Current Report

The following items were recorded during the periods presented:

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 $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 $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.

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 common stock investment in Northfield Laboratories, Inc. that is 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 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. 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 common stock investment in Northfield Laboratories, Inc. that is 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 expense was recorded in “Selling, 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:

•		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 attributable to PepsiAmericas, Inc. 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 Current Report on Form 8-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 Current Report on Form 8-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, 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 of our Annual Report on Form 10-K for fiscal year 2008 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., CEE and the Caribbean. 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. We also distribute snack foods in certain markets. We serve a significant portion of 19 states throughout the central region of the U.S. In CEE, we serve Ukraine, 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 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.

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 comparisons, this excluded the first eight months and the first sixteen days of September for Sandora, as we consolidated Sandora operating results starting in mid-September 2007. For fiscal year 2007 comparisons, this excluded the operating results of Sandora and the first seven months of Romania, as we consolidated Romania operating results starting in August 2006. 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 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 Year 2008 Key Financial Results

	•		Worldwide volume increased 6.8 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 of $436.1 million included special charges of $6.3 million.
	•		We reported diluted earnings per share attributable to PepsiAmericas, Inc. common shareholders of $1.78 for the 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 attributable to PepsiAmericas, Inc. common shareholders of $1.64 in the prior year, which included a loss from discontinued operations of $0.02.
	•		The 53rd week contributed approximately 1 percentage point of growth each to volume, net sales, cost of goods sold and selling, delivery and administrative (“SD&A”) expenses. The net contribution was approximately 2 percentage points to operating income and $0.04 to diluted earnings per share attributable to PepsiAmericas, Inc. common shareholders.
	•		The impact of foreign currency favorably benefited net sales 1.6 percentage points and operating income 4.0 percentage 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 30.4 percent from 34.3 percent in fiscal year 2007 primarily due to a favorable country mix of pre-tax earnings.
	•		We generated cash flows from operating activities of $500.6 million in fiscal year 2008 compared to $433.5 million in fiscal year 2007.

Our Focus in Fiscal Year 2008

      Worldwide. For fiscal year 2008, we achieved diluted earnings per share attributable to PepsiAmericas, Inc. common shareholders growth of 8.5 percent. Strong brands, a diverse geographic mix and a capable organization contributed to our results for fiscal year 2008 despite increasing market challenges, such as slowing global consumer demand, tightening credit markets, weakening macroeconomic conditions and volatility in the commodity and currency markets. We managed through the economic pressures by executing our pricing strategy to offset higher raw material costs and driving sustainable cost savings through ongoing productivity initiatives. We also benefited from the favorable impact of foreign currency rates, a lower effective tax rate and the Sandora acquisition.

      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 CO ³ , 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 our Annual Report on Form 10-K for fiscal year 2008.

Items Impacting Comparability

      Acquisitions

     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 a 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 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. 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, we recorded special charges and adjustments totaling $23.0 million. We recorded special charges of $16.8 million. In the Caribbean, we recorded $9.0 million of special charges, 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 related to 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 properly state the benefit obligation as of the end of fiscal year 2008. This adjustment was recorded as an increase in “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 $11.5 million in the U.S. related to our 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. 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.

      Marketable Securities Impairment

     In fiscal years 2007 and 2006, we recorded other-than-temporary impairment losses of $4.0 million and $7.3 million, respectively, related to a common stock investment that is classified as available-for-sale on our Consolidated Balance Sheets. The losses were recorded in “Other 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

     Our U.S. and Caribbean operations end their fiscal year on the Saturday closest to December 31, and as a result, a 53rd week is added every five or six years. Fiscal year 2008 consisted of 53 weeks while fiscal years 2007 and 2006 each consisted of 52 weeks. Various estimates and assumptions were made to quantify the impact of the additional week of operations. The table below summarizes the impact of the 53rd week on fiscal year 2008 (in millions):

Operating Results — 2008 compared with 2007

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

     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 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.

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

     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 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 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 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.

      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 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 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 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 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.

      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):

     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 $9.2 million, or 0.9 percent, to $1,070.4 million in fiscal year 2008, compared to $1,061.2 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 1.1 percentage points of the increase.

     In CEE, SD&A expenses increased $94.3 million, or 36.1 percent, to $355.6 million from $261.3 million in the prior year. Acquisitions contributed 16.0 percentage points of the increase and foreign currency translation contributed 11.1 percent. As a percentage of net sales, SD&A expense improved to 28.2 percent compared to 30.8 percent during fiscal year 2007, primarily due to lower overall operating costs for Sandora as compared to 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 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 (dollar amounts in millions):

     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 $3.1 million, or 0.9 percent, to $333.8 million in fiscal year 2008, compared to $336.9 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 $50.8 million, or 53.4 percent, to $146.0 million in fiscal year 2008, compared to operating income of $95.2 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 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 prior year results included a $10.2 million gain on the sale of non-core property and a $4.0 million other-than-temporary impairment loss related to a marketable security investment.

      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 (loss) earnings of nonconsolidated companies, was 30.4 percent in fiscal year 2008, compared 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.

      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 ($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.

     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 $23.9 million to $236.1 million in fiscal year 2008, compared to $212.2 million in fiscal year 2007. The discussion of our operating results, included above, explains the increase in net income.

      Net Income Attributable to Noncontrolling Interests. We fully consolidated the operating results of Sandora and the Bahamas in our Consolidated Statements of Income. Net income attributable to noncontrolling interests 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.

      Net Income Attributable to PepsiAmericas, Inc. Net income attributable to PepsiAmericas, Inc. increased $14.3 million to $226.4 million in fiscal year 2008, compared to $212.1 million in fiscal year 2007. The 53rd week contributed $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.

Operating Results — 2007 compared with 2006

      Volume. Sales volume growth (decline) for fiscal years 2007 and 2006 were as follows:

     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 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 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):

     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 $48.6 million, or 4.8 percent, to $1,061.2 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 31.4 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 $93.0 million, or 55.3 percent, to $261.3 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 30.8 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 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 $6.8 million to $336.9 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 $74.3 million to $95.2 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 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 $54.1 million to $212.2 million in fiscal year 2007, compared to $158.1 million in fiscal year 2006. The discussion of our operating results, included above, explains the increase in net income.

      Net Income Attributable to Noncontrolling Interests. We fully consolidated the operating results of Sandora and the Bahamas in our Consolidated Statements of Income. Net income attributable to noncontrolling interests represented 40 percent of Sandora results and 30 percent of the Bahamas results attributed to interests owned by others during fiscal year 2007.

      Net Income Attributable to PepsiAmericas, Inc. Net income attributable to PepsiAmericas, Inc. 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 attributable to PepsiAmericas, Inc.

Liquidity and Capital Resources

      Operating Activities. Net cash provided by operating activities of continuing operations increased by $67.1 million to $500.6 million in fiscal year 2008, compared to $433.5 million in fiscal year 2007. This increase can mainly be attributed to the favorable year-over-year benefit from changes in primary working capital, higher net income attributable to PepsiAmericas, Inc. and reduced cash outlays related to special charges. The changes in primary working capital were attributed to strong management of the components of primary working capital, namely inventory, accounts receivable and accounts payable.

     Net cash provided by operating activities was unfavorably impacted by higher compensation-related benefit payments and a year-over-year increase in contributions made to our pension plans. We contributed $4.0 million to our pension plans in fiscal year 2008 compared to $0.9 million in fiscal year 2007. We expect to make contributions of approximately $12 million in fiscal year 2009. Increased pension plan contributions may extend into future years if current market conditions persist or deteriorate further.

      Investing Activities. Investing activities during fiscal year 2008 included capital investments of $248.9 million, a decrease of $15.7 million from capital investments of $264.6 million in fiscal year 2007. Capital spending in fiscal year 2009 is expected to be approximately $275 million.

     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 a 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.

     In fiscal year 2005, we acquired 49 percent of the outstanding stock of QABCL for $51.0 million. During fiscal year 2006, we acquired the remaining 51 percent of the outstanding stock of QABCL for $81.9 million, net of $17.0 million cash acquired. We acquired $55.4 million of debt as part of the acquisition. The increased purchase price for the remainder of QABCL was due to the improved operating performance subsequent to the initial acquisition of our 49 percent noncontrolling interest.

     In fiscal year 2006, we also completed the acquisition of Ardea Beverage Co., the maker of the airforce Nutrisoda line of drinks 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 Activities. Our total debt increased $26.2 million to $2,167.3 million as of the end of fiscal year 2008, from $2,141.1 million as of the end of fiscal year 2007. The increase in total debt was driven by our commercial paper borrowings, which were used primarily for general corporate purposes. In fiscal year 2008, we repaid $47.5 million of long-term debt that was acquired as part of the Sandora acquisition. Included in this payment was $2.5 million of prepayment penalty fees. We received $26.0 million from PepsiCo that included its portion of the debt repayment. 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 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.

     In fiscal year 2006, we issued $250 million of notes with a coupon rate of 5.625 percent due May 2011. Net proceeds from this issuance were $247.4 million, which included a reduction for discount and issuance costs. The proceeds from the issuance were used primarily to repay our commercial paper obligations and for other general corporate purposes.

     We utilize revolving credit facilities both in the U.S. and in our international operations to fund short-term financing needs, primarily for working capital and general corporate 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, including commercial paper backstop. It is our policy to maintain a committed bank facility as backup financing for our commercial paper program. The interest rates on the revolving credit facility, which expires in 2011, are based primarily on the London Interbank Offered Rate. Accordingly, we have a total of $600 million available under our commercial paper program and revolving credit facility combined. We had $365.0 million of commercial paper borrowings as of the end of fiscal year 2008, compared to $269.5 million as of the end of fiscal year 2007.

     Certain wholly-owned subsidiaries maintain operating lines of credit for general operating needs. Interest rates are based primarily upon Interbank Offered Rates for borrowings in the subsidiaries’ local currencies. The outstanding balances were $1.6 million and $19.3 million as of the end of fiscal years 2008 and 2007, respectively, and were recorded in “Short-term debt, including current maturities of long-term debt” in the Consolidated Balance Sheets.

     We continue to execute our strategy to repurchase shares of our common stock. In fiscal year 2008, our Board of Directors authorized the repurchase of 10 million additional shares under our previously authorized repurchase program. As of the end of fiscal year 2008, 11.5 million shares remained available for repurchase under the 2008 and 2005 authorizations. During fiscal years 2008, 2007 and 2006, we repurchased a total of 5.7 million, 2.7 million and 6.3 million shares of our common stock, respectively, for an aggregate purchase price of $135.0 million, $59.4 million and $150.7 million, respectively.

     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 capital and credit markets, including the commercial paper markets, have recently experienced increased volatility and disruption. Despite this volatility and disruption, we continue to have access to the capital markets, as evidenced by our most recent debt issuance in February 2009. In addition, as noted above, we have a revolving credit facility that acts as a commercial paper backstop. We believe that our operating cash flows are sufficient to fund our existing operations and contractual obligations for the foreseeable future. In addition, we believe that our operating cash flows, available lines of credit, and the potential for additional debt and equity offerings will provide sufficient resources to fund our future growth and expansion, although there can be no assurance that continued or increased volatility and disruption in the worldwide capital and credit markets will 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 return.

Contractual Obligations

     The following table provides a summary of our contractual obligations as of the end of fiscal year 2008 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 11, 12 and 20, respectively, in the Notes to the Consolidated Financial Statements. Our interest obligations relate to our contractual obligations under our fixed-rate long-term debt.

     Not included in the table above are contingent payments for uncertain tax positions of $35.8 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 $12 million that we expect to make to our pension plans in fiscal year 2009.

      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 of our Annual Report on Form 10-K for fiscal year 2008 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 12 “Leases” and Note 20 “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. generally accepted accounting principles 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 liabilities that are not readily apparent from other sources. Actual results could differ from those estimates, and 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 Financial Statements include recoverability of goodwill and intangible assets with indefinite lives, 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 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 impairment evaluation requires the use of considerable management judgment to determine the fair value of goodwill and intangible assets with indefinite lives using discounted future cash flows, including estimates and assumptions regarding the amount and timing of cash flows, cost of capital and growth rates.

     In fiscal year 2008, we initiated a strategic restructuring in the Caribbean, which included 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 of our Annual Report on Form 10-K for fiscal year 2008 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 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 and equity in net (loss) earnings of nonconsolidated companies, was 30.4 percent in fiscal year 2008 compared 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.

      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 an annual 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 $2.4 million. A 100 basis point decrease in the discount rate would increase our annual pension expense by $2.7 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 15 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, 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 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 also purchase finished beverage products from PepsiCo and certain of its affiliates, including tea, concentrate and finished beverage products from a Pepsi/Lipton partnership, as well as finished beverage products from a PepsiCo/Starbucks partnership. The table below summarizes amounts paid to PepsiCo 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 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.

     In 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.

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

      Sandora Joint Venture. We are party to a joint venture agreement with PepsiCo pursuant to which we hold the outstanding common stock of Sandora, LLC, the leading juice company in Ukraine. We hold a 60 percent interest in the joint venture and PepsiCo holds a 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 contracts on our behalf and in accordance with our hedging strategies. Payments to PepsiCo for procurement services are reflected in the table below.

     In summary, the Consolidated Statements of Income include the following income and (expense) transactions with PepsiCo and affiliates (in millions):

      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 $210.8 million, $213.0 million and $170.1 million in

fiscal years 2008, 2007 and 2006, respectively. Our purchases from such other bottlers were $0.5 million, $0.3 million and $2.0 million in fiscal years 2008, 2007 and 2006, respectively.

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

     Under the terms of the PepsiAmericas merger agreement, Dakota Holdings, LLC (“Dakota”), a Delaware limited liability company whose members at the time of the PepsiAmericas merger included PepsiCo and Pohlad Companies, became the owner of 14,562,970 shares of our common stock, 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 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 27, 2009. 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

     We own a one-eighth interest in a Challenger aircraft which we own with Pohlad Companies. SD&A expenses we paid 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 2008, 2007 and 2006 were $0.2 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 to various market risks, including risks from changes in commodity prices, interest rates and currency exchange rates, which are addressed below. In addition, see Note 13 to the Consolidated Financial Statements.

      Commodity Prices. We use commodity inputs such as aluminum for our cans, resin for our PET bottles, natural gas, diesel fuel, unleaded gasoline, high fructose corn syrup and sugar to be used in our operations. These commodities are subject to price fluctuations that may create price risk. Our ability to recover higher product costs through price increases to customers may be limited due to the competitive pricing environment that exists in the soft drink business. With respect to commodity costs included in our product costs, we may enter into firm price commitments for future purchases that enable us to establish a fixed purchase price within a defined time period. We may also use derivative financial instruments to hedge price fluctuations for a portion of anticipated purchases of certain commodities used in our operations. We have policies governing the hedging instruments we may use, including a policy to not enter into derivative contracts for speculative or trading purposes. For derivatives where we cannot achieve hedge accounting, such as hedges of forecasted purchases of diesel fuel, we record changes in the fair value of those instruments on a mark-to-market basis. As of the end of fiscal year 2008, we had outstanding derivative contracts for anticipated purchases of aluminum and natural gas. As of the end of fiscal year 2007, we had no outstanding hedges.

      Interest Rates. During fiscal years 2008 and 2007, 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 2008 and 2007, approximately 20 percent 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 point (0.5 percent) change in each of these rates would have an impact of approximately $3 million and $2 million, respectively, on our annual interest expense. During fiscal years 2008 and 2007, we had cash equivalents throughout the year, 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 short-term investments, interest income would not have changed by a significant amount.

      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 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, Romanian leu and the Polish zloty.

     Based on net sales, international operations represented approximately 31 percent and 24 percent of our total operations in fiscal years 2008 and 2007, respectively. Changes in currency exchange rates impact the translation of the operations’ results from their local currencies into U.S. dollars. During fiscal years 2008 and 2007, foreign currency had a beneficial impact to net income attributable to PepsiAmericas, Inc. of $13.4 million and $19.0 million, respectively. If the currency exchange rates had changed by 1 percent in fiscal years 2008 and 2007, we estimate the impact on operating income would have been approximately $3 million and $1 million, respectively. Our estimate reflects the fact that a portion of the international operations costs are denominated in U.S. dollars and euros. This estimate does not take into account the possibility that rates can move in 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.

Item 8. Financial Statements and Supplementary Data.

     See Index to Financial Information on page F-1.

PEPSIAMERICAS, INC.

Index to Financial Information

		Page
Report of Independent Registered Public Accounting Firm		F-2
Consolidated Statements of Income for the fiscal years 2008, 2007 and 2006		F-3
Consolidated Balance Sheets as of fiscal year end 2008 and 2007		F-4
Consolidated Statements of Cash Flows for the fiscal years 2008, 2007 and 2006		F-5
Consolidated Statements of Equity for the fiscal years 2008, 2007 and 2006		F-6
Consolidated Statements of Comprehensive (Loss) Income for the fiscal years 2008, 2007 and 2006		F-7
Notes to Consolidated Financial Statements		F-8

Financial Statement Schedules:

Financial statement schedules have been omitted because they are not applicable or the required information is shown in the consolidated financial statements or accompanying notes

Report of Independent Registered Public Accounting Firm

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

     We have audited the accompanying consolidated balance sheets of PepsiAmericas, Inc. and subsidiaries (the Company) as of the end of fiscal years 2008 and 2007, and the related consolidated statements of income, equity, comprehensive (loss) income and cash flows for each of the fiscal years 2008, 2007 and 2006. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

     We conducted our audits 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 the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

     In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of the end of fiscal years 2008 and 2007, and the results of their operations and their cash flows for each of the fiscal years 2008, 2007 and 2006, in conformity with U.S. generally accepted accounting principles.

     We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company’s internal control over financial reporting as of January 3, 2009, based on the criteria established in “Internal Control — Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 3, 2009 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

     As discussed in the notes to the Consolidated Financial Statements, PepsiAmericas, Inc. and subsidiaries adopted the presentation and disclosure requirements of SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements” for all periods presented.

/s/ KPMG LLP

Minneapolis, Minnesota
March 3, 2009, except for Notes 1, 3, 7, 21, 23 and 25, which are dated as of September 17, 2009.

The accompanying notes are an integral part of these consolidated financial statements.