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

For the quarterly period ended April 4, 2009

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

For the transition period from                    to                   

Commission File Number 001-15019

(Exact name of registrant as specified in its charter)

Delaware		13-6167838
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification Number)
4000 RBC Plaza, 60 South Sixth Street
Minneapolis, Minnesota		55402
(Address of principal executive offices)		(Zip Code)

(612) 661-4000

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes     /x/          No     /  /

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes     /  /          No     /  /

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

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

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2 of the Exchange Act).

Yes     /  /          No     /x/

As of May 1, 2009, the registrant had 124,472,452 outstanding shares of common stock, par value $0.01 per share, the registrant’s only class of common stock.

 

 

						Page
PART I		FINANCIAL INFORMATION
		Item 1.		Financial Statements
				Condensed Consolidated Statements of Income			2
				Condensed Consolidated Balance Sheets			3
				Condensed Consolidated Statements of Cash Flows			4
				Condensed Consolidated Statements of Shareholders’ Equity			5
				Condensed Consolidated Statements of Comprehensive (Loss) Income			6
				Notes to Condensed Consolidated Financial Statements			7
		Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			22
		Item 3.		Quantitative and Qualitative Disclosures About Market Risk			36
		Item 4.		Controls and Procedures			37
PART II		OTHER INFORMATION
		Item 1.		Legal Proceedings			38
		Item 1A.		Risk Factors			38
		Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds			38
		Item 5.		Other Information			39
		Item 6.		Exhibits			39
SIGNATURES							40
EXHIBIT INDEX							41
EX-3.2
EX-31.1
EX-31.2
EX-32.1
EX-32.2

		First Quarter
		2009				2008
Net sales			$1,057.5				$1,098.7
Cost of goods sold			644.1				674.9
Gross profit			413.4				423.8
Selling, delivery and administrative expenses			349.0				353.0
Special charges			0.2				0.5
Operating income			64.2				70.3
Interest expense, net			26.0				29.6
Other expense, net			2.6				1.3
Income from continuing operations before income taxes and equity in net loss of nonconsolidated companies			35.6				39.4
Income taxes			12.3				13.4
Equity in net loss of nonconsolidated companies			0.6				0.4
Net income			22.7				25.6
Less: Net income attributable to noncontrolling interests			1.0				0.9
Net income attributable to PepsiAmericas, Inc.			$     21.7				$     24.7
Weighted average common shares:
Basic			122.5				127.0
Incremental effect of stock options and awards			1.7				1.9
Diluted			124.2				128.9
Earnings per share attributable to PepsiAmericas, Inc. common shareholders:
Basic			$     0.18				$     0.19
Diluted			0.17				0.19
Cash dividends declared per share			$     0.14				$   0.135

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

		End of First				End of Fiscal
		Quarter				Year
		2009				2008
ASSETS:
Current assets:
Cash and cash equivalents			$     202.9				$    242.4
Receivables, net			473.7				305.5
Inventories			287.7				238.5
Other current assets			126.2				119.7
Total current assets			1,090.5				906.1
Property and equipment, net			1,295.7				1,355.7
Goodwill			2,194.5				2,244.6
Intangible assets, net			488.9				498.6
Other assets			43.0				49.1
Total assets			$  5,112.6				$ 5,054.1
LIABILITIES AND EQUITY:
Current liabilities:
Short-term debt, including current maturities of long-term debt			$     433.7				$    525.0
Payables and other current liabilities			519.2				523.2
Total current liabilities			952.9				1,048.2
Long-term debt			1,988.4				1,642.3
Deferred income taxes			245.9				237.6
Other liabilities			263.4				295.0
Total liabilities			3,450.6				3,223.1
Equity:
PepsiAmericas, Inc. shareholders’ equity:
Preferred stock ($0.01 par value, 12.5 million shares authorized, no shares issued)			-				-
Common stock ($0.01 par value, 350 million shares authorized, 137.6 million shares issued - 2009 and 2008)			1,281.6				1,296.9
Retained income			832.6				828.2
Accumulated other comprehensive loss			(309.2	)			(200.8	)
Treasury stock, at cost (16.5 million shares and 14.5 million shares, respectively)			(353.2	)			(324.3	)
Total PepsiAmericas, Inc. shareholders’ equity			1,451.8				1,600.0
Noncontrolling interests			210.2				231.0
Total equity			1,662.0				1,831.0
Total liabilities and equity			$  5,112.6				$ 5,054.1

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

		First Quarter
		2009				2008
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income			$   22.7				$   25.6
Adjustments to reconcile to net cash provided by operating activities of continuing operations:
Depreciation and amortization			47.4				55.2
Deferred income taxes			0.7				1.6
Special charges			0.2				0.5
Cash outlays related to special charges			(1.0	)			(0.6	)
Pension contribution			(11.0	)			-
Equity in net loss of nonconsolidated companies			0.6				0.4
Excess tax benefits from share-based payment arrangements			(0.1	)			(0.8	)
Other			10.9				3.7
Changes in assets and liabilities:
Decrease in securitization receivables			(150.0	)			-
Increase in remaining receivables			(39.4	)			(3.4	)
Increase in inventories			(61.3	)			(17.5	)
Increase in payables			32.4				14.2
Net change in other assets and liabilities			(13.2	)			(61.9	)
Net cash (used in) provided by operating activities of continuing operations			(161.1	)			17.0
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital investments			(49.7	)			(31.5	)
Distribution rights acquired			(12.5	)			-
Proceeds from sales of property and equipment			1.0				0.7
Net cash used in investing activities			(61.2	)			(30.8	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings of short-term debt			(85.7	)			120.2
Proceeds from issuance of long-term debt			345.6				-
Repayment of long-term debt			(5.0	)			-
Contribution from noncontrolling interests			6.4				-
Excess tax benefits from share-based payment arrangements			0.1				0.8
Issuance of common stock			0.8				0.9
Treasury stock purchases			(45.2	)			(81.2	)
Cash dividends			(18.3	)			(17.7	)
Net cash provided by financing activities			198.7				23.0
Net operating cash flows provided by (used in) discontinued operations			0.7				(6.7	)
Effects of exchange rate changes on cash and cash equivalents			(16.6	)			6.0
Change in cash and cash equivalents			(39.5	)			8.5
Cash and cash equivalents as of beginning of fiscal year			242.4				189.7
Cash and cash equivalents as of end of first quarter			$ 202.9				$ 198.2

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

																		Accumulated
																		Other
																		Comprehensive								Total
		Shares								Common				Retained				Income				Treasury				Shareholders’				Noncontrolling				Total
		Common				Treasury				Stock				Income				(Loss)				Stock				Equity				Interests				Equity
As of Fiscal Year End 2007			137.6				(9.5	)		$	1,292.7			$	670.9			$	98.8			$	(204.1	)		$	1,858.3			$	273.4			$	2,131.7
Comprehensive income:
Net income															24.7												24.7				0.9				25.6
Foreign currency translation adjustment																			23.3								23.3								23.3
Unrealized losses on securities, net of income taxes																			(0.1	)							(0.1	)							(0.1	)
Cash flow hedge adjustment, net of income taxes																			0.1								0.1								0.1
Total comprehensive income																											48.0				0.9				48.9
Adoption of SFAS No. 158 adjustment, net of income taxes															(0.2	)			0.1								(0.1	)							(0.1	)
Treasury stock purchases							(3.2	)															(82.8	)			(82.8	)							(82.8	)
Stock compensation plans							0.6				(10.5	)											11.6				1.1								1.1
Dividends declared															(17.4	)											(17.4	)							(17.4	)
As of End of First Quarter of 2008			137.6				(12.1	)		$	1,282.2			$	678.0			$	122.2			$	(275.3	)		$	1,807.1			$	274.3			$	2,081.4
As of Fiscal Year End 2008			137.6				(14.5	)		$	1,296.9			$	828.2			$	(200.8	)		$	(324.3	)		$	1,600.0			$	231.0			$	1,831.0
Comprehensive loss:
Net income															21.7												21.7				1.0				22.7
Foreign currency translation adjustment																			(125.1	)							(125.1	)			(28.2	)			(153.3	)
Unrealized losses on securities, net of income taxes																			(0.7	)							(0.7	)							(0.7	)
Cash flow hedge adjustment, net of income taxes																			17.4								17.4								17.4
Total comprehensive loss																											(86.7	)			(27.2	)			(113.9	)
Treasury stock purchases							(2.7	)															(45.2	)			(45.2	)							(45.2	)
Stock compensation plans							0.7				(15.3	)											16.3				1.0								1.0
Dividends declared															(17.3	)											(17.3	)							(17.3	)
Contributions from noncontrolling interests																															6.4				6.4
As of End of First Quarter of 2009			137.6				(16.5	)		$	1,281.6			$	832.6			$	(309.2	)		$	(353.2	)		$	1,451.8			$	210.2			$	1,662.0

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

PEPSIAMERICAS, INC.

		First Quarter
		2009				2008
Net income		$	22.7			$	25.6
Foreign currency translation adjustment			(153.3	)			23.3
Unrealized losses on securities, net of income taxes			(0.7	)			(0.1	)
Cash flow hedge adjustment, net of income taxes			17.4				0.1
Comprehensive (loss) income			(113.9	)			48.9
Less: Comprehensive (loss) income attributable to noncontrolling interests			(27.2	)			0.9
Comprehensive (loss) income attributable to PepsiAmericas, Inc.		$	(86.7	)		$	48.0

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

PEPSIAMERICAS, INC.

1.     Significant Accounting Policies

Quarterly Reporting. The Condensed Consolidated Financial Statements included herein have been prepared by PepsiAmericas, Inc. (referred to herein as “PepsiAmericas,” “we,” “our” and “us”) without audit. Certain information and disclosures normally included in financial statements prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission, although we believe that the disclosures are adequate to make the information presented not misleading. The year-end Condensed Consolidated Balance Sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. These Condensed Consolidated Financial Statements should be read in conjunction with the financial statements and notes thereto included in our Annual Report on Form 10-K for fiscal year 2008. In the opinion of management, the information furnished herein reflects all adjustments (consisting only of normal, recurring adjustments) necessary for a fair statement of results for the interim periods presented.

Use of Accounting Estimates. The preparation of the accompanying condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenues and expenses. These estimates and assumptions are based on management’s best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. We adjust such estimates and assumptions when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates.

Fiscal Year. Our United States (“U.S.”) and Caribbean operations report using a fiscal year that consists of 52 or 53 weeks ending on the Saturday closest to December 31. Our Central and Eastern Europe (“CEE”) operations’ fiscal year ends on December 31 and therefore, are not impacted by the 53rd week. Our first quarter of 2009 and 2008 were based on thirteen weeks that ended April 4, 2009 and March 29, 2008, respectively. Due to the timing of the receipt of available financial information, certain operations are reported on a one-month or one-quarter lag basis.

Our business is seasonal with the second and third quarters generating higher sales volumes than the first and fourth quarters. Accordingly, the operating results of any individual quarter may not be indicative of a full year’s operating results.

Earnings Per Share. Basic earnings per share is based upon the weighted-average number of common shares outstanding. Diluted earnings per share assumes the exercise of all options which are dilutive, whether exercisable or not. The dilutive effects of stock options and non-vested restricted stock awards are measured under the treasury stock method.

The following options and restricted stock awards were not included in the computation of diluted earnings per share because they were antidilutive:

		First Quarter
		2009				2008
Shares under options outstanding			442,561				-
Weighted-average exercise price per share		$	18.82			$	-
Shares under non-vested restricted stock awards			-				935,314
Weighted-average grant date fair value per share		$	-			$	26.30

Reclassifications. Certain amounts in the prior period Condensed Consolidated Financial Statements have been reclassified to conform to the current year presentation.

Recently Adopted Accounting Pronouncements. In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements,” to provide enhanced guidance when using fair value to measure assets and liabilities. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in GAAP and expands disclosures about fair value measurements. SFAS No. 157 applies whenever other pronouncements require or permit assets or liabilities to be measured by fair value. We adopted SFAS No. 157 as of the beginning of fiscal year 2008 as it relates to recurring financial assets and liabilities. We adopted SFAS No. 157 as it relates to nonrecurring fair value measurement requirements for nonfinancial assets and liabilities as of the beginning of fiscal year 2009. These include goodwill, other intangible assets not subject to amortization and unallocated purchase price for recent acquisitions. The adoption of SFAS No. 157 related to nonfinancial assets and liabilities had no impact on our disclosures for the first quarter of 2009.

In December 2007, the FASB issued a revised SFAS No. 141, “Business Combinations.” SFAS No. 141(R) amends the guidance relating to the use of the purchase method in a business combination. SFAS No. 141(R) requires that we recognize and measure the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquired business at fair value. SFAS No. 141(R) also requires that we recognize and measure the goodwill acquired in the business combination or a gain from a bargain purchase. Acquisition costs to effect the acquisition and any integration costs are no longer considered a component of the cost of the acquisition, but will be expensed as incurred. SFAS No. 141(R) became effective with acquisitions occurring on or after the beginning of fiscal year 2009.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements – an amendment to ARB No. 51,” to establish accounting and reporting standards for noncontrolling interests, sometimes called minority interest. SFAS No. 160 requires that the parent report noncontrolling interests in the equity section of the balance sheet but separate from the parent’s equity. SFAS No. 160 also requires clear presentation of net income attributable to the parent and the noncontrolling interest on the face of the income statement. All changes in the parent’s ownership interest in the subsidiary must be accounted for consistently. Deconsolidation of the subsidiary requires the recognition of a gain or loss using the fair value of the noncontrolling equity investment rather than the carrying amount. We adopted SFAS No. 160 as of the beginning of fiscal year 2009.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities – an amendment of FASB Statement No. 133.” SFAS No. 161 requires enhanced disclosures about an entity’s derivative and hedging activities. We adopted SFAS No. 161 as of the beginning of fiscal year 2009. See Note 9 for required disclosures.

Recently Issued Accounting Pronouncements to be Adopted in the Future. In December 2008, the FASB issued FASB Staff Position No. FAS 132(R)-1 (“FSP 132(R)-1”), “Employers’ Disclosures about Postretirement Benefit Plan Assets.” FSP 132(R)-1 provides guidance on an employer’s disclosures about plan assets of a defined benefit pension or other postretirement plan. The disclosures about plan assets required by FSP 132(R)-1 must be provided for fiscal years ending after December 15, 2009. We are currently evaluating the impact FSP 132(R)-1 will have on our disclosures about plan assets.

2.     Special Charges

In the first quarter of 2009, we recorded special charges of $0.2 million in the Caribbean, which primarily consisted of severance costs. In the first quarter of 2008, we recorded special charges of $0.5 million in the U.S. related to our strategic realignment of the U.S. sales organization, primarily for relocation costs.

The following table summarizes the activity associated with special charges during the first quarter of 2009 (in millions):

Special charge liability, fiscal year end 2008		$	2.5
Special charges			0.2
Application of special charges			(1.0	)
Application of non-cash charges			(0.3	)
Special charge liability, end of the first quarter of 2009		$	1.4

The total accrued liabilities remaining as of the end of the first quarter of 2009 were comprised of severance payments, lease terminations and other costs. We expect the remaining special charge liability of $1.4 million to be paid using cash from operations during the next 12 months; accordingly, such amounts are classified as “Payables and other current liabilities” in the Condensed Consolidated Balance Sheet.

3.     Statement of Income Details

Details of certain line items on the Condensed Consolidated Statements of Income for the first quarter of 2009 and 2008 were as follows (in millions):

		First Quarter
		2009				2008
Cost of goods sold:
Cost of goods sold		$	640.1			$	675.0
Unrealized losses (gains) on derivative instruments			4.0				(0.1	)
Total cost of goods sold		$	644.1			$	674.9
Selling, delivery and administrative (“SD&A”) expenses
SD&A expenses		$	347.4			$	353.0
Unrealized losses on derivative instruments			1.6				-
Total SD&A expenses		$	349.0			$	353.0
Interest expense, net:
Interest expense		$	28.1			$	30.6
Interest income			(2.1	)			(1.0	)
Interest expense, net		$	26.0			$	29.6

Cost of goods sold consists of the costs related to goods produced and sold during the period. SD&A expenses consist of costs related to selling and delivering our products and other administrative costs during the period. Unrealized losses (gains) recorded on derivative instruments consists of the change in market value for commodity swap contracts that were not designated as hedging instruments.

4.     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 of nonconsolidated companies, was 34.6 percent in the first quarter of 2009 compared to 34.0 percent in the first quarter of 2008. The higher tax rate was due primarily to the change in the geographic mix of earnings and the associated varying statutory tax rates.

During the first quarter of 2009, our gross unrecognized tax benefits increased by $0.3 million. The impact to our effective tax rate consisted of $0.7 million of gross interest related to unrecognized tax benefits for the first quarter of 2009.

During the next 12 months it is reasonably possible that a reduction of gross unrecognized tax benefits will occur in a range of $4 million to $6 million as a result of the resolution of positions taken on previously filed returns.

We are subject to U.S. federal income tax, state income tax in multiple state tax jurisdictions, and foreign income tax in our CEE and Caribbean tax jurisdictions. Currently, our U.S. federal income tax returns are under examination for fiscal year 2006 and 2007. Fiscal year 2005 is currently not under examination but is still subject to future review subject to the applicable statute of limitations.

5.     Goodwill and Intangible Assets

The changes in the carrying amount of goodwill by geographic segment for the first quarter of 2009 were as follows (in millions):

		U.S.				CEE				Caribbean				Total
Balance, fiscal year end 2008		$	1,824.3			$	404.6			$	15.7			$	2,244.6
Foreign currency translation adjustment			-				(50.0	)			(0.1	)			(50.1	)
Balance, end of the first quarter of 2009		$	1,824.3			$	354.6			$	15.6			$	2,194.5

Intangible asset balances as of the end of the first quarter of 2009 and end of fiscal year 2008 were as follows (in millions):

	End of First					End of Fiscal
	Quarter 2009					Year 2008
Intangible assets subject to amortization:
Gross carrying amount:
Customer relationships and lists		$	51.1				$	57.3
Franchise and distribution agreements			10.6					3.3
Other			2.5					2.5
Total		$	64.2				$	63.1
Accumulated amortization:
Customer relationships and lists		$	(12.1	)			$	(11.9	)
Franchise and distribution agreements			(1.3	)				(1.2	)
Other			(0.7	)				(0.6	)
Total		$	(14.1	)			$	(13.7	)
Intangible assets subject to amortization, net		$	50.1				$	49.4
Intangible assets not subject to amortization:
Franchise and distribution agreements		$	362.7				$	362.3
Trademarks and tradenames			76.1					86.9
Total		$	438.8				$	449.2
Total intangible assets, net		$	488.9				$	498.6

During the first quarter of 2009, we acquired distribution rights for Rockstar energy drinks and Muscle Milk protein-enhanced beverages. As a result of these acquisitions, we recorded $7.3 million of amortizable distribution rights. We also recorded $10.6 million of distribution rights not subject to amortization in connection with the Crush beverage brand distribution agreement.

For intangible assets subject to amortization, we calculate amortization expense over the period we expect to receive economic benefit. Total amortization expense was $1.6 million and $3.1 million in the first quarter of 2009 and 2008, respectively.

6.     Sale of Receivables

In the first quarter of 2009, we terminated our trade receivables securitization program because the program had become uncompetitive with alternate sources of capital resulting in a $150 million increase in trade receivables and a comparable increase in debt on our Condensed Consolidated Balance Sheet. Additionally, termination of this program resulted in a decline in net cash (used in) provided by operating activities of $150 million offset by a corresponding increase in cash provided by financing activities on our Condensed Consolidated Statement of Cash Flows.

7.     Balance Sheet Details

Details of certain line items on the Condensed Consolidated Balance Sheets as of the end of the first quarter of 2009 and end of fiscal year 2008 were as follows (in millions):

		End of First				End of Fiscal
		Quarter 2009				Year 2008
Receivables, net:
Trade receivables		$	419.1			$	418.0
Securitization receivables			-				(150.0	)
Funding and rebates, net			60.2				39.7
Other receivables			8.9				11.3
Allowance for doubtful accounts			(14.5	)			(13.5	)
Receivables, net		$	473.7			$	305.5
Inventories:
Raw materials and supplies		$	126.9			$	117.2
Finished goods			160.8				121.3
Inventories		$	287.7			$	238.5
Other current assets:
Prepaid expenses		$	62.8			$	56.7
Prepaid customer incentives			21.9				23.5
Other			41.5				39.5
Other current assets		$	126.2			$	119.7
Property and equipment, net:
Land		$	79.6			$	84.1
Building and improvements			505.4				524.9
Machinery and equipment			2,266.0				2,301.1
Total property and equipment			2,851.0				2,910.1
Accumulated depreciation			(1,555.3	)			(1,554.4	)
Property and equipment, net		$	1,295.7			$	1,355.7
Payables and other current liabilities:
Trade payables		$	206.2			$	186.9
Income tax and other payables			17.3				16.5
Accrued salaries and wages			53.2				71.3
Accrued customer incentives			75.8				86.9
Accrued interest			27.5				25.3
Other current liabilities			139.2				136.3
Payables and other current liabilities		$	519.2			$	523.2

8.     Debt

In the first quarter of 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 $345.6 million, which reflected a discount of $2.2 million and debt issuance costs of $2.2 million. The net proceeds from the issuance of the notes were used to repay commercial paper and for other general corporate purposes. The notes were issued under our automatic shelf registration statement filed May 16, 2006.

9.     Financial Instruments

In March 2008, the FASB issued SFAS No. 161 to provide an enhanced understanding of the use of derivative instruments, how they are accounted for under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” and their effect on financial position, financial performance and cash flows. We adopted the disclosure provisions of SFAS No. 161 as of the beginning of fiscal year 2009.

We are exposed to certain risks relating to our ongoing business operations. The primary risks managed by using derivative instruments are commodity price risk, foreign currency exchange risk and interest rate risk. In accordance with SFAS No. 133, we record all derivative instruments at fair value as either assets or liabilities in our Condensed Consolidated Balance Sheets. Derivative instruments are designated and accounted for as either a hedge of a recognized asset or liability (“fair value hedge”), a hedge of a forecasted transaction (“cash flow hedge”), or they are not designated as a hedge. Cash flows from derivatives used to manage commodity, foreign currency exchange or interest rate risks are classified as operating activities.

For cash flow hedges, changes in fair value are deferred in accumulated other comprehensive loss (“AOCL”) until the underlying hedged item is recognized in earnings. For fair value hedges, changes in fair value are recognized immediately in earnings, consistent with the underlying hedged item. Hedging transactions are limited to an underlying exposure. As a result, any change in the value of our derivative instruments would be substantially offset by an opposite change in the value of the underlying hedged items. Hedging ineffectiveness and a net earnings impact occur when the change in the value of the hedge does not offset the change in the value of the underlying hedged item. If the derivative instrument is terminated, we continue to defer the related gain or loss and include it as a component of the cost of the underlying hedged item. Upon determination that the underlying hedged item will not be part of an actual transaction, we recognize the related gain or loss in earnings immediately.

We also use derivatives for which hedge accounting is not elected. We account for such derivatives at fair value with the resulting gains and losses reflected in our Condensed Consolidated Statements of Income. Our corporate policy prohibits the use of derivative instruments for trading or speculative purposes, and we have procedures in place to monitor and control their use.

By using derivative instruments, we expose ourselves, from time to time, to credit risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes us, which creates credit risk for us. We monitor our counterparty credit risk on an ongoing basis. None of our derivative instruments contain credit-risk-related contingent features as defined under SFAS No. 161.

Commodity Prices. We are subject to commodity price risk because our ability to recover increased costs through higher pricing may be limited in the competitive environment in which we operate. This risk is managed through the use of fixed-price purchase orders, pricing agreements, geographic diversity and derivatives. We use derivatives, with terms of no more than 3 years, to economically hedge price fluctuations related to a portion of our anticipated commodity purchases, primarily for aluminum, natural gas and diesel fuel. For those derivatives that qualify for hedge accounting, any ineffectiveness is recorded immediately. We classify both the earnings and cash flow impact from these derivatives consistent with the underlying hedged item. During the next 12 months, we expect to reclassify net losses of $2.3 million related to cash flow hedges of commodity transactions from AOCL into earnings. Derivatives used to hedge commodity price risk that do not qualify for hedge accounting are marked-to-market each period and reflected in our Condensed Consolidated Statements of Income.

Our open commodity derivative contracts that qualify for hedge accounting had a face value of $111.1 million as of the end of the first quarter of 2009 and $44.8 million as of the end of fiscal year 2008. Our open commodity derivative contracts that do not qualify for hedge accounting had a face value of $80.0 million as of the end of the first quarter of 2009. There were no open commodity derivative contracts that did not qualify for hedge accounting as of the end of fiscal year 2008.

Foreign Currency Exchange. Exchange rate gains or losses related to foreign currency transactions are recognized as transaction gains or losses in our Condensed Consolidated Statements of Income as incurred. We use foreign currency derivative contracts to hedge the volatility of foreign currency rates for purchases of raw materials for which payment is settled in a currency other than our local operations’ functional currency. Our foreign currency derivatives had a total face value of $25.7 million as of the end of the first quarter of 2009 and $46.1 million as of the end of fiscal year 2008. During the next 12 months, we expect to reclassify net gains of $7.4 million related to cash flow hedges of foreign currency transactions from AOCL into earnings.

Interest Rates. In anticipation of long-term debt issuances, we enter into treasury rate lock instruments and forward starting swap agreements. We account for these treasury rate lock instruments and forward starting swap agreements as cash flow hedges, as each hedges against the variability of interest payments attributable to changes in interest rates on the forecasted issuance of fixed-rate debt. These treasury rate locks and the forward starting swap agreements are considered highly effective in eliminating the variability of cash flows associated with the forecasted debt issuances. The notional amounts of the interest rate swaps outstanding as of the end of the first quarter of 2009 and the end of fiscal year 2008 were $250 million for each respective date.

We have also entered into interest rate swap contracts to convert a portion of our fixed rate debt to floating rate debt, with the objective of reducing overall borrowing costs. We account for these swaps as fair value hedges, since they hedge against the change in fair value of fixed rate debt resulting from fluctuations in interest rates. For derivative instruments that are designated and qualify as a fair value hedge, the gain or loss on the derivative as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in current earnings.

In fiscal year 2004, we terminated all outstanding interest rate swap contracts and received $14.4 million for the fair value of the interest rate swap contracts. Amounts included in the cumulative fair value adjustment to long-term debt will be reclassified into earnings commensurate with the recognition of the related interest expense. As of the end of the first quarter of 2009 and fiscal year 2008, the cumulative fair value adjustments to long-term debt were $0.2 million and $0.9 million, respectively.

The location and amounts of derivative fair values in our Condensed Consolidated Balance Sheets as of the end of the first quarter of 2009 and end of fiscal year 2008 were as follows (in millions):

Asset Derivatives

End of First Quarter 2009

End of Fiscal Year 2008

Derivatives designated as

Balance

Balance

hedging instruments

Sheet

Fair

Sheet

Fair

under SFAS No. 133

Location

Value

Location

Value

Foreign exchange contracts

Other current assets

$

7.4

Other current assets

$

8.9

Commodity contracts

Other current assets

0.3

Other current assets

-

Total asset derivatives

$

7.7

$

8.9

Liability Derivatives

End of First Quarter 2009

End of Fiscal Year 2008

Derivatives designated as

Balance

Balance

hedging instruments

Sheet

Fair

Sheet

Fair

under SFAS No. 133

Location

Value

Location

Value

Interest rate contracts

Other liabilities

$

8.6

Other liabilities

$

34.3

Commodity contracts

Payables and other

Payables and other

current liabilities

1.5

current liabilities

4.9

$

10.1

$

39.2

Derivatives not designated

as hedging instruments

under SFAS No. 133

Commodity contracts

Payables and other

Payables and other

current liabilities

6.0

current liabilities

1.7

Total liability derivatives

$

16.1

$

40.9

The location and amounts of derivative gains and losses in our Condensed Consolidated Statements of Income for the first quarter of 2009 and 2008 were as follows (in millions):

		Amount of Gain
		Recognized in Other										Amount of Gain (Loss)
		Comprehensive Income										Reclassified from
Derivatives in Statement		on Derivative (a)								Location of Gain		AOCL into Income (a)
133 Cash Flow Hedging		First Quarter								Reclassified from		First Quarter
Relationships		2009				2008				AOCL into Income		2009				2008
Interest rate contracts		$	25.6			$	-			Interest expense, net		$	(0.1)			$	(0.1)
Foreign exchange contracts			3.7				-			Cost of goods sold			5.2				-
Commodity contracts			3.2				-			Cost of goods sold			(0.6)				(0.1)
Total		$	32.5			$	-			Total		$	4.5			$	(0.2)

(a) The amount of ineffectiveness was not material to the Condensed Consolidated Statements of Income.

				Amount of Gain
				Recognized in Income
Derivatives in Statement		Location of Gain		on Derivatives
133 Fair Value Hedging		Recognized in Income on		First Quarter
Relationships		Derivatives		2009				2008
Interest rate contracts		Interest expense, net		$	0.7			$	0.7

				Amount of Loss
Derivatives Not				Recognized in Income
Designated as Hedging		Location of Loss		on Derivatives
Instruments under		Recognized in Income on		First Quarter
Statement 133		Derivatives		2009				2008
Commodity contracts		Cost of goods sold		$	(6.4)			$	-
Commodity contracts		SD&A expenses			(2.5)				-
Investment contracts		SD&A expenses			(1.6)				(2.0)
		Total		$	(10.5)			$	(2.0)

10.     Fair Value Measurements

SFAS No. 157 defines and establishes a framework for measuring fair value and expands disclosure about fair value measurements. Furthermore, SFAS No. 157 specifies a hierarchy of valuation techniques based upon whether the inputs to those valuation techniques reflect assumptions other market participants would use based upon market data obtained from independent sources (observable inputs) or reflect our own assumptions of market participant valuation (unobservable inputs). In accordance with SFAS No. 157, we have categorized our assets and liabilities, based on the priority of the inputs to the valuation technique, into a three-level fair value hierarchy as set forth below. If the inputs used to measure fair value fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement.

Assets and liabilities recorded on the Condensed Consolidated Balance Sheet are categorized on the inputs to the valuation techniques as follows:

Level 1 – Assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that the company has the ability to access at the measurement date (examples include active exchange-traded equity securities, listed derivatives, and most U.S. Government and agency securities).

Level 2 – Assets and liabilities whose values are based on quoted prices in markets where trading occurs infrequently or whose values are based on quoted prices of assets and liabilities with similar attributes in active markets. Level 2 inputs include the following:

•

Quoted prices for similar assets or liabilities in active markets;

	•		Quoted prices for identical or similar assets or liabilities in non-active markets (examples include corporate and municipal bonds which trade infrequently);
	•		Inputs other than quoted prices that are observable for substantially the full term of the asset or liability (examples include interest rate and currency swaps); and
	•		Inputs that are derived principally from or corroborated by observable market data for substantially the full term of the asset or liability (examples include certain securities and derivatives).

Level 3 – Assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s own assumptions about the assumptions a market participant would use in pricing the asset or liability.

The following table summarizes our financial assets and liabilities measured at fair value on a recurring basis as of the end of the first quarter of 2009 (in millions):

						Quoted Prices
						in Active				Significant
						Markets for				Other				Significant
						Identical				Observable				Unobservable
		End of First				Assets				Inputs				Inputs
		Quarter 2009				(Level 1)				(Level 2)				(Level 3)
Available-for-sale equity securities		$	0.6			$	0.6			$	-			$	-
Deferred compensation plan assets			1.5				1.5				-				-
Derivative assets			7.7				-				7.7				-
Total assets		$	9.8			$	2.1			$	7.7			$	-
Deferred compensation plan liabilities		$	34.7			$	-			$	34.7			$	-
Derivative liabilities			16.1				-				16.1				-
Total liabilities		$	50.8			$	-			$	50.8			$	-

Available-for-sale equity securities. As of the end of the first quarter of 2009, our available-for-sale equity securities consisted of common stock of Northfield Laboratories, Inc. Our available-for-sale equity securities are valued using quoted market prices multiplied by the number of shares owned.

Deferred compensation plan assets and liabilities. We maintain a self-directed, non-qualified deferred compensation plan for certain executives and other highly compensated employees. In addition, we maintain assets for a portion of the deferred compensation plans in a rabbi trust. Our rabbi trust funds are invested in money market accounts, which are adjusted monthly for any accrued interest. Our unfunded deferred compensation liability is subject to changes in our stock price as well as price changes in other equity and fixed-income investments. Employees’ deferred compensation amounts are not directly invested in these investment vehicles. We track the performance of each employee’s investment selections and adjust the deferred compensation liability accordingly. The fair value of the unfunded deferred compensation liability is primarily based on the market indices corresponding to the employees’ investment selections.

Derivative assets and liabilities. We calculate derivative asset and liability amounts using a variety of interest rate and valuation techniques, depending on the specific characteristics of the hedging instrument. The fair values of our forward exchange and commodity contracts are primarily based on observable interest rate yields, forward foreign exchange and commodity rates.

11.     Pension and Other Postretirement Benefit Plans

Net periodic pension and other postretirement benefit costs for the first quarter of 2009 and 2008 included the following components (in millions):

		First Quarter
		Pension								Other Postretirement
		Benefit Costs								Benefit Costs
		2009				2008				2009				2008
Service cost		$	1.0			$	0.8			$	-			$	-
Interest cost			3.0				2.8				0.3				0.3
Expected return on plan assets			(3.9)				(3.8)				-				-
Amortization of net loss (gain)			1.1				0.5				(0.2)				(0.2)
Amortization of prior service cost			0.1				-				-				-
Net periodic cost		$	1.3			$	0.3			$	0.1			$	0.1

During the first quarter of 2009, we made $11.0 million of contributions to the plans. We expect to make additional contributions of approximately $1.0 million during the remainder of fiscal year 2009. We will continue to evaluate the plans’ funding requirements and fund to levels deemed necessary for the plans.

12.     Share-Based Compensation

In February 2009, we granted 1,452,209 restricted shares at a weighted-average fair value of $16.69 on the date of grant to key members of U.S. and Caribbean management and members of our Board of Directors under our 2000 Stock Incentive Plan (the “Plan”). We recognized compensation expense of $6.2 million and $5.2 million in the first quarter of 2009 and 2008, respectively, related to unvested restricted share grants. As of the end of the first quarter of 2009, there were 3,234,019 unvested restricted shares outstanding.

In February 2009, we granted 209,560 restricted stock units at a weighted-average value of $16.69 on the date of grant to key members of our CEE management team under the Plan. Restricted stock units are considered liability awards whose fair value is remeasured at each reporting date until settlement. As such, compensation expense associated with restricted stock units is subject to variability based on changes in the fair value of PepsiAmericas’ underlying stock price. We recognized compensation expense of $0.2 million in the first quarter of 2009 related to unvested restricted stock unit grants. Due to decline in the stock price during the first quarter of 2008, we recognized a benefit to compensation expense of $0.8 million in the first quarter of 2008 related to unvested restricted stock unit grants. As of the end of the first quarter of 2009, there were 422,730 unvested restricted stock units outstanding.

13.     Supplemental Cash Flow Information

Net cash (used in) provided by operating activities reflected cash payments and receipts for interest and income taxes as follows (in millions):

		First Quarter
		2009				2008
Interest paid		$	25.5			$	30.5
Interest received			2.1				0.9
Income taxes paid			7.0				0.4
Income tax refunds			(0.1)				(0.9)

14.     Environmental and Other Contingencies

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

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

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

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

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

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

As of the end of the first quarter of 2009 and fiscal year 2008, we had $36.1 million accrued to cover potential indemnification obligations. Of the total amount accrued, $11.9 million was recorded in “Payables and others current liabilities” on the Condensed Consolidated Balance Sheets representing estimates of amounts to be spent during the next 12 months. This indemnification obligation includes costs associated with several sites in various stages of remediation or negotiations. At the present time, the most significant remaining indemnification obligation is associated with the Willits site, as discussed below, while no other single site has significant estimated remaining costs associated with it. The amounts exclude possible insurance recoveries and are determined on an undiscounted cash flow basis. The estimated indemnification liabilities include expenses for the investigation and remediation of identified sites, payments to third parties for claims and expenses (including product liability), administrative expenses, and the expenses of on-going evaluations and litigation. We expect a significant portion of the accrued liabilities will be spent during the next several years.

Included in our indemnification obligations is financial exposure related to certain remedial actions required at a facility that manufactured hydraulic and related equipment in Willits, California. Various chemicals and metals contaminate this site. A final consent decree was issued in August 1997 and subsequently amended in December 2000 and 2006 in the case of the People of the State of California and the City of Willits, California v. Remco Hydraulics, Inc. The final consent decree established a trust (the “Willits Trust”) which is obligated to investigate and clean up this site. We are currently funding the Willits Trust and the investigation and interim remediation costs on a year-to-year basis as required in the final amended consent decree. We have accrued $10.5 million as of the end of the first quarter of 2009 for future remediation and trust administration costs, with the majority of this amount to be spent over the next several years.

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

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

Essentially all of the assets of the Trust were expended by the Trust in connection with the purchase of the insurance coverage, the Finite Funding and related expenses. These actions were taken to fund remediation and related costs associated with the sites previously owned and operated or impacted by Pneumo Abex and its subsidiaries and to protect against additional future costs in excess of our self-insured retention. The original amount of self-insured retention (the amount we must pay before the insurance carrier is obligated to begin payments) was $114.0 million of which $58.5 million has been eroded, leaving a remaining self-insured retention of $55.5 million as of the end of the first quarter of 2009. The estimated range of aggregate exposure related only to the remediation costs of such environmental liabilities is approximately $17 million to $36 million. We had accrued $20.1 million as of the end of the first quarter of 2009 for remediation costs, which is our best estimate of the contingent liabilities related to these environmental matters. The Finite Funding may be used to pay a portion of the $20.1 million and thus reduces our future cash obligations. Amounts recorded in our Condensed Consolidated Balance Sheets related to Finite Funding were $8.8 million as of the end of first quarter of 2009 and $9.9 million as of the end of fiscal year 2008 and were recorded in “Other assets,” net of $4.2 million recorded in “Other current assets” as of the end of each respective period.

Discontinued Operations – Product Liability and Toxic Tort Claims. We also have certain indemnification obligations related to product liability and toxic tort claims that might emanate out of the 1988 agreement with Pneumo Abex. Other companies not owned by or associated with us also are responsible to Pneumo Abex for the financial burden of all asbestos product liability claims filed against Pneumo Abex after a certain date in 1998, except for certain claims indemnified by us. The sites and product liability and toxic tort claims included in the aggregate accrued liabilities we have recorded are described more fully in our Annual Report on Form 10-K for fiscal year 2008.

Four lawsuits have been filed in California, which name several defendants including certain of our prior subsidiaries. The lawsuits allege that we and our former subsidiaries are liable for personal injury and/or property damage resulting from environmental contamination at the Willits facility. There are 42 personal injury plaintiffs in the lawsuits seeking an unspecified amount of damages, punitive damages, injunctive relief and medical monitoring damages. We are actively defending these lawsuits. At this time, we do not believe these lawsuits are material to our business or financial condition. No other significant changes in the status of the above-described sites or claims occurred, and we were not notified of any other significant new sites or claims during the first quarter of 2009.

15.     Segment Reporting

We operate in one industry located in three geographic areas – U.S., CEE and the Caribbean. We operate in 19 states in the U.S. Internationally, we operate in Ukraine, Poland, Romania, Hungary, the Czech Republic, Slovakia, Puerto Rico, Jamaica, and Trinidad and Tobago. We have distribution rights in Moldova, Estonia, Latvia and Lithuania which are recorded in the CEE geographic segment, and the Bahamas and Barbados, which are recorded in the Caribbean geographic segment.

Operating income is inclusive of special charges of $0.2 million and $0.5 million in the first quarter of 2009 and 2008, respectively (see Note 2 for further discussion).

The following tables present net sales and operating income (loss) of our geographic segments for the first quarter of 2009 and 2008 (in millions):

		First Quarter
		Net Sales								Operating Income (Loss)
		2009				2008				2009				2008
U.S.		$	826.6			$	780.8			$	66.4			$	58.2
CEE			182.8				263.0				(0.7	)			14.1
Caribbean			48.1				54.9				(1.5	)			(2.0	)
Total		$	1,057.5			$	1,098.7			$	64.2			$	70.3

In the first quarter of 2009, we determined that certain administrative costs that were previously recorded in our U.S. geographic segment were more appropriately associated with our CEE geographic segment. As a result, we have reclassified $0.8 million of administrative costs previously recorded in our U.S. geographic segment to our CEE geographic segment for the first quarter of 2008.

16.     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 the first quarter of 2009, PepsiCo beneficially owned approximately 43 percent of PepsiAmericas’ outstanding common stock. These shares are subject to the Shareholder Agreement with our company. As of the end of the first quarter of 2009 and fiscal year 2008, net amounts due to PepsiCo were $11.1 million and $16.4 million, respectively. During the first quarter of 2009, approximately 82 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 $49.3 million and $53.0 million in the first quarter of 2009 and 2008, respectively. There are no conditions or requirements that could result in the repayment of any support payments we received.

In accordance with 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 Condensed 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 services to PepsiCo in connection with the production of certain finished beverage products, and 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.

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 Condensed Consolidated Statements of Income include the following income and (expense) transactions with PepsiCo (in millions):

		First Quarter
		2009				2008
Net sales:
Bottler incentives		$	6.8			$	8.5
Manufacturing and national account services			2.6				4.5
Total		$	9.4			$	13.0
Cost of goods sold:
Bottler incentives		$	39.0			$	38.2
Purchase of concentrate			(244.3)				(200.0)
Purchases of finished beverage products			(46.8)				(61.6)
Purchases of finished snack food products			(5.1)				(1.9)
Aquafina royalty fee			(10.5)				(11.6)
Procurement services			(1.0)				(1.0)
Total		$	(268.7)			$	(237.9)
Selling, delivery and administrative expenses:
Bottler incentives		$	3.5			$	6.3
Purchases of advertising materials			(0.5)				(0.7)
Total		$	3.0			$	5.6

Transactions with Bottlers in Which PepsiCo Holds an Equity Interest.   We sell finished beverage products to other bottlers, including The Pepsi Bottling Group, Inc. and Pepsi Bottling Ventures LLC, bottlers in which PepsiCo owns an equity interest. 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 $53.9 million and $47.3 million in the first quarter of 2009 and 2008, respectively. Our purchases from such other bottlers were $0.1 million and $0.2 million in the first quarter of 2009 and 2008, 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 May 1, 2009. The shares held by Starquest are subject to the 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 were approximately $16,000 and $30,000 in the first quarter of 2009 and 2008, respectively.

17.     Subsequent Event

On April 19, 2009, we received a non-binding proposal from PepsiCo to acquire all of the outstanding shares of PepsiAmericas’ common stock that are not already owned by PepsiCo for $11.64 in cash and 0.223 shares of PepsiCo common stock per PepsiAmericas common share. Our Board of Directors formed a Transactions Committee, comprised of all eight independent directors as defined by our Shareholder Agreement with PepsiCo, to evaluate the proposal. On May 7, 2009, we announced that we had informed PepsiCo that our Board of Directors, based on the recommendation of the Transactions Committee, unanimously determined that PepsiCo’s April 19 proposal is not acceptable and is not in the best interest of our shareholders. On May 7, 2009, PepsiCo reiterated its belief that its offer is full and fair.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q 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 Form 10-Q refer to the 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, Inc. (“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.

CRITICAL ACCOUNTING POLICIES

The preparation of the Condensed Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America requires management to use estimates. These estimates are made using management’s best judgment and the information available at the time these estimates are made. For a better understanding of our significant accounting policies used in preparation of the Condensed Consolidated Financial Statements, please refer to our Annual Report on Form 10-K for fiscal year 2008. We focus your attention on the following critical accounting policies:

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.

As noted in our Annual Report on Form 10-K for fiscal year 2008, we performed our annual impairment tests during the fourth quarter of 2008, whereby we determined that the fair value of our Sandora trademark and tradenames exceeded their carrying value.  This assessment was made using management’s judgment regarding expected future results associated with our current plans, including assumptions regarding volume, average net pricing and inflation.  Changing market conditions brought about by the continuing world economic crisis may cause our anticipated plans to change.  We will continue to closely assess our performance relative to our plans and monitor these assets for 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 Note 14 to the Condensed Consolidated Financial Statements). We have recorded our best estimate of our probable liability under those indemnification obligations. The estimated indemnification liabilities include expenses for the remediation of identified sites, payments to third parties for claims and expenses (including product liability and toxic tort claims), administrative expenses, and the expense of on-going evaluations and litigation. Such estimates and the recorded liabilities are subject to various factors, including possible insurance recoveries, the allocation of liability among other potentially responsible parties, the advancement of technology for means of remediation, possible changes in the scope of work at the contaminated sites, as well as possible changes in related laws, regulations, and agency requirements. We do not discount environmental liabilities.

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

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

The effective income tax rate, which is income tax expense expressed as a percentage of income from continuing operations before income taxes and equity in net loss of nonconsolidated companies, was 34.6 percent in the first quarter of 2009 compared to 34.0 percent in the first quarter of 2008. The higher tax rate was due primarily to the change in the geographic mix of earnings and the associated varying statutory tax rates.

Casualty Insurance Costs. Due to the nature of our business, we require insurance coverage for certain casualty risks. We are self-insured for workers’ compensation, product and general liability up to $1 million per occurrence and automobile liability up to $2 million per occurrence. The casualty insurance costs for our self-insurance program represent the ultimate net cost of all reported and estimated unreported losses incurred during the period. 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 and are 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 Condensed 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. We use high-quality, long-term bond rates as a guideline for establishing this rate. 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.

RESULTS OF OPERATIONS

BUSINESS OVERVIEW

We manufacture, distribute, and market a broad portfolio of beverage products in the U.S., Central and Eastern Europe (“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. Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the unaudited Condensed Consolidated Financial Statements and accompanying Notes in this Form 10-Q and our Annual Report on Form 10-K for fiscal year 2008.

In the discussion of our results of operations below, the number of bottle and can cases sold is referred to as volume. Net pricing is net sales divided by the number of cases and gallons sold for our core businesses, which include bottles and cans (including bottle and can volume from vending equipment sales), foodservice and export sales. Changes in net pricing include the impact of sales price (or rate) changes, as well as the impact of foreign currency and brand, package and geographic mix. Net pricing and reported volume amounts exclude contract, commissary, and vending (other than bottles and cans) transactions. Contract sales represent sales of manufactured product to other franchise bottlers and typically decline as excess manufacturing capacity is utilized. Net pricing and volume also exclude activity associated with snack food products. Cost of goods sold per unit is the cost of goods sold for our core businesses, excluding the impact of unrealized losses (gains) on derivatives not designated as hedging instruments, divided by the related number of cases and gallons sold. Changes in cost of goods sold per unit include the impact of cost changes, as well as the impact of foreign currency and brand, package and geographic mix.

Financial Results

Net income attributable to PepsiAmericas, Inc. in the first quarter of 2009 was $21.7 million, or $0.17 per diluted common share, compared to $24.7 million, or $0.19 per diluted common share, in the first quarter of 2008. The decrease in diluted earnings per share resulted from a decline in volume in CEE and the negative impact of foreign currency, partly offset by higher net sales in the U.S.

In the first quarter of 2009, worldwide volume declined 5.2 percent, with volume declines in all of our geographic regions. Net pricing on a worldwide basis increased 0.4 percent for the first quarter of 2009 and cost of goods sold per unit decreased 1.6 percent for the first quarter of 2009. Both measures were significantly impacted by foreign currency exchange rates.

Seasonality

Our business is seasonal with the second and third quarters generating higher sales volumes than the first and fourth quarters. Accordingly, the operating results of any individual quarter may not be indicative of a full year’s operating results.

Items Impacting Comparability

Special Charges

In the first quarter of 2009, we recorded special charges of $0.2 million in the Caribbean, which primarily consisted of severance costs. In the first quarter of 2008, we recorded special charges of $0.5 million in the U.S. related to our strategic realignment of the U.S. sales organization, primarily for relocation costs.

Unrealized Losses (Gains) on Derivatives

Unrealized losses (gains) on derivatives consists of the change in market value of derivative instruments that were not designated as hedging instruments. These derivative instruments are used to manage the risks associated with the variability in the market price for forecasted purchases of certain commodities. As a result of the subsequent change in the price of certain commodities, we recognized this mark-to-market impact during the first quarter which will reverse out over the balance of the year as the forecasted purchases occur.

In the first quarter of 2009, we recorded $5.6 million of unrealized losses on derivatives in the U.S. related to commodity contracts; $4.0 million was recorded in cost of goods sold and $1.6 million was recorded in selling, delivery and administrative (“SD&A”) expenses. In the first quarter of 2008, we recorded $0.1 million of unrealized gains in cost of goods sold in the U.S. related to commodity contracts.

RESULTS OF OPERATIONS
2009 FIRST QUARTER COMPARED WITH 2008 FIRST QUARTER

The following is a discussion of our results of operations for the first quarter of 2009 compared to the first quarter of 2008.

Volume

Sales volume (decline) growth for the first quarter of 2009 and 2008 was as follows:

		2009				2008
U.S.		(1.2%)				(1.0%)
CEE		(12.2%)				61.8%
Caribbean		(14.0%)				4.8%
Worldwide		(5.2%)				12.7%

In the first quarter of 2009, worldwide volume declined 5.2 percent as global economic conditions and the Easter holiday shift negatively impacted our business.

Volume in the U.S. declined 1.2 percent in the first quarter of 2009 compared to the first quarter of 2008 due to the shift of a portion of the Easter holiday season to the second quarter of 2009. Despite the holiday impact, carbonated soft drink volume grew modestly, led by trademark Mountain Dew and the addition of Crush. Non-carbonated soft drink volume declined 7 percent, as declines in lower-margin Aquafina take-home package continued, partially offset by the new Lipton jug package innovation. Single-serve volume declined 1 percent due to softness in the foodservice channel, partially offset by growth across all retail channels.

Volume in CEE declined 12.2 percent in the first quarter of 2009 compared to the first quarter of 2008, reflecting difficult economic conditions as well as the lapping of double digit growth in the prior year first quarter. Favorable volume trends continued in Poland during the first quarter of 2009.

Volume in the Caribbean declined 14.0 percent in the first quarter of 2009 compared to the same period last year, which was driven mainly by a weaker economy in Puerto Rico.

Net sales and net pricing statistics for the first quarter of 2009 and 2008 were as follows (dollar amounts in millions):

Net Sales		2009				2008				Change
U.S.			$      826.6				$      780.8			5.9%
CEE			182.8				263.0			(30.5%)
Caribbean			48.1				54.9			(12.4%)
Worldwide			$   1,057.5				$   1,098.7			(3.7%)

		2009 compared to 2008
Net Sales Change		U.S.				CEE				Caribbean				Worldwide
Volume impact*		(1.0%)				(11.3%)				(12.0%)				(4.6%)
Net price per case, excluding impact of currency translation		6.0%				7.4%				5.7%				7.0%
Currency translation		--				(24.9%)				(4.9%)				(6.2%)
Non-core		0.9%				(1.7%)				(1.2%)				0.1%
Change in net sales		5.9%				(30.5%)				(12.4%)				(3.7%)

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

Net Pricing Growth (Decline)**		2009				2008
U.S.		6.0%				4.3%
CEE		(20.9%)				17.3%
Caribbean		--				1.3%
Worldwide		0.4%				3.6%