Snapple 2010 Annual Report Download - page 65

Other Matters
Agreement with PepsiCo
On February 26, 2010, the Company completed the licensing of certain brands to PepsiCo following PepsiCo’s acquisition
of PBG and PAS.
Under the new licensing agreements, PepsiCo began distributing Dr Pepper, Crush and Schweppes in the U.S. territories
where these brands were previously being distributed by PBG and PAS.The same applies to Dr Pepper, Crush, Schweppes, Vernors
and Sussex in Canada; and Squirt and Canada Dry in Mexico.
Under the agreements, DPS received a one-time nonrefundable cash payment of $900 million. The new agreements have an
initial period of 20 years with automatic 20-year renewal periods, and will require PepsiCo to meet certain performance conditions.
The payment was recorded as deferred revenue and will be recognized as net sales ratably over the estimated 25-year life of the
customer relationship.
Additionally, in U.S. territories where it has a distribution footprint, DPS distributes certain owned and licensed brands,
including Sunkist soda, Squirt, Vernors, Canada Dry and Hawaiian Punch, that were previously distributed by PBG and PAS.
Agreement with The Coca-Cola Company
On October 4, 2010, the Company received a one-time nonrefundable cash payment of $715 million, completed the licensing
of certain brands to Coca-Cola following Coca-Cola's acquisition of CCE's North American Bottling Business and executed
separate agreements pursuant to which Coca-Cola will offer Dr Pepper and Diet Dr Pepper in local fountain accounts and the
Freestyle fountain program.
Under the new licensing agreements, Coca-Cola began distributing Dr Pepper in the U.S. and Canada Dry in the Northeast
U.S. where these brands were previously being distributed by CCE. The same applies to Canada Dry and C Plus in Canada. As
part of the U.S. licensing agreement, Coca-Cola has agreed to offer Dr Pepper and Diet Dr Pepper in its local fountain accounts.
The new agreements have an initial period of 20 years with automatic 20-year renewal periods, and will require Coca-Cola to
meet certain performance conditions.
Under a separate agreement, Coca-Cola has agreed to include Dr Pepper and Diet Dr Pepper brands in its Freestyle fountain
program. The Freestyle fountain program agreement has a period of 20 years. Additionally, in certain U.S. territories where it has
a distribution footprint, DPS will begin selling in early 2011 certain owned and licensed brands, including Canada Dry, Schweppes,
Squirt and Cactus Cooler, that were previously distributed by CCE.
Under these arrangements, DPS received a one-time nonrefundable cash payment of $715 million, which was recorded net,
as no competent or verifiable evidence of fair value could be determined for the significant elements in this arrangement. The total
cash consideration was recorded as deferred revenue and will be recognized as net sales ratably over the estimated 25-year life of
the customer relationship.
Critical Accounting Estimates
The process of preparing our consolidated financial statements in conformity with U.S. GAAP requires the use of estimates
and judgments that affect the reported amounts of assets, liabilities, revenue, and expenses. Critical accounting estimates are
both fundamental to the portrayal of a company’s financial condition and results and require difficult, subjective or complex
estimates and assessments. These estimates and judgments are based on historical experience, future expectations and other
factors and assumptions we believe to be reasonable under the circumstances. The most significant estimates and judgments are
reviewed on an ongoing basis and revised when necessary. Actual amounts may differ from these estimates and judgments. We
have identified the policies described below as our critical accounting estimates. See Note 2 of the Notes to our Audited
Consolidated Financial Statements for a discussion of these and other accounting policies.
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