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84 PepsiCo, Inc. 2008 Annual Report
Notes to Consolidated Financial Statements
Note 8 Noncontrolled Bottling Afliates
Our most signicant noncontrolled bottling afliates are PBG
and PAS. Sales to PBG reected approximately 8%, 9% and 10%
of our total net revenue in 2008, 2007 and 2006, respectively.
THE PEPSI BOTTLING GROUP
In addition to approximately 33% and 35% of PBG’s outstanding
common stock that we owned at year-end 2008 and 2007,
respectively, we owned 100% of PBG’s class B common stock
and approximately 7% of the equity of Bottling Group, LLC,
PBG’s principal operating subsidiary.
PBG’s summarized nancial information is as follows:
2008 2007 2006
Current assets $÷3,141 $÷3,086
Noncurrent assets 9,841 10,029
Total assets $12,982 $13,115
Current liabilities $÷3,083 $÷2,215
Noncurrent liabilities 7,408 7,312
Minority interest 1,148 973
Total liabilities $11,639 $10,500
Our investment $÷1,457 $÷2,022
Net revenue $13,796 $13,591 $12,730
Gross prot $÷6,210 $÷6,221 $÷5,830
Operating prot $÷÷«649 $÷1,071 $÷1,017
Net income $÷÷«162 $÷÷«532 $÷÷«522
Our investment in PBG, which includes the related goodwill,
was $536 million and $507 million higher than our ownership
interest in their net assets at year-end 2008 and 2007, respec-
tively. Based upon the quoted closing price of PBG shares at
year-end 2008, the calculated market value of our shares in PBG
exceeded our investment balance, excluding our investment in
Bottling Group, LLC, by approximately $567 million.
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 consolidates the entity. We account for our interest of 40%
under the equity method of accounting.
During 2008, together with PBG, we jointly acquired Russia’s
leading branded juice company, Lebedyansky. Lebedyansky is
owned 25% and 75% by PBG and us, respectively. See Note 14
for further information on this acquisition.
PEPSIAMERICAS
At year-end 2008 and 2007, we owned approximately 43% and
44%, respectively, of the outstanding common stock of PAS.
PAS summarized nancial information is as follows:
2008 2007 2006
Current assets $÷«906 $÷«922
Noncurrent assets 4,148 4,386
Total assets $5,054 $5,308
Current liabilities $1,048 $÷«903
Noncurrent liabilities 2,175 2,274
Minority interest 307 273
Total liabilities $3,530 $3,450
Our investment $÷«972 $1,118
Net revenue $4,937 $4,480 $3,972
Gross prot $1,982 $1,823 $1,608
Operating prot $÷«473 $÷«436 $÷«356
Net income $÷«226 $÷«212 $÷«158
Our investment in PAS, which includes the related goodwill,
was $318 million and $303 million higher than our ownership
interest in their net assets at year-end 2008 and 2007, respec-
tively. Based upon the quoted closing price of PAS shares at
year-end 2008, the calculated market value of our shares in PAS
exceeded our investment balance by approximately $143 million.
Additionally, in 2007, we completed the joint purchase of
Sandora, LLC, a juice company in the Ukraine, with PAS. PAS
holds a 60% majority interest in the joint venture and consolidates
the entity. We account for our interest of 40% under the equity
method of accounting.
RELATED PARTY TRANSACTIONS
Our signicant related party transactions include our noncon-
trolled bottling afliates. We sell concentrate to these afliates,
which they use in the production of CSDs and non-carbonated
beverages. We also sell certain nished goods to these afliates,
and we receive royalties for the use of our trademarks for certain
products. Sales of concentrate and nished goods are reported
net of bottler funding. For further unaudited information on these
bottlers, see “Our Customers” in Management’s Discussion and
Analysis. These transactions with our bottling afliates are
reected in our consolidated nancial statements as follows:
2008 2007 2006
Net revenue $4,919 $4,874 $4,837
Selling, general and administrative
expenses $÷«131 $÷÷«91 $÷÷«87
Accounts and notes receivable $÷«153 $÷«163
Accounts payable and other current
liabilities $÷«104 $÷«106