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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
You should read the following discussion in conjunction with our audited financial statements and the related
notes thereto included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking
statements that are based on management’s current expectations, estimates and projections about our business and
operations. Our actual results may differ materially from those currently anticipated and expressed in such forward-
looking statements as a result of various factors including the factors we describe under “Special Note Regarding
Forward-Looking Statements”, “Risk Factors,” and elsewhere in this Annual Report on Form 10-K.
The periods presented in this section are the years ended December 31, 2008, 2007 and 2006, which we refer to
as “2008,” “2007” and “2006”, respectively. The following discussion and analysis includes the effects of the
restatement of net sales as discussed in Note 1 of the Notes to the Audited Consolidated Financial Statements.
Business Overview
We are a leading integrated brand owner, bottler and distributor of non-alcoholic beverages in the United
States, Canada and Mexico with a diverse portfolio of flavored CSDs and NCBs, including ready-to-drink teas,
juices, juice drinks and mixers. Our brand portfolio includes popular CSD brands such as Dr Pepper, 7UP, Sunkist,
A&W, Canada Dry, Schweppes, Squirt and Peñafiel, and NCB brands such as Snapple, Mott’s, Hawaiian Punch,
Clamato, Mr & Mrs T, Margaritaville and Rose’s. Our largest brand, Dr Pepper, is a leading flavored CSD in the
United States according to The Nielsen Company. We have some of the most recognized beverage brands in North
America, with significant consumer awareness levels and long histories that evoke strong emotional connections
with consumers.
We operate primarily in the United States, Mexico and Canada and we also distribute our products in the
Caribbean. In 2008, 89% of our net sales were generated in the United States, 4% in Canada and 7% in Mexico and
the Caribbean.
Our Business Model
We operate as a brand owner, a bottler and a distributor.
Our Brand Ownership Businesses. As a brand owner, we build our brands by promoting brand awareness
through marketing, advertising and promotion and by developing new and innovative products and product line
extensions that address consumer preferences and needs. As the owner of the formulas and proprietary know-how
required for the preparation of beverages, we manufacture, sell and distribute beverage concentrates and syrups
used primarily to produce CSDs and we manufacture, bottle, sell and distribute primarily finished NCBs. Most of
our sales of beverage concentrates are to bottlers who manufacture, bottle, sell and distribute our branded products
into retail channels. We also manufacture, sell and distribute syrups for use in beverage fountain dispensers to
restaurants and retailers, as well as to fountain wholesalers, who resell it to restaurants and retailers. In addition, we
distribute finished NCBs through ourselves and through third party distributors.
Our beverage concentrates and syrup brand ownership businesses are characterized by relatively low capital
investment, raw materials and employee costs. Although the cost of building or acquiring an established brand can
be significant, established brands typically do not require significant ongoing expenditures, other than marketing,
and therefore generate relatively high margins. Our finished beverages brand ownership business has characteristics
of both of our beverage concentrates and syrup brand ownership businesses as well as our bottling and distribution
businesses discussed below.
Our Bottling and Distribution Businesses. We manufacture, bottle, sell and distribute finished CSDs from
concentrates and finished NCBs and products mostly from ingredients other than concentrates. We sell and
distribute finished beverages and other products primarily into retail channels either directly to retail shelves or to
warehouses through our large fleet of delivery trucks or through third party logistics providers.
Our bottling and distribution businesses are characterized by relatively high capital investment, raw material,
selling and distribution costs, in each case compared to our beverage concentrates and syrup brand ownership
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