UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March~~June 2113, 2009 (12 weeks)


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 333-80361-01

BOTTLING GROUP, LLC

(Exact Name of Registrant as Specified in Its Charter)


Delaware		13-4042452

(State or Other Jurisdiction of		(I.R.S. Employer
Incorporation or Organization)		Identification No.)

One Pepsi Way, Somers, New York		10589

(Address of Principal Executive Offices)		(Zip Code)

914-767-6000

(Registrant’s Telephone Number, Including Area Code)

N/A

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES þ NO o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES o NO o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer o	Accelerated filer o	Non-accelerated filer þ	Smaller reporting company o
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES o NO þ

Bottling Group, LLC
Index

		Page No.
Part I	Financial Information
Item 1.	Financial Statements
	Condensed Consolidated Statements of Operations — 12 weeks ended March 21, 2009 and March 22, 2008		2
	Condensed Consolidated Statements of Operations — 12 and 24 weeks ended June 13, 2009 and June 14, 2008		2
	Condensed Consolidated Statements of Comprehensive (Loss) Income — 12 weeks ended March 21, 2009 and March 22, 2008		3
	Condensed Consolidated Statements of Cash Flows — 24 weeks ended June 13, 2009 and June 14, 2008		3
	Condensed Consolidated Statements of Cash Flows — 12 weeks ended March 21, 2009 and March 22, 2008		4
	Condensed Consolidated Balance Sheets — June 13, 2009 and December 27, 2008		4
	Condensed Consolidated Balance Sheets — March 21, 2009 and December 27, 2008		5
	Condensed Consolidated Statements of Changes in Equity — 24 weeks ended June 13, 2009 and June 14, 2008		5
	Condensed Consolidated Statements of Changes in Equity — 12 weeks ended March 21, 2009 and March 22, 2008		6
	Condensed Consolidated Statements of Comprehensive Income — 12 and 24 weeks ended June 13, 2009 and June 14, 2008		6
	Notes to Condensed Consolidated Financial Statements		7-2021
Item 2.	Management’'s Financial Review		2122-2932
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		2932
Item 4.	Controls and Procedures		2932-33
Part II	Other Information
Item 1.	Legal Proceedings		3033
Item 1A.	Risk Factors		3033
Item 6.	Exhibits		3034
EX-31.1
EX-31.2
EX-32.1
EX-32.2

PART I — FINANCIAL INFORMATION

Item 1.

Bottling Group, LLC Condensed Consolidated Statements of Operations in millions, unaudited

Condensed Consolidated Statements of Operations


	12 Weeks Ended						24 Weeks Ended
	June			June			June			June
	13, 2009			14, 2008			13, 2009			14, 2008
Net revenues	$	3,274		$	3,522		$	5,781		$	6,173
Cost of sales		1,830			1,916			3,233			3,398


Gross profit		1,444			1,606			2,548			2,775
Selling, delivery and administrative expenses		1,134			1,263			2,123			2,326


Operating income		310			343			425			449
Interest expense		58			52			125			99
Interest income		24			33			50			74
Other non-operating income, net		(11	)		(3	)		(4	)		(5	)


Income before income taxes		287			327			354			429
Income tax (benefit) expense		(12	)		21			(9	)		28


Net income		299			306			363			401
Less: Net income attributable to noncontrolling interests		7			9			4			6


Net income attributable to Bottling LLC	$	292		$	297		$	359		$	395

in millions, unaudited

	12 Weeks Ended
	March			March
	21, 2009			22, 2008
Net revenues	$	2,507		$	2,651
Cost of sales		1,403			1,482
Gross profit		1,104			1,169
Selling, delivery and administrative expenses		989			1,063
Operating income		115			106
Interest expense		67			47
Interest income		26			41
Other non-operating expenses (income), net		7			(2	)
Income before income taxes		67			102
Income tax expense		3			7
Net income		64			95
Less: Net income attributable to noncontrolling interests		(3	)		(3	)
Net income attributable to Bottling LLC	$	67		$	98

See accompanying notes to Condensed Consolidated Financial Statements.

Bottling Group, LLC

Condensed Consolidated Statements of ~~Comprehensive~~Cash ~~(Loss) Income~~Flows

in millions, unaudited

	12 Weeks Ended
	24 Weeks Ended
	March			March
	June			June
	21, 2009			22, 2008
	13, 2009			14, 2008
Net income	$	64		$	95
Cash Flows — Operations
Net currency translation adjustment		(290	)		(13	)
Net income	$	363		$	401
Cash flow hedge adjustment		2			5
Adjustments to reconcile net income to net cash provided by operations:
Pension and postretirement medical benefit plans adjustment		11			6
Depreciation and amortization		285			306
Comprehensive (loss) income		(213	)		93
Deferred income taxes		3			4
Less: Comprehensive (loss) income attributable to noncontrolling interests		(79	)		6
Share-based compensation		26			27
Comprehensive (loss) income attributable to Bottling LLC	$	(134	)	$	87
Net other non-cash charges and credits		63			83
Changes in operating working capital, excluding effects of acquisitions:
Accounts receivable, net		(435	)		(410	)
Inventories		(188	)		(191	)
Prepaid expenses and other current assets		69			(66	)
Accounts payable and other current liabilities		367			135
Income taxes payable		(5	)		14
Net change in operating working capital		(192	)		(518	)
Pension contributions		(88	)		—
Other, net		(34	)		(78	)
Net Cash Provided by Operations		426			225
Cash Flows — Investments
Capital expenditures		(226	)		(398	)
Acquisitions, net of cash acquired		(82	)		(22	)
Proceeds from sale of property, plant and equipment		5			10
Note receivable from PBG, net		(43	)		(109	)
Issuance of note receivable from noncontrolled affiliate		(92	)		—
Repayments of note receivable from noncontrolled affiliate		8			—
Other investing activities, net		(1	)		4
Net Cash Used for Investments		(431	)		(515	)
Cash Flows — Financing
Short-term borrowings, net		121			216
Proceeds from long-term debt		741			—
Payments of long-term debt		(1,304	)		(6	)
Contributions from noncontrolling interest holder		33			8
Other financing activities		(9	)		—
Net Cash (Used for) Provided by Financing		(418	)		218
Effect of Exchange Rate Changes on Cash and Cash Equivalents		2			(3	)
Net Decrease in Cash and Cash Equivalents		(421	)		(75	)
Cash and Cash Equivalents — Beginning of Period		786			459
Cash and Cash Equivalents — End of Period	$	365		$	384

See accompanying notes to Condensed Consolidated Financial Statements.

Bottling Group, LLC

Condensed Consolidated ~~Statements~~Balance ~~of Cash Flows~~Sheets

in millions~~, unaudited~~

	12 Weeks Ended
	(Unaudited)
	March			March
	June			December
	21, 2009			22, 2008
	13, 2009			27, 2008
Cash Flows — Operations
ASSETS
Net income	$	64		$	95
Current Assets
Adjustments to reconcile net income to net cash provided by operations:
Cash and cash equivalents	$	365		$	786
Depreciation and amortization		136			144
Accounts receivable, net		1,830			1,371
Deferred income taxes		—			1
Inventories		732			528
Share-based compensation		12			12
Prepaid expenses and other current assets		322			337
Net other non-cash charges and credits		49			41
Total Current Assets		3,249			3,022
Changes in operating working capital, excluding effects of acquisitions:
Property, plant and equipment, net		3,866			3,869
Accounts receivable, net		(49	)		(4	)
Other intangible assets, net		3,891			3,751
Inventories		(103	)		(88	)
Goodwill		1,471			1,434
Prepaid expenses and other current assets		98			(17	)
Investments in noncontrolled affiliates		593			619
Accounts payable and other current liabilities		72			(42	)
Notes receivable from PBG		3,735			3,692
Income taxes payable		(2	)		8
Other assets		170			108
Net change in operating working capital		16			(143	)
Total Assets	$	16,975		$	16,495
Other, net		(16	)		(39	)
LIABILITIES AND EQUITY
Net Cash Provided by Operations		261			111
Current Liabilities
Cash Flows — Investments
Accounts payable and other current liabilities	$	1,928		$	1,529
Capital expenditures		(95	)		(185	)
Short-term borrowings		232			103
Acquisitions		(15	)		(6	)
Current maturities of long-term debt		10			1,305
Proceeds from sale of property, plant and equipment		1			2
Total Current Liabilities		2,170			2,937
Notes receivable from PBG, net		(64	)		8
Long-term debt		4,456			3,789
Note receivable from PepsiCo		(92	)		—
Other liabilities		1,304			1,284
Other investing activities, net		(1	)		—
Deferred income taxes		299			279
Net Cash Used for Investments		(266	)		(181	)
Total Liabilities		8,229			8,289
Cash Flows — Financing
Equity
Short-term borrowings, net		86			29
Owners’ net investment		9,285			8,907
Proceeds from long-term debt		741			—
Accumulated other comprehensive loss		(1,240	)		(1,373	)
Payments of long-term debt		(1,301	)		(2	)
Total Bottling LLC Owners’ Equity		8,045			7,534
Contributions from noncontrolling interest holder		33			—
Noncontrolling interests		701			672
Other financing activities		(7	)		—
Total Equity		8,746			8,206
Net Cash (Used for) Provided by Financing		(448	)		27
Total Liabilities and Equity	$	16,975		$	16,495
Effect of Exchange Rate Changes on Cash and Cash Equivalents		(16	)		(3	)
Net Decrease in Cash and Cash Equivalents		(469	)		(46	)
Cash and Cash Equivalents — Beginning of Period		786			459
Cash and Cash Equivalents — End of Period	$	317		$	413

See accompanying notes to Condensed Consolidated Financial Statements.

Bottling Group, LLC

Condensed Consolidated ~~Balance~~Statements ~~Sheets~~of Changes in Equity

in24 ~~millions~~Weeks Ended June 13, 2009 and June 14, 2008

	(Unaudited)
	March			December
	21, 2009			27, 2008
ASSETS
Current Assets
Cash and cash equivalents	$	317		$	786
Accounts receivable, net		1,408			1,371
Inventories		619			528
Prepaid expenses and other current assets		236			337
Total Current Assets		2,580			3,022
Property, plant and equipment, net		3,697			3,869
Other intangible assets, net		3,758			3,751
Goodwill		1,417			1,434
Investments in noncontrolled affiliates		511			619
Notes receivable from PBG		3,756			3,692
Other assets		158			108
Total Assets	$	15,877		$	16,495
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable and other current liabilities	$	1,548		$	1,529
Short-term borrowings		177			103
Current maturities of long-term debt		6			1,305
Total Current Liabilities		1,731			2,937
Long-term debt		4,526			3,789
Other liabilities		1,297			1,284
Deferred income taxes		276			279
Total Liabilities		7,830			8,289
Equity
Owners’ net investment		8,980			8,907
Accumulated other comprehensive loss		(1,574	)		(1,373	)
Total Owners’ Equity		7,406			7,534
Noncontrolling interests		641			672
Total Equity		8,047			8,206
Total Liabilities and Equity	$	15,877		$	16,495

in millions, unaudited


				Accumulated			Total
				Other			Bottling
	Owners’			Compre-			LLC			Noncon-						Compre-
	Net			hensive			Owners’			trolling			Total			hensive
	Investment			Loss			Equity			Interests			Equity			Income
Balance at December 29, 2007	$	9,418		$	(189	)	$	9,229		$	379		$	9,608
Comprehensive income:
Net income		395			—			395			6			401		$	401
Net currency translation adjustment		—			21			21			11			32			32
Cash flow hedge adjustment, net of tax of $(1)		—			12			12			—			12			12
Pension and postretirement medical benefit plans adjustment		—			12			12			—			12			12

Total comprehensive income																$	457

SFAS 158 — measurement date adjustment		(27	)		36			9			—			9
Share-based compensation		28			—			28			—			28
Contributions from owners		26			—			26			32			58

Balance at June 14, 2008	$	9,840		$	(108	)	$	9,732		$	428		$	10,160


Balance at December 27, 2008	$	8,907		$	(1,373	)	$	7,534		$	672		$	8,206
Comprehensive income:
Net income		359			—			359			4			363		$	363
Net currency translation adjustment		—			67			67			(20	)		47			47
Cash flow hedge adjustment, net of tax of $4		—			45			45			(3	)		42			42
Pension and postretirement medical benefit plans adjustment		—			21			21			—			21			21

Total comprehensive income																$	473

Tax benefit — equity awards		1			—			1			—			1
Withholding tax — equity awards		(6	)		—			(6	)		—			(6	)
Share-based compensation		25			—			25			—			25
Cash distributions to owner		(1	)		—			(1	)		—			(1	)
Contributions from noncontrolling interest holder		—			—			—			48			48

Balance at June 13, 2009	$	9,285		$	(1,240	)	$	8,045		$	701		$	8,746

See accompanying notes to Condensed Consolidated Financial Statements.

Bottling Group, LLC

Condensed Consolidated Statements of ~~Changes~~Comprehensive ~~in Equity~~Income

12 Weeks Ended March 21, 2009 and March 22, 2008

in millions, unaudited

				Accumulated
	12 Weeks Ended						24 Weeks Ended
				Other												Compre-
	June			June			June			June
	Owners’			Compre-			Total			Non-						hensive
	13, 2009			14, 2008			13, 2009			14, 2008
	Net			hensive			Owners’			controlling			Total			Income
Net income	$	299		$	306		$	363		$	401
	Investment			Loss			Equity			Interests			Equity			(Loss)
Net currency translation adjustment		337			45			47			32
Balance at December 29, 2007	$	9,418		$	(189	)	$	9,229		$	379		$	9,608
Cash flow hedge adjustment, net of tax		40			7			42			12
Comprehensive income (loss):
Pension and postretirement medical benefit plans adjustment		10			6			21			12
Net income		98			—			98			(3	)		95		$	95
Comprehensive income		686			364			473			457
Net currency translation adjustment		—			(22	)		(22	)		9			(13	)		(13	)
Less: Comprehensive income (loss) attributable to noncontrolling interests		60			11			(19	)		17
Cash flow hedge adjustment, net of tax of $1		—			5			5			—			5			5
Comprehensive income attributable to Bottling LLC	$	626		$	353		$	492		$	440
Pension and postretirement medical benefit plans adjustment		—			6			6			—			6			6
Total comprehensive income																$	93
SFAS 158 — measurement date adjustment		(27	)		36			9			—			9
Share-based compensation		12			—			12			—			12
Contributions from owners		22			—			22			3			25
Balance at March 22, 2008	$	9,523		$	(164	)	$	9,359		$	388		$	9,747
Balance at December 27, 2008	$	8,907		$	(1,373	)	$	7,534		$	672		$	8,206
Comprehensive income (loss):
Net income		67			—			67			(3	)		64		$	64
Net currency translation adjustment		—			(214	)		(214	)		(76	)		(290	)		(290	)
Cash flow hedge adjustment		—			2			2			—			2			2
Pension and postretirement medical benefit plans adjustment		—			11			11			—			11			11
Total comprehensive loss																$	(213	)
Tax benefit and withholding tax — equity awards		(5	)		—			(5	)		—			(5	)
Share-based compensation		12			—			12			—			12
Cash distributions to owner		(1	)		—			(1	)		—			(1	)
Contributions from noncontrolling interest holder		—			—			—			48			48
Balance at March 21, 2009	$	8,980		$	(1,574	)	$	7,406		$	641		$	8,047

See accompanying notes to Condensed Consolidated Financial Statements.

Notes to Condensed Consolidated Financial Statements
Tabular dollars in millions

Note 1—Basis of Presentation

Bottling Group, LLC (referred to as “Bottling LLC,” “we,” “our,” “us” and the “Company”) is the principal operating subsidiary of The Pepsi Bottling Group, Inc. (“PBG”) and consists of substantially all of the operations and assets of PBG. PBG is the world’s largest manufacturer, seller and distributor of Pepsi-Cola beverages. We have the exclusive right to manufacture, sell and distribute Pepsi-Cola beverages, in all or a portion of the United States, Mexico, Canada, Spain, Russia, Greece and Turkey.

We prepare our unaudited Condensed Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America, which requires us to make judgments, estimates and assumptions that affect the results of operations, financial position and cash flows, as well as the related footnote disclosures. We evaluate our estimates on an on-going basis using our historical experience as well as other factors we believe appropriate under the circumstances, such as current economic conditions, and adjust or revise our estimates as circumstances change. As future events and their effect cannot be determined with precision, actual results may differ from these estimates.

These interim financial statements have been prepared in conformity with the instructions to Form 10-Q and Article 10 of U.S. Securities and Exchange Commission Regulation S-X. Accordingly, they do not include certain information and disclosures required for comprehensive annual financial statements. Therefore, the Condensed Consolidated Financial Statements should be read in conjunction with the audited consolidated financial statements for the fiscal year ended December 27, 2008 as presented in our Annual Report on Form 10-K. In the opinion of management, this interim information includes all material adjustments, which are of a normal and recurring nature, necessary for a fair presentation.

Our U.S. and Canadian operations report using a fiscal year that consists of 52 weeks, ending on the last Saturday in December. Every five or six years a 53rd week is added. Fiscal years 2009 and 2008 consist of 52 weeks. Our remaining countries report ~~using~~on a calendar-year basis. Accordingly, we recognize our quarterly business results as outlined below:


Quarter	U.S. & Canada	Mexico & Europe
First Quarter	12 weeks	January and February
Second Quarter	12 weeks	March, April and May
Third Quarter	12 weeks	June, July and August
Fourth Quarter	16 weeks	September, October, November and December

In conjunction with PBG’s initial public offering and other subsequent transactions, PBG and PepsiCo, Inc. (“PepsiCo”) contributed bottling businesses and assets used in the bottling businesses to Bottling LLC. As a result of the contribution of these assets, PBG owns 93.4 percent of Bottling LLC and PepsiCo owns the remaining 6.6 percent as of ~~March~~June 2113, 2009. In addition, PepsiCo has a 40 percent ownership interest in ~~our~~PR ~~Russian~~Beverages ~~venture,~~Limited (“PR Beverages”), ~~Limited~~a consolidated venture for our Russian operations.

We consolidate in our financial statements entities in which we have a controlling financial interest, as well as variable interest entities for which we are the primary beneficiary. Noncontrolling interest in earnings and ownership has been recorded for the percentage of these entities not owned by Bottling LLC. We have eliminated all intercompany accounts and transactions in consolidation.

Note 2—Seasonality of Business

The results for the ~~first~~second quarter are not necessarily indicative of the results that may be expected for the full year because sales of our products are seasonal. The seasonality of our operating results arises from higher sales in the second and third quarters versus the first and fourth quarters of the year, combined with the impact of fixed costs, such as depreciation and interest, which are not significantly impacted by business seasonality. From a cash flow perspective, the majority of our cash flow from operations is generated in the third and fourth quarters.

Note 3—New Accounting Standards

SFAS No. 141(R) as amended

In December 2007, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 141(revised 2007), “Business Combinations” (“SFAS 141(R)”), which addresses the accounting and disclosure for identifiable assets acquired, liabilities assumed, and noncontrolling interests in a business combination. In April 2009, the FASB issued FASB Staff Position No. FAS 141(R)-1, “Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies” (“FSP FAS 141(R)-1”), which amended certain provisions of SFAS 141(R) related to the recognition, measurement, and disclosure of assets acquired and liabilities assumed in a business combination that arise from contingencies. SFAS 141(R) and FSP FAS 141(R)-1 became effective in the first quarter of 2009, and did not have a material impact on our Condensed Consolidated Financial Statements.

SFAS No. 160

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51” (“SFAS 160”), which addresses the accounting and reporting framework for noncontrolling interests by a parent company. SFAS 160 also addresses disclosure requirements to distinguish between interests of the parent and interests of the noncontrolling owners of a subsidiary. SFAS 160 became effective in the first quarter of 2009,. ~~which~~The resulted in reporting noncontrolling interest as a component of equity in our Condensed Consolidated Balance Sheets and below income tax expense in our Condensed Consolidated Statements of Operations. In addition, the provisions of SFAS 160 require that minority interest be renamed noncontrolling interests and that a company present a consolidated net income measure that includes the amount attributable to such noncontrolling interests for all periods presented. In addition SFAS 160 requires reporting noncontrolling interest as a component of equity in our Condensed Consolidated Balance Sheets and below income tax expense in our Condensed Consolidated Statements of Operations. As required by SFAS 160, we have retrospectively applied the presentation to our prior year balances in our Condensed Consolidated Financial Statements.

SFAS No. 161

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133” (“SFAS 161”), which requires enhanced disclosures for derivative and hedging activities. SFAS 161 became effective in the first quarter of 2009. See Note 8 for required disclosure.

FSP FAS 132(R)-1

In December 2008, the FASB issued FASB Staff Position No. SFAS 132(revised 2003)-1, “Employers’ Disclosures about Postretirement Benefit Plan Assets” (“FSP FAS 132(R)-1”), which requires employers to disclose information about fair value measurements of plan assets that are similar to the disclosures about fair value measurements required by SFAS No. 157, “Fair Value Measurements” (“SFAS 157”). FSP FAS 132(R)-1 will become effective for our annual financial statements for 2009. We are currently evaluating the impact of this standard on our Consolidated Financial Statements.

FSP FAS 107-1 and APB 28-1

In April 2009, the FASB issued FASB Staff Position No. SFAS 107-1 and APB No. 28-1, “Interim Disclosures about ~~the~~ Fair Value of Financial Instruments” (“FSP FAS 107-1 and APB 28-1”), which requires quarterly disclosure of information about the fair value of financial instruments within the scope of FASB Statement No. 107, “Disclosures about Fair Value of Financial Instruments.” FSP FAS 107-1 and APB 28-1 ~~has an~~

has an effective date requiring adoption by the third quarter of 2009 with early adoption permitted. We adopted the provisions of FSP FAS 107-1 and APB 28-1 in the first quarter of 2009. See Note 7 for required disclosures.

SFAS No. 165

In May 2009, the FASB issued SFAS No. 165, “Subsequent Events” (“SFAS 165”), which sets forth general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. SFAS 165 will become effective in the third quarter of 2009 and will not likely have a material impact on our Consolidated Financial Statements.

SFAS No. 167

In June 2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No. 46(R)” (“SFAS 167”), which amends FASB Interpretation No. 46(revised December 2003) to address the elimination of the concept of a qualifying special purpose entity. SFAS 167 also replaces the quantitative-based risks and rewards calculation for determining which enterprise has a controlling financial interest in a variable interest entity with an approach focused on identifying which enterprise has the power to direct the activities of a variable interest entity and the obligation to absorb losses of the entity or the right to receive benefits from the entity. Additionally, SFAS 167 provides more timely and useful information about an enterprise’s involvement with a variable interest entity. SFAS 167 will become effective in the first quarter of 2010. We are currently evaluating the impact of this standard on our Consolidated Financial Statements.

SFAS No. 168

In June 2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards Codification^TM and the Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162” (“SFAS 168”), which establishes the FASB Accounting Standards Codification as the source of authoritative accounting principles recognized by the FASB to be applied in the preparation of financial statements in conformity with generally accepted accounting principles. SFAS 168 explicitly recognizes rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under federal securities laws as authoritative GAAP for SEC registrants. SFAS 168 will become effective in the fourth quarter of 2009 and will not have a material impact on our Consolidated Financial Statements.

Note 4—Share-Based Compensation

The total impact of share-based compensation recognized in the Condensed Consolidated Statements of Operations was $1214 million and $15 million for the 12 week periods ended ~~March~~June 2113, 2009 and ~~March~~June 2214, 2008, respectively, and $26 million and $27 million for the 24 week periods ended June 13, 2009 and June 14, 2008, respectively.

During ~~each of~~ the 1224 weeks ended ~~March~~June 2113, 2009 and ~~March~~June 2214, 2008, we granted 56 million and 3 million of PBG stock option awards at a weighted-average fair value of $4.4652 and $7.0611, respectively.

During ~~each of~~ the 1224 weeks ended ~~March~~June 2113, 2009 and ~~March~~June 2214, 2008, we granted 2 million and 1 million of PBG restricted stock unit awards at a weighted-average fair value of $18.72 and $35.7738, respectively.

Unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the incentive plans amounted to $~~112~~101 million as of ~~March~~June 2113, 2009. That cost is expected to be recognized over a weighted-average period of 2.32 years.

Note 5—Balance Sheet Details

	March			December
	21, 2009			27, 2008
Accounts Receivable, net
Trade accounts receivable	$	1,207		$	1,208
Allowance for doubtful accounts		(72	)		(71	)
Accounts receivable from PepsiCo		188			154
Note receivable from PepsiCo		29			—
Other receivables		56			80
	$	1,408		$	1,371
Inventories
Raw materials and supplies	$	215		$	185
Finished goods		404			343
	$	619		$	528
Prepaid Expenses and Other Current Assets
Prepaid expenses	$	194		$	187
Accrued interest receivable from PBG		15			118
Other current assets		27			32
	$	236		$	337
Property, Plant and Equipment, net
Land	$	293		$	300
Buildings and improvements		1,533			1,542
Manufacturing and distribution equipment		3,887			3,999
Marketing equipment		2,168			2,246
Capital leases		21			23
Other		135			139
		8,037			8,249
Accumulated depreciation		(4,340	)		(4,380	)
	$	3,697		$	3,869

	March		December
	21, 2009		27, 2008
Other Assets
Note receivable from PepsiCo	$	58	$	—
Other assets		100		108
	$	158	$	108

Note 5—Balance Sheet Details

Note Receivable from PepsiCo


	June			December
	13, 2009			27, 2008
Accounts Receivable, net
Trade accounts receivable	$	1,626		$	1,208
Allowance for doubtful accounts		(73	)		(71	)
Accounts receivable from PepsiCo		198			154
Other receivables		79			80

	$	1,830		$	1,371


Inventories
Raw materials and supplies	$	234		$	185
Finished goods		498			343

	$	732		$	528


Prepaid Expenses and Other Current Assets
Prepaid expenses	$	235		$	187
Accrued interest receivable from PBG		35			118
Other current assets		52			32

	$	322		$	337


Property, Plant and Equipment, net
Land	$	304		$	300
Buildings and improvements		1,644			1,542
Manufacturing and distribution equipment		4,047			3,999
Marketing equipment		2,228			2,246
Capital leases		45			23
Other		138			139

		8,406			8,249
Accumulated depreciation		(4,540	)		(4,380	)

	$	3,866		$	3,869


Other Assets
Note receivable from noncontrolled affiliate	$	92		$	—
Other assets		78			108

	$	170		$	108

~~During the first quarter of 2009, we issued a ruble-denominated 3-year note with an interest rate of 10.0 percent (“~~Note ~~receivable~~Receivable from ~~PepsiCo”)~~Noncontrolled ~~to JSC Lebedyansky (“Lebedyansky”), a~~Affiliate consolidated subsidiary of PepsiCo and a noncontrolled affiliate of Bottling LLC, valued at $87 million on March 21, 2009. This funding was contemplated as part of the initial capitalization of the purchase of Lebedyansky between PepsiCo and us. This note receivable is recorded in accounts receivable, net and other assets in our Condensed Consolidated Balance Sheets.

	March		December
	21, 2009		27, 2008
Accounts Payable and Other Current Liabilities
Accounts payable	$	469	$	444
Accounts payable to PepsiCo		275		217
Trade incentives		155		189
Accrued compensation and benefits		197		240
Other accrued taxes		98		128
Accrued interest		58		62
Other current liabilities		296		249
	$	1,548	$	1,529

During the first quarter of 2009, we issued a ruble-denominated three-year note with an interest rate of 10.0 percent (“Note receivable from noncontrolled affiliate”) to JSC Lebedyansky (“Lebedyansky”), a consolidated subsidiary of PepsiCo and a noncontrolled affiliate of Bottling LLC, valued at $92 million on June 13, 2009. This funding was contemplated as part of the initial capitalization of the purchase of Lebedyansky between PepsiCo and us. This note receivable is recorded in other assets in our Condensed Consolidated Balance Sheets.


	June		December
	13, 2009		27, 2008
Accounts Payable and Other Current Liabilities
Accounts payable	$	614	$	444
Accounts payable to PepsiCo		336		217
Trade incentives		208		189
Accrued compensation and benefits		235		240
Other accrued taxes		124		128
Accrued interest		60		62
Other current liabilities		351		249

	$	1,928	$	1,529

Note 6—Other Intangible Assets, net and Goodwill

The components of other intangible assets are as follows:

	March			December
	June			December
	21, 2009			27, 2008
	13, 2009			27, 2008
Intangibles subject to amortization
Gross carrying amount
Customer relationships and lists	$	4247		$	45
Franchise and distribution rights		7478			41
Other identified intangibles		2129			34
		137			120
		154			120
Accumulated amortization
Customer relationships and lists		(1416	)		(15	)
Franchise and distribution rights		(3133	)		(31	)
Other identified intangibles		(89	)		(21	)
		(53	)		(67	)
		(58	)		(67	)
Intangibles subject to amortization, net		8496			53
Intangibles not subject to amortization
Carrying amount
Franchise rights		3,~~231~~336			3,244
Licensing rights		315			315
Distribution rights		4651			49
Brands		3541			39
Other identified intangibles		4752			51
Intangibles not subject to amortization		3,~~674~~795			3,698
Total other intangible assets, net	$	3,~~758~~891		$	3,751

~~Intangible~~ During ~~asset~~the first quarter of 2009, we acquired distribution rights for certain energy drinks in the United States and Canada and protein-enhanced functional beverages in the United States. As a result of these acquisitions, we recorded approximately $36 million of amortizable distribution rights, with a weighted-average amortization period of 10 years.

~~Intangible~~During ~~asset~~the ~~amortization~~second ~~expense~~quarter, ~~was~~we ~~$1 million~~acquired a Pepsi-Cola and ~~$2 million~~Dr ~~for~~Pepper ~~the~~franchise ~~12 weeks~~bottler ~~ended~~serving ~~March 21,~~portions ~~2009~~of ~~and~~central ~~March 22,~~Texas. ~~2008,~~As ~~respectively.~~a ~~Amortization~~result ~~expense~~of ~~for~~this ~~each~~acquisition ofwe ~~the~~recorded ~~next~~approximately ~~five~~$57 million ~~years~~of isnon-amortizable ~~estimated~~franchise torights beand ~~approximately~~ $108 million orof ~~less~~non-compete agreements, with a weighted-average amortization period of 10 years.

During the first quarter of 2009, we acquired distribution rights for Rockstar energy drinks in the United States and Canada and Muscle Milk protein-enhanced functional beverages in the United States. As a result of these acquisitions, we recorded approximately $35 million of amortizable distribution rights.

Goodwill

The changes in the carrying value of goodwill by reportable segment for the 12 weeks ended March 21, 2009 are as follows:

	U.S. &
	Canada			Europe		Mexico			Total
Balance at December 27, 2008	$	1,235		$	26	$	173		$	1,434
Purchase price allocations relating to acquisitions		1			—		—			1
Impact of foreign currency translation		(4	)		—		(14	)		(18	)
Balance at March 21, 2009	$	1,232		$	26	$	159		$	1,417

Intangible asset amortization

Intangible asset amortization expense was $2 million for both the 12 weeks ended June 13, 2009 and June 14, 2008. Intangible asset amortization expense was $4 million for both the 24 weeks ended June 13, 2009 and June 14, 2008. Amortization expense for each of the next five years is estimated to be approximately $11 million or less.

Goodwill

The changes in the carrying value of goodwill by reportable segment for the 24 weeks ended June 13, 2009 are as follows:


			U.S. &
	Total		Canada		Europe			Mexico
Balance at December 27, 2008	$	1,434	$	1,235	$	26		$	173
Purchase price allocations relating to acquisitions		3		1		2			—
Impact of foreign currency translation		34		26		(1	)		9

Balance at June 13, 2009	$	1,471	$	1,262	$	27		$	182

Note 7—Fair Value Measurements

We adopted SFAS 157 at the beginning of the 2008 fiscal year for all financial instruments valued on a recurring basis, at least annually. Additionally, beginning in the first quarter of 2009, in accordance with the provisions of FASB Staff Position No. 157-2, “Effective Date of FASB Statement No. 157” (“FSP 157-2”) we now apply SFAS 157 to financial and nonfinancial assets and liabilities. FSP 157-2 delayed the effective date of SFAS 157 for nonfinancial assets and liabilities, except for certain items that are recognized or disclosed at fair value in the financial statements on a recurring basis. In accordance with SFAS 157, we have categorized our assets and liabilities that are measured at fair value into a three-level fair value hierarchy as set forth below. If the inputs used to measure fair value fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement. The three levels of the hierarchy are defined as follows:

Level 1 — Unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for identical assets and liabilities in non-active markets, quoted prices for similar assets or liabilities in active markets and inputs other than quoted prices that are observable for substantially the full term of the asset or liability.

Level 3 — Unobservable inputs reflecting management’s own assumptions about the input used in pricing the asset or liability.

~~The following table summarizes the financial assets and liabilities we measure at fair value~~12 ~~on a recurring basis as of March 21, 2009 and December 27, 2008:~~

	Level 2
	March		December
	21, 2009		27, 2008
Financial Assets
Foreign currency (1)	$	5	$	13
Deferred compensation (2)		11		13
Interest-rate swaps (3)		4		8
Total	$	20	$	34
Financial Liabilities
Commodity (1)	$	58	$	57
Foreign currency (1)		7		6
Interest-rate swaps (3)		5		1
Total	$	70	$	64

The following table summarizes the financial assets and liabilities we measure at fair value on a recurring basis as of June 13, 2009 and December 27, 2008:


	Level 2
	June		December
	13, 2009		27, 2008
Financial Assets
Commodity ⁽¹⁾	$	24	$	—
Foreign currency contracts ⁽¹⁾		3		13
Prepaid forward contract ⁽²⁾		20		13
Interest rate swaps ⁽³⁾		—		8

Total	$	47	$	34


Financial Liabilities
Commodity ⁽¹⁾	$	22	$	57
Foreign currency contracts ⁽¹⁾		18		6
Interest rate swaps ⁽³⁾		89		1

Total	$	129	$	64


⁽¹⁾		Based primarily on the forward rates of the specific indices upon which the 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.

Other Financial Assets and Liabilities

Financial assets with carrying values approximating fair value include cash and cash equivalents and accounts receivable. Financial liabilities with carrying values approximating fair value include accounts payable and other accrued liabilities and short-term debt. The carrying value of these financial assets and liabilities approximates fair value due to their short maturities and since interest rates approximate current market rates for short-term debt.

Long-term debt, which includes the current maturities of long-term debt, at ~~March~~June 2113, 2009, ~~had~~ had a carrying value and fair value of $4.5 billion and $4.8 billion, respectively, and at December 27, 2008, had a carrying value and fair value of $5.1 billion and $5.3 billion, respectively. The ~~fair~~ fair value is based on interest rates that are currently available to us for issuance of debt with similar terms and remaining maturities.

Note 8—Financial Instruments and Risk Management

We are subject to the risk of loss arising from adverse changes in commodity prices, foreign currency exchange rates, interest rates and PBG’s stock price. In the normal course of business, we manage these risks through a variety of strategies, including the use of derivatives. Our corporate policy prohibits the use of derivative instruments for trading or speculative purposes, and we have procedures in place to monitor and control their use.

All derivative instruments are recorded at fair value as either assets or liabilities in our Condensed Consolidated Balance Sheets. Derivative instruments are generally designated and accounted for under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS 133”) as either a hedge of a recognized asset or liability (“fair value hedge”) or a hedge of a forecasted transaction (“cash flow hedge”). Certain of these derivatives are not designated as hedging instruments under SFAS 133 and are used as “economic hedges” to manage certain risks in our business.

Credit Risk Associated with Derivatives

We are exposed to counterparty credit risk on all of our derivative financial instruments. We have established and maintained counterparty credit guidelines and enter into transactions only with financial institutions of investment grade or better. We monitor our counterparty credit risk and utilize numerous counterparties to minimize our exposure to potential defaults. We do not require collateral under these agreements.

Cash Flow Hedges

For derivative instruments that are designated and qualify as a cash flow hedge, the effective portion of the change in the fair value of a derivative instrument is deferred in accumulated other comprehensive loss (“AOCL”) until the underlying hedged item is recognized in earnings. The derivative’s gain or loss recognized in earnings is recorded consistent with the expense classification of the underlying hedged item. The ineffective portion of a fair value change on a qualifying cash flow hedge is recognized in earnings immediately.

The Company hedges the following types of items that qualify for cash flow hedge accounting under SFAS 133:

Commodity — We use forward and option contracts to hedge the risk of adverse movements in commodity prices related primarily to anticipated purchases of raw materials and energy used in our operations. These contracts generally range from one to 24 months in duration and as of ~~March~~June 2113, 2009, have a notional value, based on the contract price, of $~~351~~345 million.

Foreign Currency — We are subject to foreign currency transactional risks in certain of our international territories primarily for the purchase of commodities that are denominated in currencies that are different from their functional currency. We enter into forward contract agreements to hedge a portion of this foreign currency risk. These contracts generally range from one to 1224 months in duration and as of ~~March~~June 2113, 2009, have a notional value, based on the contract price, of $6474 million.

Interest — We have entered into treasury rate lock agreements to hedge against adverse interest rate changes onrelating to the issuance of certain fixed rate debt financing arrangements. Gains and losses from these treasury rate lock agreements that are considered effective are deferred in AOCL and amortized to interest expense over the duration of the debt term. The Company has a $3 million net deferred gain in AOCL, which will be amortized over athe ~~maximum~~next ofseven 7 years. For the ~~quarter~~12 weeks and 24 weeks ended ~~March~~June 2113, 2009, we recognized, in interest expense, a loss of $0.2 1 million inand ~~interest~~$0.3 million, ~~expense~~respectively.

Fair Value Hedges

Interest Rate Swaps — We effectively converted $~~750~~1.25 ~~million~~billion of our fixed-rate debt to floating-rate debt through the use of interest- rate swaps with the objective of reducing our overall borrowing costs. These interest rate swaps meet the criteria for fair value hedge accounting and are assumed to be 100 percent effective in eliminating the market-rate risk inherent in our long-term debt. Accordingly, any gain or loss associated with these swaps is fully offset by the opposite market impact on the related debt and recognized currently in earnings.

Economic Hedges

As part of our risk management strategy, we enter into derivative instruments that are not designated as hedging instruments under SFAS 133, but are used as economic hedges to manage certain risks in our business. These derivative instruments are marked to market on a periodic basis and recognized currently in earnings consistent with the expense classification of the underlying hedged item. The Company has the following types of economic hedges:

Foreign Currency Hedges — We entered into forward exchange contracts to economically hedge a portion of our intercompany receivable balances that are denominated in Mexican pesos. These contracts generally range from one to 12 months in duration and as of June 13, 2009, have a notional value, based on the contract price, of $33 million.

Additionally, we fair value certain vendor and customer contracts that have embedded foreign currency derivative components. These contracts generally range from one year to three years and as of June 13, 2009, have a notional value, based on the contract price, of $15 million.

Unfunded Deferred Compensation Liability — Our unfunded deferred compensation liability is subject to changes in PBG’s stock price as well as price changes in other equity and fixed-income investments. We use prepaid forward contracts to hedge the portion of our deferred compensation liability that is based on PBG’s stock price. At June 13, 2009, we had a prepaid forward contract for 585,000 shares of PBG’s stock.

Foreign Currency Hedges — We entered into forward exchange contracts to economically hedge a portion of our intercompany receivable balances that are denominated in Mexican pesos. These contracts generally range from one to 12 months in duration and as of March 21, 2009, have a notional value, based on the contract price, of $50 million.

Additionally, we fair value certain vendor and customer contracts that have embedded foreign currency derivative components. These contracts generally range from one year to four years and have a notional value, based on the contract price, of $16 million.

Unfunded Deferred Compensation Liability — Our unfunded deferred compensation liability is subject to changes in PBG’s stock price as well as price changes in other equity and fixed-income investments. We use prepaid forward contracts to hedge the portion of our deferred compensation liability that is based on PBG’s stock price. At March 21, 2009, we had a prepaid forward contract for 585,000 shares of PBG’s stock.

Balance Sheet Classification

The following summarizes the fair values and location in our Condensed Consolidated Balance Sheet of all derivatives held by the Company as of ~~March~~June 2113, 2009.:

Derivatives Designated as Hedging		Fair
Instruments under SFAS 133	Balance Sheet Classification	Value
Assets
Foreign currency	Prepaid expenses and other current assets	$	4
Commodity	Prepaid expenses and other current assets	$	14
Interest-rate swaps	Other assets		4
Commodity	Other assets		10
Commodity	Accounts payable and other current liabilities		1
		$	24
Commodity	Other liabilities		2
		$	11
Liabilities
Foreign currency	~~Prepaid~~Accounts ~~expenses~~payable and other current ~~assets~~liabilities	$	113
Commodity	Accounts payable and other current liabilities		5119
Commodity	Other liabilities		103
Interest-rate swaps	Other liabilities		5
Interest rate swaps	Other liabilities		89
		$	67124
Derivatives Not Designated as Hedging		Fair
Instruments under SFAS 133	Balance Sheet Classification	Value
Assets
Foreign currency	Prepaid expenses and other current assets	$	3
Deferred compensation	Prepaid expenses and other current assets		11
		$	14
Liabilities
Foreign currency	Prepaid expenses and other current assets	$	1
Foreign currency	Accounts payable and other current liabilities		5
Foreign currency	Other liabilities		2
		$	8

Cash Flow Hedge Gains (Losses) Recognition


Derivatives Not Designated as Hedging		Fair
Instruments under SFAS 133	Balance Sheet Classification	Value
Assets
Foreign currency	Prepaid expenses and other current assets	$	3
Prepaid forward contract	Prepaid expenses and other current assets		20

		$	23


Liabilities
Foreign currency	Accounts payable and other current liabilities	$	3
Foreign currency	Other liabilities		2

		$	5

~~The following summarizes the gains (losses) recognized in the Condensed Consolidated Statement~~15 ~~of Operations and AOCL of derivatives designated and qualifying as cash flow hedges for the quarter ended March 21, 2009.~~

Derivatives in SFAS	Amount of				Amount of Gain (Loss)
133 Cash Flow	Gain (Loss)			Location of Gain (Loss)	Reclassified
Hedging	recognized in			Reclassified from AOCL into	from AOCL into
Relationships	OCL			Income	Income
Foreign currency	$	—		Cost of goods sold	$	3
Commodity		(7	)	Cost of goods sold		(3	)
Commodity		(5	)	Selling, delivery and administrative expenses		(14	)
Treasury rate lock		—		Interest expense, net		—
	$	(12	)		$	(14	)

Cash Flow Hedge Gains (Losses) Recognition

The ~~ineffective~~following ~~portion~~summarizes of the ~~change~~gains (losses) recognized in ~~fair~~the ~~value~~Condensed Consolidated Statements of ~~our~~Operations ~~cash~~and ~~flow~~Other ~~hedges~~Comprehensive ~~was~~Income ~~not~~(“OCI”) ~~material to~~of ~~our~~derivatives ~~results~~designated ~~for~~and qualifying ~~the~~as ~~quarter~~cash ~~ended~~flow ~~March 21,~~hedges ~~2009.~~for ~~Assuming no change in~~ the ~~commodity~~12 ~~prices~~ and ~~foreign~~24 weeks ~~currency~~ended ~~rates as measured on March~~June 2113, 2009~~, $42 million of unrealized losses will be~~: ~~reclassified from AOCL and recognized in earnings over the next 12 months.~~


	Amount of							Amount of Gain (Loss)
	Gain (Loss)							Reclassified
	Recognized in							from AOCL into
	OCI							Income
Derivatives in SFAS	12 Weeks			24 Weeks				12 Weeks			24 Weeks
133 Cash Flow	Ended			Ended			Location of Gain (Loss)	Ended			Ended
Hedging	June			June 13,			Reclassified from AOCL into	June			June
Relationships	13, 2009			2009			Income	13, 2009			13, 2009
Foreign currency	$	(15	)	$	(15	)	Cost of sales	$	2		$	5
Commodity		26			19		Cost of sales		—			(3	)
Commodity		15			10		Selling, delivery and administrative expenses		(12	)		(26	)

	$	26		$	14			$	(10	)	$	(24	)

The ineffective portion of the change in fair value of our cash flow hedges was not material to our results for the 12 weeks and 24 weeks ended June 13, 2009. Assuming no change in the commodity prices and foreign currency rates as measured on June 13, 2009, $19 million of unrealized net losses will be reclassified from AOCL and recognized in earnings over the next 12 months.

Other Derivatives Gains (Losses) Recognition

The following summarizes the gains (losses) and the location in the Condensed Consolidated ~~Statement~~Statements of Operations of derivatives designated and qualifying as fair value hedges and derivatives not designated as hedging instruments for the ~~quarter~~12 and 24 weeks ended ~~March~~June 2113, 2009:

		Amount of
		Gain (Loss)
		Recognized in
	Location of Gain (Loss) Recognized in	Income on
		Income on
	Income on Derivative	Derivative
		Derivative
Derivatives in SFAS 133 Fair Value Hedging Relationship
		12 Weeks			24 Weeks
Interest-rate swaps	Interest expense, net	$	4
		Ended			Ended
Derivatives Not Designated as Hedging Instruments under SFAS 133
	Location of Gain (Loss) Recognized in	June			June
Deferred compensation	Selling, delivery and administrative expenses	$	(1	)
	Income on Derivative	13, 2009			13, 2009
Foreign currency	Other non-operating expenses (income), net		(5	)
Derivatives in SFAS 133 Fair Value Hedging Relationship
		$	(6	)
Interest rate swaps	Interest expense	$	5		$	9
Derivatives Not Designated as Hedging Instruments under SFAS 133
Prepaid forward contract	Selling, delivery and administrative expenses	$	8		$	7
Foreign currency	Other non-operating income, net		1			(4	)
		$	9		$	3

The Company has recorded $711 million and $4 million of net foreign currency transactional gains ~~losses~~ in other non-operating ~~expenses (~~income), net in the Condensed Consolidated ~~Statement~~Statements of Operations for ~~the~~ ~~quarter~~the 12 weeks and 24 weeks ended ~~March~~June 2113, 2009, respectively.

1516

Note 9—Pension and Postretirement Medical Benefit Plans

~~Employee~~ We ~~Benefit~~participate ~~Plans~~in PBG sponsored pension and other postretirement medical benefit plans in various forms in the United States and other similar pension plans in our international locations, covering employees who meet specified eligibility requirements.

We participate in PBG sponsored pension and other postretirement medical benefit plans in various forms in the United States and other similar pension plans in our international locations, covering employees who meet specified eligibility requirements. The assets, liabilities and expense associated with our international plans were not significant to our results of operations and our financial position and are not included in the tables and discussion presented below.

Defined Benefit Pension Plans

In the U.S. we participate in PBG’s non-contributory defined benefit pension plans for certain full-time salaried and hourly employees. Benefits are generally based on years of service and compensation, or stated amounts for each year of service. Effective January 1, 2007, newly hired salaried and non-union hourly employees are not eligible to participate in these plans. Additionally, effective April 1, 2009, we no longer accrue benefits for certain of our salaried and non-union employees that do not meet age and service requirements.

Postretirement Medical Plans

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

Components of Net Pension Expense

	12 Weeks Ended						24 Weeks Ended
	March			March
	June			June			June			June
	21, 2009			22, 2008
	13, 2009			14, 2008			13, 2009			14, 2008
Service cost	$	1410		$	1211		$	23		$	23
Interest cost		2524			23			49			46
Expected return on plan assets — (income)		(28	)		(2726	)		(55	)		(53	)
Amortization of net loss		8			34			16			7
Amortization of prior service costs		2			2			4			4
Net pension expense for the defined benefit plans	$	2116		$	1314		$	37		$	27

OnFor ~~March~~the 24 31weeks ended June 13, 2009, we made ~~a contribution of~~ $7088 million of contributions to the U.S. defined benefit pension trust.

Components of Postretirement Medical Expense

	12 Weeks Ended				24 Weeks Ended
	March		March
	June		June		June		June
	21, 2009		22, 2008
	13, 2009		14, 2008		13, 2009		14, 2008
Service cost	$	1	$	1	$	2	$	2
Interest cost		5		5		9		10
Amortization of net loss		—		1		1		2
Total postretirement medical expense	$	6	$	7	$	12	$	14

Defined Contribution Benefits

~~Nearly~~Defined ~~all of our U.S. employees are eligible to participate in PBG’s defined~~ contribution ~~plans,~~ ~~which~~expense ~~are~~was ~~voluntary~~$13 million ~~defined~~and ~~contribution~~$7 million ~~savings~~for ~~plans. We make matching contributions to~~ the ~~defined~~12 weeks ~~contribution~~ended ~~savings plans on behalf of participants eligible to receive such contributions. Additionally~~June 13, ~~U.S. employees not eligible to participate in the defined benefit~~ ~~pension~~2009 ~~plans~~ and ~~whose~~June 14, ~~benefits~~2008, ~~are~~respectively, ~~discontinued~~and ~~will receive additional Company retirement contributions under the defined contribution plans. Defined contribution expense was~~ $821 million and $715 million for the 1224 weeks ended ~~March 21~~June 13, 2009 and ~~March~~June 2214, 2008, respectively.

Note 10—Income Taxes

~~We currently have on-going income tax audits in our major tax jurisdictions, where issues such as deductibility of certain expenses have been raised.~~ During the second quarter of 2009, we reached a settlement with the Canadian tax authorities ~~related~~on to an issue ~~that~~related ~~was~~to inthe ~~dispute for our~~ 1999-2005 tax years. WeAs ~~believe~~a ~~that~~result, ~~it is reasonably possible that~~ our ~~worldwide~~gross reserves for uncertain tax benefits, ~~could~~excluding ~~decrease~~interest, indecreased ~~the~~by ~~range of~~ $1019 million to ~~$50 million~~which ~~within~~was ~~the~~reflected ~~next 12 months~~ as a ~~result~~benefit ~~of the completion of audits~~ in ~~various~~income ~~jurisdictions~~tax ~~and~~expense ~~the expiration of statute of limitations. The reductions~~ in our ~~tax~~Condensed ~~reserves could~~Consolidated ~~result~~Statements ~~in a combination~~ of ~~additional~~Operations. ~~tax~~In ~~payments~~addition, ~~the~~we ~~adjustment~~decreased ~~of certain deferred taxes~~our orrelated ~~the~~reserves ~~recognition~~for ofinterest ~~tax~~by ~~benefits~~approximately in$6 million ~~our~~and ~~Consolidated~~recognized ~~Statements~~a oftax ~~Operations.~~benefit ~~In the event that~~from weinterest ~~cannot~~refunds ~~reach settlement~~ of ~~some~~approximately of$4 million, ~~these~~for ~~audits,~~a ~~our~~total net tax ~~reserves~~benefit ~~may~~of ~~increase,~~$29 million ~~although~~as wea ~~cannot~~result ~~estimate~~of ~~such~~these ~~potential increases at this time~~items.

~~Note~~ We ~~11—Segment~~currently ~~Information~~have on-going income tax audits in our major tax jurisdictions, where issues such as deductibility of certain expenses have been raised. We believe that it is reasonably possible that our reserves for uncertain tax benefits could further decrease in the range of $10 million to $45 million within the next 12 months as a result of the completion of audits in various jurisdictions and the expiration of statute of limitations. The reductions in our tax reserves could result in a combination of additional tax payments, the adjustment of certain deferred taxes or the recognition of tax benefits in our Condensed Consolidated

We operate in one industry, carbonated soft drinks and other ready-to-drink beverages, and all of our segments derive revenue from these products. We conduct business in all or a portion of the United States, Mexico, Canada, Spain, Russia, Greece and Turkey. We manage and report operating results through three reportable segments — U.S. & Canada, Europe (which includes Spain, Russia, Greece and Turkey) and Mexico.

Operationally, the Company is organized along geographic lines with specific regional management teams having responsibility for the financial results in each reportable segment. We evaluate the performance of these segments based on operating income or loss. Operating income or loss is exclusive of net interest expense, noncontrolling interest, foreign exchange gains and losses and income taxes.

Statements of Operations. In the event that we cannot reach settlement of some of these audits, our tax reserves may increase, although we cannot estimate such potential increases at this time.

Note 11—Segment Information

We operate in one industry, carbonated soft drinks and other ready-to-drink beverages, and all of our segments derive revenue from these products. We conduct business in all or a portion of the United States, Mexico, Canada, Spain, Russia, Greece and Turkey. We manage and report operating results through three reportable segments – U.S. & Canada, Europe (which includes Spain, Russia, Greece and Turkey) and Mexico.

The following tables summarize select financial information related to our reportable segments:

	12 Weeks Ended						24 Weeks Ended
	March			March
	June			June			June			June
	21, 2009			22, 2008
	13, 2009			14, 2008			13, 2009			14, 2008
Net Revenues
U.S. & Canada	$	2,~~177~~551		$	2,~~207~~536		$	4,728		$	4,743
Europe		~~174~~424			~~236~~592			598			828
Mexico		~~156~~299			~~208~~394			455			602
Worldwide net revenues	$	23,~~507~~274		$	23,~~651~~522		$	5,781		$	6,173
Operating Income (Loss)
U.S. & Canada	$	~~142~~274		$	~~134~~269		$	416		$	403
Europe		~~(25~~19	)		~~(31~~45	)		(6	)		14
Mexico		(217	)		329			15			32
Worldwide operating income		~~115~~310			~~106~~343			425			449
Interest expense		6758			4752			125			99
Interest income		2624			4133			50			74
Other non-operating expenses (income), net		7			(2	)
Other non-operating income, net		(11	)		(3	)		(4	)		(5	)
Income before income taxes	$	67287		$	~~102~~327		$	354		$	429

	March		December
	June		December
	21, 2009		27, 2008
	13, 2009		27, 2008
Total Assets
U.S. & Canada	$	13,~~029~~614	$	13,328
Europe		12,~~999~~388		2,222
Mexico		~~849~~973		945
Worldwide total assets	$	1516,~~877~~975	$	16,495

Note 12—Restructuring Charges

In the fourth quarter of 2008, we announced a restructuring program to enhance the Company’s operating capabilities in each of our reporting segments with the objective to strengthen customer service and selling effectiveness; simplify decision making and streamline the organization; drive greater cost productivity to adapt to current macroeconomic challenges; and rationalize the Company’s supply chain infrastructure. As part of the restructuring program, approximately 3,600 positions will be eliminated across all reporting segments, four facilities will be closed in the United States, three plants and about 30 distribution centers will be closed in Mexico and about 700 routes will be eliminated in Mexico. In addition, PBG modified its U.S. defined benefit pension plans, which will generate long-term savings and significantly reduce future financial obligations.

The Company expects to record pre-tax charges of $140 million to $170 million in selling, delivery and administrative expenses over the course of the restructuring program, which are primarily for severance and related benefits, pension and other employee-related costs and other charges, including employee relocation and asset disposal costs. The program is expected to be substantially completed by the end of 2009. Since the inception of the program and through March 21, 2009, we eliminated approximately 1,700 positions across all reporting segments and closed four facilities in the United States, two plants in Mexico and eliminated 326 routes in Mexico.

The Company expects to incur approximately $130 million in pre-tax cash expenditures from these restructuring actions, of which $35 million was paid since the inception of the program, with the balance expected to occur in 2009 and 2010. This includes $2 million of employee benefit payments pursuant to existing unfunded termination indemnity plans. These benefit payments have been accrued for in previous periods, and therefore, are not included in our estimated cost for this program or the tables below.

Note 12—Restructuring Charges

The Company expects to record pre-tax charges of $140 million to $170 million in selling, delivery and administrative expenses over the course of the restructuring program, which are primarily for severance and related benefits, pension and other employee-related costs and other charges, including employee relocation and asset disposal costs. The program is expected to be substantially completed by the end of 2009. Since the inception of the program and through June 13, 2009, we eliminated approximately 2,500 positions across all reporting segments and closed four facilities in the United States, two plants and 10 distribution centers in Mexico and eliminated 432 routes in Mexico.

The Company expects to incur approximately $130 million in pre-tax cash expenditures from these restructuring actions, of which $52 million was paid since the inception of the program, with the balance expected to occur in 2009 and 2010. This includes $5 million of employee benefit payments pursuant to existing unfunded termination indemnity plans. These benefit payments have been accrued for in previous periods, and therefore, are not included in our estimated cost for this program or the tables below.

The following tables summarize the pre-tax costs associated with the restructuring program.

By Reportable Segment

			U.S. &
	Worldwide		Canada		Mexico		Europe
Costs incurred through December 27, 2008	$	83	$	53	$	3	$	27
Costs incurred during the first quarter ended March 21, 2009		5		3		2		—
Costs expected to be incurred through December 26, 2009		52-82		33-44		18-33		1-5
Costs incurred during the second quarter ended June 13, 2009		9		4		4		1
Costs expected to be incurred through December 26, 2009		43-73		29-40		14-29		0-4
Total costs expected to be incurred	$	140-$170	$	89-$100	$	23-$38	$	28-$32

By Activity

										Asset
							Pension &			Disposal,
				Severance			Other			Employee
				& Related			Related			Relocation
	Total			Benefits			Costs			& Other
Costs incurred through December 27, 2008	$	83		$	47		$	29		$	7
Cash payments		(11	)		(10	)		—			(1	)
Non-cash settlements		(30	)		(1	)		(23	)		(6	)
Remaining costs accrued at December 27, 2008		42			36			6			—
Costs incurred during the first quarter ended March 21, 2009		5			1			1			3
Cash payments		(22	)		(18	)		(2	)		(2	)
Non-cash settlements		(2	)		—			(1	)		(1	)
Remaining costs accrued at March 21, 2009	$	23		$	19		$	4		$	—
Costs incurred during the second quarter ended June 13, 2009		9			4			—			5
Cash payments		(14	)		(11	)		—			(3	)
Non-cash settlements		(1	)		—			—			(1	)
Remaining costs accrued at June 13, 2009	$	17		$	12		$	4		$	1

Note 13—Supplemental Cash Flow Information

The table below presents the Company’s supplemental cash flow information:

	12 Weeks Ended
	24 Weeks Ended
	March			March
	June			June
	21, 2009			22, 2008
	13, 2009			14, 2008
Interest paid	$	66124		$	3497
Income taxes paid (received)	$	6		$	(1	)
Income taxes received (paid)	$	7		$	(10	)
Decrease in accounts payable related to capital expenditures	$	(10	)	$	(49	)
Increase (decrease) in accounts payable related to capital expenditures	$	8		$	(44	)

Note 14—Contingencies

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

19Litigation Related to PepsiCo Proposal

On April 19, 2009, PBG received an unsolicited proposal from PepsiCo to acquire all of the outstanding shares of PBG’s common stock not already owned by PepsiCo for $29.50 per share. The proposal consisted of $14.75 in cash plus 0.283 shares of PepsiCo common stock for each share of PBG common stock. Immediately following receipt of the proposal, PBG’s Board of Directors formed a special committee to review the adequacy of the proposal. On May 4, 2009, PBG’s Board of Directors rejected the proposal.

As discussed below, PBG and members of its Board of Directors have been named in a number of lawsuits relating to the PepsiCo proposal. It is not presently possible to accurately forecast the outcome or the ultimate cost of these lawsuits. In the event of prolonged proceedings or a determination adverse to the Company or PBG or its directors or officers, the Company

may incur substantial monetary liability and expense, which could have a material adverse effect on our business and financial results.

Since April 20, 2009, seven separate stockholder lawsuits were filed in Delaware Chancery Court against PBG and members of its Board of Directors by various shareholder plaintiffs on behalf of themselves and all others similarly situated (the “Delaware Lawsuits”). The Delaware Lawsuits generally allege that PBG’s Board of Directors breached their fiduciary duties in connection with PepsiCo’s proposal. The Delaware Lawsuits seek declaratory and injunctive relief, as well as an award of plaintiffs’ attorneys’ fees and costs. The Delaware Lawsuits were consolidated on June 5, 2009, and an amended complaint was filed on June 19, 2009. The amended complaint does not contain any additional causes of action.

Since April 20, 2009, three separate stockholder lawsuits were filed in New York Supreme Court against PBG and members of its Board of Directors by various shareholder plaintiffs on behalf of themselves and all others similarly situated (the “New York Lawsuits”). The claims and relief sought under the New York Lawsuits are substantially similar to the Delaware Lawsuits. On June 8, 2009, PBG filed Motions to Dismiss (or, in the alternative, to Stay), asking the Courts to dismiss (or at least stay) the New York Lawsuits because identical claims were first made in Delaware Chancery Court (as described above), and because Delaware is the more appropriate forum for this dispute. The Motions to Dismiss are pending the Courts’ review.

On May 11, 2009, PepsiCo, Inc. and the PBG Board members affiliated with PepsiCo filed a complaint against PBG and the non-PepsiCo affiliated members of its Board of Directors, in Delaware Chancery Court, alleging, among other things, that the named Board of Directors breached their fiduciary duties by rejecting PepsiCo’s unsolicited proposal to purchase all outstanding shares of PBG that it does not already own, and by adopting certain defensive measures in response to the proposal (the “PepsiCo Lawsuit”). The PepsiCo Lawsuit seeks declaratory and injunctive relief, as well as an award of plaintiffs’ attorneys’ fees and costs. PBG’s answer to the PepsiCo Lawsuit is due on August 3, 2009. PepsiCo has informed the Court that it does not seek any expedited action in this matter at this time.

Note 15—Guarantees

PBG has a committed revolving credit facility of $1.2 billion and an uncommitted credit facility of $500 million. Both of these credit facilities are guaranteed by us and will be used to support PBG’s commercial paper program and our working capital requirements. PBG had $~~129~~153 million and $0 million of outstanding commercial paper at ~~March~~June 2113, 2009 and December 27, 2008, respectively.

In March 1999, PBG issued $1 billion of 7seven percent senior notes due 2029, which are guaranteed by us. We also guarantee that to the extent there is available cash, we will distribute pro rata to PBG and PepsiCo sufficient cash such that the aggregate cash distributed to PBG will enable PBG to pay its taxes, share repurchases, dividends and make interest payments for its internal and external debt.

~~Note 16—Subsequent Event~~21

On April 19, 2009, PBG received an unsolicited, non-binding proposal from PepsiCo to acquire all of the outstanding shares of PBG’s common stock not already owned by PepsiCo for $29.50 per share. The tender offer consists of $14.75 in cash plus 0.283 shares of PepsiCo common stock for each share of PBG common stock. PBG’s Board of Directors will evaluate the proposal and respond in due course.

Item 2.

MANAGEMENT’S FINANCIAL REVIEW

Tabular dollars in millions

OUR BUSINESS

Bottling Group, LLC (referred to as “Bottling LLC,” “we,” “our,” “us” and “Company”) is the principal operating subsidiary of The Pepsi Bottling Group, Inc. (“PBG”) and consists of substantially all of the operations and the assets of PBG. We have the exclusive right to manufacture, sell and distribute Pepsi-Cola beverages in all or a portion of the U.S., Mexico, Canada, Spain, Russia, Greece and Turkey.

We operate in one industry, carbonated soft drinks and other ready-to-drink beverages, and all of our segments derive revenue from these products. We manage and report operating results through three reportable segments —– U.S. & Canada, Europe (which includes Spain, Russia, Greece and Turkey) and Mexico. Operationally, the Company is organized along geographic lines with specific ~~regional~~ regional management teams having responsibility for the financial results in each reportable segment.

Management’s Financial Review should be read in conjunction with the unaudited Condensed Consolidated Financial Statements and the accompanying notes and our Annual Report on Form 10-K for the fiscal year ended December 27, 2008, which include additional information about our accounting policies, practices and the transactions that underlie our financial results. The preparation of our Condensed Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires us to make estimates and assumptions that affect the reported amounts in our Condensed Consolidated Financial Statements and the accompanying notes, including various claims and contingencies related to lawsuits, taxes, environmental and other matters arising out of the normal course of business. We apply our best judgment, our knowledge of existing facts and circumstances and actions that we may undertake in the future, in determining the estimates that affect our Condensed Consolidated Financial Statements. We evaluate our estimates on an on-going basis using our historical experience as well as other factors we believe appropriate under the circumstances, such as current economic conditions, and adjust or revise our estimates as circumstances change. As future events and their effect cannot be determined with precision, actual results may differ from these estimates.

OUR CRITICAL ACCOUNTING POLICIES

As discussed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 27, 2008, management believes the following policies, which require the use of estimates, assumptions and the application of judgment, to be the most critical to the portrayal of Bottling LLC’s financial condition and results of operations:

•

Other Intangible Assets, net and Goodwill;

•

Pension and Postretirement Medical Benefit Plans; and

•

Income Taxes.

2122

OUR FINANCIAL RESULTS

ITEMS AFFECTING COMPARABILITY OF OUR FINANCIAL RESULTS

The ~~year~~period-over-~~year~~period comparisons of our financial results are affected by the following ~~items~~ items included in our reported results:

	12 Weeks Ended						24 Weeks Ended
	March			March
	June			June			June			June
Income/(Expense)	2113, 2009			2214, 2008			13, 2009			14, 2008
Operating Income
2008 Restructuring Charges	$	(59	)	$	—		$	(14	)	$	—
2007 Restructuring and Asset Disposal Charges		—			(32	)		—			(5	)
Total Operating Income Impact	$	(59	)	$	(32	)	$	(14	)	$	(5	)
Net Income Attributable to Bottling LLC
2008 Restructuring Charges	$	(59	)	$	—		$	(14	)	$	—
2007 Restructuring and Asset Disposal Charges		—			(32	)		—			(5	)
Total Net Income Attributable to Bottling LLC Impact	$	(5	)	$	(3	)
Canada Tax Audit Settlement		29			—			29			—
Total Net Income Attributable to Bottling LLC Impact	$	20		$	(2	)	$	15		$	(5	)

2009 Items

2008 Restructuring Charges

In the fourth quarter of 2008, we announced a restructuring program to enhance the Company’s operating capabilities in each of our reportable segments. We anticipate the program to be substantially complete by the end of 2009 and the program is expected to result in annual pre-tax savings of approximately $150 million to $160 million. The Company expects to record pre-tax charges of $140 million to $170 million over the course of the restructuring program. These charges are primarily for severance and related benefits, pension and other employee-related costs and other charges, including employee relocation and asset disposal costs. As part of the restructuring program, approximately 3,600 positions will be eliminated including 800 positions in the U.S. & Canada, 600 positions in Europe and 2,200 positions in Mexico.

Since the inception of the program, the Company incurred pre-tax charges of $8897 million. Of Of this amount, we recorded $59 million in the ~~first~~second quarter of 2009, of which $34 million was recorded in our U.S. & Canada segment, $4 million was recorded in our Mexico segment and $1 million was recorded in our Europe segment. For the 24 weeks ended June 13, 2009, we recorded $14 million in pre-tax charges, of which $7 million was recorded in our U.S. & Canada segment, $6 million was recorded in our Mexico segment and $21 million was recorded in our ~~Mexico~~Europe segment.

The Company expects to incur approximately $130 million in pre-tax cash expenditures from these restructuring actions, of which $3552 million was paid since the inception of the program, with the balance expected to occur in 2009 and 2010. During the ~~first~~second quarter of 2009, we paid ~~$22~~ $17 million in pre-tax cash expenditures ~~from~~for these restructuring actions.

For further information about our restructuring charges see Note 12 in the Notes to Condensed Consolidated Financial Statements.

Canada Tax Audit Settlement

During the second quarter of 2009, we reached a settlement with the Canadian tax authorities on an issue related to the 1999-2005 tax years. As a result, we recorded a tax benefit of $29 million which was reflected in income tax expense.

For further information about our tax audit settlement see Note 10 in the Notes to Condensed Consolidated Financial Statements.

2008 Items

2007 Restructuring Charges

In the third quarter of 2007, we announced a restructuring program to realign the Company’s organization to adapt to changes in the marketplace, improve operating efficiencies and enhance the growth potential of the Company’s product portfolio. During ~~the first quarter of~~ 2008, we ~~substantially~~ completed the organizational realignment, which resulted in the elimination of approximately 800 positions. Annual cost savings from this restructuring program are approximately $30 million. Over the course of the program we incurred a pre-tax charge of $29 million. Of this amount, we recorded $2 million in the first quarter of 2008 and $1 million in the second quarter of 2008, primarily relating to relocation expenses in our U.S. & Canada segment.

Asset Disposal Costs

In the fourth quarter of 2007, we adopted a Full Service Vending (“FSV”) Rationalization plan to rationalize our vending asset base in our U.S. & Canada segment by disposing of older underperforming assets and redeploying certain assets to higher return accounts. Our FSV business portfolio consists of accounts where we stock and service vending equipment. This plan, which we completed in the second quarter of 2008, was part of the Company’s broader initiative designed to improve operating income margins of our FSV business. Over the course of the FSV Rationalization plan, we incurred a pre-tax charge of $25 million, the majority of which was non-cash, including costs associated with the removal of these assets from service, disposal costs and redeployment expenses. Of this amount, we incurred a pre-tax charge of $1 million associated with the FSV Rationalization plan in each of the first ~~quarter~~and second quarters of 2008. This charge was recorded in selling, delivery and administrative expenses.

FINANCIAL PERFORMANCE SUMMARY AND WORLDWIDE FINANCIAL HIGHLIGHTS

	12 Weeks Ended							24 Weeks Ended
	March		March		% Change
	June		June		% Change			June		June		% Change
	21, 2009		22, 2008		Better/(Worse)
	13, 2009		14, 2008		Better/(Worse)			13, 2009		14, 2008		Better/(Worse)
Net revenues	$	23,~~507~~274	$	23,~~651~~522		(57	)%	$	5,781	$	6,173		(6	)%
Cost of sales	$	1,~~403~~830	$	1,~~482~~916		5	%	$	3,233	$	3,398		5	%
Gross profit	$	1,~~104~~444	$	1,~~169~~606		(610	)%	$	2,548	$	2,775		(8	)%
Selling, delivery and administrative expenses	$	~~989~~1,134	$	1,~~063~~263		710	%	$	2,123	$	2,326		9	%
Operating income	$	~~115~~310	$	~~106~~343		9(10	)%	$	425	$	449		(5)	%
Net income attributable to Bottling LLC	$	67292	$	98297		(322	)%	$	359	$	395		(9)	%

~~Foreign~~Worldwide ~~currency~~Financial ~~impact~~Highlights —for ~~The~~the ~~impact~~12 ~~of foreign currency translation, driven by weakening foreign functional currencies, reduced worldwide net revenues~~ and ~~gross~~24 ~~profit~~Weeks ~~growth~~Ended ~~by approximately five percentage points. Weakening currencies also reduced growth in cost of sales and selling~~June 13, ~~delivery and administrative expenses by approximately six percentage points. Operating~~2009 ~~income was favorably impacted by a net increase of five percentage points due to foreign currency translation.~~

Foreign Currency Impact — The ~~benefit~~impact ~~from~~of foreign currency translation ~~was~~for ~~offset~~the byquarter areduced the ~~significant~~growth ~~increase~~ in ~~foreign currency~~reported ~~transactional~~net ~~costs~~revenues ~~for~~and ~~our~~gross ~~U.S.~~profit ~~dollar~~by ~~and~~seven ~~euro~~percentage ~~denominated~~points. ~~purchases~~Foreign ~~in Europe and~~currency ~~Mexico.~~translation ~~Negative~~also ~~foreign~~reduced ~~currency~~the ~~transactional~~growth ~~costs~~in ~~increased~~reported cost of sales ~~growth~~and ~~by approximately~~selling, ~~$27 million~~delivery and administrative ~~other non-operating~~ expenses (~~income~~“SD&A”), ~~net~~ by aneight ~~additional~~percentage ~~$9 million,~~points ~~for~~and ~~the~~operating ~~quarter~~income by a net four percentage points.

~~Volume~~The —impact ~~Decrease~~ of ~~five~~foreign ~~percent~~currency ~~was~~translation ~~driven~~for bythe ~~declines in each of our segments due~~ year-to-date ~~the soft~~period ~~economic~~reduced ~~conditions globally, which have negatively impacted~~ the ~~liquid~~growth ~~refreshment beverage~~in ~~category.~~reported ~~Additionally,~~net ~~worldwide~~revenues ~~volume~~and ~~was~~gross ~~negatively~~profit ~~impacted~~ by ~~two~~six percentage points, ~~due~~cost ~~to the shift~~ of ~~the~~sales ~~Easter~~and ~~holiday~~SD&A ~~from~~by ~~the~~seven percentage ~~first~~points ~~quarter~~and inoperating ~~2008~~income toby ~~the~~a ~~second~~net ~~quarter~~two inpercentage ~~2009 (“Easter Shift”)~~points.

~~Net~~Currency ~~revenues~~neutral ~~— Reported net revenues declined five percent driven by a decrease in worldwide volume~~ growth ~~and~~rates exclude the ~~negative~~ impact ~~from~~of foreign currency translation. ~~This decline was~~(discussed ~~partially~~above) ~~offset~~ by atranslating ~~five~~current ~~percentage~~year ~~point~~results ~~increase~~using ~~in net revenue per case on a currency neutral basis driven primarily by rate increases in each of our segments. Reported net revenue per case declined one percent versus the~~ prior year,’s ~~which includes a five percentage point negative impact from~~ foreign ~~currency~~exchange ~~translation~~rates.

~~Cost of sales — Reported cost of sales declined five percent due to foreign currency~~24 translation and lower volume in the quarter. These declines were partially offset by a five percentage point increase in cost of sales per case on a currency neutral basis due to higher raw material costs coupled with the negative impact of foreign currency transactional costs in Europe and Mexico. Reported cost of sales per case was flat versus the prior year, which includes a six percentage point benefit from foreign currency translation.

Gross profit — Reported gross profit declined by six percent driven by volume declines and foreign currency translation. This was partially offset by a five percentage point improvement in gross profit per case on a currency neutral basis where rate gains more than offset higher raw material costs. Reported gross profit per case declined one percent versus the prior year, which includes a five percentage point negative impact from foreign currency translation.

~~Selling,~~Volume ~~delivery~~— ~~and~~Volume ~~administrative~~decreased ~~(“SD&A”)~~by ~~expenses~~four —percent ~~Reported~~in ~~SD&A~~the ~~expenses~~second ~~declined~~quarter ~~by seven~~and five percent for the first 24 weeks of 2009, driven by ~~foreign~~declines ~~currency~~in ~~translation~~each ~~and~~of ~~lower~~our ~~operating~~segments ~~costs~~ due to ~~continued~~the soft economic conditions ~~productivity~~globally, ~~improvements~~which ~~across~~have ~~all~~negatively ~~segments~~impacted ~~coupled~~the ~~with~~liquid refreshment beverage category. In the second quarter, worldwide volume ~~declines~~growth benefited by one percentage point due to the shift of the Easter holiday from the first quarter in 2008 to the second quarter in 2009 (“Easter Shift”).

~~Operating~~Net ~~income~~revenues — Reported ~~operating~~net ~~income~~revenues ~~grew~~declined ~~nine~~seven percent ~~driven~~in ~~primarily~~the bysecond ~~cost~~quarter and six ~~productivity~~percent ~~improvements~~for the first 24 weeks of 2009, ~~strong~~driven ~~pricing~~by ~~actions~~a decrease in worldwide volume growth and the negative ~~positive~~ impact from ~~acquisitions and~~ foreign currency translation. ~~Operating~~This ~~income~~decline ~~growth~~ was ~~reduced~~partially offset by ~~volume~~a ~~declines~~five percentage ~~and~~point increase in net revenue per case on a currency neutral basis for both the quarter and year-to-date period, driven primarily by rate increases in each of our segments. Reported net revenue per case declined three percent for the quarter and two percent for the year-to-date ~~percentage~~period, ~~point~~which includes a negative impact of eight percentage points and seven percentage points from foreign currency translation for the ~~restructuring~~quarter ~~charges~~and ~~discussed~~year-to-date ~~above~~period, respectively.

~~Net~~Cost ~~income~~of ~~attributable~~sales to— ~~Bottling~~Reported ~~LLC~~cost —of ~~Decline~~sales declined five percent for both the second quarter ~~reflects~~and first ~~higher~~24 weeks ~~interest expense~~of on2009, ~~third~~due ~~party~~to ~~loans~~the favorable impact of foreign currency translation and lower volume ~~interest~~in ~~income~~the ~~generated~~quarter. ~~from~~These ~~loans~~declines ~~made~~were topartially ~~PBG~~offset by higher raw material costs coupled with the negative impact of foreign currency transactional ~~losses~~costs relating primarily to our U.S. dollar denominated purchases in ~~2009~~Europe and Mexico. ~~This~~Currency neutral cost of sales per case increased eight percent in the quarter and seven percent for the year-to-date period. Reported cost of sales per case was ~~partially~~flat versus the prior year for both the quarter and the year-to-date ~~offset~~period, bywhich anincludes ~~increase~~a innegative ~~operating~~impact ~~income~~of eight percentage points and ~~lower~~seven ~~income~~percentage ~~tax~~points from ~~expense~~foreign currency translation for the quarter and year-to-date period, respectively.

Gross profit — Reported gross profit declined 10 percent in the second quarter and eight percent for the first 24 weeks of 2009, driven by volume declines and the impact of foreign currency translation. This was partially offset by improvement in gross profit per case on a currency neutral basis as rate gains more than offset higher raw material costs due to the Company’s global pricing strategy. Currency neutral gross profit per case increased one percent in the quarter and three percent in the year-to-date period. Reported gross profit per case declined six percent for the quarter and four percent for the year-to-date period, which includes a negative impact of seven percentage points from foreign currency translation for both the quarter and year-to-date period.

Selling, delivery and administrative expenses — Reported SD&A declined by 10 percent in the second quarter and nine percent for the first 24 weeks of 2009, driven by the favorable benefit of foreign currency translation and volume declines coupled with lower operating costs due to continued productivity improvements across all segments.

Operating income — Reported operating income declined 10 percent in the second quarter and five percent for the first 24 weeks of 2009. Restructuring charges reduced operating income growth by two percent for the quarter and year-to-date period. The remaining decrease in reported operating income for the quarter and the year-to-date period was due to volume declines and the negative impact of foreign currency translation, partially offset by rate increases, cost and productivity improvements and the positive impact from acquisitions.

Net income attributable to Bottling LLC — Net income attributable to Bottling LLC for the second quarter was $292 million, which decreased 2 percent versus the prior year. The decrease for the quarter includes a net after-tax gain of $20 million, resulting from the benefit of the Canada tax audit settlement and restructuring charges. These items contributed seven percentage points to the net income growth rate for the quarter. The remaining nine percentage point decrease for the quarter was driven by a decline in operating income, higher interest expense on third party loans and lower interest income generated from loans made to PBG. This was partially offset by a lower effective tax rate and the benefit from foreign currency transactional gains.

Net income attributable to Bottling LLC for the first 24 weeks of 2009 was $359 million, which decreased nine percent versus the prior year. The decrease for the year-to-date period includes a net after-tax gain of $15 million, resulting from the benefit of the Canada tax audit settlement and restructuring charges.

These items contributed four percent to the net income growth rate for the year-to-date period. The remaining 13 percent decrease for the year was impacted by higher interest expense on third party loans and lower interest income generated from loans made to PBG, partially offset by a lower effective tax rate.

2009 RESULTS OF OPERATIONS

Tables and discussion are presented as compared to the similar periods in the prior year. Growth rates are rounded to the nearest whole percentage.

Volume

	12 Weeks Ended
	March 21, 2009 vs. March 22, 2008
	June 13, 2009 vs. June 14, 2008
				U.S. &
	Worldwide			Canada			Europe			Mexico
Base volume		(65	)%		(52	)%		(1615	)%		(7	)%
Acquisitions		1			21			—			—
Total volume change		(54	)%		(31	)%		(1615	)%		(7	)%


	24 Weeks Ended
	June 13, 2009 vs. June 14, 2008
				U.S. &
	Worldwide			Canada			Europe			Mexico
Base volume		(6	)%		(3	)%		(15	)%		(7	)%
Acquisitions		1			1			—			—

Total volume change		(5	)%		(2	)%		(15	)%		(7	)%

U.S. & Canada

In our U.S. & Canada segment, volume decreased ~~three~~one percent ~~due~~for the quarter and two percent for the year-to-date period, primarily due to the macroeconomic factors negatively impacting the liquid refreshment beverage category. ~~and~~For the ~~Easter Shift.~~quarter, ~~The~~volume ~~Easter~~growth ~~Shift~~benefited ~~contributed~~by two percentage points due to the ~~decline~~Easter ~~for~~holiday ~~the~~shifting ~~quarter. This decline in volume was partially offset by a two percentage point increase~~ from ~~our~~the ~~acquisition~~first ~~of Lane~~quarter ~~Affiliated~~in ~~Companies,~~2008 ~~Inc.~~to ~~(“Lane”) in~~ the ~~fourth~~second quarter ofin ~~2008~~2009. Additionally, ~~coupled with incremental~~ volume from our newly acquired rights to distribute Crush, Rockstar and Muscle Milk in the U.S., ~~which~~ contributed ~~an additional~~ two percentage points of growth for both the quarter and the year-to-date period and volume from our acquisition of Lane Affiliated Companies, Inc. (“Lane”) contributed one percentage point of growth for both the quarter and the year-to-date period.

~~Take~~Our take-home ~~and~~channel ~~cold~~was ~~drink~~flat ~~channels~~for ~~declined~~the byquarter ~~four percent~~ and ~~seven~~decreased two percent, ~~respectively,~~ for the ~~quarter~~year-to-date period. ~~The~~During ~~decline in~~ the ~~take-home channel for the~~ quarter, ~~was driven primarily by our~~ large format stores ~~due~~benefited ~~to the overall slow down in the economy and the negative impact~~ from ~~the Easter~~improving ~~Shift.~~trends ~~Declines~~ in ~~the cold drink channel were driven by~~ our ~~foodservice channel, including~~carbonated ~~restaurants,~~soft ~~travel~~drink ~~and~~(“CSD”) ~~leisure~~portfolio and ~~workplace,~~incremental ~~which~~volume ~~have~~from ~~been particularly impacted by~~ the ~~economic~~ ~~downturn~~Easter ~~in the United States~~Shift.

Our cold drink channel declined seven percent in both the quarter and the year-to-date period. These declines were driven by our foodservice channel, including restaurants, travel and leisure and workplace, which have been particularly impacted by the economic downturn in the United States.

Europe

In our Europe segment, volume declined by 1615 percent for both the quarter and the year-to-date period. Soft volume performance reflected the overall weak macroeconomic environment and category softness throughout Europe, which resulted in double digit declines in Russia, Spain and Turkey.

2426

Mexico

In our Mexico segment, volume decreased seven percent for both the quarter and the year-to-date period, driven by ~~slower economic~~worsening ~~growth~~macroeconomics and category softness, coupled with pricing actions taken by the Company to drive improved margins across its portfolio. This drove ~~single digit~~ declines in ~~our~~each ~~carbonated~~of ~~soft~~our ~~drink~~categories (“including CSD”), ~~and~~ bottled water ~~categories~~ and ~~double digit declines in~~ jug ~~water and single serve packages~~categories.

Net Revenues

	12 Weeks Ended
	March 21, 2009 vs. March 22, 2008
	June 13, 2009 vs. June 14, 2008
				U.S. &
	Worldwide			Canada			Europe			Mexico
2009 Net revenues	$	23,~~507~~274		$	2,~~177~~551		$	~~174~~424		$	~~156~~299
2008 Net revenues	$	23,~~651~~522		$	2,~~207~~536		$	~~236~~592		$	~~208~~394
% Impact of:
Volume impact		(65	)%		(52	)%		(1615	)%		(7	)%
Net price per case impact (rate/mix)		5			4			10			5
Net price impact (rate/mix)		4			3			7			5
Acquisitions		1			1			—			—
Currency translation		(57	)		(21	)		(2021	)		(23	)
Total net revenues change		(57	)%		(1)	%*		(2628)	)%*		(2524)	)%*


*		Does not add due to rounding to the whole percent.


	24 Weeks Ended
	June 13, 2009 vs. June 14, 2008
				U.S. &
	Worldwide			Canada			Europe			Mexico
2009 Net revenues	$	5,781		$	4,728		$	598		$	455
2008 Net revenues	$	6,173		$	4,743		$	828		$	602

% Impact of:
Volume impact		(6	)%		(3	)%		(15	)%		(7	)%
Net price impact (rate/mix)		5			4			8			5
Acquisitions		1			1			—			—
Currency translation		(6	)		(2	)		(21	)		(23	)

Total net revenues change		(6	)%		—	%		(28	)%		(24)	%*


*		Does not add due to rounding to the whole percent.

U.S. & Canada

In our U.S. & Canada segment, net revenues ~~declined~~increased one percent in the quarter ~~driven~~and bywere flat ~~volume~~for ~~declines~~the year-to-date period. Net revenues results for the quarter and ~~currency~~year-to-date ~~translation.~~period ~~These~~reflect improvements ~~decreases~~in ~~were~~rate per case partially offset by avolume ~~four~~declines ~~percent~~and the negative impact of ~~improvement~~foreign incurrency ~~net~~translation. Net revenue per case on a currency neutral basis improved by three percent for the quarter and four percent for the year-to-date period, driven by rate increases taken on the majority of our packages ~~taken~~ to offset rising raw material costs and improve ~~profitability~~ ~~coupled~~profitability. ~~with~~Reported ~~incremental~~net revenue ~~from~~per ~~our~~case ~~prior~~increased two percent for both the quarter and the year-to-date ~~acquisition~~period, ofwhich ~~Lane~~includes a one percentage point and two percentage point negative impact from foreign currency translation for the quarter and the year-to-date period, respectively.

Europe

In our Europe segment, net revenues declined 2628 percent infor the quarter and year-to-date period, due primarily to the negative impact of foreign currency translation and volume declines. Growth in net revenue per case on a currency neutral basis of eight percent for the quarter and nine percent for the year-to-date period was driven primarily by rate actions and disciplined ~~promotional~~ promotional spending. inEurope’s ~~Russia~~reported net revenue per case declined 16 percent for the quarter and 15 percent for the year-to-date period, which includes a 24 percentage point negative impact from foreign currency translation for both the quarter and the year-to-date period.

Mexico

In our Mexico segment, declines in net revenues of 2524 percent infor the quarter and year-to-date period, reflect the negative impact of foreign currency translation and lower volume. Net revenue per case ~~grew five percent~~ on a currency neutral basis grew six percent for the quarter and year-to-date period, primarily due to rate increases ~~taken~~to ondrive ~~our~~margin ~~CSD~~improvement. ~~and~~Mexico’s ~~bottled~~reported net revenue per ~~water~~case ~~categories~~declined 19 percent for both the quarter and the year-to-date ~~drive~~period, ~~margin~~which ~~improvement~~includes a 25 percentage point negative impact from foreign currency translation for both the quarter and the year-to-date period.

Operating Income

	12 Weeks Ended
	March 21, 2009 vs. March 22, 2008
	June 13, 2009 vs. June 14, 2008
				U.S. &
	Worldwide			Canada			Europe			Mexico
2009 Operating income (loss)	$	115		$	142		$	(25	)	$	(2	)
2009 Operating income	$	310		$	274		$	19		$	17
2008 Operating income (loss)	$	106		$	134		$	(31	)	$	3
2008 Operating income	$	343		$	269		$	45		$	29
% Impact of:
Operations		3(6	)%		73	%		(853	)%		(~~147~~8	)%
Currency translation		5(4	)		(2	)		26(4	)		29(17	)
2008 Restructuring charges		(43	)		(2	)		—(1	)		(6215	)
2007 Restructuring and asset disposal charges		21			21			—			—
Acquisitions		31			2			—			—
Total operating income change		9(10)	%*		72	%		17(58	)%*		(~~180~~40	)%


*		Does not add due to rounding to the whole percent.


	24 Weeks Ended
	June 13, 2009 vs. June 14, 2008
				U.S. &
	Worldwide			Canada			Europe			Mexico
2009 Operating income (loss)	$	425		$	416		$	(6	)	$	15
2008 Operating income	$	449		$	403		$	14		$	32

% Impact of:
Operations		(4	)%		4	%		(186	)%		(20	)%
Currency translation		(2	)		(2	)		44			(13	)
2008 Restructuring charges		(3	)		(2	)		(4	)		(19	)
2007 Restructuring and asset disposal charges		1			1			—			—
Acquisitions		2			2			—			—

Total operating income change		(5)	%*		3	%		(146	)%		(52	)%


*		Does not add due to rounding to the whole percent.

U.S. & Canada

In our U.S. & Canada segment, operating income increased ~~seven~~two percent for the quarter~~. Increase~~ inand ~~operating~~three percent ~~income~~ for the ~~quarter was primarily due~~ year-to-date ~~cost~~period, ~~and~~driven ~~productivity improvements,~~by ~~increases~~an improvement in ~~gross~~operating ~~profit~~activities, ~~per~~partially offset ~~case~~by ~~and~~ the ~~positive~~negative impact from ~~our~~foreign ~~acquisition~~currency oftranslation and items affecting comparability ~~Lane~~listed above. ~~These~~Increases ~~increases~~in ~~were~~operating ~~partially~~activities ~~offset~~were driven by ~~lower~~cost ~~income~~and ~~due~~productivity tosavings ~~volume~~and gross ~~declines~~profit ~~and~~per ~~the negative~~case ~~impact~~improvement, ofpartially ~~foreign~~offset ~~currency~~by ~~translation~~volume declines.

~~Reported~~On a currency neutral basis gross profit per case improved ~~two~~one percent for the quarter ~~in our U.S. & Canada~~and ~~segment~~three ~~which includes a two percentage point negative impact from foreign currency translation. The remaining four~~ percent ~~improvement~~for inthe ~~gross~~year-to-date ~~profit~~period ~~per case on a currency neutral basis was~~ driven by growth in net revenue per case, which more than offset higher raw material costs. Reported ~~cost~~gross ofprofit ~~sales~~ per case ~~increased~~declined ~~two~~one percent ~~versus~~for the quarter ~~prior~~and improved one percent for the year-to-date period, which includes a two percentage point negative ~~benefit~~impact from foreign currency translation for both the quarter and the year-to-date period.

SD&A ~~expenses~~ improved three percent for both the quarter inand ~~our~~the ~~U.S.~~year-to-date &period ~~Canada segment~~ due to lower costs resulting from productivity initiatives and volume declines coupled with a ~~three~~two percentage point positive impact from foreign currency. ~~These~~translation, ~~declines were~~ partially offset by ~~rising~~increased costs in connection ~~labor~~with ~~and~~employee ~~benefits~~related ~~and the impact of our prior year acquisition~~benefits.

Europe

In our Europe segment, ~~reported~~ operating income ~~increased~~declines ~~17 percent~~ for the quarter ~~which includes~~and ayear-to-date ~~26 percentage~~period ~~point~~were driven ~~benefit~~primarily ~~from~~by ~~foreign~~decreases ~~currency translation. The remaining eight percent decrease~~ in ~~operating income on a currency neutral basis was due to lower~~ volume, partially offset by ~~improvements~~declines in ~~gross profit per case and cost and productivity improvements~~SD&A.

Reported gross profit per case in Europe declined 1421 percent for the quarter and 19 percent for the year-to-date period, which includes a 22 21 percentage point negative impact from foreign currency translation. ~~The~~for ~~remaining~~both ~~eight~~the ~~percent improvement~~quarter inand ~~gross~~the year-to-date period. Gross profit per case on a currency neutral basis was flat for the quarter and increased two percent for the year-to-date period driven by strong rate increases which offset higher raw material costs. Increases in raw material costs in Europe were primarily due to the negative impact of foreign currency transactional costs resulting from U.S. dollar and Euro denominated purchases in this segment.

SD&A ~~expenses~~ in Europe improved 2528 percent for the quarter and 27 percent for the year-to-date period, which includes a 2021 percentage point benefit from foreign currency translation. ~~The~~for ~~remaining~~both ~~five~~the ~~percentage~~quarter and ~~points~~the ofyear-to-date period. The remaining improvement ~~were~~in SD&A was driven by ~~lower~~ volume ~~and~~declines, ~~cost~~a decrease ~~and~~in ~~productivity~~bad ~~initiatives~~debt ~~throughout~~provision ~~Europe,~~due ~~partially~~to ~~offset~~the byCompany’s ~~higher~~increased focus on credit and collections and ~~operating~~lower costs ~~due~~resulting tofrom ~~the~~productivity ~~increased~~initiatives ~~investment~~throughout ~~in Russia~~Europe.

Mexico

In our Mexico segment, operating income ~~decreased~~declines infor the quarter and year-to-date period were due to decreases in volume ~~declines~~growth, partially offset by improved pricing actions and lower costs resulting from productivity initiatives.

Reported gross profit per case declined 21 percent for both the quarter and the year-to-date period which includes a ~~24 percent~~ negative impact from foreign currency translation. ~~The~~of ~~remaining~~23 percentage ~~three~~points for ~~percent~~the ~~improvement~~quarter inand ~~gross~~24 percentage points for the year-to-date period. Gross profit per case on a currency neutral basis ~~was~~increased ~~due~~two topercent ~~solid~~for ~~revenue~~the quarter and three percent for the year-to-date period, reflecting solid margin management which offset rising raw material costs. ~~due~~Higher toraw material ~~higher~~costs were driven by the negative impact of foreign currency transactional costs ~~relating~~resulting from ~~to our~~ U.S. dollar denominated purchases ~~in Mexico~~.

SD&A ~~expenses~~ improved 2224 percent ~~which~~for the quarter and 23 percent for the year-to-date period which includes a 2523 ~~percent~~percentage point benefit from foreign currency translation for both the quarter and the ayear-to-date ~~two~~period. Restructuring charges increased SD&A by three percentage ~~point~~points ~~negative~~for ~~impact~~the quarter ~~from~~and ~~restructuring~~two ~~charges~~percentage points for the year-to-date period. The remaining decrease in SD&A ~~one~~growth ~~percent~~for ~~increase~~the ~~was~~quarter ~~due~~and year-to-date ~~inflation,~~period ~~partially~~was ~~offset~~driven by lower costs associated with volume declines and reduced operating costs attributable to improved route productivity.

Interest Expense

Interest expense increased $206 million in the second quarter and $26 million on a year-to-date basis versus the prior year, largely due to higher debt levels associated with the issuance of $750 million of senior notes in January 2009 and the pre-funding of our February 2009 $1.3 billion debt maturity.

Interest Income

Interest income decreased $159 million in the second quarter and $24 million on a year-to-date basis versus the prior year, driven primarily by lower effective interest rates on loans made to PBG.

Other Non-operating ~~Expenses (~~Income), net

Other net non-operating ~~expense~~income was $711 million infor the ~~first~~ quarter ofand ~~2009 as compared to~~ $2 4 million offor ~~net non-operating income in~~ the first ~~quarter~~24 weeks of ~~2008. Foreign currency transactional losses in~~ 2009, ~~resulted~~driven primarily ~~from~~by ~~our~~foreign ~~U.S.~~currency ~~dollar~~transactional ~~and~~gains ~~euro~~recorded ~~denominated purchases~~ in ~~Mexico~~the ~~and~~quarter ~~Russia,~~resulting ~~reflecting~~from ~~the~~strengthening ~~impact~~currencies ofin ~~the~~Europe ~~weakening peso~~ and ~~ruble~~Mexico.

Net Income Attributable to Noncontrolling Interests

Net income attributable to noncontrolling interests ~~was~~primarily ~~flat~~reflects ~~versus~~PepsiCo’s 40 percent ownership in the ~~prior~~PR Beverages venture. The $2 million decrease in the second quarter and on a year,-to-date basis was primarily ~~reflecting~~driven ~~PepsiCo’s~~by ~~40 percent~~lower ~~ownership~~income in the PR Beverages venture.

Income Tax Expense

We are a limited liability company, classified as a partnership for U.S. tax purposes and, as such, generally will pay limited U.S. federal, state and local income taxes. Our federal and state distributive shares of income, deductions and credits are allocated to our owners based on their percentage of ownership. However, certain domestic and foreign affiliates pay taxes in their respective jurisdictions and record related deferred income tax assets and liabilities.

Our effective tax rate for the 1224 weeks ended ~~March~~June 2113, 2009 was 5a benefit of 2.17 percent compared with our effective tax rate of 76.35 percent for the 1224 weeks ended ~~March~~June 2214, 2008. The decrease in our 2009 effective tax rate was primarily driven by a settlement with the Canadian tax authorities related to an issue in dispute for 1999-2005 tax years, which resulted in a tax benefit of approximately $29 million. These audit settlements benefited our effective tax rate by approximately 8.3 percentage points. In addition, in 2009, we have certain tax planning strategies that are favorably impacting our tax provision.

LIQUIDITY AND FINANCIAL CONDITION

Cash Flows

1224 Weeks Ended ~~March~~June 2113, 2009 vs. ~~March~~June 2214, 2008

Bottling LLC generated $~~261~~426 million of net cash from operations, an increase of $~~150~~201 million from 2008. The increase in net cash provided by operations was driven primarily by the timing of disbursements and higher interest ~~payments~~ received from the note receivable from PBG, ~~and~~partially ~~the~~offset ~~timing~~by an of$88 million ~~accounts~~pension ~~payable~~contribution ~~disbursements~~made in 2009.

Net cash used for investments was $~~266~~431 million, ana ~~increase~~decrease of $8584 million from 2008. The ~~increase~~decrease in cash used for investments was ~~driven~~due ~~primarily~~to lower capital expenditures, partially offset by a loan ~~made~~ to our Lebedyansky non-controlled affiliate, which was contemplated as part of the initial capitalization of the purchase of Lebedyansky between PepsiCo and us, and anhigher ~~increase in notes receivable from PBG, partially offset~~acquisition ~~by lower capital expenditures~~spending.

Net cash used for financing activities was $~~448~~418 million, an increase of $~~475~~636 million from 2008. This increase in cash used for financing activities reflects the repayment of our $1.3 billion bond and lower proceeds from short-term borrowings, partially offset by the issuance of a $750 million bond.

Liquidity and Capital Resources

Our principal sources of cash include cash from our operating activities and the issuance of debt and bank borrowings. We believe that these cash inflows will be sufficient to fund capital expenditures, benefit plan contributions, acquisitions and working capital requirements for PBG and us for the foreseeable future. Our liquidity remains healthy and management does not expect that it will be materially impacted in the near-future.

The recent and extraordinary disruption in the world credit markets has had a significant adverse impact on a number of financial institutions. At this point in time, the Company’s liquidity has not been materially impacted by the current credit environment and management does not expect that it will be materially impacted in the near-future. Management will continue to closely monitor the Company’s liquidity and the credit markets. However, management cannot predict with any certainty the impact to the Company of any further disruption in the credit environment.

During the first quarter of 2009, we issued $750 million in senior notes, with a coupon rate of 5.125 percent, maturing in 2019. The net proceeds of the offering, together with a portion of the proceeds from the offering of our senior notes issued in the fourth quarter of 2008, were used to repay our senior notes due at their scheduled maturity on February 17, 2009. The next significant scheduled debt maturity is not until 2012.

OnFor ~~March~~the 24 31weeks ended June 13, 2009, we made ~~a contribution of~~ $7088 million of contributions to the U.S. defined benefit pension trust.

Contractual Obligations

As of ~~March~~June 2113, 2009, there have been no material changes outside the normal course of ~~business~~ business in the contractual obligations disclosed in Item 7 to our Annual Report on Form 10-K for the fiscal year ended December 27, 2008, under the caption “Contractual Obligations”.

Off-Balance Sheet Arrangements

For information about our off-balance sheet arrangements see Note 15 in the Notes to Condensed Consolidated Financial Statements.

CAUTIONARY STATEMENTS

Except for the historical information and discussions contained herein, statements contained in this Form 10-Q may constitute forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on currently available competitive, financial and economic data and our operating plans. These statements involve a ~~number~~ number of risks, uncertainties and other factors that could cause actual results to be materially different. Among the events and uncertainties that could adversely affect future periods are:

28 • the outcome of, expenses associated with, or developments concerning, PepsiCo’s unsolicited proposal to purchase all outstanding shares of PBG that it does not already own or any litigation related to the proposal; • PepsiCo’s ability to affect matters concerning us through its equity ownership of PBG, representation on PBG’s Board and approval rights under our Master Bottling Agreement; • material changes in expected levels of bottler incentive payments from PepsiCo; • material changes from expectations in the cost or availability of ingredients, packaging materials, other raw materials or energy including changes resulting from restrictions on our suppliers required by PepsiCo; • limitations on the availability of water or obtaining water rights; • an inability to achieve strategic business plan targets; • 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;

~~Cautionary~~• ~~statements~~unfavorable ~~included~~weather conditions in ~~Management’s~~our ~~Discussion~~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 ~~Analysis~~regulations; • litigation, other claims and negative publicity relating to alleged unhealthy properties or environmental impact of our products; • changes in ~~Item 1A~~laws and regulations governing the manufacture and sale of food and beverages, the environment, transportation, employee safety, labor and government contracts; • changes in accounting standards and taxation requirements (including unfavorable outcomes from audits performed by various tax authorities); • 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 pension plan liability, such as discount rate; • unforeseen social, economic and political changes; • possible recalls of our ~~Annual~~ ~~Report~~products; • interruptions of operations due to labor disagreements; • limitations on ~~Form~~our ~~10-K~~ability ~~for~~to ~~the~~invest ~~fiscal~~in ~~year~~our ~~ended~~business ~~December 27~~as a result of our repayment obligations under our existing indebtedness; • changes in our debt ratings, ~~2008~~an ~~should~~increase bein ~~considered~~financing ~~when evaluating~~costs or limitations on our ~~trends~~ability to obtain credit; and ~~future~~• ~~results~~material changes in expected interest and currency exchange rates.

For additional information on these and other risks and uncertainties that could cause our actual results to materially differ from those expressed or implied in our forward-looking statements, see the “Risk Factors” section of this Report and our Annual Report on Form 10-K for the fiscal year ended December 27, 2008. Forward-looking statements speak only as of the date they were made, and we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Item 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes to our market risks as disclosed in Item 7 to our Annual Report on Form 10-K for the year ended December 27, 2008.

Item 4.

CONTROLS AND PROCEDURES

Bottling LLC’s management carried out an evaluation, as required by Rule 13a-15(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), with the participation of our Principal Executive Officer and our Principal Financial Officer, of the effectiveness of our disclosure controls and procedures, as of the end of our last fiscal quarter. Based upon this evaluation, the Principal Executive Officer and the Principal Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report on Form 10-Q, such that the information relating to Bottling LLC and its consolidated subsidiaries required to be disclosed in our Exchange Act reports filed with the SEC (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to Bottling LLC’s management, including our Principal Executive Officer and Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

~~In addition, Bottling LLC’s management carried out an evaluation, as required by Rule~~32 13a-15(d) of the Exchange Act, with the participation of our Principal Executive Officer and our Principal Financial Officer, of changes in Bottling LLC’s internal control over financial reporting. Based on this evaluation, the Principal Executive Officer and the Principal Financial Officer concluded that there were no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

In addition, Bottling LLC’s management carried out an evaluation, as required by Rule 13a-15(d) of the Exchange Act, with the participation of our Principal Executive Officer and our Principal Financial Officer, of changes in Bottling LLC’s internal control over financial reporting. Based on this evaluation, the Principal Executive Officer and the Principal Financial Officer concluded that there were no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

We are party to a variety of legal proceedings arising in the normal course of business. ~~While~~ While the results of these proceedings cannot be predicted with certainty, management believes that the final outcome of these proceedings will not have a material adverse effect on our Consolidated Financial Statements, results of operations or cash flows.

Item 1A. Risk Factors

There have been no material changes with respect to the risk factors disclosed in our Annual ~~Report~~ Report on Form 10-K for the fiscal year ended December 27, 2008. with the exception of the following:

Uncertainty resulting from PepsiCo’s unsolicited proposal to purchase all outstanding shares of PBG that it does not already own and related matters could adversely affect our business and financial results.

On April 19, 2009, PBG received an unsolicited proposal from PepsiCo to purchase all outstanding shares of common stock of PBG that PepsiCo does not already own. On May 4, 2009, PBG’s Board of Directors rejected the proposal. Until the status of this proposal is resolved, there may be continuing uncertainty for our employees, customers and other business partners. This continuing uncertainty could negatively impact our business. Additionally, PBG and members of its Board of Directors have been named in a number of lawsuits relating to the PepsiCo proposal as more fully described in Note 14 — “Contingencies” to our Condensed Consolidated Financial Statements. These lawsuits or any future lawsuits may be time consuming and expensive. These matters, alone or in combination, could have a material adverse effect on our business and financial results.

Item 6.

EXHIBITS


EXHIBIT NO.		DESCRIPTION OF EXHIBIT
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

3034

SIGNATURES

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

	BOTTLING GROUP, LLC (Registrant)
Date: April 27, 2009	/s/ Thomas M. Lardieri
Date: July 14, 2009	/s/ Thomas M. Lardieri
	Thomas M. Lardieri
	Principal Accounting Officer and Managing Director
Date: April 27, 2009	/s/ Alfred H. Drewes
Date: July 14, 2009	/s/ Alfred H. Drewes
	Alfred H. Drewes
	Principal Financial Officer

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