Snapple 2010 Annual Report Download - page 112

DR PEPPER SNAPPLE GROUP, INC.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table summarizes the expected future benefit payments cash activity for the Company’s pension and
postretirement medical plans in the future (in millions):
Pension plans
Postretirement medical plans
2011
$16
1
2012
$16
1
2013
$17
1
2014
$18
1
2015
$20
1
2016-2020
$ 102
3
Actuarial Assumptions
The Company’s pension expense was calculated based upon a number of actuarial assumptions including discount rate,
retirement age, compensation rate increases, expected long-term rate of return on plan assets for pension benefits and the
healthcare cost trend rate related to its postretirement medical plans.
The discount rate utilized to determine the Company's projected benefit obligations as of December 31, 2010 and projected
2011 net periodic benefit cost for U.S. plans reflects the current rate at which the associated liabilities could be effectively
settled as of the end of the year. The Company set its rate to reflect the yield of a portfolio of high quality, fixed-income debt
instruments that would produce cash flows sufficient in timing and amount to settle projected future benefits.
The discount rate that was utilized to determine the Company’s projected benefit obligations as of December 31, 2009 for
U.S. plans was selected based upon an interest rate yield curve. The yield curve was constructed based on the yields of over
400 high-quality, non-callable corporate bonds with maturities between zero and 30 years as of December 31, 2009. The
population of bonds utilized to calculate the discount rate included those having an average yield between the 40th and 90th
percentiles. Projected cash flows from the U.S. plans were then matched to spot rates along that yield curve in order to
determine their present value and a single equivalent discount rate was calculated that produced the same present value as the
spot rates.
For the year ended December 31, 2010 and 2009, the expected long-term rate of return on U.S. pension fund assets held by
the Company’s pension trusts was determined based on several factors, including the impact of active portfolio management
and projected long-term returns of broad equity and bond indices. The plans’ historical returns were also considered. The
expected long-term rate of return on the assets in the plans was based on an asset allocation assumption of approximately 25%
with equity managers, with expected long-term rates of return of approximately 9.40%, and approximately 75% with fixed
income managers, with an expected long-term rate of return of approximately 5.50% for the year ended December 31, 2010.
The expected long-term rate of return on the assets in the plans was based on an asset allocation assumptions of approximately
35% with equity managers, with expected long-term rates of return of approximately 8.50%, and approximately 65% with fixed
income managers, with an expected rate of return of approximately 5.50% for the year ended December 31, 2009.
The following table summarizes the weighted-average assumptions used to determine benefit obligations at the plan
measurement dates for U.S. plans:
Weighted-average discount rate
Rate of increase in compensation levels
Pension Plans
2010
5.60%
3.50%
2009
5.90%
3.50%
Postretirement
Medical Plans
2010
5.60%
N/A
2009
5.90%
N/A
The following table summarizes the weighted average actuarial assumptions used to determine the net periodic benefit costs for
U.S. plans for the years ended December 31, 2010, 2009 and 2008:
Weighted-average discount rate
Expected long-term rate of return on assets
Rate of increase in compensation levels
Pension Plans
2010
5.52%
7.00%
3.50%
2009
6.50%
7.30%
3.50%
2008
6.00%
7.30%
3.50%
Postretirement
Medical Plans
2010
5.57%
7.00%
N/A
2009
6.50%
7.30%
N/A
2008
6.00%
7.30%
N/A
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