UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

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

For the quarterly period ended April 2, 2005

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

For the transition period from _______ to _______

Commission File Number 001-15019

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

Registrant's telephone number, including area code (612) 661-4000

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

As of April 29, 2005, the Registrant had 137,207,969 outstanding shares of common stock, par value $0.01 per share, the Registrant's only class of common stock.

PEPSIAMERICAS, INC.
FORM 10-Q
FIRST QUARTER 2004

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

Item 1.    Financial Statements

PEPSIAMERICAS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited and in millions, except per share data)

PEPSIAMERICAS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited and in millions, except per share data)

PEPSIAMERICAS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited and in millions)

PEPSIAMERICAS, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

        The following table summarizes activity associated with the special charges (in millions):

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

        The preparation of the Condensed Consolidated Financial Statements in conformity with United States generally accepted accounting principles requires management to use estimates. These estimates are made using management’s best judgment and the information available at the time these estimates are made, including the advice of outside experts. For a better understanding of our significant accounting policies used in preparation of the Condensed Consolidated Financial Statements, please refer to our Annual Report on Form 10-K for the fiscal year 2004. We focus your attention on the following critical accounting policies:

RESULTS OF OPERATIONS
2005 FIRST QUARTER COMPARED WITH 2004 FIRST QUARTER

        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 the acquisition of CIC 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 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. Cost of goods sold per unit is the cost of goods sold for our core business divided by the related number of cases and gallons sold.

        Our business is highly seasonal; accordingly, the operating results of any individual quarter may not be indicative of a full year’s operating results.

Volume

        Sales volume growth (declines) for the first quarter of 2005 and 2004 were as follows:

        First quarter 2005 worldwide volume increased 6.1 percent compared to the prior year first quarter. The growth in worldwide volume was attributed to volume growth in the U.S. and Caribbean of 8.2 percent and 12.5 percent, respectively. This volume growth was offset by a volume decline of 8.2 percent in Central Europe. We anticipate worldwide volume growth for the full year to be approximately nine to ten percent, which includes the incremental growth attributed to the CIC acquisition. On a constant territory basis, which excludes the impact of the CIC acquisition, we anticipate worldwide volume growth of approximately two to three percent in fiscal year 2005.

        The increase in U.S. volume of 8.2 percent in the first quarter of 2005 reflected the incremental volume generated by the CIC acquisition completed in January 2005. The addition of the CIC territories increased U.S. volumes by 7.2 percent. The remaining volume growth in the U.S. reflected contributions from non-carbonated beverages, which grew at a double-digit rate in the first quarter of 2005. This growth was driven by growth in Aquafina volume, which included the introduction of Aquafina Flavor Splash and Aquafina Sparkling in the first quarter of 2005. Aquafina volume growth was also driven by increased promotional efforts in our large format channel. Volume growth in the U.S. was also benefited by the early timing of the Easter holiday, which fell in the first quarter. In the previous year, volume associated with the Easter holiday was reflected in the second quarter results. The growth in non-carbonated beverages was partially offset by the decline in our carbonated soft drink portfolio. We experienced mid single-digit growth in our diet category, offset by volume declines in brand Pepsi, while Trademark Mountain Dew was flat. Our single-serve category grew at a single-digit rate in the first quarter of 2005. This growth was driven, in part, by the reformulation of Wild Cherry Pepsi, Cherry Vanilla Dr Pepper, and Pepsi One. We believe that product innovation, including the introduction of Pepsi Lime in the second quarter of 2005 and further expansion of the non-carbonated beverage category, will continue to contribute to volume growth for the balance of fiscal year 2005.

        Total volume in Central Europe decreased 8.2 percent in the first quarter of 2005. The decline is consistent with prior quarters as the markets in which we operate continue to adjust to the impact of the May 2004 accession into the European Union (“EU”). In addition, we are lapping the successful results of the first quarter of 2004 water promotion in our markets. We have experienced sequential improvement in our volume performance since the EU accession. We continue to operate in a very competitive pricing environment, and we have responded by introducing the Slice brand in Central Europe to compete with private label products. The decrease in volume was driven by double-digit declines in the water category, reflecting the previous year’s water promotion, offset by single-digit growth in carbonated soft drinks. We anticipate that the volume trend will improve during the balance of the year as we begin to lap soft results during the last three quarters of fiscal year 2004.

        Volumes in the Caribbean increased 12.5 percent in the first quarter of 2005 compared to the same period last year. Volume growth was driven by the incremental volume provided by the Bahamas due to the lapping of the consolidation of the Bahamas starting in March 2004 and strong volume growth in Puerto Rico and Jamaica. Volume growth was primarily driven by contributions from carbonated soft drinks with volume growth in single-serve and take-home can packaging. Mid single-digit growth in Trademark Pepsi, double-digit growth in Trademark Mountain Dew and double-digit growth in flavored carbonated soft drinks also drove the volume increase. Trademark Pepsi accounts for almost 60 percent of our business in the Caribbean, while the remainder of our business is mainly comprised of flavored carbonated soft drinks and Trademark Seven Up.

Net Sales

        Net sales and net pricing statistics for the first quarter of 2005 and 2004 were as follows (dollar amounts in millions):

        Net sales increased $91.8 million, or 12.4 percent, to $829.4 million in the first quarter of 2005 compared to $737.6 million the first quarter of 2004. The increase was driven primarily by increased worldwide net pricing of 5.1 percent and volume growth in the U.S. and Caribbean, offset by volume declines in Central Europe. We anticipate that worldwide net pricing will grow three to four percent in fiscal year 2005 compared to fiscal year 2004.

        Net sales in the U.S. for the first quarter of 2005 increased $75.7 million, or 11.9 percent, to $712.0 million from $636.3 million in the prior year first quarter. The increase was primarily the result of the incremental net sales contributed by CIC, which represented more than half of the increase in net sales in the U.S. The remainder of the increase in net sales was primarily due to the 3.0 percent increase in net pricing along with a 1.0 percent increase in volume on a constant territory basis. The improvement in net pricing was driven by price increases of 2.6 percent and a package mix contribution of 0.4 percent. The increase in pricing reflected our initiative to grow the single-serve category. Also driving net sales during the first quarter of 2005 was the timing of the Easter holiday, which fell during the first quarter of 2005 versus falling in the second quarter of 2004. Additionally, successful promotional efforts early in the quarter associated with the Superbowl and continued innovation with the reformulation of Wild Cherry Pepsi, Cherry Vanilla Dr Pepper, Pepsi One, and the Aquafina product extension drove the net sales increase.

        Net sales in Central Europe for the first quarter of 2005 increased $9.7 million, or 16.1 percent, to $70.1 million from $60.4 million in the prior year first quarter. The increase was primarily due to the impact of foreign currency translation, which contributed $10.3 million to net sales. Net sales were also impacted by an increase in net pricing of 18.9 percent, partly offset by a volume decline of 8.2 percent. The increase in net pricing was partly due to the lapping of the first quarter of 2004 water promotion that drove significant volume growth. In addition, we increased our pricing in anticipation of raw material cost increases, primarily sugar costs, commensurate with the accession into the EU in May 2004.

        Net sales in the Caribbean increased 15.6 percent in the first quarter of 2005 to $47.3 million from $40.9 million in the prior year first quarter. The increase was a result of both volume growth of 12.5 percent and an increase in net pricing of 3.5 percent. The increase in net pricing was mainly due to an increase in pricing in the single-serve category and a favorable shift in mix to the non-carbonated beverage category. Approximately one-third of the increase in revenue was due to the acquisition of a majority interest in the Bahamas in March 2004, which resulted in the Bahamas being fully consolidated into our operating results beginning in March 2004.

Cost of Goods Sold

        Cost of goods sold for the first quarter of 2005 and 2004 was as follows (dollar amounts in millions):

        Cost of goods sold increased $54.6 million, or 12.9 percent, to $479.1 million in the first quarter of 2005 from $424.5 million in the prior year first quarter. This increase was driven primarily by higher volume and higher costs for raw materials, including aluminum, resin and fuel worldwide and sugar in Central Europe. Cost of goods sold per unit increased 4.9 percent in the first quarter 2005 compared to the same period in 2004. Overall, we expect that cost of goods sold per unit will grow four to five percent during fiscal year 2005 as compared to the prior fiscal year.

        In the U.S., cost of goods sold increased $39.5 million, or 11.0 percent, to $398.8 million in the first quarter of 2005 from $359.3 million in the prior year first quarter. This increase was primarily driven by the incremental cost of goods sold contributed by CIC, increased volumes on a constant territory basis of 1.0 percent and a higher cost of goods sold per unit. Cost of goods sold per unit increased 1.8 percent in the U.S., primarily driven by price increases in aluminum, resin and fuel.

        In Central Europe, cost of goods sold increased $10.5 million, or 30.5 percent, to $44.9 million in the first quarter of 2005, compared to $34.4 million in the prior year first quarter. Cost of goods sold increased mainly due to increased sugar and resin prices and the unfavorable impact of foreign currency translation of $3.8 million, offset partially by a volume decline of 8.2 percent.

        In the Caribbean, cost of goods sold increased $4.6 million, or 14.9 percent, to $35.4 million in the first quarter of 2005, compared to $30.8 million in the first quarter of 2004. The increase was mainly driven by volume growth of 12.5 percent and a modest increase in cost of goods sold per unit. The cost of goods sold per unit increased due to increases in the prices for aluminum, resin, fuel, and utilities.

Selling, Delivery and Administrative Expenses

        Selling, delivery and administrative expenses for the first quarter of 2005 and 2004 were as follows (dollar amounts in millions):

        In the first quarter of 2005, selling, delivery and administrative (“SD&A”) expenses increased $29.9 million, or 11.4 percent, to $292.7 million from $262.8 million in the comparable period of the previous year. As a percentage of net sales, SD&A expenses decreased to 35.3 percent in the first quarter of 2005, compared to 35.6 percent in the prior year first quarter. The decline in SD&A expenses as a percentage of net sales was primarily attributed to lower operating costs achieved in Central Europe associated with cost reduction programs implemented during fiscal year 2004 and the first quarter of 2005. We expect increases of eleven to twelve percent in SD&A expenses for fiscal year 2005 compared to fiscal year 2004. The CIC acquisition is expected to contribute approximately seven percent of the increase.

        In the U.S., SD&A expenses increased $28.3 million, or 13.0 percent, to $246.1 million in the first quarter of 2005, compared to $217.8 million in the prior year first quarter. The increase in SD&A expenses in the first quarter of 2005 was due, in part, to the impact of the CIC acquisition, which represented approximately 60 percent of the increase. The remainder of the increase was due to increases in insurance, employee benefits and fuel costs. SD&A expenses as a percentage of net sales increased to 34.6 percent compared to 34.2 percent in the prior year first quarter, reflecting these increased costs.

        In Central Europe, SD&A expenses increased $0.1 million, or 0.3 percent, to $33.0 million in the first quarter of 2005 from $32.9 million in the prior year first quarter. The increase in SD&A expenses was driven by unfavorable foreign currency translation, which contributed $3.7 million, offset by the decrease in operating costs associated with our cost reduction programs implemented in fiscal year 2004 and the first quarter of 2005.

        In the Caribbean, SD&A expenses increased $1.5 million, or 12.4 percent, to $13.6 million in the first quarter of 2005 from $12.1 million in the prior year first quarter due mainly to higher volumes and the impact of acquiring a majority interest in the Bahamas and fully consolidating their results beginning in March 2004. During the first quarter of 2005, we also renegotiated our collective bargaining agreement in Puerto Rico, which will be in effect until 2009.

Special Charges

        In the first quarter of 2005, we recorded special charges of $2.5 million ($1.6 million after tax) in Central Europe primarily for 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. We anticipate that the programs that gave rise to these charges and charges incurred in the fourth quarter of 2004 will result in annual savings in Central Europe in the range of $3.5 million to $4.0 million once the programs are completed. Special charges of $0.2 million ($0.1 million after tax) were recorded in the first quarter of 2004 in Central Europe primarily for severance costs and other related benefits.

Operating Income (Loss)

        Operating income (loss) for the first quarter of 2005 and 2004 was as follows (dollar amounts in millions):

        Operating income increased $5.0 million, or 10.0 percent, to $55.1 million in the first quarter of 2005, compared to $50.1 million in the prior year first quarter, driven by a $7.9 million increase in operating income in the U.S., offset in part by the increase of operating losses in Central Europe of $3.2 million. The increase in operating income in the U.S. benefited from the operating income contributed by the CIC acquisition, which accounted for approximately 60 percent of the operating income increase in the U.S. The remaining increase in operating income in the U.S. was attributed to increased volume, up 1.0 percent on a constant territory basis, and improved pricing, up 3.0 percent. Operating income, including the contribution provided by CIC, is expected to increase eleven to thirteen percent for fiscal year 2005.

        Operating losses in Central Europe increased $3.2 million to $10.3 million in the first quarter of 2005, compared to an operating loss of $7.1 million in the prior year first quarter, due primarily to the special charges of $2.5 million recorded in the first quarter of 2005. The remaining decline was due to the decline in volume and higher raw material costs. The impact of foreign currency translation benefited operating results in Central Europe by approximately $2.8 million.

        The operating performance in the Caribbean improved, as operating losses in the Caribbean of $1.7 million in the first quarter of 2005 were $0.3 million lower than the operating losses of $2.0 million in the prior year. Volume growth and increases in net pricing contributed to this improvement.

Interest and Other Expenses

        Net interest expense increased $3.2 million in the first quarter of 2005 to $19.1 million, compared to $15.9 million in the first quarter of 2004, due primarily to the issuance of $300 million of fixed-rate debt in January 2005 to fund the acquisition of CIC and higher average balances on our variable-rate debt. We anticipate total interest expense for fiscal year 2005 will be approximately $85 million.

        We recorded other expense, net, of $2.7 million in the first quarter of 2005 compared to other expense, net, of $1.4 million reported in the first quarter of 2004. The increase in other expense, net, was due primarily to foreign currency transaction losses of $1.3 million in the current quarter compared to foreign currency transaction gains of $0.4 million in the previous year’s first quarter.

Income Taxes

        The effective income tax rate, which is income tax expense expressed as a percentage of income before income taxes, was 37.7 percent for the first quarter of 2005, compared to 37.5 percent in the first quarter of 2004. The effective income tax rate changed primarily due to the impact of a higher effective state income tax rate in the current year.

Net Income

        Net income increased $0.3 million to $20.8 million in the first quarter of 2005, compared to $20.5 million in the first quarter of 2004. The discussion of our operating results, included above, explains the increase in net income.

LIQUIDITY AND CAPITAL RESOURCES

        Operating Activities. Net cash provided by operating activities decreased by $2.5 million to $34.8 million in the first quarter of 2005, compared to $37.3 million in the first quarter of 2004. This decrease can mainly be attributed to a reduction in accounts receivable sold under our accounts receivable securitization program of $14.0 million compared to a benefit from the securitization program in the previous year’s first quarter of $25.0 million. In addition, the decline was caused by a lower benefit from changes in primary working capital due to increases in accounts receivable and inventory, reflecting the timing of the Easter holiday. These decreases were offset by a greater benefit provided by other assets and liabilities, which included the receipt of a federal tax refund of approximately $13.3 million in the first quarter of 2005. Primary working capital is comprised of inventory, accounts payable and accounts receivable, excluding securitized receivables. The changes in primary working capital are expected to reverse in the second quarter of 2005 and benefit our cash flow from operating activities.

        Investing Activities. Investing activities in the first quarter of 2005 included capital investments of $25.3 million, compared to $19.8 million in the first quarter of 2004. The increase in capital expenditures was in line with our expectations, as we anticipate our capital spending to return to normalized levels in the range of $160 million to $170 million in fiscal year 2005, compared to capital investments of $121.8 million for fiscal year 2004.

        In January 2005, we completed the acquisition of CIC. We agreed to acquire the capital stock of CIC for a purchase price of $339.3 million plus $13.1 million related to an adjustment for working capital and $0.5 million for acquisition-related costs. At the date of closing, $8.4 million of the working capital adjustment was paid to seller and $4.7 million is included in “Other current liabilities” on the Condensed Consolidated Balance Sheet at the end of the first quarter of 2005. We expect to pay the remaining working capital adjustment in the second quarter of 2005. We also acquired the capital stock of FM Vending for $2.2 million, net of cash acquired.

        Financing Activities. Our total debt increased $404.2 million to $1,552.8 million at the end of the first quarter of 2005, from $1,148.6 million at the end of fiscal year 2004. In the first quarter of 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 reflected the reduction for discount and issuance costs. The proceeds from this issuance and borrowings from our commercial paper program funded the acquisition of CIC.

        We have a revolving credit facility under which we can borrow up to an aggregate of $500 million. This credit facility serves as a back up for our commercial paper program, and it is required by our credit rating agencies. Accordingly, we have a total of $500 million available under the commercial paper program and revolving credit facility combined. We had $162.0 million of commercial paper borrowings at the end of the first quarter of 2005, compared to $59.5 million at the end of fiscal year 2004. The increase in commercial paper borrowings was partly due to the funding of the CIC acquisition.

        During the first quarter of 2005, we repurchased 2.7 million shares of our common stock. In the same period in the prior year, we did not repurchase any shares of our common stock. The issuance of common stock, including treasury shares, for the exercise of stock options resulted in cash inflows of $22.5 million in the first quarter of 2005, compared to $43.9 million in the first quarter of 2004.

        On February 24, 2005, we announced that our Board of Directors declared a quarterly dividend of $0.085 per share on PepsiAmericas common stock for the first quarter of 2005. The dividend was payable April 1, 2005 to shareholders of record on March 15, 2005. We paid cash dividends of $11.7 million in the first quarter 2005 based on this quarterly cash dividend rate. In the first quarter of 2004, we paid cash dividends of $11.0 million based on a dividend rate of $0.075 per share.

        See the Annual Report on Form 10-K for fiscal year 2004 for a summary of our contractual obligations as of the end of fiscal year 2004. There were no significant changes to such contractual obligations in the first quarter of 2005 except as discussed in Note 9 to the Condensed Consolidated Financial Statements. We believe that our operating cash flows are sufficient to fund our existing operations for the foreseeable future. In addition, we believe that with our operating cash flows, available lines of credit, and the potential for additional debt and equity offerings, we will have sufficient resources to fund our future growth and expansion opportunities. 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 business or acquisitions with an appropriate economic return. Our primary focus is to continue to increase shareholder value through improving our adjusted return on invested capital.

        Discontinued operations. We continue to be subject to certain indemnification obligations, net of insurance, under agreements related to previously sold subsidiaries, including indemnification expenses for potential environmental and tort liabilities of these former subsidiaries. There is significant uncertainty in assessing our potential expenses for complying with our indemnification obligations, as the determination of such amounts is subject to various factors, including possible insurance recoveries and the allocation of liabilities among other potentially responsible and financially viable parties. Accordingly, the ultimate settlement and timing of cash requirements related to such indemnification obligations may vary significantly from the estimates included in our financial statements. At the end of the first quarter of 2005, we had recorded $102.4 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 (see Note 14 to the Condensed Consolidated Financial Statements), 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 $21.3 million at the end of the first quarter of 2005, of which $1.5 million is expected to be recovered in 2005 based on our expenditures, and thus, is included as a current asset.

        During the first quarters of 2005 and 2004, we paid approximately $2.4 million and $0.8 million, respectively, related to such indemnification obligations, net of insurance settlements of $0.6 million and $3.1 million, respectively, as well as the benefit of taxes. We expect to spend approximately $15 million to $25 million in fiscal year 2005 for remediation and other related costs, excluding possible insurance recoveries and the benefit of income taxes (see Note 14 to the Condensed Consolidated Financial Statements for further discussion of discontinued operations and related environmental liabilities).

RELATED PARTY TRANSACTIONS

        We are a licensed producer and distributor of Pepsi carbonated and non-carbonated soft drinks and other non-alcoholic beverages in the U.S., Central Europe and the Caribbean. We operate under exclusive franchise agreements with soft drink concentrate producers, including “master” bottling and fountain syrup agreements with PepsiCo, Inc. for the manufacture, packaging, sale and distribution of PepsiCo branded products. The franchise agreements exist in perpetuity and contain operating and marketing commitments and conditions for termination. As of the end of the first quarter of 2005, PepsiCo beneficially owned 41.5 of PepsiAmericas’ common stock.

        We purchase concentrate from PepsiCo to be used in the production of Pepsi carbonated soft drinks and other non-alcoholic beverages. PepsiCo also provides us with various forms of bottler incentives (marketing support programs) to promote Pepsi’s brands. These bottler incentives cover a variety of initiatives, including marketplace support, equipment-related programs, and shared media and advertising support. There are no conditions or requirements that could result in the repayment of any support payments we have received.

        We manufacture and distribute fountain products and provide fountain equipment service to PepsiCo customers in certain territories in accordance with various agreements. There are other products that we produce and/or distribute through various arrangements with PepsiCo or partners of PepsiCo. We also purchase finished beverage products from PepsiCo and certain of its affiliates including tea, concentrate and finished beverage products from a Pepsi/Lipton partnership, as well as finished beverage products from a Pepsi/Starbucks partnership.

        PepsiCo provides various procurement services under a shared services agreement. Under such agreement, PepsiCo negotiates with various suppliers the cost of certain raw materials by entering into raw material contracts on our behalf. PepsiCo also collects and remits to us certain rebates from the various suppliers related to our procurement volume. In addition, PepsiCo acts as our agent for the execution of derivative contracts associated with certain anticipated raw material purchases.

        We have an existing arrangement with a subsidiary of Pohlad Companies related to the joint ownership of an aircraft. This transaction is not material to our Condensed Consolidated Financial Statements. Robert C. Pohlad, our Chairman and Chief Executive Officer, is the President and owner of approximately 33 percent of the capital stock of Pohlad Companies.

        See additional discussion of our related party transactions in our Annual Report on Form 10-K for the fiscal year 2004.

FORWARD-LOOKING STATEMENTS

        This quarterly report on Form 10-Q contains certain forward-looking statements of expected future developments, as defined in the Private Securities Litigation Reform Act of 1995. The forward-looking statements in this Form 10-Q refer to the expectations regarding continuing operating improvement and other matters. These forward-looking statements reflect our expectations and are based on currently available data; however, actual results are subject to future risks and uncertainties, which could materially affect actual performance. Risks and uncertainties that could affect such future performance include, but are not limited to, the following: competition, including product and pricing pressures; changing trends in consumer tastes; changes in the our relationship and/or support programs with PepsiCo and other brand owners; market acceptance of new product offerings; weather conditions; cost and availability of raw materials; availability of capital; labor and employee benefit costs; unfavorable interest rate and currency fluctuations; costs of legal proceedings; outcomes of environmental claims and litigation; changing legislation; and general economic, business and political conditions in the countries and territories where we operate.

        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.

Item 3.     Quantitative and Qualitative Disclosures About Market Risk

        We are subject to various market risks, including risks from changes in commodity prices, interest rates and currency exchange rates, which are addressed below. In addition, please see Note 10 to the Condensed Consolidated Financial Statements.

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, natural gas, and diesel fuel. Because of the high correlation between such commodity prices and our cost of these products, we consider these hedges to be highly effective. As of the end of the first quarter of 2005, we have hedged a portion of our anticipated aluminum can and natural gas purchases through November 2005, and we have hedged a portion of our anticipated diesel fuel purchases through December 2005.

Interest Rates

        In the first quarter of 2005, the risk from changes in interest rates was not material to our operations because a significant portion of our debt issues represented fixed rate obligations. Our floating rate exposure relates to changes in the six-month London Interbank Offered Rank (“LIBOR”) rate and the overnight Federal Funds rate. Assuming consistent levels of floating rate debt with those held at the end of the first quarter of 2005, a 50 basis-point (0.5 percent) change in each of these rates would not have had a significant impact on our first quarter of 2005 interest expense. We had cash equivalents throughout the first quarter of 2005, principally invested in money market funds, which were most closely tied to overnight Federal Funds rates. Assuming a 50 basis-point change in the rate of interest associated with our cash equivalents at the end of the first quarter of 2005, interest income for the first quarter of 2005 would not have changed by a significant amount.

Currency Exchange Rates

        Because we operate in non-U.S. franchise territories, we are subject to risk resulting from changes in currency exchange rates. Currency exchange rates are influenced by a variety of economic factors including local inflation, growth, interest rates and governmental actions, as well as other factors. 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 14 percent of our total operations in the first quarter of 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 the first quarter of 2005, we estimate the impact on reported operating income for those periods would not have been significant. 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 4.     Controls and Procedures

Disclosure Controls and Procedures

        We maintain a system of disclosure controls and procedures that is designed to provide reasonable assurance that information, which is required to be disclosed in our periodic SEC filings, is accumulated and timely communicated to management. 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 team, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, at the end of the period covered by this report, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective.

Internal Control over Financial Reporting

        During the first 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. In making our assessment of changes in internal control over financial reporting as of April 2, 2005, management has excluded Central Investment Corporation (“CIC”) because the capital stock of such company was acquired in a purchase business combination during the quarter ended April 2, 2005. As of the purchase date of January 10, 2005, we wholly own CIC. CIC’s total net sales and assets represented approximately 5.4% and 9.8% of our consolidated total net sales and assets, respectively, as reflected in our condensed consolidated financial statements as of and for the period ended April 2, 2005.

PART II-OTHER INFORMATION

Item 1.     Legal Proceedings

        No new legal proceedings and no material changes to previously reported legal proceedings to be reported for the first quarter of 2005.

Item 2.     Unregistered Sales of Equity Securities and Use of Proceeds

         (c).    Our share repurchase program activity for each of the three months and the quarter ended April 2, 2005 was as follows:

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