UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

Commission File Number 001-15019

PEPSIAMERICAS, INC.
(Exact name of registrant as specified in its charter)

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

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

        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, and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

        Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. Large Accelerated Filer ý Accelerated Filer o Non-Accelerated Filer o

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

        As of July 2, 2005, the aggregate market value of the registrant's common stock held by non-affiliates (assuming for the sole purpose of this calculation, that all directors and officers of the registrant are "affiliates") was $1,718.2 million (based on the closing sale price of the registrant's common stock as reported on the New York Stock Exchange). The number of shares of common stock outstanding at that date was 136,710,860 shares.

        The number of shares of common stock outstanding as of February 24, 2006 was 132,582,208.

DOCUMENTS INCORPORATED BY REFERENCE

        Certain information required by Part III of this document is incorporated by reference to specified portions of the registrant's definitive proxy statement for the annual meeting of shareholders to be held April 27, 2006.

PEPSIAMERICAS, INC.

FORM 10-K ANNUAL REPORT
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005

TABLE OF CONTENTS

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Part I

Item 1. Business.

General

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

We sell a variety of brands that we bottle under licenses from PepsiCo, Inc. ("PepsiCo") or PepsiCo joint ventures, which accounted for approximately 91 percent of our total volume in fiscal year 2005. We account for approximately 19 percent of all Pepsi-Cola beverage products sold in the U.S. In some territories, we manufacture, package, sell and distribute products under brands licensed by companies other than PepsiCo, and in some territories we distribute our own brands, such as the Toma brands in Central Europe (see "Products and Packaging").

Our distribution channels for the retail sale of our products include supermarkets, supercenters, club stores, mass merchandisers, convenience stores, gas stations, small grocery stores, dollar stores and drug stores. We also distribute our products through various other channels, including restaurants and cafeterias, vending machines, and other formats that provide for immediate consumption of our products. Our largest distribution channels are supermarkets and supercenters, and our fastest growing channels in fiscal year 2005 were club stores, mass merchandisers and dollar stores.

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

In January 2005, we completed the acquisition of Central Investment Corporation ("CIC"), the seventh largest Pepsi bottler in the U.S., for a purchase price of $352.4 million. CIC had bottling operations in southeast Florida and central Ohio. This is our largest acquisition since the merger with the former PepsiAmericas.

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

Business Segments

See "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 7 and Note 19 to the Consolidated Financial Statements for additional information regarding business and operating results of our geographic segments.

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Relationship with PepsiCo

PepsiCo beneficially owned approximately 43 percent of PepsiAmericas' outstanding common stock as of fiscal year end 2005.

While we manage all phases of our operations, including pricing of our products, PepsiAmericas and PepsiCo exchange production, marketing and distribution information, benefiting both companies' respective efforts to lower costs, improve productivity and increase product sales. We have a significant ongoing relationship with PepsiCo and have entered into a number of significant transactions and agreements with PepsiCo. We expect to enter into additional transactions and agreements with PepsiCo in the future.

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

Other significant transactions and agreements with PepsiCo include arrangements for marketing, promotional and advertising support; manufacturing services related to PepsiCo's national account customers; and procurement of raw materials (see "Related Party Transactions" in Item 7 and Note 20 to the Consolidated Financial Statements for further discussion).

Products and Packaging

Our portfolio of beverage products includes some of the best-recognized trademarks in the world. Our three largest brands in terms of volume are Pepsi, Diet Pepsi and Mountain Dew. While the majority of our volume is derived from brands licensed from PepsiCo and PepsiCo joint ventures, we also sell and distribute brands licensed from others, as well as some of our own brands. Our principal beverage brands are listed below:

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     * Brands owned by PepsiCo in the Caribbean and owned by us outside the Caribbean.

   ** Brands owned by Cadbury Schweppes in Puerto Rico and owned by PepsiCo elsewhere in the Caribbean.

Our beverages are available in different package types, including but not limited to, 1.5-liter bottles, 2-liter bottles, and 2.5-liter bottles; multi-pack and single serve offerings of half-liter, 20-ounce, 24-ounce and 1-liter bottles; and multi-packs of 6, 12, 18 and 24 12-ounce cans, as well as 8-ounce cans. Syrup is also sold in 3 and 5 gallon bag-in-box packages for fountain use.

In addition to the above brands, we distribute snack food products in Trinidad and Tobago, the Czech Republic, Puerto Rico, and Hungary pursuant to a joint venture agreement with Frito-Lay, Inc., a subsidiary of PepsiCo. Beginning in fiscal year 2005, we began distribution of Beck's brand beer in Poland through our partnership with InBev, a leading global brewer.

Territories

In the U.S., we serve a significant portion of a 19 state region, primarily in the Midwest, which includes our expanded reach into the high-growth Florida market with the strategic acquisition of CIC. Outside the U.S., we serve Central European and Caribbean markets, including Poland, Hungary, the Czech Republic, Republic of Slovakia, Puerto Rico,

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Jamaica, Barbados, the Bahamas, and Trinidad and Tobago. We serve areas with a total population of approximately 122 million people. In fiscal year 2005, we derived approximately 85 percent of our net sales from U.S. operations and approximately 15 percent of our net sales from non-U.S. operations (see Note 19 to the Consolidated Financial Statements for further discussion). In fiscal year 2005, we expanded our geographic footprint into Romania and Moldova with our 49 percent investment in Quadrant-Amroq Bottling Company Limited ("QABCL").

Sales, Marketing and Distribution

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

Package mix is an important consideration in the development of our marketing plans. Although some packages are more expensive to produce, in certain channels those packages may have higher average selling prices. For example, a packaged product that is sold cold for immediate consumption generally has better margins than a product sold to take home. This cold drink channel includes vending machines and coolers. The full service vending channel has the highest gross margin of any distribution channel, because it eliminates the middleman and enables us to establish the retail price. We own a majority of the vending machines used to dispense our products. We refurbish a majority of our cold drink equipment in our refurbishment centers in the U.S. and Puerto Rico.

In the U.S., we distribute directly to a majority of customers in our licensed territories through a direct-to-store distribution system. Our sales force is key to our selling efforts as it continually interacts with our customers to promote and sell our products. During fiscal year 2004, we substantially completed our conversion to Next Generation, a pre-sell system that allows account sales managers to call accounts in advance to determine how much product and promotional material to deliver. During the first half of fiscal year 2006, we expect to migrate the remaining former PepsiAmericas and CIC locations to our Next Generation selling platform, thus achieving one sales platform for all U.S. locations.

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

We operate a call center, Pepsi Connect, in Fargo, North Dakota, which enables us to provide the level of service our customers require in a manner that is cost effective.

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

Franchise Agreements

We conduct our business primarily under agreements with PepsiCo. These agreements with PepsiCo give us the exclusive rights to produce, market and distribute Pepsi-Cola products in authorized containers and to use the related trade names and trademarks in the specified territories. These agreements require us, among other things, to purchase our concentrate for such cola beverages solely from PepsiCo, at prices established by PepsiCo, and to diligently promote the sale and distribution of Pepsi brand products.

We also have entered into bottling and distribution agreements for non-cola products in the U.S., and international bottling agreements for countries outside the U.S. Our Pepsi franchise agreements have perpetual terms, subject to termination only upon failure to comply with the conditions of the agreement. We also have similar arrangements with other companies whose brands we produce and distribute.

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Set forth below is a summary of the significant PepsiCo franchise agreements to which we are a party.

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

Under the Bottling Agreement we are obligated to:

(1)

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

(2)

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

(3)

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

(4)

vigorously advance the sale of the beverages throughout the territories;

(5)

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

(6)

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

The Bottling Agreement requires that we meet with PepsiCo on an annual basis to discuss the business plan for the following three years. At these meetings, we are obligated to present the plans necessary to perform the duties required under the Bottling Agreement. These plans include marketing, management, advertising and financial plans. Subsequently, on a quarterly basis, we are required to report on the status of the implementation of the approved plans. If we carry out our annual plan in all material respects, we will be deemed to have satisfied our obligations according to the Bottling Agreement.

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

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

(1)

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

(2)

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

(3)

any disposition of any voting securities of one of our bottling subsidiaries or substantially all of our bottling assets without PepsiCo's consent;

(4)

we do not make timely payments for concentrate purchases;

(5)

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

(6)

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

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

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

The Syrup Agreement contains provisions that are similar to those contained in the Bottling Agreement with respect to pricing, territorial restrictions with respect to local customers and national customers electing direct-to-store delivery only, planning, quality control, transfer restrictions and related matters. The Syrup Agreement, which we entered into in November 2000, had an initial term of five years and was automatically renewed for an additional five-year period in November 2005. No new terms or conditions were imposed as a condition of renewal. The Syrup Agreement is automatically renewable for additional five-year periods unless PepsiCo terminates it for cause. PepsiCo has the right to terminate the Syrup Agreement without cause at any time during a renewal term upon twenty-four months notice. If PepsiCo terminates the Syrup Agreement without cause, PepsiCo is required to pay us the fair market value of our rights thereunder. The Syrup Agreement will terminate if PepsiCo terminates the Bottling Agreement.

Advertising

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

Raw Materials and Manufacturing

Expenditures for concentrate and packaging constitute our largest individual raw material costs. We buy various soft drink concentrates from PepsiCo and other soft drink companies and mix them with other ingredients in our plants, including carbon dioxide and sweeteners. Artificial sweeteners are included in the concentrates we purchase for diet soft drinks. The product is then bottled in a variety of containers ranging from 8-ounce cans to 2-liter plastic bottles to various glass packages, depending on market requirements.

In addition to concentrates, we purchase sweeteners, glass and plastic bottles, cans, closures, syrup containers, other packaging materials and carbon dioxide. We purchase all raw materials and supplies, other than concentrates, from multiple suppliers. PepsiCo acts as our agent for the purchase of such raw materials (see "Related Party Transactions" in Item 7 and Note 20 to the Consolidated Financial Statements for further discussion of PepsiCo's procurement services).

A portion of our contractual cost of cans, plastic bottles and fructose is subject to price fluctuations based on commodity price changes in aluminum, resin and corn, respectively. We use derivative financial instruments to hedge the price risk associated with anticipated purchases of aluminum.

The inability of suppliers to deliver concentrates or other products to us could adversely affect operating results. None of the raw materials or supplies in use is currently in short supply, although factors outside of our control could adversely impact the future availability of these supplies. During the second half of fiscal year 2005, we experienced a shortage of polyethylene terephthalate ("PET") bottles in the U.S. that adversely impacted our volume performance.

Seasonality

Sales of our products are seasonal, with the second and third quarters generating higher sales volumes than the first and fourth quarters. Approximately 54 percent of our sales volume in fiscal year 2005 was generated during the second and third quarters. Sales volumes in our Central Europe operations tend to be more sensitive to weather conditions than our U.S. and Caribbean operations.

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Competition

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

Employees

We employed approximately 16,000 people worldwide as of fiscal year end 2005. This included approximately 12,200 employees in our U.S. operations and approximately 3,800 employees in our non-U.S. operations. Employment levels are subject to seasonal variations. We are a party to collective bargaining agreements covering approximately 5,600 employees. Eleven agreements covering approximately 700 employees will be renegotiated in 2006. We regard our employee relations as generally satisfactory.

Government Regulation

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

In Jamaica, we are subject to the regulatory oversight of the National Resources Conservation Authority ("NRCA"). Following discussions with the NRCA about an effluent treatment plan, we have decided to construct a wastewater treatment facility in partnership with another company. Operation of the facility will be governed by a shared services agreement. Construction of the facility should be complete by the first quarter of 2007. Construction and operating costs for the facility are not anticipated to be material.

Environmental Matters

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

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

Discontinued Operations — Remediation.    Under the agreement pursuant to which we sold our subsidiaries, Abex Corporation and Pneumo Abex Corporation (collectively, "Pneumo Abex"), in 1988 and a subsequent settlement agreement entered into in September 1991, we have assumed indemnification obligations for certain environmental liabilities of Pneumo Abex, after any insurance recoveries. Pneumo Abex has been and is subject to a number of environmental cleanup proceedings, including proceedings under the Comprehensive Environmental Response,

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Compensation and Liability Act of 1980 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. The insurance carriers required that we employ an outside consultant to perform 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 consultant's review was completed in fiscal year 2001 and was updated in the fourth quarter of 2005. We have recorded our best estimate of our probable liability under those indemnification obligations using this consultant's review and the assistance of other professionals.

At the end of fiscal year 2005, we had $87.5 million accrued to cover potential indemnification obligations, compared to $106.8 million recorded at the end of fiscal year 2004. This indemnification obligation includes costs associated with approximately 20 sites in various stages of remediation. The most significant remaining indemnification obligation was associated with the Willits site, as discussed below, while no other sites had significant estimated remaining costs associated with them. Of the total amount accrued, $30.5 million was classified as current liabilities at the end of fiscal year 2005 and $20.0 million at the end of fiscal year 2004. 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 and toxic tort claims), administrative expenses, and the expenses of on-going evaluations and litigation. We expect a significant portion of the accrued liabilities will be disbursed during the next 10 years. All estimated costs for the known claims arising from sites discussed below are included in the $87.5 million accrued as of the end of fiscal year 2005.

We continue to have environmental exposure related to the remedial action required at a facility in Portsmouth, Virginia (consisting principally of soil treatment and removal) for which we have an indemnity obligation to Pneumo Abex. This is a Superfund site, which the United States Environmental Protection Agency required Pneumo Abex to remediate. Through fiscal year 2005, we made indemnity payments of approximately $41.4 million (excluding $3.1 million of recoveries from other responsible parties) for remediation of the Portsmouth site. We have accrued and expect to incur an estimated $3.9 million to complete the remediation and for administration and legal defense costs over the next several years.

We also have 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. In August 1997, a final consent decree was issued in the case of the People of the State of California and the City of Willits, California v. Remco Hydraulics, Inc. This final consent decree was amended in December 2000 and established a trust whose officers are obligated to investigate and clean up this site. We are currently funding the investigation and interim remediation costs on a year-to-year basis according to the final consent decree. Through fiscal year 2005, we made indemnity payments of approximately $37.5 million for investigation and remediation at the Willits site (consisting principally of soil removal, groundwater and surface/water treatment). We have accrued $26.6 million for future remediation and trust administration costs, with the majority of this amount to be spent over the next several years.

Through the end of fiscal year 2004, we had accrued approximately $18.2 million related to several investigations regarding on-site and off-site disposal of wastes generated at a facility in Mahwah, New Jersey. In fiscal year 2005, a significant portion of our liability was settled and remaining obligations are not deemed to be significant.

Although we have certain indemnification obligations for environmental liabilities at a number of sites other than those sites described above, including Superfund sites, it is not anticipated that additional expense at any specific site will have a material effect on us. In the case of some of the 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

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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 have been 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 $32.3 million has been eroded, leaving a remaining self-insured retention of $81.7 million at the end of fiscal year 2005. The estimated range of aggregate exposure related only to the remediation costs of such environmental liabilities is approximately $40 million to $60 million. We had accrued $44.1 million at the end of fiscal year 2005 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 $44.1 million and thus reduces our future cash obligations. The Finite Funding amounts recorded were $19.6 million and $21.9 million at the end of fiscal years 2005 and 2004, respectively, and are recorded in "Other assets," net of $5.4 million and $1.5 million, respectively, recorded in "Other current assets."

On May 31, 2005, Cooper Industries, LLC filed and later served us with a Cook County, Illinois lawsuit against us, Pneumo Abex, LLC, and the Trustee of the Trust, captioned Cooper Industries, LLC v. PepsiAmericas, Inc., et al., Case No. 05 CH 09214 (Cook Cty. Cir. Ct.). The claims involve the Trust and insurance policy described above. See "Legal Proceedings" in Item 3 for further discussion.

In addition, we had recorded other receivables of $11.4 million at the end of fiscal year 2005 and $12.3 million at the end of fiscal year 2004 for future probable amounts to be received from insurance companies and other responsible parties. These amounts were recorded in "Other assets" in the Consolidated Balance Sheets as of the end of each respective period. Of this total, no portion of the receivable was reflected as current as of fiscal year end 2005 and 2004.

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.

In fiscal year 2004, we noted that three mass-filed lawsuits accounted for thousands of claims for which Pneumo Abex claimed indemnification. During the last quarter of fiscal year 2005, these and other related claims were resolved for an amount we viewed as reasonable given all of the circumstances and consistent with our prior judgments as to valuation. We have received year end 2005 claim statistics from law firms and Pneumo Abex which reflect the resolution of those claims and the remaining cases for which Pneumo Abex claims indemnification from PepsiAmericas. After giving effect to the noted resolution of prior mass-filed claims, at the end of fiscal year 2005, there are less than 7,500 claims for which indemnification is claimed. Of these claims, approximately 4,900 are filed in federal court and are subject to orders issued by the Multi-District Litigation panel, which effectively stay all federal claims, subject to specific requests to activate a particular claim or a discrete group of claims. The remaining cases are in state court and some are in "pleural registries" or other similar classifications that cause a case not to be allowed to go to trial unless there is a specific showing as to a particular plaintiff. Over 50 percent of the state court claims were filed prior to or in 1998. Prior to 1980, sales ceased for the asbestos-containing product claimed to have generated the largest subset of the open cases, and, therefore, we expect a decreasing rate of individual claims for that subset of cases. Our employees and agents manage or monitor the defense of the underlying claims that are or may be indemnifiable by us.

11

At the end of fiscal year 2005, we had accrued $7.0 million related to product liability. These accruals primarily relate to probable asbestos claim settlements and legal defense costs. We also have additional amounts accrued for legal and other costs associated with obtaining insurance recoveries for previously resolved and currently open claims and their related costs. These amounts are included in the total liabilities of $87.5 million accrued at the end of fiscal year 2005. In addition to the known and probable asbestos claims, we may be subject to additional asbestos claims that are possible for which no reserve has been established at the end of fiscal year 2005. These additional reasonably possible claims are primarily asbestos related and the aggregate exposure related to these possible claims is estimated to be in the range of $6 million to $17 million. These amounts are undiscounted and do not reflect any insurance recoveries that we will pursue from insurers for these claims.

In addition, two lawsuits have been filed in California, which name several defendants including certain of our prior subsidiaries. The lawsuits allege that our former subsidiaries and we are liable for personal injury and/or property damage resulting from environmental contamination at the Willits facility. There are approximately 250 personal injury plaintiffs in the lawsuits seeking an unspecified amount of damages, punitive damages, injunctive relief and medical monitoring damages. We are actively defending the lawsuits. At this time, we do not believe these lawsuits are material to our business or financial condition.

We have other indemnification obligations related to product liability matters. In our opinion, based on the information currently available and the amounts already accrued, these claims should not have a material effect on our financial condition.

We also participate in and monitor insurance-recovery efforts for the claims against Pneumo Abex. Recoveries from insurers vary year by year because certain insurance policies exhaust and other insurance policies become responsive. Recoveries also vary due to delays in litigation, limits on payments in particular periods, and because insurers sometimes seek to avoid their obligations based on positions that we believe are improper. We, assisted by our consultants, monitor the financial ratings of insurers that issued responsive coverage and the claims submitted by Pneumo Abex.

Executive Officers of the Registrant

Our executive officers and their ages as of March 1, 2006 were as follows:

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

Mr. Pohlad became Chief Executive Officer of PepsiAmericas in November 2000, was named Vice Chairman in January 2001 and became Chairman in January 2002. Mr. Pohlad served as Chairman, Chief Executive Officer and director of the former PepsiAmericas prior to the merger with Whitman Corporation, a position he had held since 1998. From 1987 to present, Mr. Pohlad has also served as President of Pohlad Companies. Mr. Pohlad is also a director of MAIR Holdings, Inc.

Mr. Keiser was named President and Chief Operating Officer in January 2002 with responsibilities for the global operations of PepsiAmericas. From November 2000 to January 2002, Mr. Keiser had served as President and Chief Operating Officer, U.S. of PepsiAmericas. Mr. Keiser served as President and Chief Operating Officer of the former PepsiAmericas prior to the merger with Whitman Corporation, a position he held since 1998. Mr. Keiser was President and Chief Operating Officer of Delta Beverage Group, Inc. ("Delta"), a wholly-owned subsidiary of the former PepsiAmericas, from 1990 to November 2000. Mr. Keiser is also a director of C.H. Robinson Worldwide, Inc.

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Mr. Ware was named Executive Vice President and Chief Financial Officer in March 2005. From January 2003 to March 2005, Mr. Ware had served as Senior Vice President, Planning and Corporate Development. Prior to this role, he served as Vice President Finance for the East Group of PepsiAmericas since 1999. He joined PepsiAmericas as Director of Finance for PepsiCo's Heartland Business Unit, which was acquired by PepsiAmericas from PepsiCo in 1999. Prior to this position, he had served in various strategic planning and corporate development roles within PepsiCo since 1994.

Mr. Durkin was named Executive Vice President of U.S. Operations in March 2005. Prior to this role, Mr. Durkin served as Chief Financial Officer of PepsiAmericas since 2000, and as Senior Vice President, East Group, for a subsidiary of Whitman Corporation, from March 1999 to November 2000. Prior to such position, Mr. Durkin was Vice President, Customer Development of PepsiCo's Heartland Business Unit, which was acquired by PepsiAmericas from PepsiCo in 1999. Mr. Durkin also serves on the Board of Directors of The Schwan Food Company, Inc.

Mr. Rogers was named Executive Vice President, International in September 2004. Prior to this appointment, he served as Executive Vice President/General Manager of Central Europe since August 2000. Prior to joining PepsiAmericas, he was Vice President, Sales and Marketing, Southern California for The Pepsi Bottling Group, Inc. from July 1999 to August 2000.

Mr. Hawaux was named Senior Vice President, Worldwide Strategy and Corporate Development in May 2005. Prior to joining PepsiAmericas this year, Mr. Hawaux was Vice President—Finance and CFO for Pepsi-Cola N.A. since 2000. From 1995 to 2000, Mr. Hawaux served as Vice President of Finance for the China Business Unit of Pepsi-Cola International.

Mr. Hulbert was named Senior Vice President, Worldwide Supply Chain of PepsiAmericas in December 2002. From November 2000 through December 2002, he served as Senior Vice President, Operations of PepsiAmericas. Prior to the merger with Whitman Corporation, Mr. Hulbert held the position of Director of Operations of Delta.

Ms. Sample was named Senior Vice President, Human Resources in May 2001. Ms. Sample joined Pepsi-Cola North America in 1988 as a Human Resources Manager in the field operations. During her 10 years with PepsiCo, she held numerous human resource positions. In 1997, she joined Citibank as Vice President of Leadership, Staffing and Development.

Mr. Gorman has been with PepsiAmericas since 1984 and has served in various finance and tax positions. Mr. Gorman became Vice President and Controller in May 2003. Prior to this role, Mr. Gorman served as Vice President, Planning and Reporting since August 1999.

Mr. Stark joined PepsiAmericas in 1993, working in compensation and benefits. Since 1996, he has served in various treasury positions, being named Assistant Treasurer in August 1998. In July 2002, Mr. Stark was named Vice President and Treasurer.

Item 1A. Risk Factors.

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

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

We face intense competition and are impacted by both customer and competitor consolidation. Our response to marketplace competition and retailer consolidations may result in lower than expected net pricing of our products. Our efforts to improve pricing may result in lower than expected volumes. Changes in net pricing and volume could have an adverse effect on our business, results of operations and financial condition.

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Health and wellness trends have decreased demand for sugared carbonated soft drinks. In response to changes in consumers' preferences, we have increased our emphasis on volume in non-carbonated beverages, including Aquafina, Tropicana juice drinks, Lipton Iced Tea, energy drinks, and diet carbonated beverages. Our business could be adversely impacted by our inability to offset the decline in sales of sugared carbonated soft drinks with sales of diet soft drinks and non-carbonated beverages. In addition, our business could be adversely affected by customer trends, such as consumer health concerns about obesity, product attributes and ingredients.

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

An increase in the price of raw materials or a decrease in the availability of raw materials, including aluminum, resin, sweeteners and fuel, could adversely affect our financial condition.

Unanticipated increases in ingredients, packaging materials and other raw material costs could adversely impact our earnings and financial condition if we are unable to pass along these higher costs to our customers. The inability of suppliers to deliver concentrate, raw materials, other ingredients and products to us could also adversely affect operating results.

Energy prices, including the price of natural gas, gasoline and diesel fuel, are cost drivers for our business. Sustained high energy or commodity prices could negatively impact our operating results and demand for our products.

The successful operation of our business depends upon our relationship with PepsiCo.

We operate under various bottling agreements with PepsiCo that allow us to manufacture, package, distribute and sell carbonated and non-carbonated beverages. Our inability to comply with the terms and conditions established in these agreements could result in termination of bottling agreements which would have a material adverse impact on our short-term and long-term business.

Bottler incentives cover a variety of initiatives to support volume and market share growth. The level of support is negotiated regularly and can be increased or decreased at the discretion of PepsiCo. PepsiCo is under no obligation to continue past levels of support in the future. Material changes in expected levels of bottler incentive payments and other support arrangements could adversely affect future results of operations.

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

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

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

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

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

We cannot predict the outcome of legal proceedings and an adverse determination could negatively impact our financial results.

The nature of operations of previously owned subsidiaries exposes us to the potential for various claims and litigation related to, among other things, personal injury and asbestos product liability claims. The nature of assets we currently

14

own and operate exposes us to the potential for various claims and litigation related to, among other things, personal injury and property damage. The resolution of outstanding claims and assessments may be materially different than what we have estimated.

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

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

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

Approximately 35 percent of our employees are covered by collective bargaining agreements. These agreements expire at various dates, including some in fiscal year 2006. Our inability to successfully renegotiate these agreements could cause work stoppages and interruptions, which may adversely impact our operating results.

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

Our non-U.S. operations are exposed to foreign exchange rate fluctuations as the financial results of certain locations are translated from the local currency into U.S. dollars upon consolidation. As exchange rates vary, revenue and other operating results, when translated, may differ materially from expectations.

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

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

A change in the financial stability of our third-party distributors in Central Europe could disrupt our international business.

In addition to our direct-to-store delivery system, we also utilize an alternative sales and distribution strategy in which we use third-party distributors in certain locations to reduce delivery costs and expand our points of distribution. Adverse changes to the financial condition of third-party distributors may inhibit our ability to distribute products and negatively impact volume and operating results.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties.

Our U.S. manufacturing facilities include ten owned and one leased combination bottling/canning plants, four owned bottling plants and two owned canning plants with a total manufacturing area of approximately 1.4 million square feet. Non-U.S. manufacturing facilities include two owned plants in Poland, two owned plants in Hungary, two owned plants in the Czech Republic, one owned plant in Puerto Rico, one owned plant in Jamaica, one owned plant in the Bahamas and one owned plant in Trinidad. In addition, we operate 127 distribution facilities in the U.S., 32 distribution facilities in Central Europe and 8 distribution facilities in the Caribbean. Sixty-five of the distribution facilities are leased and less than 7 percent of our U.S. production is from our one leased domestic plant. We believe all facilities are adequately equipped and maintained and capacity is sufficient for our current needs. We currently operate a fleet of approximately 6,100 vehicles in the U.S. and approximately 1,800 vehicles internationally to service and support our distribution system.

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In addition, we own various industrial and commercial real estate properties in the U.S. We also own a leasing company, which leases approximately 1,900 railcars, comprised of locomotives, flatcars and hopper cars, to the Illinois Central Railroad Company.

Item 3. Legal Proceedings.

From approximately 1945 to 1995, various entities owned and operated a facility that manufactured hydraulic equipment in Willits, California. The plant site is contaminated by various chemicals and metals. On August 23, 1999, an action entitled Donna M. Avila, et al. v. Willits Environmental Remediation Trust, Remco Hydraulics, Inc., M-C Industries, Inc., Pneumo Abex Corporation and Whitman Corporation, Case No. C99-3941 CAL, was filed in U.S. District Court for the Northern District of California. On January 16, 2001, a second lawsuit, entitled Pamela Jo Alrich, et al. v. Willits Environmental Remediation Trust, et al., Case No. C 01 0266 SI, against essentially the same defendants was filed in the same court. In the two lawsuits, individual plaintiffs claim that PepsiAmericas is liable for personal injury and/or property damage resulting from environmental contamination at the facility. As of fiscal year end 2005, there were approximately 250 personal injury plaintiffs in the lawsuits seeking an unspecified amount of damages, punitive damages, injunctive relief and medical monitoring damages from PepsiAmericas. We are actively defending the lawsuits. At this time, we do not believe these lawsuits are material to the business or financial condition of PepsiAmericas.

On May 31, 2005, Cooper Industries, LLC ("Cooper") filed and later served us with a Cook County, Illinois lawsuit against us, Pneumo Abex, LLC, and the Trustee of the Trust (the "Trustee"), captioned Cooper Industries, LLC v. PepsiAmericas, Inc., et al., Case No. 05 CH 09214 (Cook Cty. Cir. Ct.). The claims involve the Trust and insurance policy described in "Environmental Matters" in Item 1. Cooper asserts that it was entitled to access $34 million that previously was in the Trust and that was spent to purchase the insurance policy. Cooper claims that Trust funds should not have been distributed for environmental expenses and instead claims that the monies should have been distributed for underlying Pneumo Abex asbestos claims indemnified by Cooper. Cooper complains that we deprived it of access to money in the Trust because of the Trustee's decision to use money in the Trust to purchase the insurance policy. Cooper's lawsuit also named Pneumo Abex as a defendant. We have not filed an answer to the complaint, but we will deny and vigorously contest the claim. We have joined a motion by the Trustee to dismiss the lawsuit on the grounds that Cooper lacks standing to pursue its claims, because it is not a beneficiary under the Trust. Pneumo Abex, LLC, the corporate successor to our prior subsidiary, has previously filed papers that deny the claim. Pneumo Abex, LLC also has filed papers and otherwise asserted that Cooper is not a beneficiary of the Trust and that Cooper's claims lack merit.

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

See also "Environmental Matters" in Item 1 and Note 18 to the Consolidated Financial Statements for further discussion.

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

Not applicable.

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Part II

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

The common stock of PepsiAmericas is listed and traded on the New York Stock Exchange and the Pacific Stock Exchange under the stock trading symbol "PAS." The table below sets forth the reported high and low sales prices as reported for New York Stock Exchange Composite Transactions for our common stock and indicates our dividends declared for each quarterly period for the fiscal years 2005 and 2004.

Beginning in fiscal year 2004, our Board of Directors instituted a practice of reviewing dividend declarations on a quarterly basis. On February 24, 2006, we announced that our Board of Directors declared a first quarter 2006 dividend of $0.125 per share on PepsiAmericas common stock. The dividend is payable April 3, 2006 to shareholders of record on March 15, 2006. There were 11,047 shareholders of record as of February 24, 2006.

Our share repurchase program activity during the quarter ended December 31, 2005 was as follows:

¹

Represents shares purchased in open-market transactions pursuant to our publicly announced repurchase program.

²

Includes commissions of $0.02 per share.

³

On July 21, 2005, we announced that our Board of Directors authorized the repurchase of 20 million additional shares under a previously authorized repurchase program. This repurchase authorization does not have a scheduled expiration date.

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

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Item 6. Selected Financial Data.

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

¹

Amounts presented prior to fiscal year 2003 are presented as reported and are not adjusted for the pro forma impact of the prospective adoption in the first quarter of 2003 of Emerging Issues Task Force ("EITF") Issue No. 02-16, "Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor."

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The following were recorded during the periods presented:

In fiscal year 2005:

•

We recorded a gain 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 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 benefit to net income related to the reversal of valuation allowances for certain net operating loss carryforwards offset by tax contingency requirements. This benefit was comprised of interest expense of $0.6 million ($0.4 million after tax) for the tax contingency requirements recorded in "Interest expense, net" and $1.5 million of tax benefit recorded in "Income taxes."



•

We recorded an expense of $6.1 million related to lease exit costs. The lease exit costs are the result of the relocation of our corporate offices in the Chicago area.



•

We recorded an expense of $5.6 million related to the loss on the 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 special charges in Central Europe of $2.5 million. The special charges related to a reduction in the workforce and the consolidation of certain production facilities as we continue to rationalize our cost structure. These special charges were primarily for severance costs and related benefits and asset write-downs.

In fiscal year 2004:

•

In Central Europe, 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 Central Europe substantially completed the plans to modify the distribution strategy in all markets.



•

We recorded an additional 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.



•

We recorded a net gain of $2.7 million relating to a state income tax refund. This gain is comprised of $0.7 million for consulting expenses (recorded in "Selling, delivery and administrative expenses"), $0.8 million of interest income (recorded in "Interest expense, net") and $2.6 million of income tax benefit, net (recorded in "Income taxes").



•

We recorded a $3.5 million benefit to net income relating to the reversal of certain tax liabilities due to the settlement of income tax audits through the 2002 tax year. This benefit is comprised of interest income of $1.1 million ($0.7 million after tax) recorded in "Interest expense, net" and $2.8 million of tax benefit recorded in "Income taxes."

In fiscal year 2003:

•

Our fiscal year ends on the Saturday closest to December 31 and resulted in an additional week, or fifty-three weeks, of operating results in fiscal year 2003 in our U.S. operations. PepsiAmericas' fiscal year end policy only impacts the U.S. operations. The Central European and Caribbean operations are based upon a calendar year end and, therefore, did not have an additional week of operating results in fiscal year 2003. All other fiscal years presented in the table of "Selected Financial Data" contain fifty-two weeks of operating results in the U.S. The 53^rd week contributed $33.9 million to net sales and $4.9 million to operating income in the U.S. in fiscal year 2003.



•

We recorded net special charges of $6.4 million. These charges consisted primarily of a $5.8 million charge related to the reduction in workforce in the U.S. and charges related to changes in the production, marketing and distribution strategies in our international operations. The U.S. special charges were primarily for severance costs and related benefits, including the acceleration of restricted stock awards. In addition, as a result of excess

19

severance costs identified, we recorded a reversal of $0.2 million related to the fiscal year 2003 charge in the U.S. We also recorded special charges of $0.8 million related to a change in the production and distribution strategy in Barbados, which consisted primarily of asset write-downs. In addition, we recorded additional special charges of $2.1 million related to the changes in the marketing and distribution strategy in Poland, the Czech Republic, and Republic of Slovakia, offset by a special charge reversal of $2.1 million related primarily to favorable outcomes with outstanding lease commitments and severance in Poland. The initial special charge was based on an estimate that no sublease income would offset our lease commitments.

•

In fiscal year 2003, the investors in our $150 million, face value 5.79 percent notes notified us that they would exercise their option to purchase and resell the notes pursuant to the remarketing agreement, unless we elected to redeem the notes. We exercised our option and elected to redeem the notes at fair value pursuant to the remarketing agreement. As a result, we recorded a loss on the extinguishment of debt of $8.8 million in "Interest expense, net."



•

We recorded an additional gain of $2.1 million on the previous sale of a parcel of land in downtown Chicago for the reversal of accruals related to the favorable resolution of certain contingencies. The gain is reflected in "Other (expense) income, net."



•

We favorably settled a tax refund case with the Internal Revenue Service that arose from the 1990 termination of our Employee Stock Ownership Plan ("ESOP"). The tax settlement consisted of $6.4 million of interest income and a tax benefit of $6.0 million recorded in "Income taxes." During fiscal year 2003, we recorded a net tax benefit of $7.7 million related primarily to the reversal of certain tax accruals, offset by additional tax liabilities recorded. Included in the net tax benefit of $7.7 million are tax benefits of $6.0 million from the favorable settlement of the ESOP case and a tax benefit of $6.0 million related mainly to the reversal of tax liabilities due to the settlement of various income tax audits through the 1999 tax year. These tax benefits were offset, in part, by net additional tax accruals of $4.3 million for contingent liabilities arising in fiscal year 2003.

In fiscal year 2002:

•

We recorded net special charges of $2.6 million. These charges included $5.7 million relating to changes in the distribution and marketing strategies in Poland, the Czech Republic and Republic of Slovakia. Also included in the charges was $0.2 million in additional severance costs in the U.S. relating to the fiscal 2000 special charge. We also identified and reversed $3.3 million in excess severance and related exit costs, including $2.2 million relating to the Hungary special charges recorded in fiscal 2001, and $1.1 million relating to previous special charges. These net special charges reduced the U.S. and Central Europe operating income by $0.2 million and $2.4 million, respectively.



•

We recorded a gain of $3.5 million related to the sale of a parcel of land in downtown Chicago, which is reflected in "Other (expense) income, net."



•

Loss from discontinued operations included a charge of $9.8 million ($6.0 million after tax) resulting from the purchase of new insurance policies concerning the environmental liabilities related to previously sold subsidiaries.

In fiscal year 2001:

•

We recorded special charges of $13.8 million that included $9.2 million for severance costs and other costs related to changing our marketing and distribution strategy in Hungary, as well as for the write-down of marketing equipment in the U.S. Also included was a $4.6 million charge related to organizational changes resulting from the merger with the former PepsiAmericas. This charge was principally composed of severance and related benefits. These charges reduced U.S. and Central Europe operating income by $6.3 million and $7.5 million, respectively.



•

We recorded a gain on pension curtailment of $8.9 million in connection with the integration of the former Whitman Corporation and former PepsiAmericas U.S. benefit plans.



•

Loss from discontinued operations included a charge of $111.0 million ($71.2 million after tax) for environmental liabilities related to previously sold subsidiaries.

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

Forward-Looking Statements

This Annual Report on Form 10-K contains certain forward-looking statements of expected future developments, as defined in the Private Securities Litigation Reform Act of 1995. The forward-looking statements in this Annual Report on Form 10-K refer 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; outcomes of environmental claims and litigation; availability of capital including changes in our debt ratings; labor and employee benefit costs; unfavorable interest rate and currency fluctuations; costs of legal proceedings; and general economic, business and political conditions in the countries and territories where we operate. See "Risk Factors" in Item 1A for additional information.

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

Executive Overview

What we do

We manufacture, distribute, and market a broad portfolio of beverage products in the U.S., Central Europe 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 Toma brands in Central Europe. We operate in a significant portion of a 19 state region in the U.S. In Central Europe, we serve Poland, Hungary, the Czech Republic, and Republic of Slovakia. In addition, we have an equity investment in QABCL, which gives us a market presence in Romania and Moldova. In the Caribbean, our territories include Puerto Rico, Jamaica, Barbados, the Bahamas, and Trinidad and Tobago.

Our key fiscal year 2005 financial results

•

Worldwide average net selling prices improved 3.9 percent in fiscal year 2005.



•

Worldwide volume increased 6.5 percent in fiscal year 2005, compared to the prior year.



•

Operating margins increased 40 basis points to 10.6 percent in fiscal year 2005.



•

We generated operating income of $393.4 million in fiscal year 2005, compared to $339.7 million in fiscal year 2004. This included a benefit of $16.6 million in fiscal year 2005 due to the proceeds from the high fructose corn syrup litigation settlement.



•

We generated cash from operating activities of $431.8 million in fiscal year 2005.



•

We reported diluted net income per share of $1.42 for the fiscal year 2005, compared to diluted net income per share of $1.28 in the prior year.

Our focus in fiscal year 2005

We managed our business to optimize shareholder value through our focus on the balance between volume and pricing, improved cost performance, strong execution in the marketplace, and enhanced utilization of our international infrastructure. The challenges and opportunities we faced in our geographic segments are summarized as follows:

In the U.S.    Despite the challenges set forth below, we grew operating income by $55.4 million to $387.7 million. In January 2005, we acquired CIC, our largest acquisition since the PepsiAmericas merger in 2000. CIC provides us access to a Florida market, which is a faster growing market than our existing U.S. markets, as well as additional territories that are contiguous to our existing operations in Ohio. The meaningful contribution of this acquisition and the strong

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performance of our non-carbonated category drove solid financial results. We continued to drive initiatives to expand our single-serve business that provides consumers the convenience of immediate consumption of our products. In fiscal year 2005, we continued our emphasis on the total liquid refreshment beverage category and not just carbonated soft drinks. We saw an opportunity for growth in the non-carbonated beverage category and introduced Aquafina FlavorSplash. We also focused on expanding our presence in the energy drink category, which includes products such as Adrenaline Rush, AMP and No Fear. Additionally, we experienced growth in our Lipton Iced Tea and ready-to-drink coffee products.

The most significant challenges we faced were volume declines in our carbonated soft drink category, raw material cost increases, a shortage of PET bottle supply and the impact of Hurricane Katrina. Price increases in raw materials such as aluminum, fuel and resin challenged our business throughout the year. The direct and indirect effects of Hurricane Katrina further impacted prices for fuel, energy and packaging costs, specifically resin. During the second half of the year, we experienced difficulties in procuring sufficient quantities of PET bottles that limited the volume growth in our Aquafina products. Changing consumer preferences have driven volume declines in brand Pepsi and brand Mountain Dew of 5.2 percent and 0.4 percent, respectively, and a shift in our total portfolio mix as U.S. consumers are moving to diet carbonated soft drinks and healthier, non-carbonated alternatives. Trademark Pepsi and trademark Mountain Dew comprised 72 percent of our sales volume, a decrease from 75 percent in fiscal year 2004.

On a constant territory basis, which refers to the results of operations excluding the acquisition of CIC, our volume growth in fiscal year 2005 was essentially flat. We were able to offset the effects of volume softness in the carbonated soft drink category and higher raw material costs through our pricing initiatives. For the third consecutive year, pricing drove our top-line growth. Volume growth in the non-carbonated beverage and sports drink/energy categories was offset by volume declines in our core trademarks.

Our international operations.    For the third consecutive year, we achieved profitability in our combined international operations due to our focus on pricing, managing costs, and leveraging our infrastructure. In fiscal year 2005, we generated a total of $5.7 million in operating income in Central Europe and the Caribbean, which included the favorable impact of foreign currency translation offset by the impact of special charges of $2.5 million. This compares to operating income in our international operations of $7.4 million in fiscal year 2004, which included special charges of $3.9 million.

In Central Europe, operating income declined $0.5 million due primarily to challenges we faced in Hungary. In this market, we were challenged by a competitive water market, pricing pressures in the carbonated soft drink category and changing trade and channel dynamics. Additionally, we experienced significantly higher raw material costs, including resin and sugar. While these challenges are present, we have implemented various initiatives to counteract these conditions across Central Europe. We leveraged our existing distribution systems by expanding into new product lines such as the introduction of Frito Lay snack foods in the Czech Republic in fiscal year 2004 and in Hungary in fiscal year 2005. We initiated a new relationship with InBev and began distributing Beck's brand beer in Poland in the middle of fiscal year 2005. We continued to cut costs through the further rationalization of our business, including the closure of two plants and other cost reduction programs. We sourced more products between the countries in order to reduce costs and take advantage of the reduction in trade restrictions made possible by our markets joining the European Union ("EU"). We successfully introduced new products such as Slice and Tropicana juice drinks. Lastly, we expanded our geographic footprint through our 49 percent investment in QABCL, the Pepsi bottler in Romania and Moldova.

In the Caribbean, we were challenged by the macroeconomic and political conditions that existed in Puerto Rico. Operating income declined $1.2 million to $4.2 million in fiscal year 2005 due to economic conditions that affected Puerto Rico, as well as the impact caused by the difficult hurricane season in Jamaica. In Puerto Rico, a country-wide labor strike impacted our supply of raw materials, which limited sales for a short period of time. In addition, we saw an economic slowdown in Puerto Rico as consumers became more wary of inflation. While the hurricanes in Jamaica did not cause any severe damage, flooding became an issue and affected net sales. Despite these challenges, the Caribbean continued to drive the initiatives that contributed to its strong performance in fiscal year 2004. Non-carbonated beverages and flavored beverages continued to contribute to volume growth. During fiscal year 2005, we continued to distribute Frito-Lay snack food products through retail channels in Trinidad and Tobago and through vending channels in Puerto Rico.

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Focusing on fiscal year 2006

Looking ahead to fiscal year 2006, we are focused on continuing to drive top-line growth and finding an appropriate balance between volume and price. Pricing, with a focus on both rate and mix, continues to be a driving factor in achieving our top-line growth. Our plans include increased emphasis on volume in the growth categories based on the continued shift in consumer demand and increased interest in products related to health and wellness, such as non-carbonated beverages, energy drinks, water, and the diet category. In addition, we will continue to focus on our single serve, immediate consumption business across all channels and products with a primary emphasis on the on-premise channel.

We will continue to focus on product-line extension and packaging innovation to drive consumer awareness. We expect volume to benefit from our marketing calendar and product line extensions that will provide exciting brand and package programs during the entire year. We are in the process of rolling out a reformulated Diet Mountain Dew and continue to expand our non-carbonated beverage offerings with new flavors of Lipton branded teas and Aquafina FlavorSplash Grape and the introduction of SoBe LifeWater. We also plan to introduce new Starbucks ready-to-drink coffee flavors and a new 0.5-liter multi-pack package for Tropicana and Lipton beverages in the first quarter of 2006. Lastly, we acquired Ardea Beverage Co. and its brand, airforce Nutrisoda, in January 2006 to further expand our alternative beverage category offerings.

In Central Europe and the Caribbean, we seek to continue our top-line growth through product expansion and the distribution of snack foods and beer. Additionally, we will evaluate our option to expand our investment in Romania.

In fiscal year 2006, we expect to achieve diluted income per share of $1.44 to $1.49, compared to fiscal year 2005 diluted income per share of $1.42. Net income growth in fiscal year 2005 benefited by $0.05 per diluted share due to the adjustments described in "Selected Financial Data" in Item 6. We expect worldwide volume to increase in the range of 2 to 3 percent, including growth of 1 to 2 percent in the U.S., and to improve average net selling price by 2.5 to 3.5 percent. We expect cost of goods sold per unit to increase approximately 3 percent, and selling, delivery and administrative ("SD&A") expenses to be higher by 4.5 to 5.5 percent compared to fiscal year 2005. Overall, we expect to generate operating income growth of 3 to 5 percent. This growth target is based on fiscal year 2005 operating income that excludes the impact of the fructose settlement, special charges and other unusual items.

Our success in achieving operating income growth and managing our working capital drove our operating cash flow of $431.8 million in fiscal year 2005. Our ability to generate significant operating cash flow makes several options available to us, including paying dividends to our shareholders, repurchasing our stock, reinvesting in our existing business and pursuing acquisitions with an appropriate economic return. We continue to examine the optimal uses of cash to maximize shareholder value.

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

The following discussion and analysis includes eight major categories: results of operations, liquidity and capital resources, contractual obligations, off-balance sheet arrangements, critical accounting policies, related party transactions, recently issued accounting pronouncements, and discussion of our market risks (which appears in Item 7A). The discussion and analysis of our financial condition and results of operations should be read in conjunction with our Consolidated Financial Statements and notes thereto included in this Annual Report on Form 10-K.

Results of Operations

In the discussions of our results of operations below, the number of cases sold is referred to as volume. Constant territory refers to the results of operations excluding acquisitions and is used only in the discussion of 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), as well as food service. Changes in net pricing include the impact of sales price (or rate) changes, as well as the impact of foreign currency translation and brand, package and geographic mix. Net pricing and reported volume amounts exclude contract, commissary, private label, concentrate, and vending (other than bottles and cans) revenue and volume. 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 beer and 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.

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Operating Results — 2005 compared with 2004

Items Impacting Comparability — Hurricane Katrina.    Our operations in the U.S. were impacted by the devastation created by Hurricane Katrina in September 2005. We incurred losses due to damaged marketing equipment, inventory write-offs, incremental freight costs incurred to source product to the impacted area from our other locations and other incremental costs incurred to restart operations. Losses, net of insurance recoveries, recorded in cost of goods sold and sales, delivery and administrative expenses in fiscal year 2005 were $1.4 million and $1.2 million, respectively.

Volume.    Sales volume growth (declines) for fiscal years 2005 and 2004 were as follows:

In fiscal year 2005, worldwide volume increased 6.5 percent compared to the prior year due mainly to the impact of the CIC acquisition, which contributed 5.8 percent of the worldwide volume growth. Additionally, sales volume in Central Europe in fiscal year 2005 was stronger than the volume that we experienced during fiscal year 2004. In fiscal year 2004, volume in Central Europe was unfavorably impacted by the accession of our markets into the EU.

The 7.4 percent growth in U.S. volume in fiscal year 2005 was primarily attributed to the incremental volume from the CIC acquisition. On a constant territory basis, U.S. volume remained essentially flat. The double-digit growth in our non-carbonated beverages category was offset by low single-digit declines in carbonated soft drinks. Growth in non-carbonated beverages was driven primarily by a 39 percent increase in Aquafina volume, which included the introduction of Aquafina Flavor Splash in the first quarter of 2005. In addition, double-digit growth in sports and energy drinks contributed to the overall growth in the non-carbonated beverage category. Non-carbonated beverages represented 14 percent of our overall portfolio in fiscal year 2005, up from 12 percent in fiscal year 2004. We experienced single-digit volume declines in Trademarks Pepsi and Mountain Dew, offset partly by single-digit growth in both our overall diet category and Trademark Dr Pepper.

Total volume in Central Europe increased 3.3 percent during fiscal year 2005. During fiscal year 2004, we experienced volume declines due primarily to the market-wide increases in costs related to the accession of our markets into the EU. We also experienced cold weather conditions in the late spring and early summer of fiscal year 2004 that negatively impacted volume. Therefore, fiscal year 2005 volume improvement was partially attributed to the soft performance we experienced during fiscal year 2004. The remainder of growth in volume for fiscal year 2005 was driven by a high single-digit increase in the premium carbonated soft drink category, driven by promotional efforts for Trademark Pepsi in a 2.5-liter package and a positive consumer response to pricing in Republic of Slovakia. The successful launch of Slice in all markets to compete against our competitors' value brands also drove volume throughout fiscal year 2005. The launch of Tropicana juice drinks in Hungary and improved promotional activities for other juice brands in the Czech Republic and Republic of Slovakia drove volume growth in the non-carbonated beverage category. Volume growth in those categories was partly offset by a high single-digit decline in the water category due to the highly competitive water environment, especially in Hungary.

Volume in the Caribbean increased 3.4 percent during fiscal year 2005 compared to the same period last year. The volume increase reflected volume growth across all markets as well as the two months of incremental volume provided by the Bahamas in fiscal year 2005. We acquired a majority interest in the Bahamas in March 2004 and the Bahamas was included in our consolidated results at that time. Volume was driven by double-digit growth in the non-carbonated beverage category and high single-digit growth in flavors. Volume increases in these categories were partly offset by the negative impacts caused by a difficult hurricane season in Jamaica and a country-wide labor strike that limited raw material supply for a short period of time in Puerto Rico. In addition, an economic slowdown in Puerto Rico during the fourth quarter of 2005 also negatively impacted volume.

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Net Sales.    Net sales and net pricing statistics for fiscal years 2005 and 2004 were as follows (dollar amounts in millions):

Net sales in fiscal year 2005 increased $381.3 million, or 11.4 percent, to $3,726.0 million compared to $3,344.7 million in fiscal year 2004. The 11.4 percent increase in worldwide net sales reflected an increase in net pricing and volume and the incremental benefit of the CIC acquisition.

Net sales in the U.S. in fiscal year 2005 increased $330.3 million, or 11.7 percent, to $3,156.1 million from $2,825.8 million in the prior year. Approximately two-thirds of the increase in net sales in the U.S. was the result of the incremental net sales contributed by the CIC territories. The remainder of the increase in net sales was primarily due to the 3.6 percent increase in net pricing. The improvement in net pricing was driven by a two-thirds contribution from price and a one-third contribution from changes in package mix. The increase in pricing reflected our initiative to grow our single-serve category. Net sales increases were also driven by successful promotional efforts during fiscal year 2005, including holiday activity and continued product innovation with the reformulation of Wild Cherry Pepsi, Cherry Vanilla Dr Pepper and Pepsi One. Net sales also benefited from line extensions with the introduction of Pepsi Lime and Aquafina FlavorSplash.

Net sales in Central Europe increased $34.1 million, or 11.0 percent, to $343.5 million in fiscal year 2005 from $309.4 million in the prior year. The increase resulted from a 3.3 percent volume increase and a 4.3 percent increase in net pricing driven by the favorable impact of foreign currency translation. Foreign currency translation contributed $22.5 million to net sales growth in fiscal year 2005. On a local currency basis, net pricing declined due to the overall competitive pricing environment and promotional activity executed in our markets.

Caribbean net sales increased $16.9 million, or 8.1 percent, to $226.4 million in fiscal year 2005 compared to $209.5 million in the prior year. Both a net selling price increase of 4.2 percent and volume growth of 3.4 percent drove the increase in net sales. The increase in net selling price was driven by favorable package mix shifts and increased pricing in the single-serve packages. Comparisons between periods were impacted by the consolidation of the Bahamas in March 2004; the two additional months of net sales in fiscal year 2005 contributed $1.9 million of the increase.

Cost of Goods Sold.    Cost of goods sold for fiscal years 2005 and 2004 were as follows (dollar amounts in millions):

Cost of goods sold increased $241.3 million, or 12.6 percent, to $2,163.5 million compared to $1,922.2 million in the prior year. The increase was driven primarily by volume growth in all geographic segments and higher raw material costs, as worldwide cost of goods sold per unit increased 4.5 percent during fiscal year 2005. The primary drivers of the increase in raw material costs were increases in aluminum, fuel and resin costs.

In the U.S., cost of goods sold increased $190.1 million, or 11.9 percent, to $1,784.9 million from $1,594.8 million in the prior year. The increase was primarily driven by the incremental cost of goods sold attributable to CIC, which represented approximately two-thirds of the increase, and a higher cost of goods sold per unit. Cost of goods sold per unit increased 3.4 percent in the U.S., primarily due to price increases in aluminum, fuel and resin. We were able to mitigate, in part, the increase in aluminum and fuel costs with our hedging program. On average, concentrate prices from PepsiCo for carbonated soft drinks were approximately 2.0 percent higher in fiscal year 2005 than the prior year.

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In Central Europe, cost of goods sold increased $36.2 million, or 20.7 percent, to $211.3 million compared to $175.1 million in the previous year. This increase was primarily due to volume growth of 3.3 percent, higher raw material costs and the $6.8 million unfavorable impact of foreign currency translation. The cost of goods sold per unit increase of 11.1 percent in fiscal year 2005 included the unfavorable impact of foreign currency translation. Higher sugar, fuel and resin prices also contributed to the increase in cost of goods sold per unit.

In the Caribbean, cost of goods sold increased $15.0 million, or 9.8 percent, to $167.3 million compared to $152.3 million in the prior year, driven mainly by volume growth of 3.4 percent, an increase in cost of goods sold per unit of 5.8 percent and the incremental two months of cost of goods sold contributed by the Bahamas in fiscal year 2005 compared to the prior year. The cost of goods sold per unit increased due to increases in the prices for resin, fuel and utilities.

Selling, Delivery and Administrative Expenses.    SD&A expenses for fiscal years 2005 and 2004 were as follows (dollar amounts in millions):

In fiscal year 2005, SD&A expenses increased $104.3 million, or 9.7 percent, to $1,183.2 million from $1,078.9 million in the prior year. As a percentage of net sales, SD&A expenses decreased to 31.8 percent in fiscal year 2005, compared to 32.3 percent in fiscal year 2004 due primarily to the lower operating costs achieved in Central Europe as a result of cost containment initiatives.

In the U.S., SD&A expenses increased $101.4 million to $1,000.1 million in fiscal year 2005 compared to $898.7 million in the prior year. The increase in SD&A in fiscal year 2005 was primarily due to the incremental SD&A contribution of CIC, which represented approximately two-thirds of the total increase. The remainder of the increase was due primarily to increases in insurance, employee benefits and fuel costs. Additionally, SD&A expenses in fiscal year 2005 included $1.4 million of expense recorded for the early termination of a real estate lease for our corporate offices in the Chicago area and $6.1 million of expense related to the remaining obligations related to this lease. As a percentage of net sales, SD&A expenses remained essentially flat at 31.7 percent in fiscal year 2005, compared to 31.8 percent in the prior year.

In Central Europe, SD&A expenses decreased $0.2 million to $128.2 million in fiscal year 2005 from $128.4 million in the prior year. The decrease was driven by lower operating costs associated with our cost reduction programs implemented in fiscal year 2004 and the first quarter of 2005 and a $1.1 gain from the sale of a facility in Hungary in fiscal year 2005. This decrease was partially offset by the $6.4 million unfavorable impact of foreign currency translation and volume growth of 3.3 percent. SD&A expenses as a percentage of net sales improved to 37.3 percent in fiscal year 2005, compared to 41.5 percent in the prior year.

SD&A expenses in the Caribbean increased $3.1 million to $54.9 million in fiscal year 2005, compared to $51.8 million in fiscal year 2004. This increase was mainly due to volume growth of 3.4 percent and higher fuel costs. SD&A expenses as a percentage of net sales improved to 24.2 percent in fiscal year 2005, compared to 24.7 percent in the prior year. SD&A expenses were also higher due to the incremental two months of SD&A expenses contributed by the Bahamas in fiscal year 2005 compared to the prior year.

Fructose Settlement Income.    During fiscal year 2005, we recorded a gain of $16.6 million related to proceeds from the settlement of a class action lawsuit. The lawsuit alleged price fixing related to high fructose corn syrup purchased from July 1, 1991 through June 30, 1995. We received all proceeds from the lawsuit settlement to which we were entitled during fiscal year 2005.

Special Charges.    During fiscal year 2005, we recorded special charges of $2.5 million in Central Europe, related to a reduction in workforce and the consolidation of certain production facilities as we continue to rationalize our cost structure. These special charges were primarily for severance costs and related benefits and asset write-downs.

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Operating Income.    Operating income for fiscal years 2005 and 2004 was as follows (dollar amounts in millions):

Operating income increased $53.7 million, or 15.8 percent, to $393.4 million in fiscal year 2005 compared to $339.7 million in fiscal year 2004, driven by an increase in operating income in the U.S. of $55.4 million, offset partly by a decrease in operating income in our combined international operations of $1.7 million.

U.S. operating income benefited from the contribution of CIC, which accounted for approximately 56 percent of the operating income growth in the U.S. The remaining growth in operating income in the U.S. was attributed to higher net pricing of 3.6 percent and the fructose settlement income partially offset by higher raw material costs.

Operating income in Central Europe decreased $0.5 million to $1.5 million in fiscal year 2005 compared to $2.0 million in fiscal year 2004. The decline was due mainly to the competitive pricing pressures that we faced in Hungary during fiscal year 2005, partially offset by favorable foreign currency translation of $9.3 million.

Operating income in the Caribbean decreased $1.2 million to $4.2 million in fiscal year 2005 compared to $5.4 million in fiscal year 2004. The decline was due in part to the economic slowdown and country-wide labor strike in Puerto Rico. The decrease also reflected increased operating costs, primarily for fuel, utilities and resin.

Interest and Other Expenses.    Interest expense, net, increased $27.8 million to $89.9 million in fiscal year 2005 compared to $62.1 million in the prior year. This increase was due to higher debt levels of over $400 million since the end of fiscal year 2004, used primarily to finance our acquisition of CIC and our investment in QABCL, and a $5.6 million charge related to the early extinguishment of debt. The extinguished debt was refinanced with new debt maturing in 2017 and 2035. Interest expense related to variable-rate debt also contributed to the increase due to the increase in short-term interest rates during fiscal year 2005. The increase in interest expense was partly offset by the receipt of $1.5 million of interest income related to a real estate tax appeals refund on a previously sold parcel of land. Interest expense, net, in fiscal year 2004 included the receipt of $1.9 million of interest income related to a state income tax refund and the settlement of various income tax audits. See Notes 7 and 10 to the Consolidated Financial Statements for further discussion.

We recorded other expense, net, of $4.9 million in fiscal year 2005 compared to other income, net, of $4.8 million reported in fiscal year 2004. Fiscal year 2005 included foreign currency transaction losses of $3.3 million compared to foreign currency transaction gains of $4.5 million in fiscal year 2004.

Income Taxes.    The effective income tax rate, which is income tax expense expressed as a percentage of income from continuing operations before income taxes, was 36.4 percent for fiscal year 2005 compared to 35.6 percent for fiscal year 2004. Several significant items impacted our effective tax rate for fiscal years 2005 and 2004. In fiscal year 2005, we recorded a $1.6 million benefit related to the reversal of valuation allowances for certain net operating loss carryforwards offset by tax contingency requirements. In addition, we recorded a $0.9 million benefit from a state income tax law change in the state of Ohio. In the aggregate, these items reduced our effective income tax rate by approximately 0.9 percent.

In fiscal year 2004, we recorded a $2.8 million benefit relating to the reversal of certain tax liabilities due to the settlement of income tax audits through the 2002 tax year. In addition, we recorded a $2.6 million net tax benefit relating to a state income tax refund. In aggregate, both items reduced our effective income tax rate by approximately 1.9 percent in fiscal year 2004. See Note 8 to the Consolidated Financial Statements for further discussion of the significant items recorded in "Income taxes."

Equity in Net Earnings (Loss) of Nonconsolidated Companies.    In fiscal year 2005, we acquired a 49 percent minority interest in QABCL, the Pepsi bottler in Romania and Moldova. Equity in net earnings of nonconsolidated companies was $4.9 million for fiscal year 2005.

Prior to increasing our ownership in the Bahamas to 70 percent in March 2004, we owned a 30 percent minority interest investment in those operations. We previously accounted for the investment under the equity method. During

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fiscal year 2004, we recorded $0.1 million in equity in net loss of nonconsolidated companies related to this investment.

Net Income.    Net income increased $12.8 million to $194.7 million in fiscal year 2005, compared to $181.9 million in fiscal year 2004. The factors affecting the improved performance were previously discussed.

Operating Results — 2004 compared with 2003

Items Impacting Comparability — Fiscal Year.    Our U.S. operations report using a fiscal year that ends on the Saturday closest to December 31 and as a result, a 53^rd week is added every five to six years. Fiscal years 2005 and 2004 consisted of 52 weeks ended on December 31, 2005 and January 1, 2005, respectively. Fiscal year 2003 consisted of 53 weeks ended on January 3, 2004. Our Central Europe and Caribbean operations fiscal years end on December 31st and therefore were not impacted by the 53^rd week in fiscal year 2003. The following table illustrates the approximate dollars (in millions) and percentage points of growth that the incremental week contributed to our fiscal year 2003 operating results:

Volume.    Sales volume growth (declines) for fiscal years 2004 and 2003 were as follows:

In fiscal year 2004, worldwide volume decreased 3.5 percent compared to the prior year, mainly attributable to volume declines of 2.0 percent in the U.S. and 13.0 percent in Central Europe partially offset by Caribbean volume growth of 3.8 percent. The decline in worldwide volume for the year was mainly due to the lapping of the 53^rd week in fiscal year 2003 in the U.S., lower volumes in our core Pepsi trademark, and the impact of the entry of our markets into the EU in May 2004.

The decline in U.S. volume of 2.0 percent in fiscal year 2004 reflected the lapping of the 53^rd week in fiscal year 2003 and softness in our Pepsi and Mountain Dew brands, partially offset by high single-digit volume growth in our non-carbonated beverage portfolio. The lapping of the incremental 53^rd week contributed 1.2 percent to the U.S. volume decline in fiscal year 2004. Trademark Pepsi experienced mid single-digit declines, driven mainly by lower volumes in brand Pepsi, offset, in part, by continued strength in the diet Pepsi brands and growth from product innovation during fiscal year 2004. Volume in trademark Mountain Dew was relatively flat in fiscal year 2004 compared to the prior year, driven by growth in brand Diet Mountain Dew and the introduction of Mountain Dew Pitch Black during the third quarter of 2004, offset by the impact of lapping our Mountain Dew LiveWire product launch in the first quarter of 2003. Trademark Pepsi and trademark Mountain Dew comprise approximately 75 percent of our total volume. Non-carbonated beverage growth was driven by double-digit growth in Aquafina volume and the introduction of Tropicana juice drinks in February 2004.

Volume in Central Europe decreased 13.0 percent during fiscal year 2004. This decline was driven primarily by market-wide increases in costs related to the accession of our markets into the EU, including increases in retailer prices, higher raw material costs, increased value-added taxes and higher utility costs as a result of privatization of those industries. We also experienced cold weather conditions in the late spring and early summer that negatively impacted volume. Despite these challenges, the rate of volume declines slowed with each sequential quarter in fiscal year 2004. In Central Europe, carbonated soft drinks account for approximately 63 percent of total volume, while the water category and other non-carbonated beverages comprise our remaining volume. Our carbonated soft drink business declined in the low double digits driven primarily by a high single-digit volume decline in trademark Pepsi and double-digit volume declines in other carbonated soft drinks. Our water category experienced double-digit volume declines during fiscal year 2004 despite successful promotional activity in the first quarter.

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Volume in the Caribbean increased 3.8 percent compared to the same period last year, primarily driven by the 3.7 percent volume contribution from the consolidation of the Bahamas. The volume growth of 0.1 for the remainder of the Caribbean was mainly driven by volume growth in Puerto Rico, offset by volume declines in Jamaica as a result of higher pricing. The introduction of the Essential water brand contributed to the volume growth, as well as the expansion of our product portfolio.

Net Sales.    Net sales and net pricing statistics for fiscal years 2004 and 2003 were as follows (dollar amounts in millions):

Net sales in fiscal year 2004 increased $107.9 million, or 3.3 percent, to $3,344.7 million compared to $3,236.8 million in fiscal year 2003. The 3.3 percent increase in worldwide net sales primarily reflected an increase in net average selling prices in all three geographic segments, offset, in part, by the impact of volume declines in both the U.S. and Central Europe.

Net sales in the U.S. in fiscal year 2004 increased $86.4 million, or 3.2 percent, to $2,825.8 million from $2,739.4 million in the prior year. This increase occurred despite the lapping of the incremental 53^rd week, which contributed $33.9 million to net sales in fiscal year 2003.    The increase in U.S. net sales was the result of improved net selling prices of 4.8 percent, which offset the impact of the lower volumes in fiscal year 2004. The improvement in net pricing was driven by rate increases of approximately 3.2 percent and package mix contribution of 1.6 percent. The top-line growth was driven by our focus on our single serve packages and our disciplined approach to pricing across all geographic segments, as well as strong contributions from our non-carbonated beverage category, most notably double-digit growth in Aquafina and the introduction of Tropicana Juice drinks.

Net sales in Central Europe decreased $1.0 million, or 0.3 percent, to $309.4 million in fiscal year 2004 from $310.4 million in the prior year. The decrease resulted from a volume decrease of 13.0 percent, which was partially offset by a 14.2 percent increase in net pricing, aided by the impact of foreign currency translation. Foreign currency translation contributed $25.5 million to net sales, which accounted for approximately 9.8 percent of the net pricing growth in fiscal year 2004. As a result of the cost pressures associated with our markets' accession into the EU, we increased our net pricing starting in the fourth quarter of 2003 and the first quarter of 2004. Promotional efforts in the first quarter of 2004 enabled us to maintain volume while we continued to maintain pricing during this period. The reduction of these promotional activities after the first quarter of 2004 and the impact of the accession of our markets into the EU contributed to the decreases in volume during the balance of fiscal year 2004, as consumers were impacted by the higher price points on many consumer products. Customers appeared to be adjusting to the higher pricing during the balance of the year, as the rate of volume declines slowed with each sequential quarter in fiscal year 2004.

Caribbean net sales increased $22.5 million, or 12.0 percent, to $209.5 million in fiscal year 2004 compared to $187.0 million in the prior year. The increase in net sales resulted from the $11.2 million contribution from the consolidation of the Bahamas beginning in the first quarter of 2004. The remainder of the increase in net sales was mainly due to the increase in net pricing in Puerto Rico, Jamaica, and Trinidad and Tobago.

Cost of Goods Sold.    Cost of goods sold for fiscal years 2004 and 2003 were as follows (dollar amounts in millions):

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Cost of goods sold increased $45.6 million, or 2.4 percent, to $1,922.2 million compared to $1,876.6 million in fiscal year 2003. The increase was driven primarily by higher raw material costs, as worldwide cost of goods sold per unit increased 5.3 percent during fiscal year 2004. The primary drivers of the increase in raw material costs were increases in aluminum and resin costs.

In the U.S., cost of goods sold increased $34.2 million, or 2.2 percent, to $1,594.8 million from $1,560.6 million in fiscal year 2003. In fiscal year 2003, the 53^rd week resulted in an additional $20.8 million in cost of goods sold. Cost of goods sold per unit increased 3.4 percent in the U.S., primarily driven by price increases in aluminum, fuel and resin. We were able to mitigate, in part, the increase in aluminum costs with our hedging program. In addition, concentrate costs, which represented approximately 40 percent of total product costs in the U.S., were higher as PepsiCo concentrate prices on carbonated soft drinks increased on average by approximately 0.5 percent beginning in February 2004.

In Central Europe, cost of goods sold decreased $1.0 million, or 0.6 percent, to $175.1 million compared to $176.1 million in fiscal year 2003. This decrease was primarily due to volume declines of 13.0 percent, offset by higher raw material costs and the $12.5 million unfavorable impact of foreign currency translation. Higher sugar prices after the accession of our markets into the EU, as well as higher fuel and resin costs, contributed to the 14.3 percent increase in cost of goods sold per unit during fiscal year 2004.

In the Caribbean, cost of goods sold increased $12.4 million, or 8.9 percent, to $152.3 million compared to $139.9 million in fiscal year 2003, driven mainly by the consolidation of the Bahamas beginning in the first quarter of 2004 which contributed more than half of the increase in cost of goods sold. The remainder of the increase was due to an increase in volume of 0.1 percent for the remainder of the Caribbean and a higher cost of goods sold per unit, primarily due to higher operating costs.

Selling, Delivery and Administrative Expenses.    SD&A expenses for fiscal years 2004 and 2003 were as follows (dollar amounts in millions):

In fiscal year 2004, SD&A expenses increased $41.4 million, or 4.0 percent, to $1,078.9 million from $1,037.5 million in the prior year. As a percentage of net sales, SD&A expenses increased to 32.3 percent in fiscal year 2004, compared to 32.1 percent in fiscal year 2003.

In the U.S., SD&A expenses increased $41.3 million to $898.7 million in fiscal year 2004 compared to $857.4 million in the prior year. In fiscal year 2003, the 53^rd week resulted in an incremental $8.2 million of SD&A expenses. As a percentage of net sales, SD&A expenses increased to approximately 31.8 percent in fiscal year 2004, compared to 31.3 percent in the prior year. The increase in SD&A expenses was primarily attributed to higher insurance, compensation and benefit costs.

In Central Europe, SD&A expenses decreased $5.5 million to $128.4 million from $133.9 million in the prior year, despite the $7.5 million unfavorable impact of foreign currency translation. SD&A expenses as a percentage of net sales improved to 41.5 percent in fiscal year 2004, compared to 43.1 percent in the prior year. The decrease in SD&A expense was mainly attributed to cost savings related to our efforts to better leverage our infrastructure, including the completion of our migration to an alternative sales and distribution strategy in the rural areas in Central Europe, and the implementation of a standard organization structure, which reduced headcount and streamlined operations.

SD&A expenses in the Caribbean increased $5.6 million to $51.8 million in fiscal year 2004, compared to $46.2 million in fiscal year 2003. This increase was mainly due to the incremental SD&A costs of $3.1 million due to the consolidation of the Bahamas in the first quarter of 2004, as well as higher costs in Puerto Rico.

Special Charges.    During fiscal year 2004, we recorded special charges, net, of $3.9 million in Central Europe, as we continued to rationalize our infrastructure to better fit our business model and the changing market conditions, including the accession of our markets into the EU. The special charges included a charge of $2.3 million, primarily for severance costs and related benefits, related to a reduction in the workforce in Central Europe as a result of the standardization of the organizational structure in all countries.

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In addition, in the fourth quarter of 2004, we recorded a special charge of $2.0 million related to the consolidation of certain production lines and facilities in Poland and Hungary, as we take advantage of the opportunities that existed with the entry of our markets into the EU to improve the efficiencies of our supply chain in Central Europe. This special charge consisted primarily of asset write-downs and the acceleration of depreciation. This charge was offset by a $0.4 million reversal recorded in the fourth quarter of 2004 due to revisions of estimates of certain liabilities related to previous special charges, as we substantially completed the plans to modify our distribution strategy in all of our markets in Central Europe.

Operating Income.    Operating income for fiscal years 2004 and 2003 was as follows (dollar amounts in millions):

*  Calculation of percentage change is not meaningful.

Operating income increased $23.4 million, or 7.4 percent, to $339.7 million in fiscal year 2004 compared to $316.3 million in fiscal year 2003, driven by an increase in operating income in the U.S. of $16.6 million and an increase in operating income in our combined international operations of $6.8 million. U.S. operating income increased $16.6 million to $332.3 million in fiscal year 2004, despite the $4.9 million benefit to U.S. operating income related to the incremental 53^rd week in fiscal year 2003. The most significant contributing factor to U.S. operating income growth in fiscal year 2004 was the improvement in our net pricing, which offset lower volumes, higher raw material costs and increased SD&A expenses.

In fiscal year 2004, we continued to achieve operating profitability in our combined international operations. Operating income in our international operations was $7.4 million in fiscal year 2004, compared to $0.6 million in the prior year. Operating income in Central Europe increased $1.5 million to $2.0 million in fiscal year 2004, compared to $0.5 million in the prior year. Foreign currency translation contributed approximately $5.5 million to the operating income growth in fiscal year 2004, which helped to partially offset higher raw material costs and the impact of lower volumes. We continued to achieve efficiencies and lower SD&A costs in local currency as a result of our new alternatives sales and distribution system and other cost reduction efforts.

In the Caribbean, operating income increased $5.3 million to $5.4 million in fiscal year 2004, compared to $0.1 million in the prior year. The operating income improvement in the Caribbean was primarily due to higher net pricing, reflecting strong single serve and 2-liter pricing. Operating income in fiscal year 2004 included $0.3 million of losses from the consolidation of the Bahamas beginning in the first quarter.

Interest and Other Expenses.    Interest expense, net, decreased $7.5 million to $62.1 million in fiscal year 2004 compared to $69.6 million in the prior year. This decrease was due to lower borrowing costs in fiscal year 2004 due, in part, to financing activities and lower debt levels. Interest expense, net in fiscal year 2004 included $1.9 million of interest income related to a state income tax refund and the settlement of various income tax audits. Included in interest expense, net, in fiscal year 2003 was a loss on the early extinguishment of debt of $8.8 million, offset, in part, by a $6.4 million increase in interest income due to the favorable resolution of a tax refund case related to our previous ESOP. See Notes 7 and 10 to the Consolidated Financial Statements for further discussion.

We recorded other income, net, of $4.8 million in fiscal year 2004 compared to other expense, net, of $6.2 million reported in fiscal year 2003. Included in other income, net, in fiscal year 2004 was a gain of $5.2 million related to the sale of a parcel of land in 2002. The gain reflected the settlement and final payment on the promissory note related to the initial land sale, for which we had previously provided a full allowance. In fiscal year 2003, we recorded an additional gain of $2.1 million on the same land sale related to the favorable resolution of certain contingencies. In addition, other income, net, included $4.5 million of foreign currency exchange gains in fiscal year 2004, compared to foreign exchange gains of $0.9 million in fiscal year 2003.

Income Taxes.    The effective income tax rate, which is income tax expense expressed as a percentage of income from continuing operations before income taxes, was 35.6 percent for fiscal year 2004 compared to 34.4 percent for fiscal year 2003. Several significant items impacted our effective tax rate for fiscal year 2004 and 2003. For fiscal year 2004, we recorded a $2.8 million benefit relating to the reversal of certain tax liabilities due to the settlement of income tax

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audits through the 2002 tax year. In addition, we recorded a $2.6 million net tax benefit relating to a state income tax refund. In aggregate, these significant items for fiscal year 2004 reduced our effective income tax rate by approximately 1.9 percent.

In fiscal year 2003, we recorded additional tax accruals of $4.3 million and a tax benefit of $6.0 million related to the favorable ESOP settlement. We also recorded a net reversal of tax liabilities of $6.0 million due primarily to the conclusion of various income tax audits through the 1999 tax year. In aggregate, these significant tax items in fiscal year 2003 reduced our effective income tax rate by approximately 3.2 percent. See Note 8 to the Consolidated Financial Statements for further discussion of the significant items recorded in "Income taxes."

Net Income.    Net income increased $24.3 million to $181.9 million in fiscal year 2004, compared to $157.6 million in fiscal year 2003. The factors affecting the improved performance were previously discussed.

Liquidity and Capital Resources

Operating activities.    Net cash provided by operating activities of continuing operations decreased by $32.3 million to $431.8 million in fiscal year 2005, compared to $464.1 million in fiscal year 2004. The decrease in net cash provided by operating activities in fiscal year 2005 can be mainly attributed to the benefit of $100 million from our securitization program in fiscal year 2004 and higher pension plan contributions in fiscal year 2005. These unfavorable items were partially offset by the favorable year-over-year change in primary working capital of $51.7 million and the benefit of the fructose settlement proceeds. Primary working capital is comprised of inventory, accounts payable and accounts receivable, excluding securitized receivables. Fiscal year 2005 showed improvement in our working capital measures, including days sales outstanding, inventory turnover and days payable outstanding compared to fiscal year 2004.

We contributed $16.8 million to our pension plan in fiscal year 2005 compared to $6.3 million in fiscal year 2004. We were $32.1 million underfunded in our pension plans as of the end of fiscal year 2005. We funded $10 million into our pension plans in both the fourth quarter of 2005 and the first quarter of 2006. We do not believe that any known trends or uncertainties related to our pension plan will result in a material change in our results of operations, financial condition, or our liquidity.

Investing activities.    Investing activities during fiscal year 2005 included capital investments of $180.3 million, an increase of $58.5 million from capital investments of $121.8 million in fiscal year 2004. Capital spending in fiscal year 2005 increased as a result of higher spending on machinery and equipment for capital investments to enhance our PET capacity in 2006, higher spending on vending equipment and coolers, and incremental spending for CIC. The increase in capital spending was partly offset by a reduction in spending for our Next Generation selling system as the significant portion of that investment was made in fiscal year 2004. Capital spending in fiscal year 2006, excluding potential acquisitions, is expected to be in the range of $170 million to $180 million.

In fiscal year 2005, we completed the acquisition of the capital stock of CIC and the capital stock of FM Vending for $354.6 million. This amount is included in the "Franchises and companies acquired, net of cash acquired" line item in the Consolidated Statement of Cash Flows. We also acquired a 49 percent interest in a Romanian bottler, QABCL, for $51.0 million. This amount is included in the "Purchase of equity investment" line item in the Consolidated Statement of Cash Flows.

In fiscal year 2004, we completed the acquisition of the Dr Pepper franchise rights for a 13-county area in northeast Arkansas and certain related assets from Dr Pepper Bottling Company of Paragould, Inc., and we acquired an additional 40 percent interest in Pepsi-Cola Bahamas. The total cost of these two acquisitions and another smaller acquisition was $21.2 million. This amount is included in the "Franchises and companies acquired, net of cash acquired" line item in the Consolidated Statement of Cash Flows.

In fiscal year 2004, we received $5.2 million associated with the 2002 sale of a parcel of land. This receipt reflected the settlement and final payment on the $12.0 million promissory note related to the initial sale of this property. In fiscal year 2003, we received $6.4 million as partial payment on the same promissory note. These receipts are included in the "Proceeds from the sale of investments, net" line item in the Consolidated Statements of Cash Flows.

Financing Activities.    Our total debt increased $427.7 million to $1,576.3 million as of the end of fiscal year 2005, from $1,148.6 million as of the end of fiscal year 2004. In January 2005, we issued $300 million of notes due January 2015 with a coupon rate of 4.875 percent. Net proceeds from the transaction were $297.0 million, which

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reflected the reduction for discount and issuance costs. The proceeds from this issuance were used to fund the acquisition of CIC.

In May 2005, we issued $250 million of notes due May 2017 with a coupon rate of 5.0 percent and $250 million of notes due May 2035 with a coupon rate of 5.5 percent. Net proceeds from these issuances were $492.3 million, which reflected the reduction for discount and issuance costs. The proceeds from these issuances were used, in part, to fund the debt tender offer in May 2005.

In May 2005, we completed a cash tender offer related to $550 million of our outstanding debt. The total principal amount of securities tendered was $388.0 million. The cash payment to the bondholders for this transaction, including accrued interest and premiums, was $395.3 million. As a result of the tender offer we recorded a loss on the early extinguishment of debt in fiscal year 2005 of $5.6 million, which is recorded in "Interest expense, net" on our Consolidated Statement of Income.

During fiscal year 2004, we assumed $4.3 million of debt associated with the Pepsi-Cola Bahamas transaction. We also had net borrowings of $19.4 million from our short-term debt during fiscal year 2004. In May 2004, we repaid the $150 million face value 6.0 percent notes at their maturity.

In fiscal year 2003, we issued $150 million of notes due in March 2013 with a coupon rate of 4.5 percent. Net proceeds from these notes were $146.3 million, which reflected the reduction for discount and issuance costs totaling $2.6 million, as well as a treasury rate lock settlement payment of $1.1 million. The proceeds were used to redeem $150 million of notes that were issued in March 2001. In February 2003, the investors of the $150 million of notes issued in March 2001 notified us that they wanted to exercise their option to purchase and remarket the notes pursuant to the remarketing agreement, unless we elected to redeem the notes. In March 2003, we redeemed the notes pursuant to the agreement. We paid approximately $164.5 million for the fair value of the debt to be extinguished, net of the reverse treasury rate lock settlement of $3.2 million. In addition, we repaid the $125 million 7.25 percent notes that came due during the first quarter of 2003.

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. In the U.S. we have a revolving credit agreement with maximum borrowings of $500 million, which acts as back up for our commercial paper program. Accordingly, we have a total of $500 million available under our commercial paper program and revolving credit facility combined. We had $141.5 million of outstanding commercial paper borrowings as of the end of fiscal year 2005, compared to $59.5 million at the end of fiscal year 2004. Internationally, we had revolving credit facility borrowings of $13.9 million at the end of fiscal year 2005 compared to $10.3 million at the end of fiscal year 2004.

Since fiscal year 2001, we have executed a strategy to repurchase stock. On July 21, 2005, we announced our Board of Directors approved the repurchase of 20 million additional shares under a previously authorized repurchase program. This authorization was in addition to previous authorizations approved in both fiscal years 2001 and 2002. During fiscal year 2005, we repurchased 10.1 million shares of our common stock for $239.2 million. As of fiscal year end 2005, 16.2 million shares remained available for repurchase under the 2005 authorization.

During the fourth quarter of 2005, we retired 30 million shares of treasury stock. No cash consideration was paid or received as a part of this transaction. The transaction reduced the number of common shares issued to 137.6 million shares at the end of fiscal year 2005 compared to 167.6 million shares at the end of fiscal year 2004.

During fiscal year 2004, we executed an accelerated stock repurchase program in which we repurchased 10 million shares of our common stock for $203.5 million. See Note 14 in the Consolidated Financial Statements for further discussion. During fiscal year 2004, after the completion of the accelerated stock repurchase program, we repurchased an additional 0.2 million shares of our common stock for $4.2 million. During fiscal year 2003, we repurchased 5.0 million shares of our common stock for $67.6 million. In addition, during fiscal year 2003 we paid $10.6 million relating to treasury stock purchases that were executed but unsettled at the end of fiscal year 2002, which were included in "Other accrued expenses" in the Consolidated Balance Sheet.

Beginning in fiscal year 2004, our Board of Directors instituted a practice of reviewing dividend declarations on a quarterly basis. The Board has declared quarterly dividends of $0.085 per share on PepsiAmericas common stock for each quarter in fiscal year 2005. We paid cash dividends of $35.1 million in fiscal year 2005 based on this quarterly cash dividend rate; however, at the end of fiscal year 2005, $11.2 million of dividends were declared and not yet paid. As a result, this amount is included in "Payables" in the Consolidated Balance Sheet. During fiscal year 2004, we paid cash dividends of $42.0 million based on a quarterly dividend rate of $0.075 per share.

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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.

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. There are a number of options available to us and we continue to examine the optimal uses of our cash, including repurchasing our stock, reinvesting in our existing business and 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 2005, by due date. Long-term debt obligations do not include amounts related to the fair value adjustment for interest rate swaps and unamortized (discount) premium. Our short-term and long-term debt, lease commitments, purchase obligations and advertising and exclusivity rights are more fully described in Notes 10, 11 and 18, respectively, in the Notes to the Consolidated Financial Statements. Our interest obligations relate to our contractual obligations under our fixed-rate long-term debt.

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 prior 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. At the end of fiscal year 2005, we had recorded $87.5 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 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 amount recorded was $19.6 million at the end of fiscal year 2005, of which $5.4 million is expected to be recovered in 2006 based on our expenditures, and thus, is included as a current asset in the Consolidated Balance Sheets.

During fiscal years 2005 and 2004, we paid, net of taxes, $10.1 million and $6.4 million, respectively, related to such indemnification obligations, net of pretax insurance settlements of $3.4 million and $8.0 million, respectively. We expect to spend approximately $30 million on a pretax basis in fiscal year 2006 related to our indemnification obligations, excluding possible insurance recoveries. (See "Environmental Matters" in Item 1 and Note 18 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.

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Critical Accounting Policies

The preparation of the 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 value 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 goodwill impairment, environmental liabilities, income taxes and casualty insurance costs which are described in further detail below:

Goodwill Impairment.    Goodwill is tested for impairment at least annually, using a two-step approach at the reporting unit level: U.S., Central Europe and the Caribbean. First, we estimate the fair value of the reporting units primarily using discounted estimated future cash flows. If the carrying value 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. The impairment evaluation requires the use of considerable management judgment to determine the fair value of the reporting units using discounted future cash flows, including estimates and assumptions regarding the amount and timing of cash flows, cost of capital and growth rates.

Environmental Liabilities.    We continue to be subject to certain indemnification obligations under agreements related to previously sold subsidiaries, including potential environmental liabilities (see "Environmental Matters" in Item 1 and Note 18 to the Consolidated Financial Statements for further discussion). We have recorded our best estimate of our probable liability under those indemnification obligations, with the assistance of outside consultants and other professionals. 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 liabilities 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 non-U.S. 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 estimates may differ. The valuation allowance can also be impacted by changes in the tax regulations.

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

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 and are based on the best data available to us. These estimates, however, are also subject to a significant degree of inherent variability, including the relatively recent increases in medical costs. We evaluate these estimates with our actuarial advisors 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

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control could have a significant 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.

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 fiscal year end 2005, PepsiCo beneficially owned approximately 43 percent of PepsiAmericas' outstanding common stock. During fiscal year 2005, approximately 91 percent of our total volume was derived from the sale of Pepsi-Cola 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. Material agreements and transactions between our company and PepsiCo are described below.

Pepsi franchise agreements are issued in perpetuity, 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, distribute and sell carbonated and non-carbonated 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 and 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 and Pepsi One 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. Concentrate purchases from PepsiCo included in cost of goods sold totaled $763.2 million, $687.9 million and $671.7 million for the fiscal years 2005, 2004 and 2003, respectively. 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, which totaled $36.9 million, $29.6 million and $25.9 million for the fiscal years 2005, 2004 and 2003, respectively, and was included in cost of goods sold. We also purchase finished beverage and snack food 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. Such purchases are reflected in cost of goods sold and totaled $155.9 million, $97.4 million and $88.9 million for the fiscal years 2005, 2004 and 2003, respectively.

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 their brands. The level of this support is negotiated regularly and can be increased or decreased at the discretion of PepsiCo. The bottler incentives cover a variety of initiatives, including direct marketplace, shared media and advertising support, to support volume and market share growth. Worldwide bottler incentives from PepsiCo totaled approximately $203.3 million, $179.4 million, and $183.0 million for the fiscal years ended 2005, 2004 and 2003, respectively. There are no conditions or requirements that could result in the repayment of any support payments received by us.

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.

Based on information received from PepsiCo, PepsiCo provided indirect marketing support to our marketplace, which consisted primarily of media expenses. This indirect support is not reflected or included in our Consolidated Financial Statements, as these amounts were paid by PepsiCo on our behalf to third parties.

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Manufacturing and National Account Services.    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 these services were $20.4 million, $18.0 million, and $18.6 million for fiscal years 2005, 2004 and 2003, respectively.

Other Transactions.    PepsiCo provides procurement services to us pursuant to a shared services agreement. Under such 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. In fiscal years 2005, 2004 and 2003, we paid $3.4 million, $3.5 million, and $2.4 million, respectively, to PepsiCo for such services.

During fiscal year 2002, we paid $3.3 million to PepsiCo for the SoBe distribution rights, of which approximately $0.2 million of amortization expense is included in SD&A expenses for the fiscal years 2005, 2004, and 2003, respectively.

Beginning in September 2003, we purchased snack food products from Frito-Lay, Inc., a subsidiary of PepsiCo, for sale and distribution in Trinidad and Tobago. We began similar distribution of Frito-Lay snack products in the Czech Republic and Puerto Rico in fiscal year 2004 and Hungary in fiscal year 2005. Net amounts paid to PepsiCo and its affiliates for snack food products included in cost of goods sold were $3.4 million and $0.2 million in fiscal years 2005 and 2004, respectively.

During fiscal year 2005, we received payment of $2.1 million related to the settlement of the fructose lawsuit for the former Heartland territories, which we acquired in 1999. The payment was originally made to PepsiCo out of the settlement trust, and then the funds were remitted to us by PepsiCo The amount is included in "Fructose settlement income" on the Consolidated Statement of Income.

At the end of fiscal years 2005, 2004, and 2003, net amounts due from PepsiCo related to the above transactions amounted to $8.9 million, $12.6 million, and $3.9 million, respectively.

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

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

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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. These shares 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

In fiscal year 2002, we entered into an Aircraft Joint Ownership Agreement with Pohlad Companies. Pursuant to the Aircraft Joint Ownership Agreement we purchased a one-eighth interest in a Lear Jet aircraft owned by Pohlad Companies. We paid approximately $1.6 million related to the jet in fiscal year 2002, which included our capitalized portion of the purchase price ($1.5 million) and the related SD&A expenses associated with the jet ($0.1 million). SD&A expenses associated with the jet in fiscal years 2005, 2004, and 2003 were $0.2 million, $0.1 million and $0.1 million, respectively. In fiscal year 2005, we terminated this contract and entered into a new Aircraft Joint Ownership Agreement with Pohlad Companies for one-eighth interest in a Challenger aircraft and paid Pohlad Companies approximately $1.7 million.

In addition, we paid Pohlad Companies, or its subsidiaries, for various services, which totaled approximately $0.2 million, $0.1 million and $0.1 million in fiscal years 2005, 2004 and 2003, respectively.

Other Transactions

Transactions with Bottlers in Which PepsiCo Holds an Equity Interest.    We sell finished beverage products to other bottlers, including The Pepsi Bottling Group, Inc., a bottler 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 $128.8 million, $84.8 million, and $64.6 million in fiscal years 2005, 2004, and 2003, respectively. Our purchases from such other bottlers in fiscal years 2005, 2004, and 2003 were not material.

Recently Issued Accounting Pronouncements

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

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

We are subject to various market risks, including risks from changes in commodity prices, interest rates and currency exchange rates.

Commodity Prices.    The risk from commodity price changes relates to our ability to recover higher product costs through price increases to customers, which may be limited due to the competitive pricing environment that exists in the soft drink business. We use derivative financial instruments to hedge price fluctuations for a portion of anticipated purchases of certain commodities used in our operations, including aluminum and diesel fuel. Due to the high correlation between such commodity prices and our cost of these products, we consider these hedges to be highly effective. At the end of fiscal year 2005, we have hedged a portion of our anticipated aluminum purchases through November 2006, while we have hedged a portion of our anticipated diesel fuel purchases through December 2006.

Interest Rates.    Our floating rate exposure relates to changes in the six-month London Interbank Offered Rate ("LIBOR") and the overnight Federal Funds rate. Assuming consistent levels of floating rate debt with those held as of fiscal year end 2005, a 50 basis point change in each of these rates would have an impact of approximately $1.5 million on our annual interest expense. In fiscal year 2005, we had short-term investments throughout a majority of the year, principally invested in money market funds and commercial paper, which were most closely tied to the overnight Federal Funds rate. The amount of these investments was not significant throughout the year. 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 in non-U.S. franchise territories, we are subject to exposure 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. We currently do not hedge the translation risks of investments in our non-U.S. operations. Any positive cash flows generated have been reinvested in the operations, excluding repayments of intercompany loans from the manufacturing operations in Poland.

Based on net sales, non-U.S. operations represented approximately 15 percent of our total operations in fiscal year 2005. Changes in currency exchange rates impact the translation of the non-U.S. operations' results from their local currencies into U.S. dollars. If the currency exchange rates had changed by ten percent in fiscal year 2005, we estimate the impact on operating income would have been approximately $0.5 million. Our estimate reflects the fact that a portion of the non-U.S. operations costs are denominated in U.S. dollars, including concentrate purchases. 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.

Item 8. Financial Statements and Supplementary Data.

See Index to Financial Information on page F-1.

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

None.

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Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We maintain a system of disclosure controls and procedures, as defined in Exchange Act Rule 13a-15(e), that is designed to provide reasonable assurance that information, which is required to be disclosed, is accumulated and communicated to management timely. At the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(b). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective in timely alerting them to material information relating to us that is required to be included in our periodic SEC filings.

Changes in Internal Control Over Financial Reporting

During the fourth quarter of 2005, there were no significant changes in our internal control over financial reporting or in other factors that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management's Report on Internal Control Over Financial Reporting

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

•

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



•

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



•

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

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

The scope of management's assessment of the effectiveness of internal control over financial reporting includes all of our company's consolidated subsidiaries except for Central Investment Corporation (CIC), a business acquired by our company on January 10, 2005. Our company's consolidated net sales for fiscal year 2005 were approximately $3,726.0 million, of which CIC represented approximately $223.3 million. Our company's consolidated total assets as of the end of fiscal year 2005 were approximately $4,053.8 million, of which CIC represented approximately $470.7 million.

Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2005. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in "Internal Control-Integrated Framework." Based on this assessment, management believes that, as of December 31, 2005, our internal control over financial reporting was effective based on those criteria.

KPMG LLP, the independent registered public accounting firm that audited the Consolidated Financial Statements included in this Annual Report on Form 10-K, has issued an auditors' report on our assessment of our internal control over financial reporting, which appears immediately following this report.

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Report of Independent Registered Public Accounting Firm

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

We have audited management's assessment, included in the accompanying Management's Report on Internal Control Over Financial Reporting, that PepsiAmericas, Inc. (the Company) maintained effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management's assessment and an opinion on the effectiveness of the Company's internal control over financial reporting based on our audit.

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

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

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

In our opinion, management's assessment that the Company maintained effective internal control over financial reporting as of December 31, 2005, is fairly stated, in all material respects, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

The scope of management's assessment of the effectiveness of internal control over financial reporting as of December 31, 2005 includes all of the Company's consolidated subsidiaries except for Central Investment Corporation (CIC), a business acquired by the Company on January 10, 2005. The Company's consolidated net sales for fiscal year 2005 were approximately $3,726.0 million, of which CIC represented approximately $223.3 million. The Company's consolidated total assets as of the end of fiscal year 2005 were approximately $4,053.8 million, of which CIC represented approximately $470.7 million. Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over the financial reporting of CIC.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of PepsiAmericas, Inc. and subsidiaries as of the end of fiscal years 2005 and 2004, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the fiscal years 2005, 2004 and 2003, and our report dated March 2, 2006 expressed an unqualified opinion on those consolidated financial statements.

/s/ KPMG LLP

Chicago, Illinois
March 2, 2006

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Item 9B. Other Information.

None.

Part III

Item 10. Directors and Executive Officers of the Registrant.

We incorporate by reference the information contained under the captions "Proposal 1: Election of Directors", "Our Board of Directors and Committees" and "Section 16(a) Beneficial Ownership Reporting Compliance" in our definitive proxy statement for the annual meeting of shareholders to be held April 27, 2006.

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

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

Item 11. Executive Compensation.

We incorporate by reference the information contained under the captions "Executive Compensation" and "Non-Employee Director Compensation" in our definitive proxy statement for the annual meeting of shareholders to be held April 27, 2006.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

We incorporate by reference the information contained under the captions "Our Largest Shareholders" and "Shares Held by Our Directors and Executive Officers" in our definitive proxy statement for the annual meeting of shareholders to be held April 27, 2006.

Equity Compensation Plan Information.    The following table summarizes information regarding common stock that may be issued under our existing equity compensation plans as of fiscal year end 2005.

¹

This number includes stock options, as well as 1,645,292 shares underlying unvested restricted stock awards, granted or issued under stock incentive plans approved by our shareholders.

²

Weighted average exercise price of outstanding options and rights excludes unvested restricted stock awards.

Item 13. Certain Relationships and Related Transactions.

We incorporate by reference the information contained under the caption "Certain Relationships and Related Transactions" in our definitive proxy statement for the annual meeting of shareholders to be held April 27, 2006.

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Item 14. Principal Accountant Fees and Services.

We incorporate by reference the information contained under the caption "Proposal 2: Ratification of Appointment of Independent Registered Public Accountants" in our definitive proxy statement for the annual meeting of shareholders to be held April 27, 2006.

Part IV

Item 15. Exhibits and Financial Statement Schedules.

(a)

See Index to Financial Information on page F-1 and Exhibit Index on page E-1.



(b)

See Exhibit Index on page E-1.



(c)

Not applicable.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the 6^th day of March 2006.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on the 6^th day of March 2006.