Snapple 2008 Annual Report Download - page 92

Settlement of Related Party Balances
Upon the Company’s separation from Cadbury, the Company settled debt and other balances with Cadbury,
eliminated Cadbury’s net investment in the Company and purchased certain assets from Cadbury related to DPS’
business. As of December 31, 2008, the Company had receivable and payable balances with Cadbury pursuant to
the Separation and Distribution Agreement, Transition Services Agreement, Tax Indemnity Agreement, and
Employee Matters Agreement. The following debt and other balances were settled with Cadbury upon separation
(in millions):
Related party receivable .................................................. $ 11
Notes receivable from related parties ......................................... 1,375
Related party payable . ................................................... (70)
Current portion of the long-term debt payable to related parties ..................... (140)
Long-term debt payable to related parties ..................................... (2,909)
Net cash settlement of related party balances ................................... $(1,733)
Items Impacting the Statement of Operations
The following transactions related to the Company’s separation from Cadbury were included in the statement
of operations for the year ended December 31, 2008 (in millions):
Transaction costs and other one time separation costs(1) ............................. $33
Costs associated with the bridge loan facility(2) ................................... 24
Incremental tax expense related to separation, excluding indemnified taxes................ 11
Impact of Cadbury tax election(3) .............................................. 5
(1) DPS incurred transaction costs and other one time separation costs of $33 million for the year ended
December 31, 2008. These costs are included in selling, general and administrative expenses in the statement
of operations.
(2) The Company incurred $24 million of costs for the year ended December 31, 2008, associated with the
$1.7 billion bridge loan facility which was entered into to reduce financing risks and facilitate Cadbury’s
separation of the Company. Financing fees of $21 million, which were expensed when the bridge loan facility
was terminated on April 30, 2008, and $5 million of interest expense were included as a component of interest
expense, partially offset by $2 million in interest income while in escrow.
(3) The Company incurred a charge to net income of $5 million ($9 million tax charge offset by $4 million of
indemnity income) caused by a tax election made by Cadbury in December 2008.
Items Impacting Income Taxes
The consolidated financial statements present the taxes of the Company’s stand alone business and contain
certain taxes transferred to DPS at separation in accordance with the Tax Indemnity Agreement agreed between
Cadbury and DPS. This agreement provides for the transfer to DPS of taxes related to an entity that was part of
Cadbury’s confectionery business and therefore not part of DPS’ historical consolidated financial statements. The
consolidated financial statements also reflect that the Tax Indemnity Agreement requires Cadbury to indemnify
DPS for these taxes. These taxes and the associated indemnity may change over time as estimates of the amounts
change. Changes in estimates will be reflected when facts change and those changes in estimate will be reflected in
the Company’s statement of operations at the time of the estimate change. In addition, pursuant to the terms of the
Tax Indemnity Agreement, if DPS breaches certain covenants or other obligations or DPS is involved in certain
change-in-control transactions, Cadbury may not be required to indemnify the Company for any of these
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DR PEPPER SNAPPLE GROUP, INC.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)