UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K

Form 10-K


x		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the fiscal year ended January 2, 2010.
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the transition period from to .

x		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the fiscal year ended January 3, 2009.
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 001-15019

PEPSIAMERICAS, INC.

(Exact name of registrant as specified in its charter)


Delaware (State or other jurisdiction of incorporation or organization)		13-6167838 (I.R.S. Employer Identification Number)

4000 RBC Plaza, 60 South Sixth Street Minneapolis, Minnesota (Address of principal executive offices)		55402 (Zip Code)

(612) 661-4000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class		Name of Each Exchange on Which Registered

Common Stock, $0.01 par value		Each class is registered on:
Preferred Stock, $0.01 par value		New York Stock Exchange
Preferred Share Purchase Rights

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ

Indicate by check mark whether the registrant: (1) has filed ~~filed~~ all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding ~~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 ~~disclosure~~any, every ofInteractive ~~delinquent~~Data ~~filers~~File required to be submitted and posted pursuant to ~~Item~~Rule 405 of Regulation S-KT is(§ 232.405 ~~not~~of ~~contained~~this ~~herein,~~chapter) ~~and~~during ~~will not be contained, to~~ the ~~best~~preceding of12 months ~~registrant’s~~(or ~~knowledge,~~for insuch ~~definitive~~shorter ~~proxy~~period ~~or information~~that ~~statements~~the ~~incorporated by reference in~~registrant ~~Part III~~was ofrequired ~~this Form 10-K or~~to ~~any~~submit ~~amendment~~and topost ~~this~~such ~~Form 10-K~~files). Yes o No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. 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 þ	Accelerated filer o	Non-accelerated filer o	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

As of ~~June~~July 284, ~~2008~~2009, the aggregate market value of the registrant’s common stock held by non-affiliates (assuming for the sole purpose of this calculation, that all directors and officers of the registrant are “affiliates”) was $1,~~152~~512.47 million (based on the closing sale price of the registrant’s common stock as reported on the New York Stock Exchange). The number of shares of common stock outstanding at that date was ~~127~~124,~~270~~512,~~334~~095 shares.

The number of shares of the registrant’s common stock outstanding as of February 2716, ~~2009~~2010 was ~~125~~124,~~519~~866,~~755~~059.

DOCUMENTS INCORPORATED BY REFERENCE None

~~Certain information required by Part~~PEPSIAMERICAS, INC. FORM ~~III~~10-K ANNUAL ~~of this document~~REPORT isFOR ~~incorporated~~THE byFISCAL ~~reference~~YEAR toENDED ~~specified~~JANUARY ~~portions~~2, ~~of the~~2010 ~~registrant’s definitive proxy statement for the annual~~ ~~meeting~~TABLE ofOF ~~shareholders to be held May 7, 2009.~~CONTENTS

PEPSIAMERICAS, INC.


		Page

PART I
Item 1.	Business		3
Item 1A.	Risk Factors		15
Item 1B.	Unresolved Staff Comments		19
Item 2.	Properties		19
Item 3.	Legal Proceedings		20
Item 4.	Submission of Matters to a Vote of Security Holders		20

PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		21
Item 6.	Selected Financial Data		24
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		27
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk		50
Item 8.	Financial Statements and Supplementary Data		52
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		52
Item 9A.	Controls and Procedures		53
Item 9B.	Other Information		55

PART III
Item 10.	Directors, Executive Officers and Corporate Governance		55
Item 11.	Executive Compensation		59
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		84
Item 13.	Certain Relationships and Related Transactions, and Director Independence		86
Item 14.	Principal Accounting Fees and Services		91

PART IV
Item 15.	Exhibits and Financial Statement Schedules		92
SIGNATURES			93
INDEX TO FINANCIAL INFORMATION			F-1
EXHIBIT INDEX			E-1
EX-4.7
EX-4.8
EX-10.3
EX-10.4
EX-12
EX-21
EX-24
EX-31.1
EX-31.2
EX-32.1
EX-32.2

FORM 10-K ANNUAL REPORT

FOR THE FISCAL YEAR ENDED JANUARY 3, 2009

TABLE OF CONTENTS

		Page
PART I
Item 1.	Business		3
Item 1A.	Risk Factors		13
Item 1B.	Unresolved Staff Comments		16
Item 2.	Properties		16
Item 3.	Legal Proceedings		17
Item 4.	Submission of Matters to a Vote of Security Holders		17
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		18
Item 6.	Selected Financial Data		21
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		24
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk		47
Item 8.	Financial Statements and Supplementary Data		48
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		48
Item 9A.	Controls and Procedures		49
Item 9B.	Other Information		51
PART III
Item 10.	Directors, Executive Officers and Corporate Governance		51
Item 11.	Executive Compensation		51
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		51
Item 13.	Certain Relationships and Related Transactions, and Director Independence		51
Item 14.	Principal Accountant Fees and Services		51
PART IV
Item 15.	Exhibits and Financial Statement Schedules		51
SIGNATURES			52
INDEX TO FINANCIAL INFORMATION			F-1
EXHIBIT INDEX			E-1
EX-10.2
EX-10.26
EX-10.30
EX-12
EX-21
EX-23
EX-24
EX-31.1
EX-31.2
EX-32.1
EX-32.2

PART I


Item 1.	Business.

General

On November 30, 2000, Whitman Corporation merged with the former PepsiAmericas, Inc. ~~(the “former PepsiAmericas”)~~, and in January 2001, the combined entity changed its name to PepsiAmericas, Inc. (referred to as ~~“PepsiAmericas,”~~ “wePepsiAmericas,” “~~our~~PAS”, ~~and~~ “uswe,”~~). We~~ ~~manufacture, distribute and market a broad portfolio of beverage products in the United States (~~“~~U.S.~~our”), ~~Central~~ and ~~Eastern~~ ~~Europe (~~“~~CEE~~us”) ~~and the Caribbean, and have expanded our distribution to include snack foods in certain markets~~.

We ~~sell~~have entered into a ~~variety~~merger ofagreement ~~brands~~with ~~that~~PepsiCo, weInc. (“PepsiCo”) ~~bottle~~and ~~under~~Pepsi-Cola ~~licenses~~Metropolitan ~~from~~Bottling ~~PepsiCo~~Company, Inc., a wholly owned subsidiary of PepsiCo (“~~PepsiCo~~Metro”), ordated ~~PepsiCo~~August 3, ~~joint ventures~~2009, pursuant to which ~~accounted~~our ~~for~~company ~~approximately~~will ~~80 percent~~merge ofwith ~~our~~and ~~total~~into Metro, with Metro ~~net~~continuing ~~sales~~as inthe ~~fiscal~~surviving ~~year~~company ~~2008~~and a wholly owned subsidiary of PepsiCo. WeUnder ~~account~~the ~~for~~terms ~~approximately~~of the merger agreement, ~~19 percent~~PepsiCo ofwill acquire all ~~PepsiCo~~outstanding ~~beverage~~shares ~~products~~of ~~sold~~PepsiAmericas common instock it does not already own for the price of $28.50 in Ucash or 0.S.5022 Inshares ~~some~~of ~~territories,~~PepsiCo wecommon ~~manufacture~~stock, ~~package,~~subject ~~sell and~~to ~~distribute~~proration ~~products~~provisions ~~under~~which ~~brands~~provide ~~licensed~~that byan ~~companies~~aggregate 50 percent ~~other~~of the outstanding PepsiAmericas common stock ~~than~~will be converted into the right to receive common stock of PepsiCo, and inan ~~some~~aggregate ~~territories~~50 percent weof ~~distribute~~the ~~our~~outstanding PepsiAmericas ~~own~~common stock will be converted into the right to ~~brands,~~receive ~~such~~cash. asWe ~~Sandora~~hope to close the merger by the end of February 2010, ~~Sadochok~~subject to regulatory approval and ~~Toma~~the satisfaction or waiver of other customary closing conditions.

~~Our~~We ~~distribution channels for the retail sale of our products include supermarkets~~manufacture, ~~supercenters, club stores, mass merchandisers, convenience stores, gas stations, small grocery stores, dollar stores and drug stores. We also~~ distribute ~~our products through various other channels, including restaurants~~ and ~~cafeterias,~~market ~~vending~~a ~~machines~~broad ~~and~~portfolio ~~other formats that provide~~of ~~for~~beverage ~~immediate consumption of our~~ products. Inin ~~fiscal~~the ~~year~~United ~~2008, our~~States ~~largest~~(“U.S.”) ~~distribution channels were supercenters~~ and ~~supermarkets,~~Central and ~~our~~Eastern ~~fastest~~Europe ~~growing~~(“CEE”), ~~channels~~and ~~were drug stores~~distribute ~~and~~snack ~~dollar~~foods ~~stores~~in certain markets.

In the first six months of 2009, we manufactured and distributed beverage products in the Caribbean, including Puerto Rico, Jamaica and Trinidad and Tobago, with distribution rights in the Bahamas and Barbados. On July 3, 2009, we formed a strategic joint venture with The Central America Beverage Corporation (“CABCORP”) to combine our Caribbean operations, excluding the Bahamas, with CABCORP’s Central American operations, including Guatemala, Honduras, El Salvador and Nicaragua. We own an 18 percent interest in the CABCORP joint venture.

We sell a variety of brands that we bottle under licenses from PepsiCo or PepsiCo joint ventures, which accounted for approximately 83 percent of our total net sales in fiscal year 2009. We account for approximately 19 percent of all PepsiCo beverage products sold by bottlers in the U.S. In some territories, we manufacture, package, sell and distribute products under brands licensed by companies other than PepsiCo, and in some territories we distribute our own brands, such as Sandora, Sadochok and Toma.

Our distribution channels for the retail sale of our products include supermarkets, supercenters, club stores, mass merchandisers, convenience stores, gas stations, small grocery stores, dollar stores and drug stores. We also distribute our products through various other channels, including restaurants and cafeterias, vending machines and other formats that provide for immediate consumption of our products. In fiscal year 2009, our largest distribution channels were supercenters and supermarkets.

We deliver our products through these channels primarily using a direct store delivery system. In our territories, we are responsible for selling products, providing timely service to our existing customers, and identifying and obtaining new customers. We are also responsible for local advertising and marketing, as well as executing national and regional selling programs created by brand owners in our territories. The bottling business is capital intensive. Manufacturing operations require specialized high-speed equipment, and distribution requires investment in trucks and warehouse facilities as well as extensive placement of fountain equipment, cold drink vending machines and coolers.

Our annual, quarterly and current reports, and all amendments to those reports, are included on our website at www.pepsiamericas.com, and are made available, free of charge, as soon as reasonably practicable after such material is electronically filed with, or furnished to, the Securities and Exchange Commission. Our corporate governance guidelines, code of conduct, code of ethics and key committee charters are available on our website and in print upon written request to PepsiAmericas, Inc., 4000 RBC Plaza, 60 South Sixth Street, Minneapolis, Minnesota 55402, Attention: Investor Relations.

Business Segments

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 and Note 21 to the Consolidated Financial Statements for additional information regarding business and operating results of our geographic segments. See “Risk Factors” in Item 1A for additional information regarding specific risks in our international operations.

Relationship with PepsiCo

PepsiCo beneficially owned approximately 43 percent of PepsiAmericas’ outstanding common stock as of the end of fiscal year 2008.

While we manage all phases of our operations, including pricing of our products, PepsiAmericas and PepsiCo exchange production, marketing and distribution information, which benefits both companies’ respective efforts to lower costs, improve quality and productivity and increase product sales. We have a significant ongoing relationship with PepsiCo and have entered into a number of significant transactions and

~~agreements with PepsiCo. We expect to enter into additional~~Business ~~transactions and agreements with PepsiCo in the future.~~Segments

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 and Note 20 to the Consolidated Financial Statements for additional information regarding business and operating results of our geographic segments. See “Risk Factors” in Item 1A for additional information regarding specific risks in our international operations.

Relationship with PepsiCo

PepsiCo beneficially owned approximately 43 percent of PepsiAmericas’ outstanding common stock as of the end of fiscal year 2009. We have entered into a merger agreement with PepsiCo and Metro, dated August 3, 2009, pursuant to which our company will merge with and into Metro, with Metro continuing as the surviving company and a wholly owned subsidiary of PepsiCo. Closing of the merger is subject to regulatory approval and the satisfaction or waiver of other customary closing conditions.

While we manage all phases of our operations, including pricing of our products, PepsiAmericas and PepsiCo exchange production, marketing and distribution information, which benefits both companies’ respective efforts to lower costs, improve quality and productivity and increase product sales. We have entered into a number of significant transactions and agreements with PepsiCo.

We purchase concentrates from PepsiCo, pay royalties related to Aquafina products, and manufacture, package, sell and distribute cola and non-cola beverages under various bottling agreements with PepsiCo. These agreements give us the right to manufacture, package, sell and distribute beverage products of PepsiCo in both bottles and cans, as well as fountain syrup in specified territories. These agreements provide PepsiCo with the ability to set prices of concentrates, as well as the terms of payment and other terms and conditions under which we purchase such concentrates. See “Franchise Agreements” for discussion of significant agreements. We also purchase finished beverage and snack food products from PepsiCo, as well as products from certain affiliates of PepsiCo.

Other significant transactions and agreements with PepsiCo include arrangements for marketing, promotional and advertising support; manufacturing services related to PepsiCo’s national account customers; procurement of raw materials; and the acquisition of Sandora LLC (~~see~~“Sandora”) (see “Related Party Transactions” in Item 7 and Note 2221 to the Consolidated Financial Statements for further discussion).

Products and Packaging

Our portfolio of beverage products includes some of the best-recognized trademarks in the world. Our three largest brands in terms of volume are Pepsi, Mountain Dew and Diet Pepsi. While the majority of our volume is derived from brands licensed from PepsiCo and PepsiCo joint ventures, we also sell and distribute brands licensed from others, including Dr Pepper, ~~7UP~~Crush and ~~Crush~~ROCKSTAR, as well as some of our own brands. Our top five beverage brands in fiscal year ~~2008~~2009 based on volume by geographic segment are listed below:

U.S.	CEE	Caribbean
Pepsi	Pepsi	Pepsi
Mountain Dew	Sadochok	7UP
Diet Pepsi	Sandora	Desnoes and Geddes
Aquafina	Lipton Ice Tea	Diet Pepsi
Diet Mountain Dew	Toma Water	Tropicana


U.S.		CEE

Pepsi		Pepsi
Mountain Dew		Sadochok
Diet Pepsi		Sandora
Aquafina		Lipton Ice Tea
Diet Mountain Dew		Toma Water

In addition to the beverage products described above, we distribute snack food products in ~~Trinidad and Tobago,~~ the Czech Republic, ~~Hungary~~ and Ukraine pursuant to a distribution agreement with Frito-Lay, Inc., a subsidiary of PepsiCo.

Our beverages are available in different package types, including but not limited to, aluminum cans, glass and polyethylene terephthalate (“PET”) bottles, paperboard cartons and bag-in-box packages for fountain use. The bottle and can packages are available in both single-serve and multi-pack offerings.

Territories

We serve a significant portion of 19 states throughout the central region of the U.S. Internationally, we serve Central and Eastern European and Caribbean markets, including Ukraine, Poland, Romania, Hungary, the Czech Republic, Slovakia, Puerto Rico, Jamaica and Trinidad and Tobago. We have distribution rights and distribute in Moldova, Estonia, Latvia, Lithuania, the Bahamas and Barbados. We have a 20 percent equity interest in a joint venture that owns Agrima JSC (“Agrima”), which produces, sells and distributes PepsiCo products and other beverages in Bulgaria. We serve areas with a total population of more than 200 million people in these markets. In addition, through our joint venture investment in Sandora LLC (“Sandora”), we sell Sandora-branded products to third-party distributors in Belarus, Azerbaijan, Russia and other countries in Eastern Europe and Central Asia. We also distribute Frito-Lay and Lipton products in Ukraine. In fiscal year 2008, we derived 69 percent of our net sales from U.S. operations and 31 percent of our net sales from international operations (see Note 21 to the Consolidated Financial Statements for further discussion).

Territories

We serve a significant portion of 19 states throughout the central region of the U.S. Internationally, we serve Central and Eastern European markets, including Ukraine, Poland, Romania, Hungary, the Czech Republic and Slovakia. We have distribution rights and distribute in Moldova, Estonia, Latvia and Lithuania. We have a 20 percent equity interest in a joint venture that owns Agrima JSC (“Agrima”), which produces, sells and distributes PepsiCo products and other beverages in Bulgaria. We have an 18 percent equity interest in a joint venture with CABCORP, which produces, sells and distributes PepsiCo products and other beverages in the Caribbean and Central America. We serve areas with a total population of more than 240 million people in these markets. In addition, through our joint venture investment in Sandora, we sell Sandora-branded products to third-party distributors in Belarus, Azerbaijan, Russia and other countries in Eastern Europe and Central Asia. In fiscal year 2009, we derived 77 percent of our net sales from U.S. operations and 23 percent of our net sales from international operations (see Note 20 to the Consolidated Financial Statements for further discussion).

Sales, Marketing and Distribution

Our sales and marketing approach varies by region and channel to respond to unique local competitive environments. In the U.S., channels with larger stores can accommodate a number of beverage suppliers and, therefore, marketing efforts tend to focus on increasing the amount of shelf space and the number of displays in any given outlet. In locations where our products are purchased for immediate consumption, marketing efforts are aimed, not only at securing the account, but also on providing equipment that facilitates the sale of cold beverages, such as vending machines, coolers and fountain equipment.

Package mix is an important consideration in the development of our marketing plans. Although some packages are more expensive to produce and distribute, in certain channels those packages may have higher average selling prices. For example, a packaged product that is sold cold for immediate consumption generally has better margins than a product that is sold to take home. This cold drink channel includes vending machines and coolers. We own a majority of the vending machines used to dispense our products. We refurbish a majority of our existing cold drink equipment in our refurbishment ~~centers~~center in the U.S. ~~and~~The ~~Puerto Rico for those respective markets. The~~ refurbishment of CEE equipment is performed by third-party vendors.

In the U.S., we distribute directly to a majority of customers in our licensed territories through a direct store distribution system. Our sales force is key to our selling efforts as it continually interacts with our customers to promote and sell our products. We operate a call center, Pepsi Connect, in Fargo, North Dakota, to enable us to provide the level of service our customers require in a manner that is cost effective. We utilize Next Generation, a pre-sell system, that allows sales managers to call accounts in advance to determine how much product and promotional material to deliver. ~~We have continued to address internal capabilities and efficiencies throughout our organization.~~ In fiscal year 2007, we realigned our organization in the U.S. from a sales organization based on geography to one built around customer channels. This ~~new~~ structure enables us to dedicate more resources and sales support to channels and customers that are growing and helps us to align more directly with the way our customers do business. We also have ongoing supply chain initiatives, such as Customer ~~customer~~Optimization ~~optimization~~ to the ~~third~~ ~~power~~Third Power, or CO3, that streamline processes and allow us to quickly adapt to changing markets.

In the U.S., the direct store distribution system is used for all packaged goods and certain fountain accounts. We have the exclusive right to sell and deliver fountain syrup to local customers in our territories. We have a number of sales people who are responsible for calling on prospective fountain accounts, developing relationships, selling products and interacting with customers on an ongoing basis. We also manufacture and distribute fountain products and provide fountain equipment service to PepsiCo customers in certain of our territories in accordance with various agreements with PepsiCo.

In our international markets, we use both direct store distribution systems and third-party distributors. In these less developed markets, small retail outlets represent a large percentage of the market. However, with the emergence of larger, more sophisticated retailers in CEE, the percentage of total soft drinks sold to supermarkets and other larger accounts is increasing. In order to optimize the infrastructure in CEE ~~and the Caribbean~~, we ~~use an alternative sales and distribution~~ ~~strategy~~use ~~in which third-party distributors are utilized in certain locations in~~ an ~~effort to reduce delivery costs and~~ ~~expand our points of distribution.~~

Franchise Agreements

We conduct our business primarily under franchise agreements with PepsiCo. These agreements give us the exclusive right in specified territories to manufacture, package, sell and distribute PepsiCo beverages, and to use the related PepsiCo tradenames and trademarks. These agreements require us, among other things, to purchase concentrates for the beverages solely from PepsiCo, at prices established by PepsiCo, to use only PepsiCo authorized containers, packages and labeling, and to diligently promote the sale and distribution of PepsiCo beverages. We also have similar agreements with other brand owners such as Dr Pepper Snapple Group, Inc.

~~outside~~alternative ~~the~~sales ~~U.S. In addition, we have similar arrangements with other companies whose brands we produce~~ and ~~distribute. Generally,~~distribution ~~the~~strategy ~~franchise agreements exist~~ in ~~perpetuity~~which ~~and~~third-party ~~contain~~distributors ~~operating~~are ~~and~~utilized ~~marketing~~in ~~commitments~~certain ~~and~~locations ~~conditions~~in ~~for termination.~~an ~~Also~~effort ~~set forth below is a summary of our Master Fountain Syrup Agreement with PepsiCo, pursuant~~ to ~~which we~~ ~~manufacture,~~reduce ~~sell~~delivery costs and ~~distribute~~expand ~~fountain~~our ~~syrup~~points ~~for~~of ~~PepsiCo beverages~~distribution.

Franchise Agreements

Set forth below is a summary of our Master Bottling Agreement with PepsiCo, pursuant to which we manufacture, package, sell and distribute cola and non-cola beverages in the U.S. and in certain countries outside the U.S. In addition, we have similar arrangements with other companies whose brands we produce and distribute. Generally, the franchise agreements exist in perpetuity and contain operating and marketing commitments and conditions for termination. Also set forth below is a summary of our Master Fountain Syrup Agreement with PepsiCo, pursuant to which we manufacture, sell and distribute fountain syrup for PepsiCo beverages.

Master Bottling Agreement. The Master Bottling Agreement (the “Bottling Agreement”) under which we manufacture, package, sell and distribute cola and non-cola beverages bearing the Pepsi-Cola and Pepsi trademarks was entered into in November 2000. The Bottling Agreement gives us the exclusive and perpetual right to distribute cola beverages for sale in specified territories in authorized containers, with the exception of Romania. In Romania, our agreement has certain performance measures that, if exceeded, enable the agreement to automatically renew. The Bottling Agreement provides that we will purchase our entire requirements of concentrates for cola beverages from PepsiCo at prices, and on terms and conditions, determined from time to time by PepsiCo. PepsiCo has no rights under the Bottling Agreement with respect to the prices at which we sell our products. PepsiCo may determine from time to time what types of containers we are authorized to use.

Under the Bottling Agreement, we are obligated to:


	(1)	maintain plants, equipment, staff and facilities capable of manufacturing, packaging and distributing the beverages in the authorized containers, and in compliance with all requirements in sufficient quantities, to meet the demand of the territories;

	(2)	make necessary adaptations to equipment to permit the successful introduction and delivery of products in sufficient quantities;

	(3)	undertake adequate quality control measures prescribed by PepsiCo and allow PepsiCo representatives to inspect all equipment and facilities to ensure compliance;

	(4)	vigorously advance the sale of the beverages throughout the territories;

	(5)	increase and fully meet the demand for the cola beverages in our territories using all approved means and spend such funds on advertising and other forms of marketing beverages as may be reasonably required to meet the objective; and

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

The Bottling Agreement requires that we meet with PepsiCo on an annual basis to discuss the business plan for the following three years. At these meetings, we are obligated to present the plans necessary to perform the duties required under the Bottling Agreement. These include marketing, management, advertising and financial plans.

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

PepsiCo can terminate the Bottling Agreement if any of the following occur:

	(1)	we become insolvent, file for bankruptcy or adopt a plan of dissolution or liquidation;
	(2)	any person or group of persons, without PepsiCo’s consent, acquires the right of beneficial ownership of more than 15 percent of any class of voting securities of PepsiAmericas, and if that person or group of persons does not terminate that ownership within 30 days;

	(3)	any disposition of any voting securities of one of our bottling subsidiaries or substantially all of our bottling assets without PepsiCo’s consent;
	(4)	we do not make timely payments for concentrate purchases;
	(5)	we fail to meet quality control standards on products, equipment and facilities; or
	(6)	we fail to present or carry out approved plans in all material respects and do not rectify the situation within 120 days.

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

PepsiCo can terminate the Bottling Agreement if any of the following occur:


	(1)	we become insolvent, file for bankruptcy or adopt a plan of dissolution or liquidation;

	(2)	any person or group of persons, without PepsiCo’s consent, acquires the right of beneficial ownership of more than 15 percent of any class of voting securities of PepsiAmericas, and if that person or group of persons does not terminate that ownership within 30 days;

	(3)	any disposition of any voting securities of one of our bottling subsidiaries or substantially all of our bottling assets without PepsiCo’s consent;

	(4)	we do not make timely payments for concentrate purchases;

	(5)	we fail to meet quality control standards on products, equipment and facilities; or

	(6)	we fail to present or carry out approved plans in all material respects and do not rectify the situation within 120 days.

We are prohibited from assigning, transferring or pledging the Bottling Agreement without PepsiCo’s prior consent.

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

The Syrup Agreement contains provisions that are similar to those contained in the Bottling Agreement with respect to pricing, territorial restrictions with respect to local customers and national customers electing direct store delivery only, planning, quality control, transfer restrictions and related matters. The Syrup Agreement, which we entered into in November 2000, had an initial term of five years and was automatically renewed for an additional five-year period in November 2005 on the same terms and conditions. The Syrup Agreement is automatically renewable for additional five-year periods unless PepsiCo terminates it for cause. PepsiCo has the right to terminate the Syrup Agreement without cause at any time upon 24 months’ notice. If PepsiCo terminates the Syrup Agreement without cause, PepsiCo is required to pay us the fair market value of our rights thereunder. The Syrup Agreement will terminate if PepsiCo terminates the Bottling Agreement.

Advertising

We obtain the benefits of national advertising campaigns conducted by PepsiCo and the other beverage companies whose products we sell. We supplement PepsiCo’s national ad campaigns by purchasing advertising in our local markets, including the use of television, radio, print and billboards. We also make extensive use of in-store, point-of-sale displays to reinforce national and local advertising and to stimulate demand.

Raw Materials and Manufacturing

Expenditures for concentrates constitute our largest individual raw material cost. We buy various soft drink concentrates from PepsiCo and other soft drink companies and mix them with other ingredients in our plants, including water, carbon dioxide and sweeteners. Artificial sweeteners are included in the concentrates we purchase for diet soft drinks. Additionally, we buy juice concentrates for our Sandora, Sadochok and Toma juice brands.

In addition to concentrates, we purchase sweeteners, glass and PET bottles, aluminum cans, closures, paperboard cartons, bag-in-box packages, syrup containers, other packaging materials and carbon dioxide. We purchase raw materials and supplies, other than concentrates, from multiple suppliers. PepsiCo acts as our agent for the purchase of several such raw materials (see “Related Party Transactions” in Item 7 and Note 22 to the Consolidated Financial Statements for further discussion of PepsiCo’s procurement services).

A portion of our contractual cost of cans, PET bottles and sweeteners is subject to price fluctuations based on commodity price changes in aluminum, PET resin, corn and sugar. We may enter into firm price commitments for future purchases of commodities that enable us to establish a fixed purchase price within a defined time period. We may also periodically use derivative financial instruments to hedge the price risk associated with anticipated purchases of commodities.

Raw Materials and Manufacturing

In addition to concentrates, we purchase sweeteners, glass and PET bottles, aluminum cans, closures, paperboard cartons, bag-in-box packages, syrup containers, other packaging materials and carbon dioxide. We purchase raw materials and supplies, other than concentrates, from multiple suppliers. PepsiCo acts as our agent for the purchase of several such raw materials (see “Related Party Transactions” in Item 7 and Note 21 to the Consolidated Financial Statements for further discussion of PepsiCo’s procurement services).

A portion of our contractual cost of cans, PET bottles and sweeteners is subject to price fluctuations based on commodity price changes in aluminum, PET resin, corn and sugar. We may enter into firm price commitments for future purchases of commodities that enable us to establish a fixed purchase price within a defined time period. We may also use derivative financial instruments to hedge the price risk associated with anticipated purchases of certain raw materials and the underlying commodities associated with them.

The inability of suppliers to deliver concentrates or other products to us could adversely affect operating results. None of the raw materials or supplies in use is currently in short supply, although factors outside of our control could adversely impact the future availability of these supplies.

Seasonality

Sales of our products are seasonal, with the second and third quarters generating higher net sales than the first and fourth quarters. Approximately 54 percent of our net sales in fiscal year ~~2008~~2009 were generated during the second and third quarters. Net sales in our CEE operations tend to be more seasonal and sensitive to weather conditions than our U.S. ~~and Caribbean~~ operations.

Competition

The carbonated soft drink and the non-carbonated beverage markets are highly competitive. Our principal competitors are bottlers who produce, package, sell and distribute Coca-Cola products. Additionally, in both the carbonated soft drink and non-carbonated beverage markets, we also compete with bottlers and distributors of nationally advertised and marketed products, bottlers and distributors of regionally advertised and marketed products, and bottlers of private label products sold in chain stores. The industry competes primarily on the basis of advertising to create brand awareness, price and price promotions, retail space management, customer service, consumer points of access, new products, packaging innovations and distribution methods. We believe that brand recognition is a primary factor affecting our competitive position.

Employees

We employed approximately 2018,~~800~~700 people worldwide as of the end of fiscal year ~~2008~~2009. This included approximately 12,~~200~~100 employees in our U.S. operations and approximately 86,600 employees in our ~~international~~ CEE operations. Employment levels are subject to seasonal variations. We are a party to collective bargaining agreements covering approximately 5,~~500~~000 employees in the U.S. ~~and Puerto~~Nine ~~Rico. Thirteen~~ agreements covering ~~approximately~~ ~~980~~approximately 460 employees will be renegotiated in ~~2009~~2010. We regard our employee relations as generally satisfactory.

Government Regulation

Our operations and properties are subject to regulation by various federal, state and local governmental entities and agencies in the U.S., as well as foreign governmental entities. As a producer of beverage products, we are subject to production, packaging, quality, labeling and distribution standards in each of the countries where we have operations including, in the U.S., those of the Federal Food, Drug and Cosmetic Act. In the U.S., we are also subject to the Soft Drink Interbrand Competition Act, which permits us to retain an exclusive right to manufacture, distribute and sell a soft drink product in a geographic territory if the soft drink product is in substantial and effective competition with other products of the same class in the same market or markets. We believe that there is such substantial and effective competition in each of the exclusive territories in which we operate. The operations of our production and distribution facilities are subject to various federal, state and local environmental laws and workplace regulations both in the U.S. and abroad. These laws and regulations include, in the U.S., the Occupational Safety and Health Act, the Unfair Labor Standards Act, the Clean Air Act, the Clean Water Act and laws relating to the maintenance of fuel storage tanks. We believe that our current legal and environmental compliance programs adequately address these areas and that we are in substantial compliance with applicable laws and regulations.

Environmental Matters

Current Operations. We maintain compliance with federal, state and local laws and regulations relating to materials used in production and to the discharge of wastes, and other laws and regulations relating to the protection of the environment. The capital costs of such management and compliance, including the modification of existing plants and the installation of new manufacturing processes, are not material to our continuing operations.

exclusive right to manufacture, distribute and sell a soft drink product in a geographic territory if the soft drink product is in substantial and effective competition with other products of the same class in the same market or markets. We believe that there is such substantial and effective competition in each of the exclusive territories in which we operate. The operations of our production and distribution facilities are subject to various federal, state and local environmental laws and workplace regulations both in the U.S. and abroad. These laws and regulations include, in the U.S., the Occupational Safety and Health Act, the Unfair Labor Standards Act, the Clean Air Act, the Clean Water Act and laws relating to the maintenance of fuel storage tanks. We believe that our current legal and environmental compliance programs adequately address these areas and that we are in substantial compliance with applicable laws and regulations.

Environmental Matters

Current Operations. We maintain compliance with federal, state and local laws and regulations relating to materials used in production and to the discharge of wastes, and other laws and regulations relating to the protection of the environment. The capital costs of such management and compliance, including the modification of existing plants and the installation of new manufacturing processes, are not material to our continuing operations.

We are defendants in lawsuits that arise in the ordinary course of business, none of which is expected to have a material adverse effect on our financial condition, although amounts recorded in any given period could be material to the results of operations or cash flows for that period.

Discontinued Operations — Remediation. Under the agreement pursuant to which we sold our subsidiaries, Abex Corporation and Pneumo Abex Corporation (collectively, “Pneumo Abex”), in 1988 and a subsequent settlement agreement entered into in September 1991, we have assumed indemnification obligations for certain environmental liabilities of Pneumo Abex, after any insurance recoveries. Pneumo Abex has been and is subject to a number of environmental cleanup proceedings, including responsibilities under the Comprehensive Environmental Response, Compensation and Liability Act and other related federal and state laws regarding release or disposal of wastes at on-site and off-site locations. In some proceedings, federal, state and local government agencies are involved and other major corporations have been named as potentially responsible parties. Pneumo Abex is also subject to private claims and lawsuits for remediation of properties previously owned by Pneumo Abex and its subsidiaries.

There is an inherent uncertainty in assessing the total cost to investigate and remediate a given site. This is because of the evolving and varying nature of the remediation and allocation process. Any assessment of expenses is more speculative in an early stage of remediation and is dependent upon a number of variables beyond the control of any party. Furthermore, there are often timing considerations, in that a portion of the expense incurred by Pneumo Abex, and any resulting obligation of ours to indemnify Pneumo Abex, may not occur for a number of years.

In fiscal year 2001, we investigated the use of insurance products to mitigate risks related to our indemnification obligations under the 1988 agreement, as amended. We oversaw a comprehensive review of the former facilities operated or impacted by Pneumo Abex. Advances in the techniques of retrospective risk evaluation and increased experience (and therefore available data) at our former facilities made this comprehensive review possible. The review was completed in fiscal year 2001 and was updated in fiscal year 2005.

~~During~~As ~~fiscal years 2008 and 2007, we recorded a charge~~ of ~~$15.0 million~~ ~~($9.2 million~~the ~~net~~end of ~~taxes)~~fiscal ~~and $3.2 million~~years ~~($2.1 million~~2009 ~~net of taxes), respectively, related to revised estimates for environmental remediation, legal~~ and ~~related administrative costs. In particular~~2008, we ~~revised~~had ~~our remediation plans at several sites~~accrued ~~during the year resulting in an increase in the accrual for remediation costs of~~ $530.04 million, and ~~we increased our accrual for legal costs by~~ $~~10.0 million. These legal costs include defense costs associated with toxic tort matters. As of the end of fiscal year 2008, we had $~~36.1 million, ~~accrued~~respectively, to to cover potential indemnification obligations~~, compared to $40~~.~~2 million~~ ~~recorded as of the end of fiscal year 2007.~~ Of the total amount accrued, $11.9 million aswas ofrecorded ~~the~~in ~~end~~“Payables ofand ~~fiscal~~other ~~year~~current ~~2008~~liabilities” ~~and~~on ~~$19.5 million as of~~ the ~~end~~Consolidated ~~of fiscal~~Balance ~~year~~Sheets ~~2007~~representing ~~were~~estimates ~~recorded~~of inthe ~~“Accrued~~amounts ~~expenses,~~to ~~other”~~be spent during on the ~~Consolidated~~next ~~Balance~~twelve ~~Sheets~~months. This indemnification obligation includes costs associated with several sites in various stages of remediation or negotiations. At the present time, the most significant remaining indemnification obligation is associated with the Willits site, as discussed below, while no other single site has significant estimated remaining costs associated with it. The amounts exclude possible insurance recoveries and are determined on an undiscounted cash flow basis. The estimated indemnification liabilities include expenses for the investigation and remediation of identified sites, payments to third parties ~~for claims and expenses~~ (including product liability), administrative expenses, and the expenses of on-going evaluations and litigation. We expect a significant portion of the accrued liabilities will be spent during the next several years.

Included in our indemnification obligations is financial exposure related to certain remedial actions required at a facility that manufactured hydraulic and related equipment in Willits, California. Various chemicals and metals contaminate this site. A final consent decree was issued in August 1997 and amended in December 2000 in the case of the People of the State of California and the City of Willits, California v. Remco Hydraulics, Inc. The final consent decree established a trust (the “Willits Trust”) which is obligated to investigate and clean up this site. We are currently funding the Willits Trust and the investigation and interim remediation costs on a year-to-year basis as required in the final amended consent decree. We have accrued

~~$10.6 million~~for asclaims ofand ~~the~~expenses ~~end~~(including ofproduct ~~fiscal~~liability), administrative ~~year~~expenses, ~~2008~~and ~~for~~the ~~future~~expenses of on-going ~~remediation~~evaluations and ~~trust~~litigation. ~~administration~~We ~~costs,~~expect ~~with~~a ~~the~~significant ~~majority~~portion of ~~this~~the ~~amount~~accrued toliabilities will be spent ~~over~~during the next several years.

Included in our indemnification obligations is financial exposure related to certain remedial actions required at a facility that manufactured hydraulic and related equipment in Willits, California. Various chemicals and metals contaminate this site. A final consent decree was issued in August 1997 and subsequently amended in December 2000 and 2006 in the case of the People of the State of California and the City of Willits, California v. Remco Hydraulics, Inc. The final consent decree established a trust (the “Willits Trust”) which is obligated to investigate and clean up this site. We are currently funding the Willits Trust and the investigation and interim remediation costs on a year-to-year basis as required in the final amended consent decree. We have accrued $8.1 million as of the end of fiscal year 2009 for future remediation and trust administration costs, with the majority of this amount expected to be spent over the next several years.

Although we have certain indemnification obligations for environmental liabilities at a number of sites other than the site discussed above, including Superfund sites, it is not anticipated that additional expense at any specific site will have a material effect on us. At some sites, the volumetric contribution for which we have an obligation has been estimated and other large, financially viable parties are responsible for substantial portions of the remainder. In our opinion, based upon information currently available, the ultimate resolution of these claims and litigation, including potential environmental exposures, and considering amounts already accrued, should not have a material effect on our financial condition, although amounts recorded in a given period could be material to our results of operations or cash flows for that period.

Discontinued Operations — Insurance. During fiscal year 2002, as part of a comprehensive program concerning environmental liabilities related to the former Whitman Corporation subsidiaries, we purchased new insurance coverage related to the sites previously owned and operated or impacted by Pneumo Abex and its subsidiaries. In addition, a trust, which was established in 2000 with the proceeds from an insurance settlement (the “Trust”), purchased ~~insurance coverage~~ and funded insurance coverage for remedial and other costs (“Finite Funding”) related to the sites previously owned and operated or impacted by Pneumo Abex and its subsidiaries.

Essentially all of the assets of the Trust were expended by the Trust in connection with the purchase of the insurance coverage, the Finite Funding and related expenses. These actions were taken to fund remediation and related costs associated with the sites previously owned and operated or impacted by Pneumo Abex and its subsidiaries and to protect against additional future costs in excess of our self-insured retention. The original amount of self-insured retention (the amount we must pay before the insurance carrier is obligated to begin payments) was $114.0 million of which $5665.61 million has been eroded, leaving a remaining self-insured retention of $5748.49 million as of the end of fiscal year ~~2008~~2009. The estimated range of aggregate exposure related only to the remediation costs of such environmental liabilities is approximately $1816 million to $3826 million. We had accrued $2017.46 million as of the end of fiscal year ~~2008~~2009 for remediation costs, which is our best estimate of the contingent liabilities related to these environmental matters. The Finite Funding may be used to pay a portion of the $2017.46 million and thus reduces our future cash obligations. Amounts recorded in our Consolidated Balance Sheets related to Finite Funding were $97.96 million as of the end of fiscal year ~~2008~~2009 and $119.59 million as of the end of fiscal year ~~2007~~2008 and were recorded in “Other assets,” net of $4.2 million ~~and $4.7 million~~ recorded in “Other current assets” as of the end of each respective period.

InDiscontinued ~~addition,~~Operations — weProduct ~~had~~Liability ~~recorded other receivables of~~and ~~$2.6 million~~Toxic asTort ofClaims. We ~~the~~also ~~end~~have ofcertain indemnification ~~fiscal~~obligations ~~year~~related ~~2007~~to ~~for~~product ~~future~~liability and ~~probable~~toxic ~~amounts~~tort toclaims bethat ~~received~~might ~~from~~emanate ~~insurance~~out ~~companies~~of ~~and~~the 1988 agreement ~~other~~with ~~responsible~~Pneumo ~~parties~~Abex. ~~These~~Other ~~amounts~~companies ~~were~~not ~~recorded~~owned inby or associated ~~“Other~~with ~~current~~us ~~assets”~~also asare ofresponsible ~~the~~to ~~end~~Pneumo ofAbex ~~fiscal~~for ~~year~~the financial ~~2007~~burden inof ~~the~~all ~~Consolidated~~asbestos ~~Balance~~product ~~Sheets.~~liability Asclaims offiled ~~the end of fiscal~~against ~~year~~Pneumo ~~2008,~~Abex ~~there~~after ~~was~~a nocertain ~~receivable~~date ~~recorded~~in as1998, ~~insurance~~except ~~amounts~~for certain ~~were~~claims ~~received~~indemnified ~~during~~by ~~the current year~~us.

OnFour ~~May 31,~~lawsuits ~~2005,~~have ~~Cooper~~been ~~Industries, LLC (“Cooper”)~~ filed ~~and~~in ~~later~~California, ~~served~~which aname ~~lawsuit against~~several ~~us,~~defendants ~~Pneumo~~including ~~Abex,~~certain ~~LLC, and the Trustee~~ of ~~the~~our ~~Trust~~prior ~~(the “Trustee”), captioned Cooper Industries, LLC v~~subsidiaries. ~~PepsiAmericas, Inc., et al., Case No. 05 CH~~The ~~09214~~lawsuits ~~(Cook~~allege ~~Cty.~~that ~~Cir.~~we ~~Ct.). The claims involved the Trust~~ and ~~insurance~~ ~~policy~~our ~~described~~former ~~above.~~subsidiaries ~~Cooper~~are ~~asserted that it was~~liable ~~entitled~~for topersonal ~~access $34 million that previously was in the~~injury ~~Trust~~ and ~~was used to purchase the insurance policy. Cooper~~/or ~~claimed~~property ~~that~~damage ~~Trust~~resulting ~~funds~~from ~~should~~environmental ~~have~~contamination ~~been distributed for~~at ~~underlying~~the ~~Pneumo~~Willits ~~Abex asbestos claims indemnified by Cooper~~facility. ~~Cooper~~ ~~complained~~The ~~that~~plaintiffs ~~it was deprived of access to money~~ in the ~~Trust~~ ~~because~~lawsuits ofare ~~the Trustee’s decision to use the Trust~~seeking ~~funds~~an tounspecified ~~purchase~~amount ~~the~~of ~~insurance policy described above. Pneumo Abex~~damages, ~~LLC,~~punitive ~~the corporate successor to our prior subsidiary~~damages, ~~has~~injunctive ~~been~~relief ~~dismissed~~and ~~from the suit.~~medical

During the second quarter of 2006, the Trustee’s motion to dismiss, in which we had joined, was granted and three counts against us based on the use of Trust funds were dismissed with prejudice, as were all counts against the Trustee, on the grounds that Cooper lacked standing to pursue these counts because it was not a beneficiary under the Trust. We then filed a separate motion to dismiss the remaining counts against us. Our motion was also granted during the second quarter of 2006 and all remaining counts against us were dismissed

~~with~~monitoring ~~prejudice~~damages. ~~Cooper~~On ~~subsequently~~June 18, ~~filed~~2009, athe ~~notice~~Court ~~of appeal~~dismissed ~~with regard to~~ all ~~rulings~~remaining byAvila ~~the court dismissing the counts against us and the Trustee~~claims. ~~Prior~~In toJuly ~~any oral argument~~2009, ~~the appellate~~592 ~~court on September 7, 2007 issued an opinion~~plaintiffs ~~affirming~~appealed ~~the~~various ~~trial~~Court ~~court’s opinion~~orders. ~~Cooper~~There ~~subsequently filed~~are ~~motion~~currently ~~papers asking the Illinois Supreme Court to accept~~590 aplaintiffs ~~discretionary~~with ~~appeal~~appeals ofthat ~~the~~are ~~rulings~~pending. ~~The~~We ~~Trustee~~will ~~then filed an~~actively ~~opposition~~oppose ~~brief~~these ~~explaining why the Illinois Supreme Court should not allow another appeal~~appeals, and we ~~joined~~are inactively ~~that~~defending ~~brief. On~~these ~~November 29,~~lawsuits. ~~2007,~~At ~~the~~this ~~Supreme Court of Illinois denied Cooper’s petition for leave to appeal the appellate court’s September 7~~time, ~~2007~~we ~~ruling.~~do ~~Cooper did~~ not ~~file a~~believe ~~petition~~these ~~for~~lawsuits ~~certiorari seeking discretionary review by the~~are ~~United~~material ~~States~~to ~~Supreme~~our ~~Court~~business byor ~~the~~financial ~~February 27, 2008 deadline for such filing~~condition.

~~Discontinued~~As ~~Operations —~~of ~~Product~~the ~~Liability~~end of fiscal years 2009 and 2008, we had accrued ~~Toxic~~$5.3 million ~~Tort~~and ~~Claims~~$5. We1 million, ~~also~~respectively, ~~have certain~~related ~~indemnification~~to ~~obligations~~product ~~related~~liability. These accruals primarily relate to probable ~~product~~asbestos ~~liability~~claim settlements and legal defense costs. We ~~toxic~~also ~~tort~~have additional amounts accrued for legal and other costs associated with currently open claims ~~that~~and ~~might~~their ~~emanate~~related ~~out~~costs. These ofamounts are included in the ~~1988~~total ~~agreement~~liabilities of ~~with~~$30.4 million ~~Pneumo~~accrued ~~Abex.~~as ~~Other~~of ~~companies~~the ~~not~~end ~~owned~~of byfiscal oryear ~~associated~~2009. In ~~with~~addition usto ~~also~~the ~~are~~known ~~responsible~~and probable asbestos claims, we may be subject to ~~Pneumo~~additional ~~Abex~~asbestos claims that are possible for which no reserve had been established as of the ~~financial~~end of fiscal ~~burden~~year of2009. ~~all~~These ~~asbestos~~additional ~~product~~reasonably ~~liability~~possible claims ~~filed~~are primarily ~~against~~asbestos-related and the aggregate exposure related to ~~Pneumo~~these ~~Abex~~possible ~~after~~claims ais ~~certain~~estimated ~~date~~to be in ~~1998,~~the ~~except~~range ~~for~~of $4 million ~~certain~~to $17 million. These amounts are ~~claims~~undiscounted ~~indemnified~~and bydo usnot reflect any insurance recoveries that we will pursue from insurers for these claims.

~~In fiscal year 2004, we noted that three mass-filed lawsuits~~ ~~accounted for thousands of claims for which Pneumo Abex claimed~~Certain indemnification. During the fourth quarter of fiscal year 2005, these and other related claims were resolved for an amount we viewed as reasonable given all of the circumstances and consistent with our prior judgments as to valuation. We have received year-end 2008 claim statistics from law firms and Pneumo Abex which reflect the resolution of those claims and the remaining cases for which Pneumo Abex claims indemnification from PepsiAmericas. After giving effect to the noted resolution of prior mass-filed claims, there are less than 6,000 such claims for which indemnification is claimed as of the end of fiscal year 2008. Of these claims, approximately 5,450 are filed in federal court and are subject to orders issued by the Multi-District Litigation ~~panel, which effectively stay all~~Matters federal claims, subject to specific requests to activate a particular claim or a discrete group of claims. The remaining cases are in state court and some are in “pleural registries” or other similar classifications that cause a case not to be allowed to go to trial unless there is a specific showing as to a particular plaintiff. Over 50 percent of the state court claims were filed prior to or in 1998. Prior to 1980, sales ceased for the asbestos-containing product claimed to have generated the largest subset of the open cases, and, therefore, we expect a decreasing rate of individual claims for that subset of cases. We oversee monitoring of the defense of the underlying claims that are or may be indemnifiable by us.

AsFollowing of the ~~end~~public ~~of fiscal years 2008 and 2007~~announcement, weon ~~had accrued $5.1~~April ~~million and $4.0 million~~20, ~~respectively~~2009, ~~related~~of toPepsiCo’s ~~product~~proposals ~~liability.~~on ~~These~~April 19, ~~accruals~~2009 ~~primarily~~to ~~relate~~acquire tothe ~~probable~~outstanding ~~asbestos~~shares ~~claim~~of ~~settlements~~PAS ~~and~~common ~~legal~~stock ~~defense~~that ~~costs.~~it Wedid not already ~~also~~own ~~have~~for ~~additional~~$11.64 ~~amounts~~in ~~accrued~~cash ~~for~~and ~~legal~~0.223 shares ~~and~~of ~~other~~PepsiCo ~~costs~~common ~~associated~~stock ~~with~~per ~~obtaining~~share ~~insurance~~of ~~recoveries~~PAS ~~for~~common ~~previously resolved~~stock and ~~currently~~to ~~open~~acquire ~~claims~~the outstanding ~~and~~shares ~~their~~of ~~related~~The ~~costs~~Pepsi Bottling Group, Inc. ~~These~~(“PBG”) ~~amounts~~common ~~are~~stock ~~included~~that init ~~the~~did ~~total~~not ~~liabilities~~already ofown for $3614.~~1 million~~75 ~~accrued~~in ascash ofand ~~the~~0.283 shares ~~end~~ of ~~fiscal~~PepsiCo ~~year~~common ~~2008.~~stock Inper ~~addition~~share toof ~~the~~PBG ~~known~~common ~~and probable asbestos claims~~stock, weseveral ~~may~~putative bestockholder class ~~subject~~action tocomplaints ~~additional~~challenging ~~asbestos~~the ~~claims~~proposals ~~that~~were ~~are~~filed ~~possible for~~against ~~which~~various nocombinations ~~reserve~~of ~~had~~PepsiCo, ~~been~~PAS, ~~established~~PBG, asand of the ~~end of fiscal~~individual ~~year~~members ~~2008.~~of ~~These~~the ~~additional~~boards ~~reasonably~~of ~~possible~~directors ~~claims~~of ~~are primarily~~PAS ~~asbestos-related~~ and ~~the~~PBG. ~~aggregate~~One ~~exposure~~of ~~related to~~these ~~these~~complaints ~~possible~~was ~~claims~~amended isfollowing ~~estimated~~the topublic beannouncement inof the ~~range of~~ ~~$4 million~~merger agreements to ~~$17 million.~~include ~~These~~allegations ~~amounts~~concerning ~~are undiscounted~~one ~~and~~of ~~do not reflect any insurance recoveries that we~~the ~~will~~proposed ~~pursue from insurers for these claims~~mergers.

~~In addition, four lawsuits have been filed in California, which~~ ~~name several defendants including certain of our prior~~Delaware ~~subsidiaries.~~Court ~~The lawsuits allege that we and our former subsidiaries are liable for personal injury and/or property damage resulting from environmental contamination at the Willits facility. As~~ of ~~the end of fiscal year 2008, there~~Chancery were 43 personal injury plaintiffs in the lawsuits seeking an unspecified amount of damages, punitive damages, injunctive relief and medical monitoring damages. We are actively defending the lawsuits. At this time, we do not believe these lawsuits are material to our business or financial condition.

WeBeginning ~~have~~on April 22, 2009, eight putative stockholder class action complaints challenging the April 19 proposals were filed against various combinations of PepsiCo, PAS and PBG and the individual members of the boards of directors of PAS and PBG in the Court of Chancery of the State of Delaware. The complaints alleged, among other ~~indemnification~~things, ~~obligations~~that ~~related~~the defendants had breached or would breach their fiduciary duties owed to ~~product~~the ~~liability~~public ~~matters~~stockholders of PAS and PBG in connection with the April 19 proposals. On June 5, 2009, the Court of Chancery entered orders consolidating the actions relating to PepsiCo’s proposal to acquire PAS under the caption In re ~~our~~PepsiAmericas, ~~opinion~~Inc. Shareholders Litigation (C.A. No. 4530-VCS) (the “Consolidated Delaware PAS Action”), consolidating ~~based~~the onactions relating to PepsiCo’s proposal to acquire PBG under the ~~information~~caption In re The Pepsi Bottling Group, ~~currently~~Inc., ~~available~~Shareholders ~~and~~Litigation (C.A. No. 4526-VCS) (the ~~amounts~~“Consolidated ~~already~~Delaware ~~accrued~~PBG Action”), ~~these~~appointing ~~claims~~co-lead ~~should~~counsel ~~not~~and ~~have~~co-lead aplaintiffs ~~material~~in ~~effect~~each onconsolidated action, ~~our~~and ~~financial~~providing for coordination between the two ~~condition~~consolidated actions.

WeOn ~~also~~June 19, ~~participate~~2009, co-lead plaintiffs in the Consolidated Delaware PAS Action filed a verified consolidated class action complaint. The complaint seeks, among other things, damages and declaratory, ~~monitor~~injunctive, ~~insurance-recovery~~and ~~efforts~~other equitable relief alleging, ~~for~~among other things, that the ~~claims~~defendants have breached or will breach their fiduciary duties owed to the public stockholders of PAS, that the April 19 proposals and the transactions contemplated thereunder were not entirely fair to the public stockholders, that PepsiCo retaliated against ~~Pneumo~~PAS ~~Abex.~~and ~~Recoveries~~PBG ~~from~~for rejecting ~~insurers~~the April 19 proposals, that certain provisions of the ~~vary~~certificate ~~year~~of incorporation of PAS are invalid and/or inapplicable to the April 19 proposals and the proposed mergers, and that PepsiCo’s pursuit of its acquisition of PAS violates the Second Amended and Restated Shareholder Agreement by ~~year~~and ~~because~~between ~~certain~~PAS ~~insurance~~and ~~policies~~PepsiCo, ~~exhaust~~dated September 6, 2005 (the “PAS Shareholder Agreement”). Also on June 19, 2009, the co-lead plaintiffs in the Consolidated Delaware PBG Action filed a verified consolidated class action complaint. The complaint seeks, among other things, damages and declaratory, injunctive, and other ~~insurance~~equitable ~~policies~~relief ~~become~~alleging, among ~~responsive.~~other ~~Recoveries~~things, ~~also~~that ~~vary~~the defendants have breached or will ~~due~~breach their fiduciary duties owed to ~~delays~~the inpublic ~~litigation~~stockholders of PBG, ~~limits~~that onthe ~~payments~~April in19 ~~particular~~proposals and the

~~periods,~~transactions ~~and~~contemplated ~~because~~thereunder ~~insurers~~were ~~sometimes~~not ~~seek~~entirely fair to the ~~avoid~~public ~~their~~stockholders, that PepsiCo had retaliated or would ~~obligations~~retaliate ~~based~~against onPAS ~~positions~~and PBG for rejecting the April 19 proposals, and that wecertain ~~believe~~provisions of the certificate of incorporation of PBG are ~~improper~~invalid and/or inapplicable to the April 19 proposals and the proposed mergers. On WeJuly 23, 2009, co-lead plaintiffs in the Consolidated ~~assisted~~Delaware byPBG ~~our~~Action ~~consultants,~~and ~~monitor~~ the ~~financial~~Consolidated ~~ratings~~Delaware ofPAS Action ~~insurers~~filed ~~that~~separate ~~issued~~motions ~~responsive~~for ~~coverage~~partial ~~and~~summary judgment concerning their allegations relating to the ~~claims~~certificates of incorporation ~~submitted~~of byPBG ~~Pneumo~~and ~~Abex~~PAS and the PAS Shareholder Agreement.

On August 31, 2009, the Court of Chancery entered a Stipulation and Order Governing the Protection and Exchange of Confidential Information in each of the Consolidated Delaware PAS Action and the Consolidated Delaware PBG Action. Shortly thereafter, defendants began producing documents to co-lead plaintiffs in these actions. On November 20, 2009, the parties to the Consolidated Delaware PAS Action and to the Consolidated Delaware PBG Action entered into the Stipulation and Agreement of Compromise, Settlement, and Release described below.

Minnesota State Court

Beginning on April 20, 2009, three putative stockholder class action complaints challenging the April 19 proposals were filed against PepsiCo, PAS, and PAS’ board of directors in the District Court of the State of Minnesota, County of Hennepin. The complaints seek, among other things, damages and declaratory, injunctive, and other equitable relief alleging, among other things, that the defendants have breached or will breach their fiduciary duties owed to the public stockholders, that PepsiCo possessed material, non-public information concerning PAS, and that the April 19 proposals and the transactions contemplated thereunder were not entirely fair to the public stockholders. On June 24, 2009, the parties to the three Minnesota actions entered into a stipulation consolidating and staying the Minnesota actions in favor of the Consolidated Delaware PAS Action. On June 29, 2009, the court entered an order consolidating and staying the Minnesota actions pending resolution of the Consolidated Delaware PAS Action.

On September 23, 2009, one of the plaintiffs in the Minnesota actions filed a notice of dismissal voluntarily dismissing the action captioned Leone v. PepsiAmericas, Inc. (No. 27-CV-099196). On November 20, 2009, the parties to the two remaining Minnesota actions entered into the Stipulation and Agreement of Compromise, Settlement, and Release described below.

New York State Court

Westchester County Actions

Beginning on April 29, 2009, two putative stockholder class action complaints challenging the April 19 proposals were filed against various combinations of PepsiCo, PAS, PBG, and the members of PBG’s board of directors in the Supreme Court of the State of New York, County of Westchester. The complaints seek, among other things, damages and declaratory, injunctive, and other equitable relief alleging, among other things, that the defendants have breached or will breach their fiduciary duties owed to the public stockholders of PAS and PBG, that the April 19 proposals and the transactions contemplated thereunder were not entirely fair to the public stockholders of PAS and PBG, and that the defensive measures implemented by PBG were not being used to maximize stockholder value. On June 8, 2009, the defendants filed motions to dismiss or stay the actions in favor of the previously filed actions pending in the Delaware Court of Chancery.

On October 19, 2009, the parties to the two Westchester County actions entered into a stipulation staying the Westchester County actions in favor of the Consolidated Delaware PAS Action and the Consolidated Delaware PBG Action. On October 21, 2009, the court entered an order staying the two Westchester County actions pending resolution of the Consolidated Delaware PAS Action and the Consolidated Delaware PBG Action. On November 20, 2009, the parties to the two Westchester County actions entered into the Stipulation and Agreement of Compromise, Settlement, and Release described below.

New York County Action

On May 8, 2009, a putative stockholder class action complaint was filed against PBG and the members of PBG’s board of directors other than John C. Compton and Cynthia M. Trudell in the Supreme Court of the

State of New York, County of New York. The complaint alleged that the defendants had breached their fiduciary duties owed to the public stockholders of PBG by depriving those stockholders of the full and fair value of their shares by failing to accept PepsiCo’s April 19 proposal to acquire PBG or to negotiate with PepsiCo after that proposal was made and by adopting certain defensive measures. On June 8, 2009, the defendants moved to dismiss or to stay this action in favor of the previously filed actions pending in the Delaware Court of Chancery. The plaintiff failed to file a timely opposition to the motion. On August 10, 2009, the plaintiff filed an amended class action complaint, adding as defendants PepsiCo, Mr. Compton, and Ms. Trudell. The amended complaint seeks, among other things, damages and declaratory, injunctive, and other equitable relief alleging, among other things, that the defendants have breached or will breach their fiduciary duties owed to the public stockholders of PBG and that the proposed PBG merger is not entirely fair to the public stockholders. On August 27, 2009 the defendants again moved to dismiss or stay this action in favor of the previously filed actions pending in the Delaware Court of Chancery.

On October 2, 2009, the parties to this action entered into a stipulation providing that this action should be voluntarily stayed for 45 days while plaintiff’s counsel conferred with co-lead counsel in the Consolidated Delaware PBG Action and that the defendants’ motion to dismiss or stay should be adjourned during the voluntary stay. Also on October 2, 2009, the court entered an order staying the New York County action for 45 days while plaintiff’s counsel conferred with co-lead counsel in the Consolidated Delaware PBG Action. On November 20, 2009, the parties to the New York County action entered into the Stipulation and Agreement of Compromise, Settlement, and Release described below. On December 2, 2009, the court entered an order staying the New York County action pending resolution of the Consolidated Delaware PBG Action.

Settlement of Stockholder Litigation

On November 20, 2009, the parties to the Consolidated Delaware PAS Action and the Consolidated Delaware PBG Action, as well as the parties to the two actions pending in the District Court of the State of Minnesota and to the three actions pending in the Supreme Court of the State of New York, entered into a Stipulation and Agreement of Compromise, Settlement, and Release (the “Settlement Stipulation”) to resolve all of these actions.

Pursuant to the Settlement Stipulation, and in exchange for the releases described below, defendants have taken or will take the following actions: (1) PepsiCo, PAS, and PBG have included and will continue to include co-lead counsel in the disclosure process (including providing them with the opportunities to review and comment on drafts of the preliminary and final proxy statements/prospectuses before they were or are filed with the Securities and Exchange Commission); (2) PepsiCo agreed to reduce the termination fee set forth in the PAS merger agreement from $71.6 million to $50 million; (3) PepsiCo agreed to reduce the termination fee set forth in the PBG merger agreement from $165.3 million to $115 million; (4) PepsiCo agreed to shorten the termination fee tail set forth in the PAS merger agreement from 12 months to 6 months; and (5) PepsiCo agreed to shorten the termination fee tail set forth in the PBG merger agreement from 12 months to 6 months. The settlement is conditioned on satisfaction by co-lead counsel that the disclosures made in connection with the PAS merger and the PBG merger are not materially omissive or misleading.

Pursuant to the Settlement Stipulation, the Consolidated Delaware PAS Action and the Consolidated Delaware PBG Action will be dismissed with prejudice on the merits, the plaintiffs in the Minnesota and New York actions will voluntarily dismiss those actions with prejudice, and all defendants will be released from any and all claims relating to, among other things, the PAS merger, the PBG merger, the PAS merger agreement, the PBG merger agreement, and any disclosures made in connection therewith. The Settlement Stipulation is subject to customary conditions, including consummation of both the PAS merger and the PBG merger, completion of certain confirmatory discovery, class certification, and final approval by the Court of Chancery of the State of Delaware following notice to the stockholders of PAS and PBG. On December 2, 2009, the Court of Chancery entered an order setting forth the schedule and procedures for notice to the stockholders of PAS and PBG and the court’s review of the settlement. The Court of Chancery scheduled a hearing for April 12, 2010, at which the court will consider the fairness, reasonableness, and adequacy of the settlement.

The settlement will not affect the form or amount of the consideration to be received by PAS stockholders in the PAS merger or by PBG stockholders in the PBG merger.

The defendants have denied and continue to deny any wrongdoing or liability with respect to all claims, events, and transactions complained of in the aforementioned litigation or that they have engaged in any wrongdoing. The defendants have entered into the Settlement Stipulation to eliminate the uncertainty, burden, risk, expense, and distraction of further litigation.

Executive Officers of the Registrant

Our executive officers and their ages as of February 2716, ~~2009~~2010 were as follows:

Name	Age		Position
Robert C. Pohlad		5455	Chairman of the Board and Chief Executive Officer
Kenneth E. Keiser		5758	President and Chief Operating Officer
Alexander H. Ware		4647	Executive Vice President and Chief Financial Officer
G. Michael Durkin, Jr.		4950	Executive Vice President, U.S.
James R. Rogers		5455	Executive Vice President, International
Jay S. Hulbert		5556	Executive Vice President, Worldwide Supply Chain
Anne D. Sample		4546	Executive Vice President, Human Resources
Kenneth L. Johnsen		4748	Senior Vice President and Chief Information Officer
Timothy W. Gorman		4849	Senior Vice President and Controller
Andrew R. Stark		4546	Vice President and Treasurer

Each executive officer has been appointed to serve until his or her successor is duly appointed or his or her earlier removal or resignation from office. There are no familial relationships between any director or executive officer. The following is a brief description of the business background of each of our executive officers.

Mr. Pohlad became Chief Executive Officer of PepsiAmericas in November 2000, was named Vice Chairman in January 2001 and became Chairman of the Board in January 2002. From 1987 to present, Mr. Pohlad has also served as President of Pohlad Companies.

Mr. Keiser was named President and Chief Operating Officer in January 2002 with responsibilities for the global operations of PepsiAmericas. ~~Mr. Keiser is also a director of C.H.~~ ~~Robinson Worldwide, Inc.~~

Mr. Ware was named Executive Vice President and Chief Financial Officer in March 2005. From January 2003 to March 2005, Mr. Ware had served as Senior Vice President, Planning and Corporate Development.

Mr. Durkin was named Executive Vice President, U.S. in March 2005. Prior to this role, Mr. Durkin served as Chief Financial Officer of PepsiAmericas since 2000. Mr. Durkin also serves on the Board of Directors of The Schwan Food Company, Inc. and Mesaba Aviation, Inc.

Mr. Rogers was named Executive Vice President, International in September 2004. Prior to this appointment, he served as Executive Vice President/General Manager of Central Europe since August 2000.

Mr. Hulbert was named Executive Vice President, Worldwide Supply Chain in January 2008. Prior to this appointment, he served as Senior Vice President, Supply Chain since December ~~2002~~2000.

Ms. Sample was named Executive Vice President, Human Resources in January 2008. Prior to this appointment, she served as Senior Vice President, Human Resources since May 2001.

Mr. Johnsen was named Senior Vice President and Chief Information Officer in March 2005. From July 2001 to February 2005, he served as Vice President and Chief Information Officer. From November 1997 to June 2001, he served as Chief of Information Technology.

Mr. Gorman was named Senior Vice President and Controller in January 2008. Prior to this appointment, he served as Vice President and Controller since May 2003, and Vice President, Planning and Reporting from August 1999 to May 2003.

~~Mr. Stark was named Vice President and Treasurer in July~~ ~~2002. Prior to his appointment, Mr. Stark served as~~14 ~~Assistant Treasurer since August 1998.~~

Mr. Stark was named Vice President and Treasurer in July 2002. Prior to his appointment, Mr. Stark served as Assistant Treasurer since August 1998.


Item 1A.	Risk Factors.

The following are certain risk factors that could affect our business, financial condition, operating results and cash flows. These risk factors should be considered in connection with evaluating the forward-looking statements contained in this Annual Report on Form 10-K because these risk factors could cause our actual results to differ materially from those expressed in any forward-looking statement. The risks we have highlighted below are not the only ones we face. If any of these events actually occur, our business, financial condition, operating results or cash flows could be negatively affected. We caution you to keep in mind these risk factors and to refrain from attributing undue certainty to any forward-looking statements, which speak only as of the date of this report.

Our pending merger with PepsiCo may cause disruption in our business and, if the pending merger does not occur, we will have incurred significant expenses, may need to pay a termination fee under the merger agreement and our stock price may decline.

We have entered into a merger agreement with PepsiCo and Metro, dated August 3, 2009, pursuant to which our company will merge with and into Metro, with Metro continuing as the surviving company and a wholly owned subsidiary of PepsiCo. Under the terms of the merger agreement, as of the effective time of the merger, each outstanding share of PepsiAmericas common stock that is not owned by PepsiCo or any of its subsidiaries or held by our company as treasury stock will be converted into the right to receive, at the holder’s election, either 0.5022 shares of common stock of PepsiCo or $28.50 in cash, without interest, subject to proration provisions which provide that an aggregate 50 percent of the outstanding PepsiAmericas common stock will be converted into the right to receive common stock of PepsiCo and an aggregate 50 percent of the outstanding PepsiAmericas common stock will be converted into the right to receive cash. We hope to close the merger by the end of February 2010, subject to regulatory approval and the satisfaction or waiver of other customary closing conditions.

Each share of PepsiAmericas common stock held by our company as treasury stock, held by PepsiCo or held by Metro, in each case immediately prior to the effective time of the merger, will be canceled, and no payment will be made with respect to them. Each share of PepsiAmericas common stock owned by any subsidiary of PepsiCo other than Metro immediately prior to the effective time of the merger will automatically be converted into the right to receive 0.5022 of a share of PepsiCo common stock.

The announcement of the pending merger, whether or not consummated, may result in a loss of key personnel and may disrupt our sales and operations, which may have an impact on our financial performance. The merger agreement generally requires us to operate our business in the ordinary course pending consummation of the merger, but includes certain contractual restrictions on the conduct of our business that may affect our ability to execute on our business strategies and attain our financial goals. Additionally, the announcement of the pending merger, whether or not consummated, may impact our relationships with third parties.

The completion of the pending merger is subject to certain conditions, including, among others (i) the absence of certain legal impediments to the consummation of the pending merger, (ii) subject to certain materiality exceptions, the accuracy of the representations and warranties made by us and PepsiCo, respectively, and compliance by us and PepsiCo with our and its respective obligations under the merger agreement, and (iii) the non-occurrence of a Material Adverse Effect (as defined in the merger agreement) on our company or PepsiCo. In addition, PepsiCo’s obligation to consummate the merger is subject to the satisfaction of certain conditions to the consummation of the PBG merger, to the extent they relate to antitrust and competition laws.

If the merger agreement is terminated under certain circumstances, such as if our Board of Directors recommends to our shareholders an acquisition proposal made by a third party, or materially breaches its obligations under the merger agreement, then we would be required to pay PepsiCo a termination fee of $50 million.

We cannot predict whether the closing conditions for the pending merger set forth in the merger agreement will be satisfied. As a result, there can be no assurance that the pending merger will be completed. If the closing conditions for the pending merger set forth in the merger agreement are not satisfied or waived pursuant to the merger agreement, or if the transaction is not completed for any other reason, the market price of our common stock may decline. In addition, if the pending merger does not occur, we will nonetheless remain liable for significant expenses that we have incurred related to the transaction.

Additionally, we and members of our Board of Directors have been named in a number of lawsuits relating to the pending merger as more fully described in Item 1 and Note 19 to the Consolidated Financial Statements. Although the parties have entered into a settlement stipulation to resolve these actions, the Court of Chancery must consider the fairness, reasonableness, and adequacy of the settlement. Further action in connection with 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, financial condition, results of operations and stock price.

Our operating results may fluctuate based on changes in marketplace conditions, especially customer and competitor consolidation; changes in consumer preferences, including our consumers’ shift from carbonated soft drinks to non-carbonated beverages; and unfavorable weather conditions in the territories in which we operate.

We face intense competition in the carbonated soft drink market and the non-carbonated beverage market and are impacted by both customer and competitor consolidation. Our response to marketplace competition and retailer consolidations may result in lower than expected net pricing of our products. Retail consolidation has increased the importance of our major customers and further consolidation is expected. In addition, competitive pressures may cause channel and product mix to shift from more profitable channels and packages and adversely affect our overall pricing. Our efforts to improve pricing may result in lower than expected volumes. Changes in net pricing and volume could have an adverse effect on our business, results of operations and financial condition.

Health and wellness trends have decreased demand for sugared carbonated soft drinks and shifted interest to diet soft drinks and non-carbonated beverages. In the U.S., carbonated soft drink volume, which represented approximately 8082 percent of our volume mix, declined 32 percent and 43 percent in fiscal years ~~2008~~2009 and ~~2007~~2008, respectively. In response to changes in consumers’ preferences, we have increased our emphasis on diet carbonated soft drinks and non-carbonated beverages, including Aquafina, SoBe, Tropicana juice drinks, Lipton Iced Tea, and energy drinks. Our business could be adversely impacted by a significant decline in sales of sugared carbonated soft drinks and our inability to offset that decline with sales of diet soft drinks and non-carbonated beverages. Because we rely mainly on PepsiCo to provide us with the products that we sell, if PepsiCo fails to develop innovative products that respond to these and other consumer trends, this could put us at a competitive disadvantage in the marketplace and adversely affect our business and financial results.

Our business could also be adversely affected by other consumer trends, such as consumer health concerns about obesity, product attributes and ingredients. Consumer preferences may change due to a variety of factors, including the aging of the general population, changes in social trends, changes in travel, vacation or leisure activity patterns or worsening economic conditions.

Additionally, our business is highly seasonal and unfavorable weather conditions in our markets may impact sales volume. Sales volumes in our CEE operations tend to be more sensitive to weather conditions than our U.S. ~~and Caribbean~~ operations.

Our business may be adversely impacted by unfavorable global and local economic, political and regulatory developments or other risks in the countries in which we operate.

Our operations are affected by local and global economic environments, including inflation, recession and currency volatility. Political and regulatory changes, some of which may be disruptive, can interfere with our supply chain, our customers, our distributors and ~~all of~~ our activities in a particular ~~particular~~ location. Volatility in global

An ~~increase in the price of raw materials, natural gas and fuel or~~16 a decrease in the availability of raw materials, natural gas and fuel could adversely affect our financial condition. Disruption of our supply chain also could have an adverse effect on our business, financial condition and operating results.

~~customers.~~macroeconomic ~~The~~conditions ~~inability~~has ofhad ~~suppliers~~a tonegative ~~deliver~~impact ~~concentrate, raw~~on ~~materials, other ingredients and products to us could also~~our ~~adversely~~business ~~affect operating~~ results. ~~The~~If ~~inability~~this ofvolatility ~~our suppliers~~continues to ~~meet~~persist ~~our requirements could result in short-term~~into ~~shortages~~the ~~until alternative sources of supply could be located. In particular~~future, wethe ~~require~~fair ~~significant~~value ~~amounts~~ of ~~aluminum cans and PET bottle containers to support~~ our ~~requirements.~~goodwill ~~Failure of~~and ~~our~~intangible ~~suppliers to meet our purchase requirements could reduce~~assets our profitability. In addition, we also require access to significant amounts of water. Any sustained interruption in the supply of these materials or any significant increase in their prices could ~~have~~be aadversely ~~material adverse effect on our business and financial results~~impacted.

An increase in the price of raw materials, natural gas and fuel or a decrease in the availability of raw materials, natural gas and fuel could adversely affect our financial condition. Disruption of our supply chain also could have an adverse effect on our business, financial condition and operating results.

Increases in the price of ingredients, packaging materials, other raw materials, natural gas and fuel could adversely impact our earnings and financial condition if we are unable to pass along these higher costs to our customers. The inability of suppliers to deliver concentrate, raw materials, other ingredients and products to us could also adversely affect operating results. The inability of our suppliers to meet our requirements could result in short-term shortages until alternative sources of supply could be located. In particular, we require significant amounts of aluminum cans and PET bottle containers to support our requirements. Failure of our suppliers to meet our purchase requirements could reduce our profitability. In addition, we also require access to significant amounts of water. Any sustained interruption in the supply of these materials or any significant increase in their prices could have a material adverse effect on our business and financial results.

Energy prices, including the price of natural gas, gasoline and diesel fuel, are cost drivers for our business. Sustained high energy or commodity prices could negatively impact our operating results and demand for our products. Events such as natural disasters could impact the supply of fuel and could impact the timely delivery of our products to our customers.

Our ability to make, move and sell products is critical to our success. Damage or disruption to our supply chain, including our manufacturing or distribution capabilities, due to weather, natural disaster, fire or explosion, terrorism, pandemic, strikes or other reasons could impair our ability to manufacture, package, sell and distribute our products. Failure to take adequate steps to mitigate the likelihood or potential impact of such events, or to effectively manage such events if they occur, could adversely affect our business, financial condition and results of operations, as well as require additional resources to restore our supply chain.

The successful operation of our business depends upon our relationship with PepsiCo, including its level of advertising, bottler incentives and brand innovation. We may also have conflicts of interest with PepsiCo.

We operate under various bottling agreements with PepsiCo that allow us to manufacture, package, sell and distribute carbonated and non-carbonated beverages. Our inability to comply with the terms and conditions established in these agreements could result in termination of bottling agreements which would have a material adverse impact on our short-term and long-term business. These agreements provide that we must purchase all of the concentrates for PepsiCo beverages at prices and on terms which are set by PepsiCo in its sole discretion. Any significant concentrate price increases could materially affect our business and financial results.

PepsiCo’s advertising campaigns and their effectiveness, bottler incentives provided by PepsiCo, and PepsiCo’s brand innovation directly impact our operations. Bottler incentives cover a variety of initiatives to support volume and market share growth. The level of support is negotiated regularly and can be increased or decreased at the discretion of PepsiCo. PepsiCo is under no obligation to continue past levels of support in the future. Material changes in expected levels of bottler incentive payments and other support arrangements could adversely affect future results of operations. Furthermore, if the sales volume of sugared carbonated soft drinks continues to decline, our sales volume growth will increasingly depend on product innovation by PepsiCo. Even if PepsiCo maintains a robust pipeline of new products, we may be unable to achieve volume growth through product and packaging initiatives.

PepsiCo also provides procurement services for certain raw materials which result in rebates from vendors as a result of procurement volume. Cost of goods sold may be negatively impacted if we are unable to maintain targeted volume levels to secure such anticipated rebates or if PepsiCo no longer provides this service on our behalf.

~~Our past and ongoing relationship with PepsiCo could give rise~~ ~~to conflicts of interest. These potential conflicts include~~17 balancing the objectives of increasing sales volume of PepsiCo beverages and maintaining or increasing our profitability. Other possible conflicts could relate to the nature, quality and pricing of services or products provided to us from PepsiCo or by us to PepsiCo.

In addition, under our Master Bottling Agreement, we must obtain PepsiCo’s approval to acquire any independent PepsiCo bottler. PepsiCo has agreed not to withhold approval for any acquisition within agreed-upon U.S. territories if we have successfully negotiated the acquisition and, in PepsiCo’s reasonable judgment, satisfactorily performed our obligations under the Master Bottling Agreement.

AsOur ofrelationship ~~the~~with ~~end~~PepsiCo ofcould ~~fiscal~~give ~~year~~rise ~~2008,~~to ~~PepsiCo~~conflicts ~~beneficially owned~~of ~~approximately~~interest. ~~43 percent~~These ofpotential ~~our~~conflicts ~~common~~include ~~stock.~~balancing ~~As a result,~~the ~~PepsiCo~~objectives isof ~~able~~increasing tosales ~~significantly~~volume ~~affect~~of ~~the~~PepsiCo ~~outcome~~beverages ~~of our~~and ~~shareholder~~maintaining ~~votes,~~or ~~thereby~~increasing ~~affecting~~our ~~matters concerning us~~profitability. ~~PepsiCo~~ ~~has~~Other ~~expressed its intent to reduce its ownership status~~possible toconflicts ~~37 percent~~could ~~over~~relate ~~the next several years~~ to ~~return to~~ the ~~ownership~~ ~~levels~~nature, atquality ~~the~~and ~~time~~pricing of ~~the Whitman Corporation and~~ ~~PepsiAmericas~~services ~~merger,~~or ~~which~~products ~~may~~provided ~~impact~~to ~~the~~us ~~market~~from ~~price~~PepsiCo ofor ~~our~~by us to ~~common stock~~PepsiCo.

As of the end of fiscal year 2009, PepsiCo beneficially owned approximately 43 percent of our common stock. As a result, PepsiCo is able to significantly affect the outcome of our shareholder votes, thereby affecting matters concerning us.

A negative change in our credit rating or the availability of capital could impact borrowing costs and financial results.

We depend, in part, upon the issuance of unsecured debt to fund our operations and contractual commitments. A number of factors could cause us to incur increased borrowing costs and to have greater difficulty accessing public and private markets for unsecured debt. These factors include the global capital market environment and outlook, our financial performance and outlook, and our credit ratings as determined primarily by rating agencies. It is possible that our other sources of funds, including available cash, bank facilities and cash flow from operations, may not provide adequate liquidity to fund our operations and contractual commitments.

Because our international operations are conducted under multiple local currencies, our operating results experience foreign currency fluctuations.

Our international operations are exposed to foreign exchange rate fluctuations resulting from foreign currency transactions and translation of the operations’ financial results from local currency into U.S. dollars upon consolidation. As exchange rates vary, revenue, capital spending and other operating results, when translated, may differ materially from expectations.

The cost to remediate environmental concerns associated with previously owned subsidiaries could be materially different than our estimates.

We are subject to federal and state requirements for protection of the environment, including those for the remediation of contaminated sites related to certain previously owned subsidiaries. We routinely assess our environmental exposure, including obligations and commitments for remediation of contaminated sites and assessments of ranges and probabilities of recoveries from other potentially responsible parties, including insurance providers. Due to the regulatory complexities and risk of unidentified contaminants on our former properties, the potential exists for remediation costs to be materially different from the costs we have estimated.

We cannot predict the outcome of legal proceedings and an adverse determination could negatively impact our financial results, nor can we predict the nature or outcome of future legal proceedings.

The nature of operations of certain previously owned subsidiaries exposes us to the potential for various claims and litigation related to, among other things, personal injury and asbestos product liability claims. The nature of assets we currently own and operate exposes us to the potential for various claims and litigation related to, among other things, personal injury and property damage. The resolution of outstanding claims and assessments may be materially different than what we have estimated.

In addition, litigation or other claims based on alleged unhealthful properties of soft drinks could be filed against us and would require our management to devote significant time and resources to dealing with such claims. While we would not believe such claims to be meritorious, any such claims would be accompanied by ~~unfavorable publicity that could adversely affect~~ the sales of certain of our products. Our failure to abide by laws, orders or other legal commitments could subject us to fines, penalties or other damages, including costs associated with recalling products. We could be required to recall products if they become contaminated or damaged.

1518

unfavorable publicity that could adversely affect the sales of certain of our products. Our failure to abide by laws, orders or other legal commitments could subject us to fines, penalties or other damages, including costs associated with recalling products. We could be required to recall products if they become contaminated or damaged.

Increases in the cost of compliance with applicable regulations, including those governing the production, packaging, quality, labeling and distribution of beverage products, could negatively impact our financial results.

Our operations and properties are subject to various federal, state and local laws and regulations, including those governing the production, packaging, quality, labeling and distribution of beverage products, environmental laws, competition laws, taxes and accounting standards. We are also subject to the jurisdiction of regulatory agencies of foreign countries. New laws or regulations or changes in existing laws or regulations could negatively impact our financial results by restricting our ability to distribute products in certain venues or through higher operating costs to achieve compliance.

Changes in tax laws or in the tax status of our international operations could increase our tax liability and negatively impact our financial results.

We are subject to federal, state and local taxes in the U.S. and various foreign jurisdictions. As a result, our effective tax rate could be adversely affected by changes in the mix of earnings in the U.S. and foreign countries with differing statutory tax rates, legislative changes impacting statutory tax rates, including the impact on recorded deferred tax assets and liabilities, changes in tax laws or material audit assessments. In addition, deferred tax balances reflect the benefit of net operating loss carryforwards, the realization of which will depend upon generating future taxable income in ~~the~~ the corresponding tax jurisdiction.

A strike or work stoppage by our union employees, which represent approximately one-fourth of our workforce, could disrupt our business.

Approximately 2627 percent of our employees are covered by collective bargaining agreements with higher representation in the U.S. at ~~nearly~~approximately 4541 percent of our employee ~~base.~~ base. These agreements expire at various dates, including some in in fiscal year ~~2009~~2010. Our inability to successfully renegotiate these agreements could cause work stoppages and interruptions, which may adversely impact our operating results. The terms and conditions of existing or renegotiated agreements could also increase our costs or otherwise affect our ability to fully implement future operational changes to enhance our efficiency.

~~Our acquisition~~We ~~strategy~~ may be ~~limited~~adversely affected by our ability to successfully consummate ~~proposed~~ acquisitions or integrate acquired businesses.

We ~~intend to continue to pursue acquiring businesses that would strategically fit within our operations. We~~ may be unable to consummate, successfully integrate and manage acquired businesses without substantial costs, delay or difficulties.

Technology failures could disrupt our operations and negatively impact our business.

We rely on information technology systems to process, transmit and store electronic information. If we do not effectively manage our information technology infrastructure, we could be subject to transaction errors, processing inefficiencies, the loss of customers, and business disruptions.


Item 1B.	Unresolved Staff Comments.

None.


Item 2.	Properties.

Our U.S. manufacturing facilities include 10ten owned and 1one leased combination bottling/canning plants, 4four owned bottling plants and 2two owned canning plants. International manufacturing facilities include ~~4 owned plants in Ukraine; 3 owned plants in~~four Romania; 2 owned plants each in Poland, Hungary, and the Czech Republic; and 1 owned plant each in Puerto Rico, Jamaica and Trinidad. The total manufacturing area is approximately 3.3 million square feet. In addition, we operate 127 distribution facilities in the U.S., 45 distribution facilities in CEE and 5 distribution facilities in the Caribbean. Seventy-one of the distribution facilities are leased and almost 6 percent of our U.S. production is from 1 leased domestic plant. We believe all facilities are adequately equipped and maintained and capacity is sufficient for our current needs. We currently operate a fleet of approximately 5,000 vehicles in the U.S. and approximately 2,300 vehicles

1619

owned plants in Ukraine; three owned plants in Romania; two owned plants each in Poland, Hungary, and the Czech Republic. The total manufacturing area is approximately 3.2 million square feet. In addition, we operate 128 distribution facilities in the U.S. and 48 distribution facilities in CEE. Seventy-six of the distribution facilities are leased and almost six percent of our U.S. production is from one leased domestic plant. We believe all facilities are adequately equipped and maintained and capacity is sufficient for our current needs. We currently operate a fleet of approximately 4,900 vehicles in the U.S. and approximately 2,100 vehicles internationally to service and support our distribution system. In addition, we own and lease various industrial and commercial real estate properties in the U.S.


Item 3.	Legal Proceedings.

From approximately 1945 to 1995, various entities owned and operated a facility that manufactured hydraulic equipment in Willits, California. The plant site was contaminated by various chemicals and metals. On August 23, 1999, an action entitled Donna M. Avila, et al. v. Willits Environmental Remediation Trust, Remco Hydraulics, Inc., M-C Industries, Inc., Pneumo Abex Corporation and Whitman Corporation, Case No. C99-3941 CAL, was filed in U.S. District Court for the Northern District of California. On January 16, 2001, a second lawsuit, entitled Pamela Jo ~~Alrich~~Arlich, et al. v. Willits Environmental Remediation Trust, et al., Case No. C 01 0266 SI, against essentially the same defendants was filed in the same court. The same defendants were served with a third lawsuit, entitled Nickerman v. Remco Hydraulics, on April 3, 2006. These three lawsuits were consolidated (Avila/Arlich/Nickerman) before the same judge in the U.S. District Court for the Northern District of California. In these lawsuits, individual plaintiffs claim that PepsiAmericas is liable for personal injury and/or property damage resulting from environmental contamination at the facility. There were over 1,000 claims filed in the three lawsuits. The Court dismissed a large portion of the claims; and in 2006 and 2008 we settled a significant number of the claims. There were 1412 claims remaining ~~for~~from these lawsuits as of the end of fiscal year 2008. AOn ~~trial~~June 18, ~~date~~2009, ~~has~~the ~~been~~Court ~~set~~dismissed all ~~for~~remaining ~~June~~Avila/Arlich/Nickerman ~~2009~~claims. ~~for~~In July ~~these~~2009, ~~claims~~592 plaintiffs appealed various Court orders. InThere ~~early~~are currently ~~July~~590 plaintiffs with appeals that are pending. On May 30, 2008, a fourth lawsuit ~~was~~with ~~filed.~~30 plaintiffs, entitled ~~This~~Whitlock, ~~lawsuit~~et ~~has~~al. v. 29PepsiAmericas, ~~plaintiffs~~et ~~and~~al., Case No. 3:2008cv02742 was filed. This lawsuit is based on the same claims as the prior three lawsuits. WeThere are currently 27 plaintiffs. We will actively ~~defending~~oppose ~~the~~these appeals, and we are actively defending these lawsuits. At this time, we do not believe these lawsuits are material to ~~the~~our business or financial condition ~~of PepsiAmericas~~.

We and our subsidiaries are defendants in ~~numerous~~ other lawsuits in the ordinary course of business, none of which, in the opinion of management, is expected to have a material adverse effect on our financial condition, although amounts recorded in any given period could be material to the results of operations or cash flows for that period.

See also “Environmental Matters” and “Certain Litigation Matters” in Item 1 and Note 2019 to the Consolidated Financial Statements for further discussion.


Item 4.	Submission of Matters to a Vote of Security Holders.

Not applicable.

1720

PART II


Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Our common stock is listed and traded on the New York Stock Exchange under the stock trading symbol “PAS.” The table below sets forth the reported high and low sales prices as reported for New York Stock Exchange Composite Transactions for our common stock and indicates our dividends declared for each quarterly period for the fiscal years ~~2008~~2009 and ~~2007~~2008.

	Common Stock
					Dividends
	High		Low		Declared
2009:
First quarter	$	20.97	$	14.98	$	0.14
Second quarter		27.43		18.17		0.14
Third quarter		29.20		26.00		0.14
Fourth quarter		30.30		28.81		0.14
2008:
First quarter	$	34.50	$	23.00	$	0.135
Second quarter		27.02		19.94		0.135
Third quarter		24.78		18.95		0.135
Fourth quarter		21.90		14.51		0.135
2007:
First quarter	$	22.32	$	20.50	$	0.13
Second quarter		26.60		22.27		0.13
Third quarter		32.96		23.47		0.13
Fourth quarter		35.99		31.27		0.13

1821

Performance Graph

The following performance graph compares the performance of PepsiAmericas common stock to the MidCap 400 Index ~~(“MidCap 400”)~~ and to an index of peer companies selected by us, the Bottling Group Index (“BGI”). The BGI consists of The Pepsi Bottling Group, Inc., Coca-Cola Enterprises, Inc., Coca-Cola Bottling Company Consolidated, Coca-Cola FEMSA S.A.B. de C.V. ADRs and Coca-Cola Hellenic Bottling Company S.A. ADRs. The graph assumes the return on $100 invested on January 32, ~~2004~~2005 until January 32, ~~2009~~2010. The returns of each member of the BGI are weighted by market capitalization and include the subsequent reinvestment of dividends into the respective stock.

	2003		2004		2005		2006		2007		2008
	2004		2005		2006		2007		2008		2009
PepsiAmericas		100.00		125.93		139.90		129.05		216.08		132.99
PAS		100.00		111.10		102.48		171.59		105.60		152.96
MidCap 400		100.00		~~116~~112.5056		~~131~~124.1318		~~144~~134.6785		~~157~~87.1058		~~102~~117.0346
BGI		100.00		106.7145		~~114~~130.2418		~~140~~182.5241		~~197~~99.4334		~~108~~159.2503

The closing price of our common stock on January 32, ~~2009 was~~2010 was $2029.6926 per share.

Shareholders

There were 87,~~103~~775 shareholders of record as of our common stock as of February 2716, ~~2009~~2010.

1922

Share Repurchase Program

We did not repurchase shares of PepsiAmericas common stock in the fourth quarter of 2009. Our share repurchase program activity for each of the three months and the quarter ended January 32, ~~2009~~2010 was as follows:

					Total Number of		Maximum Number of
					Shares Purchased		Maximum Number
					Shares Purchased as		Shares that May Yet
	Total				as Part of		of Shares that May
	Total Number of				Part of Publicly		Be Purchased Under
	Number of				Publicly		Yet Be Purchased
	Shares Purchased		Average Price Paid		Announced Plans or		the Plans or
	Shares		Average Price		Announced Plans		Under the Plans or
Period	(1)		per Share		Programs(2)		Programs(3)
Period	Purchased(1)		Paid per Share		or Programs(2)		Programs(3)
October 4, 2009 — October 31, 2009		—	$	—		56,201,081		8,798,919
September 28, 2008 — October 25, 2008		—		—		51,930,500		13,069,500
November 1, 2009 — November 28, 2009		—		—		56,201,081		8,798,919
October 26, 2008 — November 22, 2008		—		—		51,930,500		13,069,500
November 29, 2009 — January 2, 2010		—		—		56,201,081		8,798,919
November 23, 2008 — January 3, 2009		1,570,581	$	18.97		53,501,081		11,498,919
For the Quarter Ended January 2, 2010		—	$	—
For the Quarter Ended January 3, 2009		1,570,581	$	18.97

(1)		Represents shares purchased in open-market transactions pursuant to our publicly announced repurchase program.
(2)		Represents cumulative shares purchased under previously announced share repurchase authorizations by the Board of Directors. Share repurchases began in 1999 under an authorization for 15 million shares announced on November 19, 1999. On December 19, 2002, the Board of Directors authorized the repurchase of 20 million additional shares. The Board of Directors later authorized the repurchase of 20 million additional shares as announced on July 21, 2005. On July 24, 2008, the Board of Directors authorized the repurchase of 10 million additional shares.
(3)		AsThis ~~noted above, on July 21, 2005 we announced that our Board of Directors authorized the~~ repurchase ofauthorization 20does million additional shares under a previously authorized repurchase program. On July 24, 2008, we announced that our Board of Directors authorized the repurchase of 10 million additional shares under our previously authorized repurchase program. These repurchase authorizations do not have a scheduled expiration ~~dates~~date.

Securities Authorized for Issuance under Equity Compensation Plans

See “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” in Item 12 for information regarding securities authorized for issuance under our equity compensation plans.

2023


Item 6.	Selected Financial Data.

The following table presents summary operating results and other information of PepsiAmericas and should be read along with ~~Item 7~~ “Management’s Discussion and Analysis of Financial ~~Financial~~ Condition and Results of Operations,” in Item 7, the Consolidated Financial Statements and accompanying notes included elsewhere in this Annual Report on Form 10-K. (Amounts are presented in millions, except per share and employee data).

For the Fiscal Years	~~2008~~2009			~~2007~~2008			~~2006~~2007			~~2005~~2006			~~2004~~2005
OPERATING RESULTS:
Net sales:
U.S.	$	3,~~429~~405.92		$	3,~~384~~429.9		$	3,~~245~~384.89		$	3,~~156~~245.18		$	23,~~825~~156.81
CEE		~~1,260~~915.92			~~849~~1,260.49			~~484~~849.14			~~343~~484.51			~~309~~343.45
Caribbean		~~246~~100.49			~~245~~246.24			~~242~~245.52			~~226~~242.45			~~209~~226.54
Worldwide	$	4,~~937~~421.23		$	4,~~479~~937.52		$	34,~~972~~479.45		$	3,~~726~~972.04		$	3,~~344~~726.70
Operating income (loss):
U.S.	$	~~324~~341.41		$	~~331~~333.68		$	~~330~~336.19		$	~~387~~330.71		$	~~332~~387.37
CEE		~~155~~41.42			~~100~~146.50			2095.92			120.59			21.05
Caribbean		(61.64	)		4(6.06	)		54.0			45.20			5.4.2
Worldwide		~~473~~380.29			~~436~~473.12			~~356~~436.01			~~393~~356.40			~~339~~393.74
Interest expense, net		~~111~~65.16			~~109~~111.21			~~101~~109.32			89101.93			6289.19
Other expense (income), net		7.9			0.6			11.7			5.0			(4.7	)
Loss from deconsolidation of business		25.8			—			—			—			—
Income from continuing operations before income taxes, minority interest and equity in net (loss) earnings of nonconsolidated companies		354.2			326.3			243.0			298.5			282.3
Other expense, net		13.9			7.9			0.6			11.7			5.0
Income taxes		107.8			112.0			90.5			108.8			100.4
Income from continuing operations before income taxes and equity in net earnings (loss) of nonconsolidated companies		275.6			354.2			326.3			243.0			298.5
Minority interest		(9.7	)		(0.1	)		0.2			0.1			0.1
Income taxes		99.3			107.8			112.0			90.5			108.8
Equity in net (loss) earnings of nonconsolidated companies		(1.1	)		—			5.6			4.9			(0.1	)
Equity in net earnings (loss) of nonconsolidated companies		1.4			(1.1	)		—			5.6			4.9
Income from continuing operations		~~235~~177.67			~~214~~245.23			~~158~~214.3			~~194~~158.71			~~181~~194.96
Loss from discontinued operations, net of tax		~~9.2~~—			29.12			—2.1			—			—
Net income	$	~~226~~177.47		$	~~212~~236.1		$	~~158~~212.32		$	~~194~~158.71		$	~~181~~194.96
Less: Net (loss) income attributable to noncontrolling interests		(3.5	)		9.7			0.1			(0.2	)		(0.1	)
Net income attributable to PepsiAmericas, Inc.	$	181.2		$	226.4		$	212.1		$	158.3		$	194.7
Weighted average common shares:
Basic		~~125~~121.26			~~126~~125.72			~~127~~126.97			~~134~~127.79			~~139~~134.27
Incremental effect of stock options and awards		2.03			2.50			12.95			21.59			2.65
Diluted		~~127~~123.29			~~129~~127.2			129.82			~~137~~129.28			~~141~~137.82
Earnings per share:
Earnings per share attributable to PepsiAmericas, Inc. common shareholders:
Basic:
Income from continuing operations	$	1.8849		$	1.6988		$	1.2469		$	1.4524		$	1.3145
Loss from discontinued operations		~~(0.07~~—	)		(0.0207	)		—(0.02	)		—			—
Total	$	1.8149		$	1.6781		$	1.2467		$	1.4524		$	1.3145
Diluted:
Income from continuing operations	$	1.8546		$	1.6685		$	1.2266		$	1.4222		$	1.2842
Loss from discontinued operations		~~(0.07~~—	)		(0.0207	)		—(0.02	)		—			—
Total	$	1.7846		$	1.6478		$	1.2264		$	1.4222		$	1.2842
Cash dividends declared per share	$	0.5456		$	0.5254		$	0.5052		$	0.3450		$	0.3034
OTHER INFORMATION:
Total assets	$	5,~~054~~092.17		$	5,~~308~~054.01		$	45,~~207~~308.40		$	4,~~053~~207.84		$	34,~~529~~053.8
Long-term debt	$	1,~~642~~990.38		$	1,~~803~~642.53		$	1,~~490~~803.25		$	1,~~285~~490.92		$	1,~~006~~285.69
Capital investments	$	~~248~~235.97		$	~~264~~248.69		$	~~169~~264.36		$	~~180~~169.3		$	~~121~~180.83
Depreciation and amortization	$	~~204~~184.3		$	204.43		$	~~193~~204.4		$	~~184~~193.74		$	~~176~~184.47
Number of employees		20,800			20,700			17,100			16,000			15,100

2124

The following items were recorded during the periods presented:

In fiscal year 2009:


	•	We recorded a $17.4 million impairment charge ($7.9 million net of taxes and noncontrolling interests) on our Sandora and Sadochok brands. This non-cash charge resulted from our determination that the carrying amounts of these indefinite life intangible assets exceeded their fair value.

	•	We recorded special charges totaling $11.1 million. In CEE, we recorded special charges of $9.8 million related to the restructuring of our Hungary operations, primarily for severance, fixed asset impairments and lease termination costs. We also recorded $1.3 million of special charges, net of recoveries, in the Caribbean and the U.S. related to restructuring costs.

	•	We recorded $6.1 million of fees associated with the pending merger with PepsiCo in “Selling, delivery and administrative (“SD&A”) expenses.”

	•	We recorded a $4.9 million write-down of non-operating assets in the U.S. in “SD&A expenses.”

	•	We recorded a $3.4 million loss related to our decision to exit a multi-employer pension plan in the U.S. in “SD&A expenses.”

	•	On July 3, 2009, we formed a strategic joint venture with CABCORP to combine our Caribbean operations, excluding the Bahamas, with CABCORP’s Central American operations. Upon execution of the joint venture agreement, we deconsolidated our Caribbean business resulting in a non-cash loss of $25.8 million ($23.0 million net of taxes). This loss included the recognition of deferred losses associated with cumulative translation adjustments of $19.2 million and pension losses of $6.5 million, which were previously included in accumulated other comprehensive loss.

	•	We recorded an other-than-temporary marketable securities impairment loss of $2.1 million ($1.3 million net of taxes) to write-off an equity security, Northfield Laboratories, Inc., that was classified as available-for-sale. The loss was recorded in “Other expense, net.”

	•	We recorded a gain of $33.0 million ($20.9 million net of taxes) from the termination of an interest rate swap based on our determination that interest payments associated with a forecasted debt issuance for which the interest rate swap was designated was probable not to occur. The gain was recorded in “Interest expense, net.”

In fiscal year 2008:

• Our fiscal year ends on the Saturday closest to December 31 and, as a result, an additional week is added every five to six years. Fiscal year 2008 consisted of 53 weeks ending on January 3, 2009. All other periods presented in the table above consisted of 52 weeks. Our ~~fiscal year-end policy only impacts the U.S. and Caribbean operations. The~~ CEE operations are based on a calendar year ending December 31, 2008 and, therefore, are not impacted by the 53rd week. Various estimates and assumptions were made to quantify the impact of the additional week of operations. The 53rd week contributed an estimated $52.7 million to net sales, $8.9 million to operating income and $5.7 million to net income attributable to PepsiAmericas, Inc. in fiscal year 2008. • We recorded special charges and adjustments totaling $23.0 million. We recorded $9.0 million of special charges in the Caribbean, which consisted of severance and impairment charges that included a $2.9 million impairment charge related to an intangible asset and a $3.0 million impairment of fixed assets. As a result of various realignment initiatives, we recorded special charges of $4.1 million in the U.S. and $1.3 million in CEE ~~of special charges~~ related to severance, fixed asset impairment and lease termination costs. We also recorded a legal contingency of $2.4 million in our CEE operations. Additionally in fiscal year 2008, we determined that we had improperly accounted for certain U.S. employee benefit obligations in prior years. Accordingly, we recorded an out-of-period accounting adjustment of $6.2 million to increase the benefit obligation as of the end of fiscal year 2008. • We recorded a discontinued operations charge of $15.0 million ($9.2 million net of taxes) related to revised estimates for environmental remediation, legal and related administrative costs. In particular, we revised our remediation plans at several sites during the year, which resulted in an increase in the accrual for remediation costs of $5.0 million, and we increased our accrual for legal costs by $10.0 million.


		revised our remediation plans at several sites during the year, which resulted in an increase in the accrual for remediation costs of $5.0 million, and we increased our accrual for legal costs by $10.0 million.

In fiscal year 2007:

• We recorded special charges of $6.3 million. In the U.S., we recorded $4.8 million of special charges primarily related to severance and relocation costs associated with our strategic realignment to further strengthen our customer focused go-to-market strategy. In CEE, we recorded special charges of $1.5 million related to lease termination costs in Hungary and associated severance costs. • We recorded a gain of $10.2 million related to the sale of railcars and locomotives, which was reflected in “Other expense ~~(income)~~, net.” • We recorded an other-than-temporary marketable securities impairment loss of $4.0 million related to ~~our~~an ~~common~~equity ~~stock~~security, ~~investment in~~ Northfield Laboratories, Inc., that iswas classified as available-for-sale. The loss was recorded in “Other expense ~~(income)~~, net.” • We recorded a discontinued operations charge of $3.2 million ($2.1 million net of taxes). The charge related to revised estimates for environmental remediation, legal, and related administrative costs.

In fiscal year 2006:

	•	We recorded special charges of $13.7 million. We recorded special charges of $11.5 million in the U.S. related to ~~our~~the ~~previously announced~~ strategic realignment of the U.S. sales organization, primarily for severance, relocation and other employee-related costs, including the acceleration of vesting of certain restricted stock awards and consulting services incurred in connection with the realignment ~~project~~initiative. In addition, we recorded special charges in CEE of $2.2 million. The special charges related primarily to a reduction in the workforce and were for severance costs and related benefits.
	•	We recorded an other-than-temporary marketable securities impairment loss of $7.3 million related to ~~our~~an ~~common~~equity ~~stock~~security, ~~investment in~~ Northfield Laboratories, Inc., that iswas classified as available-for-sale. The loss was recorded in “Other expense ~~(income)~~, net.”

In fiscal year 2005:

• We recorded an expense of $6.1 million related to lease exit costs, which resulted from the relocation of our corporate offices in the Chicago area. ~~This~~These ~~expense~~costs ~~was~~were recorded in “~~Selling,~~SD&A ~~delivery and administrative~~ expenses.” • We recorded income of $16.6 million related to the proceeds from the settlement of a class action lawsuit. The lawsuit alleged price fixing related to high fructose corn syrup purchased in the U.S. from July 1, 1991 through June 30, 1995. • We recorded special charges in CEE of $2.5 million. ~~The special charges~~ related to a reduction in the workforce and the consolidation of certain production facilities as we rationalized our cost structure. These special charges were primarily for severance costs, related benefits and asset write-downs. • We recorded an expense of $5.6 million related to a loss on extinguishment of debt. During fiscal year 2005, we completed a cash tender offer related to $550 million of our outstanding debt. The total amount of securities tendered was $388 million. The loss was recorded in “Interest expense, net.” • We recorded a $5.6 million benefit associated with a real estate tax refund concerning a previously sold parcel of land in downtown Chicago. The gain was recorded in “Other expense ~~(income)~~, net.” • We recorded a $1.1 million net benefit to net income attributable to PepsiAmericas, Inc. related to the reversal of valuation allowances for certain net operating loss carryforwards offset by tax contingency requirements. This net benefit was comprised of interest expense of $0.6 million ($0.4 million net of taxes) for the tax contingency requirements recorded in “Interest expense, net” and $1.5 million of tax benefit recorded in “Income taxes.”

~~In fiscal year 2004:~~ 26

• In CEE, we recorded special charges of $3.9 million related to the consolidation of certain production facilities and a reduction in the workforce. These special charges were primarily for severance costs and related benefits, as well as asset write-downs. Special charges are net of reversals of approximately $0.4 million recorded in the fourth quarter due to revisions of estimates of the related liabilities as CEE substantially completed the plans to modify the distribution strategy in all markets. • We recorded a gain of $5.2 million associated with the 2002 sale of a parcel of land in downtown Chicago. The gain reflected the settlement and final payment on the promissory note related to the initial sale, for which we had previously provided a full allowance. The gain was recorded in “Other expense (income), net.” • We recorded a net gain of $2.7 million relating to a state income tax refund. This gain was comprised of $0.7 million for consulting expenses (recorded in “Selling, delivery and administrative expenses”), $0.8 million of interest income (recorded in “Interest expense, net”) and $2.6 million of income tax benefit, net (recorded in “Income taxes”). • We recorded a $3.5 million benefit to net income relating to the reversal of certain tax liabilities due to the settlement of income tax audits through the 2002 tax year. This benefit was comprised of interest income of $1.1 million ($0.7 million net of taxes) recorded in “Interest expense, net” and $2.8 million of tax benefit recorded in “Income taxes.”


Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward-Looking Statements

This Annual Report on Form 10-K contains certain forward-looking statements of expected future developments, as defined in the Private Securities Litigation Reform Act of 1995. The forward-looking statements in this Annual Report on Form 10-K refers to our expectations regarding continuing operating improvement and other matters. These forward-looking statements reflect our expectations and are based on currently available data; however, actual results are subject to future risks and uncertainties, which could materially affect actual performance. Risks and uncertainties that could affect such performance include, but are not limited to, the following: ~~competition~~the outcome of, or developments concerning, our pending merger with PepsiCo, Inc. (“PepsiCo”); competition, including product and pricing pressures; changing trends in consumer tastes; changes in our relationship and/or support programs with PepsiCo and other brand owners; market acceptance of new product and package offerings; weather conditions; cost and availability of raw materials; changing legislation, including tax laws; cost and outcome of environmental claims; availability and cost of capital including changes in our debt ratings; labor and employee benefit costs; unfavorable foreign currency rate fluctuations; cost and outcome of legal proceedings; integration of acquisitions; failure of information technology systems; and general economic, business, regulatory and political conditions in the countries and territories where we operate. See “Risk Factors” in Item 1A for additional information.

These events and uncertainties are difficult or impossible to predict accurately and many are beyond our control. We assume no obligation to publicly release the result of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

Executive Overview

What We Do

We manufacture, distribute, and market a broad portfolio of beverage products in the U.S., and ~~CEE~~Central and ~~the~~Eastern Europe ~~Caribbean~~(“CEE”). We sell a variety of brands that we bottle under franchise agreements with various brand owners, the majority with PepsiCo or PepsiCo joint ventures. In some territories, we manufacture, package, sell and distribute our own brands, such as Sandora, Sadochok and ~~Toma.~~ Toma. We also distribute snack foods in certain markets. We serve a significant portion of 19 states throughout the ~~central~~ central region of the U.S. In CEE, we serve Ukraine, ~~Poland,~~ Poland, Romania, Hungary, the Czech Republic, and Slovakia, with distribution rights in Moldova, Estonia, Latvia and Lithuania. In addition, we have an equity investment in Agrima, ~~which~~JSC (“Agrima”), which produces, sells and distributes PepsiCo products and other beverages in Bulgaria. ~~In the Caribbean, we serve Puerto Rico,~~ ~~Jamaica and Trinidad and Tobago, with distribution rights in the Bahamas and Barbados.~~

We have entered into a merger agreement with PepsiCo and Pepsi-Cola Metropolitan Bottling Company, Inc., a wholly owned subsidiary of PepsiCo (“Metro”), dated August 3, 2009, pursuant to which our company will merge with and into Metro, with Metro continuing as the surviving company and a wholly owned subsidiary of PepsiCo. Under the terms of the merger agreement, PepsiCo will acquire all outstanding shares of PepsiAmericas common stock it does not already own for the price of $28.50 in cash or 0.5022 shares of PepsiCo common stock, subject to proration provisions which provide that an aggregate 50 percent of the outstanding PepsiAmericas common stock will be converted into the right to receive common stock of PepsiCo and an aggregate 50 percent of the outstanding PepsiAmericas common stock will be converted into

the right to receive cash. We hope to close the merger by the end of February 2010, subject to regulatory approval and the satisfaction or waiver of other customary closing conditions.

Results of Operations

In the discussion of our results of operations below, the number of bottle and can cases sold is referred to as volume. Constant territory refers to the results of operations excluding the non-comparable territories year-over-year. For fiscal year ~~2008~~2009 comparisons, this excluded the ~~first~~last ~~eight~~six months ~~and~~of the ~~first~~Caribbean ~~sixteen~~operating ~~days~~results ofin ~~September~~fiscal ~~for~~year ~~Sandora~~2008, as as we ~~consolidated~~deconsolidated ~~Sandora~~our ~~operating~~Caribbean ~~results~~business ~~starting~~at inthe end of the ~~mid-September~~second ~~2007~~quarter of 2009. For fiscal year ~~2007~~2008 comparisons, this excluded the ~~operating~~first ~~results~~eight ofmonths ~~Sandora~~ and the first ~~seven~~sixteen days of ~~months~~September offor ~~Romania~~Sandora LLC (“Sandora”), as we consolidated ~~Romania~~Sandora operating results starting in ~~August 2006~~mid-September 2007. Net pricing is net sales divided by the number of cases and gallons sold for our core businesses, which include bottles and cans (including bottle and can volume from vending equipment sales), foodservice and export sales. Changes in net pricing include the impact of sales price (or rate) changes, as well as the impact of foreign currency and brand, package and geographic mix. Net pricing and reported volume amounts exclude contract, commissary, and vending (other than bottles and cans) transactions. Contract sales represent sales of manufactured product to other franchise bottlers and typically decline as excess manufacturing capacity is utilized. Net pricing and volume also exclude activity associated with snack food products. Cost of goods sold per unit is the cost of goods sold for our core businesses, excluding the impact of unrealized gains or losses on derivatives not designated as hedging instruments, divided by the related number of cases and gallons sold. Changes in cost of goods sold per unit include the impact of cost changes, as well as the impact of foreign currency and brand, package and geographic mix.

Fiscal 24Year 2009 Key Financial Results


	•	Worldwide volume decreased 10.1 percent, primarily due to volume declines in CEE and the U.S., as well as the impact of the Caribbean deconsolidation.

	•	Worldwide net sales decreased 10.4 percent, mainly due to the impact of foreign currency and the Caribbean deconsolidation. Volume declines were partially offset by net selling price increases on a currency neutral basis across all geographies.

	•	Worldwide cost of goods sold per unit decreased 0.8 percent, primarily driven by the impact of foreign currency, offset in part by higher raw material costs in the U.S.

	•	We generated operating income of $380.9 million, which included $42.9 million of special charges and other items impacting comparability, including asset impairment charges and merger related fees, as described in “Items Impacting Comparability.” Operating income in fiscal year 2008 of $473.2 million included special charges and adjustments of $23.0 million.

	•	We reported diluted earnings per share of $1.46 for the fiscal year 2009, which included a negative $0.06 impact from special charges and a combined $0.17 negative impact from other items impacting comparability as described in “Items Impacting Comparability.” This compared to diluted earnings per share of $1.78 for the fiscal year 2008, which included a loss from discontinued operations of $0.07, a negative $0.14 impact from special charges and adjustments, and an estimated positive $0.04 contribution from the 53^rd week.

	•	We estimate that the 53^rd week in fiscal 2008 contributed approximately 1 percentage point to the year over year decline in volume, net sales, costs of goods sold and selling, delivery and administrative (“SD&A”) expenses and 1.5 percentage points to the operating income decline.

	•	The impact of foreign currency unfavorably impacted net sales by 5.9 percentage points and operating income by 26.7 percentage points.

	•	The effective income tax rate increased to 36.0 percent from 30.4 percent in fiscal year 2008 primarily due to the impact of the deconsolidation of our Caribbean business and a change in the geographic mix of earnings and the associated varying statutory tax rates.

~~goods~~• ~~sold~~We ~~per~~generated ~~unit~~cash ~~include~~flows ~~the~~from ~~impact~~operating activities of ~~cost~~$308.6 ~~changes~~million in fiscal year 2009, aswhich ~~well as~~included a decrease of $150.0 million related to the ~~impact~~termination of ~~foreign~~our ~~currency~~trade ~~and~~receivables ~~brand~~securitization program. This compared to cash flows from operating activities of $500.6 million in fiscal year 2008, ~~package~~which ~~and geographic~~included ~~mix~~the benefit of the 53rd week.

~~Fiscal~~Our Focus ~~Year~~in ~~2008~~Fiscal ~~Key~~Year ~~Financial Results~~2009

• Worldwide ~~volume increased 6~~.8 For percent, primarily due to the incremental impact of acquisitions and constant territory growth in CEE, partly offset by volume declines in the U.S. and the Caribbean. • Worldwide net sales increased 10.2 percent, due to acquisitions, volume growth in CEE and net selling price increases across all markets, which included a 4.4 percent increase on a local currency basis. • Worldwide cost of goods sold per unit increased 5.3 percent, primarily driven by rate which reflected raw material cost increases across all geographies. • We generated operating income of $473.2 million, which included special charges and adjustments of $23.0 million. Operating income in fiscal year ~~2007~~2009, ~~of $436.1 million included special charges of $6.3 million. • We reported~~ diluted earnings per share of $1.7846 ~~for~~declined ~~the~~18 percent ~~fiscal year 2008, which included a loss from discontinued operations of $0.07 and a negative $0.14 impact from special charges and adjustments,~~ compared to ~~diluted earnings per share of $1.64 in~~ the prior year, ~~which~~due ~~included a loss from discontinued operations of $0.02. • The 53rd week contributed approximately 1 percentage point of growth each~~ to ~~volume,~~significant ~~net~~foreign ~~sales,~~currency ~~cost~~pressures ~~of goods sold~~ and volume ~~selling,~~declines ~~delivery~~as ~~and~~global ~~administrative~~economic ~~(“SD&A”)~~conditions ~~expenses~~remained difficult. ~~The~~Our ~~net~~disciplined ~~contribution~~pricing ~~was~~strategy, ~~approximately~~brand 2portfolio expansion ~~percentage~~initiatives ~~points to operating income~~ and ~~$0.04~~productivity toimprovements ~~diluted~~helped offset ~~earnings~~the ~~per~~volume ~~share.~~softness ~~• The impact of foreign currency favorably benefited net sales 1.6 percentage points~~ and ~~operating~~higher ~~income~~raw ~~4.0~~material ~~percentage~~costs ~~points, and unfavorably impacted cost of goods sold 1.0 percentage point and SD&A expenses 2.0 percentage points. • The effective income tax rate decreased~~ to drive ~~30.4~~year ~~percent~~over ~~from 34.3 percent in fiscal~~ year ~~2007~~operating ~~primarily~~profit ~~due~~growth toon a ~~favorable~~currency neutral ~~country~~basis. ~~mix~~Our oforganization ~~pre-tax~~continued ~~earnings.~~its •focus Weon ~~generated~~ cash ~~flows~~flow and ~~from~~drove ~~operating~~improvements ~~activities of $500.6 million~~ in ~~fiscal~~working ~~year 2008 compared to $433~~capital.~~5 million in fiscal year 2007.~~

U.S. operations. Changing consumer demand and higher raw material costs continued to challenge our U.S. business. Carbonated soft drink volume declined 2 percent, an improvement from the prior year rate of decline as we benefited from a renewed focus on core brands and an expanded product portfolio. Our ~~Focus~~single-serve business was down 5 percent due to declines in ~~Fiscal~~the ~~Year~~foodservice ~~2008~~channel, reflecting the difficult economic environment. Non-carbonated beverage volume declined 10 percent driven by lower volumes in Aquafina take-home package and teas. Despite the economic pressures, operating profits grew 2.2 percent over prior year due to higher net pricing, productivity initiatives and cost management. Our most significant productivity initiative, Customer Optimization to the Third Power, or CO3, drove improvements in forecasting accuracy, miles driven and the level of out-of-stocks, and resulted in lower SD&A expenses.

~~Worldwide~~International operations. ~~For~~Foreign ~~fiscal~~currency headwinds ~~year~~and ~~2008~~difficult economic conditions, weparticularly ~~achieved~~in ~~diluted~~emerging ~~earnings~~markets, ~~per~~drove ~~share~~CEE ~~growth~~operating ofprofits 8down 71.58 percent compared to prior year. ~~Strong~~Volumes were lower by ~~brands~~12.8 percent, areflecting ~~diverse~~double ~~geographic~~digit ~~mix~~volume ~~and~~declines ~~a capable organization~~in ~~contributed~~Romania toand ~~our~~Ukraine. ~~results~~We ~~for~~executed ~~fiscal~~disciplined ~~year~~pricing ~~2008 despite~~strategies ~~increasing~~and ~~market~~productivity ~~challenges,~~initiatives ~~such~~to ashelp ~~slowing~~mitigate ~~global~~the ~~consumer~~impact of ~~demand,~~foreign ~~tightening~~currency ~~credit~~and ~~markets,~~lower ~~weakening~~volumes. ~~macroeconomic~~Despite these challenges, we ~~conditions~~believe ~~and~~there ~~volatility~~are opportunities in the ~~commodity~~CEE ~~and currency~~ markets. We expanded Weour ~~managed~~water ~~through~~presence ~~the~~in ~~economic~~several ~~pressures~~markets, byadded ~~executing~~flavored ~~our~~carbonated ~~pricing~~soft ~~strategy~~drinks toin ~~offset~~Ukraine, ~~higher~~and ~~raw~~continued ~~material~~our ~~costs~~“feet ~~and~~on ~~driving~~the ~~sustainable~~street” ~~cost~~sales ~~savings~~force ~~through~~initiative ~~ongoing~~to ~~productivity~~drive new distribution. ~~initiatives.~~In Weaddition, ~~also~~we ~~benefited~~continued ~~from~~to ~~the~~invest ~~favorable~~in ~~impact~~capacity, ofwith a new ~~foreign~~plant ~~currency~~in ~~rates,~~Romania aand ~~lower~~new ~~effective~~carbonated ~~tax~~soft ~~rate~~drink ~~and~~lines ~~the Sandora~~in ~~acquisition~~Ukraine.

U.S. operations. Price increases in raw materials and changing consumer demand challenged our business in fiscal year 2008. Non-carbonated beverage volume declined 8 percent driven by declines in the Aquafina take-home package and lower Trademark Lipton volume. A difficult economic environment drove declines in single-serve volume of 4 percent, due to declines in the foodservice and convenience and gas channels. The foodservice channel represents approximately 45 percent of our single-serve business. Carbonated soft drink volume declined 3 percent driven by declines in Trademark Pepsi, partly offset by growth in Trademark Mountain Dew of almost 1 percent. We were able to raise our average net selling price to cover higher raw material costs, and we implemented productivity initiatives to provide cost savings and enhance our capabilities.

International operations. Our international markets continue to be a key driver of growth. These markets generated approximately $1.5 billion in net sales, an increase of 37.7 percent from the prior year. In

CEE, the acquisition of Sandora, coupled with growth in the Romania and Poland markets, drove a 34.7 percent increase in volume. Net selling price increases on a local currency basis and the favorable impact of foreign currency offset higher raw material costs.

In the Caribbean, volume declined 3.9 percent due to continued soft economic conditions and competitive pressures in Puerto Rico, partly offset by volume growth in Jamaica. The operating loss was $6.6 million, a change from operating income of $4.0 million in fiscal year 2007, driven primarily by costs incurred for severance and asset impairments resulting from a realignment initiative executed in fiscal year 2008.

Focusing on Fiscal Year 2009

While we are mindful of the challenges and volatility that we face in this uncertain economic environment, we believe that we have the fundamentals, capability and financial strength to navigate within this new economic landscape. We expect to face two significant challenges in fiscal year 2009: consumers’ reaction to their economic environment and foreign currency volatility in CEE. We have established plans that we expect will address these challenges. In fiscal year 2009, our strategy will be to increase our focus on core brands, productivity and value-oriented innovation and packaging, both in the U.S. and in CEE.

In the U.S., we have a new approach to our core brands, Pepsi, Mountain Dew and Sierra Mist, called Refresh Everything that includes new graphics and advertising. Our sales and marketing calendar includes brand extensions like Sierra Mist Ruby Red Splash, and newly added brands like Crush and ROCKSTAR Energy Drink. We anticipate our tea portfolio will benefit from sales of the Lipton jug package, a value-oriented innovation, as well as Sparkling Green Tea and Tazo. We will introduce new graphics, flavors and formulations in our hydration portfolio, including SoBe Lifewater and Propel. Additionally, we will launch the new Aquafina bottle, which supports our sustainability efforts and lowers our costs by further light-weighting the bottle.

We will continue to focus on productivity initiatives and capability through customer optimization to the third power, or CO3, with the goal of improving forecasting accuracy and reducing out-of-stocks at our customers. We are rolling out suggested order technology and are installing global positioning systems on our trucks. We are also taking steps to reduce controllable costs, including specific actions that impact the compensation of our corporate executives, as well as discretionary spending.

Lastly, we are reassessing certain package sizes and configurations. We expect to capture more value-oriented consumers through a greater emphasis on different package sizes. For carbonated soft drinks, we are assessing our new price pack architecture where we are testing 8 and 18-pack can configurations to replace the current 12-pack package. We are testing the 8-pack package in certain markets, and further differentiating this packaging by channel to match consumer shopping behavior. We will be emphasizing the one-liter and two-liter carbonated soft drink and Lipton jug packages, as well as a more value-oriented promotional calendar.

Internationally, we anticipate a decline in local country gross domestic product growth rates and continued foreign currency volatility. Despite these challenges, we believe there are opportunities in the CEE market. We plan to continue spending on advertising and marketing and introducing new products. We expect to utilize our “feet on the street” sales force initiative to drive new distribution opportunities and gain higher penetration in higher margin channels. Lastly, we continue to invest in capacity, with a new plant in Romania and new carbonated soft drink lines in Ukraine.

To further address the challenges we face in CEE, we plan to put a greater emphasis on value-oriented packages, categories and promotions. We will expand our brand portfolio through the introduction of water brands in Romania and mainstream flavored carbonated soft drinks in Ukraine. Finally, we will address foreign currency volatility by increasing our net pricing on a local currency basis, reducing costs, and mitigating volatility with hedges, which were executed during fiscal year 2008.

Our ability to generate significant operating cash flow makes several options available to us, including reinvesting in our existing business, reducing debt, repurchasing our stock, paying dividends and pursuing

acquisitions with an appropriate expected economic return. We will continue to examine the optimal uses of cash to maximize shareholder value.

The above overview should not be considered by itself in determining full disclosure and should be read in conjunction with the other sections of this Annual Report on Form 10-K.

Items Impacting Comparability

~~Acquisitions~~Intangible Assets Impairment

In fiscal year ~~2007~~2009, we ~~formed~~recorded a ~~joint~~$17.4 million ~~venture with PepsiCo to~~impairment ~~acquire~~charge ~~an interest in Sandora, the leading juice company in Ukraine~~($7.9 million ~~Under~~net ~~the terms~~ of ~~the~~taxes ~~joint venture agreement, we hold a 60 percent interest~~ and ~~PepsiCo holds a 40 percent~~noncontrolling ~~interest.~~interests) Inon ~~August~~our ~~2007, the joint venture acquired 80 percent of~~ Sandora. Inand ~~November~~Sadochok ~~2007, the joint venture completed the acquisition of the remaining 20 percent interest~~brands. ~~Beginning in September 2007, we fully consolidated the~~ ~~results~~This ofnon-cash ~~operations~~charge ofresulted ~~the~~from ~~joint venture and report minority interest in~~ our ~~Consolidated~~determination ~~Financial~~that ~~Statements. Due to~~ the ~~timing~~carrying ofamount ~~the receipt~~ of ~~available~~these ~~financial~~indefinite ~~information,~~life weintangible assets ~~record~~exceeded ~~results~~their onfair ~~a one-month lag basis~~value.

In the third quarter of 2007, we purchased a 20 percent interest in a joint venture that owns Agrima. Agrima produces, sells and distributes PepsiCo products and other beverages throughout Bulgaria. We record equity in net earnings (loss) of nonconsolidated companies in our Consolidated Financial Statements. Due to the timing of the receipt of available financial information, we record results on a one-quarter lag basis.

Special Charges and Adjustments

In fiscal year ~~2008~~2009, we recorded special charges ~~and adjustments~~ totaling ~~$23.0 million. We recorded special charges of~~ $1611.81 million. In ~~the Caribbean~~CEE, we recorded ~~$9.0 million~~ of special charges, ~~which consisted~~ of ~~severance and impairment charges that included a~~ $2.9.8 million ~~impairment charge~~ related to anthe ~~intangible asset~~restructuring ~~and a $3.0 million impairment~~ of ~~fixed~~our ~~assets. As a~~Hungary ~~result~~operations, ofprimarily ~~various~~for ~~realignment initiatives~~severance, wefixed ~~recorded~~asset ~~special~~impairments and ~~charges~~lease oftermination $4costs.~~1 million~~ inWe ~~the~~also ~~U.S. and~~ recorded $1.3 million ~~in CEE related to severance, fixed asset~~of ~~impairment~~special ~~and~~charges, ~~lease~~net ~~termination~~of ~~costs.~~recoveries, Wein ~~also~~the ~~recorded~~Caribbean aand ~~legal~~the ~~contingency of $2~~U.4S. ~~million~~related into ~~our~~restructuring ~~CEE operations~~costs.

In fiscal year 2008, we ~~determined~~recorded ~~that~~special wecharges ~~had~~and ~~improperly~~adjustments ~~accounted~~totaling ~~for certain U~~$23.S.0 ~~employee~~million. ~~benefit~~We ~~obligations~~recorded inspecial charges of ~~prior years~~$16.8 million. ~~Accordingly~~In the Caribbean, we recorded an ~~out-~~$9.0 million of~~-period~~ special charges, which consisted of ~~accounting~~severance ~~adjustment~~and ofimpairment charges that included a $6.2.9 million toimpairment ~~properly~~charge ~~state~~related ~~the~~to an intangible ~~benefit~~asset ~~obligation~~and asa of$3.0 million ~~the~~impairment ~~end~~ of ~~fiscal~~fixed ~~year 2008~~assets. ~~This~~As a ~~adjustment~~result ~~was~~of various realignment initiatives, we recorded asspecial charges anof ~~increase~~$4.1 million in ~~“Other~~the ~~current~~U.S. and ~~liabilities”~~$1.3 million in ~~the~~CEE ~~Consolidated~~related ~~Balance~~to ~~Sheet.~~severance, fixed

asset impairment and lease termination costs. We also recorded a legal contingency of $2.4 million in our CEE operations.

In fiscal year 2008, we determined that we had improperly accounted for certain U.S. employee benefit obligations in prior years. Accordingly, we recorded an out-of-period accounting adjustment of $6.2 million to increase the benefit obligation as of the end of fiscal year 2008. This adjustment was recorded as an increase in “Payables and other current liabilities” in the Consolidated Balance Sheet.

In fiscal year 2007, we recorded special charges of $6.3 million. In the U.S., we recorded $4.8 million of special charges primarily related to severance and relocation costs associated with our strategic realignment to further strengthen our customer focused go-to-market strategy. In CEE, we recorded special charges of $1.5 million related to lease termination costs in Hungary and associated severance costs.

~~In fiscal year 2006, we recorded special charges of~~ ~~$13.7 million. We recorded special charges of~~PepsiCo ~~$11.5 million~~Merger ~~in the U.S. related to our previously~~Fees announced strategic realignment of the U.S. sales organization, primarily for severance, relocation and other employee-related costs, including the acceleration of vesting of certain restricted stock awards and consulting services incurred in connection with the realignment project. In addition, we recorded special charges in CEE of $2.2 million. The special charges related primarily to a reduction in the workforce and were for severance costs and related benefits.

We have entered into a merger agreement with PepsiCo, dated August 3, 2009, whereby PepsiAmericas will merge with and into a wholly owned subsidiary of PepsiCo, subject to regulatory approval and the satisfaction or waiver of other customary closing conditions. In fiscal year 2009, we recorded $6.1 million of fees associated with the pending merger with PepsiCo in “SD&A expenses” in our U.S. geographic segment. In connection with this merger transaction, we have retained certain external advisors and expect to incur aggregate fees of approximately $30 million.

Non-operating Assets Impairment

In fiscal year 2009, we recorded a $4.9 million write-down of non-operating assets in the U.S. in “SD&A expenses.”

Loss from Multi-Employer Pension Plans

In fiscal year 2009, we recorded a $3.4 million loss related to our decision to exit a multi-employer pension plan in the U.S. in “SD&A expenses.”

Loss from Deconsolidation of Business

On July 3, 2009, we formed a strategic joint venture with CABCORP to combine PepsiAmericas’ Caribbean operations, excluding the Bahamas, with CABCORP’s Central American operations. Upon execution of the joint venture agreement, we deconsolidated our Caribbean business resulting in a non-cash loss of $25.8 million ($23.0 million net of taxes). This loss included the recognition of deferred losses associated with cumulative translation adjustments of $19.2 million and unrecognized pension losses of $6.5 million, which were previously included in accumulated other comprehensive loss.

Beginning in the third quarter of 2009, earnings from the strategic joint venture with CABCORP are recorded in “Equity in net earnings (loss) of nonconsolidated companies” on the Consolidated Statements of Income and operating results for the Bahamas are included in our U.S. geographic segment. Due to the timing of the receipt of available financial information, we record equity in net earnings from the joint venture on a one-month lag basis.

Marketable Securities Impairment

In fiscal years ~~2007~~2009 and ~~2006~~2007, we recorded other-than-temporary impairment losses of $42.01 million and $74.30 million, respectively, ~~related~~ to awrite-off ~~common~~an ~~stock~~equity ~~investment~~security, ~~that is~~Northfield Laboratories, Inc., that was classified as available-for-sale on our Consolidated Balance Sheets. The losses were recorded in “Other expense, net.”

Gain 27from Interest Rate Swap Termination

In fiscal year 2009, we recognized a gain of $33.0 million ($20.9 million net of taxes) from the termination of an interest rate swap based on our determination that interest payments associated with a

forecasted debt issuance for which the interest rate swap was designated was probable not to occur. The gain was recorded in “Interest expense, net.”

Gain on Sale of Non-Core Property

In fiscal year 2007, we recorded a gain of $10.2 million related to the sale of non-core property, which consisted of railcars and locomotives. The gain was recorded in “Other expense, net.”

53rd Week in Fiscal Year 2008

Our ~~U.S. and Caribbean operations end their~~ fiscal year ends on the Saturday closest to December 31, and as a result, a ~~53rd~~ 53rd week is added every five or six years. Fiscal year 2008 consisted of 53 weeks while fiscal years ~~2007~~2009 and ~~2006~~2007 each consisted of 52 weeks. Our CEE operations are based on a calendar year ending December 31 and, therefore, are not impacted by the 53rd week. Various estimates and assumptions were made to quantify the impact of the additional week of operations. The table below summarizes the estimated impact of the ~~53rd~~ 53rd week on fiscal year 2008 (in millions):

	53rd Week Impact
	U.S.		Caribbean		Worldwide
Net sales	$	48.5	$	4.2	$	52.7
Cost of goods sold		28.4		3.2		31.6
Selling, delivery and administrative expenses		11.3		0.9		12.2
SD&A expenses		11.3		0.9		12.2
Operating income		8.8		0.1		8.9
Net income						5.7
Net income attributable to PepsiAmericas, Inc.		—		—		5.7

28Acquisitions

In fiscal year 2007, we formed a joint venture with PepsiCo to acquire an interest in Sandora, the leading juice company in Ukraine. Under the terms of the joint venture agreement, we hold a 60 percent interest and PepsiCo holds the remaining 40 percent interest. In August 2007, the joint venture acquired 80 percent of Sandora. In November 2007, the joint venture completed the acquisition of the remaining 20 percent interest. Beginning in September 2007, we fully consolidated the results of operations of the joint venture and report the noncontrolling interest in our Consolidated Financial Statements. Due to the timing of the receipt of available financial information, we record results on a one-month lag basis.

In the third quarter of 2007, we purchased a 20 percent interest in a joint venture that owns Agrima. Agrima produces, sells and distributes PepsiCo products and other beverages throughout Bulgaria. Due to the timing of the receipt of available financial information, we record results in “Equity in net earnings (loss) of nonconsolidated companies” on a one-quarter lag basis.

Operating Results — 2009 compared with 2008

Volume. Sales volume (decline) growth for fiscal years 2009 and 2008 were as follows:


Volume	2009			2008

U.S.		(5.0	)%		(2.7	)%
CEE		(12.8	)%		34.7	%
Caribbean		(58.2	)%		(3.9	)%
Worldwide		(10.1	)%		6.8	%


	2009 Compared to 2008
Volume Change	U.S.			CEE			Caribbean			Worldwide

Constant territory volume		(3.6	)%		(12.8	)%		(15.9	)%		(7.0	)%
Impact of 53rd week		(1.4	)%		—			—			(0.9	)%
Deconsolidation of Caribbean		—			—			(42.3	)%		(2.2	)%

Change in volume		(5.0	)%		(12.8	)%		(58.2	)%		(10.1	)%

In fiscal year 2009, worldwide volume declined 10.1 percent, with constant territory volume declines across all our geographic segments driven by difficult economic conditions. Additionally, the deconsolidation of the Caribbean business reduced worldwide volume by 2.2 percentage points.

Volume in the U.S. declined 5 percent in fiscal year 2009 compared to fiscal year 2008. The lapping of the 53rd week contributed an estimated 1.4 percentage points to the volume decline. Carbonated soft drink volume decreased 2 percent compared to the prior year period. This decline was an improvement from the prior year rate of decline as we benefited from a renewed focus on core brands and an expanded product portfolio. Non-carbonated soft drinks decreased 10 percent, which reflected a continued decline in the low margin Aquafina take-home package and teas. Single-serve volume grew in the retail channel while softness in the foodservice channel drove overall single-serve volume down 5 percent in fiscal year 2009. Foodservice represents approximately 40 percent of our single-serve business.

Volume in CEE declined 12.8 percent in fiscal year 2009 compared to fiscal year 2008, reflecting continued category softness as a result of difficult economic conditions, particularly in our emerging markets. Additionally, volume was adversely impacted by softness in the third-party distributor business in Romania and the export business in Ukraine. Volume in Poland grew modestly, reflecting a more stable economic environment and the benefits from our “feet on the street” sales force initiative that helped drive new distribution outlets.

Volume in the Caribbean declined 58.2 percent in fiscal year 2009 compared to the same period last year. The deconsolidation of the Caribbean business reduced volume by 42.3 percentage points. The remaining decrease was driven mainly by a weaker economy and competitive pressures in Puerto Rico.

Net Sales. Net sales and net pricing statistics for fiscal years 2009 and 2008 were as follows (dollar amounts in millions):


Net Sales	2009		2008		Change

U.S.	$	3,405.2	$	3,429.9		(0.7	)%
CEE		915.2		1,260.9		(27.4	)%
Caribbean		100.9		246.4		(59.1	)%

Worldwide	$	4,421.3	$	4,937.2		(10.4	)%


	2009 Compared to 2008
Net Sales Change	U.S.			CEE			Caribbean			Worldwide

Volume impact *		(3.1	)%		(11.8	)%		(13.8	)%		(6.1	)%
Net price per case, excluding impact of foreign currency		4.1	%		7.7	%		7.0	%		5.6	%
Impact of foreign currency		—			(21.5	)%		(7.4	)%		(5.9	)%
Impact of 53rd week		(1.4	)%		—			—			(1.0	)%
Deconsolidation of Caribbean		—			—			(43.5	)%		(2.6	)%
Non-core		(0.3	)%		(1.8	)%		(1.4	)%		(0.4	)%

Change in net sales		(0.7	)%		(27.4	)%		(59.1	)%		(10.4	)%


*		The amounts in this table represent the dollar impact on net sales due to changes in volume and are not intended to equal the absolute change in volume.


Net Pricing Growth (Decline) **	2009			2008

U.S.		4.1	%		4.1	%
CEE		(16.9	)%		12.6	%
Caribbean		(3.6	)%		4.6	%
Worldwide		(1.0	)%		4.2	%


**		Includes the impact from deconsolidation, acquisitions and foreign currency on core net sales.

Net sales decreased $515.9 million, or 10.4 percent, to $4,421.3 million in fiscal year 2009 compared to $4,937.2 million in fiscal year 2008. The decrease was mainly attributable to the unfavorable impact of foreign currency, which was responsible for 5.9 percentage points of the decline, and a decrease in volume. Strong pricing in all geographies drove net pricing on a currency neutral basis up 5.6 percent, helping to mitigate the impact of lower volumes, higher raw material costs and foreign currency headwinds.

Net sales in the U.S. for fiscal year 2009 decreased $24.7 million, or 0.7 percent, to $3,405.2 million from $3,429.9 million in the prior year. The decrease was due to the lapping of the 53^rd week, which we estimate contributed $48.5 million in net sales in fiscal year 2008, and lower volumes. Net pricing grew 4.1 percent, driven mainly by rate increases to cover higher raw material costs.

Net sales in CEE for fiscal year 2009 decreased $345.7 million, or 27.4 percent, to $915.2 million from $1,260.9 million in fiscal year 2008. Foreign currency contributed 21.5 percentage points of the decrease, with the remaining decrease primarily attributed to lower volume associated with difficult economic conditions. This decrease was offset partly by an increase in net pricing of 7.7 percent on a currency neutral basis, driven by increases in rate and a positive contribution from package mix.

Net sales in the Caribbean decreased $145.5 million, or 59.1 percent in fiscal year 2009 to $100.9 million from $246.4 million in fiscal year 2008. The deconsolidation of the Caribbean business reduced net sales by 43.5 percentage points. The remaining decrease in net sales reflected a decline in constant territory volume and the unfavorable impact of foreign currency.

Cost of Goods Sold. Cost of goods sold and cost of goods sold per unit statistics for fiscal years 2009 and 2008 were as follows (dollar amounts in millions):


Cost of Goods Sold	2009		2008		Change

U.S.	$	2,010.2	$	2,015.4		(0.3	)%
CEE		568.8		755.6		(24.7	)%
Caribbean		75.4		184.6		(59.2	)%

Worldwide	$	2,654.4	$	2,955.6		(10.2	)%


	2009 Compared to 2008
Cost of Goods Sold Change	U.S.			CEE			Caribbean			Worldwide

Volume impact *		(3.0	)%		(11.6	)%		(13.9	)%		(5.9	)%
Cost per case, excluding impact of foreign currency		4.6	%		—			6.7	%		3.7	%
Impact of foreign currency		—			(12.3	)%		(7.7	)%		(3.5	)%
Impact of 53rd week		(1.4	)%		—			—			(1.0	)%
Deconsolidation of Caribbean		—			—			(42.8	)%		(3.2	)%
Non-core		(0.5	)%		(0.8	)%		(1.5	)%		(0.3	)%

Change in cost of goods sold		(0.3	)%		(24.7	)%		(59.2	)%		(10.2	)%


*		The amounts in this table represent the dollar impact on cost of goods sold due to changes in volume and are not intended to equal the absolute change in volume.


Cost of Goods Sold per Unit Increase (Decrease) **	2009			2008

U.S.		4.6	%		4.4	%
CEE		(13.7	)%		17.0	%
Caribbean		(3.4	)%		4.9	%
Worldwide		(0.8	)%		5.3	%


**		Includes the impact from deconsolidation, acquisitions and foreign currency on core cost of goods sold.

Cost of goods sold decreased $301.2 million, or 10.2 percent, to $2,654.4 million in fiscal year 2009 from $2,955.6 million in the prior year. The decrease was driven mainly by the decline in volume, favorable impact of foreign currency, and the deconsolidation of the Caribbean business. These decreases were partially offset by higher raw material costs in the U.S. and Caribbean. Cost of goods sold per unit on a currency neutral basis increased 3.7 percent in fiscal year 2009 compared to the same period in 2008.

In the U.S., cost of goods sold decreased $5.2 million, or 0.3 percent, to $2,010.2 million in fiscal year 2009 from $2,015.4 million in the prior year. The decrease was mainly driven by lower volume and lapping of the 53^rd week, partly offset by a cost of goods sold per unit increase of 4.6 percent due mainly to higher raw material costs.

In CEE, cost of goods sold decreased $186.8 million, or 24.7 percent, to $568.8 million in fiscal year 2009 compared to $755.6 million in the prior year. Foreign currency contributed 12.3 percentage points to the decrease in cost of goods sold, with the remaining decrease primarily attributed to a decline in volume. There was no change in the cost of goods sold per unit on a currency neutral basis in fiscal year 2009 compared to fiscal year 2008. Lower juice concentrate and packaging material costs offset increases in other raw material costs.

In the Caribbean, cost of goods sold decreased $109.2 million, or 59.2 percent, to $75.4 million in fiscal year 2009 compared to $184.6 million in fiscal year 2008. The deconsolidation of the Caribbean business reduced cost of goods sold by 42.8 percentage points. The remaining decrease in cost of goods sold was driven by a decline in constant territory volume and the favorable impact of foreign currency.

Selling, Delivery and Administrative Expenses. SD&A expenses and SD&A expense statistics for fiscal years 2009 and 2008 were as follows (dollar amounts in millions):


SD&A Expenses	2009		2008		Change

U.S.	$	1,054.1	$	1,070.4		(1.5	)%
CEE		278.0		355.6		(21.8	)%
Caribbean		25.4		59.4		(57.2	)%

Worldwide	$	1,357.5	$	1,485.4		(8.6	)%


	2009 Compared to 2008
SD&A Expense Change	U.S.			CEE			Caribbean			Worldwide

Cost impact, excluding items listed below		(0.4	)%		(7.0	)%		(6.7	)%		(2.2	)%
Impact of foreign currency		—			(14.8	)%		(8.1	)%		(3.8	)%
Impact of 53rd week		(1.1	)%		—			—			(0.8	)%
Deconsolidation of Caribbean		—			—			(42.4	)%		(1.8	)%

Change in SD&A expense		(1.5	)%		(21.8	)%		(57.2	)%		(8.6	)%


SD&A Expenses as a Percent of Net Sales	2009			2008

U.S.		31.0	%		31.2	%
CEE		30.4	%		28.2	%
Caribbean		25.2	%		24.1	%
Worldwide		30.7	%		30.1	%

In fiscal year 2009, SD&A expenses decreased $127.9 million, or 8.6 percent, to $1,357.5 million from $1,485.4 million in the prior year. Foreign currency reduced SD&A expenses by 3.8 percentage points in fiscal year 2009. The deconsolidation of the Caribbean business reduced SD&A expenses by 1.8 percentage points. The remainder of the decrease in SD&A expense was primarily a result of the company’s global productivity and cost containment initiatives, as well as the impact of lower volumes.

In the U.S., SD&A expenses decreased $16.3 million, or 1.5 percent, to $1,054.1 million in fiscal year 2009 compared to $1,070.4 million in the prior year. The lapping of the 53^rd week in fiscal year 2008 drove an estimated 1.1 percentage points of the decline in SD&A expenses. The remainder of the decrease was due mainly to the impact of our productivity and cost containment initiatives and lower fuel costs, as well as the impact of lower volumes. These cost savings offset the $6.1 million of fees associated with the PepsiCo merger, $4.9 million write-down of non-operating assets and $3.4 million loss from multi-employer pension plans included in SD&A expenses in fiscal year 2009. As a percentage of net sales, SD&A expenses decreased to 31.0 percent compared to 31.2 percent in fiscal year 2008.

In CEE, SD&A expenses decreased $77.6 million, or 21.8 percent, to $278.0 million in fiscal year 2009 compared to $355.6 million in the prior year. Foreign currency contributed 14.8 percentage points to the decrease. The remaining decrease was mainly due to lower volume, the impact of our productivity and restructuring initiatives and lower advertising costs. As a percentage of net sales, SD&A expenses increased to 30.4 percent compared to 28.2 percent in fiscal year 2008 primarily driven by volume declines in fiscal year 2009.

In the Caribbean, SD&A expenses decreased $34.0 million, or 57.2 percent, to $25.4 million in fiscal year 2009 from $59.4 million in the prior year. The deconsolidation of the Caribbean business reduced SD&A expenses by 42.4 percentage points. The remaining decrease reflected the impact of foreign currency, lower constant territory volume and the benefits from the restructuring of the business.

Operating Income (Loss). Operating income (loss) for fiscal years 2009 and 2008 was as follows (dollar amounts in millions):


Operating Income (Loss)	2009			2008			Change

U.S.	$	341.1		$	333.8			2.2	%
CEE		41.2			146.0			(71.8	)%
Caribbean		(1.4	)		(6.6	)		78.8	%

Worldwide	$	380.9		$	473.2			(19.5	)%


	2009 Compared to 2008
Operating Income (Loss) Change	U.S.			CEE			Caribbean			Worldwide

Operating results, excluding items listed below		5.0	%		14.4	%		(150.0	)%		7.7	%
Impact of foreign currency		—			(86.2	)%		75.0	%		(26.7	)%
Impact of 53rd week		(2.8	)%		—			—			(1.5	)%
Deconsolidation of Caribbean		—			—			153.8	%		1.0	%

Change in operating income (loss)		2.2	%		(71.8	)%		78.8	%		(19.5	)%

Operating income decreased $92.3 million, or 19.5 percent, to $380.9 million in fiscal year 2009 compared to $473.2 million in fiscal year 2008, reflecting the negative impact from foreign currency and the difficult global economic conditions, particularly in our emerging markets in CEE.

Operating income in the U.S. increased $7.3 million, or 2.2 percent, to $341.1 million in fiscal year 2009 from $333.8 million in fiscal year 2008. The increase was primarily due to lower costs driven by our productivity and cost containment initiatives, as well as higher net pricing. These factors helped offset volume declines, higher raw material costs, losses related to the multi-employer pension plans, impairment of non-operating assets and fees associated with the pending PepsiCo merger, as well as the lapping of the 53^rd week.

Operating income in CEE decreased $104.8 million, or 71.8 percent, to $41.2 million in fiscal year 2009 from $146.0 million in the prior year. The decline in operating performance was mainly due to the negative impact of foreign currency, a decrease in volume, an intangible assets impairment charge of $17.4 million related to our Sandora and Sadochok brands and special charges of $9.8 million related to the restructuring of our Hungary operations.

The operating loss in the Caribbean was $1.4 million in fiscal year 2009, compared to $6.6 million in the prior year. The improvement in operating results was mainly due to a decrease in special charges of $7.5 million in fiscal year 2009 as compared with fiscal year 2008.

Interest Expense, Net and Other Expense, Net. Interest expense, net decreased $45.5 million in fiscal year 2009 to $65.6 million, compared to $111.1 million in fiscal year 2008. During fiscal year 2009, we received $33.0 million from the termination of an interest rate swap and recorded the gain in interest expense, net. The remaining decrease was mainly due to lower interest rates on floating rate debt.

We recorded other expense, net, of $13.9 million in fiscal year 2009 compared to $7.9 million reported in fiscal year 2008. Foreign currency transaction losses were $4.8 million in fiscal year 2009 compared to foreign currency transaction gains of $0.5 million in the prior year. In fiscal year 2009, we also recorded an other-than-temporary loss of $2.1 million to write-off our remaining investment in an equity security, Northfield Laboratories, Inc., that was classified as available-for-sale.

Income Taxes. The effective income tax rate, which is income tax expense expressed as a percentage of income from continuing operations before income taxes and equity in net earnings (loss) of nonconsolidated companies, was 36.0 percent in fiscal year 2009, compared to 30.4 percent in fiscal year 2008. The higher tax rate was due primarily to the impact of the deconsolidation of our Caribbean business and a change in the geographic mix of earnings and the associated varying statutory tax rates.

Equity in Net Earnings (Loss) of Nonconsolidated Companies. Equity in net earnings (loss) of nonconsolidated companies consists of our 18 percent interest in a joint venture with CABCORP, which was formed in fiscal year 2009, and our 20 percent interest in a joint venture that owns Agrima in Bulgaria. Equity in net earnings of nonconsolidated companies was $1.4 million in fiscal year 2009, compared to equity in net loss of nonconsolidated companies of $1.1 million in fiscal year 2008.

Loss from Discontinued Operations. In fiscal year 2008, we recorded a charge of $15.0 million ($9.2 million net of taxes) related to revised estimates for the cost of environmental remediation, legal and related administrative costs.

Net Income. Net income consists of income attributable to both PepsiAmericas, Inc. and noncontrolling interests. Net income decreased $58.4 million to $177.7 million in fiscal year 2009, compared to $236.1 million in fiscal year 2008. The discussion of our operating results, included above, and the $25.8 million ($23.0 million net of taxes) non-cash loss from the deconsolidation of our Caribbean business explain the decrease in net income.

Net (Loss) Income Attributable to Noncontrolling Interests. We fully consolidated the operating results of Sandora and the Bahamas in our Consolidated Statements of Income. Net (loss) income attributable to noncontrolling interests represented 40 percent of Sandora results and 30 percent of the Bahamas results. Net loss attributable to noncontrolling interests was $3.5 million in fiscal year 2009 compared to net income attributable to noncontrolling interests of $9.7 million in fiscal year 2008, primarily reflecting the lower operating results from the Sandora business, including the intangible assets impairment charge recorded in fiscal year 2009.

Net Income Attributable to PepsiAmericas, Inc. Net income attributable to PepsiAmericas, Inc. decreased $45.2 million to $181.2 million in fiscal year 2009, compared to $226.4 million in fiscal year 2008. The discussion of our operating results, included above, explains the decrease in net income attributable to PepsiAmericas, Inc.

Operating Results — 2008 compared with 2007

Volume. Sales volume growth (decline) for fiscal years 2008 and 2007 were as follows:


Volume	2008			2007

U.S.		(2.7	)%		(1.4	)%
CEE		34.7	%		49.5	%
Caribbean		(3.9	)%		(5.0	)%
Worldwide		6.8	%		7.8	%

	2008 Compared to 2007
Volume Change	U.S.			CEE			Caribbean			Worldwide
Impact of 53rd week		1.4	%		—			2.0	%		1.1	%
Constant territory volume		(4.1	)%		2.6	%		(5.9	)%		(2.5	)%
Impact of 53rd week		1.4	%		—			2.0	%		1.1	%
Acquisitions		—			32.1	%		—			8.2	%
Change in volume		(2.7	)%		34.7	%		(3.9	)%		6.8	%

In fiscal year 2008, worldwide volume increased 6.8 percent compared to the prior year. The increase in worldwide volume was primarily due to the incremental impact of acquisitions and constant territory growth in CEE, partly offset by volume declines in the U.S. and the Caribbean.

Volume in the U.S. declined 2.7 percent in fiscal year 2008 compared to fiscal year 2007 due, in part, to a decline in carbonated soft drink volume of 3 percent. Single-serve volume declined 4 percent due mainly to softness in the foodservice and convenience and gas channels. The non-carbonated beverage category declined 8 percent, driven by a 15 percent volume decline in Aquafina due primarily to declines in take-home package ~~and an 11 percent decline in~~ ~~the tea category. The decrease in volume was partly offset by the 53rd week contribution of 1.4 percentage points.~~

~~Volume in CEE increased 34.7 percent in fiscal year 2008~~ ~~compared to fiscal year 2007. The increase was primarily due to~~37 the Sandora acquisition, which contributed 32.1 percentage points of the increase. The remaining growth in CEE was led by high single-digit growth in Romania and mid single-digit growth in Poland.

Volume in the Caribbean declined 3.9 percent in fiscal year 2008 compared to fiscal year 2007, driven mainly by a weaker economy and competitive pressures in Puerto Rico, partly offset by volume growth in Jamaica together with the 53rd week contribution of 2.0 percentage points.

and an 11 percent decline in the tea category. The decrease in volume was partly offset by the 53rd week estimated contribution of 1.4 percentage points.

Volume in CEE increased 34.7 percent in fiscal year 2008 compared to fiscal year 2007. The increase was primarily due to the Sandora acquisition, which contributed 32.1 percentage points of the increase. The remaining growth in CEE was led by high single-digit growth in Romania and mid single-digit growth in Poland.

Net Sales. Net sales and net pricing statistics for fiscal years 2008 and 2007 were as follows (dollar amounts in millions):


Net Sales	2008		2007		Change

U.S.	$	3,429.9	$	3,384.9		1.3	%
CEE		1,260.9		849.4		48.4	%
Caribbean		246.4		245.2		0.5	%

Worldwide	$	4,937.2	$	4,479.5		10.2	%

	2008 Compared to 2007
Net Sales Change	U.S.			CEE			Caribbean			Worldwide
Impact of 53rd week		1.4	%		—			1.7	%		1.2	%
Volume impact *		(3.5	)%		2.4	%		(5.0	)%		(2.1	)%
Net price per case, excluding impact of currency translation		4.1	%		6.0	%		8.2	%		4.4	%
Net price per case, excluding impact of foreign currency		4.1	%		6.0	%		8.2	%		4.4	%
Currency translation		—			9.4	%		(3.3	)%		1.6	%
Impact of foreign currency		—			9.4	%		(3.3	)%		1.6	%
Impact of 53rd week		1.4	%		—			1.7	%		1.2	%
Acquisitions		—			32.3	%		—			6.1	%
Non-core		(0.7	)%		(1.7	)%		(1.1	)%		(1.0	)%
Change in net sales		1.3	%		48.4	%		0.5	%		10.2	%


*		The amounts in this table represent the dollar impact on net sales due to changes in volume and are not intended to equal the absolute change in volume.


Net Pricing Growth **	2008			2007

U.S.		4.1	%		5.1	%
CEE		12.6	%		19.2	%
Caribbean		4.6	%		5.6	%
Worldwide		4.2	%		4.8	%

** Includes the impact from acquisitions and foreign currency ~~translation~~ on core net sales.

Net sales increased $457.7 million, or 10.2 percent, to $4,937.2 million in fiscal year 2008 compared to $4,479.5 million in fiscal year 2007. The increase was mainly attributable to acquisitions, worldwide increases in net pricing on a ~~local~~ currency neutral basis, the favorable impact of foreign currency ~~translation~~ and the impact of the 53rd week, partly offset by volume declines.

Net sales in the U.S. in fiscal year 2008 increased $45.0 million, or 1.3 percent, to $3,429.9 million from $3,384.9 million in fiscal year 2007. The increase in net sales was primarily due to a 4.1 percent increase in net pricing primarily driven by rate increases to cover higher raw material costs, partly offset by a decline in volume. The 53rd week contributed an estimated 1.4 percentage points of the increase.

Net sales in CEE in fiscal year 2008 increased $411.5 million, or 48.4 percent, to $1,260.9 million from $849.4 million in fiscal year 2007. The increase was primarily due to acquisitions, which contributed ~~32.3 percentage points of the increase. Foreign~~ currency translation contributed 9.4 percentage points to the increase in net sales. The remaining increase in net sales was due to volume growth, partly offset by a decline in non-core sales. Net pricing increased 6.0 percent on a local currency basis, driven by rate increases and product mix.

~~Net sales in the Caribbean increased $1.2 million, or~~ ~~0.5 percent, in fiscal year 2008 to $246.4 million~~38 from $245.2 million in fiscal year 2007. The increase was a result of an increase in net pricing of 4.6 percent and the 53rd week, which contributed 1.7 percentage points to net sales. The increase in net sales was partly offset by a volume decline of 3.9 percent.

32.3 percentage points of the increase. Foreign currency contributed 9.4 percentage points to the increase in net sales. The remaining increase in net sales was due to volume growth, partly offset by a decline in non-core sales. Net pricing increased 6.0 percent on a currency neutral basis, driven by rate increases and product mix.

Net sales in the Caribbean increased $1.2 million, or 0.5 percent, in fiscal year 2008 to $246.4 million from $245.2 million in fiscal year 2007. The increase was a result of an increase in net pricing of 4.6 percent and the 53rd week, which contributed an estimated 1.7 percentage points to net sales. The increase in net sales was partly offset by a volume decline of 3.9 percent.

Cost of Goods Sold. Cost of goods sold and cost of goods sold per unit statistics for fiscal years 2008 and 2007 were as follows (dollar amounts in millions):


Cost of Goods Sold	2008		2007		Change

U.S.	$	2,015.4	$	1,982.0		1.7	%
CEE		755.6		491.4		53.8	%
Caribbean		184.6		182.8		1.0	%

Worldwide	$	2,955.6	$	2,656.2		11.3	%

	2008 Compared to 2007
Cost of Goods Sold Change	U.S.			CEE			Caribbean			Worldwide
Impact of 53rd week		1.4	%		—			1.8	%		1.2	%
Volume impact *		(3.4	)%		2.3	%		(5.0	)%		(2.1	)%
Cost per case, excluding impact of currency translation		4.4	%		5.4	%		8.4	%		4.3	%
Cost per case, excluding impact of foreign currency		4.4	%		5.4	%		8.4	%		4.3	%
Currency translation		—			6.9	%		(3.3	)%		1.0	%
Impact of foreign currency		—			6.9	%		(3.3	)%		1.0	%
Impact of 53rd week		1.4	%		—			1.8	%		1.2	%
Acquisitions		—			41.1	%		—			7.6	%
Non-core		(0.7	)%		(1.9	)%		(0.9	)%		(0.7	)%
Change in cost of goods sold		1.7	%		53.8	%		1.0	%		11.3	%


*		The amounts in this table represent the dollar impact on cost of goods sold due to changes in volume and are not intended to equal the absolute change in volume.

Cost of Goods Sold per Unit Increase **	2008			2007
U.S		4.4	%		5.2	%
U.S.		4.4	%		5.2	%
CEE		17.0	%		13.0	%
Caribbean		4.9	%		5.6	%
Worldwide		5.3	%		3.9	%

** Includes the impact from acquisitions and foreign currency ~~translation~~ on core cost of goods sold.

Cost of goods sold increased $299.4 million, or 11.3 percent, to $2,955.6 million in fiscal year 2008 from $2,656.2 million in fiscal year 2007. This increase was driven primarily by acquisitions, higher raw material costs and the negative impact of foreign currency ~~translation~~. The 53rd week contributed an estimated 1.2 percentage points of the increase. Cost of goods sold per unit increased 5.3 percent during fiscal year 2008 compared to fiscal year 2007.

In the U.S., cost of goods sold increased $33.4 million, or 1.7 percent, to $2,015.4 million in fiscal year 2008 from $1,982.0 million in the prior year. Cost of goods sold per unit increased 4.4 percent in the U.S., primarily due to higher raw material costs, as well as the impact of mix, partly offset by a decline in volume. The 53rd week contributed an estimated 1.4 percentage points of the increase.

In CEE, cost of goods sold increased $264.2 million, or 53.8 percent, to $755.6 million in fiscal year 2008, compared to $491.4 million in the prior year. The increase was primarily due to acquisitions, which contributed 41.1 percentage points of the increase, while the impact of foreign currency ~~translation~~ contributed ~~6.9 percentage~~ points to the increase in cost of goods sold. Cost of goods sold per unit increased 5.4 percent on a local currency basis in fiscal year 2008 compared to fiscal year 2007 due to higher raw material costs.

~~In the Caribbean, cost of goods sold increased~~ ~~$1.8 million, or 1.0 percent, to $184.6 million~~39 in fiscal year 2008, compared to $182.8 million in fiscal year 2007. The increase was mainly driven by an increase in cost of goods sold per unit of 4.9 percent, attributable to higher raw material and energy costs. The 53rd week contributed 1.8 percentage points of the increase.

6.9 percentage points to the increase in cost of goods sold. Cost of goods sold per unit increased 5.4 percent on a currency neutral basis in fiscal year 2008 compared to fiscal year 2007 due to higher raw material costs.

In the Caribbean, cost of goods sold increased $1.8 million, or 1.0 percent, to $184.6 million in fiscal year 2008, compared to $182.8 million in fiscal year 2007. The increase was mainly driven by an increase in cost of goods sold per unit of 4.9 percent, attributable to higher raw material and energy costs. The 53rd week contributed an estimated 1.8 percentage points of the increase.

Selling, Delivery and Administrative Expenses. SD&A expenses and SD&A expense statistics for fiscal years 2008 and 2007 were as follows (dollar amounts in millions):

SD&A Expenses	2008		2007		Change
U.S.	$	1,~~079~~070.84	$	1,~~066~~061.52		10.29	%
CEE		~~346~~355.26		~~256~~261.03		3536.21	%
Caribbean		59.4		58.4		1.7	%
Worldwide	$	1,485.4	$	1,380.9		7.6	%

	2008 Compared to 2007
SD&A Expense Change	U.S.			CEE			Caribbean			Worldwide
Cost impact, excluding items listed below		(0.2	)%		9.0	%		3.6	%		1.6	%
Impact of foreign currency		—			11.1	%		(3.4	)%		2.0	%
Impact of 53rd week		1.1	%		—			1.5	%		0.9	%
Cost impact, excluding impact of currency translation		0.1	%		7.5	%		3.6	%		1.6	%
Acquisitions		—			16.0	%		—			3.1	%
Currency translation		—			11.3	%		(3.4	)%		2.0	%
Change in SD&A expense		0.9	%		36.1	%		1.7	%		7.6	%
Acquisitions		—			16.4	%		—			3.1	%
Change in SD&A expense		1.2	%		35.2	%		1.7	%		7.6	%

SD&A Expenses as a Percent of Net Sales	2008			2007
U.S.		31.52	%		31.54	%
CEE		2728.52	%		30.18	%
Caribbean		24.1	%		23.8	%
Worldwide		30.1	%		30.8	%

In fiscal year 2008, SD&A expenses increased $104.5 million, or 7.6 percent, to $1,485.4 million from $1,380.9 million in fiscal year 2007. As a percentage of net sales, SD&A expenses decreased to 30.1 percent during the fiscal year 2008, compared to 30.8 percent in fiscal year 2007, caused by the impact of acquisitions and effective cost management.

In the U.S., SD&A expenses increased $139.32 million, or 10.29 percent, to $1,~~079~~070.84 million in fiscal year 2008, compared to $1,~~066~~061.52 million in the prior year. SD&A expenses increased during fiscal year 2008 due to an increase in fuel costs, partly offset by favorable compensation and benefit expenses and the impact of productivity initiatives. The 53rd week contributed an estimated 1.1 percentage points of the increase.

In CEE, SD&A expenses increased $9094.23 million, or 3536.21 percent, to $~~346~~355.26 million from $~~256~~261.03 million in the prior year. Acquisitions contributed 16.40 percentage points of the increase and foreign currency ~~translation~~ contributed 11.31 percent. As a percentage of net sales, SD&A expense improved to 2728.52 percent compared to 30.18 percent during fiscal year 2007, primarily due to lower overall operating costs for Sandora as compared to the ~~the~~ other markets in CEE.

In the Caribbean, SD&A expenses increased $1.0 million, or 1.7 percent, to $59.4 million in fiscal year 2008 from $58.4 million in the prior year. The 53rd week contributed an estimated 1.5 percentage points of this increase. SD&A expenses as a percentage of net sales of 24.1 percent in fiscal year 2008 was comparable to the prior year results.

~~Operating Income (Loss). Operating~~ ~~income (loss) for fiscal years 2008 and 2007 was as follows~~40 ~~(dollar amounts in millions):~~

Operating Income (Loss)	2008			2007		Change
U.S.	$	324.4		$	331.6		(2.2	)%
CEE		155.4			100.5		54.6	%
Caribbean		(6.6	)		4.0		(265.0	)%
Worldwide	$	473.2		$	436.1		8.5	%

	2008 Compared to 2007
Operating Income (Loss) Change	U.S.			CEE			Caribbean			Worldwide
Impact of 53rd week		2.7	%		—			2.6	%		2.1	%
Operating results, excluding impact of currency translation		(4.9	)%		6.7	%		(269.9	)%		(4.6	)%
Currency translation		—			17.3	%		2.3	%		4.0	%
Acquisitions		—			30.6	%		—			7.0	%
Change in operating income (loss)		(2.2	)%		54.6	%		(265.0	)%		8.5	%

Operating Income (Loss). Operating income (loss) for fiscal years 2008 and 2007 was as follows (dollar amounts in millions):


Operating Income (Loss)	2008			2007		Change

U.S.	$	333.8		$	336.9		(0.9	)%
CEE		146.0			95.2		53.4	%
Caribbean		(6.6	)		4.0		(265.0	)%

Worldwide	$	473.2		$	436.1		8.5	%


	2008 Compared to 2007
Operating Income (Loss) Change	U.S.			CEE			Caribbean			Worldwide

Operating results, excluding items listed below		(3.5	)%		2.8	%		(269.9	)%		(4.6	)%
Impact of foreign currency		—			18.3	%		2.3	%		4.0	%
Impact of 53rd week		2.6	%		—			2.6	%		2.1	%
Acquisitions		—			32.3	%		—			7.0	%

Change in operating income (loss)		(0.9	)%		53.4	%		(265.0	)%		8.5	%

Operating income increased $37.1 million, or 8.5 percent, to $473.2 million in fiscal year 2008, compared to $436.1 million in fiscal year 2007.

Operating income in the U.S. decreased $73.21 million, or 20.29 percent, to $~~324~~333.48 million in fiscal year 2008, compared to $~~331~~336.69 million in fiscal year 2007. The decrease was primarily due to lower volume, higher cost of goods sold, higher SD&A expenses and special charges and adjustments. The decrease was partly offset by increases in net pricing and the contribution from the 53rd week.

Operating income in CEE increased $5450.98 million, or 5453.64 percent, to $~~155~~146.40 million in fiscal year 2008, compared to operating income of $~~100~~95.52 million in fiscal year 2007. This was mainly due to the beneficial impact of acquisitions, foreign currency ~~translation~~ and increases in net pricing on a ~~local~~ currency neutral basis.

Operating income in the Caribbean decreased $10.6 million to an operating loss of $6.6 million in fiscal year 2008, compared to operating income of $4.0 million in fiscal year 2007, due to special charges and higher raw material and energy costs.

Interest Expense, Net and Other Expense, Net. Net interest expense increased $1.9 million in fiscal year 2008 to $111.1 million, compared to $109.2 million in fiscal year 2007. The increase was mainly due to higher overall debt levels related to acquisitions, partly offset by higher interest income.

We recorded other expense, net, of $7.9 million in fiscal year 2008 compared to ~~other expense, net, of~~ $0.6 million ~~reported~~ in fiscal year 2007. Foreign currency transaction gains were $0.5 million in ~~the~~ fiscal year 2008 compared to $0.9 million in fiscal year 2007. The foreign currency transaction gains were offset by other expenses. ~~The~~Fiscal ~~prior~~ year 2007 results included a $10.2 million gain on the sale of non-core property and ~~a $4.0 million~~ an other-than-temporary impairment loss of $4.0 million related to aan ~~marketable~~ equity security ~~investment~~that was classified as available-for-sale.

Income Taxes. The effective income tax rate, which is income tax expense expressed as a percentage of income from continuing operations before income taxes, ~~minority interest~~ and equity in net earnings (loss) ~~earnings~~ of nonconsolidated companies, was 30.4 percent in fiscal year 2008, compared to to 34.3 percent in fiscal year 2007. The lower tax rate was due primarily to favorable country mix of earnings and the associated lower in-country tax rates. In addition, we recorded favorable adjustments associated with the filing of our 2007 U.S. federal income tax return, an investment tax credit in the Czech Republic and a reduction in accruals for uncertain tax positions. These items provided 1.8 percentage points of favorability to the effective income tax rate in fiscal year 2008.

Minority Interest. We fully consolidated the operating results of Sandora and the Bahamas in our Consolidated Statements of Income. Minority interest represented 40 percent of Sandora results and 30 percent of the Bahamas results attributed to interests owned by others during fiscal years 2008 and 2007.

Equity in Net Loss of Nonconsolidated Companies. In fiscal year 2007, we purchased a 20 percent interest in a joint venture that owns Agrima. Equity in net loss of nonconsolidated companies was $1.1 million in fiscal year 2008.

~~Loss on Discontinued Operations. In~~ ~~fiscal year 2008, we recorded a charge of $15.0 million~~41 ($9.2 million net of taxes) related to revised estimates for the costs of environmental remediation, legal and related administrative costs. In particular, we revised our remediation plans at several sites during the year resulting in a $5.0 million increase in the accrual for remediation costs and a $10.0 million increase in our accrual for legal costs. These legal costs also include defense costs associated with toxic tort matters.

Loss on Discontinued Operations. In fiscal year 2008, we recorded a charge of $15.0 million ($9.2 million net of taxes) related to revised estimates for the costs of environmental remediation, legal and related administrative costs. In particular, we revised our remediation plans at several sites during the year resulting in a $5.0 million increase in the accrual for remediation costs and a $10.0 million increase in our accrual for legal costs. These legal costs include costs associated with toxic tort matters.

In fiscal year 2007, we recorded a charge of $3.2 million ($2.1 million net of taxes) related to revised estimates for environmental remediation, legal and related administrative costs.

Net Income. Net income increased $1423.39 million to $~~226~~236.41 million in fiscal year 2008, compared to $212.12 million in fiscal year 2007. The ~~53rd week contributed $5.7 million of the increase. The~~ discussion of our operating results, included above, explains ~~explains~~ the ~~remainder of the~~ increase in net income.

Net Income Attributable to Noncontrolling ~~Operating~~Interests. We fully consolidated the ~~Results~~operating results of Sandora and the Bahamas in our Consolidated Statements of Income. Net income attributable to noncontrolling interests represented 40 —percent ~~2007~~of ~~compared~~Sandora ~~with~~results ~~2006~~and 30 percent of the Bahamas results during fiscal years 2008 and 2007.

~~Volume~~Net Income Attributable to PepsiAmericas, Inc. ~~Sales~~Net ~~volume~~income ~~growth~~attributable ~~(decline)~~to ~~for~~PepsiAmericas, Inc. increased $14.3 million to $226.4 million in fiscal ~~years~~year 2008, compared to $212.1 million in fiscal year 2007. ~~and~~The ~~2006~~53rd week contributed ~~were~~an asestimated ~~follows:~~$5.7 million of the increase. The discussion of our operating results, included above, explains the remainder of the increase in net income attributable to PepsiAmericas, Inc.

Volume	2007			2006
U.S.		(1.4	)%		0.6	%
CEE		49.5	%		34.5	%
Caribbean		(5.0	)%		1.6	%
Worldwide		7.8	%		5.6	%

	2007 Compared to 2006
Volume Change	U.S.			CEE			Caribbean			Worldwide
Constant territory volume		(1.4	)%		7.9	%		(5.0	)%		0.1	%
Acquisitions		—			41.6	%		—			7.7	%
Change in volume		(1.4	)%		49.5	%		(5.0	)%		7.8	%

In fiscal year 2007, worldwide volume increased 7.8 percent compared to the prior year. The increase in worldwide volume was attributable to volume growth of 49.5 percent in CEE, due to the incremental impact of acquisitions and constant territory growth, which was partly offset by volume declines in the U.S. and the Caribbean.

Volume in the U.S. declined 1.4 percent compared to fiscal year 2006 due to a decline in carbonated soft drink volume of approximately 4 percent, which was consistent with fiscal year 2006. The non-carbonated beverage category, excluding water, grew approximately 17 percent driven primarily by Trademark Lipton. Aquafina volume grew 1.5 percent in fiscal year 2007. Non-carbonated beverages represented 20 percent of our volume mix during fiscal year 2007 compared to 18 percent in the prior year. Single-serve volume grew 1 percent due mainly to innovation, including Diet Pepsi Max and Mountain Dew Game Fuel, and strong marketing programs.

Volume in CEE increased 49.5 percent in fiscal year 2007 compared to fiscal year 2006. The increase was primarily due to acquisitions, which contributed 41.6 percentage points of the increase. The remaining growth in CEE was due to growth in the non-carbonated beverage category, driven by double-digit growth in Trademark Lipton and juices and single-digit growth in the water category. Carbonated soft drink volume grew in the mid-single digits due to growth in Trademark Pepsi.

Volume in the Caribbean declined 5.0 percent in fiscal year 2007 compared to fiscal year 2006. The volume decline was driven primarily by soft economic conditions and competitive pressures in Puerto Rico, partly offset by volume growth in Jamaica. Carbonated soft drink volume declined 11 percent and was partly offset by double-digit growth in non-carbonated beverages.

Net Sales. Net sales and net pricing statistics for fiscal years 2007 and 2006 were as follows (dollar amounts in millions):

Net Sales	2007		2006		Change
U.S.	$	3,384.9	$	3,245.8		4.3	%
CEE		849.4		484.1		75.5	%
Caribbean		245.2		242.5		1.1	%
Worldwide	$	4,479.5	$	3,972.4		12.8	%

	2007 Compared to 2006
Net Sales Change	U.S.			CEE			Caribbean			Worldwide
Volume impact *		(1.2	)%		7.1	%		(4.3	)%		0.1	%
Net price per case, excluding impact of currency translation		5.1	%		4.6	%		6.8	%		4.7	%
Currency translation		—			15.9	%		(1.2	)%		1.9	%
Acquisitions		—			45.3	%		—			5.6	%
Non-core		0.4	%		2.6	%		(0.2	)%		0.5	%
Change in net sales		4.3	%		75.5	%		1.1	%		12.8	%

* The amounts in this table represent the dollar impact on net sales due to changes in volume and are not intended to equal the absolute change in volume.

Net Pricing Growth **	2007			2006
U.S.		5.1	%		1.1	%
CEE		19.2	%		7.2	%
Caribbean		5.6	%		5.4	%
Worldwide		4.8	%		0.5	%

** Includes the impact from acquisitions and currency translation on core net sales.

Net sales increased $507.1 million, or 12.8 percent, to $4,479.5 million in fiscal year 2007 compared to $3,972.4 million in fiscal year 2006. The increase was primarily due to acquisitions, worldwide rate and mix increases, volume growth in CEE and the favorable impact of foreign currency translation, which added 1.9 percentage points of the increase.

Net sales in the U.S. in fiscal year 2007 increased $139.1 million, or 4.3 percent, to $3,384.9 million from $3,245.8 million in fiscal year 2006. The increase in net sales was due to a 5.1 percent increase in net pricing, driven primarily by rate increases necessary to cover the higher raw material costs, partly offset by a decline in volume. Package mix also positively contributed to net pricing by approximately 1 percent due to stronger single-serve package and non-carbonated beverage performance and lower take-home water volume.

Net sales in CEE in fiscal year 2007 increased $365.3 million, or 75.5 percent, to $849.4 million from $484.1 million in fiscal year 2006. The increase was primarily due to acquisitions, which contributed 45.3 percentage points of the increase. The remainder of the growth was contributed by our existing markets, led by Romania and Poland. Net pricing increased 19.2 percent, driven by the favorable impact of foreign currency translation and improvement in mix.

Net sales in the Caribbean increased $2.7 million, or 1.1 percent, in fiscal year 2007 to $245.2 million from $242.5 million in fiscal year 2006. The increase was a result of an increase in net pricing of 5.6 percent, partly offset by a volume decline of 5.0 percent. The increase in net pricing was driven by both rate and mix increases and from growth in the single-serve package.

Cost of Goods Sold. Cost of goods sold and cost of goods sold per unit statistics for fiscal years 2007 and 2006 were as follows (dollar amounts in millions):

Cost of Goods Sold	2007		2006		Change
U.S.	$	1,982.0	$	1,891.6		4.8	%
CEE		491.4		292.7		67.9	%
Caribbean		182.8		180.0		1.6	%
Worldwide	$	2,656.2	$	2,364.3		12.3	%

	2007 Compared to 2006
Cost of Goods Sold Change	U.S.			CEE			Caribbean			Worldwide
Volume impact *		(1.1	)%		7.0	%		(4.3	)%		0.1	%
Cost per case, excluding impact of currency translation		5.2	%		1.3	%		6.8	%		4.1	%
Currency translation		—			10.4	%		(1.2	)%		1.2	%
Acquisitions		—			46.0	%		—			5.7	%
Non-core		0.7	%		3.2	%		0.3	%		1.2	%
Change in cost of goods sold		4.8	%		67.9	%		1.6	%		12.3	%

* The amounts in this table represent the dollar impact on cost of goods sold due to changes in volume and are not intended to equal the absolute change in volume.

Cost of Goods Sold per Unit Increase **	2007			2006
U.S.		5.2	%		4.3	%
CEE		13.0	%		5.4	%
Caribbean		5.6	%		6.4	%
Worldwide		3.9	%		3.2	%

** Includes the impact from acquisitions and currency translation on core cost of goods sold.

Cost of goods sold increased $291.9 million, or 12.3 percent, to $2,656.2 million in fiscal year 2007 from $2,364.3 million in fiscal year 2006. This increase was driven primarily by the impact of acquisitions, higher raw material costs and the unfavorable impact of foreign currency translation, which added 1.2 percentage points to the increase.

In the U.S., cost of goods sold increased $90.4 million, or 4.8 percent, to $1,982.0 million in fiscal year 2007 from $1,891.6 million in the prior year. Cost of goods sold per unit increased 5.2 percent in the U.S., due to price increases in ingredient costs and a 1 percentage point increase in mix due to a shift to more expensive non-carbonated beverages.

In CEE, cost of goods sold increased $198.7 million, or 67.9 percent, to $491.4 million in fiscal year 2007, compared to $292.7 million in the prior year. Acquisitions contributed 46.0 percentage points of the increase. Constant territory volume growth of 7.9 percent and higher ingredient costs also contributed to the increase in cost of goods sold. The remainder of the increase was mainly due to the unfavorable impact of foreign currency translation, which contributed 10.4 percentage points to the increase in cost of goods sold.

In the Caribbean, cost of goods sold increased $2.8 million, or 1.6 percent, to $182.8 million in fiscal year 2007, compared to $180.0 million in fiscal year 2006. The increase was mainly driven by an increase in cost of goods sold per unit of 5.6 percent, attributable to increases in the price of raw materials, partly offset by a volume decline of 5.0 percent.

Selling, Delivery and Administrative Expenses. SD&A expenses and SD&A expense statistics for fiscal years 2007 and 2006 were as follows (dollar amounts in millions):

SD&A Expenses	2007		2006		Change
U.S.	$	1,066.5	$	1,012.6		5.3	%
CEE		256.0		168.3		52.1	%
Caribbean		58.4		57.5		1.6	%
Worldwide	$	1,380.9	$	1,238.4		11.5	%

	2007 Compared to 2006
SD&A Expense Change	U.S.			CEE			Caribbean			Worldwide
Cost impact, excluding impact of currency translation		5.3	%		9.4	%		2.5	%		5.8	%
Currency translation		—			13.6	%		(0.9	)%		1.8	%
Acquisitions		—			29.1	%		—			3.9	%
Change in SD&A expense		5.3	%		52.1	%		1.6	%		11.5	%

SD&A Expenses as a Percent of Net Sales	2007			2006
U.S.		31.5	%		31.2	%
CEE		30.1	%		34.8	%
Caribbean		23.8	%		23.7	%
Worldwide		30.8	%		31.2	%

In fiscal year 2007, SD&A expenses increased $142.5 million, or 11.5 percent, to $1,380.9 million from $1,238.4 million in the previous year. The unfavorable impact of foreign currency translation added 1.8 percentage points of the increase. As a percentage of net sales, SD&A expenses decreased to 30.8 percent in fiscal year 2007, compared to 31.2 percent in fiscal year 2006 due primarily to lower operating costs in Romania.

In the U.S., SD&A expenses increased $53.9 million, or 5.3 percent, to $1,066.5 million in fiscal year 2007, compared to $1,012.6 million in the prior year. As a percentage of net sales, SD&A expenses were 31.5 percent in fiscal year 2007 compared to 31.2 percent in the prior year. SD&A expenses increased in fiscal year 2007 primarily due to higher compensation and benefit costs. In fiscal year 2007, SD&A expenses also included $3.8 million in realized gains from the settlement of derivative financial instruments. These instruments were used to manage the risks associated with the variability in the market price for forecasted purchases of diesel fuel. Comparisons between periods were also impacted by various items in fiscal year 2006, including a $3.7 million benefit recorded as a result of a change in our estimate of healthcare costs and a $9.0 million benefit from lower medical costs, partly offset by a fixed asset charge of $6.5 million for marketing and merchandising equipment.

In CEE, SD&A expenses increased $87.7 million, or 52.1 percent, to $256.0 million from $168.3 million in the prior year. Acquisitions contributed 29.1 percentage points of this increase. The remainder of the increase was due to the unfavorable impact of foreign currency translation, volume growth and higher advertising and marketing expenses. As a percentage of net sales, SD&A expenses improved to 30.1 percent compared to 34.8 percent in the prior year, primarily due to lower overall operating costs in Romania as compared to the other markets in CEE.

In the Caribbean, SD&A expenses increased $0.9 million, or 1.6 percent, to $58.4 million in fiscal year 2007 from $57.5 million in the prior year. SD&A expenses as a percentage of net sales in fiscal year 2007 were essentially flat compared to the prior year.

Operating Income. Operating income for fiscal years 2007 and 2006 was as follows (dollar amounts in millions):

Operating Income	2007		2006		Change
U.S.	$	331.6	$	330.1		0.5	%
CEE		100.5		20.9		380.9	%
Caribbean		4.0		5.0		(20.0	)%
Worldwide	$	436.1	$	356.0		22.5	%

	2007 Compared to 2006
Operating Income Change	U.S.			CEE			Caribbean			Worldwide
Operating results, excluding impact of currency translation		0.5	%		96.9	%		(14.1	)%		5.8	%
Currency translation		—			113.1	%		(5.9	)%		6.7	%
Acquisitions		—			170.9	%		—			10.0	%
Change in operating income		0.5	%		380.9	%		(20.0	)%		22.5	%

Operating income increased $80.1 million, or 22.5 percent, to $436.1 million in fiscal year 2007, compared to $356.0 million in fiscal year 2006. The favorable impact of foreign currency translation added 6.7 percentage points to the growth in worldwide operating income and acquisitions added 10.0 percentage points of growth.

Operating income in the U.S. increased $1.5 million to $331.6 million in fiscal year 2007, compared to $330.1 million in fiscal year 2006. The increase was due to lower special charges and higher net pricing, partly offset by volume declines, higher cost of goods sold and higher SD&A expenses.

Operating income in CEE increased $79.6 million to $100.5 million in fiscal year 2007, compared to $20.9 million in fiscal year 2006. This increase was primarily due to acquisitions, the beneficial impact of foreign currency, volume growth and increases in net pricing.

Operating income in the Caribbean decreased $1.0 million to $4.0 million in fiscal year 2007, compared to $5.0 million in fiscal year 2006. The decline in operating income was caused by the soft economic environment in Puerto Rico, which was partly offset by operating income growth in Jamaica.

Interest Expense, Net and Other Expense, Net. Net interest expense increased $7.9 million in fiscal year 2007 to $109.2 million, compared to $101.3 million in fiscal year 2006, due primarily to higher interest rates on floating rate debt and higher overall debt levels related to our acquisitions, partly offset by lower interest expense related to our securitization program.

We recorded other expense, net, of $0.6 million in fiscal year 2007 compared to other expense, net, of $11.7 million reported in fiscal year 2006. The decrease in other expense, net, was due primarily to a $10.2 million gain on the sale of non-core property in fiscal year 2007, offset partly by a $4.0 million other-than-temporary impairment related to an equity security investment in Northfield Laboratories, Inc.

Income Taxes. The effective income tax rate, which is income tax expense expressed as a percentage of income from continuing operations before income taxes, minority interest and equity in net earnings of nonconsolidated companies, was 34.3 percent in fiscal year 2007, compared to 37.2 percent in fiscal year 2006. The effective tax rate decreased from the prior year due, in part, to the mix of country results and the associated lower in-country tax rates. The effective income tax rate was also favorably impacted by a reorganization of the legal entity structure in CEE in the second quarter of 2007.

Equity in Net Earnings of Nonconsolidated Companies. In the second quarter of 2005, we acquired a 49 percent interest in Quadrant-Amroq Bottling Company Limited (“QABCL”), which through its subsidiaries produces, sells and distributes Pepsi and other beverages throughout Romania. Equity in net earnings of nonconsolidated companies was $5.6 million in fiscal year 2006. With the acquisition of the remaining 51 percent, we consolidated QABCL results beginning in the third quarter of fiscal year 2006.

Loss on Discontinued Operations. In fiscal year 2007, we recorded a charge of $3.2 million ($2.1 million net of taxes), related to revised estimates for environmental remediation, legal and related administrative costs.

Net Income. Net income increased $53.8 million to $212.1 million in fiscal year 2007, compared to $158.3 million in fiscal year 2006. The discussion of our operating results, included above, explains the increase in net income.

Liquidity and Capital Resources

Operating Activities. Net cash provided by operating activities of continuing operations ~~increased~~decreased by $67192.10 million to $~~500~~308.6 million in fiscal year ~~2008,~~2009 compared to $~~433~~500.56 million in fiscal year ~~2007~~2008. ~~This~~In March ~~increase~~2009, ~~can~~we ~~mainly~~terminated beour ~~attributed~~trade toreceivable ~~the~~securitization ~~favorable~~program, ~~year-over-year~~resulting ~~benefit~~in ~~from~~a ~~changes~~$150.0 million decrease in ~~primary~~cash ~~working~~flows ~~capital,~~from ~~higher~~operating ~~net~~activities. ~~income~~The ~~and~~remaining ~~reduced~~decrease ~~cash~~can ~~outlays~~mainly ~~related~~be attributed to ~~special~~lower earnings and $21.2 million of ~~charges.~~contributions ~~The~~made ~~changes~~to inour ~~primary~~pension ~~working~~plans ~~capital~~in ~~were~~fiscal ~~attributed~~year 2009, tooffset ~~strong~~partly ~~management~~by of$33.0 million ~~the~~that ~~components~~we ofreceived ~~primary~~in ~~working~~fiscal ~~capital,~~year ~~namely~~2009 ~~inventory,~~from ~~accounts~~the ~~receivable~~termination ~~and~~of ~~accounts payable~~an interest rate swap.

~~Net~~Investing ~~cash~~Activities. Investing activities ~~provided~~in byfiscal ~~operating~~year ~~activities~~2009 ~~was~~included ~~unfavorably~~capital investments of ~~impacted~~$235.7 million byas ~~higher~~compared ~~compensation-related~~with ~~benefit~~$248.9 million ~~payments and a~~in fiscal year~~-over-year~~ ~~increase~~2008. inIn ~~contributions~~fiscal ~~made~~year to2009, ~~our~~we ~~pension~~paid ~~plans. We contributed~~ $412.08 million toin ~~our~~the ~~pension~~aggregate ~~plans~~to inobtain certain ~~fiscal~~distribution ~~year~~rights ~~2008~~for ~~compared~~Crush, toROCKSTAR $0and Muscle Milk.~~9 million~~ inProceeds ~~fiscal~~from ~~year~~the sale of property and equipment and ~~2007.~~investments Wein ~~expect~~fiscal toyear ~~make~~2009 ~~contributions~~were of$21.6 million ~~approximately~~compared to $127.7 million in fiscal year ~~2009~~2008. ~~Increased~~In ~~pension~~fiscal ~~plan~~year 2009, ~~contributions~~we ~~may~~received ~~extend~~proceeds ~~into~~of ~~future~~$15.0 million ~~years~~related ifto ~~current~~the ~~market~~sale ~~conditions~~of ~~persist~~a orcorporate ~~deteriorate further~~aircraft.

~~Investing~~On ~~Activities. Investing activities~~July 3, ~~during~~2009, ~~fiscal~~we ~~year~~formed ~~2008~~a ~~included~~strategic ~~capital~~joint ~~investments~~venture with ofCABCORP ~~$248.9 million,~~to acombine ~~decrease~~our ofCaribbean ~~$15.7 million~~operations, ~~from~~excluding the ~~capital~~Bahamas, ~~investments~~with ofCABCORP’s ~~$264.6 million~~Central inAmerican ~~fiscal~~operations. ~~year~~As ~~2007.~~a ~~Capital~~result, ~~spending~~we indeconsolidated ~~fiscal~~our ~~year~~Caribbean ~~2009~~business isresulting ~~expected~~in ~~to be~~a ~~approximately~~ $~~275~~7.1 million reduction in cash and cash equivalents.

In fiscal year 2007, we entered into a joint venture agreement with PepsiCo to purchase the outstanding common stock of Sandora. Under the terms of the joint venture agreement, we hold a 60 percent interest and PepsiCo holds athe remaining 40 percent interest in the joint venture. The preliminary purchase price of $679.4 million increased to $680.4 million as a result of additional payments for acquisition costs in fiscal year 2008. The total purchase price of $680.4 million was net of cash received of $3.0 million. Of the total purchase price, our interest was $408.2 million. Additionally, the joint venture acquired $72.5 million of debt as part of the acquisition, which was retired in fiscal year 2008.

In fiscal year 2007, we purchased a 20 percent interest in a joint venture that owns Agrima, which produces, sells and distributes PepsiCo products and other beverages throughout Bulgaria.

InFinancing ~~fiscal~~Activities. Our ~~year~~total ~~2005,~~debt decreased we$35.0 million ~~acquired~~to 49$2,132.3 million ~~percent~~as of the ~~outstanding~~ ~~stock~~end of ~~QABCL~~fiscal ~~for~~year 2009, down from $512,167.03 million. ~~During~~as ~~fiscal year 2006,~~of ~~we acquired~~ the ~~remaining~~end ~~51 percent~~ of ~~the~~fiscal ~~outstanding~~year ~~stock~~2008. ~~of QABCL~~During ~~for~~fiscal ~~$81.9 million~~year 2009, ~~net~~we ~~of $17.0 million cash~~issued ~~acquired. We acquired~~ $~~55.4~~350 million of ~~debt~~notes aswith ~~part~~a ofcoupon ~~the~~rate of ~~acquisition~~4.375 percent ~~The~~due ~~increased~~February ~~purchase~~2014. ~~price~~The ~~for~~securities ~~the remainder of~~are ~~QABCL~~unsecured, ~~was~~senior ~~due~~debt toobligations ~~the~~and ~~improved~~rank ~~operating~~equally ~~performance~~in ~~subsequent~~priority towith ~~the~~all ~~initial~~other ~~acquisition~~unsecured ofand ~~our~~unsubordinated ~~49 percent minority investment~~indebtedness.

~~In fiscal year 2006, we also completed the acquisition of Ardea~~ ~~Beverage Co., the maker of the airforce Nutrisoda line of drinks~~42 ~~for $6.6 million. The purchase agreement contained contingent consideration of $3.3 million that was finalized and paid in fiscal year 2007.~~

Proceeds from the sale of property and equipment in fiscal year 2008 were $7.5 million compared to $29.2 million in fiscal year 2007. In fiscal year 2007, we received proceeds of $20.7 million related to the sale of non-core property, which consisted of railcars and locomotives.

~~Financing~~Net ~~Activities. Our~~proceeds ~~total~~from ~~debt increased~~this transaction were $26345.24 million, which toreflected a discount of $2~~,167~~.32 million asand of the debt ~~end~~issuance costs of ~~fiscal year 2008, from~~ $2~~,141~~.14 million. asThe ofnet proceeds from the ~~end~~issuance of ~~fiscal~~the ~~year~~notes ~~2007.~~were ~~The~~used ~~increase~~to inrepay ~~total~~commercial ~~debt~~paper ~~was driven~~issued by ~~our~~us ~~commercial~~and ~~paper borrowings, which were used primarily~~ for other general corporate purposes. In fiscal year ~~2008~~ 2009, we repaid ~~$47.5 million~~ ~~of long-term debt that was acquired as part of the Sandora acquisition. Included in this payment was~~ $2150.50 million of ~~prepayment penalty fees~~6. ~~We received $26.0~~375% ~~million~~notes ~~from PepsiCo that included its portion of the~~at ~~debt repayment~~maturity. ~~This cash receipt is reflected in financing~~ ~~activities in the Consolidated Statement of Cash Flows.~~

In fiscal year 2007, we issued $300 million of notes with a coupon rate of 5.75 percent due July 2012. The securities are unsecured, senior debt obligations and rank equally in priority with all other unsecured and unsubordinated indebtedness. Net proceeds from this transaction were $297.2 million, which reflected the discount reduction of $0.8 million and the debt issuance costs of $2.0 million. The net proceeds from the issuance of the notes were used to fund the acquisition of Sandora, to repay commercial paper and for other general corporate purposes. In fiscal year 2007, we also borrowed $1.0 million in long-term debt in the Bahamas.

InWe ~~fiscal~~utilize ~~year~~revolving ~~2006,~~credit wefacilities ~~issued~~both ~~$250~~in the U.S. ~~million~~and in ofour ~~notes~~international ~~with~~operations ato fund short-term financing ~~coupon~~needs, ~~rate~~primarily offor 5working capital and general corporate purposes.~~625 percent~~ ~~due~~In ~~May~~the ~~2011~~U.S., ~~Net~~we ~~proceeds~~have an unsecured revolving credit ~~from~~facility ~~this~~under ~~issuance~~which ~~were~~we can borrow up to an aggregate of $~~247.4~~600 million,. ~~which~~The ~~included~~interest arates on the revolving credit ~~reduction~~facility, ~~for~~which ~~discount~~expires ~~and~~in ~~issuance~~2011, ~~costs~~are based primarily on the London Interbank Offered Rate. The ~~proceeds~~facility ~~from~~is ~~the~~for general ~~issuance~~corporate ~~were~~purposes, ~~used~~including ~~primarily~~commercial paper backstop. It is our policy to ~~repay~~maintain a committed bank facility as backup financing for our commercial paper program. Accordingly, we have ~~obligations~~a total of $600 million available under our commercial paper program and ~~for~~revolving ~~other~~credit ~~general~~facility ~~corporate~~combined. ~~purposes~~We had $129.5 million of commercial paper borrowings as of the end of fiscal year 2009, compared to $365.0 million as of the end of fiscal year 2008.

WeCertain ~~utilize revolving credit facilities both in the U.S. and in our international operations to fund short~~wholly-~~term~~owned ~~financing needs,~~subsidiaries ~~primarily~~maintain ~~for~~operating ~~working~~lines ~~capital and general corporate~~of ~~purposes. In the U.S., we have an unsecured revolving~~ credit ~~facility~~ ~~under which we can borrow up to an aggregate of $600 million. The facility is~~ for general ~~corporate purposes,~~operating ~~including commercial paper backstop~~needs. ItInterest isrates ~~our~~are ~~policy~~based toprimarily ~~maintain~~upon aInterbank ~~committed~~Offered ~~bank~~Rates ~~facility~~for asborrowings ~~backup~~in ~~financing for~~the ~~our~~subsidiaries’ ~~commercial~~local ~~paper program~~currencies. The ~~interest~~outstanding ~~rates~~balance ~~on the~~was ~~revolving~~$8.0 million ~~credit~~as ~~facility,~~of ~~which expires in 2011, are based primarily on~~ the ~~London~~end ~~Interbank~~of ~~Offered~~fiscal ~~Rate.~~year ~~Accordingly,~~2009 weand ~~have a total of~~ $~~600~~1.6 million ~~available~~at ~~under~~the ~~our~~end ~~commercial paper~~of ~~program~~fiscal ~~and~~year ~~revolving~~2008 ~~credit~~and ~~facility~~for ~~combined. We had~~each ~~$365.0 million~~respective ofdate ~~commercial~~was ~~paper~~recorded ~~borrowings~~in as“Short-term ofdebt, ~~the end~~including ofcurrent ~~fiscal~~maturities ~~year~~of ~~2008,~~long-term ~~compared~~debt” toin ~~$269.5 million as of~~ the Consolidated ~~end~~Balance ~~of fiscal year 2007~~Sheets.

~~Certain~~Under ~~wholly-owned~~our ~~subsidiaries~~previously ~~maintain~~authorized ~~operating~~repurchase ~~lines~~program, ofwe ~~credit~~repurchased ~~for~~2.7 million ~~general~~shares ~~operating~~in ~~needs.~~fiscal ~~Interest~~year ~~rates~~2009 ~~are~~for ~~based~~an ~~primarily~~aggregate ~~upon~~purchase ~~Interbank~~price ~~Offered~~of ~~Rates~~$45.2 million. ~~for~~As ~~borrowings~~of in the ~~subsidiaries’~~ ~~local~~end ~~currencies. The outstanding balances~~of ~~were~~fiscal ~~$1.6 million~~year ~~and~~2009, ~~$19~~8.38 million asshares ofremained ~~the~~available ~~end of~~for repurchase under the 2008 authorization. During fiscal years 2008 and 2007, ~~respectively,~~we ~~and~~repurchased ~~were~~a ~~recorded~~total inof 5.7 million and ~~“Short-term~~2.7 million ~~debt,~~shares ~~including~~of ~~current~~our ~~maturities~~common ofstock, ~~long-term~~respectively, for ~~debt”~~an inaggregate ~~the~~purchase ~~Consolidated~~price ~~Balance~~of ~~Sheets~~$135.0 million and $59.4 million, respectively.

WeOur ~~continue~~Board toof ~~execute~~Directors ~~our~~declared ~~strategy~~quarterly todividends ~~repurchase shares~~ of ~~our~~$0.14 per share on PepsiAmericas common stock. Infor ~~fiscal~~each quarter in fiscal year ~~2008,~~2009. ~~our~~We ~~Board~~paid cash dividends of ~~Directors~~$52.4 million in ~~authorized~~fiscal ~~the~~year ~~repurchase~~2009, ofwhich 10included $51.1 million ~~additional~~for ~~shares~~the ~~under~~first ~~our~~three ~~previously~~quarterly ~~authorized~~dividends ~~repurchase~~declared ~~program~~in fiscal year 2009 and $1.3 million Asrelated ofto the vesting of restricted stock awards. As of the end of fiscal year ~~2008~~2009, 11there was $16.58 million ~~shares~~payable ~~remained~~for the fourth quarter 2009 dividend ~~available~~compared ~~for~~to ~~repurchase~~no ~~under~~dividend ~~the~~payable ~~2008~~recorded ~~and~~as ~~2005~~of ~~authorizations.~~the end of fiscal ~~During~~year 2008. In fiscal ~~years~~year 2008, ~~2007 and 2006,~~ we ~~repurchased~~paid acash ~~total~~dividends of ~~of 5~~$85.70 million, ~~2.7 million~~which ~~and~~included 6$67.3 million for the ~~shares~~dividends ofdeclared ~~our~~in ~~common~~fiscal ~~stock,~~year ~~respectively,~~2008 ~~for~~based anon ~~aggregate~~a quarterly ~~purchase~~dividend ~~price~~rate of $~~135.~~0 ~~million~~.135 per share, $5916.46 million ~~and~~for the fourth quarter of 2007 dividend, and $~~150~~1.71 million, ~~respectively~~of dividends that were paid as a result of the vesting of restricted stock awards.

Our Board of Directors declared quarterly dividends of $0.135 per share on PepsiAmericas common stock for each quarter in fiscal year 2008. We paid cash dividends of $85.0 million in fiscal year 2008, which included $67.3 million for the four quarterly dividends declared in fiscal year 2008, $16.6 million for the fourth quarter of 2007 dividend, and $1.1 million of dividends that were paid as a result of the vesting of restricted stock awards. During fiscal years 2007 and 2006, we paid cash dividends of $65.2 million and $59.3 million, respectively, based on a quarterly dividend rate of $0.13 and $0.125 per share, respectively. As of the end of fiscal year 2008, there was no payable recorded on the Consolidated Balance Sheet for dividends compared to a payable of $16.6 million as of the end of fiscal year 2007. Due to the timing of our fiscal year calendar, we paid the fourth quarter 2008 dividend prior to year-end; whereas, the fourth quarter 2007 dividend was paid in the first quarter of 2008.

In February 2009, we issued $350 million of notes with a coupon rate of 4.375 percent due February 2014. The securities are unsecured and unsubordinated obligations and rank equally in priority with all of our existing and future unsecured and unsubordinated indebtedness. Net proceeds from this transaction were $345.7 million, which reflected the discount reduction of $2.2 million and the debt issuance costs of $2.1 million. The net proceeds from the issuance of the notes were used to repay commercial paper issued by us and for other general corporate purposes.

In March 2009, we gave notice of our intent to terminate our trade receivables securitization program. We believe that the program has become uncompetitive with alternate sources of capital to which we have access. Termination of this program will result in a $150 million increase in trade receivables and a comparable increase in debt on our Consolidated Balance Sheet. Termination of this program will result in a decline in net cash provided by operating activities of $150 million offset by a comparable increase in cash provided by financing activities on our Consolidated Statement of Cash Flows.

Our debt agreements contain a number of covenants that limit, among other things, the creation of liens, sale and leaseback transactions and the general sale of assets. Our revolving credit agreement requires us to maintain an interest coverage ratio. We are in compliance with all of our financial covenants.

~~Worldwide~~We ~~capital~~believe ~~and~~that ~~credit~~our ~~markets,~~operating ~~including~~cash ~~the~~flows ~~commercial paper~~are ~~markets,~~sufficient ~~have~~to ~~recently experienced increased volatility~~fund ~~and~~our ~~disruption.~~existing ~~Despite~~operations ~~this volatility~~ and ~~disruption,~~contractual ~~we continue~~obligations tofor ~~have access to~~ the ~~capital markets, as evidenced by~~ ~~our~~foreseeable ~~most recent debt issuance in February 2009~~future. In addition, ~~as noted~~while ~~above,~~ we have aagreed ~~revolving~~to ~~credit~~merge with ~~facility~~and ~~that~~into ~~acts as~~ a ~~commercial~~ ~~paper~~wholly ~~backstop.~~owned Wesubsidiary ~~believe~~of ~~that~~PepsiCo, ~~our~~subject ~~operating cash~~to ~~flows~~regulatory ~~are~~approval ~~sufficient~~and tothe ~~fund~~satisfaction ~~our~~or ~~existing~~waiver ~~operations~~of ~~and~~other ~~contractual~~customary ~~obligations~~closing ~~for the foreseeable future. In addition~~conditions, we believe that our operating cash flows, available lines of credit, and the potential for additional debt and equity offerings ~~will~~would provide sufficient resources to fund our future growth and expansion on a standalone basis, although there can be no assurance that a ~~continued or increased volatility and~~ disruption in the worldwide capital and credit markets ~~will~~would not impair our ability to access these markets on terms commercially ~~acceptable. There~~ are a number of options available to us, and we continue to examine the optimal uses of our cash, including reinvesting in our existing business, reducing debt, repurchasing our stock, paying dividends and making acquisitions with an appropriate economic returnacceptable.

There are certain restrictive covenants in the merger agreement with PepsiCo that may limit, among other things, the payment of dividends, the repurchase of stock, acquisitions, and capital expenditures. Accordingly, our cash will be used primarily for debt reduction, as well as planned investment in our existing business and payment of dividends at the current rate, during the period in which the merger is pending.

Contractual Obligations

The following table provides a summary of our contractual obligations as of the end of fiscal year ~~2008~~2009 by due date. Long-term debt obligations do not include amounts related to the fair value adjustment for interest rate swaps and unamortized discount from debt issuance. Our short-term and long-term debt, lease commitments, purchase obligations and advertising and exclusivity rights are more fully described in Notes 1110, 1211 and 2019, respectively, in the Notes to the Consolidated Financial Statements. Our interest obligations relate to our contractual obligations under our fixed-rate long-term debt.

	Payments Due by Period
	Total		~~2009~~2010		~~2010~~2011		~~2011~~2012		~~2012~~2013		~~2013~~2014		Thereafter
Commercial paper and notes payable	$	~~366~~137.65	$	~~366~~137.65	$	—	$	—	$	—	$	—	$	—
Long-term debt obligations		1,~~789~~984.20		~~155.2~~—		—250.0		~~250~~300.0		~~300~~150.0		~~150~~350.0		934.0
Interest obligations		~~874~~850.27		93104.63		8897.83		8190.73		7469.7		5458.15		~~481~~430.36
Advertising commitments and exclusivity rights		7585.89		28.5		1923.69		1213.13		7.19		3.4		58.19
Raw material purchase obligations		5436.80		4026.75		127.24		0.29		—		—		1.72
Lease obligations		~~123~~103.60		2320.04		2015.18		1411.93		98.75		7.5.1		4841.49
Other purchase obligations		97.47		67.57		~~2.9~~—		—		—		—		—
Total contractual cash obligations	$	3,~~293~~204.68	$	~~714~~324.19	$	~~143~~394.64	$	~~358~~415.98	$	~~391~~236.51	$	~~215~~417.0	$	1,~~470~~416.56

Not included in the table above are contingent payments for uncertain tax positions of $3532.81 million. These amounts were not included due to our inability to predict the timing of the settlement of these amounts. Also not included in the table above is the contribution of approximately $5 million to $10 million that we expect to make to our pension plans in fiscal year 2010.

We participate in a number of trustee-managed multi-employer 41pension and health and welfare plans for employees covered under collective bargaining agreements. Several factors, including unfavorable investment performance, changes in demographics and increased benefits to participants could result in potential funding deficiencies, which could cause us to make higher future contributions to these plans.

Discontinued Operations. We continue to be subject to certain indemnification obligations, net of insurance, under agreements related to previously sold subsidiaries, including indemnification expenses for potential environmental and tort liabilities of these former subsidiaries. There is significant uncertainty in assessing our potential expenses for complying with our indemnification obligations, as the determination of such amounts is subject to various factors, including possible insurance recoveries and the allocation of liabilities among other potentially responsible and financially viable parties. Accordingly, the ultimate settlement and timing of cash requirements related to such indemnification obligations may vary significantly from the estimates included in our financial statements. As of the end of fiscal year 2009, we had recorded $30.4 million in liabilities for future remediation and other related costs arising out of our indemnification obligations. This amount excludes possible insurance recoveries and is determined on an undiscounted cash flow basis. In addition, we have funded coverage pursuant to an insurance policy (the “Finite Funding”) purchased in fiscal year 2002, which reduces the cash required to be paid by us for certain environmental sites pursuant to our indemnification obligations. The Finite Funding receivable amount recorded was $7.6 million as of the end of fiscal year 2009, of which $4.2 million is expected to be recovered in fiscal year 2010 based on our expenditures, and is recorded in “Other current assets” in the Consolidated Balance Sheet.

During fiscal years 2009 and 2008, we paid, net of taxes, $2.2 million and $9.4 million, respectively, related to such indemnification obligations, including the offsetting benefit of insurance recovery settlements of $6.7 million and $4.5 million, respectively. We expect to spend approximately $11.9 million on a pre-tax

~~Also~~basis ~~not~~in ~~included~~fiscal inyear ~~the~~2010 ~~table~~related ~~above~~to isour ~~the~~indemnification obligations, ~~contribution~~excluding possible insurance recoveries and the benefit of income taxes (See “Environmental Matters” ~~approximately~~in ~~$12~~Item ~~million~~1 ~~that~~and weNote 19 ~~expect~~ to ~~make~~the toConsolidated ~~our~~Financial ~~pension~~Statements ~~plans~~for infurther ~~fiscal~~discussion ~~year~~of ~~2009~~discontinued operations and related environmental liabilities).

Discontinued Operations. We continue to be subject to certain indemnification obligations, net of insurance, under agreements related to previously sold subsidiaries, including indemnification expenses for potential environmental and tort liabilities of these former subsidiaries. There is significant uncertainty in assessing our potential expenses for complying with our indemnification obligations, as the determination of such amounts is subject to various factors, including possible insurance recoveries and the allocation of liabilities among other potentially responsible and financially viable parties. Accordingly, the ultimate settlement and timing of cash requirements related to such indemnification obligations may vary significantly from the estimates included in our financial statements. As of the end of fiscal year 2008, we had recorded $36.1 million in liabilities for future remediation and other related costs arising out of our indemnification obligations. This amount excludes possible insurance recoveries and is determined on an undiscounted cash flow basis. In addition, we have funded coverage pursuant to an insurance policy (the “Finite Funding”) purchased in fiscal year 2002, which reduces the cash required to be paid by us for certain environmental sites pursuant to our indemnification obligations. The Finite Funding receivable amount recorded was $9.9 million as of the end of fiscal year 2008, of which $4.2 million is expected to be recovered in 2009 based on our expenditures, and was included as a current asset in the Consolidated Balance Sheet.

In fiscal years 2008 and 2007, we recorded a charge of $15.0 million ($9.2 million net of taxes) and $3.2 million ($2.1 million net of taxes) related to revised estimates for environmental remediation, legal and related administrative costs.

During fiscal years 2008 and 2007, we paid, net of taxes, $9.4 million and $10.4 million, respectively, related to such indemnification obligations, including the offsetting benefit of insurance recovery settlements of $4.5 million and $4.9 million, respectively, on an after-tax basis. We expect to spend approximately $7.6 million on a pretax basis in fiscal year 2009 related to our indemnification obligations, excluding possible insurance recoveries and the benefit of income taxes (See “Environmental Matters” in Item 1 and Note 20 to the Consolidated Financial Statements for further discussion of discontinued operations and related environmental liabilities).

Off-Balance Sheet Arrangements

It is not our business practice to enter into off-balance sheet arrangements, other than in the normal course of business, nor is it our policy to issue guarantees to nonconsolidated affiliates or third parties. For a description of our off-balance sheet arrangements entered into in the normal course of business, see Note 8 “Sales of Receivables,” Note 1211 “Leases” and Note 2019 “Environmental and Other Commitments and Contingencies” ~~in the Notes~~ to the Consolidated Financial Statements.

Critical Accounting Policies

The preparation of our Consolidated Financial Statements in conformity with ~~U.S.~~ accounting principles generally accepted ~~accounting~~in the ~~principles~~United States of America requires management to use estimates. We base our estimates on historical experience, available information and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about carrying amounts of assets ~~and~~ and liabilities that are not readily apparent from other ~~sources.~~ sources. Actual results could differ from those estimates, and ~~revisions~~ revisions to estimates are included in our results for the period in which the actual amounts or revisions become known. Presented in our notes to the Consolidated Financial Statements is a summary of our most significant accounting policies used in the preparation of such statements. Significant estimates in the ~~Consolidated~~ Consolidated Financial Statements include recoverability of goodwill and intangible assets with indefinite lives, ~~environmental~~ environmental liabilities, income taxes, casualty insurance costs and pension and postretirement benefits, which are described in further detail below:

Recoverability of Goodwill and Intangible Assets with Indefinite Lives. Goodwill and intangible assets with indefinite useful lives are not amortized, but instead tested annually for impairment or more frequently if events or changes in circumstances indicate that an asset might be impaired.

Goodwill is tested for impairment using a two-step approach at 42the reporting unit level: U.S. and CEE. First, we estimate the fair value of the reporting units primarily using discounted estimated future cash flows. If the carrying amount exceeds the fair value of the reporting unit, the second step of the goodwill impairment test is performed to measure the amount of the potential loss. Goodwill impairment is measured by comparing the “implied fair value” of goodwill with its carrying amount.

Goodwill is tested for impairment using a two-step approach at the reporting unit level: U.S., CEE and the Caribbean. First, we estimate the fair value of the reporting units primarily using discounted estimated future cash flows. If the carrying amount exceeds the fair value of the reporting unit, the second step of the goodwill impairment test is performed to measure the amount of the potential loss. Goodwill impairment is measured by comparing the “implied fair value” of goodwill with its carrying amount.

Our identified intangible assets with indefinite lives principally arise from the allocation of the purchase price of businesses acquired and consist primarily of trademarks and tradenames and franchise and distribution agreements. Impairment is measured as the amount by which the carrying amount of the intangible asset exceeds its estimated fair value. The estimated fair value is generally determined on the basis of discounted future cash flows.

~~The~~Considerable management judgment is necessary to estimate discounted future cash flows in conducting an impairment analysis ~~evaluation~~for ~~requires~~goodwill and intangible assets. The cash flows may be impacted by future actions taken by us and our competitors and the ~~use~~volatility of ~~considerable~~macroeconomic conditions in the markets in ~~management~~which ~~judgment~~we toconduct ~~determine~~business. ~~the~~Assumptions ~~fair~~used ~~value~~in our impairment analysis, such as forecasted growth rates, cost of ~~goodwill~~capital and ~~intangible~~additional ~~assets~~risk premiums used in the valuations, are based on the best available market information and are consistent with our ~~indefinite~~strategic ~~lives~~plans. ~~using~~An ~~discounted~~inability ~~future~~to achieve strategic business ~~cash~~plan ~~flows~~targets in a reporting unit, ~~including~~a ~~estimates~~change ~~and~~in our discount rate or other assumptions ~~regarding~~could have a significant impact on the fair ~~amount~~value of our reporting units and ~~timing~~other ofintangible assets, which could then result in a material non-cash ~~flows~~impairment charge to our results of operations. Volatility in global macroeconomic conditions has had a negative impact on our business results. If this volatility continues to persist into the future, ~~cost~~the fair value of ~~capital~~our goodwill and ~~growth~~intangible assets could be adversely ~~rates~~impacted. In the fourth quarter of 2009, we performed our annual impairment valuation for goodwill and intangible assets with indefinite lives, and there was no resulting impairment based on our analysis.

~~In fiscal year 2008, we initiated a strategic restructuring in~~ ~~the Caribbean, which included~~45 country-specific changes in the go-to-market strategies and streamlining of selling and delivery activities. As a result in the third quarter, we performed an impairment analysis for goodwill and intangible assets recorded in our Caribbean geographic segment. There was no resulting impairment of goodwill based on our analysis. We recorded an impairment of $2.9 million related to a franchise right intangible asset in a particular market that was part of the restructuring. In the fourth quarter, we performed our annual impairment valuation for goodwill, and there was no resulting impairment of goodwill based on our analysis. If our plans do not yield anticipated results, we anticipate possible future impairments of goodwill in the Caribbean.

We performed our 2008 annual impairment test of our trademark and tradenames in the fourth quarter. The fair values were determined using assumptions regarding volume, average net pricing and inflation. Based on current assumptions, we have estimated that the fair value of our Sandora brand trademark and tradename intangible asset exceeds its carrying amount. This assessment was made using management’s judgment regarding expected future results associated with our current plans. Changing market conditions brought about by the current economic environment may cause some of our anticipated plans to change. We will continue to closely monitor these assets for any potential impairment, which may be brought about by significant changes in market conditions.

Environmental Liabilities. We continue to be subject to certain indemnification obligations under agreements related to previously sold subsidiaries, including potential environmental liabilities (see “Environmental Matters” in Item 1 and Note 20 to the Consolidated Financial Statements for further discussion). We have recorded our best estimate of our probable liability under those indemnification obligations. The estimated indemnification liabilities include expenses for the remediation of identified sites, payments to third parties for claims and expenses (including product liability and toxic tort claims), administrative expenses, and the expense of on-going evaluations and litigation. Such estimates and the recorded liabilities are subject to various factors, including possible insurance recoveries, the allocation of liability among other potentially responsible parties, the advancement of technology for means of remediation, possible changes in the scope of work at the contaminated sites, as well as possible changes in related laws, regulations, and agency requirements. We do not discount environmental liabilities. In fiscal year 2008, we recorded a charge of $15.0 million ($9.2 million net of taxes) related to revised estimates for the costs of environmental remediation, legal and related administrative costs. In particular, we revised our remediation plans at several sites during the quarter resulting in an increase in the accrual for remediation costs of $5.0 million, and we increased our accrual for legal costs by $10.0 million. These legal costs include defense costs associated with toxic tort matters.

Income Taxes. Our effective income tax rate is based on income, statutory tax rates and tax planning opportunities available to us in the various jurisdictions in which we operate. We have established valuation allowances against a portion of the foreign net operating losses and state-related net operating losses to reflect the uncertainty of our ability to fully utilize these benefits given the limited carryforward periods permitted by the various jurisdictions. The evaluation of the realizability of our net operating losses requires the use of

~~considerable~~During ~~management~~the ~~judgment~~third toquarter ~~estimate~~of ~~the~~2009, ~~future~~we ~~taxable~~completed an impairment ~~income~~testing ~~for~~of ~~the~~our ~~various~~Sandora ~~jurisdictions~~and Sadochok trademark and tradenames. As a result of this testing, ~~for~~we ~~which~~recorded ~~the~~a $17.4 million ~~ultimate~~non-cash impairment charge ($7.9 million ~~amounts~~net of taxes and ~~timing~~noncontrolling interests) based upon the findings of ~~such~~a ~~realization~~strategic ~~may~~review ~~differ~~of our Ukraine business. In light of weakening macroeconomic conditions, we lowered our expectations of the future performance, which reduced the value of these indefinite life intangible assets. The ~~valuation~~fair value of ~~allowance~~our ~~can~~Sandora ~~also~~and beSadochok ~~impacted~~brands was estimated using a multi-period royalty savings method, which reflects the savings realized by ~~changes~~owning inthe ~~tax~~brands ~~regulations~~and, therefore, not having to pay a royalty fee to a third party.

Environmental Liabilities. We continue to be subject to certain indemnification obligations under agreements related to previously sold subsidiaries, including potential environmental liabilities (see “Environmental Matters” in Item 1 and Note 19 to the Consolidated Financial Statements for further discussion). We have recorded our best estimate of our probable liability under those indemnification obligations. The estimated indemnification liabilities include expenses for the remediation of identified sites, payments to third parties for claims and expenses (including product liability and toxic tort claims), administrative expenses, and the expense of on-going evaluations and litigation. Such estimates and the recorded liabilities are subject to various factors, including possible insurance recoveries, the allocation of liability among other potentially responsible parties, the advancement of technology for means of remediation, possible changes in the scope of work at the contaminated sites, as well as possible changes in related laws, regulations, and agency requirements. We do not discount environmental liabilities.

Income Taxes. Our effective income tax rate is based on income, statutory tax rates and tax planning opportunities available to us in the various jurisdictions in which we operate. We have established valuation allowances against a portion of the foreign net operating losses and state-related net operating losses to reflect the uncertainty of our ability to fully utilize these benefits given the limited carryforward periods permitted by the various jurisdictions. The evaluation of the realizability of our net operating losses requires the use of considerable management judgment to estimate the future taxable income for the various jurisdictions, for which the ultimate amounts and timing of such realization may differ. The valuation allowance can also be impacted by changes in tax regulations.

Significant judgment is required in determining our uncertain tax positions. We have established accruals for uncertain tax positions using management’s best judgment and adjust these liabilities as warranted by changing facts and circumstances. A change in our uncertain tax positions, in any given period, could have a significant impact on our results of operations and cash flows for that period.

The effective income tax rate, which is income tax expense expressed as a percentage of income from continuing operations before income taxes, ~~minority interest~~ and equity in net earnings (loss) ~~earnings~~ of nonconsolidated companies, was 3036.40 percent in fiscal year 2009 ~~2008~~ compared to 3430.34 percent in fiscal year ~~2007~~ 2008. The higher ~~lower~~ tax rate was due primarily to ~~favorable~~the ~~country mix~~impact of ~~earnings and~~ the ~~associated lower in-country tax rates.~~ Indeconsolidation ~~addition, we recorded favorable adjustments associated with the filing~~ of our ~~2007~~Caribbean ~~U.S. federal~~business ~~income~~and ~~tax~~a ~~return,~~change ~~an investment tax credit~~ in the geographic ~~Czech~~mix ~~Republic~~of earnings and athe ~~reduction~~associated invarying statutory ~~accruals for uncertain~~ tax ~~positions~~rates.

Casualty Insurance Costs. Due to the nature of our business, we require insurance coverage for certain casualty risks. We are self-insured for workers compensation, product and general liability up to $1 million per occurrence and automobile liability up to $2 million per occurrence. The casualty insurance costs for our self-insurance program represent the ultimate net cost of all reported and estimated unreported losses incurred during the fiscal year. We do not discount casualty insurance liabilities.

Our liability for casualty costs is estimated using individual case-based valuations and statistical analyses and is based upon historical experience, actuarial assumptions and professional judgment. These estimates are subject to the effects of trends in loss severity and frequency based on the best data available to us. These estimates, however, are also subject to a significant degree of inherent variability. We evaluate these estimates on ana ~~annual~~quarterly basis and we believe that they are appropriate and within acceptable industry ranges, although an increase or decrease in the estimates or economic events outside our control could have a material impact on our results of operations and cash flows. Accordingly, the ultimate settlement of these costs may vary significantly from the estimates included in our Consolidated Financial Statements.

Pension and Postretirement Benefits. Our pension and other postretirement benefit obligations and related costs are calculated using actuarial assumptions. Two critical assumptions, the discount rate and the expected return on plan assets, are important elements of plan expense and liability measurement. We evaluate these critical assumptions annually. Other assumptions involve demographic factors such as retirement, mortality, turnover, health care cost trends and rate of compensation increases.

The discount rate is used to calculate the present value of expected future pension and postretirement cash flows as of the measurement date. The guideline for establishing this rate is high-quality, long-term bond rates. A lower discount rate increases the present value of benefit obligations and increases pension expense. The expected long-term rate of return on plan assets is based on current and expected asset allocations, as well as historical and expected returns on various categories of plan assets. A lower-than-expected rate of return on pension plan assets will increase pension expense. A 100 basis point increase in the discount rate would decrease our annual pension expense by $20.48 million. A 100 basis point decrease in the discount rate would increase our annual pension expense by $21.70 million. A 100 basis point increase in our expected return on plan assets would decrease our annual pension expense by $1.9 million. A 100 basis point decrease in our expected return on plan assets would increase our annual pension expense by $1.9 million. See Note 1514 to the Consolidated Financial Statements for additional information regarding these assumptions.

Related Party Transactions

Transactions with PepsiCo

PepsiCo is considered a related party due to the nature of our franchise relationship and PepsiCo’s ownership interest in us. As of the end of fiscal year ~~2008~~2009, PepsiCo beneficially owned approximately 43 percent of PepsiAmericas’ outstanding common stock. These shares are subject to a shareholder agreement with our company. As of the end of fiscal years 2009 and 2008, net amounts due from PepsiCo were $11.1 million and $5.2 million, respectively. During fiscal year 2009, approximately 83 percent of our total net sales were derived from the sale of PepsiCo products. We have entered into transactions and agreements with PepsiCo from time to time. Significant agreements and transactions between our company and PepsiCo are described below.

with our company. As of the end of fiscal years 2008 and 2007, net amounts due from PepsiCo were $5.2 million and $3.1 million, respectively. During fiscal year 2008, approximately 80 percent of our total net sales were derived from the sale of PepsiCo products. We have entered into transactions and agreements with PepsiCo from time to time, and we expect to enter into additional transactions and agreements with PepsiCo in the future. Significant agreements and transactions between our company and PepsiCo are described below.

Pepsi franchise agreements are subject to termination only upon failure to comply with their terms. Termination of these agreements can occur as a result of any of the following: our bankruptcy or insolvency; change of control of greater than 15 percent of any class of our voting securities; untimely payments for concentrate purchases; quality control failure; or failure to carry out the approved business plan communicated to PepsiCo.

Bottling Agreements and Purchases of Concentrate and Finished Product. We purchase concentrates from PepsiCo and manufacture, package, sell and distribute cola and non-cola beverages under various bottling agreements with PepsiCo. These agreements give us the right to manufacture, package, sell and distribute beverage products of PepsiCo in both bottles and cans as well as fountain syrup in specified territories. These agreements include a Master Bottling Agreement and a Master Fountain Syrup Agreement for beverages bearing the “Pepsi-Cola” and “Pepsi” trademarks, including Diet Pepsi in the United States. The agreements also include bottling and distribution agreements for non-cola products in the United States, and international bottling agreements for countries outside the United States. These agreements provide PepsiCo with the ability to set prices of concentrates, as well as the terms of payment and other terms and conditions under which we purchase such concentrates. In addition, we bottle water under the “Aquafina” trademark pursuant to an agreement with PepsiCo that provides for payment of a royalty fee to PepsiCo. We have also ~~purchase~~entered into various transactions with joint ~~finished~~ventures ~~beverage~~in ~~products~~which ~~from~~ PepsiCo ~~and~~holds ~~certain~~an ofequity ~~its~~interest. In ~~affiliates~~particular, ~~including~~we purchase tea, concentrate and finished beverage products from athe Pepsi/Lipton ~~partnership~~Tea Partnership, asa ~~well~~joint asventure between ~~finished~~PepsiCo and Unilever, in which PepsiCo holds a 50 percent interest, and finished beverage products from the North American Coffee Partnership, a joint venture between PepsiCo/ and Starbucks ~~partnership.~~in ~~The~~which PepsiCo holds a 50 percent interest. The table below summarizes amounts paid to PepsiCo and affiliates for purchases of concentrate, finished beverage products, finished snack food products and Aquafina royalty fees, which are included in cost of goods sold.

~~Bottler Incentives and Other Support~~ ~~Arrangements. We share a business objective~~47 with PepsiCo of increasing availability and consumption of Pepsi-Cola beverages. Accordingly, PepsiCo provides us with various forms of bottler incentives to promote its brands. The level of this support is negotiated regularly and can be increased or decreased at the discretion of PepsiCo. To support volume and market share growth, the bottler incentives cover a variety of initiatives, including direct marketplace, shared media and advertising support. Worldwide bottler incentives from PepsiCo totaled approximately $248.7 million, $231.2 million and $226.8 million for the fiscal years ended 2008, 2007 and 2006, respectively. There are no conditions or requirements that could result in the repayment of any support payments we received.

InTable accordance with Emerging Issues Task Force (“EITF”) Issue No. 02-16, “Accounting by a Customer (including a Reseller) for Certain Consideration Received from a Vendor,” bottler incentives that are directly attributable to incremental expenses incurred are reported as either an increase to net sales or a reduction to SD&A expenses, commensurate with the recognition of the related expense. Such bottler incentives include amounts received for direct support of advertising commitments and exclusivity agreements with various customers. All other bottler incentives are recognized as a reduction of cost of goods sold when the related products are sold based on the agreements with vendors. Such bottler incentives primarily include base level funding amounts which are fixed based on the previous year’s volume and variable amounts that are reflective of the current year’s volume performance. Contents

Bottler Incentives and Other Support Arrangements. We share a business objective with PepsiCo of increasing availability and consumption of Pepsi-Cola beverages. Accordingly, PepsiCo provides us with various forms of bottler incentives to promote its brands. The level of this support is negotiated regularly and can be increased or decreased at the discretion of PepsiCo. To support volume and market share growth, the bottler incentives cover a variety of initiatives, including direct marketplace, shared media and advertising support. Worldwide bottler incentives from PepsiCo totaled approximately $230.5 million, $248.7 million and $231.2 million for the fiscal years ended 2009, 2008 and 2007, respectively. There are no conditions or requirements that could result in the repayment of any support payments we received.

Bottler incentives that are directly attributable to incremental expenses incurred are reported as either an increase to net sales or a reduction to SD&A expenses, commensurate with the recognition of the related expense. Such bottler incentives include amounts received for direct support of advertising commitments and exclusivity agreements with various customers. All other bottler incentives are recognized as a reduction of cost of goods sold when the related products are sold based on the agreements with vendors. Such bottler incentives primarily include base level funding amounts which are fixed based on the previous year’s volume and variable amounts that are reflective of the current year’s volume performance.

PepsiCo also provided indirect marketing support to our marketplace, which consisted primarily of media expenses. This indirect support was not reflected or included in our Consolidated Financial Statements, as these amounts were paid directly by PepsiCo.

~~Manufacturing and~~ National Account Sales and Services. Pursuant to the Master Fountain Syrup Agreement, we provide manufacturing ~~services~~and delivery services to PepsiCo in connection with the production of ~~certain~~fountain ~~finished beverage~~syrup ~~products,~~for PepsiCo’s national account customers and commissaries. We also provide certain manufacturing, delivery and equipment ~~equipment~~ maintenance services to PepsiCo’s national account customers. Net amounts paid or payable by PepsiCo to us for national account sales and services are summarized in the following table.

Sandora Joint Venture. We are party to 45a joint venture agreement with PepsiCo pursuant to which we hold the outstanding common stock of Sandora, the leading juice company in Ukraine. We hold a 60 percent interest in the joint venture and PepsiCo holds the remaining 40 percent interest. In fiscal year 2008, we repaid $47.5 million of long-term debt that was acquired as part of the Sandora acquisition. As a part of this transaction, we received $26.0 million of cash from PepsiCo that included its portion of the debt repayment. The joint venture financial statements have been consolidated in our Consolidated Financial Statements.

Other Transactions. PepsiCo provides procurement services to us pursuant to a shared services agreement. Under this agreement, PepsiCo acts as our agent and negotiates with various suppliers the cost of certain raw materials by entering into raw material contracts on our behalf. The raw material contracts obligate us to purchase certain minimum volumes. PepsiCo also collects and remits to us certain rebates from the various suppliers related to our procurement volume. In addition, PepsiCo executes certain derivative

~~national~~contracts ~~account~~on ~~customers.~~our ~~Net~~behalf ~~amounts~~and ~~paid~~in oraccordance ~~payable~~with byour hedging ~~PepsiCo~~strategies. Payments to usPepsiCo for ~~manufacturing~~procurement ~~and national account~~ services are ~~are~~reflected ~~summarized~~ in the ~~table~~following ~~below~~table.

~~Sandora~~In ~~Joint~~summary, ~~Venture. We are party to a joint venture agreement with PepsiCo pursuant to which we hold~~ the ~~outstanding~~Consolidated ~~common~~Statements ~~stock~~ of ~~Sandora,~~Income ~~LLC,~~include the ~~leading juice~~ ~~company~~following inincome ~~Ukraine.~~and We(expense) ~~hold~~transactions awith ~~60 percent interest in the joint venture and~~ PepsiCo ~~holds a 40 percent interest. In~~and ~~fiscal year 2008~~affiliates, wewhich ~~repaid~~includes ~~$47.5 million~~transaction ofwith ~~long-term debt that was acquired as part of~~ the ~~Sandora~~Pepsi/Lipton ~~acquisition. As a part~~Tea ofPartnership ~~this~~and ~~transaction, we received $26.0 million of cash from PepsiCo that included its portion of~~ the ~~debt~~North ~~repayment.~~American ~~The joint~~Coffee ~~venture~~Partnership ~~financial statements have been consolidated~~ (in ~~our~~ ~~Consolidated Financial Statements.~~millions):

Other Transactions. PepsiCo provides procurement services to us pursuant to a shared services agreement. Under this agreement, PepsiCo acts as our agent and negotiates with various suppliers the cost of certain raw materials by entering into raw material contracts on our behalf. The raw material contracts obligate us to purchase certain minimum volumes. PepsiCo also collects and remits to us certain rebates from the various suppliers related to our procurement volume. In addition, PepsiCo executes certain derivative contracts on our behalf and in accordance with our hedging strategies. Payments to PepsiCo for procurement services are reflected in the table below.


	2009			2008			2007

Net sales:
Bottler incentives	$	29.2		$	34.7		$	32.9
National account sales and services		228.0			230.9			223.5

	$	257.2		$	265.6		$	256.4

Cost of goods sold:
Bottler incentives	$	182.3		$	190.3		$	180.7
Purchases of concentrate		(926.4	)		(935.1	)		(896.5	)
Purchases of finished beverage products		(216.1	)		(232.8	)		(211.4	)
Purchases of finished snack food products		(23.7	)		(26.7	)		(17.6	)
Aquafina royalty fees		(39.3	)		(46.6	)		(54.3	)
Procurement services		(4.1	)		(4.1	)		(3.9	)

	$	(1,027.3	)	$	(1,055.0	)	$	(1,003.0	)

SD&A expenses:
Bottler incentives	$	19.0		$	23.7		$	17.6
Purchases of advertising materials		(1.5	)		(2.5	)		(2.0	)

	$	17.5		$	21.2		$	15.6

InTotal ~~summary,~~amounts paid or payable to the ~~Consolidated~~Pepsi/Lipton ~~Statements~~Tea Partnership ofby ~~Income~~us ~~include~~were approximately $89.8 million, $94.7 million and $102.4 million during 2009, 2008 and 2007, respectively. Total amounts paid or payable to the North ~~following~~American ~~income~~Coffee Partnership by us were approximately $56.5 million, $60.2 million and ~~(expense)~~$61.9 million during ~~transactions~~2009, ~~with~~2008 ~~PepsiCo~~and (2007, respectively. These amounts are included in our purchases of finished beverage products in the ~~millions):~~table above.

	2008			2007			2006
Net sales:
Bottler incentives	$	34.7		$	32.9		$	30.6
Manufacturing and national account services		17.0			19.6			19.3
	$	51.7		$	52.5		$	49.9
Cost of goods sold:
Purchases of concentrate	$	(923.3	)	$	(888.2	)	$	(829.8	)
Purchases of finished beverage products		(232.3	)		(210.0	)		(188.0	)
Purchases of finished snack food products		(26.7	)		(17.6	)		(12.5	)
Bottler incentives		190.3			180.7			182.3
Aquafina royalty fees		(46.6	)		(54.3	)		(50.2	)
Procurement services		(4.1	)		(3.9	)		(3.9	)
	$	(1,042.7	)	$	(993.3	)	$	(902.1	)
Selling, delivery and administrative expenses:
Bottler incentives	$	23.7		$	17.6		$	13.9
Purchases of advertising materials		(2.5	)		(2.0	)		(1.8	)
	$	21.2		$	15.6		$	12.1

Transactions with Bottlers in Which PepsiCo Holds an Equity Interest. We sell finished beverage products to other bottlers in which PepsiCo owns an equity interest, including The Pepsi Bottling Group, Inc. These sales occur in instances where the proximity of our production facilities to the other bottlers’ markets or lack of manufacturing capability, as well as other economic considerations, make it more efficient or desirable for the other bottlers to buy finished product from us. Our sales to other bottlers, including those in which PepsiCo owns an equity interest, were approximately $214.3 million, $210.8 million and $213.0 million in fiscal years 2009, 2008 and 2007, respectively. Our purchases from such other bottlers were $0.4 million, $0.5 million and $0.3 million in fiscal years 2009, 2008 and 2007, respectively.

~~Transactions~~Merger Agreement with ~~Bottlers~~PepsiCo. We inhave entered ~~Which~~into a merger agreement with PepsiCo ~~Holds~~and anMetro, dated ~~Equity~~August 3, ~~Interest. We~~2009, ~~sell~~pursuant ~~finished~~to ~~beverage~~which our company will merge ~~products~~with toand ~~other~~into ~~bottlers~~Metro, ~~including~~with ~~The~~Metro ~~Pepsi~~continuing ~~Bottling~~as ~~Group,~~the surviving ~~Inc.~~company and ~~Pepsi~~a ~~Bottling~~wholly ~~Ventures~~owned ~~LLC,~~subsidiary ~~bottlers~~of inPepsiCo. ~~which~~Under ~~PepsiCo~~the ~~owns~~terms anof ~~equity~~the ~~interest.~~merger ~~These~~agreement, ~~sales~~PepsiCo ~~occur~~will inacquire ~~instances where~~all ~~the~~outstanding ~~proximity~~shares of ~~our~~PepsiAmericas ~~production~~common ~~facilities~~stock toit ~~the~~does ~~other~~not ~~bottlers’~~already ~~markets~~own orfor ~~lack~~the price of ~~manufacturing~~$28.50 ~~capability,~~in ascash or ~~well~~0.5022 shares asof ~~other~~PepsiCo ~~economic~~common ~~considerations~~stock, ~~make~~subject itto ~~more efficient or~~proration ~~desirable~~provisions ~~for~~which provide that an aggregate 50 percent of the ~~other~~outstanding ~~bottlers~~PepsiAmericas tocommon ~~buy~~stock ~~finished~~will ~~product~~be ~~from~~converted ~~us.~~into ~~Our~~the ~~sales~~right to ~~other~~receive ~~bottlers,~~common ~~including~~stock ~~those~~of ~~in which~~ PepsiCo ~~owns~~and an ~~equity interest, were approximately~~ ~~$210.8 million,~~aggregate ~~$213.0~~50 ~~million~~percent ~~and~~of ~~$170.1 million~~the outstanding PepsiAmericas incommon ~~fiscal~~stock ~~years~~will ~~2008,~~be ~~2007~~converted ~~and~~into ~~2006,~~the ~~respectively.~~right ~~Our~~to ~~purchases~~receive cash. ~~from~~We ~~such~~hope ~~other~~to ~~bottlers~~close ~~were~~the ~~$0.5 million~~merger by the end of February 2010, subject ~~$0.3 million~~to regulatory approval and ~~$2.0 million~~the insatisfaction ~~fiscal~~or ~~years~~waiver ~~2008,~~of other ~~2007~~customary ~~and~~closing ~~2006, respectively~~conditions.

4649

Agreements and Relationships with Dakota Holdings, LLC, Starquest Securities, LLC and Mr. Pohlad

Under the terms of the ~~PepsiAmericas~~ merger agreement between Whitman Corporation and the former PepsiAmericas, ~~Dakota~~Inc. (“Whitman merger”), Dakota Holdings, LLC (“Dakota”), a Delaware limited liability company whose members at the time of the ~~PepsiAmericas~~Whitman merger included PepsiCo and Pohlad Companies, became the owner of 14,562,970 shares of our common stock, ~~including~~ including 377,128 shares purchasable pursuant to the exercise of a warrant. In November 2002, the members of Dakota entered into a redemption agreement pursuant to which the PepsiCo membership interests were redeemed in exchange for certain assets of Dakota. As a result, Dakota became the owner of of 12,027,557 shares of our common stock, including 311,470 shares purchasable pursuant to the exercise of a warrant. In June 2003, Dakota converted from a Delaware limited liability company to a Minnesota limited liability company pursuant to an agreement and plan of merger. In January 2006, Starquest Securities, LLC (“Starquest”), a Minnesota limited liability company, obtained the shares of our common stock previously owned by Dakota, including the shares of common stock purchasable upon exercise of the above-referenced warrant, pursuant to a contribution agreement. Such warrant expired unexercised in January 2006, resulting in Starquest holding 11,716,087 shares of our common stock. In February 2008, Starquest acquired an additional 400,000 shares of our common stock pursuant to open market purchases, bringing its holdings to 12,116,087 shares of common stock, or 9.7 percent, as of February 2716, ~~2009~~2010. The shares held by Starquest are subject to a shareholder agreement with our company.

Mr. Pohlad, our Chairman and Chief Executive Officer, is the President and the owner of one-third of the capital stock of Pohlad Companies. Pohlad Companies is the controlling member of Dakota. Dakota is the controlling member of Starquest. Pohlad Companies may be deemed to have beneficial ownership of the securities beneficially owned by Dakota and Starquest and Mr. Pohlad may be deemed to have beneficial ownership of the securities beneficially owned by Starquest, Dakota and Pohlad Companies.

Transactions with Pohlad Companies

WeAs ~~own~~of the end of fiscal year 2009, we owned a one-eighth interest in a Challenger aircraft which we owned with Pohlad ~~own~~Companies. ~~with~~In January 2010, we sold this one-eighth interest to Pohlad Companies for $1.7 million, ~~SD&A~~representing ~~expenses~~fair market value as determined by an unrelated third party. This transaction was approved in advance by our Affiliated Transaction Committee. During fiscal year 2009, we paid to $0.1 million to International Jet, a subsidiary of Pohlad Companies, for office and hangar rent, management fees and maintenance in connection with the storage and operation of this ~~corporate jet in fiscal~~ ~~years~~corporate ~~2008, 2007 and 2006 were $0~~jet.~~2 million,~~ ~~$0.1 million and $0.2 million, respectively.~~

Recently Issued Accounting Pronouncements

See Note 1 of the Consolidated Financial Statements for a summary of new accounting pronouncements that may impact our business.


Item 7A.	Quantitative and Qualitative Disclosures about Market Risk.

We are ~~subject~~exposed to ~~various~~commodity ~~market~~price ~~risks~~risk, ~~including~~foreign ~~risks from~~currency ~~changes~~exchange inrisk ~~commodity~~and ~~prices,~~ interest ~~rates~~rate ~~and~~risk ~~currency~~related to our ongoing ~~exchange~~business ~~rates,~~operations. ~~which~~We ~~are~~use ~~addressed~~derivative ~~below.~~instruments Into ~~addition, see~~manage some of these risks, as discussed in Note 1312 to the Consolidated Financial Statements.

Commodity Prices. We use commodity inputs such as aluminum for our cans, resin for our polyethylene terephthalate (“PET”) bottles, natural gas, diesel fuel, unleaded gasoline, high fructose corn syrup and sugar ~~to be used~~ in our operations. ~~These~~We ~~commodities~~ are subject to ~~price~~commodity ~~fluctuations that may create~~ price risk. because ~~Our~~our ability to recover ~~higher~~increased ~~product~~ costs through ~~price~~higher pricing ~~increases to customers~~ may be limited ~~due~~in to the competitive ~~pricing~~ environment ~~that exists~~ in ~~the~~which ~~soft drink business. With~~we ~~respect~~operate. toThis ~~commodity~~risk ~~costs~~is ~~included~~managed inthrough ~~our~~the ~~product~~use ~~costs,~~of ~~we may~~fixed-price ~~enter~~purchase ~~into~~orders, ~~firm~~pricing ~~price~~agreements, ~~commitments~~geographic ~~for~~diversity ~~future purchases that~~and ~~enable~~derivatives. usWe touse ~~establish~~derivatives, awith ~~fixed~~terms ~~purchase~~of ~~price~~no ~~within~~more ~~a defined~~than ~~time~~three ~~period.~~years, Weto ~~may~~economically ~~also use derivative financial instruments to~~ hedge price fluctuations ~~for~~related to a portion of ~~anticipated purchases of certain commodities used in~~ our ~~operations.~~anticipated Wecommodity ~~have policies governing the hedging instruments we may use~~purchases, ~~including~~primarily ~~a policy~~for toaluminum, ~~not~~natural ~~enter~~gas ~~into~~and ~~derivative~~diesel ~~contracts~~fuel. ~~for~~For ~~speculative~~those orderivatives ~~trading~~that ~~purposes.~~qualify ~~For~~for ~~derivatives~~hedge ~~where~~accounting, weany ~~cannot~~ineffectiveness ~~achieve hedge~~is ~~accounting,~~recorded ~~such~~immediately. asWe ~~hedges~~classify ofboth ~~forecasted~~the ~~purchases~~earnings ofand ~~diesel~~cash ~~fuel,~~flow weimpact ~~record~~from ~~changes~~these inderivatives ~~the~~consistent ~~fair~~with ~~value of those instruments~~the ~~on a mark-to-market basis.~~

4750

Asunderlying ofhedged ~~the~~item. ~~end~~Derivatives ofused ~~fiscal~~to ~~year~~hedge ~~2008, we had outstanding derivative~~commodity ~~contracts~~price ~~for~~risk ~~anticipated~~that ~~purchases~~do ofnot ~~aluminum~~qualify ~~and~~for ~~natural~~hedge ~~gas.~~accounting are Asmarked-to-market each ofperiod ~~the~~and ~~end~~reflected ofin ~~fiscal~~our ~~year~~Consolidated ~~2007,~~Statements ~~we had no outstanding hedges~~of Income.

~~Interest~~Our ~~Rates. During~~open ~~fiscal~~commodity ~~years 2008~~derivative ~~and~~contracts ~~2007,~~that ~~the~~qualify ~~risk~~for ~~from changes in interest rates was not~~hedge ~~material~~accounting tohad ~~our operations because~~ a ~~significant~~face ~~portion~~value of ~~our debt portfolio represented fixed rate obligations~~$122.6 million Asas of the end of fiscal ~~years~~year ~~2008~~2009 and ~~2007, approximately 20~~$44.8 ~~percent~~million of our debt portfolio was variable rate obligations. Our floating rate exposure relates to changes in the six-month London Interbank Offered Rate (“LIBOR”) and the federal funds rate. Assuming consistent levels of floating rate debt with those held as of the end of ~~fiscal years 2008 and 2007, a~~ ~~50 basis~~fiscal ~~point~~year (02008.~~5 percent)~~ ~~change~~As ~~in each~~ of ~~these rates~~the ~~would~~end ~~have an impact~~ of ~~approximately $3 million and $2 million, respectively, on our annual interest expense. During~~ fiscal years ~~2008~~2009 and ~~2007~~2008, ~~we had cash equivalents~~ ~~throughout~~there ~~the year, principally invested in money market funds, which~~ were ~~most~~no ~~closely~~open ~~tied~~commodity toderivative ~~the~~contracts ~~federal~~that ~~funds~~did ~~rate. Assuming a 50 basis point change in the rate of interest associated with our short-term investments, interest income would~~ not ~~have~~ ~~changed~~qualify byfor ahedge ~~significant amount~~accounting.

Foreign Currency Exchange Rates. Because we operate outside of the U.S., we are subject to risk resulting from changes in currency exchange rates. Currency exchange rates are influenced by a variety of economic factors including local inflation, growth, interest rates and governmental actions, as well as other factors. In particular, our operations in CEE are subject to currency exchange rate exposure associated with cost of goods sold, particularly concentrate and packaging, which may be be purchased in either U.S. dollars or euros. ~~We may use derivative financial instruments to hedge currency exchange rate fluctuations associated with a portion of anticipated raw material purchases.~~ Our investment in markets outside of the U.S. has increased during the past several years and, as such, our exposure to currency risk has increased. Our principal exposures are the Ukrainian hryvnya, the Romanian leu, the Polish zloty and the ~~Polish~~euro. We use ~~zloty~~foreign currency derivative contracts to hedge the volatility of foreign currency rates for purchases of raw materials for which payment is settled in a currency other than our local operations’ functional currency. There were no open foreign currency derivatives as of the end of fiscal year 2009. Our foreign currency derivatives had a total face value of $46.1 million as of the end of fiscal year 2008.

Based on net sales, international operations represented approximately 3123 percent and 2431 percent of our total operations in fiscal years ~~2008~~2009 and ~~2007~~2008, respectively. Changes in currency exchange rates impact the translation of the operations’ results from their local currencies into U.S. dollars. During fiscal ~~years~~year ~~2008~~2009, ~~and~~foreign ~~2007~~currency had a negative impact to net income attributable to PepsiAmericas, Inc. of $101.2 million. During fiscal year 2008, foreign currency had a ~~beneficial~~positive impact to net income ofattributable to ~~$13~~PepsiAmericas, Inc.~~4 million~~ ~~and~~of $1913.04 million~~, respectively~~. If the currency ~~currency~~ exchange rates had changed by 1 percent in fiscal years ~~years~~2009 ~~2008~~ and ~~2007~~2008, we estimate the impact on operating income would ~~would~~ have been approximately $36 million and $13 million, respectively. Our ~~estimate~~estimates ~~reflects~~reflect the fact that a portion of the international operations costs ~~are~~ is denominated in U.S. dollars and euros. ~~This~~The ~~estimate~~estimates ~~does~~ do not take into account the possibility that rates can move in opposite ~~opposite~~ directions and that gains in one category may or may not be offset by losses from another category. ~~As of the end of~~ fiscal year 2008, we had outstanding derivative contracts for anticipated purchases of raw materials for which payment is settled in currencies other than our local operations’ functional currency.

Interest Rates. In fiscal years 2009 and 2008, the risk from changes in interest rates was not material to our operations because a significant portion of our debt portfolio represented fixed-rate obligations. As of the end of fiscal years 2009 and 2008, approximately 23 percent and 20 percent, respectively, of our debt portfolio, after the impact of the related interest rate derivative instruments, represented variable rate obligations. Our floating rate exposure relates to changes in the six-month London Interbank Offered Rate (“LIBOR”) and the federal funds rate. Assuming consistent levels of floating rate debt with those held as of the end of fiscal years 2009 and 2008, a 50 basis point (0.5 percent) change in each of these rates would have an impact of approximately $2.5 million and $3.0 million, respectively, on interest expense. We had cash equivalents throughout fiscal years 2009 and 2008, principally invested in money market funds, which were most closely tied to the federal funds rate. Assuming a 50 basis point change in the rate of interest associated with our cash equivalents as of the end of fiscal years 2009 and 2008, interest income would not have changed by a significant amount.

In anticipation of long-term debt issuances, we have entered into treasury rate lock instruments and forward starting swap agreements. We have also entered into interest rate swap contracts to convert a portion of our fixed-rate debt to floating rate debt, with the objective of reducing overall borrowing costs. There were no open interest rate swaps designated as cash flow hedges outstanding as of the end of fiscal year 2009. The notional amount of the interest rate swaps designated as cash flow hedges outstanding as of the end of fiscal year 2008 was $250 million. The notional amount of interest rate swaps designed as fair value hedges outstanding was $350 million as of the end of fiscal year 2009. There were no open interest rate swaps designated as fair value hedges outstanding as of the end of fiscal year 2008.


Item 8.	Financial Statements and Supplementary Data.

See Index to Financial Information on page F-1.


Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

4852


Item 9A.	Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We maintain a system of disclosure controls and procedures that is designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that, as of January 32, ~~2009~~2010, our disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the quarter ended January 32, ~~2009~~2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting, as defined in Exchange Act Rule 13a-15(f), is a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:


	•	Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

	•	Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

	•	Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Our management assessed the effectiveness of our internal control over financial reporting as of January 32, ~~2009~~2010. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in “Internal Control-Integrated Framework.” Based on this assessment, management believes that, as of January 32, ~~2009~~2010, our internal control over financial reporting was effective based on those criteria.

KPMG LLP, an independent registered public accounting firm, has audited the consolidated financial statements included in this Annual Report on Form 10-K and, as a part of this audit, has issued their report, included herein, on the effectiveness of our internal control over financial reporting.

4953

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders
of PepsiAmericas, Inc.:

We have audited PepsiAmericas, Inc.’s (the Company) internal control over financial reporting as of January 32, ~~2009~~2010, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January 32, ~~2009~~2010, based on criteria established in Internal Control — - Integrated Framework issued by the Committee ~~Committee~~ of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of PepsiAmericas, Inc. and subsidiaries as of the end of fiscal years ~~2008~~2009 and ~~2007~~2008, and the related consolidated statements of income, ~~shareholders’~~ equity and ~~comprehensive income, and~~ cash flows for each of the fiscal years ~~2008~~2009, ~~2007~~2008 and ~~2006~~2007, and our report dated ~~March~~February 322, ~~2009~~2010 expressed an unqualified ~~opinion~~ opinion on those consolidated financial statements.

/s/ KPMG LLP

Minneapolis, Minnesota

~~March~~February 322, ~~2009~~2010

5054


Item 9B.	Other Information.

On February 269, ~~2009~~2010, our Board of Directors declared a first quarter ~~2009~~2010 dividend of $0.14 per share on PepsiAmericas common stock. The dividend is payable April 1, ~~2009~~2010 to shareholders of record as of March 135, ~~2009~~2010.

PART III


Item 10.	Directors, Executive Officers and Corporate Governance.

~~We incorporate by reference the information contained under the~~ ~~captions “Proposal 1: Election of Directors”,~~Our ~~“Our Board of~~ Directors ~~and Committees” and~~ ~~“Section 16(a) Beneficial Ownership Reporting Compliance” in our definitive proxy statement for the annual meeting of shareholders to be held May 7, 2009.~~

~~Pursuant~~Our todirectors ~~General~~are ~~Instruction G(3)~~elected toeach year at the ~~Annual~~annual ~~Report~~meeting by our onshareholders to serve until the next annual meeting of ~~Form 10-K~~ shareholders and ~~Instruction 3~~until tohe ~~Item 401(b)~~or ofshe is succeeded by another ~~Regulation S-K,~~qualified director who has been elected. We do not have a ~~information~~classified ~~regarding~~Board ~~executive~~of ~~officers~~Directors. ofThere ~~PepsiAmericas~~are isno familial ~~provided~~relationships inbetween ~~Part I~~any ofdirector ~~this~~and ~~Annual~~executive ~~Report~~officer. onSet ~~Form 10-K~~forth below is information concerning the members of our Board ~~under~~of ~~separate~~Directors ~~caption~~as of February 16, 2010.

~~We have adopted a code of ethics that applies to our principal~~ ~~executive officer, principal financial officer and principal~~Herbert ~~accounting officer~~M. ~~This~~Baum, ~~code~~Chairman, ofPresident ~~ethics is available on our website at www.pepsiamericas.com~~ and inChief ~~print~~Executive ~~upon written request to PepsiAmericas~~Officer, ~~Inc., 4000 RBC Plaza, 60 South Sixth~~The ~~Street,~~Dial ~~Minneapolis,~~Corporation ~~Minnesota 55402, Attention: Investor Relations~~(Retired). ~~Any~~Director ~~amendment~~since ~~to, or waiver from, a provision of our code of ethics will be posted to the above-referenced website~~1995.

Mr. Baum, 73, served as Chairman, President and Chief Executive Officer of The Dial Corporation, now a subsidiary of The Henkel Group, from August 2000 to March 2005. Prior to joining Dial, from January 1999 to August 2000, Mr. Baum was employed by Hasbro, Inc. as President and Chief Operating Officer. Prior to joining Hasbro, Mr. Baum was employed by Quaker State Corporation as its Chairman and Chief Executive Officer from 1993 to 1998. Mr. Baum was employed by Campbell Soup Company from 1978 to 1993, where he served in various positions, most recently as Executive Vice President and President, Campbell North/South America. Mr. Baum serves as a director of US Airways. He is past chairman of the Association of National Advertisers, The Advertising Council and the National Food Processors Association.

Richard G. Cline, Chairman, Hawthorne Investors, Inc. Director since 1987.

Mr. Cline, 74, served as President and Chief Operating Officer of Nicor Inc. beginning in 1985, and became Chairman of the Board and Chief Executive Officer in 1986. He retired as Chief Executive Officer in May 1995 and continued to serve as Chairman until his retirement from the company at the end of 1995. Prior to joining Nicor, Mr. Cline was an executive of Jewel Companies, Inc. for 22 years, becoming Chairman, President and Chief Executive Officer in 1984. He is also Chairman of Hawthorne Investors, Inc., a private management advisory and investment firm he founded in 1996. Additionally, he has served as a director of Ryerson, Inc., Chairman of the Boards of Trustees of The Northern Funds, The Northern Institutional Funds and The Northern Multi-Manager Funds and he is a past chairman of the Federal Reserve Bank of Chicago. From 1998 to 2000, Mr. Cline was Chairman of Hussmann International, Inc. Mr. Cline is a director emeritus and past president of the University of Illinois Foundation.

Michael J. Corliss, Chief Executive Officer, Investco Financial Corporation. Director since 2006.

Mr. Corliss, 49, is Chief Executive Officer of Investco Financial Corporation, which he founded in 1983, and a principal of Tarragon, LLC, both real estate development and management firms. From 1985 to 1998, Mr. Corliss served on the board of directors of Bank of Sumner and its holding company, Valley Bancorporation, before it was sold in 1998 to Frontier Financial Corporation. Mr. Corliss served on the board of directors of Frontier Financial Corporation from 1998 to 2003. He is principal of the Truss Company and Building Supply, Inc. and Desert Business Park, both privately held companies. He also serves as a Trustee and Treasurer at the University of Puget Sound in Tacoma, Washington.

Pierre S. du Pont, Former Governor, State of Delaware. Director since 1990.

Governor du Pont, 75, served as a director in the law firm of Richards, Layton & Finger, P.A., Wilmington, Delaware, through June 2005. A 1956 graduate of Princeton University, he served in the U.S. Navy from 1957 to 1960 and received his law degree from Harvard University in 1963. After six years in business with E.I. du Pont de Nemours & Co., Inc., he entered politics in 1968, serving in the Delaware House of Representatives (1968-1970), as a member of the U.S. House of Representatives (1971-1977), and as Governor of the State of Delaware (1977-1985). Governor du Pont served as Chairman of the Hudson Institute in 1985-1986 and currently serves as Chairman of the National Center for Policy Analysis.

Archie R. Dykes, Director of Various Corporations. Director since 1985.

Dr. Dykes, 79, is Lead Director of PepsiAmericas. He served as Chairman of Capital City Holdings Inc., a venture capital organization, from 1988 to 2005. Dr. Dykes served as Chairman and Chief Executive Officer of the Security Benefit Group of Companies from 1980 through 1987. He served as Chancellor of the University of Kansas from 1973 to 1980. Prior to that, he was Chancellor of the University of Tennessee. Dr. Dykes was Chairman of the Board and Chief Executive Officer of Fleming Companies, Inc. until September 2004. He assumed those roles at Fleming in March 2003 following his service to such company as Non-Executive Chairman of the Board. He also serves as a director of Midas, Inc. and Arbor Realty Trust, Inc. Dr. Dykes is a member of the Board of Trustees of the Kansas University Endowment Association, the William Allen White Foundation and YouthFriends, Inc. He formerly served as Vice Chairman of the Commission on the Operation of the United States Senate and as a member of the Executive Committee of the Association of American Universities.

Jarobin Gilbert, Jr., President and Chief Executive Officer, DBSS Group, Inc. Director since 1994.

Mr. Gilbert, 64, is President and Chief Executive Officer of DBSS Group, Inc., a management, planning and international trade advisory firm. The firm provides trade advisory services, trade consulting and participates in negotiations. He is also a director and a member of the audit committees of both Midas, Inc. and Foot Locker, Inc. Mr. Gilbert serves on the board of directors of the Harlem Partnership Circle and he is chairman of the board of directors of Atlantic Mutual Companies. He is a permanent member of the Council on Foreign Relations.

James R. Kackley, President and Chief Operating Officer, Orion Energy Systems, Inc. Director since 2004.

Mr. Kackley, 67, is President and Chief Operating Officer and a director of Orion Energy Systems, Inc., a Wisconsin-based energy management company. Mr. Kackley practiced as a public accountant for Arthur Andersen from 1963 to 1999. From 1974 to 1999, he was an audit partner for the firm, dealing with a substantial number of public and non-public companies. In addition, in 1998 and 1999, he served as Chief Financial Officer for Andersen Worldwide, then a professional services firm operating in more than 100 countries. From June 1999 to May 2002, Mr. Kackley served as an adjunct professor at the Kellstadt School of Management at DePaul University. Mr. Kackley serves as a director, a member of the executive committee, the audit committee financial expert, and the audit committee chairman of Herman Miller, Inc., a Michigan-based manufacturer of office furniture. Mr. Kackley served as a director, a member of the nominating and governance committee, the audit committee financial expert, and a member of the audit committee of Ryerson, Inc. from March 2007 to October 2007. Previously, he served on the audit committees of Northwestern University and the Chicago Symphony Orchestra, not-for-profit corporations. He is currently a Life Trustee of Northwestern University and the Museum of Science and Industry (Chicago).

Matthew M. McKenna, President and Chief Executive Officer, Keep America Beautiful, Inc. Director since 2001.

Mr. McKenna, 59, has served as President and Chief Executive Officer of Keep America Beautiful, Inc., a national nonprofit group that supports community improvement activities, since January 2008. From August 2001 to December 2007, he was Senior Vice President, Finance for PepsiCo. Previously he was Senior Vice

President and Treasurer for PepsiCo. Prior to joining PepsiCo in 1993, he was a partner with the law firm of Winthrop, Stimson, Putnam & Roberts in New York. He serves on the Board of the Duke University Libraries and the Manhattan Theater Club, not-for-profit companies. He is also an adjunct professor at Fordham Business School and Fordham Law School. Mr. McKenna is also a director of Foot Locker, Inc.

Robert C. Pohlad, Chairman and Chief Executive Officer, PepsiAmericas, Inc. Director since 2000.

Mr. Pohlad, 55, became our Chief Executive Officer in November 2000, was named Vice Chairman in January 2001 and became our Chairman in January 2002. Mr. Pohlad served as Chairman, Chief Executive Officer and a director of the former PepsiAmericas prior to the 2000 merger of the former PepsiAmericas and Whitman Corporation, a position he had held since 1998. From 1987 to present, Mr. Pohlad has served as President of Pohlad Companies. He also serves as a Trustee of the University of Puget Sound in Tacoma, Washington, and a member of the Dean’s Board of Visitors of the University of Minnesota Medical School.

Deborah E. Powell, M.D., Associate Vice President for New Models of Education and Dean Emeritus, University of Minnesota Medical School. Director since 2006.

Dr. Powell, 70, is Associate Vice President for New Models of Education and Dean Emeritus of the Medical School, and a McKnight Presidential Leadership Chair, at the University of Minnesota. Dr. Powell is a board-certified surgical pathologist and medical educator with more than 30 years of experience in academic medicine. She received her medical degree from Tufts University School of Medicine. Dr. Powell served as the Vice Chair and Director of Diagnostic Pathology at the University of Kentucky in Lexington before being named Chair of the Department of Pathology and Laboratory Medicine at the same institution. In 1997, she was named Executive Dean and Vice Chancellor for Clinical Affairs at the University of Kansas School of Medicine. She came to Minnesota in the fall of 2002 to lead the University of Minnesota Medical School. She is past president of the United States and Canadian Academy of Pathology and the American Board of Pathology as well as past Chair of the Council of Deans of the Association of American Medical Colleges, and currently serves as Chair of the Board of Directors of the Association of American Medical Colleges. She is a member of the Institute of Medicine of the National Academy of Sciences, and a member of the Scientific Management Review Board for the National Institutes of Health.

Our Executive Officers

Pursuant to General Instruction G(3) to Form 10-K and Instruction 3 to Item 401(b) of Regulation S-K, information regarding our executive officers is provided in Part I of this Annual Report on Form 10-K under separate caption.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires our directors and executive officers, as well as persons who own more than 10 percent of our common stock, to file reports of ownership and changes in ownership of our common stock with the Securities and Exchange Commission. We have procedures in place to assist our directors and executive officers in preparing and filing these reports on a timely basis. Based solely on our review of the forms furnished to us, upon our records and other information, we believe that all required reports were timely filed during the past year, except that three reports for Kenneth E. Keiser setting forth the acquisition of 350 shares on June 2, 2008, the gift of 350 shares on July 31, 2008, and the acquisition of 350 shares on February 20, 2009, were not filed on a timely basis.

Code of Ethics

We have adopted a code of ethics that applies to our principal executive officer, principal financial officer and principal accounting officer. This code of ethics is available on our website at www.pepsiamericas.com and in print upon written request to PepsiAmericas, Inc., 60 South Sixth Street, Suite 4000, Minneapolis, Minnesota 55402, Attention: Investor Relations. Any amendment to, or waiver from, a provision of our code of ethics will be posted to the above-referenced website.

Committee Overview

Our Board of Directors has designated an Audit Committee, a Management Resources and Compensation Committee, and a Governance, Finance and Nominating Committee. Our Board of Directors also has designated an Affiliated Transaction Committee and a Transactions Committee. The following table shows the current membership of the committees and identifies our independent directors, as defined in Section 303A.02 of the New York Stock Exchange listing standards:

Management

Governance,

Resources and

Finance and

Affiliated

Independent

Name

Audit

Compensation

Nominating

Transaction

Transactions

Director

Herbert M. Baum

Richard G. Cline

Michael J. Corliss

Pierre S. du Pont

Archie R. Dykes

Jarobin Gilbert, Jr.

James R. Kackley

Matthew M. McKenna

Robert C. Pohlad

Deborah E. Powell


*		Denotes committee chairperson.

Our Committees

Audit Committee. The members of our Audit Committee are identified above under “Committee Overview” within Item 10 of this Annual Report on Form 10-K. The committee was established in accordance with Section 3(a)(58)(A) of the Exchange Act. Each member of the committee is independent as defined in Exchange Act Rule 10A-3, and Section 303A.02 and Section 303A.06 of the New York Stock Exchange listing standards. Pursuant to our listing agreement with the New York Stock Exchange, each member of the committee is financially literate, and one member, James R. Kackley, has accounting or related financial management expertise. Our Board has determined that Mr. Kackley is our “audit committee financial expert” as defined by Item 407(d)(5) of Regulation S-K. No member of the committee concurrently serves on more than two other public company audit committees.

Management Resources and Compensation Committee. The members of our Management Resources and Compensation Committee are identified above under “Committee Overview” within Item 10 of this Annual Report on Form 10-K. Each member of the committee is independent as defined in Section 303A.02 of the New York Stock Exchange listing standards. In addition, each member of the committee is a non-employee director as defined in Rule 16b-3 of the Exchange Act, and is an outside director as defined in Section 162(m) of the Internal Revenue Code.

Governance, Finance and Nominating Committee. The members of our Governance, Finance and Nominating Committee are identified above under “Committee Overview” within Item 10 of this Annual Report on Form 10-K. Each member of the committee is independent as defined in Section 303A.02 of the New York Stock Exchange listing standards.

Affiliated Transaction Committee. The members of our Affiliated Transaction Committee are identified above under “Committee Overview” within Item 10 of this Annual Report on Form 10-K. Our Affiliated Transaction Committee was established in accordance with our By-Laws. Each member of the committee is independent as defined in our By-Laws. This means that each member of the committee is not, and for the last two years has not been, (1) an officer or director of PepsiCo or an affiliate of PepsiCo, (2) an owner of more than one percent of the shares of PepsiCo, or (3) an owner of any ownership interest in a party to an affiliated transaction.

Transactions Committee. The members of our Transactions Committee are identified above under “Committee Overview” within Item 10 of this Annual Report on Form 10-K. Our Transactions Committee was established in April 2009 to review the company’s strategic alternatives, including the proposal from PepsiCo to acquire all of the outstanding shares of common stock of our company. Each member of the committee is independent, as defined in the shareholder agreement between our company and PepsiCo. This means that each member of the committee is not, and has not been for the last two years, (1) affiliated with PepsiCo or its affiliates, (2) a director, officer, employee, consultant or advisor of PepsiCo or its affiliates, or (3) an officer, employee, consultant or advisor of our company.


Item 11.	Executive Compensation.

~~We incorporate by reference the information contained under the~~ ~~captions “Our Board of Directors and Committees — Management Resources and~~ Compensation ~~Committee Interlocks and~~ ~~Insider~~Discussion ~~Participation”, “Our Board of Directors~~ and ~~Committees —~~ ~~Management Resources and Compensation~~Analysis Committee Report”, “Non-Employee Director Compensation” and “Executive Compensation” in our definitive proxy statement for the annual meeting of shareholders to be held May 7, 2009.

Executive Summary

Our company is committed to an executive compensation philosophy based on pay-for-performance. Our Management Resources and Compensation Committee executes this philosophy by linking a significant portion of total direct compensation paid to our named executive officers to company and individual performance. In 2009, this meant that 79.3 percent of the actual total direct compensation provided to our named executive officers was based on the achievement of either short-term or long-term performance goals.

Our committee ensures that compensation paid to our named executive officers reflects our company’s evolving business priorities and the execution of its strategic plan and initiatives by annually reviewing and adjusting the performance measures and targets on which compensation is based. In 2009, our committee tied the measures for the annual incentives for our named executive officers to earnings per share and operating cash flow. Overall our company exceeded the targets for these measures in 2009, resulting in annual incentives paid in cash to the named executive officers at 142.6 percent of target.

Our committee linked the pool of long-term incentives available in 2009 to the company’s achievement of its targeted adjusted return on invested capital for 2008. We utilized 101 percent of the target for long-term incentives awarded in February 2009, which reflected the actual adjusted return on invested capital in 2008.

The remainder of our Compensation Discussion and Analysis is organized into the following sections:


	•	Overview of our executive compensation program;

	•	Details of the total direct compensation paid to our named executive officers; and

	•	Description of other arrangements, policies and practices related to our executive compensation program.

Unless the context indicates otherwise, this Compensation Discussion and Analysis describes our executive compensation program as in effect during 2009. We frequently review our executive compensation program and may change or discontinue any aspect of the program at any time.

This Compensation Discussion and Analysis contains statements regarding our company’s performance targets and goals. These targets and goals are discussed in the limited context of our 2009 executive compensation program and should not be considered statements of management’s expectations or estimates of results or other guidance. We specifically caution investors not to apply these statements to other contexts.

Our Executive Compensation Program

Our executive compensation program is designed to:


	•	Attract, motivate and retain outstanding employees;

	•	Ensure that our pay levels are competitive;


	•	Be simple, easy to understand and flexible;

	•	Create a broad sense of ownership; and

	•	Provide significant rewards for exceptional company and individual performance.

We are committed to an executive compensation philosophy that rewards performance. Our executive compensation program fulfills our pay-for-performance philosophy by:


	•	Recognizing individual performance when determining base salary increases;

	•	Tying annual incentives to our company’s performance; and

	•	Basing long-term incentives both on our company’s performance and individual performance.

With these goals in mind, our committee meets regularly throughout the year on the same general schedule to review and assess current compensation elements and compensation levels, and to plan for the future in response to shifts in the economic environment, market trends, regulations and other variables. The agendas for the committee’s regular meetings are set in advance and generally include the following items:


	•	At its first meeting of the year the committee approves the payouts of annual incentives and long-term incentives based on the company’s year-end results for the prior year, conducts executive performance reviews for the prior year, reviews tally sheets and estimates of benefits payable on termination, sets any salary adjustments for the current year and approves the funding methodology for the pool of long-term incentives for the current year. Due to the pending merger with PepsiCo, the committee does not plan to issue long-term incentives in February 2010.

	•	At its next meeting the committee approves the annual incentive plan payout curves for the current year, approves the objectives for the executives for the current year and conducts an evaluation of the company’s outside compensation consultant.

	•	At its mid-year meetings the committee reviews director compensation, the company’s peer group, the company’s compensation philosophy, applicable regulatory compliance issues, plan updates and amendments and executive succession planning.

	•	At its final meeting of the year the committee reviews compensation and market data for the executive officers for the current year and plan designs and merit budgets for the following year.

Benchmarking Against Peer Companies. To assist with its review and analysis of our executive compensation program, our committee benchmarks executive compensation against a peer group of companies. Our committee uses compensation data available from the public filings of each member of our peer group as a reference point to provide a framework for reviewing and analyzing our compensation program and pay levels against potential competitors for our executive talent.

Our peer group contains companies with the following characteristics:


	•	Industry. We look for companies within the food and beverage industry;

	•	Operations. We look for companies with manufacturing and distribution capabilities;

	•	Size. We look for companies that are generally 50 percent to 200 percent of our company’s size based on revenue, market capitalization, assets and number of employees;

	•	Performance. We exclude consistently poor performing companies or those in bankruptcy or reorganization; and

	•	Geographic scope. We look for companies with international operations.

Our peer group consists of the following companies:


• Brown-Forman Corporation (added in July 2008) • Campbell Soup Company • Coca-Cola Bottling Co. Consolidated • Coca-Cola Enterprises Inc. • Constellation Brands, Inc. • Dean Foods Company • Del Monte Foods Company • The Hershey Company		• Hormel Foods Corporation • McCormick & Company, Incorporated • Molson Coors Brewing Company • The Pepsi Bottling Group, Inc. • Performance Food Group Company (removed in July 2008) • Ralcorp Holdings, Inc. • The J. M. Smucker Company • United Natural Foods, Inc.

Our committee annually reviews the companies included in our peer group to ensure that each remains relevant for comparative purposes. This review was last conducted in July 2008, at which time the committee removed Performance Food Group Company, which recently had become a privately-held company, and added Brown-Forman Corporation, which has the characteristics identified above.

In addition to benchmarking compensation against our peer group, our committee compares the annual compensation paid to our executives using surveys published by executive compensation firms. The surveys used to assess 2009 compensation were 2008/09 Watson Wyatt Data Services Top Management Report, 2008 William M. Mercer Executive Compensation Survey, 2008 Towers Perrin General Industry Executive Database, and 2008 Towers Perrin Food Industry Group Report. Our outside compensation consultant adjusts the survey data using regression analysis to reflect comparable revenue levels. Our committee uses this data to obtain a general understanding of current compensation practices. Our committee believes that data from both the peer group and compensation surveys has its advantages, and that multiple data sources provide different reference points and a broader context for interpreting and assessing executive compensation.

Competitive Market Review. At its last meeting of the year our committee reviews a competitive market assessment of the compensation provided all of our executive officers, including our named executive officers. All key compensation elements are assessed, including base salary, annual cash compensation (base salary plus annual incentives), long-term incentives, and total direct compensation (annual cash compensation plus long-term incentives).

In connection with this assessment, our committee also reviews an analysis of our company’s financial performance as compared to our peer group. Financial measures analyzed include revenue growth, earnings per share growth, net income growth, return on invested capital, and total shareholder return for the last five years and for the current trailing 12-month period.

Competitive compensation information is obtained from the proxy statements of each member of our peer group and from the published executive compensation surveys identified above. This competitive market assessment and the analysis of our company’s financial performance as compared to our peer group provides context for our compensation positioning within the market. These reviews are timed to allow committee members to ask for additional information and to raise and discuss questions before base salary adjustments for the named executive officers are finalized at the committee’s first meeting of the next year.

Tally Sheets and Termination Benefits Analyses. At its first meeting of the year our committee reviews a compensation tally sheet for each named executive officer. The tally sheets, prepared by our outside compensation consultant, provide a five-year history of total compensation and benefits for each named executive officer, including base salary, annual incentives (target and actual payouts), long-term incentives (restricted stock awards, including dividends), perquisites, and retirement and deferred compensation contributions. The tally sheets also summarize realized equity value (stock option exercises and vesting of restricted stock), current unrealized equity value, current 401(k) and deferred compensation balances and compliance with our stock ownership guidelines.

Our committee also reviews a termination benefits analysis for each named executive officer. This analysis estimates severance, retirement and other benefits payable under certain scenarios, including voluntary resignation, termination for cause, termination without cause, termination following a change in control of the

company, and termination upon disability, death or retirement. Termination benefits are projections based on a variety of assumptions such as termination date, base salary and target incentive levels, stock price and present value of benefits. In February 2010, our committee specifically reviewed the payments to be made to our executive officers upon a change in control and upon involuntary termination without cause or for good reason following a change in control. Further information regarding such payments appears elsewhere in Item 11 of this Annual Report on Form 10-K, including the Potential Payments upon Termination or Change in Control table.

Our committee uses tally sheets and termination benefits analyses to bring together, in one place, all of the elements of actual current and potential future compensation for our named executive officers, as well as information about wealth accumulation. These tools assist our committee in analyzing the individual elements of compensation, the mix of compensation and the aggregate total amounts of actual and projected compensation. The committee reviews pay equity among executives and against the market to ensure that our executive compensation continues to meet our compensation philosophy and objectives. After completing its most recent review, our committee determined that compensation for each named executive officer continues to be consistent with our company’s compensation philosophy and objectives.

Role of Consultants. Our committee has the sole authority to retain and terminate compensation consultants used in the evaluation of director or executive officer compensation or employee benefit plans. The committee also has the authority to obtain advice and assistance from internal or external legal, accounting or other experts and advisors to assist in carrying out its responsibilities. Our committee has engaged Watson Wyatt Worldwide as its outside compensation consultant.

Our committee engaged Watson Wyatt Worldwide beginning in 2004 as its outside compensation consultant. Watson Wyatt was selected after reviewing proposals submitted by multiple compensation consultants, based on its ability to meet the committee’s needs at the most effective cost. The committee regularly meets with Watson Wyatt and receives reports on our compensation strategy, compensation levels and general market practices. Specific assignments are determined by the committee, with the advice of management. Watson Wyatt has advised the committee on: the development and use of a competitive peer group; market assessment and review of our Long-Term Incentive Plan, including plan design; top five executive compensation analysis; equity plan analysis and executive ownership analysis; regulatory compliance matters; director compensation; development of executive compensation tally sheets; retirement and welfare plans; and analysis of and changes to our compensation structure implemented in 2008.

Management has also engaged Watson Wyatt from time to time on employee benefit matters, including actuarial work for pension and retiree medical benefits as well as pension administration services. Our committee has reviewed the type and amount of work performed by Watson Wyatt on behalf of management, and has determined that the relationship between management and Watson Wyatt has not influenced the advice offered to the committee by Watson Wyatt.

Role of Executive Officers. Our committee looks to certain executive officers, including named executive officers, for assistance with the design and assessment of our compensation program. Our Chairman of the Board and Chief Executive Officer, President and Chief Operating Officer, Executive Vice President and Chief Financial Officer, and Executive Vice President, Human Resources provide insight on our company’s business goals and results, help define objectives for individual executives, and assess the effect on our culture and personnel of suggested changes to our compensation program. No executive officer is involved in assessing or setting his or her own compensation.

Impact of Tax and Accounting Treatment on Compensation Decisions. Our committee regularly reviews the tax and accounting treatment of each component of compensation paid to our named executive officers. The potential tax and accounting treatment are factors, but not the only factors, the committee takes into consideration when approving compensation components and amounts.

Section 162(m) of the Internal Revenue Code generally limits the deductibility of compensation in excess of $1 million for the Chief Executive Officer and the four most highly compensated employees other than the Chief Executive Officer. Certain performance-based compensation is not subject to this limitation. In certain

circumstances our committee has determined that our compensation objectives are not furthered when compensation must be paid in a specific manner to be tax deductible. For instance, our Annual Incentive Plan payouts do not qualify as performance-based compensation for purposes of Section 162(m). Our Long-Term Incentive Plan is, however, structured and administered in a way that restricted stock awards qualify as performance-based compensation, which is not subject to the $1 million limitation. Each of these plans is discussed in detail below.

Total Direct Compensation

Total direct compensation paid to our named executive officers consists of base salary, annual incentives (payable in cash) and long-term incentives (payable in restricted stock). In support of our philosophy of pay-for-performance, targeted total direct compensation is substantially weighted toward performance-based pay. These elements of total direct compensation are positioned as follows to achieve the following objectives:


Element of Total Direct
Compensation	Objectives	Targeted Positioning

Base Salary	• Position competitively with external market • Seek internal equity through consistent pay structures and guidelines • Reward for long-term contribution • Provide annual increases based on performance • Reflect national and local labor market conditions	50th percentile
Annual Incentives (payable in cash)	• Performance-based to drive and reward business results • Eligibility focused on participants who directly impact business results • Payout curves that reflect the challenge of the plan and are determined annually	75th percentile award opportunities
Long-Term Incentives (payable in restricted shares)	• Ensure long-term retention and rewards for those who consistently perform to the company’s high standards • Market-based award opportunities with performance-based grants • Coordinate with retirement programs	Above median award opportunities

For 2009, actual total direct compensation for the named executive officers is illustrated in the chart below.

Our committee believes that the total direct compensation provided to our named executive officers supports our company’s compensation philosophy. Targeted total direct compensation, together with the perquisites and benefits described below, is positioned to provide a competitive pay package that encourages and rewards strong performance and contributions consistent with our company’s high standards. Targeted total direct compensation is weighted so that a significant portion of compensation is tied to both annual and long-term performance, with performance goals reviewed and adjusted annually in order to continually reflect our company’s evolving business priorities. The balance of annual cash incentives and long-term equity incentives, coupled with our share ownership guidelines, encourages our executives to achieve our business priorities without taking unreasonable or excessive risks that would threaten the value of the company.

Each component of total direct compensation provided to our named executive officers is discussed in detail below.

Base Salary. Named executive officers receive a base salary as compensation for services rendered during the year. At the end of each year our committee previews base salary adjustments for all salaried employees, including the named executive officers, for the following year. The committee first establishes an overall budget for base salary increases. To do so, the committee considers general economic factors, including the rates of inflation, unemployment and cost of living, as well as salary data for our peer group and from published compensation surveys. Once the overall budget is established, the committee develops a general matrix for distribution of the budget among all salaried employees. Actual base salary adjustments for each individual are based on performance.

The committee sets any base salary adjustments for the named executive officers at its first meeting of the year. Before it approves base salary adjustments for the named executive officers, the committee considers the information provided in the tally sheets, our company’s performance during the previous year, and the individual’s job performance and accomplishment of predetermined objectives during the previous year. After this review, the committee approves specific base salary adjustments for the named executive officers within the general matrix for base salary increases.

The committee benchmarks base salary for our named executive officers to the 50th percentile of our peer group. Actual 2009 base salaries for our named executive officers were generally at the median of the competitive market, consistent with this philosophy. The exception is our Chief Executive Officer, whose base salary the committee sets well below median based upon his stated preference.

In 2009, notwithstanding our company’s strong performance in 2008, we and many other companies were required to reanalyze costs in the current macroeconomic environment. As part of our company’s global approach to cost containment in this challenging environment, the committee determined that there would be no annual base salary adjustments for the named executive officers in March of 2009. However, as part of the committee’s review of executive succession plans in late 2008, it determined that an annual base salary increase, effective January 2009, for Mr. Durkin was warranted. For 2010, base salaries for our named executive officers increased an average of 2.9 percent.

Annual Incentives. Named executive officers are eligible for annual incentives, payable in cash, under our Annual Incentive Plan (the “AIP”). The AIP payout targets, which are achieved if the company meets certain goals set out in the annual operating plan, are approved by the committee each year. The AIP payout

targets were set at the 75th percentile of the company’s peer group in 2007, the last time that our overall compensation structure was evaluated.

The AIP performance measures and their weightings are also approved by the committee each year. The AIP performance measures and their weightings are team-based to strengthen our culture of accountability, integrity and respect. Additionally, our AIP performance measures and their weightings are tied to business results to support our philosophy of pay-for-performance. We believe that this team-based, quantitative approach to annual incentive compensation ensures that we pay for performance that drives shareholder value.

The committee also reviews and approves a schedule that details the required company performance and resulting AIP payouts for each performance measure. If the threshold performance goals are met, AIP payouts equal at least 25 percent of target. The committee maintains the discretion to vary from the formula, either to increase or decrease an AIP payout. This process ensures that our AIP remains consistent with our compensation philosophy and reflects our current business priorities. Actual AIP payouts, which can vary from 0 to 200 percent of target, are delivered after the company’s results are known and applied to the AIP.

The table below identifies, for each named executive officer, the 2009 AIP targets as a percentage of base salary. In December 2008, our committee approved changes to the AIP design for 2009 to foster further alignment with our global portfolio management. As a result, company performance under the 2009 AIP for our named executive officers was measured entirely on worldwide results for earnings per share (60%) and operating cash flow (40%). Each of the performance measures was subject to adjustment for items that are unusual, infrequent, unrelated to ongoing core operations or involve special charges. As anticipated, the impact of foreign exchange rate movements was neutralized based on planned rates. The committee retains the discretion to adjust actual payouts either up or down.


	2009 Target AIP Payout as a
Name and Position	Percentage of Base Salary

Robert C. Pohlad Chairman of the Board and Chief Executive Officer		100	%
Alexander H. Ware Executive Vice President and Chief Financial Officer		85	%
Kenneth E. Keiser President and Chief Operating Officer		95	%
G. Michael Durkin, Jr. Executive Vice President, U.S.		95	%
James R. Rogers Executive Vice President, International		75	%

In 2009, our company reported diluted earnings per share (EPS) of $1.46 and net cash provided by operating activities of continuing operations of $308.6 million. On an adjusted basis, we attained adjusted EPS of $1.69 and adjusted operating cash flow of $242.3 million. Management reviews results of operations and evaluates performance on both a GAAP basis and using adjusted comparisons. For 2009, adjusted EPS excluded the impairment of intangible assets, special charges relating to various restructuring initiatives, fees associated with the pending merger with PepsiCo, Inc., impairment of non-operating assets, loss from multi-employer pension plans, loss from deconsolidation of business, impairment of marketable securities and gain from interest rate swap termination. Adjusted operating cash flow for 2009 represented net cash flow from operating activities of continuing operations less capital investments and the accounts receivable securitization impact plus the proceeds from the sale of property less net cash used in discontinued operations.

The table below identifies the AIP payout schedules and actual payout percentages for cash incentives paid in February 2010 based on the company’s adjusted performance for compensatory purposes in 2009.


	2009 AIP Payout Schedules
			Adjusted Performance for		Actual Payout
	Target		Compensatory Purposes		Percentage for
2009 Worldwide Performance Measures	(a)		(b)		2009 Performance

Earnings per Share	$	1.84	$	1.86		104.4	%
Operating Cash Flow	$	173.1 million	$	240.4 million		200.0	%


(a)		As initial 2009 targets were reviewed, our committee considered the following: (1) EPS and operating cash flow net of the impact of the Caribbean deconsolidation; and (2) EPS net of the impact of the restriction on our share buy-back strategy due to the pending PepsiCo merger.

(b)		Information regarding our 2009 results reported in accordance with GAAP and our adjusted results appears in the paragraph preceding the introduction to the above chart. When 2009 performance was compared to target, our committee considered the following: (1) adjusted EPS including the $0.17 gain from interest rate swap termination; (2) adjusted EPS net of a $0.02 favorable impact of foreign currency rate movements when compared to planned rates, offset by a $0.02 unfavorable impact related to PepsiCo funding; and (3) adjusted operating cash flow net of the $1.9 million impact from foreign currency rate movements compared to planned rates.

Long-Term Incentives. Named executive officers are eligible for awards under our Long-Term Incentive Plan (the “LTIP”). Such awards were granted annually from 2004 to 2009 in restricted shares under our 2000 Stock Incentive Plan. Due to the pending merger with PepsiCo, we do not plan to issue restricted stock awards in February 2010. Had we issued such awards, they would have originated from our 2009 Long-Term Incentive Plan, which was approved by our shareholders in April 2009. Restricted shares awarded under the LTIP vest in their entirety on the third anniversary of the award, although the committee may accelerate the vesting of restricted shares if a participant who is 55 years of age or older retires. In addition, upon closing of our pending merger with PepsiCo, unvested restricted stock awards will automatically vest in full. The LTIP is structured and administered to comply with Section 162(m) of the Internal Revenue Code so awards qualify as performance-based compensation and are not subject to the $1 million limitation.

Our LTIP reinforces our pay-for-performance philosophy because awards are tied to both our company’s performance and individual performance. In general, each February the committee approves the company’s performance measure to be used to determine the size of the annual LTIP pool relative to target. Achievement of our planned adjusted return on invested capital would result in target funding. Once a minimum level of adjusted return on invested capital is met, the total annual pool can adjust from 90 percent to 110 percent of target.

The committee set targeted adjusted return on invested capital for 2008 at 8.0 percent. We utilized 101 percent of the target for long-term incentives awarded in February 2009, which reflected the actual adjusted return on invested capital of 8.3 percent in 2008.

After the committee defines the overall LTIP pool, it applies grant guidelines to allocate the pool among salary grades and then grants awards to individual participants within those grades. Target awards for our named executive officers are above-median. LTIP ranges for each salary grade, including those for the named executive officers, are based on the established target, with the threshold equal to 50 percent of target and the maximum equal to 120 percent of target.

Individual awards for named executive officers are determined by a variety of factors, including salary grade, tenure in the current position, performance during the prior year, and future leadership potential. Our committee has the discretion to award restricted shares within a range or to award a lower number of restricted shares. In general, our committee approves individual awards for the named executive officers under the LTIP in February, based on company and individual performance for the prior year.

Other Arrangements, Policies and Practices

Perquisites and Other Benefits: Our named executive officers are eligible for certain perquisites and other benefits. Our committee believes that these perquisites and other benefits are reasonable and consistent with our philosophy to attract, motivate and retain outstanding employees while maintaining fiscal responsibility. Our committee periodically reviews the type and amount of perquisites and other benefits offered, which are positioned competitively with the external market. The specific perquisites and other benefits offered to our named executive officers are described below.


	•	Standard Company Benefits: Our named executive officers may participate in the standard company benefits we offer to all salaried employees in the U.S. These benefits are medical and dental insurance, and retirement savings contributions. As with all salaried employees, our company makes an annual contribution of 2 percent of compensation to retirement savings, and matches employee contributions to our 401(k) plan up to 6 percent of base salary and AIP payout. We do not have a defined benefit plan. In addition, all employees are eligible for relocation assistance if asked to relocate for the convenience of the company. Furthermore, all employees age 55 years or older with at least 10 years of service have access to post-retirement medical benefits, the costs of which are paid by the retirees. By offering these standard benefits to the named executive officers, our objective is to treat named executive officers consistent with the broader employee population, to recognize defined benefit market trends and to reflect national and local labor market conditions to provide adequate coverage.

	•	Executive Deferred Compensation Plan: Our named executive officers may participate in our Executive Deferred Compensation Plan. For a detailed description of this plan, please review the narrative following the Summary Compensation Table below.

	•	Executive Long-Term Disability Program: Our named executive officers may participate in our executive long-term disability program. For a detailed description of this program, please review the narrative following the Summary Compensation Table below.

	•	Personal Use of Company Airplane: Our Chairman of the Board and Chief Executive Officer and our President and Chief Operating Officer are offered the personal use of our airplane and a second airplane in which we owned a one-eighth interest during 2009 in order to travel most expeditiously. This benefit allows our top two officers to devote maximum time and attention to our business, to facilitate scheduling, to coordinate personal and professional travel and to enhance their availability and security while away from our offices. From time to time, our Chairman of the Board and Chief Executive Officer and President and Chief Operating Officer have authorized personal use of an airplane by our Executive Vice President, U.S. for the same reasons. We monitor the personal use of corporate aircraft and believe this use is reasonable.

	•	Car Allowance: Our named executive officers are offered a market-based car allowance to cover the cost of owning and operating an automobile.

	•	Financial and Tax Planning Services: Our named executive officers are offered financial and tax planning services in order to ensure that they fully understand and leverage our executive compensation program. These services also reduce the time, attention and effort required for financial planning and tax preparation.

	•	Executive Physicals: Our named executive officers are eligible for bi-annual, company-paid physical examinations in order to ensure the physical health of our senior leadership team.

Employment Agreements, Severance Policy and Change-in-Control Arrangements: We do not enter into employment agreements with our named executive officers. Our committee has reviewed the relative costs and benefits of these agreements, and has determined that the benefits to be derived are not worth the associated costs.

Until June 2009, our named executive officers were only eligible for severance benefits under our basic severance policy. Our basic severance policy provides for the continuation of salary and benefits for a specified time period, plus a lump-sum tenure payment and the payment of a prorated AIP payout, if an

employee’s position is eliminated due to a restructuring, facility closure, or if employment is terminated under certain other circumstances. The duration during which salary and benefits would continue, and the amount of the tenure payment, depend on the employee’s salary grade and the circumstances of the termination. Generally, the minimum total severance, including salary and benefits continuation and tenure payment, for named executive officers is 52 weeks.

During the second quarter of 2009, the committee assessed the adequacy of the foregoing severance program, including an assessment of the merits of adopting change in control provisions to encourage retention, continuity and engagement of management. As a result of this assessment, the committee adopted the Change in Control Severance Plan for Senior Executive Employees (the “Senior Executive CIC Plan”), effective June 19, 2009. The Senior Executive Plan provides incremental payments and benefits for our seven most senior executives that are designed to encourage participants to remain with the company in the context of a potential change in control. In addition, the committee adopted the Change in Control Severance Plan for Employees (the “CIC Plan”), which covers the remaining executives as well as all other U.S. salaried employees. The CIC Plan provides incremental payments and benefits that are designed to encourage participants to remain with the company in the context of a potential change in control. The committee also added AIP payout at target to the salary continuation provided under the company’s basic severance for all executives.

The following summary of the Senior Executive CIC Plan is a general description and is qualified in its entirety by the full text of the Senior Executive CIC Plan, which has been filed with the SEC. In the event of a change in control, such as the pending merger with PepsiCo, participants in the Senior Executive CIC Plan are not eligible for any other company-provided severance.

Our named executive officers are participants in the Senior Executive CIC Plan. An executive who is a participant in the Senior Executive CIC Plan is entitled to certain severance payments and benefits if the executive’s employment is terminated under certain circumstances. The executive is entitled to those severance payments and benefits if, during the two-year period after a change in control, the executive is terminated without cause or resigns for “good reason,” as defined in the Senior Executive CIC Plan.

If terminated or separated from the company under the circumstances set forth above, a participant who executes a separation agreement is generally be entitled to the following severance payments and benefits under the Senior Executive CIC Plan: (a) for two years following the qualifying termination, a monthly amount equal to the participant’s base salary plus the participant’s monthly target AIP payout; (b) a pro-rated lump sum amount equal to the target AIP payout in the year of the qualifying termination multiplied by the payout percentage attributed to the company’s forecasted (as determined by the company from time to time) or actual, as applicable, full-year performance under the AIP (or equivalent) for the year in which the qualifying termination occurs; (c) for two years following the qualifying termination, medical, dental, life and long-term disability insurance coverage at the level provided to the participant immediately prior to the qualifying termination date; (d) outplacement services for up to one year with a maximum cost of $50,000 per participant; and (e) financial and tax planning services for the participant for the calendar year of the qualifying termination and for the next calendar year. The Senior Executive CIC Plan does not provide for any gross up for any excise taxes the executive may incur as a result of a change in control or termination of employment.

In order to obtain severance payments and benefits under the Senior Executive CIC Plan, the executive must first execute a separation agreement with the company that includes a waiver and release of any and all claims against the company. The separation agreement also provides that, for two years following termination, the executive will not compete with the company, solicit or hire any employee of the company or its affiliates, solicit any customer or prospective customer of the company and its affiliates or interfere with any relationship between the company and its customers or prospective customers. If an executive does not sign a separation agreement, the executive will not be eligible for severance payments and benefits under the Senior Executive CIC Plan.

We believe that it is appropriate to provide severance benefits to our named executive officers under the Senior Executive CIC Plan for the following reasons:


	•	We generally do not enter into employment agreements or other arrangements with our named executive officers that would provide for post-termination benefits, so providing severance benefits under the circumstances described above is consistent with the competitive realities of the market.

	•	Having a formal severance plan assists the company in the recruitment of talented executives, since having the assurance of fixed benefits under certain separation events can mitigate the potential risks of leaving a prior employer or foregoing other opportunities in order to join our company.

	•	Providing severance benefits to named executive officers affected by changes in management promotes the orderly transition of responsibilities.

Upon a change in control of our company, the 2000 Stock Incentive Plan and the 2009 Long-Term Incentive Plan provide that any unvested restricted shares or unvested stock options would vest in their entirety. In addition, if a named executive officer has a qualifying termination of employment following a change in control of our company, the named executive officer may receive a lump sum distribution from our Executive Deferred Compensation Plan and our Supplemental Pension Plan. The 2000 Stock Incentive Plan, the 2009 Long-Term Incentive Plan, the Executive Deferred Compensation Plan and the Supplemental Pension Plan each define “change in control.”

Payouts our named executive officers will receive upon closing of our pending merger with PepsiCo, or upon termination without cause or for good reason following our pending merger with PepsiCo, are set forth below under “Potential Payments upon Termination or Change in Control” within Item 11 of this Annual Report on Form 10-K.

Stock Ownership Guidelines: The committee established in 2004 stock ownership guidelines for our named executive officers. Our stock ownership guidelines require named executive officers to own a number of shares of our company’s stock equal to a multiple of their base salary. For named executive officers this multiple ranges from two and one-half to six times their base salary. Each named executive officer has five years to attain the stock ownership requirement. The number of shares of company stock that must be held is determined by multiplying the named executive officer’s annual base salary rate at the end of each calendar year by the applicable multiple, and dividing the result by the 200-day average closing stock price at the end of each year. Shares held in trust and retirement accounts, and restricted shares that have not yet vested, count toward share ownership, but unexercised stock options do not.

As of January 2, 2010, each of our named executive officers was in compliance with our stock ownership guidelines. We believe that promoting share ownership aligns the interests of our named executive officers with those of our shareholders.

Summary Compensation Table

The following table sets forth information concerning the compensation of our named executive officers for fiscal years 2009, 2008 and 2007:


													Change in Pension
													Value and Nonqual-
											Non-Equity		ified Deferred
							Stock		Option		Incentive Plan		Compensation		All Other
			Salary		Bonus		Awards		Awards		Compensation		Earnings		Compensation		Total
Name and Principal Position	Year		($)(a)		($)		($)(b)		($)		($)(c)		($)(d)		($)(e)		($)

Robert C. Pohlad		2009		854,818		0		2,111,194		0		1,218,970		0		168,093		4,353,075
Chairman of the Board		2008		849,338		0		1,961,588		0		1,374,803		0		182,299		4,368,028
and Chief Executive Officer		2007		817,950		0		1,829,448		23,701		1,517,794		0		117,937		4,306,830

Alexander H. Ware		2009		449,280		0		1,175,842		0		544,572		127		122,234		2,292,055
Executive Vice		2008		446,400		0		1,100,526		0		614,190		3,818		105,443		2,270,377
President and Chief Financial Officer		2007		423,367		0		873,951		4,808		558,412		0		74,366		1,934,904

Kenneth E. Keiser		2009		639,170		0		2,304,338		0		865,883		0		338,221		4,147,612
President and Chief		2008		635,073		0		2,318,921		0		976,578		0		308,259		4,238,831
Operating Officer		2007		610,471		0		2,225,299		16,785		1,059,806		0		294,340		4,206,701

G. Michael Durkin, Jr.		2009		500,000		0		1,171,796		0		677,350		1,532		132,740		2,483,418
Executive Vice		2008		449,913		0		1,142,903		0		317,460		20,676		154,075		2,085,027
President, U.S.		2007		432,833		0		1,161,903		13,987		588,073		0		100,107		2,296,903

James R. Rogers		2009		360,645		0		577,647		0		385,710		663		90,952		1,415,617
Executive Vice President,		2008		357,783		0		535,397		0		363,314		4,324		88,574		1,349,392
International		2007		336,420		0		509,579		4,371		432,025		0		35,020		1,317,415


(a)		Represents base pay without regard to salary-deferred elections.

(b)		Represents the dollar amount recognized for financial statement reporting purposes with respect to the fiscal year for outstanding restricted stock awards in accordance with FAS 123R. Because of fluctuations in the price of our stock, including stock price fluctuations experienced since the date of grant, the amounts reported may not represent the actual amounts that the named executive officers will actually realize from the awards. Additional information on all outstanding stock awards is reflected in the Outstanding Equity Awards at Fiscal Year-End table. Each restricted stock award granted to our named executive officers vests in its entirety on the third anniversary of the award, but vesting will accelerate upon closing of our pending merger with PepsiCo. We do not pay preferential dividends on this restricted stock. The assumptions made in the valuation are those set forth in the “Significant Accounting Policies — Stock-Based Compensation” note to the consolidated financial statements set forth in this Annual Report on Form 10-K. There were no forfeitures of restricted stock awards by our named executive officers during fiscal years 2009, 2008 or 2007.

(c)		Represents cash compensation earned under the AIP. Awards under this plan are paid in the year following the year in which they are earned.

(d)		There was an increase in the actuarial present value of the named executive officers’ accumulated benefits under our qualified salaried or nonqualified excess pension plans from the pension plan measurement date we used for our 2008 financial statements (December 31, 2008) to the pension plan measurement date we used for our 2009 financial statements (December 31, 2009). Messrs. Pohlad and Keiser do not participate in our qualified salaried or nonqualified supplemental pension plan. Messrs. Ware, Durkin and Rogers had an increase in the present value of their pension benefits as a result of being one year closer to retirement, partially offset by the increase in the discount rate from 6.23 percent at December 31, 2008 to 6.47 percent at December 31, 2009. The present value of Mr. Ware’s combined pension benefits increased by $127 from $22,359 to $22,486. The present value of Mr. Durkin’s combined pension benefits increased by $1,532 from $125,376 to $126,908. The present value of Mr. Rogers’ combined pension benefits increased by $663 from $27,961 to $28,624.

Nonqualified deferred compensation is credited with investment gain or loss based on the investment options deemed to have been selected by the executive. As a result, such earnings are not deemed to be above-market or preferential.

(e) All other compensation for fiscal year 2009 was as follows:


									Amounts				Company
	Personal						Financial		Reimbursed				Contributions to
	Use of						and Tax		for the		Executive		Executive Deferred
	Company		Car				Planning		Payment of		Long-Term		Compensation and
	Airplane		Allowance		Physicals		Services		Taxes		Disability		401(k) Plans		Total
Name	($)		($)		($)		($)		($)		($)		($)		($)

Robert C. Pohlad		82,350		33,600		0		0		0		7,551		44,592		168,093
Alexander H. Ware		0		18,600		2,204		5,127		6,581		4,644		85,078		122,234
Kenneth E. Keiser		168,982		28,800		0		3,845		0		7,334		129,260		338,221
G. Michael Durkin, Jr.		26,022		28,800		1,838		5,127		5,556		0		65,397		132,740
James R. Rogers		0		18,600		4,505		5,127		0		4,803		57,917		90,952

Personal Use of Company Airplane. The dollar amounts listed represent the aggregate incremental cost for personal use of our airplane. In calculating the aggregate incremental cost, we determined the total hours flown for other than business purposes (including deadhead flights that create incremental cost) during fiscal year 2009 as well as the total variable cost associated with the use of the airplane. We measured total variable cost by adding the costs of the following items: fuel, repair and maintenance, aircraft use and flight fees, travel and entertainment expenses, various other services (cleaning, uniforms, etc.), and supplies, less purchase rebates. Dividing the total variable cost by the number of hours flown, we established a variable cost per hour flown. The entries set forth above represent the product of the sum of hours of personal use by the named executive officers and the variable cost per hour flown.

We reimbursed certain named executive officers for taxes associated with spousal travel on an airplane associated with business meetings. These reimbursed amounts were as follows: Mr. Ware, $6,581 and Mr. Durkin, $5,556. Such amounts are set forth in the above chart under the caption “Amounts Reimbursed for the Payment of Taxes.”

Car Allowance. These entries represent amounts paid directly to our named executive officers to facilitate their purchases or leases of vehicles.

Physicals. During 2009, Messrs. Durkin, Rogers and Ware made use of our executive physical program. We paid for the cost of these physicals.

Financial and Tax Planning Services. These entries represent half of the annual participant fees paid to a financial planning firm on behalf of our named executive officers. We estimate that these amounts represent the amounts attributable to personal financial planning services. Such amounts do not include travel and entertainment expenses associated with participant meetings with the financial planning firm nor do they reflect the corporate retainer we paid such firm.

Amounts Reimbursed for the Payment of Taxes. The nature and dollar amounts of reimbursements for the payment of taxes are specified above under the caption “Personal Use of Company Airplane.”

Executive Long-Term Disability. The amounts set forth in this column of the above chart reflect amounts paid on behalf of our named executive officers under our executive long-term disability program. We offer this program in addition to, and in coordination with, the long-term disability benefits available through our group plan. In order to participate in the executive long-term disability program, the named executive officer must be at or above a certain salary grade, must be enrolled in the voluntary long-term disability program through our group plan and must have purchased an increased benefit under such program providing for a total benefit of 60 percent of salary with a maximum of $10,000 per month. Given the base salaries of our named executive officers, the company’s basic and voluntary long-term disability program benefits are effectively capped at $10,000 per month. The executive long-term disability program provides additional benefits such that named executive officers are eligible to receive 60 percent of salary. That is, subject to medical underwriting, the benefits provided under the executive long-term disability program provide benefits equal to 60 percent of the named executive officer’s base salary when combined with the benefits provided under the basic and voluntary group plan. The executive long-term disability program also provides an additional catastrophic disability benefit equal to 40 percent of salary with a maximum of $8,000 per month that would be paid in the event of certain serious disabilities.

Company Contributions to Executive Deferred Compensation and 401(k) Plans. The amounts set forth in this column of the above chart reflect matching contributions and basic contributions we made under such plans for fiscal year 2009. In particular, we sponsor a non-qualified Executive Deferred Compensation Plan (the “EDCP”). The EDCP is a supplemental, deferred compensation plan that provides eligible U.S. executives with the opportunity for contributions that could not be credited to their individual accounts under the qualified 401(k) plan because of Internal Revenue Code limitations. The EDCP is a defined contribution plan designed to accumulate retirement funds for executives, and includes a company matching contribution (up to 6 percent) and a basic 2 percent contribution similar to that of the qualified 401(k) plan. The overall maximum company contribution to the qualified 401(k) plan and the EDCP is 8 percent of eligible pay. Generally, executives may elect the form and timing of their distributions from the EDCP. Employees hired before January 1, 2004, are immediately vested in the company contributions. Employees hired after January 1, 2004, are vested in the company contributions made under the plan in 20 percent annual increments until the employee is 100 percent vested after five years. Annual contributions made after the five-year period are immediately vested. The executive’s and the company’s contributions are credited with investment gain or loss based on the investment options deemed to have been selected by the executive.

Grants of Plan-Based Awards

The following table sets forth information concerning non-equity incentive plan awards paid in February 2010 for 2009 performance and equity incentive plan awards granted in February 2009 to our named executive officers:


															Grant Date
			Estimated Possible Payouts												Fair Value of
			Under Non-Equity Incentive						Estimated Future Payouts Under						Stock and
			Plan Awards(a)						Equity Incentive Plan Awards(b)						Option
			Threshold		Target		Maximum		Threshold		Target		Maximum		Awards ($)
Name	Grant Date		($)		($)		($)		(#)		(#)		(#)		(c)

Robert C. Pohlad		2/26/2009		213,705		854,818		1,709,636		67,405		134,811		161,773		2,384,984
Alexander H. Ware		2/26/2009		95,472		381,888		763,776		34,451		68,903		82,684		1,219,989
Kenneth E. Keiser		2/26/2009		151,803		607,211		1,214,422		43,439		86,878		104,254		1,539,986
G. Michael Durkin, Jr.		2/26/2009		118,750		475,000		950,000		40,443		80,886		97,064		1,349,987
James R. Rogers		2/26/2009		67,621		270,484		540,968		16,476		32,953		39,544		549,986


(a)		Represents amounts that could have been paid under our AIP for service rendered during fiscal year 2009. The threshold entries reflect the minimum dollar amount that would have been paid for a certain level of performance under the plan. Had such performance not been attained, dollar amounts would not have been earned under our AIP. The actual amounts earned during fiscal year 2009, and paid in February 2010, are set forth in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table.

(b)		Represents the number of shares that could have been issued under our 2000 Stock Incentive Plan on February 26, 2009. These numbers are calculated by dividing the threshold, target and maximum dollar values of the estimated future payouts under equity incentive plan awards by the average of the high and low stock prices on the date of grant. The actual numbers of shares issued on such date as restricted stock awards to each of our named executive officers were as follows: Mr. Pohlad (142,899 shares), Mr. Ware (73,097 shares), Mr. Keiser (92,270 shares), Mr. Durkin (80,886 shares), and Mr. Rogers (32,953 shares). Each restricted stock award granted to our named executive officers vests in its entirety on the third anniversary of the award, but vesting will accelerate upon closing of our pending merger with PepsiCo. Dividends declared and paid on shares of our common stock are accrued at the same rate on this restricted stock. No preferential dividends are paid.

(c)		Represents the grant date fair value of each such equity award computed in accordance with FAS 123R based upon the average of the high and low stock prices on the date of grant. There were no forfeitures of restricted stock awards by our named executive officers during fiscal years 2009, 2008 or 2007.

For details on the criteria utilized to determine the specific amounts payable under these plans, including the relationship to target levels with respect to specific quantitative or qualitative performance-related factors, please review “Compensation Discussion and Analysis” above.

For details on the proportion of salary and incentive compensation to total compensation, please review “Compensation Discussion and Analysis” above.

Outstanding Equity Awards at Fiscal Year-End

The following table sets forth information concerning outstanding equity awards held by our named executive officers at fiscal year end 2009:

Option Awards(a)

Stock Awards(b)

Equity Incentive

Number

Market

Equity Incentive

Number of

Plan Awards:

of Shares

Value of

Plan Awards:

Securities

Number of

or Units

Shares or

Number of

Market or Payout

Underlying

Securities

of Stock

Units of

Unearned Shares,

Value of Unearned

Unexercised

Underlying

Option

That

Stock That

Units or Other

Shares, Units or

Options

Unexercised

Exercise

Option

Have Not

Rights That Have

Other Rights That

(#)

Unearned Options

Price

Expiration

Vested

Not Vested

Have Not Vested

Name

Exercisable

Unexercisable

(#)

($)

Date

(#)

($)

(#)

($)

Robert C. Pohlad

122,000

18.92

2/16/2014

310,005

9,070,746

115,900

12.01

2/26/2013

176,400

12.68

2/21/2012

33,276

(c)

12.17

1/20/2010

Alexander H. Ware

N/A

171,195

5,009,166

Kenneth E. Keiser

N/A

212,916

6,229,922

G. Michael Durkin, Jr.

N/A

172,484

5,046,882

James R. Rogers

N/A

83,502

2,443,269


(a)		Each of the options set forth above is exercisable for one-third of the shares purchasable thereunder on the first anniversary of the date of grant, two-third of the shares purchasable thereunder on the second anniversary of the date of grant and in full on the third anniversary of the date of grant. Given that the most recently issued options were granted on February 16, 2004, each of the options set forth in the table above is exercisable in full.

(b)		The restricted stock awards reflected above were granted on February 22, 2007, February 28, 2008, and February 26, 2009. Each of the restricted stock awards set forth above vests in full on the third anniversary of the date of grant, but vesting will accelerate upon closing of our pending merger with PepsiCo. The market value of such restricted stock is calculated using a stock price of $29.26 per share, which was the closing price of one share of common stock on December 31, 2009 (the last trading day of fiscal year 2009).

(c)		On January 20, 2000, we granted Mr. Pohlad an option for the purchase of 33,276 shares. On May 22, 2001, Mr. Pohlad gifted two-thirds of such option and, as a result of such transfers, Mr. Pohlad retained an option for the purchase of 11,092 shares, which he exercised in January 2010.

Options to Purchase Shares

Each outstanding option to acquire our common stock granted under an equity compensation plan or arrangement will be converted automatically at the effective time of the PepsiCo merger into a vested option to purchase PepsiCo common stock, on the same terms and conditions, except that:


	•	the number of shares of PepsiCo common stock subject to the new PepsiCo option will be equal to the product of (a) the number of shares of common stock subject to the PepsiAmericas stock option and (b) the closing exchange ratio, rounded down to the nearest whole share; and

	•	the exercise price per share of PepsiCo common stock subject to the new PepsiCo stock option will be equal to (a) the exercise price per share of common stock under the PepsiAmericas stock option divided by (b) the closing exchange ratio, rounded up to the nearest cent.

For purposes of the option conversion, in compliance with Section 409A of the Internal Revenue Code, PepsiCo and PepsiAmericas agreed that the closing exchange ratio will be equal to the quotient of (a) the

closing price of a share of PepsiAmericas common stock on the business duty immediately before the PepsiCo merger divided by (b) the closing price of a share of PepsiCo common stock on the business day immediately before the PepsiCo merger.

Restricted Stock Awards

The vesting of each outstanding restricted stock award granted under an equity compensation plan or arrangement, which represents an outstanding share of our common stock subject to vesting and forfeiture, will be accelerated upon the change in control. In particular, each outstanding restricted share will be converted automatically at the effective time of the PepsiCo merger into the merger consideration, consisting of either 0.5022 of a share of PepsiCo common stock or $28.50 in cash, without interest, as validly elected by the holder of such restricted stock award, subject to the same election and proration procedures as applicable to a holder of unrestricted common stock.

Option Exercises and Stock Vested

The following table sets forth information concerning each exercise of stock options and each vesting of restricted stock for our named executive officers during fiscal year 2009:


	Option Awards				Stock Awards
	Number of Shares		Value Realized		Number of Shares		Value Realized
	Acquired on Exercise		on Exercise		Acquired on Vesting		on Vesting
Name	(#)		($)		(#)		($)(a)

Robert C. Pohlad		0		N/A		84,600		1,443,699
Alexander H. Ware		0		N/A		46,200		788,403
Kenneth E. Keiser		0		N/A		69,000		1,177,485
						113,000		3,322,765
G. Michael Durkin, Jr.		104,400		3,087,042		53,850		918,950
James R. Rogers		0		N/A		18,500		315,703


(a)		The value realized on vesting of stock awards reflects the total pre-tax value realized. It is determined by multiplying the number of shares that vested by $17.065, which was the average of the high and low sales prices of our common stock on the date of vesting (February 23, 2009), with the exception of Mr. Keiser’s grant for 113,000 shares which vested on January 1, 2010 at $29.405, the average of the high and low sales prices of our common stock on the next possible trading day, January 4, 2010.

Pension Benefits

Prior to the formation of PepsiAmericas in November 2000, Pepsi-Cola General Bottlers, then a bottling subsidiary of Whitman Corporation, maintained a qualified, defined benefit pension plan and a non-qualified supplemental pension plan. We generally froze benefit accruals under these plans as of December 31, 2001, and no new participants were enrolled after April 1, 2001. The plans pay benefits in optional forms elected by the employees. The benefit formula under the pension plans provides a normal retirement benefit equal to one percent of final average earnings multiplied by the participant’s credited service, up to a maximum of 20 years. The qualified pension plan provides a benefit on earnings up to the qualified plan limit ($170,000 for 2001), and the non-qualified plan provides a benefit on earnings over this limit.

The following table describes pension benefits of our named executive officers at fiscal year end 2009:

Number of Years

Present Value of

Payments During

Credited Service

Accumulated Benefit

Last Fiscal Year

Name

Plan Name

(#)

($)

Robert C. Pohlad

N/A

Alexander H. Ware

Qualified Salaried Plan

2.583

14,631

Supplemental Pension Plan

2.583

7,855

Kenneth E. Keiser

N/A


		Number of Years		Present Value of		Payments During
		Credited Service		Accumulated Benefit		Last Fiscal Year
Name	Plan Name	(#)		($)		($)

G. Michael Durkin, Jr.	Qualified Salaried Plan		2.667		18,505		0
	Supplemental Pension Plan		2.667		108,403		0
James R. Rogers	Qualified Salaried Plan		1.333		13,114		0
	Supplemental Pension Plan		1.333		15,510		0

Final average earnings is the average of the participant’s highest earnings during 60 consecutive months out of the last 120 months worked, but not counting earnings after December 31, 2001. Earnings recognized under each plan include salaries, commissions, wages, cash bonuses, and overtime pay. All other compensation is excludable. Participants in each plan become fully vested after completion of five years of service.

Under the qualified pension plan, the benefit is payable as a life annuity commencing at the plan’s normal retirement date, which is the first of the month coincident with or next following the attainment of age 65 and completion of five years of vesting service. Participants under such plan are eligible for early retirement upon attaining age 55 and completing five years of vesting service. Participants eligible for early retirement are entitled to immediate commencement of their benefit, reduced actuarially for commencement prior to age 65. Participants eligible for early retirement with 20 or more years of vesting service receive a benefit reduced four percent for each year that benefit payments start prior to age 65.

Under the supplemental pension plan, the benefits vested prior to December 31, 2004 are payable in a lump sum or installment payments pursuant to a participant’s election. Benefits vested thereafter are payable as a lump sum.

The figures shown in the table above represent the present value as of December 31, 2009, of the benefit earned under each plan as of that date. We determined present values based on the following assumptions: an interest rate of 6.47 percent, an assumed retirement age of 65, the PPA 2010 Optional Combined Healthy Mortality Table and no pre-retirement decrements.

Nonqualified Deferred Compensation

The following table sets forth nonqualified deferred compensation of our named executive officers at fiscal year end 2009:


					Aggregate
	Executive		Registrant		Earnings in		Aggregate		Aggregate
	Contributions		Contributions		Last		Withdrawals/		Balance
	in Last FY		in Last FY		FY		Distributions		at Last FYE
Name	($)(a)		($)(b)		($)(c)		($)		($)(d)

Robert C. Pohlad		0		39,692		10,018		0		260,844
Alexander H. Ware		159,521		65,478		124,674		0		1,115,237
Kenneth E. Keiser		161,575		109,660		117,300		0		1,759,385
G. Michael Durkin, Jr.		75,000		45,797		261,346		0		1,584,223
James R. Rogers		43,437		38,317		314,421		0		1,404,332


(a)		Contributions are made through a compensation deferral election. All amounts reflected in this column are also reported in the column captioned “Salary” of the Summary Compensation Table.

(b)		The contributions set forth in this column represent the company’s contributions to the Executive Deferred Compensation Plan. All amounts reflected in this column are also reported in the column captioned “All Other Compensation” of the Summary Compensation Table.

(c)		Nonqualified deferred compensation is credited with investment gain or loss based on the investment options deemed to have been selected by the executive. As a result, such earnings are not deemed to be above-market or preferential.


(d)		Of the amounts reported in this column, executive contributions and employer contributions are either reported in the Summary Compensation Table or have been reported in the Summary Compensation Tables for previous years.

An executive can defer up to 75 percent of salary and up to 100 percent of non-equity incentive plan compensation under the AIP. Nonqualified deferred compensation is credited with investment gain or loss based on the investment options deemed to have been selected by the executive. Generally, executives may elect the form and timing of their distributions.

Potential Payments upon Termination or Change in Control

Upon the termination of a named executive officer, such person may be entitled to payments or the provision of other benefits from our company, depending on the event triggering the termination. The events that would trigger a named executive officer’s entitlement to payments or other benefits upon termination and the value of the estimated payments and benefits are described in the following table, assuming a termination date and, where applicable, a change in control date of January 2, 2010, and a stock price of $29.26 per share, which was the closing price of one share of our common stock on December 31, 2009 (the last trading day of fiscal year 2009). Pension benefits under the qualified, defined benefit pension plan and the non-qualified supplemental pension plan that are available upon termination of employment have been previously set forth and do not appear in the following table. Lump sum EDCP payments and enhanced supplemental pension plan payments that are available upon closing of the pending merger with PepsiCo are described in the narrative below but do not appear in the following table.


		Robert C.		Alexander H.		Kenneth E.		G. Michael		James R.
Scenario	Benefits	Pohlad		Ware		Keiser		Durkin, Jr.		Rogers

Involuntary Termination Without Cause	Salary Continuation	$	575,358	$	302,400	$	430,211	$	336,538	$	242,742
	Incremental Tenure Payment	$	509,602	$	60,480	$	233,543	$	269,231	$	235,806
	Additional Payment to Reach Full Severance Benefit	$	0	$	86,400	$	0	$	0	$	0
	Pro-Rata Non-Equity Incentive Plan Award	$	1,218,969	$	544,572	$	865,884	$	677,350	$	385,710
	Outplacement	$	11,250	$	9,780	$	11,250	$	11,250	$	11,250

	Total:	$	2,315,179	$	1,003,632	$	1,540,888	$	1,294,369	$	875,508

Special Circumstances — Performance	Salary Continuation	$	295,898	$	155,520	$	221,251	$	173,077	$	124,839
	Incremental Tenure Payment	$	509,602	$	25,920	$	110,626	$	269,231	$	235,806
	Additional Payment to Reach Full Severance
	Benefit	$	49,316	$	267,840	$	307,293	$	57,692	$	0
	Pro-Rata Non-Equity Incentive Plan Award	$	1,218,969	$	544,572	$	865,884	$	677,350	$	385,710
	Outplacement	$	7,107	$	5,562	$	7,107	$	7,107	$	7,107

	Total:	$	2,080,892	$	999,414	$	1,512,161	$	1,184,457	$	753,462

Special Circumstances — Other	Salary Continuation	$	295,898	$	155,520	$	221,251	$	173,077	$	124,839
	Incremental Tenure Payment	$	509,602	$	0	$	0	$	269,231	$	235,806
	Outplacement	$	7,107	$	5,562	$	7,107	$	7,107	$	7,107

	Total:	$	812,607	$	161,082	$	228,358	$	449,415	$	367,752

Involuntary Termination Without Cause or for Good Reason Following Change in Control	Severance Payment	$	3,419,268	$	1,662,336	$	2,492,763	$	1,950,000	$	1,262,258
	Pro-Rata Non-Equity Incentive Plan Award	$	1,218,969	$	544,572	$	865,884	$	677,350	$	385,710
	Lump Sum Non-Qualified Pension	$	0	$	12,913	$	0	$	220,511	$	28,405
	Outplacement	$	50,000	$	50,000	$	50,000	$	50,000	$	50,000
	Financial and Tax Planning	$	0	$	19,750	$	19,750	$	19,750	$	19,750
	Accelerated Restricted Stock Awards	$	9,070,746	$	5,009,166	$	6,229,922	$	5,046,882	$	2,443,269

	Total:	$	13,758,983	$	7,298,737	$	9,658,319	$	7,964,493	$	4,189,392


		Robert C.		Alexander H.		Kenneth E.		G. Michael		James R.
Scenario	Benefits	Pohlad		Ware		Keiser		Durkin, Jr.		Rogers

Voluntary Resignation Following Change in Control	Lump Sum Non-Qualified Pension	$	0	$	12,913	$	0	$	220,511	$	28,405
	Accelerated Restricted Stock Awards	$	9,070,746	$	5,009,166	$	6,229,922	$	5,046,882	$	2,443,269

	Total:	$	9,070,746	$	5,022,079	$	6,229,922	$	5,267,393	$	2,471,674

Death	Accelerated Restricted Stock Awards	$	9,070,746	$	5,009,166	$	6,229,922	$	5,046,882	$	2,443,269

	Total:	$	9,070,746	$	5,009,166	$	6,229,922	$	5,046,882	$	2,443,269

Retirement(a)	Accelerated Restricted Stock Awards	$	0	$	0	$	6,229,922	$	0	$	0

	Total:	$	0	$	0	$	6,229,922	$	0	$	0

Disability	Total:	$	0	$	0	$	0	$	0	$	0

Voluntary Resignation	Total:	$	0	$	0	$	0	$	0	$	0

Involuntary Termination for Egregious Cause	Total:	$	0	$	0	$	0	$	0	$	0


(a)		If an executive retires after age 55, we may, at our discretion and upon approval of the Management Resources and Compensation Committee, cause unvested restricted stock awards to become immediately vested.

Involuntary Termination without Cause. In the event of an involuntary termination without cause, the named executive officer is entitled to a payment of severance benefits under our basic severance policy. The cash severance benefits in this situation consist of salary continuation benefits for 35 weeks and a lump sum tenure payment in the amount of one week’s base salary for each year of service; provided, however, that the minimum total cash severance payment for an executive at or above a certain level is 52 weeks of severance pay (consisting of salary continuation, incremental tenure payment and any additional payment required to reach 52 weeks of severance pay). An executive who is involuntarily terminated without cause is also entitled to a prorated AIP payout. The non-cash severance benefits in this situation consist of medical and dental continuation at active employee rates, and the provision of outplacement services, during the salary continuation period. The basic severance policy provides other benefits to the executive, but all other benefits under the basic severance policy are available generally to all salaried employees.

Involuntary Termination with Special Circumstances. In the event of an involuntary termination with special circumstances, the named executive officer is entitled to a payment of severance benefits under our basic severance policy, but in a lesser amount. Special circumstances applies to any employee whose conduct casts discredit upon our company and/or makes it impractical for the employee to continue to perform in his or her role with our company but does not rise to the level of severity of egregious cause. Involuntary terminations with special circumstances are divided into two subcategories: special circumstances (performance) and special circumstances (other).

In the event of an involuntary termination with special circumstances (performance), the named executive officer will be entitled to a payment of severance benefits under our basic severance policy. Special circumstances (performance) may be involuntary termination due to unsatisfactory performance, the employee’s refusal to accept a comparable position at a different location, or other circumstances, as defined in the basic severance policy. In the event of an executive’s involuntary termination with special circumstances (performance), the cash severance benefits to a named executive officer will consist of salary continuation benefits for 18 weeks. An executive will be entitled to a lump sum tenure payment of one week’s base salary for every two years of service. The minimum total cash severance payment for an executive at or above a certain level, including our named executive officers, will be 52 weeks of severance pay (consisting of salary continuation, incremental tenure payment and any additional payment required to reach 52 weeks of severance pay). An executive who is involuntarily terminated with special circumstances (performance) will also be entitled to a prorated AIP payout and the non-cash severance benefits available to all other employees.

In the event of an executive’s involuntary termination with special circumstances (other), the named executive officer would receive severance consisting of salary continuation benefits for 18 weeks. A lump sum tenure payment equal to one week of pay for every year of service would only be made if the terminated executive completed more than 20 years of service. There is no minimum severance amount. An executive who is involuntarily terminated for special circumstances (other) is eligible for the non-cash benefits generally available to all employees, but would be ineligible to receive a prorated AIP payout.

Termination following a Change in Control. We do not enter into change-in-control agreements with our employees. However, if a change in control results in the involuntary termination of a named executive officer, the executive is entitled to severance benefits under one of our two change-in-control severance plans. In June 2009, we adopted the Senior Executive CIC Severance Plan which provides payments and benefits for the seven most senior executive officers, including each of our named executive officers, in the context of a change in control.

An executive who is a participant in the Senior Executive CIC Severance Plan will be entitled to certain severance payments and benefits if the executive’s employment is terminated under certain circumstances. The executive is entitled to those severance payments and benefits if, during the two-year period after a change in control, the executive is terminated without cause or resigns for good reason. “Good reason” under the Senior Executive CIC Severance Plan is defined to mean:


	•	a material diminution in the participant’s target total compensation (meaning base salary, annual bonus opportunity, and target long-term incentive compensation opportunity) other than pursuant to a reduction of total compensation for all salaried employees of the company and its affiliates;

	•	a material diminution in the participant’s base salary, other than pursuant to a reduction in the base salary for all salaried employees of the company and its affiliates;

	•	a material diminution in the participant’s authority, duties, titles, or responsibilities (including budget responsibilities), held by the participant immediately prior to the change in control or any assignment to the participant of duties or responsibilities that are materially inconsistent with the participant’s status, offices, titles, and reporting relationships as in effect immediately prior to the change in control; or

	•	any change of the participant’s principal place of employment to a location more than 30 miles from the participant’s place of employment immediately prior to the change in control, or that increases the participant’s commuting time by 45 minutes or more in either direction or a material increase in the participant’s travel obligations.

If terminated or separated from our company under the circumstances set forth above, an executive who executes an irrevocable separation agreement would be entitled to the following severance payments and benefits under the Senior Executive CIC Severance Plan:


	•	for two years following the qualifying termination, a monthly amount equal to the participant’s base salary plus the participant’s monthly target AIP payout;

	•	a pro-rated lump sum amount equal to the target AIP payout in the year of the qualifying termination multiplied by the payout percentage attributed to our forecasted (as determined by our company from time to time) or actual, as applicable, full-year performance under the AIP (or equivalent) for the year in which the qualifying termination occurs;

	•	for two years following the qualifying termination, medical, dental, life and long-term disability insurance coverage at the level provided to the participant immediately prior to the qualifying termination date;

	•	outplacement services for up to one year with a maximum cost of $50,000 per participant; and

	•	financial and tax planning services for the participant for the calendar year of the qualifying termination and for the next calendar year, including necessary tax return preparation.

For purposes of Section 280G, payments under the Senior Executive CIC Severance Plan will be reduced if the executive would receive a greater after tax benefit than would be payable if no reduction were to be made. The separation agreement also provides that the executive will not solicit any employee to leave our company and for two years following termination, will not accept a position with The Coca-Cola Company or a bottling entity that sells Coca-Cola or Dr. Pepper Snapple Group licensed products that would cause him to have responsibilities related to operations where we operate.

Upon closing of the pending merger with PepsiCo, any profit sharing and matching contributions that are unvested under the Salaried 401(k) Plan and the EDCP immediately prior to the effective time of the PepsiCo merger will fully vest. If an executive officer is involuntarily terminated or resigns for good reason within two years following the PepsiCo merger, the executive will receive six months after termination a lump sum distribution of the portion of his EDCP account balance vested after December 31, 2004. In addition, if an executive officer is terminated for any reason within three years of the PepsiCo merger, the executive will receive six months after termination a lump sum distribution of the portion of his EDCP account balance vested as of December 31, 2004 and will also receive immediately an enhanced lump sum payment from the Supplemental Pension Plan. The enhanced lump sum payment from the Supplemental Pension Plan is calculated by adding three years to the executive’s age at termination of employment. Lump sum payments under the EDCP and lump sum payments under the Supplemental Pension Plan for each of our named executive officers are set forth in the table below.


			Enhanced
			Supplemental
	Lump Sum EDCP		Pension Plan
Name	Payment(1)		Payment(2)

Robert C. Pohlad	$	260,844	$	0
Alexander H. Ware	$	1,075,700	$	12,913
Kenneth E. Keiser	$	1,686,835	$	0
G. Michael Durkin, Jr.	$	1,554,376	$	220,511
James R. Rogers	$	1,378,201	$	28,405


(l)		Values are as of January 2, 2010.

(2)		Values assume a termination date of January 2, 2010.

In addition, upon a change in control of our company as defined under the 2000 Stock Incentive Plan or the 2009 Long-Term Incentive Plan, including the closing of our pending merger with PepsiCo, such plans provide that any unvested restricted stock awards or stock options would vest in their entirety. Additional detail regarding these securities appears in the Outstanding Equity Awards at Fiscal Year-End table.

Death, Disability and Retirement. In the event of an executive’s death, we would distribute the executive’s account under the EDCP in the form of a lump sum payment without regard to the executive’s previous payment elections. The executive would be entitled to the benefit under the supplemental pension plan in accordance with his previous payment election. Further, upon an executive’s death, the 2000 Stock Incentive Plan and the 2009 Long-Term Incentive Plan provide that any unvested restricted stock awards or stock options would vest in their entirety. Disability does not result in the acceleration of benefits to our executives. If an executive retires after age 55, we may, upon Management Resources and Compensation Committee approval, cause unvested restricted stock awards and stock options to become immediately vested.

Voluntary Resignation. In the event of a voluntary resignation, a named executive officer will forfeit any annual incentive compensation for that fiscal year and any unvested restricted stock awards. The named executive officer will be entitled to any vested pension benefits and the vested balance in his or her EDCP account, and can exercise any outstanding vested stock options within three months of the officer’s last day of employment.

Involuntary Termination for Egregious Cause. Our basic severance policy does not award any benefits to a named executive officer who is involuntarily terminated for egregious cause. In the event of termination for egregious cause, a named executive officer will forfeit any unpaid annual incentive compensation, any

unvested restricted stock awards, and all unexercised stock options, whether or not vested. The named executive officer will be entitled to any vested pension benefits and the vested balance in his or her EDCP account.

Non-Employee Director Compensation

Our Management Resources and Compensation Committee periodically reviews and makes recommendations to our Board of Directors regarding the components and amount of non-employee director compensation. Directors who are employees of our company receive no fees for their services as director.

Our non-employee directors each receive annual compensation as follows:


	•	a $70,000 annual retainer, paid in equal quarterly installments;

	•	a restricted stock award for a number of shares equal to approximately $75,000;

	•	a meeting fee of $1,000 for each meeting of a committee on which the director serves; and

	•	an additional $5,000 annual retainer for each committee on which the director serves.

Although our Management Resources and Compensation Committee does not plan to award restricted stock to non-employee directors in February 2010 given our pending merger with PepsiCo, restricted stock awards are generally granted to our non-employee directors each year in February. Pursuant to the terms of such awards, directors may not sell such stock while they serve on the Board.

In addition to the compensation described above, certain additional annual retainers (also paid in quarterly installments) are paid in cash as follows:


	Additional
Position	Annual Retainer

Lead Director	$	20,000
Audit Committee Chairperson	$	15,000
Management Resources and Compensation Committee Chairperson	$	15,000
Governance, Finance and Nominating Committee Chairperson	$	15,000
Transactions Committee Chairperson	$	15,000
Affiliated Transaction Committee Chairperson	$	5,000

Our Board, following the recommendation of the Management Resources and Compensation Committee, approved fee arrangements to compensate our non-employee directors for their services in connection with consideration and negotiation of the PepsiCo merger and the PepsiCo merger agreement. In particular, our Board, following the recommendation of the Management Resources and Compensation Committee, approved the members of the Transactions Committee receiving compensation consistent with service on the other committees of the Board; namely, the chairperson receives a $15,000 annual retainer, the other committee members receive a $5,000 annual retainer, and all committee members receive a fee of $1,000 per meeting attended. The foregoing amounts are reflected in the bullet points and the table set forth above. In addition, the Board, following the recommendation of the Management Resources and Compensation Committee, approved a one-time payment of $20,000 to each non-employee director in recognition of the substantial time and attention expended to deliberate and consider the PepsiCo merger and the PepsiCo merger agreement. Finally, the Board, following the recommendation of the Management Resources and Compensation Committee, approved a fee of $1,000 per meeting of the Transactions Committee that is attended by Mr. McKenna at the Transactions Committee’s invitation to compensate him for his time in consulting and advising the Transactions Committee in connection with the consideration and negotiation of the PepsiCo merger and the PepsiCo merger agreement.

We pay for or provide (or reimburse directors for out-of-pocket costs incurred for) transportation, hotel, food and other incidental expenses related to attending Board and committee meetings or participating in director education programs and other director orientation or education meetings. These amounts are not

reflected in the Director Compensation Table because we do not consider them to be compensation as they are directly and integrally related to the performance of our directors’ duties.

Director Compensation Table

The following table sets forth the compensation of our non-employee directors for fiscal year 2009:


									Change in
	Fees								Pension
	Earned								Value and
	or								Nonqualified
	Paid in				Option		Non-Equity		Deferred		All Other
	Cash		Stock Awards		Awards		Incentive Plan		Compensation		Compensation		Total
Name	($)(a)		($)(b)		($)(c)		Compensation ($)		Earnings ($)		($)(d)		($)

Herbert M. Baum		144,000		74,988		0		0		0		0		218,988
Richard G. Cline		155,000		74,988		0		0		0		12,500		242,488
Michael J. Corliss		144,000		74,988		0		0		0		10,000		228,988
Pierre S. du Pont		158,000		74,988		0		0		0		0		232,988
Archie R. Dykes		181,000		74,988		0		0		0		10,000		265,988
Jarobin Gilbert, Jr.		157,000		74,988		0		0		0		0		231,988
Wahid Hamid(e)		17,500		0		0		0		0		0		17,500
James R. Kackley		145,000		74,988		0		0		0		12,500		232,488
Matthew M. McKenna		124,500		74,988		0		0		0		10,000		209,488
Deborah E. Powell		139,000		74,988		0		0		0		0		213,988


(a)		Includes cash compensation deferred under our Directors’ Deferred Compensation Plan (“DDCP”). Further details regarding cash deferrals appear below under the caption Directors’ Deferred Compensation Plan.

(b)		Represents the value of 4,493 shares of restricted stock granted on February 26, 2009, based on the dollar amount recognized for financial statement reporting purposes with respect to fiscal year 2009 in accordance with FAS 123R. The grant date fair value of each such equity award computed in accordance with FAS 123R was $16.69.

At fiscal year end 2009, our non-employee directors did not hold any restricted stock awards in that the restricted stock awards granted to such persons vest upon issuance. Pursuant to the terms of such awards, directors may not, however, sell such stock while they serve on our Board. As of fiscal year end 2009, the following shares of common stock had originally been granted as restricted stock awards to our non-employee directors:


	Shares

Herbert M. Baum		18,360
Richard G. Cline		18,360
Michael J. Corliss		10,057
Pierre S. du Pont		18,360
Archie R. Dykes		18,360
Jarobin Gilbert, Jr.		18,360
James R. Kackley		15,189
Matthew M. McKenna		18,360
Deborah E. Powell		10,057


(c)		We have not granted stock options to our directors since February 2003. Our non-employee directors held the following unexercised options at fiscal year end 2009:

Option Awards

Number of Securities

Underlying

Unexercised Options

Option Exercise

Option Expiration

Name

(#) Exercisable

(#) Unexercisable

Price ($)

Date

Herbert M. Baum

7,570

12.01

2/26/2010

Richard G. Cline

N/A

Michael J. Corliss

N/A

Pierre S. du Pont

N/A

Archie R. Dykes

N/A

Jarobin Gilbert, Jr.

N/A

Wahid Hamid

N/A

James R. Kackley

N/A

Matthew M. McKenna

7,570

12.01

2/26/2010

Deborah E. Powell

N/A

Each of the options set forth above has a seven-year term and became exercisable in full at the date of grant.


(d)		Represents matching gifts made by the PepsiAmericas Foundation on behalf of directors during fiscal year 2009. The foundation matches gifts made by directors and former directors (as well as full-time employees) to accredited, non-profit educational institutions as well as gifts made by such persons to civic, cultural and charitable organizations (excluding purely religious institutions) in the United States. The foundation matches the first $1,000 of a participant’s gifts to education two-for-one and additional gifts one-for-one, up to a maximum of $10,000 from the foundation in any one year. For gifts to civic, cultural and charitable organizations, the foundation matches up to $2,500 per year on a one-for-one basis.

(e)		Mr. Hamid served on our Board from July 2008 until he resigned in January 2009.

Directors’ Deferred Compensation Plan

Under the DDCP, directors may, by written election, defer payment of up to 100 percent of their cash compensation. We maintain a bookkeeping account for each director who has elected to defer cash compensation to which we credit the amount deferred, plus accrued interest thereon, compounded annually, based upon the prime rate, as reported in The Wall Street Journal, on December 31 of each year. Directors may elect to receive payment of deferred cash compensation upon retirement from the Board or on another specified date, and in a lump sum or in monthly installments. Upon a change in control, including the closing of our pending merger with PepsiCo, the director would be entitled to a lump sum distribution of all such deferred cash amounts.

The DDCP also provides that directors may, by written election, defer payment of up to 100 percent of their equity compensation. We maintain an account for each director who has elected to defer equity compensation to which we credit the number of shares deferred plus dividends accrued thereon. Directors may elect to receive payment of deferred equity compensation in a lump sum upon retirement from the Board or on another specified date, provided such date is at least six months later than the date the equity compensation is awarded. Upon a change in control, including the closing of our pending merger with PepsiCo, the director would be entitled to a lump sum distribution of all such deferred equity compensation and dividends.

Upon a change in control, non-employee directors receive lump sum distributions of their entire account balances under the DDCP. The lump sum payments under the DDCP for each non-employee director are set forth in the table below:


	Lump Sum DDCP
Name	Payment(1)

Herbert M. Baum	$	0
Richard G. Cline	$	0
Michael J. Corliss	$	0
Pierre S. du Pont	$	0
Archie R. Dykes	$	0
Jarobin Gilbert, Jr.	$	0
James R. Kackley	$	213,481
Matthew M. McKenna	$	163,856
Deborah E. Powell	$	134,508


(1)		Values are as of January 2, 2010.

Management Resources and Compensation Committee Interlocks and Insider Participation

The members of our Management Resources and Compensation Committee are identified below under “Management Resources and Compensation Committee Report.” None of the members was an officer or employee of PepsiAmericas during fiscal year 2009 or in any prior year and none of the members had any relationship requiring disclosure under Item 404 of Regulation S-K. There were no compensation committee interlocks as described in Item 407(e)(4) of Regulation S-K.

Management Resources and Compensation Committee Report

Our Management Resources and Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis that appears in this Annual Report on Form 10-K. Based on such review and discussion, the committee recommended to our Board of Directors that the Compensation Discussion and Analysis be included in this Annual Report on Form 10-K.

The name of each person who serves as a member of the committee is set forth below.

Richard G. Cline, Chairman
Herbert M. Baum
Michael J. Corliss
Archie R. Dykes
James R. Kackley
Deborah E. Powell


Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

WeThe ~~incorporate~~following bytable ~~reference~~sets ~~the~~forth information, ~~contained~~as ~~under~~of February 16, 2010, with respect to the beneficial ownership ~~captions~~of ~~“Our~~shares ~~Largest~~of ~~Shareholders~~our common stock by each person who,” ~~“Shares~~to ~~Held~~our knowledge, beneficially owned more than five percent of our common stock, by ~~Our~~each ~~Directors~~director ~~and~~of ~~Executive~~our ~~Officers”~~company, ~~and~~by ~~“Equity~~each executive officer named in the Summary Compensation ~~Plan~~Table ~~Information”~~that appears in Item 11 of this Annual Report on Form 10-K and by all directors and executive officers as a group. The table lists voting securities, including restricted stock held by our ~~definitive~~executive ~~proxy~~officers over which such officers have sole ~~statement~~voting ~~for~~power but no investment power. Otherwise, except as identified below, the ~~annual~~named ~~meeting~~individual has sole voting and investment power with respect to the listed shares and none of the ~~shareholders~~listed shares has been pledged as security. Given that our directors are required to behold ~~held~~the shares of common stock they ~~May~~receive as compensation while they continue to serve on our Board of Directors, the following table includes such directors’ qualifying shares. Unless otherwise stated below, the address of each beneficial owner is 60 South Sixth Street, Suite 74000, ~~2009~~Minneapolis, MN 55402. Percentage of beneficial ownership is based on 124,866,059 shares outstanding as of February 16, 2010.


	Amount and
	Nature of
Name and Address of	Beneficial		Percent of
Beneficial Owner	Ownership		Class

PepsiCo, Inc.(1)		54,004,000		43.2	%
700 Anderson Hill Road
Purchase, NY 10577
Starquest Securities, LLC(2)		12,116,087		9.7	%
3900 RBC Plaza
60 South Sixth Street
Minneapolis, MN 55402
Barclays Global Investors, NA(3)		7,819,894		6.3	%
400 Howard Street
San Francisco, CA 94105
Herbert M. Baum		29,930			*
Richard G. Cline		25,610			*
Michael J. Corliss(4)		61,657			*
Pierre S. du Pont		18,360			*
G. Michael Durkin, Jr.		266,554			*
Archie R. Dykes		27,030			*
Jarobin Gilbert, Jr.		18,460			*
James R. Kackley(5)		17,524			*
Kenneth E. Keiser		368,588			*
Matthew M. McKenna(6)		26,982			*
Robert C. Pohlad(7)		12,986,919		10.4	%
Deborah E. Powell(8)		10,161			*
James R. Rogers		83,502			*
Alexander H. Ware		227,414			*
All Current Directors and Executive Officers as a Group (19 persons)(9)		14,593,275		11.6	%


*		Less than one percent.

(1)		PepsiCo may be deemed to beneficially own 54,004,000 shares of common stock through the beneficial ownership of its wholly owned subsidiaries as follows: (1) 33,602,096 shares beneficially owned by Pepsi-Cola Metropolitan Bottling Company, Inc. (“Metro”), (2) 10,578,951 shares beneficially owned by Pepsi-Cola Operating Company of Chesapeake and Indianapolis (“Chesapeake”), (3) 8,752,823 shares beneficially owned by Pepsi-Cola Bottling Company of St. Louis, Inc. (“St. Louis”), (4) 794,115 shares


		beneficially owned by Midland Bottling Co. (“Midland”), and (5) 276,015 shares beneficially owned by Beverages, Foods & Service Industries, Inc. (“BFSI”). PepsiCo may be deemed to have shared voting and dispositive power with respect to the shares of common stock owned by each of Metro, Chesapeake, St. Louis, Midland and BFSI, and to have the power to direct the receipt of dividends declared on the shares of common stock held by each of Metro, Chesapeake, St. Louis, Midland and BFSI and the proceeds from the sale of such shares of common stock.

The shares reported are subject to a shareholder agreement with PepsiAmericas. See “Shareholder Agreement between PepsiCo and PepsiAmericas” within Item 13 of this Annual Report on Form 10-K.

We have entered into a merger agreement with PepsiCo and Metro, dated August 3, 2009, pursuant to which our company will merge with and into Metro, with Metro continuing as the surviving company and a wholly owned subsidiary of PepsiCo. Closing of the merger is subject to regulatory approval and the satisfaction or waiver of other customary closing conditions.


(2)		The Schedule 13D filed with the SEC by Starquest Securities, LLC (“Starquest”), Dakota Holdings, LLC (“Dakota”), Pohlad Companies and Robert C. Pohlad on February 12, 2010, reports that Starquest is a Minnesota limited liability company whose members are (1) Dakota, (2) the James O. Pohlad Trust Share of the Pohlad Family Wealth Trust Created Under the 2000 Amendment and Restatement of the Revocable Trust of Eloise O. Pohlad dated October 12, 2000, as Amended, (3) the Robert C. Pohlad Trust Share of the Pohlad Family Wealth Trust Created Under the 2000 Amendment and Restatement of the Revocable Trust of Eloise O. Pohlad dated October 12, 2000, as Amended, (4) William M. Pohlad Trust Share of the Pohlad Family Wealth Trust Created Under the 2000 Amendment and Restatement of the Revocable Trust of Eloise O. Pohlad dated October 12, 2000, as Amended, (5) James O. Pohlad, (6) Robert C. Pohlad and (7) William M. Pohlad. The Schedule 13D reports that Dakota is the controlling member of Starquest because it possesses 100% of the voting rights and approximately 51.4% of the equity of Starquest. The Schedule 13D reports that Dakota’s members are (1) Pohlad Companies, (2) Robert C. Pohlad, (3) William M. Pohlad, (4) James O. Pohlad, (5) the Revocable Trust of Robert C. Pohlad Created Under Agreement Dated August 9, 1991, as Amended, (6) the Revocable Trust of William M. Pohlad Created Under Agreement Dated April 15, 2002, as Amended, (7) the children of James O. Pohlad, Robert C. Pohlad and William M. Pohlad, (8) James O. Pohlad Trust Share of the 1999 Irrevocable Security Trust No. 1 of Carl R. Pohlad Created Under Agreement dated December 20, 1999, (9) Robert C. Pohlad Trust Share of the 1999 Irrevocable Security Trust No. 1 of Carl R. Pohlad Created Under Agreement dated December 20, 1999, and (10) William M. Pohlad Trust Share of the 1999 Irrevocable Security Trust No. 1 of Carl R. Pohlad Created Under Agreement dated December 20, 1999. The Schedule 13D reports that Pohlad Companies is the controlling member of Dakota because it possesses approximately 73.3% of the voting rights of Dakota and approximately 73.3% of the equity in Dakota. The Schedule 13D reports that Pohlad Companies’ shareholders are (1) Robert C. Pohlad, (2) William M. Pohlad and (3) James O. Pohlad, each of whom holds a one-third interest. The Schedule 13D reports that Robert C. Pohlad, Chairman and Chief Executive Officer of PepsiAmericas is the President of Pohlad Companies. The Schedule 13D reports that Robert C. Pohlad holds an approximately 33.19% equity interest in Dakota, directly and indirectly. The Schedule 13D reports that Dakota may be deemed to have beneficial ownership of the securities beneficially owned by Starquest. The Schedule 13D reports that Pohlad Companies may be deemed to have beneficial ownership of the securities beneficially owned by Starquest and Dakota. The Schedule 13D reports that Robert C. Pohlad may be deemed to have beneficial ownership of the securities beneficially owned by Starquest, Dakota and Pohlad Companies.

The shares reported are subject to a shareholder agreement with PepsiAmericas. See “Shareholder Agreement among Pohlad Companies, Dakota Holdings, LLC, Mr. Pohlad and PepsiAmericas” within Item 13 of this Annual Report on Form 10-K.


(3)		As set forth in the Schedule 13G filed with the SEC by Barclays Global Investors, NA and other reporting persons on February 5, 2009. The Schedule 13G reports that these shares are held in trust accounts for the economic benefit of the beneficiaries of those accounts. The Schedule 13G reports that these shares represent 6,474,430 shares over which sole voting power is claimed and 7,819,894 shares aver which sole dispositive power is claimed as follows: (1) Barclays Global Investors, NA has sole

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