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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2014
or TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the transition period from to
Commission file number 001-33829
(Exact name of Registrant as specified in its charter)
Delaware 98-0517725
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
5301 Legacy Drive, Plano, Texas 75024
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code:
(972) 673-7000
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
COMMON STOCK, $0.01 PAR VALUE NEW YORK STOCK EXCHANGE
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange
Act. Yes No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files). Yes No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a
smaller reporting company. See the definitions of "large accelerated filer", "accelerated filer" and "smaller reporting company"
in Rule 12b-2 of the Securities Exchange Act of 1934.
Large Accelerated Filer Accelerated Filer Non-Accelerated Filer Smaller Reporting Company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of
1934). Yes No
The aggregate market value of the common equity held by non-affiliates of the registrant (assuming for these purposes, but
without conceding, that all executive officers and directors are "affiliates" of the registrant) as of June 30, 2014, the last business
day of the registrant's most recently completed second fiscal quarter, was $11,403,612,484 (based on the closing sales price of the
registrant's common stock on that date as reported on the New York Stock Exchange).
As of February 17, 2015, there were 192,962,748 shares of the registrant's common stock, par value $0.01 per share, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive proxy statement to be filed with the Securities and Exchange Commission in connection
with the registrant's Annual Meeting of Stockholders to be held on May 21, 2015 are incorporated by reference in Part III.

Table of contents

  • Page 1
    ... Texas 75024 (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: (972) 673-7000 Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Name of Each Exchange on Which Registered COMMON STOCK, $0.01 PAR VALUE NEW YORK STOCK...

  • Page 2
    ... and Financial Disclosure Controls and Procedures Other Information PART III. Item 10. Item 11. Item 12. Item 13. Item 14. Directors, Executive Officers of the Registrant and Corporate Governance Executive Compensation Security Ownership of Certain Beneficial Owners and Management and Related...

  • Page 3
    ... and health concerns; • the impact of new or proposed beverage taxes or regulations on our business; • the highly competitive markets in which we operate and our ability to compete with companies that have significant financial resources; • maintaining our relationships with our large retail...

  • Page 4
    PART I ITEM 1. BUSINESS OUR COMPANY Dr Pepper Snapple Group, Inc. is a leading integrated brand owner, manufacturer and distributor of non-alcoholic beverages in the United States ("U.S."), Canada and Mexico with a diverse portfolio of flavored (non-cola) carbonated soft drinks ("CSDs") and non-...

  • Page 5
    ... in the U.S. Flavors include orange, diet and other fruits Brand began as the all-natural orange flavor drink in 1906 • • • #2 ginger ale in the U.S. and Canada Brand includes club soda, tonic, sparkling seltzer water and other mixers First carbonated beverage in the world, invented in 1783...

  • Page 6
    ... and Mott's for Tots Apple sauce products include regular, unsweetened and flavored Brand began as a line of apple cider and vinegar offerings in 1842 A leading spicy tomato juice brand in the U.S., Canada and Mexico Key ingredient in Canada's popular cocktail, the Bloody Caesar, and mixed with beer...

  • Page 7
    ... in the ready-to-drink tea, juice, juice drinks, water and mixer categories. Our key NCB brands are Hawaiian Punch, Snapple, Mott's, and Clamato, and we also sell regional and smaller niche brands. We manufacture most of our NCBs as ready-to-drink beverages and distribute them through our own...

  • Page 8
    ... the sale of beverage concentrates or the bottling and distribution of our products. Additionally, our integrated business model enables us to be more flexible and responsive to the changing needs of our large retail customers by coordinating sales, service, distribution, promotions and product...

  • Page 9
    ... Packaged Beverages segment, through all major retail channels including supermarkets, fountains, mass merchandisers, club stores, vending machines, convenience stores, gas stations, small groceries, drug chains and dollar stores. Unlike the majority of our other CSD brands, 59% of Dr Pepper volumes...

  • Page 10
    ... coconut water, Nantucket Nectars, Mistic Garden Cocktail, Bai 5 and Rose's. Key CSD brands in this segment include 7UP, Dr Pepper, A&W, Canada Dry, Sunkist soda, Squirt, RC Cola, Big Red, Vernors, Diet Rite and Sun Drop. Approximately 83% of our 2014 Packaged Beverages net sales of branded products...

  • Page 11
    ..."), Kraft Foods Group, Inc. ("Kraft Foods") and The Campbell Soup Company ("Campbell Soup"). These competitors can use their resources and scale to rapidly respond to competitive pressures and changes in consumer preferences by introducing new products, reducing prices or increasing promotional...

  • Page 12
    ... include new and reformulated products, improved packaging design, pricing and enhanced availability. We use advertising, sponsorships, merchandising, public relations, promotions and social media to provide maximum impact for our brands and messages. We also apply a marketing return on investment...

  • Page 13
    ... U.S. and Mexico, respectively, and third party logistics providers on a selected basis. RAW MATERIALS The principal raw materials we use in our business are aluminum cans and ends, glass bottles, PET bottles and caps, paper products, sweeteners, juice, fruit, water and other ingredients. The cost...

  • Page 14
    ... CSDs, energy drinks, single-serve bottled water, non-alcoholic mixers and NCBs, including ready-to-drink teas, single-serve and multi-serve juice and juice drinks, and sports drinks. Nielsen also provides data on other food items such as apple sauce. Nielsen data we present in this report is from...

  • Page 15
    ..., including Nestle, Kraft Foods and Campbell Soup. These competitors can use their resources and scale to rapidly respond to competitive pressures and changes in consumer preferences by introducing new products, changing their route to market, reducing prices or increasing promotional activities. As...

  • Page 16
    ... reduce our prices or increase our spending on marketing, advertising and product innovation. Any of these could negatively affect our business and financial performance. We depend on a small number of large retailers for a significant portion of our sales. Food and beverage retailers in the...

  • Page 17
    ... December 31, 2014. Costs for commodities, such as raw materials and energy, may change substantially. The principal raw materials we use in our products are aluminum cans and ends, glass bottles, PET bottles and caps, paperboard packaging, sweeteners, juice, fruit, water and other ingredients. The...

  • Page 18
    ...business, provide information to management and prepare financial reports. We rely on third party providers for a number of key information systems and business processing services, including hosting our primary data center and processing various benefit-related accounting and transactional services...

  • Page 19
    .... For example, changes in recycling and bottle deposit laws or special taxes on soft drinks or ingredients could increase our costs. Regulatory focus on the health, safety and marketing of food products is increasing. Certain federal or state regulations or laws affecting the labeling of our...

  • Page 20
    ... 2014 Packaged Beverages net sales of branded products come from our owned and licensed brands, with the remaining from the distribution of third party brands such as Big Red, FIJI mineral water, AriZona tea, Vita Coco coconut water, Bai 5, Neuro drinks, Sparkling Fruit2O and Hydrive energy drinks...

  • Page 21
    ... corporate headquarters are located in Plano, Texas, in a facility that we own. The following table summarizes our significant properties by geography and by operating segment: Packaged Beverages Owned Leased United States: Office buildings(1) Manufacturing facilities Principal distribution centers...

  • Page 22
    ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 19

  • Page 23
    ...EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES In the U.S., our common stock is listed and traded on the New York Stock Exchange under the symbol "DPS". Information as to the high and low sales prices of our stock for the two years ended December 31, 2014 and 2013, and...

  • Page 24
    ... repurchases were authorized on July 12, 2010; and $1 billion of share repurchases were authorized on November 17, 2011. We repurchased approximately 6.8 million shares of our common stock, valued at approximately $400 million, in the year ended December 31, 2014. Our share repurchase activity, on...

  • Page 25
    ... reinvested quarterly. Comparison of Total Returns Assumes Initial Investment of $100 The Peer Group Index consists of the following companies: Coca-Cola, PepsiCo, Monster Beverage Corporation, Cott and National Beverage Corporation. We believe that these companies help to convey an accurate...

  • Page 26
    ... presents selected historical financial data for the years ended December 31, 2014, 2013, 2012, 2011 and 2010. All the selected historical financial data has been derived from our Audited Consolidated Financial Statements and is stated in millions of dollars except for per share information. You...

  • Page 27
    ..."2014", "2013" and "2012", respectively. OVERVIEW We are a leading integrated brand owner, manufacturer and distributor of non-alcoholic beverages in the U.S., Canada and Mexico with a diverse portfolio of flavored CSDs and NCBs, including ready-to-drink teas, juices, juice drinks, water and mixers...

  • Page 28
    ... innovation. We believe brand owners and bottling companies will continue to create new products and packages, such as beverages with new ingredients and new premium flavors and innovative convenient packaging, that address changes in consumer tastes and preferences. Changing retailer landscape. As...

  • Page 29
    ... brands and certain brands licensed to and/or distributed by us. Volume in Bottler Case Sales In addition to sales volume, we measure volume in bottler case sales ("volume (BCS)") as sales of packaged beverages, in equivalent 288 fluid ounce cases, sold by us and our bottling partners to retailers...

  • Page 30
    ..., 2014 increased approximately 8%. During the years ended December 31, 2014 and 2013, we repurchased 6.8 million and 8.7 million shares of our common stock, respectively, valued at approximately $400 million for both years. On October 31, 2014, we acquired certain assets of Davis Beverage Group, Inc...

  • Page 31
    ...grew 21% in our Latin America Beverages segment as a result of product and package innovation. Our Core 4 brands increased 2% compared to the year ago period, driven by an 8% increase in Canada Dry partially offset by a 1% decline in 7UP. A&W and Sunkist soda were both flat for the period. Schweppes...

  • Page 32
    ... the year ended December 31, 2014 compared with the year ended December 31, 2013. The primary drivers of the increase were favorable product and package mix, increased branded sales volume, higher pricing driven by the Mexican sugar tax and an increase in contract manufacturing. These drivers were...

  • Page 33
    ... Beverage Concentrates Packaged Beverages Latin America Beverages Net sales $ 1,228 4,361 532 6,121 $ 1,229 4,306 462 5,997 2013 $ $ For the Year Ended December 31, 2014 2013 Segment Results - SOP Beverage Concentrates Packaged Beverages Latin America Beverages Total SOP Unallocated corporate...

  • Page 34
    ... on our value products. Net Sales. Net sales increased $55 million for the year ended December 31, 2014 compared with the year ended December 31, 2013. Net sales increased due to favorable product mix, higher branded sales volumes, an increase in contract manufacturing and lower discounts, partially...

  • Page 35
    ... other brands in total were flat. Net Sales. Net sales increased $70 million for the year ended December 31, 2014 compared with the year ended December 31, 2013. Net sales increased as a result of higher pricing driven by the impact of the Mexican sugar tax, favorable mix and increased sales volume...

  • Page 36
    ... distribution gains in our juice and sauce categories. Our water category increased 3%, led by Aguafiel. Clamato increased 6%. Net Sales. Net sales increased $2 million for the year ended December 31, 2013 compared with the year ended December 31, 2012. The increase was attributable to favorable mix...

  • Page 37
    ... year, and increases in our net price realization. These favorable changes were offset by increases in our commodity costs, led by apples and sweeteners, the $30 million unfavorable comparison for the mark-to-market activity on commodity derivative contracts and unfavorable mix due to a higher mix...

  • Page 38
    ..., 2013 Net sales SOP $ 1,229 778 $ 2012 1,221 774 $ Change 8 4 Net Sales. Net sales increased $8 million for the year ended December 31, 2013, compared with the year ended December 31, 2012. The increase was due to an increase in concentrate prices, favorable product mix and lower discounts, which...

  • Page 39
    ... in Mott's as a result of distribution gains in our juice and sauce categories and increased promotional activity, a 2% increase in our water category and a 2% increase in Clamato. Snapple was flat for the period. Net Sales. Net sales decreased $52 million for the year ended December 31, 2013...

  • Page 40
    ...December 31, 2013 compared with the year ended December 31, 2012, primarily due to the gross margin impact of favorable product mix, increased sales volumes and ongoing productivity improvements. These favorable drivers were partially offset by increases in people costs, marketing investments, other...

  • Page 41
    ...date of issuance. We issue Commercial Paper for general corporate purposes as Commercial Paper is now a more significant part of our overall cash management strategy. The program is supported...ABR") or the Eurodollar rate, in each case plus an applicable margin which varies based upon our debt ratings...

  • Page 42
    ..., net of proceeds from disposal of property, plant and equipment, in an amount below 3.00% of our current year net sales. Cash used in investing activities for the year ended December 31, 2013, consisted primarily of purchases of property, plant and equipment of $179 million and cash paid to...

  • Page 43
    ...ended December 31, 2014 primarily related to machinery and equipment including production improvements in our Mexico facilities, our distribution fleet, IT investments and expansion and replacement of existing cold drink equipment. For the year ended December 31, 2013, capital expenditures primarily...

  • Page 44
    ... shares of common stock valued at approximately $400 million for the years ended December 31, 2014, 2013 and 2012, respectively. Refer to Part II, Item 5 "Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities" of this Annual Report on Form 10...

  • Page 45
    ... such amount that the renewal appeared reasonably assured at lease inception. Additionally, we changed our leasing strategy during the year ended December 31, 2014. As a result of this change, the Company converted a number of operating leases with a term less than twelve months into capital leases...

  • Page 46
    ... 4, 2010, we completed the licensing of certain brands to Coca-Cola following Coca-Cola's acquisition of CocaCola Enterprises' North American Bottling Business and executed separate agreements pursuant to which Coca-Cola began offering Dr Pepper and Diet Dr Pepper in local fountain accounts and...

  • Page 47
    ... goodwill or other indefinite lived intangible assets during the past three years. The effect of a 1% increase or decrease in the discount rate used to determine the fair value of the reporting unit or the indefinite lived intangible asset does not change our conclusion regarding the identification...

  • Page 48
    ...for future services or salary increases. Employee benefit plan obligations and expenses included in our Consolidated Financial Statements are determined from actuarial analyses based on plan assumptions, employee demographic data, years of service, compensation, benefits and claims paid and employer...

  • Page 49
    ..." of this Annual Report on Form 10-K for a discussion of recently issued accounting standards and recently adopted provisions of U.S. GAAP. ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk. We are exposed to market risks arising from changes in market rates and prices, including...

  • Page 50
    ... higher pricing may be limited by the competitive environment in which we operate. Our principal commodities risks relate to our purchases of PET, diesel fuel, corn (for high fructose corn syrup), aluminum, sucrose, apple juice concentrate, apples and natural gas (for use in processing and packaging...

  • Page 51
    ... Consolidated Statements of Changes in Stockholders' Equity for the years ended December 31, 2014, 2013 and 2012 Notes to Audited Consolidated Financial Statements 1. Business and Basis of Presentation 2. Significant Accounting Policies 3. Acquisitions 4. Inventories 5. Property, Plant and Equipment...

  • Page 52
    ...Dr Pepper Snapple Group, Inc. and subsidiaries (the "Company") as of December 31, 2014 and 2013, and the related consolidated statements of income, comprehensive income, changes in stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2014. These financial...

  • Page 53
    ... ACCOUNTING FIRM To the Board of Directors and Stockholders of Dr Pepper Snapple Group, Inc. We have audited the internal control over financial reporting of Dr Pepper Snapple Group, Inc. and subsidiaries (the "Company") as of December 31, 2014, based on Internal Control - Integrated Framework (2013...

  • Page 54
    DR PEPPER SNAPPLE GROUP, INC. CONSOLIDATED STATEMENTS OF INCOME For the Years Ended December 31, 2014, 2013 and 2012 (In millions, except per share data) For the Year Ended December 31, Net sales Cost of sales Gross profit Selling, general and administrative expenses Multi-employer pension plan ...

  • Page 55
    DR PEPPER SNAPPLE GROUP, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME For the Years Ended December 31, 2014, 2013 and 2012 (In millions) For the Year Ended December 31, 2014 Net income Other comprehensive income (loss), net of tax: Foreign currency translation adjustments Net change in ...

  • Page 56
    DR PEPPER SNAPPLE GROUP, INC. CONSOLIDATED BALANCE SHEETS As of December 31, 2014 and 2013 (In millions, except share and per share data) December 31, 2014 Assets Current assets: Cash and cash equivalents Accounts receivable: Trade, net Other Inventories Deferred tax assets Prepaid expenses and ...

  • Page 57
    DR PEPPER SNAPPLE GROUP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended December 31, 2014, 2013 and 2012 (In millions) For the Year Ended December 31, 2013 703 199 36 (65) 48 43 21 - (5) (8) (25) 58 29 (12) 1,022 (19) (170) (1) 8 (3) (185) - - (65) (400) (317) (16) 41 11 - (1) (747)...

  • Page 58
    ... PEPPER SNAPPLE GROUP, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY For the Years Ended December 31, 2014, 2013 and 2012 (In millions, except per share data) Accumulated Common Stock Issued Shares Balance as of January 1, 2012 Shares issued under employee stock-based compensation...

  • Page 59
    ... beverages ("NCBs"), including ready-to-drink teas, juices, juice drinks, mixers and water. The Company's brand portfolio includes popular CSD brands such as Dr Pepper, Canada Dry, 7UP, Squirt, Peñafiel, Crush, A&W, Sunkist soda and Schweppes, and NCB brands such as Snapple, Hawaiian Punch, Mott...

  • Page 60
    ...accounts receivable. The Company determines the required allowance for doubtful collections using information such as its customer credit history and financial condition, industry and market segment information, economic trends and conditions and credit reports. Allowances can be affected by changes...

  • Page 61
    ... useful life. Identifiable intangible assets deemed by the Company to have determinable finite useful lives are amortized on a straight-line basis over their estimated useful lives as follows: Type of Intangible Asset Brands Customer relationships Distribution rights Useful Life 10 years 10 years...

  • Page 62
    ... additional information. Capitalized Customer Incentive Programs The Company provides support to certain customers to cover various programs and initiatives to increase net sales, including contributions to customers or vendors for cold drink equipment used to market and sell the Company's products...

  • Page 63
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Fair Value The fair value of senior unsecured notes and marketable securities as of December 31, 2014 and 2013 are based on quoted market prices for publicly traded securities. The Company estimates fair ...

  • Page 64
    ... years ended December 31, 2014, 2013 and 2012, respectively. The amounts of trade spend are larger in the Packaged Beverages segment than those related to other parts of our business. Accruals are established for the expected payout based on contractual terms, volume-based metrics and/or historical...

  • Page 65
    ...expense in the Consolidated Statements of Income related to the fair value of employee stock-based awards. Compensation cost is based on the grant-date fair value, which is estimated using the Black-Scholes option pricing model for stock options. The fair value of restricted stock units ("RSUs") and...

  • Page 66
    ... On October 31, 2014, the Company acquired certain assets and liabilities of Davis Beverages Group, Inc. and Davis Bottling Co., Inc. ("Davis") to strengthen the Company's route to market in the U.S. and support efforts to build and enhance the Company's leading brands. The fair value of the...

  • Page 67
    ... Value Property, plant & equipment Distribution rights: definite-lived Distribution rights: indefinite-lived Goodwill Current liabilities, net of current assets assumed Total $ 7 2 10 5 (1) 23 Useful Life 3 - 40 years 5 - 15 years - - - $ The acquisition was accounted for as a business combination...

  • Page 68
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) 4. Inventories Inventories as of December 31, 2014 and 2013 consisted of the following (in millions): December 31, 2014 Raw materials Spare parts Work in process Finished goods Inventories at FIFO cost ...

  • Page 69
    ... of accounting. The carrying value of the investment was $13 million and $14 million as of December 31, 2014 and 2013, respectively. The Company also has a 40.4% investment in Hydrive Energy, LLC ("Hydrive"). On November 16, 2012, Hydrive sold its intellectual property rights to Big Red Holdings...

  • Page 70
    ... purchase of Davis. See Note 3 for further information related to the acquisition. As of December 31, 2014, the weighted average useful life of intangible assets with finite lives was 10 years for distribution rights, brands, customer relationships and in total. Amortization expense for intangible...

  • Page 71
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2014 Impairment Analysis Fair value is measured based on what each intangible asset or reporting unit would be worth to a third party market participant. For the annual impairment analysis performed as of ...

  • Page 72
    ... carrying amount includes the unamortized net discount on debt issuances and adjustments of $34 million and $18 million as of December 31, 2014 and 2013, respectively, related to the change in the fair value of interest rate swaps designated as fair value hedges. See Note 10 for further information...

  • Page 73
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) SHORT-TERM BORROWINGS AND CURRENT PORTION OF LONG-TERM OBLIGATIONS The following table summarizes the Company's short-term borrowings and current portion of long-term obligations as of December 31, 2014 ...

  • Page 74
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) The 2016 Notes On January 11, 2011, the Company completed the issuance of $500 million aggregate principal amount of the 2016 Notes at a discount of $1 million. The net proceeds from the issuance were used ...

  • Page 75
    ... DPS is exposed to market risks arising from adverse changes in interest rates; foreign exchange rates; and commodity prices affecting the cost of raw materials and fuels. The Company manages these risks through a variety of strategies, including the use of interest rate contracts, foreign...

  • Page 76
    ... cost structure. During the years ended December 31, 2014, 2013 and 2012, the Company held forward and future contracts that economically hedged certain of its risks. In these cases, a natural hedging relationship exists in which changes in the fair value of the instruments act as an economic offset...

  • Page 77
    ... SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) FAIR VALUE OF DERIVATIVE INSTRUMENTS The following table summarizes the location of the fair value of the Company's derivative instruments within the Consolidated Balance Sheets as of December 31, 2014 and 2013...

  • Page 78
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) IMPACT OF CASH FLOW HEDGES The following table presents the impact of derivative instruments designated as cash flow hedging instruments under U.S. GAAP to the Consolidated Statements of Income and ...

  • Page 79
    ... CONSOLIDATED FINANCIAL STATEMENTS (Continued) IMPACT OF FAIR VALUE HEDGES The following table presents the impact of derivative instruments designated as fair value hedging instruments under U.S. GAAP to the Consolidated Statements of Income for the years ended December 31, 2014, 2013 and 2012 (in...

  • Page 80
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) IMPACT OF ECONOMIC HEDGES The following table presents the impact of derivative instruments not designated as hedging instruments under U.S. GAAP to the Consolidated Statements of Income for the years ...

  • Page 81
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) 11. Other Non-Current Assets and Other Non-Current Liabilities The table below details the components of other non-current assets and other non-current liabilities as of December 31, 2014 and 2013 (in ...

  • Page 82
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) The provision (benefit) for income taxes has the following components (in millions): For the Year Ended December 31, 2014 2013 2012 Current: Federal State Non-U.S. Total current provision (benefit) Deferred...

  • Page 83
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Due to the completion of the IRS audit for the Company's 2006-2008 federal income tax returns in August 2013, DPS recognized a federal and state income tax benefit of $463 million primarily related to ...

  • Page 84
    .... The Company also files income tax returns in various foreign jurisdictions, principally Canada and Mexico. The U.S. and most state income tax returns for years prior to 2011 are closed to examination by applicable tax authorities. Canadian income tax returns are open for audit for tax years 2008...

  • Page 85
    ... Contents DR PEPPER SNAPPLE GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 13. Other Expense (Income), Net The table below details the components of other expense (income), net for the years ended December 31, 2014, 2013 and 2012 (in millions): For the Year Ended December 31, 2014...

  • Page 86
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Financial Statement Impact The following tables set forth amounts recognized in the Company's financial statements and the plans' funded status for the years ended December 31, 2014 and 2013 (in millions): ...

  • Page 87
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) The accumulated benefit obligations for the defined benefit pension plans were $223 million and $256 million as of December 31, 2014 and 2013, respectively. The pension plan assets and the projected benefit...

  • Page 88
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) The following table summarizes amounts included in AOCL for the plans as of December 31, 2014 and 2013 (in millions): Postretirement Medical Plans 2014 2013 (1) $ (2) $ 3 4 $ 2 $ 2 Prior service cost (...

  • Page 89
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) The following table summarizes the weighted-average assumptions used to determine benefit obligations at the plan measurement dates for U.S. plans: Postretirement Medical Plans 2014 2013 4.15% 5.00% N/A N/A...

  • Page 90
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Investment Policy and Strategy DPS has established formal investment policies for the assets associated with defined benefit plans. The Company's investment policy and strategy are mandated by the Company's...

  • Page 91
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) MULTI-EMPLOYER PLANS The Company participates in three trustee-managed multi-employer defined benefit pension plans for union-represented employees under certain collective bargaining agreements. The risks...

  • Page 92
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Individually Significant Multi-employer Plan The Company participates in the following individually significant multi-employer plan as of December 31, 2014: Central States, Southeast and Southwest Areas ...

  • Page 93
    ...EDC for the plan years ended December 31, 2014, 2013 and 2012. 15. Fair Value Under U.S. GAAP, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. U.S. GAAP provides...

  • Page 94
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Fair Value Measurements at December 31, 2013 Quoted Prices in Active Significant Markets for Other Significant Identical Observable Unobservable Assets Inputs Inputs Level 1 Commodity contracts Interest ...

  • Page 95
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) The following tables present the major categories of plan assets and the respective fair value hierarchy for the pension plan assets as of December 31, 2014 and 2013 (in millions): Fair Value Measurements ...

  • Page 96
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Fair Value Measurements at December 31, 2013 Quoted Prices in Active Significant Markets for Other Significant Identical Observable Unobservable Assets Inputs Inputs Total Level 1 Level 2 Level 3 Cash and ...

  • Page 97
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) The following tables present the major categories of plan assets and the respective fair value hierarchy for the postretirement medical plan assets as of December 31, 2014 and 2013 (in millions): Fair Value...

  • Page 98
    ..., 2014 and 2013, were based on current market rates available to the Company (Level 2 inputs). The difference between the fair value and the carrying value represents the theoretical net premium or discount that would be paid or received to retire all debt at such date. FAIR VALUE OF OTHER FINANCIAL...

  • Page 99
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) DESCRIPTION OF STOCK-BASED COMPENSATION PLANS Omnibus Stock Incentive Plan of 2009 During 2009, the Company adopted the Omnibus Stock Incentive Plan of 2009 (the "2009 Stock Plan") under which employees, ...

  • Page 100
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) The table below summarizes stock option activity for the year ended December 31, 2014: Weighted Average Remaining Contractual Term (Years) 7.65 Stock Options Outstanding as of January 1, 2014 Granted ...

  • Page 101
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) PERFORMANCE SHARE UNITS In 2011, the Compensation Committee of the Board approved a PSU plan. Each PSU is equivalent in value to one share of the Company's common stock. PSUs will vest three years from the...

  • Page 102
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) 17. Earnings Per Share Basic earnings per share ("EPS") is computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the assumed ...

  • Page 103
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) 18. Accumulated Other Comprehensive Loss The following table provides a summary of changes in the balances of each component of AOCL, net of taxes, for the years ended December 31, 2014, 2013 and 2012 (in ...

  • Page 104
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) 19. Supplemental Cash Flow Information The following table details supplemental cash flow disclosures of non-cash investing and financing activities for the years ended December 31, 2014, 2013 and 2012 (in...

  • Page 105
    ...the years ended December 31, 2014, 2013 and 2012, the Company's operating structure consisted of the following three operating segments: • The Beverage Concentrates segment reflects sales of the Company's branded concentrates and syrup to third party bottlers primarily in the U.S. and Canada. Most...

  • Page 106
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Information about the Company's operations by operating segment as of December 31, 2014 and 2013 and for the years ended December 31, 2014, 2013 and 2012 is as follows (in millions): For the Year Ended ...

  • Page 107
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) As of December 31, 2014 2013 Total assets Property, plant and equipment, net Beverage Concentrates Packaged Beverages Latin America Beverages Segment total Corporate and other Total property, plant and ...

  • Page 108
    ... Notes and the discharge of the Company's obligations under the applicable indenture. The following schedules present the financial information for the years ended December 31, 2014, 2013 and 2012, and as of December 31, 2014 and 2013, for Dr Pepper Snapple Group, Inc. (the "Parent"), Guarantors and...

  • Page 109
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Condensed Consolidating Statements of Income For the Year Ended December 31, 2013... 624 Net sales Cost of sales Gross profit Selling, general and administrative expenses Multi-employer pension plan ...

  • Page 110
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Condensed Consolidating Statements of Income For the Year Ended December 31, 2012... 629 Net sales Cost of sales Gross profit Selling, general and administrative expenses Multi-employer pension plan ...

  • Page 111
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Condensed Consolidating Statements of Comprehensive Income For the Year Ended December 31, 2014 NonGuarantors Guarantors Eliminations Total (818) $ $ 728 $ 90 $ 703 Net income Other comprehensive income (...

  • Page 112
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Condensed Consolidating Balance Sheets As of December 31, 2014 NonGuarantors Guarantors Eliminations $ 186 494 42 10 168 65 67 1,032 1,039 612 - 2,971 2,615 4,647 90 - $ 13,006 $ $ 51 62 16 - 36 3 9 177 102...

  • Page 113
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Condensed Consolidating Balance Sheets As of December 31, 2013 NonGuarantors Guarantors Eliminations $ 88 502 43 7 172 63 58 933 1,081 590 - 2,966 2,616 3,766 95 - 12,047 $ 65 62 13 - 28 6 4 178 92 - 14 ...

  • Page 114
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Condensed Consolidating Statements of Cash Flows For the Year Ended December 31, 2014 NonGuarantors Guarantors Eliminations Parent Operating activities: Net cash (used in) provided by operating activities ...

  • Page 115
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Condensed Consolidating Statements of Cash Flows For the Year Ended December 31, 2013 NonGuarantors Guarantors Eliminations Parent Operating activities: Net cash (used in) provided by operating activities ...

  • Page 116
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) Condensed Consolidating Statements of Cash Flows For the Year Ended December 31, 2012 NonGuarantors Guarantors Eliminations Parent Operating activities: Net cash (used in) provided by operating activities ...

  • Page 117
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued) 24. Selected Quarterly Financial Data (unaudited) The following table summarizes the Company's information on net sales, gross profit, net income, earnings per share and other quarterly financial data by ...

  • Page 118
    ... registered public accounting firm, as stated in their attestation report, which is included in Item 8, "Financial Statements and Supplementary Data," of this Annual Report on Form 10-K. CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING As of December 31, 2014, management has concluded...

  • Page 119
    ... 31, 2014, 2013 and 2012 Notes to Consolidated Financial Statements for the years ended December 31, 2014, 2013 and 2012 SCHEDULES Schedules are omitted because they are not required or applicable, or the required information is included in the Consolidated Financial Statements or related notes...

  • Page 120
    EXHIBIT INDEX 2.1 Separation and Distribution Agreement between Cadbury Schweppes plc and Dr Pepper Snapple Group, Inc. and, solely for certain provisions set forth therein, Cadbury plc, dated as of May 1, 2008 (filed as Exhibit 2.1 to the Company's Current Report on Form 8-K (filed on May 5, 2008) ...

  • Page 121
    ... 26, 2010) and incorporated herein by reference). Dr Pepper Snapple Group, Inc. Omnibus Stock Incentive Plan of 2008 (filed as Exhibit 10.2 to the Company's Current Report on Form 8-K (filed on May 12, 2008) and incorporated herein by reference). Dr Pepper Snapple Group, Inc. Employee Stock Purchase...

  • Page 122
    ..., as joint book-running managers and on behalf of the other underwriters named therein, and Dr Pepper Snapple Group, Inc. (filed as Exhibit 10.1 to the Company's Current Report on Form 8-K (filed on November 14, 2012) and incorporated herein by reference. Agreement dated July 22, 2013, among The...

  • Page 123
    ... Code. The following financial information from Dr Pepper Snapple Group, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2014, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Statements of Income for the years ended December 31, 2014, 2013 and 2012...

  • Page 124
    ... thereunto duly authorized. Dr Pepper Snapple Group, Inc. By: Date: February 19, 2015 Name: Title: /s/ Martin M. Ellen Martin M. Ellen Executive Vice President and Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the...

  • Page 125
    ... Title: /s/ Joyce M. Roché Joyce M. Roché Director By: Date: February 19, 2015 Name: Title: /s/ Ronald G. Rogers Ronald G. Rogers Director By: Date: February 19, 2015 Name: Title: /s/ Dunia A. Shive Dunia A. Shive Director By: Date: February 19, 2015 Name: Title: /s/ M. Anne Szostak M. Anne...

  • Page 126
    ....cfm. Trademark Information This publication contains many of our owned or licensed trademarks and trade names, which we refer to as our brands. Big Red is a registered trademark of North American Beverages, LLC. Country Time is a registered trade ark ow ed a d li e sed Kraft Foods Group Bra ds...