Pepsi 2007 Annual Report Download - page 77

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1% Increase 1% Decrease
2007 service and interest cost components $5 $(4)
2007 benefit liability $55 $(48)
Savings Plan
Our U.S. employees are eligible to
participate in 401(k) savings plans, which
are voluntary defi ned contribution plans.
The plans are designed to help employ-
ees accumulate additional savings for
retirement. We make matching contribu-
tions on a portion of eligible pay based on
years of service. In 2007 and 2006, our
matching contributions were $62 million
and $56 million, respectively.
For additional unaudited information
on our pension and retiree medical plans
and related accounting policies and
assumptions, see “Our Critical Accounting
Policies” in Management’s Discussion
and Analysis.
Note 8 — Noncontrolled Bottling Affi liates
Our most signifi cant noncontrolled bot-
tling affi liates are PBG and PAS. Sales to
PBG refl ect approximately 9% of our total
net revenue in 2007 and approximately
10% in 2006 and 2005.
The Pepsi Bottling Group
In addition to approximately 35% and
38% of PBG’s outstanding common stock
that we own at year-end 2007 and 2006,
respectively, we own 100% of PBG’s class
B common stock and approximately 7%
of the equity of Bottling Group, LLC, PBG’s
principal operating subsidiary. Bottling
equity income includes $174 million,
$186 million and $126 million of pre-tax
gains on our sales of PBG stock in 2007,
2006 and 2005, respectively.
Our investment in PBG, which includes
the related goodwill, was $507 million
and $500 million higher than our owner-
ship interest in their net assets at year-end
2007 and 2006, respectively. Based upon
the quoted closing price of PBG shares at
year-end 2007 and 2006, the calculated
market value of our shares in PBG
exceeded our investment balance, exclud-
ing our investment in Bottling Group, LLC,
by approximately $1.7 billion and
$1.4 billion, respectively.
Additionally, in 2007, we formed a
joint venture with PBG, comprising our
concentrate and PBG’s bottling businesses
in Russia. PBG holds a 60% majority
interest in the joint venture and con-
solidates the entity. We account for our
interest of 40% under the equity method
of accounting.
PBG’s summarized fi nancial information is as follows:
2007 2006 2005
Current assets $ 3,086 $ 2,749
Noncurrent assets
10,029 9,178
Total assets $13,115 $11,927
Current liabilities $ 2,215 $2,051
Noncurrent liabilities 7,312 7,252
Minority interest 973 540
Total liabilities $10,500 $9,843
Our investment $2,022 $1,842
Net revenue $13,591 $12,730 $11,885
Gross profit $6,221 $5,830 $5,540
Operating profit $1,071 $1,017 $1,023
Net income $532 $522 $466
75