Snapple 2010 Annual Report Download - page 48

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Net Sales
Net sales increased $105 million,or2%, for the year ended December 31, 2010 compared with the year ended December 31,
2009. The increase was primarily attributable to volume increases in NCBs, the favorable impact of foreign currency, concentrate
price increases, and $37 million in revenue recognized under the PepsiCo and Coca-Cola licenses. These increases were partially
offset by a $53 million decline in contract manufacturing, decreases in price/mix primarily attributable to CSDs, and an unfavorable
product mix.
Gross Profit
Gross profit increased $96 million,or3%, for the year ended December 31, 2010 compared with the year ended December 31,
2009. Gross margin of approximately 60% for the year ended December 31, 2010, was higher than the approximately 59% gross
margin for the year ended December 31, 2009, primarily due to the favorable product mix as a result of the decline in contract
manufacturing and ongoing supply chain efficiencies, partially offset by $19 million of higher expenses associated with labor, co-
packing, unfavorable yield, and an underabsorption of manufacturing overhead as a result of the strike at our Williamson, New
York manufacturing facility as we continued to produce product and service customers during this work stoppage, which ended
on September 13, 2010 and higher commodity costs.
Income from Operations
Income from operations decreased $60 million for the year ended December 31, 2010 compared with the year ended
December 31, 2009. The year ended December 31, 2009 included one-time gains of $62 million primarily related to the termination
of certain distribution agreements.
Our annual impairment analysis, performed as of December 31, 2010 and 2009, did not result in an impairment charge for
2010 and 2009.
There were no restructuring costs for the years ended December 31, 2010 and 2009.
Selling, general and administrative (“SG&A”) expenses increased $98 million for the year ended December 31, 2010 compared
with the year ended December 31, 2009. Significant drivers of the increase were primarily due to higher marketing spend related
to targeted marketing, changes in foreign currency, unfavorable comparison of the changes in fair value of commodity derivatives
used in the distribution process, higher benefit costs, the one-time transaction costs associated with PepsiCo and Coca-Cola
agreements, increased stock-based compensation costs, an unfavorable comparison of the actuarial adjustments for certain
insurance plans and higher productivity office investments. These increases were partially offset by lower compensation costs and
a one-time curtailment gain on certain U.S. postretirement medical plans.
Loss on Early Extinguishment of Debt
In December 2010, the Company completed a tender offer on a portion of the 2018 Notes and retired, at a premium, an
aggregate principal amount of approximately $476 million. The loss on early extinguishment of debt included the $96 million
premium for the tender offer, a $3 million write-off of a portion of the debt issuance costs and unamortized discount associated
with the 2018 Notes and $1 million of associated reacquisition costs.
Interest Expense and Other Income
Interest expense decreased $115 million compared with the year ago period, reflecting the repayment of our Term Loan A
during December 2009 and our Revolver in February 2010 combined with lower interest rates on our outstanding debt obligations
during 2010.
Other income of $21 million and $22 million in 2010 and 2009, respectively, is primarily comprised of indemnity income
associated with the Tax Sharing and Indemnification Agreement (“Tax Indemnity Agreement”) with Kraft. For the year ended
December 31, 2010, indemnity income of $19 million included $10 million of benefits not expect to recur driven by our separation
related tax losses and the impact of a Canadian audit in 2010. For the year ended December 31, 2009, other income included
$6 million related to indemnity income associated with the Tax Indemnity Agreement and an additional $16 million of one-time
separation related items resulting from an audit settlement during the third quarter of 2009.
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