of 52 weeks.

    REVENUE RECOGNITION We recognize revenue when goods are delivered to
customers. Sales terms do not allow a right of return unless product freshness
dating has expired. Reserves for returned product were $3 million at fiscal
year-end 2000 and $2 million at fiscal years ended 1999 and 1998, respectively.

    ADVERTISING AND MARKETING COSTS We are involved in a variety of programs to
promote our products. We include advertising and marketing costs in selling,
delivery and administrative expenses and expense such costs in the year
incurred. Advertising and marketing costs were $350 million, $342 million and
$293 million in 2000, 1999 and 1998, respectively.

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

    The total bottler incentives we received from PepsiCo and other brand owners
were $566 million, $563 million and $536 million for 2000, 1999 and 1998,
respectively. Of these amounts, we recorded $277 million, $263 million and $247
million for 2000, 1999 and 1998, respectively, in net revenues, and the
remainder as a reduction to selling, delivery and administrative expenses. The
amount of our bottler incentives received from PepsiCo was more than 90% of our
bottler incentives in each of the three years, with the balance received from
the other brand owners.

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

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

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

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

    INTANGIBLE ASSETS Intangible assets include both franchise rights and
goodwill arising from the allocation of the purchase price of businesses
acquired. Goodwill represents the residual purchase price


                                       28
<PAGE>   29

after allocation to all identifiable net assets. Franchise rights and goodwill
are evaluated at the date of acquisition and amortized on a straight-line basis
over their estimated useful lives, which in most cases is from 20 to 40 years.

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

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

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

    FINANCIAL INSTRUMENTS AND RISK MANAGEMENT We use futures contracts and
options on futures to hedge against the risk of adverse movements in the price
of certain commodities and fuel used in our operations. In order to qualify for
deferral hedge accounting of unrealized gains and losses, such instruments must
be designated and effective as a hedge of an anticipated transaction. Changes in
the value of instruments that we use to hedge commodity prices are highly
correlated to the changes in the value of the purchased commodity.

    We review the correlation and effectiveness of these financial instruments
on a periodic basis. Gains and losses on futures contracts that are designated
and effective as hedges of future commodity purchases are deferred and included
in the cost of the related raw materials when purchased. Financial instruments
that do not meet the criteria for hedge accounting treatment are
marked-to-market with the resulting unrealized gain or loss recorded as other
income and expense within selling, delivery and administrative expenses.
Realized gains and losses that result from the early termination of financial
instruments used for hedging purposes are deferred and expensed when the
anticipated transaction actually occurs. Premiums paid for the purchase of
options on futures are recorded as a prepaid expense in the Consolidated Balance
Sheets and are amortized over the duration of the contract.

    From time to time, we utilize interest rate swaps to hedge our exposure to
fluctuations in interest rates. The interest differential to be paid or received
on an interest rate swap is recognized as an adjustment to interest expense as
the differential occurs. The interest differential not yet settled in cash is
reflected in the accompanying Consolidated Balance Sheets as a receivable or
payable within the appropriate current asset or liability captions. If we
terminate an interest rate swap position, the gain or loss realized upon
termination would be deferred and amortized to interest expense over the
remaining term of the underlying debt instrument it was intended to modify, or
would be recognized immediately if the underlying debt instrument was settled
prior to maturity.


                                       29
<PAGE>   30

    We use prepaid forward contracts for the purchase of PBG common stock to
hedge the portion of our deferred compensation costs which are based on PBG's
stock price. The forward contracts are reflected in our Consolidated Balance
Sheets at fair value as a prepaid expense and changes in fair value of these
contracts are reflected as interest expense in our Consolidated Statements of
Operations.

    SHIPPING AND HANDLING COSTS We record shipping and handling costs within
selling, delivery and administrative expenses. Such costs totaled $925 million,
$915 million and $882 million in 2000, 1999 and 1998, respectively.

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

    NEW ACCOUNTING STANDARDS In June 1998, the Financial Accounting Standards
Board (FASB) issued Statement of Financial Accounting Standard 133, "Accounting
for Derivative Instruments and Hedging Activities." This statement establishes
accounting and reporting standards for hedging activities and derivative
instruments, including certain derivative instruments embedded in other
contracts, which are collectively referred to as derivatives. It requires that
an entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value.

    In July 1999, the FASB issued Statement of Financial Accounting Standard
137, delaying the implementation of SFAS 133 for one year. SFAS 133 will now be
effective for our first quarter of fiscal year 2001. In June 2000, the FASB
issued Statement of Financial Accounting Standard 138, amending the accounting
and reporting standards of SFAS 133.

    We will implement the accounting and reporting standards of SFAS 133, as
amended by SFAS 138, on the first day of fiscal year 2001. The adoption of these
pronouncements will result in an increase in assets of less than $10 million and
a corresponding decrease in accumulated other comprehensive loss.

    RECLASSIFICATIONS Certain reclassifications were made in our consolidated
financial statements to 1999 and 1998 amounts to conform with the 2000
presentation.

NOTE 3--COMPARABILITY OF RESULTS

Asset Lives

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


                                       30
<PAGE>   31
<TABLE>
<CAPTION>
    (in years)
                                                                   ESTIMATED USEFUL LIVES
                                                                   ---------------------
                                                                       2000      1999
                                                                       ----      ----
    <S>                                                                <C>     <C>
    Manufacturing equipment .....................................        15        10
    Heavy fleet .................................................        10         8
    Fountain dispensing equipment ...............................         7         5
    Small specialty coolers and specialty marketing equipment ...         3    5 to 7
</TABLE>

Fiscal Year

    Fiscal year 2000 consisted of 53 weeks while fiscal years 1999 and 1998
consisted of 52 weeks. The extra week in 2000 contributed approximately $12
million of additional net income to our 2000 operating results.

PBG's Initial Public Offering

    For the periods prior to PBG's initial public offering and the formation of
Bottling LLC, our Consolidated Financial Statements have been "carved-out" from
the financial statements of PepsiCo using the historical results of operations
and assets and liabilities of our business. The Consolidated Financial
Statements reflect certain costs that may not necessarily be indicative of the
costs we would have incurred had we operated as an independent, stand-alone
entity for all periods presented. These costs include an allocation of PepsiCo's
corporate overhead and interest expense.

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

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

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

<TABLE>
<CAPTION>
                                                                  1999*     1998
                                                                  -----     ----
<S>                                                               <C>       <C>
Corporate overhead expense....................................    $  3      $ 40
Interest expense..............................................    $ 16      $147
PepsiCo's weighted-average interest rate......................     5.8%      6.4%
</TABLE>
*Prior to PBG's initial public offering.

NOTE 4--UNUSUAL IMPAIRMENT AND OTHER CHARGES AND CREDITS

<TABLE>
<CAPTION>
                                                                 1999      1998
                                                                 ----      ----
<S>                                                              <C>      <C>
Non-cash compensation charge..................................   $ 45     $  --
Vacation policy change........................................    (53)       --
Asset impairment and restructuring charges....................     (8)      222
                                                                 ----     -----
                                                                 $(16)    $ 222
                                                                 ====     =====
</TABLE>


                                       31
<PAGE>   32

The 1999 unusual items comprise the following:

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

-       Employees now earn vacation time evenly throughout the year based upon
        service rendered. Previously, employees were fully vested for the
        current year at the beginning of each year. As a result of this change,
        we reversed an accrual of $53 million into income.

-       In the fourth quarter, $8 million of the remaining 1998 restructuring
        reserves was reversed into income, as actual costs incurred to
        renegotiate manufacturing and leasing contracts in Russia and to reduce
        the number of employees were less than the amounts originally estimated.

The 1998 unusual items comprise the following:

-       A fourth-quarter charge of $212 million for asset impairment of $194
        million and other charges of $18 million related to the restructuring of
        our Russian bottling operations. The economic turmoil in Russia, which
        accompanied the devaluation of the ruble in August 1998, had an adverse
        impact on our operations. Consequently, in the fourth quarter we
        experienced a significant drop in demand, resulting in lower net
        revenues and increased operating losses. Additionally, since net
        revenues in Russia are denominated in rubles, whereas a substantial
        portion of costs and expenses at that time were denominated in U.S.
        dollars, our operating margins were further eroded. In response to these
        conditions, we reduced our cost structure primarily through closing four
        of our 26 distribution facilities, renegotiating manufacturing and
        leasing contracts and reducing the number of employees, primarily in
        sales and operations, from approximately 4,500 to 2,000. We also
        evaluated the resulting impairment of long-lived assets, triggered by
        the reduction in utilization of assets caused by the lower demand, the
        adverse change in the business climate and the expected continuation of
        operating losses and cash deficits in that market. The impairment charge
        reduced the net book value of these assets from $245 million to $51
        million, their estimated fair market value based primarily on values
        paid for similar assets in Russia.

        A fourth-quarter charge of $10 million for employee-related and other
        costs, mainly relocation and severance, resulting from the separation of
        Pepsi-Cola North America's concentrate and bottling organizations.

NOTE 5--INVENTORIES

<TABLE>
<CAPTION>
                                                        2000         1999
                                                        ----         ----
<S>                                                     <C>          <C>
Raw materials and supplies....................          $107         $110
Finished goods................................           174          183
                                                        ----         ----
                                                        $281         $293
                                                        ====         ====
</TABLE>

                                       32
<PAGE>   33
NOTE 6--PROPERTY, PLANT AND EQUIPMENT, NET

<TABLE>
<CAPTION>
                                                                            2000         1999
                                                                            ----         ----
<S>                                                                      <C>          <C>
Land.............................................................        $   145      $   145
Buildings and improvements.......................................            903          852
Manufacturing and distribution equipment.........................          2,186        2,112
Marketing equipment..............................................          1,745        1,596
Other............................................................             89           84
                                                                         -------      -------
                                                                           5,068        4,789
Accumulated depreciation.........................................         (2,710)      (2,571)
                                                                         -------      -------
                                                                         $ 2,358      $ 2,218
                                                                         =======      =======
</TABLE>

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

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

NOTE 7--INTANGIBLE ASSETS, NET

<TABLE>
<CAPTION>
                                                                                          2000         1999
                                                                                          ----         ----
<S>                                                                                    <C>          <C>
Franchise rights and other identifiable intangibles.............................       $ 3,557      $ 3,565
Goodwill........................................................................         1,591        1,582
                                                                                       -------      -------
                                                                                         5,148        5,147
Accumulated amortization........................................................        (1,454)      (1,328)
                                                                                       -------      -------
                                                                                       $ 3,694      $ 3,819
                                                                                       =======      =======
</TABLE>

        Identifiable intangible assets arise principally from the allocation of
the purchase price of businesses acquired, and consist primarily of territorial
franchise rights. Our franchise rights are typically perpetual in duration,
subject to compliance with the underlying franchise agreement. We assign amounts
to such identifiable intangibles based on their estimated fair value at the date
of acquisition. Goodwill represents the residual purchase price after allocation
to all identifiable net assets.

NOTE 8--NOTES RECEIVABLE FROM PBG

        We lent PBG $268 million and $259 million during 2000 and 1999,
respectively, through a series of 5-year notes, with interest rates ranging from
7.2% to 8.0%. The proceeds were used by PBG to pay interest, taxes, dividends
and make share repurchases. Accrued interest receivable from PBG on these notes
totaled $26 million and $4 million at December 30, 2000 and December 25, 1999,
respectively, and is recorded within prepaid expenses and other current assets
in our Consolidated Balance Sheets.

NOTE 9--ACCOUNTS PAYABLE AND OTHER CURRENT LIABILITIES

<TABLE>
<CAPTION>
                                                                            2000          1999
                                                                            ----          ----
<S>                                                                        <C>           <C>
Accounts payable.................................................          $ 344         $ 334
Accrued compensation and benefits................................            147           147
Trade incentives.................................................            206           201
Accrued interest.................................................             48            47
Other current liabilities........................................            170           179
                                                                           -----         -----
                                                                           $ 915         $ 908
                                                                           =====         =====
</TABLE>

                                       33
<PAGE>   34

NOTE 10--SHORT-TERM BORROWINGS AND LONG-TERM DEBT

<TABLE>
<CAPTION>
                                                                                         2000         1999
                                                                                         ----         ----
<S>                                                                                   <C>          <C>
Short-term borrowings
    Current maturities of long-term debt......................................        $     1      $    10
    Borrowings under lines of credit..........................................             25           13
                                                                                      -------      -------
                                                                                      $    26      $    23
                                                                                      =======      =======
Long-term debt
    5 5/8% senior notes due 2009..............................................        $ 1,300      $ 1,300
    5 3/8% senior notes due 2004..............................................          1,000        1,000
    Other.....................................................................              6           15
                                                                                      -------      -------
                                                                                        2,306        2,315
    Less: Unamortized discount................................................             19           21
          Current maturities of long-term debt................................              1           10
                                                                                      -------      -------
                                                                                      $ 2,286      $ 2,284
                                                                                      =======      =======
</TABLE>

        Maturities of long-term debt as of December 30, 2000 are 2001: $1
million, 2002: $0, 2003: $0, 2004: $1,000 million, 2005: $0 and thereafter,
$1,305 million.

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

        We allocated $2.3 billion of PepsiCo's long-term debt in our financial
statements prior to issuing the senior notes referred to above. Our interest
expense includes the related allocated interest expense of $16 million in 1999
and $147 million in 1998, and is based on PepsiCo's weighted-average interest
rate of 5.8% and 6.4% in 1999 and 1998, respectively.

        We have available short-term bank credit lines of approximately $135
million and $121 million at December 30, 2000 and December 25, 1999,
respectively. These lines are used to support general operating needs of our
business outside the U.S. The weighted-average interest rate of these lines of
credit outstanding at December 30, 2000, December 25, 1999 and December 26, 1998
was 8.9%, 12.0% and 8.7%, respectively.

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

        Amounts paid to third parties for interest were $131 million, $74
million and $20 million in 2000, 1999 and 1998, respectively. In 1999 and 1998,
allocated interest expense was deemed to have been paid to PepsiCo, in cash, in
the period in which the cost was incurred.

NOTE 11--LEASES

        We have noncancellable commitments under both capital and long-term
operating leases. Capital and operating lease commitments expire at various
dates through 2023. Most leases require payment of related executory costs,
which include property taxes, maintenance and insurance.

                                       34
<PAGE>   35

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

<TABLE>
<CAPTION>


                                                                    COMMITMENTS
                                                                    -----------
                                                              CAPITAL             OPERATING
                                                              -------             ---------
<S>   <C>                                                        <C>               <C>
      2001.............................................          $ --              $  26
      2002.............................................            --                 21
      2003.............................................            --                 12
      2004.............................................            --                  9
      2005.............................................            --                  8
      Later years......................................             3                 60
                                                                 ----              -----
                                                                 $  3              $ 136
                                                                 ====              =====
</TABLE>

        At December 30, 2000, the present value of minimum payments under
capital leases was $1 million, after deducting $2 million for imputed interest.
Our rental expense was $42 million, $55 million and $45 million for 2000, 1999
and 1998, respectively.

NOTE 12--FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

        As of December 30, 2000, our use of derivative instruments was limited
to interest rate swaps, and futures and options contracts entered into with
financial institutions. Our corporate policy prohibits the use of derivative
instruments for trading or speculative purposes, and we have procedures in place
to monitor and control their use.

        The table below presents information on contracts outstanding at
December 30, 2000:

<TABLE>
<CAPTION>
                                                         NOTIONAL          CARRYING          FAIR
                                                          AMOUNT            AMOUNT           VALUE
                                                          ------            ------           -----
<S>                                                        <C>               <C>              <C>
      Commodity futures contracts...................       $109              $--              $ 3
      Commodity options.............................        448                5                6
      Interest rate swap............................        100               --               --
      Equity futures contracts......................         10               10               10
</TABLE>

        The table below presents information on contracts outstanding at
December 25, 1999:

<TABLE>
<CAPTION>
                                                         NOTIONAL          CARRYING          FAIR
                                                          AMOUNT            AMOUNT           VALUE
                                                          ------            ------           -----
<S>                                                        <C>               <C>              <C>
      Commodity futures contracts...................       $ 91              $--              $ 6
      Commodity options.............................         61                1               12
      Interest rate swap............................        100               --               (2)
</TABLE>

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

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

        COMMODITY PRICE RISK We use futures contracts and options on futures in
the normal course of business to hedge anticipated purchases of certain raw
materials and fuel used in our operations.

                                       35
<PAGE>   36

        Deferred gains and losses at year-end 2000 and 1999, as well as gains
and losses recognized as part of cost of sales in 2000, 1999 and 1998, were not
significant. At year-end 2000 and 1999, we had commodity contracts involving
notional amounts of $557 million and $152 million outstanding, respectively.
These notional amounts do not represent amounts exchanged by the parties and
thus are not a measure of our exposure; rather, they are used as the basis to
calculate the amounts due under the agreements.

        INTEREST RATE RISK Prior to PBG's initial public offering and our
formation, we had minimal external interest rate risk to manage. Subsequent to
the offering, as interest rate risk has grown, we have begun to manage interest
rate exposure through the use of an interest rate swap, which converted 4% of
our fixed-rate debt to floating-rate debt. Credit risk from the swap agreement
is dependent both on the movement in interest rates and the possibility of
non-payment by the swap counterparty. We mitigate credit risk by only entering
into swap agreements with high credit-quality counterparties and by netting swap
payments within each contract. The notional amount, interest payment and
maturity date of the swap matches the notional amount, interest payment and
maturity date of the related debt and, accordingly, any market risk or
opportunity associated with this swap is fully offset by the opposite market
impact on the related debt.

        OTHER RISKS At December 30, 2000, we had equity derivative contracts
with financial institutions with a notional amount of $10 million. These prepaid
futures contracts are for the purchase of PBG common stock and are used to hedge
the portion of our deferred compensation costs which are based on PBG's stock
price. These contracts are marked-to-market with changes in fair value
recognized as interest expense in our Consolidated Statements of Operations. The
change in fair value of these contracts was not significant in 2000. The fair
value of these contracts totaled $10 million at December 30, 2000 and was
recorded in prepaid expenses and other current assets in our Consolidated
Balance Sheets.

NOTE 13--PENSION AND POSTRETIREMENT BENEFIT PLANS

PENSION BENEFITS

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

POSTRETIREMENT BENEFITS

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

                                       36
<PAGE>   37

<TABLE>
<CAPTION>
                                                                                                     PENSION
                                                                                         ---------------------------------
Components of net periodic benefit costs:                                                2000          1999           1998
-----------------------------------------                                                ----          ----           ----
<S>                                                                                      <C>           <C>            <C>
    Service cost...............................................................          $ 27          $ 30           $ 24
    Interest cost..............................................................            49            42             37
    Expected return on plan assets.............................................           (56)          (49)           (45)
    Amortization of transition asset...........................................            --            --             (2)
    Amortization of net loss...................................................            --             4             --
    Amortization of prior service amendments...................................             5             5              4
                                                                                         ----          ----           ----
    Net periodic benefit costs.................................................            25            32             18
    Settlement loss............................................................            --            --              1
                                                                                         ----          ----           ----
    Net periodic benefit costs including settlements...........................          $ 25          $ 32           $ 19
                                                                                         ====          ====           ====
</TABLE>

<TABLE>
<CAPTION>
                                                                                                 POSTRETIREMENT
                                                                                         ---------------------------------
Components of net periodic benefit costs:                                                2000          1999           1998
-----------------------------------------                                                ----          ----           ----
<S>                                                                                      <C>           <C>            <C>
    Service cost...............................................................          $  3          $  4           $  4
    Interest cost..............................................................            14            12             12
    Amortization of net loss...................................................             1            --             --
    Amortization of prior service amendments...................................            (6)           (5)            (5)
                                                                                         ----          ----           ----
    Net periodic benefit costs.................................................          $ 12          $ 11           $ 11
                                                                                         ====          ====           ====
</TABLE>

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

<TABLE>
<CAPTION>
                                                                                            PENSION               POSTRETIREMENT
                                                                                            -------               --------------
Changes in the benefit obligation:                                                       2000         1999       2000         1999
----------------------------------                                                       ----         ----       ----         ----
<S>                                                                                      <C>          <C>        <C>          <C>
    Obligation at beginning of year.............................................         $647         $648       $206         $187
    Service cost................................................................           27           30          3            4
    Interest cost...............................................................           49           42         14           12
    Plan amendments.............................................................            4            3        (10)          --
    Actuarial (gain)/loss.......................................................          (19)         (57)        11           14
    Benefit payments............................................................          (40)         (38)       (12)         (11)
    Acquisitions and other......................................................           (4)          19         --           --
                                                                                         ----         ----       ----         ----
    Obligation at end of year...................................................         $664         $647       $212         $206
                                                                                         ====         ====       ====         ====
</TABLE>

<TABLE>
<CAPTION>
                                                                                            PENSION               POSTRETIREMENT
                                                                                            -------               --------------
Changes in the fair value of assets:                                                     2000         1999       2000         1999
------------------------------------                                                     ----         ----       ----         ----
<S>                                                                                      <C>          <C>        <C>          <C>
    Fair value at beginning of year.............................................         $597         $541       $ --         $ --
    Actual return on plan assets................................................           96           85         --           --
    Employer contributions......................................................           16           --         12           11
    Benefit payments............................................................          (40)         (38)       (12)         (11)
    Acquisitions and other......................................................           (4)           9         --           --
                                                                                         ----         ----       ----         ----
    Fair value at end of year...................................................         $665         $597       $ --         $ --
                                                                                         ====         ====       ====         ====
</TABLE>

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

<TABLE>
<CAPTION>
                                                                                            PENSION                 POSTRETIREMENT
                                                                                            -------                 --------------
                                                                                         2000         1999        2000         1999
                                                                                         ----         ----        ----         ----
<S>                                                                                       <C>          <C>        <C>          <C>
Projected benefit obligation....................................................          $31          $32        $212         $206
Accumulated benefit obligation..................................................           14           12         212          206
Fair value of plan assets.......................................................           --           --          --           --
</TABLE>

                                       37
<PAGE>   38
        Funded status recognized on the Consolidated Balance Sheets:

<TABLE>
<CAPTION>
                                                                                            PENSION              POSTRETIREMENT
                                                                                            -------              --------------
                                                                                       2000          1999       2000         1999
                                                                                       ----          ----       ----         ----
<S>                                                                                     <C>           <C>        <C>          <C>
Funded status at end of year....................................................      $  1          $(50)      $(212)       $(206)
Unrecognized prior service cost.................................................        31            33         (21)         (17)
Unrecognized (gain)/loss........................................................       (73)          (14)         45           35
Unrecognized special termination benefits.......................................        (1)           (2)         --           --
Fourth quarter employer contributions...........................................        10            --           7            3
                                                                                      -----         ----       -----        -----
Net amounts recognized..........................................................      $(32)         $(33)      $(181)       $(185)
                                                                                      =====         ====       =====        =====
</TABLE>

        Net amounts recognized in the Consolidated Balance Sheets:

<TABLE>
<CAPTION>
                                                                                         PENSION                POSTRETIREMENT
                                                                                         -------                --------------
                                                                                    2000          1999          2000         1999
                                                                                    ----          ----          ----         ----
<S>                                                                                   <C>           <C>          <C>          <C>
Prepaid benefit costs.........................................................      $ 31          $ 18         $  --        $  --
Accrued benefit liability.....................................................       (63)          (51)         (181)        (185)
                                                                                   ------        ------        -----        -----
Net amounts recognized........................................................      $(32)         $(33)        $(181)       $(185)
                                                                                    ====          ====         =====        =====
</TABLE>

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

<TABLE>
<CAPTION>
                                                                                                   PENSION
                                                                                                   -------
                                                                                          2000          1999         1998
                                                                                          ----          ----         ----
<S>                                                                                      <C>           <C>          <C>
Discount rate for benefit obligation............................................          7.8%          7.8%         6.8%
Expected return on plan assets..................................................         10.0%         10.0%        10.0%
Rate of compensation increase...................................................          4.6%          4.3%         4.8%
</TABLE>

<TABLE>
<CAPTION>
                                                                                            POSTRETIREMENT
                                                                                            --------------
                                                                                        2000          1999         1998
                                                                                        ----          ----         ----
<S>                                                                                     <C>           <C>          <C>
Discount rate for benefit obligation............................................        7.8%          7.8%         6.9%
</TABLE>

COMPONENTS OF PENSION ASSETS

        The pension plan assets are principally invested in stocks and bonds.

HEALTH CARE COST TREND RATES

        We have assumed an average increase of 5.9% in 2001 in the cost of
postretirement medical benefits for employees who retired before cost sharing
was introduced. This average increase is then projected to decline gradually to
5.5% in 2005 and thereafter.

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

<TABLE>
<CAPTION>
                                                                                                                 1%            1%
                                                                                                              INCREASE      DECREASE
                                                                                                              --------      --------
<S>                                                                                                                 <C>        <C>
Effect on total fiscal year 2000 service and interest cost components.....................................          $1         $(1)
Effect on the fiscal year 2000 accumulated postretirement benefit obligation..............................           5          (5)
</TABLE>

OTHER EMPLOYEE BENEFIT PLANS

        We made several changes to our employee benefit plans that took effect
in fiscal year 2000. The changes were made to our vacation policy, pension and
retiree medical plans and included some benefit

                                       38
<PAGE>   39

enhancements as well as cost containment provisions. These changes did not have
a significant impact on our financial results in 2000.

        In 1999, we implemented a matching company contribution to our 401(k)
plan, which began in 2000. The match is dependent upon the employee's
contribution and years of service. Fiscal year 2000 matching company
contributions were approximately $15 million.

        In the fourth quarter of 1999, we contributed $16 million to a defined
contribution plan as a one-time payment for the benefit of management employees.
The amount was based on full-year 1999 performance and included other
incentive-related features.

NOTE 14--EMPLOYEE STOCK OPTION PLANS

        Under our long-term incentive plan, PBG stock options are issued to
middle and senior management employees and vary according to salary and level.
Options granted in 2000 had exercise prices ranging from $18.75 per share to
$31.75 per share, expire in 10 years and become exercisable 25% after the first
year, 25% after the second year and the remainder after the third year. Options
granted in 1999 had exercise prices ranging from $19.25 per share to $23 per
share and, with the exception of our chairman's options, are exercisable after
three years and expire in 10 years. Our chairman's 1999 options are exercisable
ratably over the three years following PBG's initial public offering date.

        In conjunction with PBG's initial public offering and our formation, PBG
issued a one-time founders' grant of options to all full-time non-management
employees in 1999 to purchase 100 shares of PBG stock. These options have an
exercise price equal to the initial public offering price of $23 per share, are
exercisable after three years, and expire in 10 years.

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

        The following table summarizes option activity:

<TABLE>
<CAPTION>
                                                                                         2000                       1999
                                                                                  -----------------         ---------------------
                                                                                          WEIGHTED-                      WEIGHTED-
                                                                                           AVERAGE                        AVERAGE
                                                                                           EXERCISE                      EXERCISE
                                                                               OPTIONS      PRICE        OPTIONS           PRICE
(options in millions)                                                          -------      -----        --------          -----
<S>                                                                            <C>          <C>          <C>              <C>
Outstanding at beginning of year...........................................       11.2      $ 22.98            --         $    --
    Granted................................................................        6.6        19.13          12.1           22.98
    Exercised..............................................................       (0.1)       21.05            --              --
    Forfeited..............................................................       (1.1)       22.39          (0.9)          23.00
                                                                                 -----      -------         -----         -------
Outstanding at end of year.................................................       16.6      $ 21.50          11.2         $ 22.98
                                                                                 =====      =======         =====         =======
Exercisable at end of year.................................................        0.9      $ 22.22            --         $    --
                                                                                 =====      =======         =====         =======
Weighted-average fair value of options granted during the
    year...................................................................                 $  9.35                       $ 10.29
                                                                                            =======                       =======
</TABLE>

                                       39
<PAGE>   40

        Stock options outstanding and exercisable at December 30, 2000:

<TABLE>
<CAPTION>
                                              OPTIONS OUTSTANDING                                OPTIONS EXERCISABLE
                                 ------------------------------------------------------     -----------------------------------
                                                WEIGHTED-AVERAGE
                                                   REMAINING
(options in millions)                          CONTRACTUAL LIFE        WEIGHTED-AVERAGE                        WEIGHTED-AVERAGE
RANGE OF EXERCISE PRICE           OPTIONS           IN YEARS            EXERCISE PRICE        OPTIONS           EXERCISE PRICE
-----------------------           -------           --------            --------------        -------           --------------
<S>                                  <C>                <C>                   <C>               <C>                   <C>
$18.75-$22.99                         6.2               8.99                  $18.77             0.2                   $18.75
$23.00-$31.75                        10.4               8.02                   23.12             0.7                    23.00
                                     ----               ----                  ------             ---                   ------
                                     16.6               8.38                  $21.50             0.9                   $22.22
                                     ====               ====                  ======             ===                   ======
</TABLE>

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

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

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

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

NOTE 15--INCOME TAXES

        We are a limited liability company, taxable as a partnership for U.S.
tax purposes and, as such, generally pay no U.S. federal or state income taxes.
Our federal and state distributable share of income, deductions and credits are
allocated to our owners based on their percentage of ownership. However, certain
domestic and foreign affiliates pay income taxes in their respective
jurisdictions. We had income tax expense of $22 million and $4 million in 2000
and 1999, respectively. Our income tax benefit for 1998 was $1 million. These
amounts were comprised of current income tax expenses of $27 million, $4 million
and $4 million and deferred income tax benefits of $5 million, $0 and $5 million
in 2000, 1999 and 1998, respectively.

                                       40
<PAGE>   41

        The details of our 2000 and 1999 deferred tax liabilities (assets) are
set forth below:



<TABLE>
<CAPTION>
                                                                                          2000         1999
                                                                                          ----         ----
<S>                                                                                      <C>          <C>
Intangible assets and property, plant and equipment.............................         $ 185        $ 191
Other...........................................................................             7            3
                                                                                         -----        -----
Gross deferred tax liabilities..................................................           192          194
                                                                                         -----        -----

Net operating loss carryforwards................................................          (139)        (132)
Various liabilities and other...................................................           (27)         (26)
                                                                                         -----        -----
Gross deferred tax assets.......................................................          (166)        (158)
Deferred tax asset valuation allowance..........................................           148          147
                                                                                         -----        -----
Net deferred tax assets.........................................................           (18)         (11)
                                                                                         -----        -----

Net deferred tax liability......................................................         $ 174        $ 183
                                                                                         =====        =====

Included in:
Prepaid expenses and other current assets.......................................         $ (13)       $ (17)
Deferred income taxes...........................................................           187          200
                                                                                         -----        -----
                                                                                         $ 174        $ 183
                                                                                         =====        =====
</TABLE>

        We have net operating loss carryforwards totaling $402 million at
December 30, 2000, which are available to reduce future taxes in the U.S.,
Spain, Greece and Russia. Of these carryforwards, $40 million expire in 2001 and
$362 million expire at various times between 2002 and 2019. We have established
a full valuation allowance for the net operating loss carryforwards attributable
to Spain, Greece and Russia based upon our projection that these losses will
more likely than not expire before they can be used. In addition, at December
30, 2000 we have a tax credit carryforward in the U.S. of $7 million with an
indefinite carryforward period.

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

        Our valuation allowances, which reduce deferred tax assets to an amount
that will more likely than not be realized, have increased by $1 million and $12
million in 2000 and 1999, respectively.

        Income taxes receivable were $7 million and $0 at December 30, 2000 and
December 25, 1999, respectively. Such amounts are recorded within prepaid
expenses and other current assets in our Consolidated Balance Sheets. Amounts
paid to taxing authorities for income taxes were $34 million and $3 million in
2000 and 1999, respectively. In 1998 our allocable share of income taxes was
deemed to have been paid to PepsiCo, in cash, in the period in which the cost
was incurred.

NOTE 16--GEOGRAPHIC DATA

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

                                       41
<PAGE>   42

<TABLE>
<CAPTION>
                                                                                                         NET REVENUES
                                                                                          --------------------------------------
                                                                                            2000            1999            1998
                                                                                            ----            ----            ----
<S>                                                                                       <C>             <C>             <C>
      U.S.....................................................................            $6,830          $6,352          $5,886
      Other countries.........................................................             1,152           1,153           1,155
                                                                                          ------          ------          ------
                                                                                          $7,982          $7,505          $7,041
                                                                                          ======          ======          ======
</TABLE>

<TABLE>
<CAPTION>
                                                                                                      LONG-LIVED ASSETS
                                                                                          --------------------------------------
                                                                                            2000            1999            1998
                                                                                            ----            ----            ----
<S>                                                                                       <C>             <C>             <C>
      U.S.....................................................................            $5,719          $5,398          $5,024
      Other countries.........................................................               960             987             980
                                                                                          ------          ------          ------
                                                                                          $6,679          $6,385          $6,004
                                                                                          ======          ======          ======
</TABLE>

NOTE 17--RELATIONSHIP WITH PEPSICO

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

        (1)     the Master Bottling Agreement for cola beverages bearing the
                "Pepsi-Cola" and "Pepsi" trademark, including Pepsi, Diet Pepsi
                and Pepsi ONE in the United States; bottling and distribution
                agreements for non-cola products in the United States, including
                Mountain Dew; and a Master Fountain Syrup Agreement in the
                United States;

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

        (3)     a shared services agreement whereby PepsiCo provides us with
                certain administrative support, including procurement of raw
                materials, transaction processing, such as accounts payable and
                credit and collection, certain tax and treasury services, and
                information technology maintenance and systems development.
                Beginning in 1998, a PepsiCo affiliate has provided casualty
                insurance to us; and

        (4)     transition agreements that provide certain indemnities to the
                parties, and provide for the allocation of tax and other assets,
                liabilities and obligations arising from periods prior to PBG's
                initial public offering. Under our tax separation agreement,
                PepsiCo maintains full control and absolute discretion for any
                combined or consolidated tax filings for tax periods ending on
                or before PBG's initial public offering. PepsiCo has
                contractually agreed to act in good faith with respect to all
                tax audit matters affecting us. In addition, PepsiCo has agreed
                to use their best efforts to settle all joint interests in any
                common audit issue on a basis consistent with prior practice.

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

        We share a business objective with PepsiCo of increasing the
availability and consumption of Pepsi-Cola beverages. Accordingly, PepsiCo
provides us with various forms of marketing support to promote its beverages.
This support covers a variety of initiatives, including marketplace support,
marketing programs, capital equipment investment and shared media expense. Based
on the objective of

                                       42
<PAGE>   43
the programs and initiatives, we record marketing support as an adjustment to
net revenues or as a reduction of selling, delivery and administrative expense.

        We manufacture and distribute fountain products and provide fountain
equipment service to PepsiCo customers in some territories in accordance with
the Pepsi beverage agreements. We pay a royalty fee to PepsiCo for the Aquafina
trademark.

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

<TABLE>
<CAPTION>
                                                                                        2000            1999            1998
                                                                                        ----            ----            ----
<S>                                                                                   <C>             <C>             <C>
      Net revenues..........................................................         $   244         $   236         $   228
      Cost of sales.........................................................          (1,626)         (1,488)         (1,396)
      Selling, delivery and administrative expenses.........................             266             285             260
</TABLE>

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

        Net amounts receivable from PepsiCo and its affiliates were $8 million
at December 30, 2000 and net amounts payable to PepsiCo and its affiliates were
$5 million at December 25, 1999. Such amounts are recorded within accounts
receivable and accounts payable and other current liabilities, respectively, in
our Consolidated Balance Sheets.

NOTE 18--CONTINGENCIES

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

NOTE 19--ACQUISITIONS

        During 2000 and 1999, we acquired the exclusive right to manufacture,
sell and distribute Pepsi-Cola beverages from several independent PepsiCo
franchise bottlers. These acquisitions were accounted for by the purchase
method. During 2000, we acquired two territories in Canada for an aggregate
purchase price of $26 million in cash. During 1999, we acquired four territories
in the U.S., one in Canada and one in Russia for an aggregate purchase price of
$185 million in cash and assumed debt. The aggregate purchase price exceeded the
fair value of net tangible assets acquired, including the resulting tax effect,
by approximately $14 million and $174 million in 2000 and 1999, respectively.
The excess was recorded in intangible assets.

NOTE 20--SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

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

</TABLE>

                                       43
<PAGE>   44
<TABLE>
<CAPTION>
                                      FIRST          SECOND                 THIRD          FOURTH
  1999                               QUARTER         QUARTER               QUARTER         QUARTER              FULL YEAR
                                     -------         -------               -------         -------              ---------
<S>                                   <C>             <C>                   <C>             <C>                    <C>
  Net revenues...................     $1,452          $1,831                $2,036          $2,186                 $7,505
  Gross profit...................        617             785                   874             933                  3,209
  Operating income...............         42              92 (2)               205              73 (3)                412
  Net income.....................         12              55                   171              35                    273

</TABLE>

(1) Our 2000 results were impacted by a change in estimated useful lives of
certain categories of assets. The favorable impact of this change in asset lives
increased operating income by $14 million in the first quarter, $18 million in
the second quarter, $16 million in the third quarter, $21 million in the fourth
quarter and $69 million for the full year.

(2) Includes a $45 million non-cash compensation charge.

(3) Includes $61 million of income for vacation policy changes and restructuring
accrual reversal.

The first, second and third quarters of each year consisted of 12 weeks, while
the fourth quarter consisted of 17 weeks in 2000 and 16 weeks in 1999. The extra
week in fiscal year 2000 contributed $12 million of additional net income to our
fourth quarter and fiscal year 2000 results.

See Note 4 of the Consolidated Financial Statements for further information
regarding unusual impairment and other charges and credits included in the table
above.

                                       44
<PAGE>   45

                         REPORT OF INDEPENDENT AUDITORS

The Owners of
Bottling Group, LLC:

        We have audited the accompanying Consolidated Balance Sheets of Bottling
Group, LLC as of December 30, 2000 and December 25, 1999, and the related
Consolidated Statements of Operations, Cash Flows and Changes in Owners' Equity
for each of the fiscal years in the three-year period ended December 30, 2000.
These Consolidated Financial Statements are the responsibility of management of
Bottling Group, LLC. Our responsibility is to express an opinion on these
Consolidated Financial Statements based on our audits.

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

        In our opinion, the Consolidated Financial Statements referred to above
present fairly, in all material respects, the financial position of Bottling
Group, LLC as of December 30, 2000 and December 25, 1999, and the results of its
operations and its cash flows for each of the fiscal years in the three-year
period ended December 30, 2000, in conformity with accounting principles
generally accepted in the United States of America.

/s/ KPMG LLP

New York, New York
January 30, 2001

                                       45
<PAGE>   46

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

        Not applicable.

                                    PART III

ITEM 10. MANAGING DIRECTORS AND EXECUTIVE OFFICERS OF BOTTLING LLC

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

JOHN T. CAHILL, 43, is a Managing Director of Bottling LLC. He is also President
and Chief Operating Officer of PBG and has been designated to succeed Mr.
Weatherup as Chief Executive Officer of PBG in late 2001. Mr. Cahill has been a
member of PBG's Board of Directors since January 1999 and served as PBG's
Executive Vice President and Chief Financial Officer prior to becoming President
and Chief Operating Officer in August 2000. He was Executive Vice President and
Chief Financial Officer of the Pepsi-Cola Company from April 1998 until November
1998. Prior to that, Mr. Cahill was Senior Vice President and Treasurer of
PepsiCo, having been appointed to that position in April 1997. In 1996, he
became Senior Vice President and Chief Financial Officer of Pepsi-Cola North
America. Mr. Cahill joined PepsiCo in 1989 where he held several other senior
financial positions through 1996.

PAMELA C. MCGUIRE, 53, is a Managing Director of Bottling LLC. She is also the
Senior Vice President, General Counsel and Secretary of PBG. She was the Vice
President and Division Counsel of the Pepsi-Cola Company from 1989 to March
1998, at which time she was named its Vice President and Associate General
Counsel. Ms. McGuire joined PepsiCo in 1977 and held several other positions in
its legal department through 1989.

MATTHEW M. MCKENNA, 50, is a Managing Director of Bottling LLC. He is also the
Senior Vice President and Treasurer of PepsiCo. Prior to becoming Senior Vice
President and Treasurer, he served as PepsiCo's Senior Vice President, Taxes.
Prior to joining PepsiCo in 1993 as Vice President, Taxes, he was a partner with
the law firm of Winthrop, Stimson, Putnam & Roberts in New York.

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

                                       46
<PAGE>   47
ITEM 11. EXECUTIVE COMPENSATION

        Summary of Cash and Certain Other Compensation. The following table
provides information on compensation earned and stock options awarded for the
years indicated by PBG to Bottling LLC's Chief Executive Officer and the two
other executive officers of Bottling LLC as of the end of the 2000 fiscal year
in accordance with the rules of the Securities and Exchange Commission. These
three individuals are referred to as the named executive officers. Amounts shown
include compensation paid or awarded to the named executive officers for periods
prior to the initial public offering.

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                           ANNUAL COMPENSATION (1)                           LONG-TERM COMPENSATION
                                                                                                     AWARDS
                                                                                           SECURITIES
                                                                                              UNDER
                                                                          OTHER ANNUAL        LYING       ALL OTHER
NAME AND PRINCIPAL               YEAR       SALARY        BONUS ($)     COMPENSATION ($)     OPTIONS     COMPENSATION
POSITION                                      ($)                                              (#)           ($)
<S>                              <C>    <C>           <C>             <C>                <C>             <C>
Craig E. Weatherup               2000   $  858,654    $ 1,488,000     $  67,500(2)                   0(3) $ 24,819(4)
Principal Executive Officer      1999      800,000      1,200,000          168,143           1,086,957      12,411
                                 1998      792,307        844,000          131,182             156,486      11,698

Lionel L. Nowell, III            2000      149,423(5)     460,650(5)         8,814(6)           95,484     500,000(7)
Principal Financial Officer      1999        ----         ----               ----                 ----        ----
                                 1998        ----         ----               ----                 ----        ----

Andrea L. Forster                2000      163,857        126,990            4,695(6)            33,707       0
Principal Accounting             1999      135,565         74,180            4,695               17,557    100,000(8)
Officer                          1998      118,599         31,270            4,695                ----        0
</TABLE>

---------------------
(1)     Annual compensation for 2000 reflects a 53-week period.
(2)     This amount includes benefits from the use of corporate transportation
        and reimbursement for appropriate tax-related expenses.
(3)     Mr. Weatherup did not receive a long-term incentive award for 2000;
        however, he received a Founder's Grant of stock options in 1999.
(4)     This amount includes $20,838 in preferential earnings on income deferred
        by Mr. Weatherup. In order to earn a preferential return, Mr. Weatherup
        elected a risk feature under which, if he terminated his employment, he
        would forfeit all his deferred income. In addition, this amount includes
        $3,981, which reflects the Company paid portion of a life insurance
        policy for Mr. Weatherup. If Mr. Weatherup dies while employed by the
        Company, the Company is reimbursed for its payments from the proceeds of
        the policy.
(5)     Mr. Nowell's salary reflects his employment at PBG commencing as of
        August 8, 2000. Mr. Nowell's bonus reflects a full year payout based on
        PBG's business performance.
(6)     This amount represents reimbursement for appropriate tax-related
        expenses.
(7)     This amount reflects a one-time grant of restricted stock to ensure
        senior management continuity. This grant is similar to one-time awards
        made to key PBG managers in 1999. Mr. Nowell must remain employed by PBG
        through February 2003 to receive this award.
(8)     This amount reflects a one-time cash award to ensure senior management
        continuity. Ms. Forster must remain employed by PBG through February
        2002 to receive this award.

                                       47
<PAGE>   48

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

        PBG holds 92.9% and PepsiCo indirectly holds 7.1% of the ownership in
Bottling LLC.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

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

        STOCK OWNERSHIP AND DIRECTOR RELATIONSHIPS WITH PEPSICO. PBG was
initially incorporated in January 1999 as a wholly owned subsidiary of PepsiCo
to effect the separation of most of PepsiCo's company-owned bottling businesses.
PBG became a publicly traded company on March 31, 1999. As of February 21, 2001,
PepsiCo's ownership represented 37.9% of the outstanding Common Stock and 100%
of the outstanding Class B Common Stock together representing 46.2% of the
voting power of all classes of PBG's voting stock. PepsiCo also owns 7.1% of the
equity of Bottling Group, LLC, PBG's principal operating subsidiary, giving
PepsiCo economic ownership of 42.4% of PBG's combined operations.

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

        Material agreements and transactions between PBG and PepsiCo (and
certain of its affiliates) during 2000 are described below.

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

        During 2000, total payments by PBG to PepsiCo for concentrates,
royalties and finished beverage products were approximately $1.5 billion.

        PBG Manufacturing Services. PBG provides manufacturing services to
PepsiCo in connection with the production of certain finished beverage products.
In 2000, amounts paid or payable by PepsiCo to PBG for these services were
approximately $21.1 million.

        Transactions with Joint Ventures in which PepsiCo holds an equity
interest. PBG purchases tea concentrate and finished beverage products from the
Pepsi/Lipton Tea Partnership, a joint venture of Pepsi-Cola North America, a
division of PepsiCo, and Lipton (the "Partnership"). During 2000, total amounts
paid or payable to PepsiCo for the benefit of the Partnership were approximately
$113.3 million. In addition, PBG provides certain manufacturing services in
connection with the hot-filled tea products of the Partnership to PepsiCo for
the benefit of the Partnership. In 2000, amounts paid or payable by PepsiCo to
PBG for these services were approximately $14.8 million.

                                       48
<PAGE>   49

        PBG purchases finished beverage products from the North American Coffee
Partnership, a joint venture of Pepsi-Cola North America and Starbucks. During
2000, amounts paid or payable to the North American Coffee Partnership by PBG
were approximately $95.8 million.

        In addition to the amounts described above, PBG received approximately
$4.1 million from an international joint venture, in which PepsiCo holds an
equity interest.

        Purchase of Snack Food Products from Frito-Lay, Inc. PBG purchases snack
food products from Frito-Lay, Inc., a subsidiary of PepsiCo, for sale and
distribution through all of Russia except for Moscow. In 2000, amounts paid or
payable by PBG to Frito-Lay, Inc. were approximately $23.7 million.

        Shared Services. PepsiCo provides various services to PBG pursuant to a
shared services agreement, including procurement of raw materials, processing of
accounts payable and credit and collection, certain tax and treasury services
and information technology maintenance and systems development. During 2000,
amounts paid or payable to PepsiCo for shared services totaled approximately
$138.8 million.

        Pursuant to the shared services agreements, PBG provides certain
employee benefit and international tax and accounting services to PepsiCo.
During 2000, payments to PBG from PepsiCo for these services totaled
approximately $638,000.

        Rental Payments. Amounts paid or payable by PepsiCo to PBG for rental of
office space at certain PBG facilities were approximately $10.6 million in 2000.

        Insurance Services. Hillbrook Insurance Company, Inc., a subsidiary of
PepsiCo, provides insurance and risk management services to PBG pursuant to a
contractual arrangement. Costs associated with such services in 2000 totaled
approximately $62.1 million. Additionally, in December 2000, PBG paid Hillbrook
Insurance Company, Inc. approximately $57.6 million for insurance and risk
management services for 2001.

        National Fountain Services. PBG provides certain manufacturing, delivery
and equipment maintenance services to PepsiCo's national fountain customers. In
2000, net amounts paid or payable by PepsiCo to PBG for these services were
approximately $188.5 million.

        Marketing and Other Support Arrangements. PepsiCo provides PBG with
various forms of marketing support. The level of this support is negotiated
annually and can be increased or decreased at the discretion of PepsiCo. This
marketing support is intended to cover a variety of programs and initiatives,
including direct marketplace support (including point-of-sale materials),
capital equipment funding and shared media and advertising support. For 2000,
total direct marketing support funding paid or payable to PBG by PepsiCo
approximated $523.6 million.

        Transactions with Bottlers in which PepsiCo holds an Equity Interest.
PBG and PepsiAmericas, Inc., a bottler in which PepsiCo owns an equity interest,
and PBG and Pepsi Bottling Ventures LLC, a bottler in which PepsiCo owns an
equity interest, bought from and sold to each other finished beverage products.
These transactions occurred in instances where the proximity of one party's
production facilities to the other party's markets or lack of manufacturing
capability, as well as other economic considerations, made it more efficient or
desirable for one bottler to buy finished product from another. In 2000, PBG's
sales to those bottlers totaled approximately $18.5 million and purchases were
approximately $1.5 million.

        PBG provides certain administrative support services to PepsiAmericas,
Inc. and Pepsi Bottling Ventures LLC. In 2000, amounts paid or payable by
PepsiAmericas, Inc. and Pepsi Bottling Ventures LLC to PBG for these services
were approximately $894,000.

                                       49
<PAGE>   50

        Bottling Group, LLC Distribution. PepsiCo has a 7.1% ownership interest
in Bottling LLC. In accordance with the Bottling LLC Limited Liability Company
Agreement, PepsiCo received a $3.2 million distribution from Bottling LLC in
2000.

        Relationships and Transactions with Management and Others. Linda G.
Alvarado, a member of PBG's Board of Directors, together with her husband and
children, own and operate Taco Bell and Pizza Hut restaurant companies that
purchase beverage products from PBG. In 2000, the total amount of these
purchases was approximately $382,521.

                                       50
<PAGE>   51

                                     PART IV

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

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

        Consolidated Statements of Operations - Fiscal years ended December 30,
        2000, December 25, 1999 and December 26, 1998.

        Consolidated Statements of Cash Flows - Fiscal years ended December 30,
        2000, December 25, 1999 and December 26, 1998.

        Consolidated Balance Sheets - December 30, 2000 and December 25, 1999.

        Consolidated Statements of Changes in Owners' Equity - Fiscal years
        ended December 30, 2000, December 25, 1999 and December 26, 1998.

        Notes to Consolidated Financial Statements.

        Report of Independent Auditors.

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

<TABLE>
<CAPTION>
                                                                                             Page
                                                                                             ----
<S>                                                                                         <C>
Report of Independent Auditors...............................................................F-2

Schedule II - Valuation and Qualifying Accounts for the fiscal years ended
              December 30, 2000, December 25, 1999 and December 26, 1998 ....................F-3
</TABLE>

                3.      Exhibits

                                See Index to Exhibits on pages E-1 -
E-2.

        (b)     Reports on Form 8-K

                        None.

                                       51
<PAGE>   52

                                   SIGNATURES

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

Dated:  March 28, 2001
                                                    Bottling Group, LLC


                                          By:       /s/ Craig E. Weatherup
                                                    ----------------------
                                                    Craig E. Weatherup
                                                    Principal Executive Officer

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

<TABLE>
<CAPTION>
SIGNATURE                                                  TITLE                                       DATE
<S>                                                        <C>                                         <C>
/s/ Craig E. Weatherup                                     Principal Executive Officer                 March 28, 2001
----------------------
Craig E. Weatherup

/s/ Lionel L.  Nowell, III                                 Principal Financial Officer                 March 28, 2001
--------------------------
Lionel L. Nowell, III

/s/ Andrea L. Forster                                      Principal Accounting Officer                March 28, 2001
---------------------
Andrea L. Forster

/s/ John T. Cahill                                         Managing Director                           March 28, 2001
------------------
John T. Cahill

/s/ Pamela C. McGuire                                      Managing Director                           March 28, 2001
---------------------
Pamela C. McGuire

/s/ Matthew M. McKenna                                     Managing Director                           March 26_, 2001
----------------------
Matthew M. McKenna
</TABLE>

                                      S-1
<PAGE>   53

                      INDEX TO FINANCIAL STATEMENT SCHEDULE

<TABLE>
<CAPTION>
                                                                                                                     PAGE
                                                                                                                     ----
<S>                                                                                                                  <C>
Report of Independent Auditors..................................................................................     F-2
Schedule II - Valuation and Qualifying Accounts for the fiscal years ended December 30, 2000,
      December 25, 1999 and December 26, 1998 ..................................................................     F-3
</TABLE>

                                      F-1
<PAGE>   54
                         REPORT OF INDEPENDENT AUDITORS

Owners of
Bottling Group, LLC:

Under date of January 30, 2001, we reported on the Consolidated Balance Sheets
of Bottling Group, LLC, as of December 30, 2000 and December 25, 1999, and the
related Consolidated Statement of Operations, Cash Flows and Changes in Owners'
Equity for each of the fiscal years in the three-year period ended December 30,
2000, which are included in the Bottling Group, LLC Annual Report on Form 10-K.
In connection with our audits of the aforementioned Consolidated Financial
Statements, we also audited the related consolidated financial statement
schedule included in the Bottling Group, LLC Annual Report on Form 10-K. This
consolidated financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion on this consolidated
financial statement schedule based on our audits.

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






/S/ KPMG LLP


New York, New York
January 30, 2001

                                      F-2
<PAGE>   55

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

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

FISCAL YEAR ENDED
<S>                                     <C>                  <C>                  <C>                  <C>                 <C>
DECEMBER 30, 2000
   Allowance for losses
        on trade accounts
        receivable ...........          $48                  $ 2                  $--                  $ 8                 $42

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

DECEMBER 26, 1998
   Allowance for losses
        on trade accounts
        receivable..........            $45                  $13                  $--                  $12                 $46
</TABLE>

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

                                      F-3
<PAGE>   56

                                INDEX TO EXHIBITS
                                  ITEM 14(a)(3)

EXHIBIT

3.1             Articles of Formation of Bottling LLC which is incorporated
                herein by reference from Exhibit 3.4 to Bottling LLC's
                Registration Statement on Form S-4 (Registration No. 333-80361)

3.2             Amended and Restated Limited Liability Company Agreement of
                Bottling LLC which is incorporated herein by reference from
                Exhibit 3.5 to Bottling LLC's Registration Statement on Form S-4
                (Registration No. 333-80361)

4.1             Indenture dated as of February 8, 1999 among Pepsi Bottling
                Holdings, Inc., PepsiCo, Inc. and The Chase Manhattan Bank, as
                trustee, relating to $1,000,000,000 5 3/8% Senior Notes due 2004
                and $1,300,000,000 5 5/8% Senior Notes due 2009 incorporated
                herein by reference to Exhibit 10.9 to PBG's Registration
                Statement on Form S-1/A (Registration No. 333-70291).

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

4.3             Indenture, dated as of March 8, 1999, by and among The Pepsi
                Bottling Group, Inc., as obligor, Bottling Group, LLC, as
                guarantor, and The Chase Manhattan Bank, as trustee, relating to
                $1,000,000,000 7% Series B Senior Notes due 2029 which is
                incorporated herein by reference to Exhibit 10.14 to PBG's
                Registration Statement on Form S-1/A (Registration No.
                333-70291).

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

                                      E-1
<PAGE>   57

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

4.6             U.S. $250,000,000 364 Day Credit Agreement, dated as of May 3,
                2000 among PBG, Bottling Group, LLC, The Chase Manhattan Bank,
                Bank of America, N. A., Citibank, N.A., Credit Suisse First
                Boston, UBS AG, Lehman Commercial Paper Inc., The Northern Trust
                Company, Deutsche Bank AG New York Branch and/or Cayman Islands
                Branch, Royal Bank of Canada, Banco Bilbao Vizcaya, Fleet
                National Bank, The Bank of New York, The Chase Manhattan Bank,
                as Agent, Solomon Smith Barney Inc and Banc of America
                Securities LLC as Co-Lead Arrangers and Book Managers and
                Citibank, N.A. and Bank of America, N.A. as Co-Syndication
                Agents.

21              Subsidiaries of Bottling LLC.

24              Power of Attorney

27.1            Financial Data Schedule for Bottling LLC for the fiscal year
                ended December 30, 2000.

27.2            Restated Financial Data Schedule for Bottling LLC for the
                fiscal year ended December 25, 1999.
                                      E-2