##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-K
 þ
    
    Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the Fiscal Year Ended December 27, 2008
 or
 o
    
    Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 (No Fee Required)
 For the
transition period from
to
 Commission file number 333-80361-01
 Bottling Group, LLC
  Organized in Delaware
    
    13-4042452(State or other Jurisdiction of Incorporation or Organization)
    
    (I.R.S. Employer Identification No.)One Pepsi Way, Somers, New York
    
    10589(Address of Principal Executive Offices)
    
    (Zip code)
 Registrants telephone number, including area code: (914) 767-6000  Securities registered pursuant to Section 12(b) of the Act: None
  þ o
 o þ
 þ o
 þ
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer   þ
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 o þ




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##### 



Table of Contents
 PART IItem 1. Business
    
    
    1Item 1A. Risk Factors
    
    
    8Item 1B. Unresolved Staff Comments
    
    
    12Item 2. Properties
    
    
    12Item 3. Legal Proceedings
    
    
    12Item 4. Submission of Matters to a Vote of Security Holders
    
    
    12PART IIItem 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
    
    
    13Item 6. Selected Financial Data
    
    
    14Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    15Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    69Item 8. Financial Statements and Supplementary Data
    
    
    69Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
    
    
    69Item 9A(T). Controls and Procedures
    
    
    69Item 9B. Other Information
    
    
    70PART IIIItem 10. Directors, Executive Officers and Corporate Governance
    
    
    71Item 11. Executive Compensation
    
    
    72Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    98Item 13. Certain Relationships and Related Transactions, and Director Independence
    
    
    98Item 14. Principal Accountant Fees and Services
    
    
    100PART IVItem 15. Exhibits and Financial Statement Schedules
    
    
    101SIGNATURES
    
    
    S-1INDEX TO FINANCIAL STATEMENT SCHEDULES
    
    
    F-1INDEX TO EXHIBITS
    
    
    E-1






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PART I
 
 ITEM 1. BUSINESS
 Introduction
      Principal Products
    U.S. & CanadaPepsi
    
    Sierra Mist
    
    LiptonDiet Pepsi
    
    Sierra Mist Free
    
    SoBeDiet Pepsi Max
    
    Aquafina
    
    SoBe No FearWild Cherry Pepsi
    
    Aquafina FlavorSplash
    
    SoBe Life WaterPepsi Lime
    
    G2 from Gatorade
    
    Starbucks Frappuccino®Pepsi ONE
    
    Propel
    
    DoleMountain Dew
    
    Crush
    
    Muscle MilkDiet Mountain Dew
    
    Tropicana juice drinksAMP
    
    Mug Root BeerMountain Dew Code Red
    
    Trademark Dr Pepper
 1




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##### Table of Contents



EuropePepsi
    
    Tropicana
    
    FrukoPepsi Light
    
    Aqua Minerale
    
    YedigunPepsi Max
    
    Mirinda
    
    Tamek7UP
    
    IVI
    
    LiptonKAS
    
    FiestaMexicoPepsi
    
    Mirinda
    
    ElectropuraPepsi Light
    
    Manzanita Sol
    
    e-pura7UP
    
    Squirt
    
    JarritosKAS
    
    Garci CrespoBelight
    
    Aguas Frescas
  Raw Materials and Other Supplies
   Franchise and Venture Agreements
   Terms of the Master Bottling Agreement.
   2




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3




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




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Terms of Other U.S. Bottling Agreements. ®
 Terms of the Country-Specific Bottling Agreements.
 Terms of the Russia Venture Agreement.
 Terms of Russia Snack Food Distribution Agreement.
 Seasonality
  Competition
   5




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Governmental Regulation Applicable to Bottling LLC
   Bottle and Can Legislation.
      Soft Drink Excise Tax Legislation.
  6




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Trade Regulation.
 School Sales Legislation; Industry Guidelines.
 California Carcinogen and Reproductive Toxin Legislation.
 Mexican Water Regulation.
 Employees
  Available Information
 www.pbg.com
 7




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Financial Information on Industry Segments and Geographic Areas
   
 ITEM 1A. RISK FACTORS
  We may not be able to respond successfully to consumer trends related to carbonated and
non-carbonated beverages.
   We may not be able to respond successfully to the demands of our largest customers.
  Our business requires a significant supply of raw materials and energy, the limited availability or
increased costs of which could adversely affect our business and financial results.
   8




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Changes in the legal and regulatory environment, including those related to climate change, could
increase our costs or liabilities or impact the sale of our products.
    PepsiCos equity ownership of PBG could affect matters concerning us.
  Because we depend upon PepsiCo to provide us with concentrate, certain funding and various
services, changes in our relationship with PepsiCo could adversely affect our business and
financial results.
    9




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We may have potential conflicts of interest with PepsiCo, which could result in PepsiCos
objectives being favored over our objectives.
    Our acquisition strategy may be limited by our ability to successfully integrate acquired
businesses into ours or our failure to realize our expected return on acquired businesses.
  We may not be able to compete successfully within the highly competitive carbonated and
non-carbonated beverage markets.
  If we are unable to fund our substantial capital requirements, it could cause us to reduce our
planned capital expenditures and could result in a material adverse effect on our business and
financial results.
  The level of our indebtedness could adversely affect our financial health.
  We are unable to predict the impact of the recent downturn in the credit markets and the resulting
costs or constraints in obtaining financing on our business and financial results.
  10




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Our foreign operations are subject to social, political and economic risks and may be adversely
affected by foreign currency fluctuations.
  If we are unable to maintain brand image and product quality, or if we encounter other product
issues such as product recalls, our business may suffer.
  Our success depends on key members of our management, the loss of whom could disrupt our business
operations.
  If we are unable to renew collective bargaining agreements on satisfactory terms, or if we
experience strikes, work stoppages or labor unrest, our business may suffer.
  Benefits cost increases could reduce our profitability or cash flow.
  Our failure to effectively manage our information technology infrastructure could disrupt our
operations and negatively impact our business.
  11




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##### Table of Contents



Adverse weather conditions could reduce the demand for our products.
  Catastrophic events in the markets in which we operate could have a material adverse effect on our
financial condition.
  
 ITEM 1B. UNRESOLVED STAFF COMMENTS
  
 ITEM 2. PROPERTIES
  U.S. & Canada
    
    Europe
    
    MexicoManufacturing FacilitiesOwned
    
    
    51
    
    
    
    14
    
    
    
    22Leased
    
    
    2
    
    
    
    
    
    
    
    3Other
    
    
    4
    
    
    
    
    
    
    
    Total
    
    
    57
    
    
    
    14
    
    
    
    25Distribution FacilitiesOwned
    
    
    222
    
    
    
    12
    
    
    
    84Leased
    
    
    49
    
    
    
    48
    
    
    
    80Total
    
    
    271
    
    
    
    60
    
    
    
    164
   
 ITEM 3. LEGAL PROCEEDINGS
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  12




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PART II
 
 ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
  13




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##### Table of Contents



ITEM 6. SELECTED FINANCIAL DATA
 SELECTED FINANCIAL AND OPERATING DATA
 Fiscal years ended
    
    2008(1)
    
    
    2007(2)
    
    
    2006(3)(4)
    
    
    2005(3)(5)
    
    
    2004Statement of Operations Data:Net revenues
    
    $
    13,796
    
    
    $
    13,591
    
    
    $
    12,730
    
    
    $
    11,885
    
    
    $
    10,906Cost of sales
    
    
    7,586
    
    
    
    7,370
    
    
    
    6,900
    
    
    
    6,345
    
    
    
    5,656Gross profit
    
    
    6,210
    
    
    
    6,221
    
    
    
    5,830
    
    
    
    5,540
    
    
    
    5,250Selling, delivery and administrative expenses
    
    
    5,171
    
    
    
    5,167
    
    
    
    4,842
    
    
    
    4,533
    
    
    
    4,285Impairment charges
    
    
    412
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating income
    
    
    627
    
    
    
    1,054
    
    
    
    988
    
    
    
    1,007
    
    
    
    965Interest expense
    
    
    244
    
    
    
    232
    
    
    
    227
    
    
    
    187
    
    
    
    166Interest income
    
    
    162
    
    
    
    222
    
    
    
    174
    
    
    
    77
    
    
    
    34Other non-operating expenses (income), net
    
    
    24
    
    
    
    (5
    )
    
    
    10
    
    
    
    1
    
    
    
    1Minority interest
    
    
    24
    
    
    
    28
    
    
    
    (2
    )
    
    
    1
    
    
    
    Income before income taxes
    
    
    497
    
    
    
    1,021
    
    
    
    927
    
    
    
    895
    
    
    
    832Income tax (benefit) expense (6)(7)(8)
    
    
    (39
    )
    
    
    27
    
    
    
    3
    
    
    
    24
    
    
    
    3Net income
    
    $
    536
    
    
    $
    994
    
    
    $
    924
    
    
    $
    871
    
    
    $
    829Balance Sheet Data (at period end):Total assets
    
    $
    16,495
    
    
    $
    16,712
    
    
    $
    14,955
    
    
    $
    13,745
    
    
    $
    12,724Long-term debt
    
    $
    3,789
    
    
    $
    3,776
    
    
    $
    3,759
    
    
    $
    2,943
    
    
    $
    3,495Minority interest
    
    $
    672
    
    
    $
    379
    
    
    $
    18
    
    
    $
    3
    
    
    $
    3Accumulated other comprehensive loss (9)
    
    $
    (1,373
    )
    
    $
    (189
    )
    
    $
    (589
    )
    
    $
    (395
    )
    
    $
    (447
    )Owners equity
    
    $
    7,534
    
    
    $
    9,229
    
    
    $
    8,092
    
    
    $
    7,581
    
    
    $
    6,620
 
 (1)
    
    Our fiscal year 2008 results include a $412 million non-cash impairment charge
related primarily to distribution rights and product brands in Mexico and an $83 million
pre-tax charge related to restructuring charges. See Items Affecting Comparability of Our
Financial Results in Item 7.(2)
    
    Our fiscal year 2007 results include a $30 million pre-tax charge related to
restructuring charges and a $23 million pre-tax charge related to our asset disposal plan.
See Items Affecting Comparability of Our Financial Results in Item 7.(3)
    
    In 2007, we made a classification correction for certain miscellaneous costs
incurred from product losses in the trade. Approximately $90 million and $92 million of costs
incurred, which were incorrectly included in selling, delivery and administrative expenses,
were reclassified to cost of sales in our Consolidated Statements of Operations for the years
ended 2006 and 2005, respectively. We have not reclassified these expenses for the 2004
fiscal year.(4)
    
    In fiscal year 2006, we adopted Statement of Financial Accounting Standards (SFAS)
No. 123 (revised 2004), Share-Based Payment resulting in a $65 million decrease in operating
income. Results for prior periods have not been restated as provided for under the modified
prospective approach.(5)
    
    Our fiscal year 2005 results include an extra week of activity. The pre-tax income
generated from the extra week was spent back in strategic initiatives within our selling,
delivery and administrative expenses and, accordingly, had no impact on our net income.(6)
    
    Our fiscal year 2007 results include a net non-cash benefit of $13 million due to
tax law changes in Canada and Mexico. See Items Affecting Comparability of Our Financial
Results in Item 7.(7)
    
    Our fiscal year 2006 results include a tax benefit of $12 million from tax law
changes in Canada, Turkey, and in certain U.S. jurisdictions. See Items Affecting
Comparability of Our Financial Results in Item 7.(8)
    
    Our fiscal year 2004 results include Mexico tax law change benefit of $26 million.(9)
    
    In fiscal year 2006, we adopted SFAS No. 158, Employers Accounting for Defined
Benefit Pension and Other Postretirement Plans and recorded a $278 million loss, net of
taxes, to accumulated other comprehensive loss. 14




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ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 TABLE OF CONTENTS
 MANAGEMENTS FINANCIAL REVIEW
  Our Business
    
    
    16Critical Accounting Policies
    
    
    17Other Intangible Assets net, and Goodwill
    
    
    17Pension and Postretirement Medical Benefit Plans
    
    
    18Income Taxes
    
    
    21Relationship with PepsiCo
    
    
    21Items Affecting Comparability of Our Financial Results
    
    
    22Financial Performance Summary and Worldwide Financial Highlights for Fiscal Year 2008
    
    
    24Results of Operations by Segment
    
    
    24Liquidity and Financial Condition
    
    
    30Market Risks and Cautionary Statements
    
    
    33
 AUDITED CONSOLIDATED FINANCIAL STATEMENTS
  Consolidated Statements of Operations
    
    
    36Consolidated Statements of Cash Flows
    
    
    37Consolidated Balance Sheets
    
    
    38Consolidated Statements of Changes in Owners Equity
    
    
    39Notes to Consolidated Financial Statements
    
    
    40Note 1 - Basis of Presentation
    
    
    40Note 2 - Summary of Significant Accounting Policies
    
    
    40Note 3 - Share-Based Compensation
    
    
    44Note 4 - Balance Sheet Details
    
    
    46Note 5 - Other Intangible Assets net, and Goodwill
    
    
    48Note 6 - Investment in Noncontrolled Affiliate
    
    
    50Note 7 - Fair Value Measurements
    
    
    50Note 8 - Short-term Borrowings and Long-term Debt
    
    
    51Note 9 - Leases
    
    
    52Note 10 - Financial Instruments and Risk Management
    
    
    52Note 11 - Pension and Postretirement Medical Benefit Plans
    
    
    54Note 12 - Income Taxes
    
    
    59Note 13 - Segment Information
    
    
    62Note 14 - Related Party Transactions
    
    
    63Note 15 - Restructuring Charges
    
    
    66Note 16 - Accumulated Other Comprehensive Loss
    
    
    66Note 17 - Supplemental Cash Flow Information
    
    
    67Note 18 - Contingencies
    
    
    67Note 19 - Selected Quarterly Financial Data
    
    
    67Note 20 - Subsequent Event
    
    
    67Report of Independent Registered Public Accounting Firm
    
    
    68
  15




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MANAGEMENTS FINANCIAL REVIEW  Tabular dollars in millions
 OUR BUSINESS
   Volume
    
    RevenueTotal: 1.6 Billion Raw Cases
    
    Total: $13.8 Billion(PIE CHART)
    
    (PIE CHART)
      16




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.
 CRITICAL ACCOUNTING POLICIES
  Other Intangible Assets, net and Goodwill
      17




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Pension and Postretirement Medical Benefit Plans
    Assumptions
   18




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2009
    
    2008PensionDiscount rate
    
    
    6.20
    %
    
    
    6.70
    %Expected rate of return on plan assets (net of administrative expenses)
    
    
    8.00
    %
    
    
    8.50
    %Rate of compensation increase
    
    
    3.53
    %
    
    
    3.56
    %
 2009
    
    2008PostretirementDiscount rate
    
    
    6.50
    %
    
    
    6.35
    %Rate of compensation increase
    
    
    3.53
    %
    
    
    3.56
    %Health care cost trend rate
    
    
    8.75
    %
    
    
    9.50
    %
 19




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
    
    A decrease in our weighted-average discount rate for our pension expense from 6.70
percent to 6.20 percent, reflecting decreases in the yields of long-term corporate bonds
comprising the yield curve. This change in assumption will increase our 2009 pension
expense by approximately $18 million.
    
    Asset losses during 2008 will increase our pension expense by $20 million.
    
    A decrease in the rate of return on plan asset assumption from 8.5 percent to 8.0
percent, due to revised asset allocation, historical trends and our projected long-term
outlook. This change in assumption will increase our 2009 pension expense by approximately
$8 million.
    
    The pension design change, which will freeze benefits of certain salaried and non-union
hourly employees, will decrease our 2009 pension expense by approximately $20 million.
    
    Additional expected contributions to the pension trust will decrease 2009 pension
expense by $11 million.
    
    Other factors, including improved health care claim experience, will decrease our 2009
defined benefit pension and postretirement medical expenses by approximately $4 million.
  Sensitivity Analysis
  2008
    
    2007
    
    2006Expected rates of return on plan assets (net of administrative
expenses)
    
    
    8.50
    %
    
    
    8.50
    %
    
    
    8.50
    %Actual rates of return on plan assets (net of administrative expenses)
    
    
    (28.50
    )%
    
    
    12.64
    %
    
    
    9.74
    %
  
    
    Discount rate  A 25 basis point change in the discount rate would increase or decrease
the 2009 expense for the pension and postretirement medical benefit plans by approximately
$9 million.
    
    Expected rate of return on plan assets  A 25 basis point change in the expected return
on plan assets would increase or decrease the 2009 expense for the pension plans by
approximately $4 million. The postretirement medical benefit plans have no expected return
on plan assets as they are funded from the general assets of the Company as the payments
come due.
    
    Contribution to the plan  A $20 million decrease in planned contributions to the plan
for 2009 will increase our pension expense by $1 million.
 Funding
   20




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Income Taxes
      RELATIONSHIP WITH PEPSICO
      21




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ITEMS AFFECTING COMPARABILITY OF OUR FINANCIAL RESULTS
  December
    
    
    December
    
    
    DecemberIncome/(Expense)
    
    27, 2008
    
    
    29, 2007
    
    
    30, 2006Gross ProfitPR Beverages
    
    $
    
    
    
    $
    29
    
    
    $
    Operating IncomeImpairment Charges
    
    $
    (412
    )
    
    $
    
    
    
    $
    2008 Restructuring Charges
    
    
    (83
    )
    
    
    
    
    
    
    2007 Restructuring Charges
    
    
    (3
    )
    
    
    (30
    )
    
    
    Asset Disposal Charges
    
    
    (2
    )
    
    
    (23
    )
    
    
    PR Beverages
    
    
    
    
    
    
    29
    
    
    
    Total Operating Income Impact
    
    $
    (500
    )
    
    $
    (24
    )
    
    $
    Net IncomeImpairment Charges
    
    $
    (297
    )
    
    $
    
    
    
    $
    2008 Restructuring Charges
    
    
    (83
    )
    
    
    
    
    
    
    2007 Restructuring Charges
    
    
    (3
    )
    
    
    (30
    )
    
    
    Asset Disposal Charges
    
    
    (2
    )
    
    
    (23
    )
    
    
    Tax Law Changes
    
    
    
    
    
    
    13
    
    
    
    12Total Net Income Impact
    
    $
    (385
    )
    
    $
    (40
    )
    
    $
    12
 Items impacting comparability described below are shown in the year the action was initiated.
 2008 Items
 Impairment Charges
  2008 Restructuring Charges
    22




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2007 Items
 2007 Restructuring Charges
   Asset Disposal Charges
   PR Beverages
  Tax Law Changes
  2006 Items
 Tax Law Changes
  23




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FINANCIAL PERFORMANCE SUMMARY AND WORLDWIDE FINANCIAL HIGHLIGHTS FOR FISCAL YEAR 2008
 December
    
    December
    
    Fiscal Year27, 2008
    
    29, 2007
    
    % ChangeNet Revenues
    
    $
    13,796
    
    
    $
    13,591
    
    
    
    2
    %Cost of Sales
    
    $
    7,586
    
    
    $
    7,370
    
    
    
    3
    %Gross Profit
    
    $
    6,210
    
    
    $
    6,221
    
    
    
    
    %Selling, Delivery and Administrative Expenses
    
    $
    5,171
    
    
    $
    5,167
    
    
    
    
    %Operating Income
    
    $
    627
    
    
    $
    1,054
    
    
    
    (41
    )%Net Income
    
    $
    536
    
    
    $
    994
    
    
    
    (46
    )%
 Volume 
 Net Revenues 
 Cost of Sales 
 Gross Profit 
 Selling, Delivery and Administrative (SD&A) Expenses 
 Operating Income 
 Net Income
 RESULTS OF OPERATIONS BY SEGMENT
 Except where noted, tables and discussion are presented as compared to the prior fiscal year.
Growth rates are rounded to the nearest whole percentage.
 Volume
 2008 vs. 2007
 U.S. &Worldwide
    
    Canada
    
    Europe
    
    MexicoTotal Volume Change
    
    
    (4
    )%
    
    
    (4
    )%
    
    
    (3
    )%
    
    
    (5
    )%
 24




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U.S. & Canada
  Europe
  Mexico
  2007 vs. 2006
 U.S. &Worldwide
    
    Canada
    
    Europe
    
    MexicoBase volume
    
    
    
    %
    
    
    
    %
    
    
    4
    %
    
    
    (2
    )%Acquisitions
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    3Total Volume Change
    
    
    1
    %
    
    
    
    %
    
    
    4
    %
    
    
    1
    %
 U.S. & Canada
   Europe
  Mexico
  25




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Net Revenues
 2008 vs. 2007
 U.S. &Worldwide
    
    
    Canada
    
    
    Europe
    
    
    Mexico2008 Net revenues
    
    $
    13,796
    
    
    $
    10,300
    
    
    $
    2,115
    
    
    $
    1,3812007 Net revenues
    
    $
    13,591
    
    
    $
    10,336
    
    
    $
    1,872
    
    
    $
    1,383% Impact of:Volume
    
    
    (4
    )%
    
    
    (4
    )%
    
    
    (3
    )%
    
    
    (5
    )%Net price per case (rate/mix)
    
    
    5
    
    
    
    4
    
    
    
    10
    
    
    
    6Currency translation
    
    
    1
    
    
    
    
    
    
    
    6
    
    
    
    (1
    )Total Net Revenues Change
    
    
    2
    %
    
    
    
    %
    
    
    13
    %
    
    
    
    %
 U.S. & Canada
  Europe
  Mexico
  2007 vs. 2006
 U.S. &Worldwide
    
    
    Canada
    
    
    Europe
    
    
    Mexico2007 Net revenues
    
    $
    13,591
    
    
    $
    10,336
    
    
    $
    1,872
    
    
    $
    1,3832006 Net revenues
    
    $
    12,730
    
    
    $
    9,910
    
    
    $
    1,534
    
    
    $
    1,286% Impact of:Volume
    
    
    
    %
    
    
    
    %
    
    
    4
    %
    
    
    (2
    )%Net price per case (rate/mix)
    
    
    4
    
    
    
    4
    
    
    
    9
    
    
    
    7Acquisitions
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    3Currency translation
    
    
    2
    
    
    
    
    
    
    
    9
    
    
    
    Total Net Revenues Change
    
    
    7
    %
    
    
    4
    %
    
    
    22
    %
    
    
    8
    %
 U.S. & Canada
  Europe
  26




---



##### Table of Contents



Mexico
  Operating Income
 2008 vs. 2007
 U.S. &Worldwide
    
    
    Canada
    
    
    Europe
    
    
    Mexico2008 Operating income
    
    $
    627
    
    
    $
    864
    
    
    $
    101
    
    
    $
    (338
    )2007 Operating income
    
    $
    1,054
    
    
    $
    876
    
    
    $
    106
    
    
    $
    72% Impact of:Operations
    
    
    1
    %
    
    
    1
    %
    
    
    2
    %
    
    
    (3
    )%Currency translation
    
    
    1
    
    
    
    
    
    
    
    12
    
    
    
    2Impairment charges
    
    
    (39
    )
    
    
    
    
    
    
    (3
    )
    
    
    (571
    )2008 Restructuring charges
    
    
    (8
    )
    
    
    (6
    )
    
    
    (25
    )
    
    
    (4
    )2007 Restructuring charges
    
    
    3
    
    
    
    2
    
    
    
    8
    
    
    
    4Asset disposal charges
    
    
    2
    
    
    
    2
    
    
    
    
    
    
    
    Total Operating Income Change
    
    
    (41
    )%*
    
    
    (1
    )%
    
    
    (5
    )%*
    
    
    (572
    )%
 
 *
    
    Does not add due to rounding to the whole percentage. U.S. & Canada
    Europe
    Mexico
  27




---



##### Table of Contents



2007 vs. 2006
 U.S. &Worldwide
    
    
    Canada
    
    
    Europe
    
    
    Mexico2007 Operating income
    
    $
    1,054
    
    
    $
    876
    
    
    $
    106
    
    
    $
    722006 Operating income
    
    $
    988
    
    
    $
    849
    
    
    $
    57
    
    
    $
    82% Impact of:Operations
    
    
    8
    %
    
    
    8
    %
    
    
    41
    %
    
    
    (11
    )%Currency translation
    
    
    1
    
    
    
    1
    
    
    
    11
    
    
    
    1PR Beverages
    
    
    3
    
    
    
    
    
    
    
    50
    
    
    
    2007 Restructuring
    
    
    (3
    )
    
    
    (2
    )
    
    
    (15
    )
    
    
    (4
    )Asset disposal charges
    
    
    (2
    )
    
    
    (3
    )
    
    
    
    
    
    
    Acquisitions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2Total Operating Income Change
    
    
    7
    %
    
    
    3
    %*
    
    
    86
    %*
    
    
    (13
    )%*
 
 *
    
    Does not add due to rounding to the whole percentage. U.S. & Canada
    Europe
    Mexico
  28




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##### Table of Contents



Interest Expense
 2008 vs. 2007
  2007 vs. 2006
  Interest Income
 2008 vs. 2007
  2007 vs. 2006
  Other Non-Operating Expenses (Income), net
 2008 vs. 2007
  2007 vs. 2006
  Minority Interest
 2008 vs. 2007
  2007 vs. 2006
  Income Tax Expense
  29




---



##### Table of Contents



2008 vs. 2007
  
    
    In 2008, we had pre-tax impairment charges related primarily to Mexico as well as
pre-tax restructuring charges which resulted in a tax provision benefit of $115 million.
The net impact of these items decreased our effective tax rate by 15.4 percentage points.
    
    In 2007, we had tax law changes that reduced our deferred income tax provision by $13
million, coupled with valuation allowance reversals of $11 million. These items decreased
our effective tax rate by 2.4 percentage points.
 2007 vs. 2006
  LIQUIDITY AND FINANCIAL CONDITION
 Cash Flows
 2008 vs. 2007
    2007 vs. 2006
    Capital Expenditures
  30




---



##### Table of Contents



Liquidity and Capital Resources
   Acquisitions and Investments
    Long-Term Debt Activities
   Short-Term Debt Activities
   Debt Covenants and Credit Ratings
  31




---



##### Table of Contents



Pensions
  Contractual Obligations
  Payments Due by Period2010-
    
    2012-
    
    2014 andTotal
    
    2009
    
    2011
    
    2013
    
    beyondContractual ObligationsLong-term debt obligations(1)
    
    $
    5,086
    
    
    $
    1,301
    
    
    $
    35
    
    
    $
    1,400
    
    
    $
    2,350Capital lease obligations(2)
    
    
    9
    
    
    
    4
    
    
    
    3
    
    
    
    
    
    
    
    2Operating leases(2)
    
    
    279
    
    
    
    58
    
    
    
    69
    
    
    
    34
    
    
    
    118Interest obligations(3)
    
    
    1,203
    
    
    
    237
    
    
    
    420
    
    
    
    376
    
    
    
    170Purchase obligations:Raw material obligations(4)
    
    
    821
    
    
    
    718
    
    
    
    100
    
    
    
    
    
    
    
    3Capital expenditure obligations(5)
    
    
    33
    
    
    
    33
    
    
    
    
    
    
    
    
    
    
    
    Other obligations(6)
    
    
    324
    
    
    
    135
    
    
    
    113
    
    
    
    38
    
    
    
    38Other long-term liabilities(7)
    
    
    7
    
    
    
    2
    
    
    
    3
    
    
    
    1
    
    
    
    1$
    7,762
    
    
    $
    2,488
    
    
    $
    743
    
    
    $
    1,849
    
    
    $
    2,682
 
 (1)
    
    See Note 8 in the Notes to Consolidated Financial Statements for additional
information relating to our long-term debt obligations.(2)
    
    Lease obligation balances include imputed interest. See Note 9 in the Notes to
Consolidated Financial Statements for additional information relating to our lease
obligations.(3)
    
    Represents interest payment obligations related to our long-term fixed-rate debt as
specified in the applicable debt agreements. A portion of our long-term debt has variable
interest rates due to either existing swap agreements or interest arrangements. We have
estimated our variable interest payment obligations by using the interest rate forward curve
where practical. Given uncertainties in future interest rates we have not included the
beneficial impact of interest rate swaps after the year 2010.(4)
    
    Represents obligations to purchase raw materials pursuant to contracts entered into
by PepsiCo on our behalf and international agreements to purchase raw materials.(5)
    
    Represents commitments to suppliers under capital expenditure related contracts or
purchase orders.(6)
    
    Represents legally binding agreements to purchase goods or services that specify all
significant terms, including: fixed or minimum quantities, price arrangements and timing of
payments. If applicable, penalty, notice, or minimum purchase amount is used in the
calculation. Balances also include non-cancelable customer contracts for sports marketing
arrangements.(7)
    
    Primarily represents non-compete contracts that resulted from business
acquisitions. The non-current portion of unrecognized tax benefits recorded on the balance
sheet as of December 27, 2008 is not included in the table. There was no current portion of
unrecognized tax benefits as of December 27, 2008. For additional information about our
income taxes see Note 12 in the Notes to Consolidated Financial Statements.  Off-Balance Sheet Arrangements
  32




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##### Table of Contents



MARKET RISKS AND CAUTIONARY STATEMENTS
 Quantitative and Qualitative Disclosures about Market Risk
    Commodity Price Risk
  Interest Rate Risk
  Foreign Currency Exchange Rate Risk
   33




---



##### Table of Contents



Unfunded Deferred Compensation Liability
  Cautionary Statements
  
    
    changes in our relationship with PepsiCo;
    
    PepsiCos ability to affect matters concerning us through its equity ownership of PBG and
Bottling LLC, representation on PBGs Board and approval rights under our Master Bottling
Agreement;
    
    material changes in expected levels of bottler incentive payments from PepsiCo;
    
    restrictions imposed by PepsiCo on our raw material suppliers that could increase our
costs;
    
    material changes from expectations in the cost or availability of ingredients, packaging
materials, other raw materials or energy;
    
    limitations on the availability of water or obtaining water rights;
    
    an inability to achieve strategic business plan targets that could result in a non-cash
intangible asset impairment charge;
    
    an inability to achieve cost savings;
    
    material changes in capital investment for infrastructure and an inability to achieve the
expected timing for returns on cold-drink equipment and related infrastructure expenditures;
    
    decreased demand for our product resulting from changes in consumers preferences;
    
    an inability to achieve volume growth through product and packaging initiatives;
    
    impact of competitive activities on our business;
    
    impact of customer consolidations on our business;
    
    unfavorable weather conditions in our markets;
    
    an inability to successfully integrate acquired businesses or to meet projections for
performance in newly acquired territories;
    
    loss of business from a significant customer;
    
    loss of key members of management;
    
    failure or inability to comply with laws and regulations;
    
    litigation, other claims and negative publicity relating to alleged unhealthy properties or
environmental impact of our products;
    
    changes in laws and regulations governing the manufacture and sale of food and beverages,
the environment, transportation, employee safety, labor and government contracts;
 34




---



##### Table of Contents




    
    changes in accounting standards and taxation requirements (including unfavorable outcomes
from audits performed by various tax authorities);
    
    an increase in costs of pension, medical and other employee benefit costs;
    
    unfavorable market performance of assets in PBGs pension plans or material changes in key
assumptions used to calculate the liability of PBGs pension plans, such as discount rate;
    
    unforeseen social, economic and political changes;
    
    possible recalls of our products;
    
    interruptions of operations due to labor disagreements;
    
    limitations on our ability to invest in our business as a result of our repayment
obligations under our existing indebtedness;
    
    changes in our debt ratings, an increase in financing costs or limitations on our ability
to obtain credit; and
    
    material changes in expected interest and currency exchange rates.
 35




---



##### Table of Contents



Bottling Group, LLC
Consolidated Statements of Operations
 Fiscal years ended December 27, 2008, December 29, 2007 and December 30, 2006
 2008
    
    
    2007
    
    
    2006Net Revenues
    
    $
    13,796
    
    
    $
    13,591
    
    
    $
    12,730Cost of sales
    
    
    7,586
    
    
    
    7,370
    
    
    
    6,900Gross Profit
    
    
    6,210
    
    
    
    6,221
    
    
    
    5,830Selling, delivery and administrative expenses
    
    
    5,171
    
    
    
    5,167
    
    
    
    4,842Impairment charges
    
    
    412
    
    
    
    
    
    
    
    Operating Income
    
    
    627
    
    
    
    1,054
    
    
    
    988Interest expense
    
    
    244
    
    
    
    232
    
    
    
    227Interest income
    
    
    162
    
    
    
    222
    
    
    
    174Other non-operating expenses (income), net
    
    
    24
    
    
    
    (5
    )
    
    
    10Minority interest expense (income)
    
    
    24
    
    
    
    28
    
    
    
    (2
    )Income Before Income Taxes
    
    
    497
    
    
    
    1,021
    
    
    
    927Income tax (benefit) expense
    
    
    (39
    )
    
    
    27
    
    
    
    3Net Income
    
    $
    536
    
    
    $
    994
    
    
    $
    924
  36




---



##### Table of Contents



Bottling Group, LLC
Consolidated Statements of Cash Flows
 Fiscal years ended December 27, 2008, December 29, 2007 and December 30, 2006
 2008
    
    
    2007
    
    
    2006Cash FlowsOperationsNet income
    
    $
    536
    
    
    $
    994
    
    
    $
    924Adjustments to reconcile net income to net cash provided by operations:Depreciation and amortization
    
    
    672
    
    
    
    668
    
    
    
    648Deferred income taxes
    
    
    (87
    )
    
    
    (8
    )
    
    
    (41
    )Stock-based compensation
    
    
    56
    
    
    
    61
    
    
    
    65Impairment charges
    
    
    412
    
    
    
    
    
    
    
    Defined benefit pension and postretirement expenses
    
    
    114
    
    
    
    121
    
    
    
    119Minority interest expense (income)
    
    
    24
    
    
    
    28
    
    
    
    (2
    )Other non-cash charges and credits
    
    
    95
    
    
    
    78
    
    
    
    68Changes in operating working capital, excluding effects of acquisitions:Accounts receivable, net
    
    
    40
    
    
    
    (110
    )
    
    
    (120
    )Inventories
    
    
    3
    
    
    
    (19
    )
    
    
    (57
    )Prepaid expenses and other current assets
    
    
    (96
    )
    
    
    116
    
    
    
    (75
    )Accounts payable and other current liabilities
    
    
    (136
    )
    
    
    187
    
    
    
    87Income taxes payable
    
    
    18
    
    
    
    5
    
    
    
    25Net change in operating working capital
    
    
    (171
    )
    
    
    179
    
    
    
    (140
    )Pension contributions to funded plans
    
    
    (85
    )
    
    
    (70
    )
    
    
    (68
    )Other, net
    
    
    (93
    )
    
    
    (73
    )
    
    
    (46
    )Net Cash Provided by Operations
    
    
    1,473
    
    
    
    1,978
    
    
    
    1,527Cash FlowsInvestmentsCapital expenditures
    
    
    (755
    )
    
    
    (854
    )
    
    
    (721
    )Acquisitions, net of cash acquired
    
    
    (257
    )
    
    
    (49
    )
    
    
    (33
    )Investments in noncontrolled affiliates
    
    
    (742
    )
    
    
    
    
    
    
    Proceeds from sale of property, plant and equipment
    
    
    24
    
    
    
    14
    
    
    
    18Increase in notes receivable from PBG, net
    
    
    (839
    )
    
    
    (733
    )
    
    
    (763
    )Proceeds from collection of notes receivable from PBG
    
    
    1,027
    
    
    
    
    
    
    
    Other investing activities, net
    
    
    (1
    )
    
    
    6
    
    
    
    5Net Cash Used for Investments
    
    
    (1,543
    )
    
    
    (1,616
    )
    
    
    (1,494
    )Cash FlowsFinancingShort-term borrowings, netthree months or less
    
    
    (58
    )
    
    
    (40
    )
    
    
    133Proceeds from short-term borrowings  more than three months
    
    
    117
    
    
    
    167
    
    
    
    96Payments of short-term borrowings  more than three months
    
    
    (91
    )
    
    
    (211
    )
    
    
    (74
    )Proceeds from issuances of long-term debt
    
    
    1,290
    
    
    
    24
    
    
    
    793Payments of long-term debt
    
    
    (9
    )
    
    
    (41
    )
    
    
    (603
    )Contributions from minority interest holder
    
    
    308
    
    
    
    
    
    
    
    Distributions to owners
    
    
    (1,102
    )
    
    
    (271
    )
    
    
    (284
    )Other financing activities, net
    
    
    (1
    )
    
    
    
    
    
    
    Net Cash Provided by (Used for) Financing
    
    
    454
    
    
    
    (372
    )
    
    
    61Effect of Exchange Rate Changes on Cash and Cash Equivalents
    
    
    (57
    )
    
    
    28
    
    
    
    1Net Increase in Cash and Cash Equivalents
    
    
    327
    
    
    
    18
    
    
    
    95Cash and Cash EquivalentsBeginning of Year
    
    
    459
    
    
    
    441
    
    
    
    346Cash and Cash EquivalentsEnd of Year
    
    $
    786
    
    
    $
    459
    
    
    $
    441
  37




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##### Table of Contents



Bottling Group, LLC
Consolidated Balance Sheets
 December 27, 2008 and December 29, 2007
 2008
    
    
    2007ASSETSCurrent AssetsCash and cash equivalents
    
    $
    786
    
    
    $
    459Accounts receivable, net
    
    
    1,371
    
    
    
    1,520Inventories
    
    
    528
    
    
    
    577Prepaid expenses and other current assets
    
    
    337
    
    
    
    308Total Current Assets
    
    
    3,022
    
    
    
    2,864Property, plant and equipment, net
    
    
    3,869
    
    
    
    4,071Other intangible assets, net
    
    
    3,751
    
    
    
    4,181Goodwill
    
    
    1,434
    
    
    
    1,533Investments in noncontrolled affiliates
    
    
    619
    
    
    
    Notes receivable from PBG
    
    
    3,692
    
    
    
    3,880Other assets
    
    
    108
    
    
    
    183Total Assets
    
    $
    16,495
    
    
    $
    16,712LIABILITIES AND OWNERS EQUITYCurrent LiabilitiesAccounts payable and other current liabilities
    
    $
    1,529
    
    
    $
    1,829Short-term borrowings
    
    
    103
    
    
    
    190Current maturities of long-term debt
    
    
    1,305
    
    
    
    6Total Current Liabilities
    
    
    2,937
    
    
    
    2,025Long-term debt
    
    
    3,789
    
    
    
    3,776Other liabilities
    
    
    1,284
    
    
    
    832Deferred income taxes
    
    
    279
    
    
    
    471Minority interest
    
    
    672
    
    
    
    379Total Liabilities
    
    
    8,961
    
    
    
    7,483Owners EquityOwners net investment
    
    
    8,907
    
    
    
    9,418Accumulated other comprehensive loss
    
    
    (1,373
    )
    
    
    (189
    )Total Owners Equity
    
    
    7,534
    
    
    
    9,229Total Liabilities and Owners Equity
    
    $
    16,495
    
    
    $
    16,712
  38




---



##### Table of Contents



Bottling Group, LLC
Consolidated Statements of Changes in Owners Equity
 December 27, 2008, December 29, 2007 and December 30, 2006
 AccumulatedOwners
    
    
    
    
    
    
    OtherNet
    
    
    Deferred
    
    
    Comprehensive
    
    
    
    
    
    
    ComprehensiveInvestment
    
    
    Compensation
    
    
    Loss
    
    
    Total
    
    
    Income (Loss)Balance at December 31, 2005
    
    $
    7,990
    
    
    $
    (14
    )
    
    $
    (395
    )
    
    $
    7,581Comprehensive income:Net income
    
    
    924
    
    
    
    
    
    
    
    
    
    
    
    924
    
    
    $
    924Net currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    26
    
    
    
    26
    
    
    
    26Minimum pension liability adjustment
    
    
    
    
    
    
    
    
    
    
    48
    
    
    
    48
    
    
    
    48Cash flow hedge adjustment (net of tax
of $(3))
    
    
    
    
    
    
    
    
    
    
    10
    
    
    
    10
    
    
    
    10Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,008FAS 158 - pension liability adjustment
(net of tax of $4 )
    
    
    
    
    
    
    
    
    
    
    (278
    )
    
    
    (278
    )Cash distributions to owners
    
    
    (284
    )
    
    
    
    
    
    
    
    
    
    
    (284
    )Stock compensation
    
    
    51
    
    
    
    14
    
    
    
    
    
    
    
    65Balance at December 30, 2006
    
    
    8,681
    
    
    
    
    
    
    
    (589
    )
    
    
    8,092Comprehensive income:Net income
    
    
    994
    
    
    
    
    
    
    
    
    
    
    
    994
    
    
    $
    994Net currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    235
    
    
    
    235
    
    
    
    235Pension and postretirement medical
benefit plans adjustment (net of
tax of
$(3))
    
    
    
    
    
    
    
    
    
    
    163
    
    
    
    163
    
    
    
    163Cash flow hedge adjustment (net of tax
of $2)
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    2
    
    
    
    2Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,394Impact from adopting FIN 48
    
    
    (45
    )
    
    
    
    
    
    
    
    
    
    
    (45
    )Cash distributions to owners
    
    
    (271
    )
    
    
    
    
    
    
    
    
    
    
    (271
    )Stock compensation
    
    
    59
    
    
    
    
    
    
    
    
    
    
    
    59Balance at December 29, 2007
    
    
    9,418
    
    
    
    
    
    
    
    (189
    )
    
    
    9,229Comprehensive income (loss):Net income
    
    
    536
    
    
    
    
    
    
    
    
    
    
    
    536
    
    
    $
    536Net currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    (593
    )
    
    
    (593
    )
    
    
    (593
    )Pension and postretirement medical
benefit plans adjustment (net of
tax of
$2)
    
    
    
    
    
    
    
    
    
    
    (562
    )
    
    
    (562
    )
    
    
    (562
    )Cash flow hedge adjustment (net of tax
of $(3))
    
    
    
    
    
    
    
    
    
    
    (64
    )
    
    
    (64
    )
    
    
    (64
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (683
    )FAS 158 - measurement date adjustment (net
of tax of $0)
    
    
    (27
    )
    
    
    
    
    
    
    35
    
    
    
    8Cash distributions to owners
    
    
    (1,102
    )
    
    
    
    
    
    
    
    
    
    
    (1,102
    )Non-cash contributions from owners
    
    
    26
    
    
    
    
    
    
    
    
    
    
    
    26Stock compensation
    
    
    56
    
    
    
    
    
    
    
    
    
    
    
    56Balance at December 27, 2008
    
    $
    8,907
    
    
    $
    
    
    
    $
    (1,373
    )
    
    $
    7,534
  39




---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Note 1Basis of Presentation
   Note 2Summary of Significant Accounting Policies
  Basis of Consolidation 
 Fiscal Year 
 Quarter
    
    U.S. & Canada
    
    Mexico & EuropeFirst Quarter
    
    12 weeks
    
    January and FebruarySecond Quarter
    
    12 weeks
    
    March, April and MayThird Quarter
    
    12 weeks
    
    June, July and AugustFourth Quarter
    
    16 weeks
    
    September, October, November and December
 Revenue Recognition 
  Advertising and Marketing Costs 
 40




---



##### Table of Contents



Bottler Incentives 
 
    
    Direct marketplace support represents PepsiCos and other brand owners agreed-upon
funding to assist us in offering sales and promotional discounts to retailers and is
generally recorded as an adjustment to cost of sales. If the direct marketplace support is
a reimbursement for a specific, incremental and identifiable program, the funding is
recorded as an offset to the cost of the program either in net revenues or selling,
delivery and administrative expenses.
    
    Advertising support represents agreed-upon funding to assist us with the cost of media
time and promotional materials and is generally recorded as an adjustment to cost of sales.
Advertising support that represents reimbursement for a specific, incremental and
identifiable media cost, is recorded as a reduction to advertising and marketing expenses
within selling, delivery and administrative expenses.
  Fiscal Year Ended2008
    
    
    2007
    
    
    2006Net revenues
    
    $
    93
    
    
    $
    66
    
    
    $
    67Cost of sales
    
    
    586
    
    
    
    626
    
    
    
    612Selling, delivery and administrative expenses
    
    
    57
    
    
    
    67
    
    
    
    70Total bottler incentives
    
    $
    736
    
    
    $
    759
    
    
    $
    749
 Share-Based Compensation
 Shipping and Handling Costs
 Foreign Currency Gains and Losses and Currency Translation 
 Pension and Postretirement Medical Benefit Plans 
   41




---



##### Table of Contents



Income Taxes
     Cash and Cash Equivalents 
 Allowance for Doubtful Accounts 
 Inventories 
 Property, Plant and Equipment 
 Other Intangible Assets, net and Goodwill 
  42




---



##### Table of Contents



Minority Interest 
 Financial Instruments and Risk Management 
    Commitments and Contingencies 
 New Accounting Standards
 SFAS No. 157
   SFAS No. 141(R)
  43




---



##### Table of Contents



SFAS No. 160
  SFAS No. 161
  EITF Issue No. 07-1
  Note 3Share-Based Compensation
 Accounting for Share-Based Compensation
    Share-Based Long-Term Incentive Compensation Plans
    44




---



##### Table of Contents



2008
    
    2007
    
    2006Risk-free interest rate
    
    
    2.8
    %
    
    
    4.5
    %
    
    
    4.7
    %Expected term (in years)
    
    
    5.3
    
    
    
    5.6
    
    
    
    5.7Expected volatility
    
    
    24
    %
    
    
    25
    %
    
    
    27
    %Expected dividend yield
    
    
    2.0
    %
    
    
    1.8
    %
    
    
    1.5
    %
     Stock Options
   Weighted-
    
    Weighted-Average
    
    AverageExercise
    
    Remaining
    
    AggregateShares
    
    Price
    
    Contractual
    
    Intrinsic(in millions)
    
    per Share
    
    Term (years)
    
    ValueOutstanding at December 29, 2007
    
    
    26.5
    
    
    $
    25.32
    
    
    
    5.9
    
    
    $
    388Granted
    
    
    3.6
    
    
    $
    33.69Exercised
    
    
    (1.9
    )
    
    $
    21.75Forfeited
    
    
    (0.7
    )
    
    $
    28.39Outstanding at December 27, 2008
    
    
    27.5
    
    
    $
    26.59
    
    
    
    5.5
    
    
    $
    33Vested or expected to vest at
December 27, 2008
    
    
    27.1
    
    
    $
    26.50
    
    
    
    5.4
    
    
    $
    33Exercisable at December 27, 2008
    
    
    21.0
    
    
    $
    24.89
    
    
    
    4.5
    
    
    $
    33
   45




---



##### Table of Contents



Restricted Stock Units
   Weighted-Weighted-
    
    AverageAverage
    
    Remaining
    
    AggregateShares
    
    Grant-Date
    
    Contractual
    
    Intrinsic(in thousands)
    
    Fair Value
    
    Term (years)
    
    ValueOutstanding at December 29, 2007
    
    
    2,339
    
    
    $
    30.04
    
    
    
    1.7
    
    
    $
    93Granted
    
    
    1,305
    
    
    $
    35.34Converted
    
    
    (160
    )
    
    $
    30.10Forfeited
    
    
    (182
    )
    
    $
    31.61Outstanding at December 27, 2008
    
    
    3,302
    
    
    $
    32.04
    
    
    
    1.3
    
    
    $
    73Vested or expected to vest at
December 27, 2008
    
    
    2,775
    
    
    $
    32.34
    
    
    
    1.4
    
    
    $
    61Convertible at December 27, 2008
    
    
    139
    
    
    $
    29.39
    
    
    
    
    
    
    $
    3
  Note 4Balance Sheet Details
 2008
    
    
    2007Accounts Receivable, netTrade accounts receivable
    
    $
    1,208
    
    
    $
    1,319Allowance for doubtful accounts
    
    
    (71
    )
    
    
    (54
    )Accounts receivable from PepsiCo
    
    
    154
    
    
    
    188Other receivables
    
    
    80
    
    
    
    67$
    1,371
    
    
    $
    1,520InventoriesRaw materials and supplies
    
    $
    185
    
    
    $
    195Finished goods
    
    
    343
    
    
    
    382$
    528
    
    
    $
    577Prepaid Expenses and Other
Current AssetsPrepaid expenses
    
    $
    187
    
    
    $
    244Accrued interest receivable from PBG
    
    
    118
    
    
    
    12Other current assets
    
    
    32
    
    
    
    52$
    337
    
    
    $
    308
 46




---



##### Table of Contents



2008
    
    
    2007Property, Plant and Equipment, netLand
    
    $
    300
    
    
    $
    320Buildings and improvements
    
    
    1,542
    
    
    
    1,484Manufacturing and distribution equipment
    
    
    3,999
    
    
    
    4,091Marketing equipment
    
    
    2,246
    
    
    
    2,389Capital leases
    
    
    23
    
    
    
    36Other
    
    
    139
    
    
    
    1548,249
    
    
    
    8,474Accumulated depreciation
    
    
    (4,380
    )
    
    
    (4,403
    )$
    3,869
    
    
    $
    4,071
   Buildings and improvements
    
    20-33 yearsManufacturing and distribution equipment
    
    2-15 yearsMarketing equipment
    
    2-7 years
 Industrial Revenue Bonds
  2008
    
    
    2007Accounts Payable and Other Current LiabilitiesAccounts payable
    
    $
    444
    
    
    $
    615Accounts payable to PepsiCo
    
    
    217
    
    
    
    255Trade incentives
    
    
    189
    
    
    
    235Accrued compensation and benefits
    
    
    240
    
    
    
    276Other accrued taxes
    
    
    128
    
    
    
    139Accrued interest
    
    
    62
    
    
    
    47Other current liabilities
    
    
    249
    
    
    
    262$
    1,529
    
    
    $
    1,829
 47




---



##### Table of Contents



Note 5Other Intangible Assets, net and Goodwill
  2008
    
    
    2007Intangibles subject to amortization:Gross carrying amount:Customer relationships and lists
    
    $
    45
    
    
    $
    54Franchise and distribution rights
    
    
    41
    
    
    
    46Other identified intangibles
    
    
    34
    
    
    
    30120
    
    
    
    130Accumulated amortization:Customer relationships and lists
    
    
    (15
    )
    
    
    (15
    )Franchise and distribution rights
    
    
    (31
    )
    
    
    (31
    )Other identified intangibles
    
    
    (21
    )
    
    
    (17
    )(67
    )
    
    
    (63
    )Intangibles subject to amortization, net
    
    
    53
    
    
    
    67Intangibles not subject to amortization:Carrying amount:Franchise rights
    
    
    3,244
    
    
    
    3,235Licensing rights
    
    
    315
    
    
    
    315Distribution rights
    
    
    49
    
    
    
    294Brands
    
    
    39
    
    
    
    213Other identified intangibles
    
    
    51
    
    
    
    57Intangibles not subject to amortization
    
    
    3,698
    
    
    
    4,114Total other intangible assets, net
    
    $
    3,751
    
    
    $
    4,181
      Intangible Asset Amortization
  48




---



##### Table of Contents



Goodwill
  U.S. &Canada
    
    
    Europe
    
    
    Mexico
    
    
    TotalBalance at December 30, 2006
    
    $
    1,229
    
    
    $
    16
    
    
    $
    245
    
    
    $
    1,490Purchase price allocations
    
    
    1
    
    
    
    
    
    
    
    (16
    )
    
    
    (15
    )Impact of foreign currency translation and other
    
    
    60
    
    
    
    1
    
    
    
    (3
    )
    
    
    58Balance at December 29, 2007
    
    
    1,290
    
    
    
    17
    
    
    
    226
    
    
    
    1,533Purchase price allocations
    
    
    20
    
    
    
    13
    
    
    
    (6
    )
    
    
    27Impact of foreign currency translation and other
    
    
    (75
    )
    
    
    (4
    )
    
    
    (47
    )
    
    
    (126
    )Balance at December 27, 2008
    
    $
    1,235
    
    
    $
    26
    
    
    $
    173
    
    
    $
    1,434
   Annual Impairment Testing
   49




---



##### Table of Contents



Note 6Investment in Noncontrolled Affiliate
   Note 7Fair Value Measurements
  Level 1
 Level 2
 Level 3
   Level 2Financial Assets:Foreign currency forward contracts (1)
    
    $
    13Prepaid forward contracts (2)
    
    
    13Interest rate swaps (3)
    
    
    8$
    34Financial Liabilities:Commodity contracts (1)
    
    $
    57Foreign currency contracts (1)
    
    
    6Interest rate swaps (3)
    
    
    1$
    64
 
 (1)
    
    Based primarily on the forward rates of the specific indices upon which contract settlement is based.(2)
    
    Based primarily on the value of PBGs stock price.(3)
    
    Based primarily on the London Inter-Bank Offer Rate (LIBOR) index. 50




---



##### Table of Contents



Note 8Short-Term Borrowings and Long-Term Debt
 2008
    
    
    2007Short-term borrowingsCurrent maturities of long-term debt
    
    $
    1,305
    
    
    $
    6Other short-term borrowings
    
    
    103
    
    
    
    190$
    1,408
    
    
    $
    196Long-term debt5.63% (5.2% effective rate) (2)(3) senior notes due 2009
    
    $
    1,300
    
    
    $
    1,3004.63% (4.6% effective rate)(3) senior notes due 2012
    
    
    1,000
    
    
    
    1,0005.00% (5.2% effective rate) senior notes due 2013
    
    
    400
    
    
    
    4006.95% (7.4% effective rate) (4) senior notes due 2014
    
    
    1,300
    
    
    
    4.13% (4.4% effective rate) senior notes due 2015
    
    
    250
    
    
    
    2505.50% (5.3% effective rate) (2) senior notes due 2016
    
    
    800
    
    
    
    800Capital lease obligations (Note 9)
    
    
    8
    
    
    
    9Other (average rate 14.73%)
    
    
    36
    
    
    
    285,094
    
    
    
    3,787SFAS 133 adjustment (1)
    
    
    6
    
    
    
    Unamortized discount, net
    
    
    (6
    )
    
    
    (5
    )Current maturities of long-term debt
    
    
    (1,305
    )
    
    
    (6
    )$
    3,789
    
    
    $
    3,776
 
 (1)
    
    In accordance with the requirements of SFAS No. 133, Accounting for Derivative Instruments
and Hedging Activities (SFAS 133), the portion of our fixed-rate debt obligations that is
hedged is reflected in our Consolidated Balance Sheets as an amount equal to the sum of the
debts carrying value plus a SFAS 133 fair value adjustment, representing changes recorded in
the fair value of the hedged debt obligations attributable to movements in market interest
rates.(2)
    
    Effective interest rates include the impact of the gain/loss realized on swap instruments and
represent the rates that were achieved in 2008.(3)
    
    These notes are guaranteed by PepsiCo.(4)
    
    Effective interest rate excludes the impact of the loss realized on Treasury Rate Locks in
2008. Aggregate Maturities  Long-Term Debt
   2008 Short-Term Debt Activities
  Debt Covenants
  .
 51




---



##### Table of Contents



Interest Payments
  Letters of Credit, Bank Guarantees and Surety Bonds
  Note 9Leases
     LeasesCapital
    
    
    Operating2009
    
    $
    4
    
    
    $
    582010
    
    
    2
    
    
    
    432011
    
    
    1
    
    
    
    262012
    
    
    
    
    
    
    202013
    
    
    
    
    
    
    14Thereafter
    
    
    2
    
    
    
    118$
    9
    
    
    $
    279Less: Amount representing interest
    
    
    1Present value of net minimum lease payments
    
    
    8Less: current portion of net minimum lease payments
    
    
    3Long-term portion of net minimum lease payments
    
    $
    5
 Components of Net Rental Expense Under Operating Leases
 2008
    
    
    2007
    
    
    2006Minimum rentals
    
    $
    121
    
    
    $
    114
    
    
    $
    99Sublease rental income
    
    
    (1
    )
    
    
    (2
    )
    
    
    (3
    )Net Rental Expense
    
    $
    120
    
    
    $
    112
    
    
    $
    96
 Note 10Financial Instruments and Risk Management
  52




---



##### Table of Contents



Cash Flow Hedges
       Before Taxes
    
    
    Taxes
    
    
    Net of TaxesAccumulated net gains as of December 31, 2005
    
    $
    5
    
    
    $
    2
    
    
    $
    7Net changes in the fair value of cash flow hedges
    
    
    14
    
    
    
    (2
    )
    
    
    12Net gains reclassified from AOCL into earnings
    
    
    (1
    )
    
    
    (1
    )
    
    
    (2
    )Accumulated net gains as of December 30, 2006
    
    
    18
    
    
    
    (1
    )
    
    
    17Net changes in the fair value of cash flow hedges
    
    
    (4
    )
    
    
    3
    
    
    
    (1
    )Net losses reclassified from AOCL into earnings
    
    
    4
    
    
    
    (1
    )
    
    
    3Accumulated net gains as of December 29, 2007
    
    
    18
    
    
    
    1
    
    
    
    19Net changes in the fair value of cash flow hedges
    
    
    (57
    )
    
    
    (2
    )
    
    
    (59
    )Net gains reclassified from AOCL into earnings
    
    
    (4
    )
    
    
    (1
    )
    
    
    (5
    )Accumulated net losses as of December 27, 2008
    
    $
    (43
    )
    
    $
    (2
    )
    
    $
    (45
    )
  Fair Value Hedges
  53




---



##### Table of Contents



Foreign Currency Hedges
  Unfunded Deferred Compensation Liability
    Other Financial Assets and Liabilities
   Note 11Pension and Postretirement Medical Benefit Plans
 Employee Benefit Plans
  Defined Benefit Pension Plans
  54




---



##### Table of Contents



Postretirement Medical Plans
  Defined Contribution Benefits
  Components of Net Pension Expense and Other Amounts Recognized in Other Comprehensive Loss
(Income)
 Pension2008
    
    
    2007
    
    
    2006Net Pension ExpenseService cost
    
    $
    51
    
    
    $
    55
    
    
    $
    53Interest cost
    
    
    100
    
    
    
    90
    
    
    
    82Expected return on plan assets  (income)
    
    
    (116
    )
    
    
    (102
    )
    
    
    (94
    )Amortization of net loss
    
    
    15
    
    
    
    38
    
    
    
    38Amortization of prior service amendments
    
    
    7
    
    
    
    7
    
    
    
    9Curtailment charge
    
    
    20
    
    
    
    
    
    
    
    Special termination benefits
    
    
    7
    
    
    
    4
    
    
    
    Net pension expense for the defined benefit plans
    
    
    84
    
    
    
    92
    
    
    
    88Other Comprehensive Loss (Income)Prior service cost arising during the year
    
    
    14
    
    
    
    8
    
    
    
    N/ANet loss (gain) arising during the year
    
    
    619
    
    
    
    (114
    )
    
    
    N/AAmortization of net loss
    
    
    (15
    )
    
    
    (38
    )
    
    
    N/AAmortization of prior service amendments (1)
    
    
    (27
    )
    
    
    (7
    )
    
    
    N/ATotal recognized in other comprehensive loss (income)
    
    
    591
    
    
    
    (151
    )
    
    
    N/ATotal recognized in net pension expense and other
comprehensive loss (income)
    
    $
    675
    
    
    $
    (59
    )
    
    $
    88
 
 (1)
    
    2008 includes curtailment charge of $20 million. Components of Postretirement Medical Expense and Other Amounts Recognized in Other
Comprehensive Loss (Income)
 Postretirement2008
    
    
    2007
    
    
    2006Net Postretirement ExpenseService cost
    
    $
    5
    
    
    $
    5
    
    
    $
    4Interest cost
    
    
    21
    
    
    
    20
    
    
    
    20Amortization of net loss
    
    
    3
    
    
    
    4
    
    
    
    7Special termination benefits
    
    
    1
    
    
    
    
    
    
    
    Net postretirement expense
    
    
    30
    
    
    
    29
    
    
    
    31Other Comprehensive Loss (Income)Net (gain) arising during the year
    
    
    (30
    )
    
    
    (4
    )
    
    
    N/AAmortization of net loss
    
    
    (3
    )
    
    
    (4
    )
    
    
    N/ATotal recognized in other comprehensive loss (income)
    
    
    (33
    )
    
    
    (8
    )
    
    
    N/ATotal recognized in net postretirement expense and
other comprehensive loss (income)
    
    $
    (3
    )
    
    $
    21
    
    
    $
    31
 55




---



##### Table of Contents



Changes in Benefit Obligations
 Pension
    
    
    Postretirement2008
    
    
    2007
    
    
    2008
    
    
    2007Obligation at beginning of year
    
    $
    1,585
    
    
    $
    1,539
    
    
    $
    353
    
    
    $
    354SFAS 158 adoption
    
    
    (53
    )
    
    
    
    
    
    
    (5
    )
    
    
    Service cost
    
    
    51
    
    
    
    55
    
    
    
    5
    
    
    
    5Interest cost
    
    
    100
    
    
    
    90
    
    
    
    21
    
    
    
    20Plan amendments
    
    
    14
    
    
    
    8
    
    
    
    
    
    
    
    Plan curtailment
    
    
    (50
    )
    
    
    
    
    
    
    
    
    
    
    Actuarial (gain) loss
    
    
    141
    
    
    
    (53
    )
    
    
    (30
    )
    
    
    (4
    )Benefit payments
    
    
    (69
    )
    
    
    (57
    )
    
    
    (19
    )
    
    
    (23
    )Special termination benefits
    
    
    7
    
    
    
    4
    
    
    
    1
    
    
    
    Adjustment for Medicare subsidy
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    1Transfers
    
    
    (2
    )
    
    
    (1
    )
    
    
    
    
    
    
    Obligation at end of year
    
    $
    1,724
    
    
    $
    1,585
    
    
    $
    327
    
    
    $
    353
 Changes in the Fair Value of Plan Assets
 Pension
    
    
    Postretirement2008
    
    
    2007
    
    
    2008
    
    
    2007Fair value of plan assets at beginning of year
    
    $
    1,455
    
    
    $
    1,289
    
    
    $
    
    
    
    $
    SFAS 158 adoption
    
    
    (17
    )
    
    
    
    
    
    
    
    
    
    
    Actual return on plan assets
    
    
    (412
    )
    
    
    163
    
    
    
    
    
    
    
    Transfers
    
    
    (2
    )
    
    
    (1
    )
    
    
    
    
    
    
    Employer contributions
    
    
    90
    
    
    
    61
    
    
    
    18
    
    
    
    22Adjustment for Medicare subsidy
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    1Benefit payments
    
    
    (69
    )
    
    
    (57
    )
    
    
    (19
    )
    
    
    (23
    )Fair value of plan assets at end of year
    
    $
    1,045
    
    
    $
    1,455
    
    
    $
    
    
    
    $
    
 Amounts Included in AOCL
 Pension
    
    
    Postretirement2008
    
    
    2007
    
    
    2008
    
    
    2007Prior service cost
    
    $
    38
    
    
    $
    48
    
    
    $
    3
    
    
    $
    3Net loss
    
    
    879
    
    
    
    308
    
    
    
    49
    
    
    
    90Total
    
    $
    917
    
    
    $
    356
    
    
    $
    52
    
    
    $
    93
 Estimated Gross Amounts in AOCL to be Amortized in 2009
 Pension
    
    PostretirementPrior service cost
    
    $
    6
    
    
    $
    Net loss
    
    $
    35
    
    
    $
    1
  56




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##### Table of Contents



Selected Information for Plans with Liabilities in Excess of Plan Assets
 Pension
    
    Postretirement2008
    
    2007(1)
    
    2008
    
    2007(1)Projected benefit obligation
    
    $
    1,724
    
    
    $
    777
    
    
    $
    327
    
    
    $
    353Accumulated benefit obligation
    
    $
    1,636
    
    
    $
    649
    
    
    $
    327
    
    
    $
    353Fair value of plan assets (1)
    
    $
    1,045
    
    
    $
    598
    
    
    $
    
    
    
    $
    
 
 (1)
    
    2007 balances were measured on September 30, 2007. Fair value of plan assets for
2007 includes fourth quarter employer contributions. Reconciliation of Funded Status
 Pension
    
    
    Postretirement2008
    
    
    2007
    
    
    2008
    
    
    2007Funded status at measurement date
    
    $
    (679
    )
    
    $
    (130
    )
    
    $
    (327
    )
    
    $
    (353
    )Fourth quarter employer contributions/payments
    
    
    N/A
    
    
    
    23
    
    
    
    N/A
    
    
    
    4Funded status at end of year
    
    $
    (679
    )
    
    $
    (107
    )
    
    $
    (327
    )
    
    $
    (349
    )Amounts RecognizedOther assets
    
    $
    
    
    
    $
    69
    
    
    $
    
    
    
    $
    Accounts payable and other current liabilities
    
    
    (10
    )
    
    
    (5
    )
    
    
    (24
    )
    
    
    (26
    )Other liabilities
    
    
    (669
    )
    
    
    (171
    )
    
    
    (303
    )
    
    
    (323
    )Total net liabilities
    
    
    (679
    )
    
    
    (107
    )
    
    
    (327
    )
    
    
    (349
    )Accumulated other comprehensive loss
    
    
    917
    
    
    
    356
    
    
    
    52
    
    
    
    93Net amount recognized
    
    $
    238
    
    
    $
    249
    
    
    $
    (275
    )
    
    $
    (256
    )
 Weighted Average Assumptions
 Pension
    
    Postretirement2008
    
    2007
    
    2006
    
    2008
    
    2007
    
    2006Expense discount rate
    
    
    6.70
    %
    
    
    6.00
    %
    
    
    5.80
    %
    
    
    6.35
    %
    
    
    5.80
    %
    
    
    5.55
    %Liability discount rate
    
    
    6.20
    %
    
    
    6.35
    %
    
    
    6.00
    %
    
    
    6.50
    %
    
    
    6.20
    %
    
    
    5.80
    %Expected rate of return on plan assets (1)
    
    
    8.50
    %
    
    
    8.50
    %
    
    
    8.50
    %
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/AExpense rate of compensation increase
    
    
    3.56
    %
    
    
    3.55
    %
    
    
    3.53
    %
    
    
    3.56
    %
    
    
    3.55
    %
    
    
    3.53
    %Liability rate of compensation increase
    
    
    3.53
    %
    
    
    3.56
    %
    
    
    3.55
    %
    
    
    3.53
    %
    
    
    3.56
    %
    
    
    3.55
    %
 
 (1)
    
    Expected rate of return on plan assets is presented after administration expenses.  Funding and Plan Assets
 Allocation PercentageTarget
    
    Actual
    
    Actual2009
    
    2008
    
    2007Asset CategoryEquity securities
    
    
    65
    %
    
    
    60
    %
    
    
    75
    %Debt securities
    
    
    35
    %
    
    
    40
    %
    
    
    25
    %
  57




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##### Table of Contents



Health Care Cost Trend Rates
   1% Increase
    
    1% DecreaseEffect on total fiscal year 2008 service and interest cost components
    
    $
    
    
    
    $
    Effect on total fiscal year 2008 postretirement benefit obligation
    
    $
    6
    
    
    $
    (5
    )
 Pension and Postretirement Cash Flow
  Pension
    
    PostretirementEmployer Contributions2007
    
    $
    74
    
    
    $
    212008
    
    $
    90
    
    
    $
    182009 (expected)
    
    $
    160
    
    
    $
    25
 Expected Benefits
  PostretirementIncluding Medicare
    
    Excluding MedicarePension
    
    Subsidy
    
    SubsidyExpected Benefit Payments2009
    
    $
    80
    
    
    $
    25
    
    
    $
    262010
    
    $
    73
    
    
    $
    25
    
    
    $
    262011
    
    $
    80
    
    
    $
    26
    
    
    $
    272012
    
    $
    88
    
    
    $
    27
    
    
    $
    282013
    
    $
    96
    
    
    $
    27
    
    
    $
    282014 to 2018
    
    $
    627
    
    
    $
    141
    
    
    $
    146
 58




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##### Table of Contents



Note 12Income Taxes
  2008
    
    
    2007
    
    
    2006Current:Federal
    
    $
    7
    
    
    $
    6
    
    
    $
    6Foreign
    
    
    43
    
    
    
    24
    
    
    
    36State
    
    
    (2
    )
    
    
    5
    
    
    
    248
    
    
    
    35
    
    
    
    44Deferred:Federal
    
    
    12
    
    
    
    (17
    )
    
    
    (5
    )Foreign
    
    
    (96
    )
    
    
    6
    
    
    
    (36
    )State
    
    
    (3
    )
    
    
    3
    
    
    
    (87
    )
    
    
    (8
    )
    
    
    (41
    )$
    (39
    )
    
    $
    27
    
    
    $
    3
  
    
    Tax impact from impairment charge  During 2008, we recorded a deferred tax benefit of
$115 million associated with the impairment charges primarily related to our business in
Mexico.
  
    
    Valuation allowances  During 2007, we reversed valuation allowances resulting in an $11
million tax benefit. These reversals were due to improved profitability trends in Russia.
    
    Tax rate changes  During 2007, changes to the income tax laws in Canada and Mexico were
enacted. These law changes required us to re-measure our net deferred tax liabilities
which resulted in a net decrease to our income tax expense of approximately $13 million.
  
    
    Valuation allowances  During 2006, we reversed valuation allowances resulting in a $34
million tax benefit. These reversals were due to improved profitability trends and certain
restructurings in Spain, Russia and Turkey.
    
    Tax rate changes  During 2006, changes to the income tax laws in Canada, Turkey and
certain jurisdictions within the U.S. were enacted. These law changes enabled us to
re-measure our net deferred tax liabilities using lower tax rates which decreased our
income tax expense by approximately $12 million.
  2008
    
    
    2007
    
    
    2006U.S.
    
    $
    651
    
    
    $
    787
    
    
    $
    731Foreign
    
    
    (154
    )
    
    
    234
    
    
    
    196$
    497
    
    
    $
    1,021
    
    
    $
    927
 59




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##### Table of Contents



2008
    
    2007
    
    2006Income taxes computed at the U.S. federal statutory rate
    
    
    35.0
    %
    
    
    35.0
    %
    
    
    35.0
    %Income taxable to owners
    
    
    (46.3
    )
    
    
    (26.6
    )
    
    
    (31.4
    )State income tax, net of federal tax benefit
    
    
    (0.8
    )
    
    
    0.7
    
    
    
    3.1Impact of foreign results
    
    
    (10.1
    )
    
    
    (2.8
    )
    
    
    (1.3
    )Change in valuation allowances, net
    
    
    0.5
    
    
    
    (2.4
    )
    
    
    (5.5
    )Nondeductible expenses
    
    
    6.6
    
    
    
    1.9
    
    
    
    1.4Other, net
    
    
    1.2
    
    
    
    (1.8
    )
    
    
    0.4Impairment charges
    
    
    5.8
    
    
    
    
    
    
    
    Tax rate change charge (benefit)
    
    
    0.4
    
    
    
    (1.3
    )
    
    
    (1.4
    )Total effective income tax rate
    
    
    (7.7
    )%
    
    
    2.7
    %
    
    
    0.3
    %
   2008
    
    
    2007Intangible assets and property, plant and equipment
    
    $
    288
    
    
    $
    438Investment
    
    
    305
    
    
    
    178Other
    
    
    12
    
    
    
    15Gross deferred tax liabilities
    
    
    605
    
    
    
    631Net operating loss carryforwards
    
    
    (433
    )
    
    
    (354
    )Employee benefit obligations
    
    
    (41
    )
    
    
    (30
    )Various liabilities and other
    
    
    (114
    )
    
    
    (100
    )Gross deferred tax assets
    
    
    (588
    )
    
    
    (484
    )Deferred tax asset valuation allowance
    
    
    214
    
    
    
    240Net deferred tax assets
    
    
    (374
    )
    
    
    (244
    )Net deferred tax liability
    
    $
    231
    
    
    $
    387Classification within the Consolidated Balance SheetsPrepaid expenses and other current assets
    
    $
    (51
    )
    
    $
    (86
    )Accounts payable and other current liabilities
    
    
    3
    
    
    
    2Deferred income taxes
    
    
    279
    
    
    
    471$
    231
    
    
    $
    387
     60




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##### Table of Contents



Years subject toJurisdiction
    
    examination
    
    Years under auditMexico
    
    
    2002-2007
    
    
    
    2002-2003Canada
    
    
    2006-2007
    
    
    
    2006Russia
    
    
    2005-2007
    
    
    
    2005-2007
   61




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2008
    
    
    2007Reserves (excluding interest and penalties)Balance at beginning of year
    
    $
    87
    
    
    $
    82Increases due to tax positions related to prior years
    
    
    3
    
    
    
    4Increases due to tax positions related to the current year
    
    
    9
    
    
    
    9Decreases due to tax positions related to prior years
    
    
    (4
    )
    
    
    (5
    )Decreases due to settlements with taxing authorities
    
    
    
    
    
    
    (2
    )Decreases due to lapse of statute of limitations
    
    
    (5
    )
    
    
    (9
    )Currency translation adjustment
    
    
    (19
    )
    
    
    8Balance at end of year
    
    $
    71
    
    
    $
    87Classification of reserves within the Consolidated
Balance SheetsOther liabilities
    
    $
    68
    
    
    $
    84Deferred income taxes
    
    
    3
    
    
    
    3Total amount of reserves recognized
    
    $
    71
    
    
    $
    87
  2008
    
    
    2007Interest and penalties accrued
    
    $
    45
    
    
    $
    38
  Note 13Segment Information
   Net Revenues2008
    
    
    2007
    
    
    2006U.S. & Canada
    
    $
    10,300
    
    
    $
    10,336
    
    
    $
    9,910Europe
    
    
    2,115
    
    
    
    1,872
    
    
    
    1,534Mexico
    
    
    1,381
    
    
    
    1,383
    
    
    
    1,286Worldwide net revenues
    
    $
    13,796
    
    
    $
    13,591
    
    
    $
    12,730
  62




---



##### Table of Contents



Operating Income (Loss)2008
    
    
    2007
    
    
    2006U.S. & Canada
    
    $
    864
    
    
    $
    876
    
    
    $
    849Europe
    
    
    101
    
    
    
    106
    
    
    
    57Mexico
    
    
    (338
    )
    
    
    72
    
    
    
    82Worldwide operating income
    
    
    627
    
    
    
    1,054
    
    
    
    988Interest expense
    
    
    244
    
    
    
    232
    
    
    
    227Interest income
    
    
    162
    
    
    
    222
    
    
    
    174Other non-operating expenses (income), net
    
    
    24
    
    
    
    (5
    )
    
    
    10Minority interest
    
    
    24
    
    
    
    28
    
    
    
    (2
    )Income before income taxes
    
    $
    497
    
    
    $
    1,021
    
    
    $
    927
 Total Assets
    
    

Long-Lived
Assets
(1)2008
    
    
    2007
    
    
    2006
    
    
    2008
    
    
    2007
    
    
    2006U.S. & Canada
    
    $
    13,328
    
    
    $
    13,334
    
    
    $
    12,072
    
    
    $
    11,098
    
    
    $
    11,391
    
    
    $
    10,267Europe (2)
    
    
    2,222
    
    
    
    1,671
    
    
    
    1,072
    
    
    
    1,630
    
    
    
    1,014
    
    
    
    554Mexico
    
    
    945
    
    
    
    1,707
    
    
    
    1,811
    
    
    
    745
    
    
    
    1,443
    
    
    
    1,474Worldwide total
    
    $
    16,495
    
    
    $
    16,712
    
    
    $
    14,955
    
    
    $
    13,473
    
    
    $
    13,848
    
    
    $
    12,295
 
 (1)
    
    Long-lived assets represent property, plant and equipment,
other intangible assets, net,
goodwill, investments in noncontrolled affiliates, notes receivable
from PBG and other assets.(2)
    
    Long-lived assets include an equity method investment in Lebedyansky with a net book
value of $617 million as of December 27, 2008.  Capital Expenditures
    
    
    Depreciation and Amortization2008
    
    
    2007
    
    
    2006
    
    
    2008
    
    
    2007
    
    
    2006U.S. & Canada
    
    $
    523
    
    
    $
    626
    
    
    $
    554
    
    
    $
    498
    
    
    $
    509
    
    
    $
    513Europe
    
    
    147
    
    
    
    146
    
    
    
    99
    
    
    
    86
    
    
    
    72
    
    
    
    52Mexico
    
    
    85
    
    
    
    82
    
    
    
    68
    
    
    
    88
    
    
    
    87
    
    
    
    83Worldwide total
    
    $
    755
    
    
    $
    854
    
    
    $
    721
    
    
    $
    672
    
    
    $
    668
    
    
    $
    648
 Note 14Related Party Transactions
  (1)
    
    Master Bottling Agreement for cola beverages bearing the Pepsi-Cola and Pepsi
trademarks in the U.S.; bottling agreements and distribution agreements for non-cola
beverages; and a master fountain syrup agreement in the U.S.;(2)
    
    Agreements similar to the Master Bottling Agreement and the non-cola agreement for each
country in which we operate, as well as a fountain syrup agreement for Canada;(3)
    
    A shared services agreement where we obtain various services from PepsiCo and provide
services to PepsiCo;(4)
    
    Russia Venture Agreement related to the formation of PR Beverages;(5)
    
    Russia Snack Food Distribution Agreement pursuant to which our PR Beverages venture
purchases snack food products from Frito-Lay, Inc. (Frito) a subsidiary of PepsiCo, for
sale and distribution in the Russian Federation; and(6)
    
    Transition agreements that provide certain indemnities to the parties, and provide for
the allocation of tax and other assets, liabilities and obligations arising from periods
prior to the initial public offering.
 63




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2008
    
    
    2007
    
    
    2006Net revenues:Bottler incentives and other arrangements (a)
    
    $
    93
    
    
    $
    66
    
    
    $
    67Cost of sales:Purchases of concentrate and finished products,
and royalty fees (b)
    
    $
    (3,451
    )
    
    $
    (3,406
    )
    
    $
    (3,227
    )Bottler incentives and other arrangements (a)
    
    
    542
    
    
    
    582
    
    
    
    570Total cost of sales
    
    $
    (2,909
    )
    
    $
    (2,824
    )
    
    $
    (2,657
    )Selling, delivery and administrative expenses:Bottler incentives and other arrangements (a)
    
    $
    56
    
    
    $
    66
    
    
    $
    69Fountain service fee (c)
    
    
    187
    
    
    
    188
    
    
    
    178Frito-Lay purchases (d)
    
    
    (355
    )
    
    
    (270
    )
    
    
    (198
    )Shared services: (e)Shared services expense
    
    
    (52
    )
    
    
    (57
    )
    
    
    (61
    )Shared services revenue
    
    
    7
    
    
    
    8
    
    
    
    8Net shared services
    
    
    (45
    )
    
    
    (49
    )
    
    
    (53
    )Total selling, delivery and administrative expenses
    
    $
    (157
    )
    
    $
    (65
    )
    
    $
    (4
    )Income tax benefit: (f)
    
    $
    1
    
    
    $
    7
    
    
    $
    6
 (a) Bottler Incentives and Other Arrangements 
 (b) Purchases of Concentrate and Finished Product 
 (c) Fountain Service Fee 
 (d) Frito-Lay Purchases 
 64




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##### Table of Contents



(e) Shared Services 
 (f) Income Tax Benefit
 Other Related Party Transactions
            65




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Note 15 Restructuring Charges
    U.S. &Worldwide
    
    
    Canada
    
    
    Mexico
    
    
    EuropeCosts incurred through December 27, 2008
    
    $
    83
    
    
    $
    53
    
    
    $
    3
    
    
    $
    27Costs expected to be incurred through
December 26, 2009
    
    
    57-87
    
    
    
    36-47
    
    
    
    20-35
    
    
    
    1-5Total costs expected to be incurred
    
    $
    140-$170
    
    
    $
    89-$100
    
    
    $
    23-$38
    
    
    $
    28-$32
  AssetPension &
    
    
    Disposal,Severance
    
    
    Other
    
    
    Employee& Related
    
    
    Related
    
    
    RelocationTotal
    
    
    Benefits
    
    
    Costs
    
    
    & OtherCosts accrued
    
    $
    83
    
    
    $
    47
    
    
    $
    29
    
    
    $
    7Cash payments
    
    
    (11
    )
    
    
    (10
    )
    
    
    
    
    
    
    (1
    )Non-cash settlements
    
    
    (30
    )
    
    
    (1
    )
    
    
    (23
    )
    
    
    (6
    )Remaining costs accrued at December 27, 2008
    
    $
    42
    
    
    $
    36
    
    
    $
    6
    
    
    $
    
 Note 16Accumulated Other Comprehensive Loss
  2008
    
    
    2007
    
    
    2006Net currency translation adjustment
    
    $
    (351
    )
    
    $
    242
    
    
    $
    7Cash flow hedge adjustment (1)
    
    
    (45
    )
    
    
    19
    
    
    
    17Minimum pension liability adjustment
    
    
    
    
    
    
    
    
    
    
    (335
    )Adoption of SFAS 158 (2)
    
    
    
    
    
    
    
    
    
    
    (278
    )Pension and postretirement medical benefit plans adjustment (3)
    
    
    (977
    )
    
    
    (450
    )
    
    
    Accumulated other comprehensive loss
    
    $
    (1,373
    )
    
    $
    (189
    )
    
    $
    (589
    )
 
 (1)
    
    Net of taxes of $(2) million in 2008, $1 million in 2007 and $(1) million in 2006.(2)
    
    Net of taxes of $4 million in 2006.(3)
    
    Net of taxes of $4 million in 2008 and $1 million in 2007. 66




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Note 17Supplemental Cash Flow Information
  2008
    
    2007
    
    2006Non-cash investing and financing activities:(Decrease) increase in accounts payable related to capital expenditures
    
    $
    (67)
    
    
    $
    15
    
    
    $
    7Acquisition of intangible asset
    
    $
    
    
    
    $
    315
    
    
    $
    Contribution of acquired entity by PBG
    
    $
    26
    
    
    $
    
    
    
    $
    Liabilities assumed in conjunction with acquisition of bottlers
    
    $
    17
    
    
    $
    1
    
    
    $
    20Capital-in-kind contributions
    
    $
    34
    
    
    $
    15
    
    
    $
    Share compensation
    
    $
    4
    
    
    $
    
    
    
    $
    
 Note 18Contingencies
  Note 19Selected Quarterly Financial Data (unaudited)
  First
    
    Second
    
    Third
    
    FourthQuarter
    
    Quarter
    
    Quarter
    
    Quarter
    
    Full Year2008(1)Net revenues
    
    $
    2,651
    
    
    $
    3,522
    
    
    $
    3,814
    
    
    $
    3,809
    
    
    $
    13,796Gross profit
    
    $
    1,169
    
    
    $
    1,606
    
    
    $
    1,737
    
    
    $
    1,698
    
    
    $
    6,210Operating income (loss)
    
    $
    106
    
    
    $
    343
    
    
    $
    453
    
    
    $
    (275
    )
    
    $
    627Net income (loss)
    
    $
    98
    
    
    $
    297
    
    
    $
    384
    
    
    $
    (243
    )
    
    $
    536
 First
    
    Second
    
    Third
    
    FourthQuarter
    
    Quarter
    
    Quarter
    
    Quarter
    
    Full Year2007(1)Net revenues
    
    $
    2,466
    
    
    $
    3,360
    
    
    $
    3,729
    
    
    $
    4,036
    
    
    $
    13,591Gross profit
    
    $
    1,123
    
    
    $
    1,535
    
    
    $
    1,726
    
    
    $
    1,837
    
    
    $
    6,221Operating income
    
    $
    119
    
    
    $
    320
    
    
    $
    430
    
    
    $
    185
    
    
    $
    1,054Net income
    
    $
    102
    
    
    $
    301
    
    
    $
    401
    
    
    $
    190
    
    
    $
    994
 
 (1)
    
    For additional unaudited information see Items affecting comparability
of our financial results in Managements Financial Review in Item 7. Note 20Subsequent Event
  67




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68




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##### Table of Contents



ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
    
 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 9A(T). CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
  Managements Annual Report on Internal Control Over Financial Reporting
   69




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##### Table of Contents



Changes in Internal Control Over Financial Reporting
  
 ITEM 9B. OTHER INFORMATION
  70




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##### Table of Contents



PART III
 
 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
  Thomas M. Lardieri
 Marie T. Gallagher
 Steven M. Rapp
  Eric J. Foss
 Alfred H. Drewes
 Thomas M. Lardieri
  71




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##### Table of Contents



ITEM 11. EXECUTIVE COMPENSATION
 Compensation Discussion and Analysis (CD&A)
 What are the highlights of PBGs 2008 executive compensation program as described in this CD&A?
 
    
    PBG provides compensation and benefits to the executive officers of Bottling LLC
    
    The primary objectives of PBGs compensation program are to attract, retain, and
motivate talented and diverse domestic and international executives
    
    PBG provides executive officers with the following types of compensation: base salary,
short-term performance-based cash incentives, and long-term performance-based equity
incentive awards
    
    PBG believes that to appropriately motivate senior executives to achieve and sustain the
long-term growth of PBG, a majority of their compensation should be tied to PBGs
performance
    
    PBG uses equity-based compensation as a means to align the interests of their executives
with those of their shareholders
    
    PBG believes the design of its executive compensation program drives performance in a
financially responsible way that is sensitive to the dilutive impact on their shareholders
    
    PBG generally targets total compensation within the third quartile of companies within
its peer group of companies which was changed slightly in 2008
    
    In early 2008, consistent with this philosophy, PBG granted a special, one-time
performance-based equity award (the Strategic Leadership Award) to select senior
executives linking their long-term compensation with PBGs strategic imperatives and
reinforcing continuity within the senior leadership team of PBG
    
    In early 2008, PBG added an individual non-financial performance component to the annual
performance-based cash incentive program for senior executives to reinforce the importance
of their individual contribution to certain non-financial objectives of PBG
    
    The challenging worldwide economic environment resulted in PBG performance in 2008 that
was significantly below target. Our management nevertheless delivered solid
year-over-year financial results. Based on these results, the Committee determined it
appropriate to award a discretionary bonus amount to each of the Named Executive Officers.
The total bonus payout for each of the Named Executive Officers was significantly
below target
    
    PBG has never backdated or re-priced equity awards and does not time its equity award
grants relative to the release of material non-public information
    
    Executive officers of Bottling LLC do not have employment, severance or
change-in-control agreements
    
    PBG does not provide any gross-ups for potential excise taxes that may be incurred in
connection with a change-in-control of PBG
    
    PBG has a long-standing policy in place to recoup compensation from an executive who has
engaged in misconduct
    
    Bottling LLC executives participate in the same group benefit programs, at the same
levels, as all PBG employees
 Who oversees PBGs executive compensation program?
  72




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##### Table of Contents



What are the objectives of PBGs executive compensation program?
  
    
    Provide a total compensation program that is appropriately competitive within its
industry and to reinforce its short-term and long-term business objectives by:
 §
    
    motivating and rewarding key executives for achieving and exceeding PBGs
business objectives;§
    
    providing financial consequences to key executives for failing to achieve
PBGs business objectives; and§
    
    attracting and retaining key executives through meaningful wealth-creation
opportunities;
 
    
    Align the interests of their shareholders and executives by placing particular
emphasis on performance-based and equity-based compensation;
    
    Maintain a financially responsible program that is appropriate within PBGs
financial structure and sensitive to the dilutive impact on their shareholders; and
    
    Establish and maintain PBGs program in accordance with all applicable laws and
regulations, as well as with corporate governance best practices.
 How does PBG achieve its objectives?
  ObjectiveAlignment withElement of Total
    
    Form of
    
    
    
    
    
    Motivation
    
    ShareholderCompensation
    
    Compensation
    
    Attraction
    
    Short-Term
    
    Long-Term
    
    Interests
    
    RetentionBase Salary
    
    Cash
    
    

ü
    
    
    
    ü
    
    
    
    
    
    
    
    
    
    
    
    üAnnual Performance-Based 
Cash Incentive
    
    Cash
    
    
    ü
    
    
    
    ü
    
    
    
    
    
    
    
    ü
    
    
    
    üLong-Term
    
    Stock Options
    
    
    ü
    
    
    
    
    
    
    
    ü
    
    
    
    ü
    
    
    
    üPerformance-Based
    
    RSUsEquity Incentive
 Why does PBG choose to pay a mix of cash and equity-based compensation?
     73




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Chairman and CEO
    
    Other Named Executive Officers (Average)(PIE CHART)
    
    (PIE CHART)
 Why is the compensation of our Named Executive Officers largely performance-based compensation
rather than fixed?
    74




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##### Table of Contents



Chairman and CEO
    
    Other Named Executive Officers (Average)(PIE CHART)
    
    (PIE CHART)
 Why does PBG use earnings per share, volume and cash flow as the financial criteria for its
performance-based compensation?
   Short-Term Incentive
   75




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Long-Term Incentive
   Why does PBG provide perquisites as an element of compensation?
     76




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What other forms of compensation does PBG provide to employees, including the Named Executive
Officers, and why are they provided?
  Pension.
   4 01(k) Savings Plan.
  Deferred Income Program.
 Health and Welfare Benefits.
 What policies and practices does PBG utilize in designing its executive compensation program and
setting target levels of total compensation?
  Process of Designing the Executive Compensation Program.
 Target Compensation Use of Peer Group Data. th th
 77




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##### Table of Contents



Deleted
    
    AddedColgate-Palmolive Company
    
    ConAgra Foods, Inc.Kimberly-Clark Corporation
    
    Newell Rubbermaid Inc.Staples, Inc.
    
    Sysco CorporationYum! Brands, Inc.
  Anheuser-Busch Companies, Inc
    
    H.J. Heinz CompanyAramark Corporation
    
    Hershey Foods CorporationCampbell Soup Company
    
    Kellogg CompanyClorox Company, Inc.
    
    Newell Rubbermaid Inc.Coca-Cola Enterprises Inc.
    
    PepsiAmericas, Inc.ConAgra Foods, Inc.
    
    Sara Lee CorporationDean Foods Company
    
    Supervalu Inc.FedEx Corporation
    
    Sysco CorporationGeneral Mills, Inc.
  Peer Group*
    
    
    PBG*75th
    
    
    PBG
    
    PercentMedian
    
    Percentile
    
    
    Data
    
    RankRevenue
    
    $
    11,799
    
    
    $
    17,748
    
    
    
    $
    13,591
    
    
    
    68
    %Net Income
    
    $
    604
    
    
    $
    1,027
    
    
    
    $
    532
    
    
    
    48
    %Market Capitalization
    
    $
    12,128
    
    
    $
    19,052
    
    
    
    $
    8,839
    
    
    
    26
    %Number of Employees
    
    
    27,497
    
    
    
    51,175
    
    
    
    
    69,100
    
    
    
    85
    %
 
 *
    
    Dollars are in millions. Based on information as of December 31, 2007.   78




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##### Table of Contents



Establishing Target Compensation; Role of the PEO.
   Use of Tally Sheets.
 
    
    Annual direct compensation: Information regarding base salary, annual incentive,
and long-term incentive for the past three years;
    
    Equity awards: Detailed chart of information regarding all PBG equity-based
awards, whether vested, unvested, exercised or unexercised, including total pre-tax
value to the executive and holdings relative to the executives Stock Ownership
Guidelines (discussed below);
    
    Perquisites: Line item summary showing the value of each perquisite as well as
the value of the tax gross-up, if any;
    
    Pension / Deferred Compensation: Value of pension plan benefits (qualified plan,
non-qualified plan and total) and value of defined-contribution plan accounts (401(k)
and deferred compensation), including the year-over-year change in value in those
accounts;
    
    Life Insurance Benefits (expressed as multiple of cash compensation as well as
actual dollar value);
    
    Description of all compensation and benefits payable upon a termination of
employment.
  Form of Equity-Based Compensation.
   79




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##### Table of Contents



Equity Award Grant Practices.
 Timing of Grants
   Pricing of Stock Options
 What are some other policies and practices that govern the design and structure of PBGs
compensation program?
 Stock Ownership Guidelines.
 Trading Windows / Trading Plans / Hedging.
 Compensation Recovery for Misconduct.
   Employment / Severance Agreements.
 80




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##### Table of Contents



Approved Transfers To / From PepsiCo.
  Change in Control Protections.
 Deductibility of Compensation Expenses.
  What compensation actions were taken in 2008 and why were they taken?
  Base Salary.
 81




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##### Table of Contents



Annual Cash Incentive Award
 Actual Annual Cash Incentive Awards.
 Ø Financial Performance Targets and Results.
 Worldwide Measure
    
    Weighting*
    
    Target
    
    Actual ResultEPS (comparable)
    
    
    40
    %
    
    $
    2.37
    
    
    $
    2.25Volume Growth v. Prior Year
    
    
    24
    %
    
    
    2.8
    %
    
    
    -4.0
    %Operating Free Cash Flow
    
    
    16
    %
    
    $635 million
    
    $526 million
 
 *
    
    The weighting for Mr. Lardieri was 50%, 30% and 20% for EPS, Volume Growth and Operating Free
Cash Flow, respectively.  Ø Non-Financial Performance Targets and Results.
  82




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##### Table of Contents



2008 Annual Cash Incentive AwardsTarget
    
    
    
    
    
    2008 AwardNamed Executive Officer
    
    
    (% of Salary)
    
    Target ($)
    
    (% of Target)
    
    2008 Award ($)Eric J. Foss
    
    
    
    150
    %
    
    
    1,500,000
    
    
    
    56
    %
    
    
    840,000Alfred H. Drewes
    
    
    
    85
    %
    
    
    408,000
    
    
    
    50
    %
    
    
    204,000Thomas M. Lardieri
    
    
    
    65
    %
    
    
    211,250
    
    
    
    50
    %
    
    
    105,630
  Long-Term Incentive.
 Strategic Leadership Awards
  Annual Equity Award.
 83




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##### Table of Contents



Supplemental Stock Option Award for the PEO.
 What noteworthy executive compensation actions took place during the first quarter of 2009 and why
were such actions taken?
  84




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##### Table of Contents



2008 Summary Compensation Table
 Change inPension ValueNon-Equity
    
    andIncentive
    
    NonqualifiedPlan
    
    DeferredStock
    
    Option
    
    Compen-
    
    Compensation
    
    All OtherName and Principal
    
    
    
    
    
    Salary
    
    Awards
    
    Awards
    
    sation
    
    Earnings
    
    Compensation
    
    TotalPosition
    
    Year
    
    ($)
    
    ($)(1)
    
    ($)(1)
    
    ($)
    
    ($)(2)(3)
    
    ($)(4)
    
    ($)Eric J. Foss
    
    
    2008
    
    
    
    984,615
    
    
    
    2,383,547
    
    
    
    1,934,908
    
    
    
    840,000
    
    
    
    1,166,000
    
    
    
    191,748
    (5)
    
    
    7,500,818Principal Executive Officer
    
    
    2007
    
    
    
    892,308
    
    
    
    1,584,557
    
    
    
    1,893,158
    
    
    
    1,805,580
    
    
    
    594,000
    
    
    
    66,680
    
    
    
    6,836,2832006
    
    
    
    754,500
    
    
    
    975,979
    
    
    
    2,025,066
    
    
    
    1,289,000
    
    
    
    387,000
    
    
    
    64,513
    
    
    
    5,496,058Alfred H. Drewes
    
    
    2008
    
    
    
    476,154
    
    
    
    841,694
    
    
    
    444,431
    
    
    
    204,000
    
    
    
    505,000
    
    
    
    50,669
    (6)
    
    
    2,521,948Principal Financial Officer
    
    
    2007
    
    
    
    451,154
    
    
    
    304,747
    
    
    
    664,901
    
    
    
    551,120
    
    
    
    222,000
    
    
    
    81,884
    
    
    
    2,275,8062006
    
    
    
    425,385
    
    
    
    139,141
    
    
    
    899,853
    
    
    
    456,150
    
    
    
    180,000
    
    
    
    69,442
    
    
    
    2,169,971Thomas M. Lardieri
    
    
    2008
    
    
    
    323,462
    
    
    
    162,331
    
    
    
    48,920
    
    
    
    105,630
    
    
    
    159,000
    
    
    
    41,617
    (7)
    
    
    840,960Principal Accounting Officer
    
    
    2007
    
    
    
    182,942
    
    
    
    48,361
    
    
    
    0
    
    
    
    170,200
    
    
    
    54,000
    
    
    
    16,441
    
    
    
    471,9442006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 
 1.
    
    The amount included in this column is the compensation cost recognized by PBG in fiscal year
2008 related to the executives outstanding equity awards that were unvested for all or any
part of 2008, calculated in accordance with SFAS 123R without regard to forfeiture estimates.
This amount encompasses equity awards that were granted in 2005, 2006, 2007 and 2008 and was
determined using the assumptions set forth in Note 3, Share-Based Compensation, to Bottling
LLCs Annual Report on Form 10-K for the fiscal year ended December 27, 2008 (for 2008, 2007,
2006 awards) and Note 3, Share-Based Compensation, to Bottling LLCs Annual Report on Form
10-K for the fiscal year ended December 29, 2007 (for 2005 awards). As of the end of PBGs
fiscal year, the market price of PBGs common stock was below the exercise price of the option
awards. Therefore, all of the option awards are out of the money and have no intrinsic
value to the executive.2.
    
    No executive earned above-market or preferential earnings on deferred compensation in 2008
and, therefore, no such earnings are reported in this column. Consequently, this amount
reflects only the aggregate change in 2008 in the actuarial present value of the executives
accumulated benefit under all PBG-sponsored defined benefit pension plans in which the
executive participates. The executive participates in such plans on the same terms as all
other eligible employees.3.
    
    This amount was calculated based on the material assumptions set forth in Note 11, Pension
and Postretirement Medical Benefit Plans, to Bottling LLCs Annual Report on Form 10-K for the
fiscal year ended December 27, 2008 and Note 9, Pension and Postretirement Medical Benefit
Plans, to Bottling LLCs Annual Report on Form 10-K for the fiscal year ended December 29,
2007, except for the generally applicable assumptions regarding retirement age and
pre-retirement mortality. During 2008, PBG changed its measurement date from September 30 to
the fiscal year-end. Consequently, we have used an annualized approach adjusting the 15 month
period to a 12 month period, consistent with SEC guidance, in determining the change in
pension value.4.
    
    The amount in this column reflects the actual cost of perquisites and personal benefits
provided by PBG to each of the Named Executive Officers as well as the reimbursements paid by
PBG to the executive for his tax liability related to certain of these PBG provided benefits
and the dollar value of life insurance premiums paid by PBG for the benefit of the Named
Executive Officers each on the same terms and conditions as all other eligible employees. The
particular benefits provided to each Named Executive Officer are described below in footnotes
5, 6, and 7. In addition, PBG purchases club memberships, season tickets and passes to
various sporting events and other venues for purposes of business entertainment. On limited
occasions, employees (including one or more of the Named Executive Officers) may use such
memberships, tickets or passes for personal use. There is no incremental cost to the Company
in such circumstances. Therefore, no cost of such memberships, tickets and passes is
reflected in the All Other Compensation column.5.
    
    This amount includes: $160,425, which equals the total cost of all perquisites and personal
benefits provided by PBG to Mr. Foss, including a car allowance, financial advisory services,
personal use of corporate transportation, nominal recognition awards and nominal personal
expenses incurred in connection with a PBG Board of Directors meeting. The value of Mr.
Foss personal use of the PBG-leased aircraft is $128,225 and represents the aggregate
incremental cost to the Company. For this purpose, the Company has calculated the aggregate
incremental cost based on the actual variable operating costs that were incurred as a result
of Mr. Foss use of the aircraft, which includes an hourly occupied rate, fuel rate and other
flight specific fees. Mr. Foss is responsible for all taxes associated with any personal use
of corporate transportation. 85




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##### Table of Contents



The amount shown in the above table also includes: (i) $17,629, which equals all tax reimbursements
paid to Mr. Foss for the tax liability related to PBG provided perquisites and personal benefits,
including his car allowance, financial advisory services, nominal recognition awards and nominal
personal expenses incurred in connection with a PBG Board of Directors meeting; (ii) a standard
PBG matching contribution of $9,038 to Mr. Foss 401(k) account; and (iii) $4,656, which represents
the dollar value of life insurance premiums paid by PBG for the benefit of Mr. Foss.6.
    
    This amount includes: (i) $25,896, which equals the total cost of all perquisites and
personal benefits provided by PBG to Mr. Drewes, including a car allowance, financial advisory
services and a nominal recognition award; (ii) $13,489, which equals all tax reimbursements
paid to Mr. Drewes for the tax liability related to PBG provided perquisites and personal
benefits, including his car allowance, financial advisory services and a nominal recognition
award; (iii) a standard PBG matching contribution of $9,200 to Mr. Drewes 401(k) account; and
(iv) $2,084, which represents the dollar value of life insurance premiums paid by PBG for the
benefit of Mr. Drewes.7.
    
    This amount includes: (i) $24,856, which equals the total cost of all perquisites and
personal benefits provided by PBG to Mr. Lardieri, including a company car and related car
expenses, a service award and a nominal recognition award; (ii) $7,227, which equals all tax
reimbursements paid to Mr. Lardieri for the tax liability related to PBG provided perquisites
and personal benefits, including a company car and related car expenses and a nominal
recognition award; (iii) a standard PBG matching contribution of $8,781 to Mr. Laridieris
401(k) account; and (iv) $753, which represents the dollar value of life insurance premiums
paid by PBG for the benefit of Mr. Lardieri. Grants of Plan-Based Awards In Fiscal Year 2008
 All OtherOptionAwards:Number
    
    
    
    
    
    
    
    
    
    Grantof
    
    Exercise
    
    
    
    
    
    Date FairEstimated Possible Payouts Under
    
    
    Estimated Future Payouts Under
    
    Securities
    
    or Base
    
    Closing
    
    Value ofNon-Equity Incentive Plan Awards(1)
    
    
    Equity Incentive Plan Awards(2)(3)
    
    Under-
    
    Price of
    
    Market
    
    Stock andDate of
    
    Thres-
    
    
    
    
    
    
    
    
    
    
    Thres-
    
    
    
    
    
    
    
    
    
    lying
    
    Option
    
    Price on
    
    OptionGrant
    
    Board
    
    hold
    
    Target
    
    Maximum
    
    
    hold
    
    Target
    
    Maximum
    
    Options
    
    Awards
    
    Grant
    
    AwardsName
    
    Date
    
    Action
    
    ($)
    
    ($)
    
    ($)
    
    
    (#)
    
    (#)
    
    (#)
    
    (#)
    
    ($/Sh)
    
    Date ($)
    
    ($)(4)Eric J. Foss

Non-Equity
    
    
    
    
    
    
    
    
    
    
    0
    
    
    
    1,500,000
    
    
    
    3,000,000RSUs
    
    
    03/01/2008
    
    
    
    01/25/2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    72,823
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,500,014Options
    
    
    03/01/2008
    
    
    
    01/25/2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    218,468
    
    
    
    34.33
    
    
    
    34.01
    
    
    
    1,542,384Options
    
    
    10/02/2008
    
    
    
    10/02/2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    400,000
    
    
    
    28.90
    
    
    
    28.49
    
    
    
    2,760,000Alfred H. DrewesNon-Equity
    
    
    
    
    
    
    
    
    
    
    0
    
    
    
    408,000
    
    
    
    816,000SLA RSUs
    
    
    01/01/2008
    
    
    
    10/11/2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0
    
    
    
    37,765
    
    
    
    56,648
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,500,026RSUs
    
    
    03/01/2008
    
    
    
    01/25/2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,565
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    500,016Options
    
    
    03/01/2008
    
    
    
    01/25/2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    43,694
    
    
    
    34.33
    
    
    
    34.01
    
    
    
    308,480Thomas M. Lardieri
Non-Equity
    
    
    
    
    
    
    
    
    
    
    0
    
    
    
    211,250
    
    
    
    422,500RSUs
    
    
    03/01/2008
    
    
    
    01/25/2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,375
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    287,514Options
    
    
    03/01/2008
    
    
    
    01/25/2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,124
    
    
    
    34.33
    
    
    
    34.01
    
    
    
    177,375
 
 1.
    
    Amounts shown reflect the threshold, target and maximum payout amounts under PBGs annual
incentive program which is administered under the PBG shareholder-approved 2005 Executive
Incentive Compensation Plan (EICP). The target amount is equal to a percentage of each
executives salary, which for 2008 ranged from 65% to 150%, depending on the executives role
and level of responsibility. The maximum amount equals 200% of the target amount. The actual
payout amount is contingent upon achievement of certain financial and non-financial
performance goals. Please refer to the narrative below for more detail regarding each
executives target amount, the specific performance criteria used to determine the actual
payout and how such payout is typically the result of the Committees exercise of negative
discretion with respect to separate maximum payout amounts established for purposes of Section
162(m).2.
    
    In addition to the 2008 annual RSU awards, this column reflects a special award of
performance-based RSUs (Strategic Leadership Award or SLA RSUs) granted to Mr. Drewes. Please
refer to the narrative below for more detail regarding the Strategic Leadership Award. 86




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3.
    
    The 2008 stock option awards and RSU awards, including the Strategic Leadership Award, were
made under the LTIP, which was approved by PBG shareholders in 2008.4.
    
    The assumptions used in calculating the SFAS 123R grant date fair value of the option awards
and stock awards are set forth in Note 3, Share-Based Compensation, to Bottling LLCs Annual
Report on Form 10-K for the fiscal year ended December 27, 2008. As of the end of PBGs
fiscal year, the market price of PBGs common stock was below the exercise price of the option
awards. Therefore, all of the option awards are out of the money and have no intrinsic
value to the executive. Narrative to the Summary Compensation Table and Grants of Plan-Based Awards Table
 Salary
 Stock Awards
    Option Awards.
  87




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Non-Equity Incentive Plan Compensation
 Change in Pension Value and Nonqualified Deferred Compensation Earnings.
 All Other Compensation
 Proportion of Salary to Total Compensation
 88




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##### Table of Contents



Outstanding Equity Awards At 2008 Fiscal Year-End
 Option Awards
    
    
    Stock AwardsIncentiveEquityEquity
    
    PlanIncentive
    
    Awards:Market
    
    Plan
    
    Market orValue of
    
    Awards:
    
    PayoutShares
    
    Number of
    
    Value ofor Units
    
    Unearned
    
    UnearnedNumber of
    
    Number of
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Number of
    
    of
    
    Shares,
    
    Shares,Securities
    
    Securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Shares or
    
    Stock
    
    Units or
    
    Units orUnderlying
    
    Underlying
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Units of
    
    That
    
    Other
    
    OtherUnexercised
    
    Unexercised
    
    Option
    
    
    
    
    
    
    
    
    
    
    Stock That
    
    Have
    
    Rights That
    
    Rights ThatStock
    
    Options
    
    Options
    
    Exercise
    
    Option
    
    
    
    
    Have
    
    Not
    
    Have Not
    
    Have NotOption
    
    (#)(26)
    
    (#)(26)
    
    Price
    
    Expiration
    
    
    Stock Award
    
    Not Vested
    
    Vested
    
    Vested
    
    VestedName
    
    Grant Date
    
    Exercisable
    
    Unexercisable
    
    ($)
    
    Date
    
    
    Grant Date
    
    (#)
    
    ($)(26)
    
    (#)
    
    ($)(26)E. Foss
    
    
    03/01/2002
    (1)
    
    
    145,743
    
    
    
    0
    
    
    
    25.25
    
    
    
    03/29/2012
    
    
    
    
    10/07/2005
    (10)
    
    
    125,718
    
    
    
    2,765,79603/01/2003
    (2)
    
    
    223,404
    
    
    
    0
    
    
    
    23.50
    
    
    
    03/29/2013
    
    
    
    
    03/01/2006
    (11)
    
    
    35,627
    (17)
    
    
    783,79403/01/2004
    (3)
    
    
    182,373
    
    
    
    0
    
    
    
    29.50
    
    
    
    03/29/2014
    
    
    
    
    03/01/2007
    (12)
    
    
    66,846
    (18)
    
    
    1,470,61203/01/2005
    (4)
    
    
    212,389
    
    
    
    0
    
    
    
    28.25
    
    
    
    02/28/2015
    
    
    
    
    03/01/2008
    (13)
    
    
    73,998
    (19)
    
    
    1,627,95603/01/2006
    (5)
    
    
    67,530
    
    
    
    34,789
    
    
    
    29.32
    
    
    
    02/29/201607/24/2006
    (6)
    
    
    0
    
    
    
    200,000
    
    
    
    33.77
    
    
    
    07/23/201603/01/2007
    (7)
    
    
    64,181
    
    
    
    130,309
    
    
    
    30.85
    
    
    
    02/28/201703/01/2008
    (8)
    
    
    0
    
    
    
    218,468
    
    
    
    34.33
    
    
    
    02/28/201810/02/2008
    (9)
    
    
    0
    
    
    
    400,000
    
    
    
    28.90
    
    
    
    10/01/2018A. Drewes
    
    
    03/01/2003
    (2)
    
    
    127,660
    
    
    
    0
    
    
    
    23.50
    
    
    
    03/29/2013
    
    
    
    
    03/01/2006
    (11)
    
    
    17,813
    (20)
    
    
    391,88603/01/2004
    (3)
    
    
    104,407
    
    
    
    0
    
    
    
    29.50
    
    
    
    03/29/2014
    
    
    
    
    03/01/2007
    (12)
    
    
    16,712
    (21)
    
    
    367,66403/01/2005
    (4)
    
    
    113,274
    
    
    
    0
    
    
    
    28.25
    
    
    
    02/28/2015
    
    
    
    
    01/01/2008
    (14)
    
    
    
    
    
    
    
    
    
    
    38,374
    (25)
    
    
    844,22803/01/2006
    (5)
    
    
    33,765
    
    
    
    17,395
    
    
    
    29.32
    
    
    
    02/29/2016
    
    
    
    
    03/01/2008
    (13)
    
    
    14,800
    (22)
    
    
    325,60003/01/2007
    (7)
    
    
    16,045
    
    
    
    32,578
    
    
    
    30.85
    
    
    
    02/28/201703/01/2008
    (8)
    
    
    0
    
    
    
    43,694
    
    
    
    34.33
    
    
    
    02/28/2018T. Lardieri
    
    
    03/01/2008
    (8)
    
    
    0
    
    
    
    25,124
    
    
    
    34.33
    
    
    
    02/28/2018
    
    
    
    
    06/01/2007
    (15)
    
    
    7,324
    (23)
    
    
    161,12803/01/2008
    (16)
    
    
    8,510
    (24)
    
    
    187,220
 
 1.
    
    The vesting schedule with respect to this 2002 stock option award is as follows: 25% of the
options vested and became exercisable on March 30, 2003; 25% of the options vested and became
exercisable on March 30, 2004; and the remaining 50% of the options vested and became
exercisable on March 30, 2005.2.
    
    The vesting schedule with respect to this 2003 stock option award is as follows: 25% of the
options vested and became exercisable on March 30, 2004; 25% of the options vested and became
exercisable on March 30, 2005; and the remaining 50% of the options vested and became
exercisable on March 30, 2006.3.
    
    The vesting schedule with respect to this 2004 stock option award is as follows: 25% of the
options vested and became exercisable on March 30, 2005; 25% of the options vested and became
exercisable on March 30, 2006; and the remaining 50% of the options vested and became
exercisable on March 30, 2007.4.
    
    The vesting schedule with respect to this 2005 stock option award is as follows: 25% of the
options vested and became exercisable on March 30, 2006; 25% of the options vested and became
exercisable on March 30, 2007; and the remaining 50% of the options vest and become
exercisable on March 30, 2008, provided the executive remains employed through such date.5.
    
    The vesting schedule with respect to this 2006 stock option award is as follows: 33% of the
options vested and became exercisable on March 1, 2007; 33% of the options vest and become
exercisable on March 1, 2008; and the remaining 34% of the options vest and become exercisable
on March 1, 2009, provided the executive remains employed through the applicable vesting
dates.6.
    
    This stock option award was granted to Mr. Foss in recognition of his role and
responsibilities as President and Chief Executive Officer of PBG. The award fully vests and
becomes exercisable on July 24, 2011, provided Mr. Foss remains employed through such date.7.
    
    The vesting schedule with respect to this 2007 stock option award is as follows: 33% of the
options vest and become exercisable on March 1, 2008; 33% of the options vest and become
exercisable on March 1, 2009; and the remaining 34% of the options vest and become exercisable
on March 1, 2010, provided the executive remains employed through the applicable vesting
dates. 89




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##### Table of Contents



8.
    
    The vesting schedule with respect to this 2008 stock option award is as follows: 33% of the
options vest and become exercisable on March 1, 2009; 33% of the options vest and become
exercisable on March 1, 2010; and the remaining 34% of the options vest and become exercisable
on March 1, 2011, provided the executive remains employed through the applicable vesting
dates.9.
    
    This stock option award was granted to Mr. Foss in recognition of his new role and
responsibilities as Chairman of the Board of Directors of PBG. The award fully vests and
becomes exercisable on October 2, 2013, provided Mr. Foss remains employed through October 2,
2013.10.
    
    Since the pre-established PBG earnings per share performance target was met, these RSUs fully
vest on October 7, 2010, provided the executive remains employed through October 7, 2010.11.
    
    Since the pre-established PBG earnings per share performance target was met, these RSUs fully
vest on March 1, 2009, provided the executive remains employed through March 1, 2009.12.
    
    Since the pre-established PBG earnings per share performance target was met, these RSUs fully
vest on March 1, 2010, provided the executive remains employed through March 1, 2010.13.
    
    Since the pre-established PBG earnings per share performance target was met, these RSUs fully
vest on March 1, 2011, provided the executive remains employed through March 1, 2011.14.
    
    The vesting of this RSU award is contingent upon the satisfaction of a pre-established 2008
and 2009 PBG earnings per share performance target, achievement of specific performance
criteria and continued employment through January 1, 2012.15.
    
    These RSUs fully vest on June 1, 2010, provided the executive remains employed through June
1, 2010.16.
    
    These RSUs fully vest on March 1, 2011, provided the executive remains employed through March
1, 2011.17.
    
    This amount includes 1,521 RSUs accumulated as a result of dividend equivalents credited to
the executive at the same time and in the same amount as dividends were paid to shareholders
of PBG common stock in accordance with the governing RSU agreement.18.
    
    This amount includes 2,016 RSUs accumulated as a result of dividend equivalents credited to
the executive at the same time and in the same amount as dividends were paid to shareholders
of PBG common stock in accordance with the governing RSU agreement.19.
    
    This amount includes 1,175 RSUs accumulated as a result of dividend equivalents credited to
the executive at the same time and in the same amount as dividends were paid to shareholders
of PBG common stock in accordance with the governing RSU agreement.20.
    
    This amount includes 760 RSUs accumulated as a result of dividend equivalents credited to the
executive at the same time and in the same amount as dividends were paid to shareholders of
PBG common stock in accordance with the governing RSU agreement.21.
    
    This amount includes 504 RSUs accumulated as a result of dividend equivalents credited to the
executive at the same time and in the same amount as dividends were paid to shareholders of
PBG common stock in accordance with the governing RSU agreement.22.
    
    This amount includes 235 RSUs accumulated as a result of dividend equivalents credited to the
executive at the same time and in the same amount as dividends were paid to shareholders of
PBG common stock in accordance with the governing RSU agreement.23.
    
    This amount includes 199 RSUs accumulated as a result of dividend equivalents credited to the
executive at the same time and in the same amount as dividends were paid to shareholders of
PBG common stock in accordance with the governing RSU agreement.24.
    
    This amount includes 135 RSUs accumulated as a result of dividend equivalents credited to the
executive at the same time and in the same amount as dividends were paid to shareholders of
PBG common stock in accordance with the governing RSU agreement.25.
    
    This amount includes 609 RSUs accumulated as a result of dividend equivalents credited to the
executive at the same time and in the same amount as dividends were paid to shareholders of
PBG common stock in accordance with the governing RSU agreement.26.
    
    The closing price for a share of PBG common stock on December 26, 2008, the last trading day
of PBGs fiscal year, was $22.00. This price is below the exercise price of the option
awards. Therefore, all of the option awards are out of the money and have no intrinsic
value to the executive. 
 90




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##### Table of Contents



Option Exercises and Stock Vested In Fiscal Year 2008
 Option Awards
    
    
    Stock AwardsNumber of Shares
    
    Value Realized
    
    
    Number of Shares
    
    Value RealizedName
    
    Acquired on Exercise (#)
    
    on Exercise ($)
    
    
    Acquired on Vesting (#)
    
    on Vesting ($)Eric J. Foss
    
    
    0
    
    
    
    0
    
    
    
    
    0
    
    
    
    0Alfred H. Drewes
    
    
    0
    
    
    
    0
    
    
    
    
    0
    
    
    
    0Thomas M. Lardieri
    
    
    0
    
    
    
    0
    
    
    
    
    0
    
    
    
    0
 Pension Benefits for the 2008 Fiscal Year
 Number of Years
    
    Present Value of
    
    Payments DuringCredited Service
    
    Accumulated Benefit
    
    Last Fiscal YearName
    
    Plan Name
    
    (#)(1)
    
    ($)(2)
    
    ($)Eric J. Foss
    
    PBG Salaried Employees Retirement Plan
    
    
    26.6
    
    
    
    462,000
    
    
    
    0PBG Pension Equalization Plan
    
    
    26.6
    
    
    
    3,626,000
    
    
    
    0Alfred H. Drewes

    
    PBG Salaried Employees Retirement Plan
    
    
    26.6
    (3)
    
    
    565,000
    
    
    
    0PBG Pension Equalization Plan
    
    
    26.6
    (3)
    
    
    1,887,000
    
    
    
    0Thomas M. Lardieri
    
    PBG Salaried Employees Retirement Plan
    
    
    20.0
    (4)
    
    
    308,000
    
    
    
    0PBG Pension Equalization Plan
    
    
    20.0
    (4)
    
    
    438,000
    
    
    
    0
 
 1.
    
    The number of years of service shown for each executive includes service with PepsiCo, PBGs
parent company prior to March 31, 1999, at which time PBG became a separate, publicly traded
company. The executives service with PepsiCo prior to March 31, 1999 has not been separately
identified and the benefit attributable to such service has not been separately quantified for
such period. Any benefit amount attributable to the executives service with PepsiCo after
March 31, 1999 has been separately identified and quantified. In this regard, periods of
PepsiCo service that Mr. Drewes and Mr. Lardieri accrued after PBG became a separate company
have been separately identified and quantified in footnotes 3 (for Mr. Drewes) and 4 (for Mr.
Lardieri). PBGs policy for granting extra years of credited service is discussed in more
detail in the CD&A and in the Narrative to the Pension Benefits Table.2.
    
    The material assumptions used to quantify the present value of the accumulated benefit for
each executive are set forth in Note 11, Pension and Postretirement Medical Benefit Plans, to
Bottling LLCs Annual Report on Form 10-K for the fiscal year ended December 27, 2008, except
for the generally applicable assumptions regarding retirement age and pre-retirement
mortality.3.
    
    Mr. Drewes transferred from PepsiCo on June 25, 2001. The years of credited service shown
above include all prior PepsiCo service. However, only the portion of the pension benefit
attributable to Mr. Drewes PepsiCo service that accrued after March 31, 1999 (two years of
service) has been separately quantified as follows: $33,000 under the PBG Salaried Employees
Retirement Plan and $120,000 under the PBG Pension Equalization Plan. PepsiCo transferred to
the PBG Salaried Employees Retirement Plan an amount equal to the present value of Mr. Drewes
pension benefit under the PepsiCo Salaried Employees Retirement Plan at the time Mr. Drewes
transferred to PBG.4.
    
    Mr. Lardieri transferred from PepsiCo on June 1, 2007. The years of credited service shown
above include all prior PepsiCo service. However, only the portion of the pension benefit
attributable to Mr. Lardieris PepsiCo service that accrued after March 31, 1999 (eight years
of service) has been separately quantified as follows: $101,000 under the PBG Salaried
Employees Retirement Plan and $148,000 under the PBG Pension Equalization Plan. PepsiCo
transferred to the PBG Salaried Employees Retirement Plan an amount equal to the present value
of Mr. Lardieris pension benefit under the PepsiCo Salaried Employees Retirement Plan at the
time Mr. Lardieri transferred to PBG. 91




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##### Table of Contents



Narrative to the Pension Benefits Table
  The PBG Salaried Employees Retirement Plan
        The PBG Pension Equalization Plan.
 92




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##### Table of Contents



Nonqualified Deferred Compensation for the 2008 Fiscal Year
 AggregateExecutive
    
    Company
    
    Aggregate Earnings
    
    Withdrawals/
    
    AggregateContributions
    
    Contributions
    
    in Last FY
    
    Distributions
    
    Balance atName
    
    in Last FY ($)
    
    in Last FY ($)
    
    ($)
    
    ($)
    
    Last FYE ($)(5)Eric J. Foss
    
    
    902,790
    
    
    
    0
    
    
    
    (1,316,342
    )
    
    
    0
    
    
    
    1,889,821
    (1)Alfred H. Drewes
    
    
    536,817
    
    
    
    0
    
    
    
    (505,210
    )
    
    
    0
    
    
    
    2,098,835
    (2)Thomas M. Lardieri
    
    
    64,692
    (3)
    
    
    0
    
    
    
    (21,214
    )
    
    
    0
    
    
    
    72,843
    (4)
 
 1.
    
    $1,965,025 of Mr. Foss aggregate balance was previously reported as compensation in Summary
Compensation Tables for prior years.2.
    
    $675,899 of Mr. Drewes aggregate balance was previously reported as compensation in Summary
Compensation Tables for prior years.3.
    
    $64,692 is reported as compensation in the Salary column of the Summary Compensation Table
to this Executive Compensation section.4.
    
    $31,500 of Mr. Lardieris aggregate balance was previously reported as compensation in
Summary Compensation Tables for prior years. This amount also includes an additional $2,423
that was inadvertently omitted from the total reflected in the Executive Contributions in
Last FY column of the Nonqualified Deferred Compensation Table in last years Executive
Compensation section of Bottling LLCs Annual Report on Form 10-K for the fiscal year ended
December 29, 2007 due to a reporting error by the third party administrator for the
nonqualified deferred compensation plan.5.
    
    The amount reflected in this column for Mr. Drewes includes compensation deferred by the
Named Executive Officer over the entirety of his career at both PepsiCo and PBG. Narrative to the Nonqualified Deferred Compensation Table
  93




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##### Table of Contents



Deferrals of Base Salary and Annual Non-Equity Incentive Award.
 Phantom Investment Options.
  PHANTOM FUND
    
    FYE RETURN RATE (%)The Phantom PBG Stock Fund
    
    
    (41.00
    )The Phantom Security Plus Fund
    
    
    4.19The Phantom Bond Index Fund
    
    
    5.46The Phantom Total U.S. Equity Index Fund
    
    
    (37.01
    )The Phantom Large Cap Equity Index Fund
    
    
    (36.93
    )The Phantom Mid Cap Equity Index Fund
    
    
    (36.09
    )The Phantom Small Cap Equity Index Fund
    
    
    (33.66
    )The Phantom International Equity Index Fund
    
    
    (43.26
    )
 Time and Form of Payment.
 Deferral Periods.
 Distribution Rules.
  Deferral Extensions (Second-Look Elections).
 94




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##### Table of Contents



Hardship Withdrawals.
 Potential Payments Upon Termination or Change In Control
   Nonqualified Pension Benefits
 Death
  DeathName
    
    Plan Name
    
    Annual Annuity
    
    
    Lump SumEric J. Foss
    
    PBG Pension Equalization Plan
    
    $
    34,000
    
    
    
    $
    3,239,000Alfred H. Drewes
    
    PBG Pension Equalization Plan
    
    
    16,000
    
    
    
    
    1,199,000Thomas M. Lardieri
    
    PBG Pension Equalization Plan
    
    
    N/A
    
    
    
    
    624,000
 95




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##### Table of Contents



LTIP
 Disability
 Death.
 Retirement
 Approved Transfer to PepsiCo
 Change in Control
   96




---



##### Table of Contents



Approved Transfer
    
    Changeto
    
    InName
    
    Disability
    
    Death
    
    PepsiCo
    
    ControlEric J. Foss
    
    $
    3,836,177
    
    
    $
    5,666,101
    
    
    $
    3,882,352
    
    
    $
    6,648,148Alfred H. Drewes
    
    
    882,373
    
    
    
    1,291,910
    
    
    
    1,085,159
    
    
    
    1,929,391Thomas M. Lardieri
    
    
    133,338
    
    
    
    348,342
    
    
    
    348,342
    
    
    
    348,342
 Nonqualified Deferred Compensation Plan.
 Severance
 Benefits Generally Available to All Salaried Employees
 Compensation of Managing Directors
 Compensation Committee Interlocks and Insider Participation.
 97




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##### Table of Contents



ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
  
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
  Stock Ownership and Director Relationships with PepsiCo.
 Agreements and Transactions with PepsiCo and Affiliates.
  Beverage Agreements and Purchases of Concentrates and Finished Products
  Transactions with Joint Ventures in which PepsiCo holds an equity interest.
    98




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##### Table of Contents



Purchase of Frito-Lay Snack Food Products.
 Shared Services
  Rental Payments.
 National Fountain Services
 Bottler Incentives
 PepsiCo Guarantees
 PBG/Bottling LLC Transactions.
     99




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##### Table of Contents



Bottling LLC Distribution.
 Relationships and Transactions with Management and Others.
 
 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
 INDEPENDENT ACCOUNTANTS FEES AND SERVICES
  Audit and Non-Audit Fees
 2008
    
    2007Audit Fees (1)
    
    $
    5.8
    
    
    $
    5.6Audit-Related Fees (2)
    
    $
    0.8
    
    
    $
    0.7Tax Fees (3)
    
    $
    0.4
    
    
    $
    0.3All Other Fees
    
    $
    0.0
    
    
    $
    0.0Total
    
    $
    7.0
    
    
    $
    6.6
 
 (1)
    
    Represents fees for the audit of our consolidated financial statements, audit of
internal controls, the reviews of interim financial statements included in our Forms 10-Q and
all statutory audits.(2)
    
    Represents fees primarily related to audits of employee benefit plans and other
audit-related services.(3)
    
    Represents fees primarily related to assistance with tax compliance matters. Pre-Approval Policies and Procedures .
 100




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##### Table of Contents



PART IV
 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
         PageSchedule II  Valuation and Qualifying Accounts for the fiscal years
ended December 27, 2008, December 29, 2007 and December 30, 2006
    
    F-2
   101




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##### Table of Contents



SIGNATURES
   Bottling Group, LLC/s/ Eric J. FossEric J. FossPrincipal Executive Officer  SIGNATURE
    
    TITLE
    
    DATE/s/ Eric J. Foss
    
    Principal Executive Officer
    
    February 19, 2009Eric J. Foss/s/ Alfred H. Drewes
    
    Principal Financial Officer
    
    February 19, 2009Alfred H. Drewes/s/ Thomas M. Lardieri
    
    Principal Accounting Officer and
    
    February 19, 2009Thomas M. Lardieri
    
    Managing Director/s/ Steven M. Rapp
    
    Managing Director
    
    February 19, 2009Steven M. Rapp/s/ Marie T. Gallagher
    
    Managing Director
    
    February 19, 2009Marie T. Gallagher
 S - 1




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##### Table of Contents



INDEX TO FINANCIAL STATEMENT SCHEDULES
 PageSchedule II  Valuation and Qualifying Accounts for the fiscal years
ended December 27, 2008, December 29, 2007 and December 30, 2006
    
    F-2
 F - 1




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##### Table of Contents



SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS BOTTLING GROUP, LLC
 Balance At
    
    Charges to
    
    
    
    
    
    Accounts
    
    Foreign
    
    Balance AtBeginning
    
    Cost and
    
    
    
    
    
    Written
    
    Currency
    
    End OfIn millions
    
    Of Period
    
    Expenses
    
    Acquisitions
    
    Off
    
    Translation
    
    PeriodFiscal Year Ended December 27, 2008Allowance for losses on trade accounts receivable
    
    $
    54
    
    
    $
    30
    
    
    $
    
    
    
    $
    (9
    )
    
    $
    (4
    )
    
    $
    71Fiscal Year Ended December 29, 2007Allowance for losses on trade accounts receivable
    
    $
    50
    
    
    $
    11
    
    
    $
    
    
    
    $
    (10
    )
    
    $
    3
    
    
    $
    54Fiscal Year Ended December 30, 2006Allowance for losses on trade accounts receivable
    
    $
    51
    
    
    $
    5
    
    
    $
    
    
    
    $
    (7
    )
    
    $
    1
    
    
    $
    50
 F - 2




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##### Table of Contents



INDEX TO EXHIBITS
 EXHIBIT NO.
    
    DESCRIPTION OF EXHIBIT3.1
    
    Articles of Formation of Bottling LLC, which is
incorporated herein by reference to Exhibit 3.4 to
Bottling LLCs Registration Statement on Form S-4
(Registration No. 333-80361).3.2
    
    Amended and Restated Limited Liability Company Agreement
of Bottling LLC, which is incorporated herein by
reference to Exhibit 3.5 to Bottling LLCs Registration
Statement on Form S-4 (Registration No. 333-80361).3.3
    
    Amendment No. 1 to Bottling LLCs Amended and Restated
Limited Liability Company Agreement, which is
incorporated herein by reference to Exhibit 3.3 to
Bottling LLCs Quarterly Report on Form 10-Q for the
quarter ended June 14, 2008.4.1
    
    Indenture dated as of March 8, 1999 by and among PBG, as
obligor, Bottling LLC, as guarantor, and The Chase
Manhattan Bank, as trustee, relating to $1,000,000,000
7% Series B Senior Notes due 2029, which is incorporated
herein by reference to Exhibit 10.14 to PBGs
Registration Statement on Form S-1 (Registration No.
333-70291).4.2
    
    Indenture dated as of November 15, 2002 among Bottling
LLC, PepsiCo, Inc., as guarantor, and JPMorgan Chase
Bank, as trustee, relating to $1,000,000,000 4 5/8%
Senior Notes due November 15, 2012, which is
incorporated herein by reference to Exhibit 4.8 to PBGs
Annual Report on Form 10-K for the year ended December
28, 2002.4.3
    
    Registration Rights Agreement dated as of November 7,
2002 relating to the $1,000,000,000 4 5/8% Senior Notes
due November 15, 2012, which is incorporated herein by
reference to Exhibit 4.8 to Bottling LLCs Annual Report
on Form 10-K for the year ended December 28, 2002.4.4
    
    Indenture, dated as of June 10, 2003 by and between
Bottling LLC, as obligor, and JPMorgan Chase Bank, as
trustee, relating to $250,000,000 4 1/8% Senior Notes
due June 15, 2015, which is incorporated herein by
reference to Exhibit 4.1 to Bottling LLCs registration
statement on Form S-4 (Registration No. 333-106285).4.5
    
    Registration Rights Agreement dated June 10, 2003 by and
among Bottling LLC, J.P. Morgan Securities Inc., Lehman
Brothers Inc., Banc of America Securities LLC, Citigroup
Global Markets Inc, Credit Suisse First Boston LLC,
Deutsche Bank Securities Inc., Blaylock & Partners, L.P.
and Fleet Securities, Inc, relating to $250,000,000
4 1/8% Senior Notes due June 15, 2015, which is
incorporated herein by reference to Exhibit 4.3 to
Bottling LLCs registration statement on Form S-4
(Registration No. 333-106285).4.6
    
    Indenture, dated as of October 1, 2003, by and between
Bottling LLC, as obligor, and JPMorgan Chase Bank, as
trustee, which is incorporated herein by reference to
Exhibit 4.1 to Bottling LLCs Current Report on Form 8-K
dated October 3, 2003.4.7
    
    Form of Note for the $400,000,000 5.00% Senior Notes due
November 15, 2013, which is incorporated herein by
reference to Exhibit 4.1 to Bottling LLCs Current
Report on Form 8-K dated November 13, 2003.4.8
    
    Indenture, dated as of March 30, 2006, by and between
Bottling LLC, as obligor, and JPMorgan Chase Bank, N.A.,
as trustee, which is incorporated herein by reference to
Exhibit 4.1 to PBGs Quarterly Report on Form 10-Q for
the quarter ended March 25, 2006.4.9
    
    Form of Note for the $800,000,000 5 1/2% Senior Notes
due April 1, 2016, which is incorporated herein by
reference to Exhibit 4.2 to PBGs Quarterly Report on
Form 10-Q for the quarter ended March 25, 2006.4.10
    
    Indenture, dated as of October 24, 2008, by and among
Bottling LLC, as obligor, PepsiCo, Inc., as guarantor,
and The Bank of New York Mellon, as trustee, relating to
$1,300,000,000 6.95% Senior Notes due March 15, 2014,
which is incorporated herein by reference to Exhibit 4.1
to Bottling LLCs Current Report on Form 8-K dated
October 21, 2008.4.11
    
    Form of Note for the $1,300,000,000 6.95% Senior Notes
due March 15, 2014, which is incorporated herein by
reference to Exhibit 4.2 to Bottling LLCs Current
Report on Form 8-K dated October 21, 2008.4.12
    
    Form of Note for the $750,000,000 5.125% Senior Notes
due January 15, 2019, which is incorporated herein by
reference to Exhibit 4.1 to Bottling LLCs Current
Report on Form 8-K dated January 14, 2009.
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##### Table of Contents



EXHIBIT NO.
    
    DESCRIPTION OF EXHIBIT10.1
    
    Private Limited Company Agreement of PR Beverages
Limited dated as of March 1, 2007 among PBG Beverages
Ireland Limited, PepsiCo (Ireland), Limited and PR
Beverages Limited, which is incorporated herein by
reference to Exhibit 10.1 to PBGs Quarterly Report on
Form 10-Q for the quarter ended March 24, 2007.10.2
    
    U.S. $1,200,000,000 First Amended and Restated Credit Agreement dated as of October 19, 2007 among The Pepsi Bottling
Group, Inc., as borrower; Bottling Group, LLC, as guarantor; Citigroup Global Markets Inc. and HSBC Securities (USA)
Inc., as joint lead arrangers and book managers; Citibank, N.A., as agent; HSBC Bank USA, N.A., as syndication agent;
and certain other banks identified in the First Amended and Restated Credit Agreement, which is incorporated herein by
reference to Exhibit 10.1 to PBGs Current Report on Form 8-K dated October 19, 2007 and filed October 25, 2007.10.3
    
    Insurance Policy between Bottling LLC and Woodlands Insurance Company, Inc., which is incorporated herein by reference
to Exhibit 10.1 to Bottling LLCs Quarterly Report on Form 10-Q for the quarter ended June 14, 2008.10.4
    
    Form of Promissory Note between The Pepsi Bottling Group, Inc. and Bottling LLC, which is incorporated herein by
reference to Exhibit 10.2 to Bottling LLCs Quarterly Report on Form 10-Q for the quarter ended June 14, 2008.10.5*
    
    Distribution Agreement between PepsiCo Holdings LLC and Frito-Lay Manufacturing LLC effective as of January 1, 2009.12*
    
    Computation of Ratio of Earnings to Fixed Charges.21*
    
    Subsidiaries of Bottling LLC.23.1*
    
    Consent of Deloitte & Touche LLP.23.2*
    
    Consent of Deloitte & Touche LLP, independent registered public accounting firm of The Pepsi Bottling Group, Inc.23.3*
    
    Consent of KPMG LLP, independent registered public accounting firm of PepsiCo, Inc.31.1*
    
    Certification by the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2*
    
    Certification by the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1*
    
    Certification by the Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2*
    
    Certification by the Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.99.1*
    
    The Pepsi Bottling Group, Inc.s Annual Report on Form 10-K for the fiscal year ended December 27, 2008.99.2
    
    PepsiCo, Inc.s consolidated
financial statements and notes thereto included in PepsiCos
Annual Report on Form 10-K for the fiscal year ended December 27, 2008, which
are incorporated herein by reference to PepsiCo, Inc.s Annual Report on Form 10-K for the year ended December 27,
2008.
 
 *
    
    Filed herewith E - 2