Snapple 2010 Annual Report Download - page 54
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Selling, general and administrative (“SG&A”) expenses increased for 2009 primarily due to an increase in compensation-
related costs and an increase in advertising and marketing of $53 million, partially offset by decreased transportation and
warehousing costs of $69 million driven by supply chain network optimization efforts in addition to a decrease in fuel costs and
carrier rates. In connection with our separation from Cadbury, we incurred transaction costs and other one time costs of $33 million
for the year ended December 31, 2008.
Interest Expense, Interest Income and Other Income
Interest expense decreased $14 million compared with the year ago period. Interest expense for the year ended December 31,
2009, reflects our capital structure as a stand-alone company and principally relates to our Term Loan Afacility and senior unsecured
notes. As the Term Loan A was fully repaid prior to its maturity in December 2009, the Company recorded a $30 million expense
from the write-off of deferred financing fees and $7 million expense from the de-designation of a cash flow hedge associated with
the Term Loan A in interest expense. During the year ended December 31, 2008, we incurred $26 million related to our bridge
loan facility, including $21 million of financing fees expensed when the bridge loan facility was terminated on April 30, 2008,
and additional interest expense on debt balances with subsidiaries of Cadbury prior to our separation.
The $28 million decrease in interest income was primarily due to the loss of interest income earned on note receivable balances
with subsidiaries of Cadbury prior to our separation.
Other income of $22 million in 2009 includes $6 million related to indemnity income associated with the Tax Indemnity
Agreement with Cadbury and an additional $16 million of one-time separation related items resulting from an audit settlement
during the third quarter of 2009.
Provision for Income Taxes
The effective tax rates for 2009 and 2008 were 36.3% and 16.3%, respectively. The 2009 tax rate is higher than 2008 primarily
because the 2008 tax rate reflects that the tax benefit provided on the 2008 impairment charge is at an effective rate lower than
our statutory rate primarily due to limits on the tax benefit provided against goodwill. However, the 2009 tax rate also includes a
reduced level of nonrecurring separation related costs, benefits due to tax planning, and decreased state tax rates which reduced
our deferred tax liabilities. These benefits were partly offset by additional tax expense related to a change in Mexican tax law
enacted in the fourth quarter.
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