Snapple 2009 Annual Report Download - page 64

Bridge Loan Facility and Separation from Cadbury
The Company’s bridge credit agreement provided a senior unsecured bridge loan facility in an aggregate
principal amount of $1,700 million with a term of 364 days from the date the bridge loan facility is funded.
On April 11, 2008, DPS borrowed $1,700 million under the bridge loan facility to reduce financing risks and
facilitate Cadbury’s separation of the Company. All of the proceeds from the borrowings were placed into interest-
bearing collateral accounts. On April 30, 2008, borrowings under the bridge loan facility were released from the
collateral account containing such funds and returned to the lenders and the 364-day bridge loan facility was
terminated. For the year ended December 31, 2008, the Company incurred $24 million of costs associated with the
bridge loan facility. Financing fees of $21 million, which were expensed when the bridge loan facility was
terminated, and $5 million of interest expense were included as a component of interest expense. These costs were
partially offset as the Company earned $2 million in interest income on the bridge loan while in escrow.
On May 7, 2008, upon the Company’s separation from Cadbury, the borrowings under the Term Loan A
facility and the net proceeds of the senior unsecured notes were released to DPS from collateral accounts and escrow
accounts. The Company used the funds to settle with Cadbury related party debt and other balances, eliminate
Cadbury’s net investment in the Company, purchase certain assets from Cadbury related to DPS’ business and pay
fees and expenses related to the Company’s credit facilities.
Use of Proceeds
We used the funds from the Term Loan A and the net proceeds of the 2013, 2018 and 2038 Notes to settle with
Cadbury related party debt and other balances, eliminate Cadbury’s net investment in us, purchase certain assets
from Cadbury related to our business and pay fees and expenses related to our credit facilities. We used the funds
from the 2011 and 2012 Notes to partially repay principal associated with the Term Loan A.
Debt Ratings
As of December 31, 2009, our debt ratings were Baa3 with a stable outlook from Moody’s Investor Service and
BBB- with a positive outlook from Standard & Poor’s. We are currently on positive watch by both rating agencies.
These debt ratings impact the interest we pay on our financing arrangements. A downgrade of one or both of
our debt ratings could increase our interest expense and decrease the cash available to fund anticipated obligations.
Cash Management
Prior to separation, our cash was available for use and was regularly swept by Cadbury operations in the United
States at its discretion. Cadbury also funded our operating and investing activities as needed. We earned interest
income on certain related party balances. Our interest income has been reduced due to the settlement of the related
party balances upon separation and, accordingly, we expect interest income for 2010 to be minimal.
Post separation, we fund our liquidity needs from cash flow from operations and amounts available under
financing arrangements.
Capital Expenditures
Capital expenditures were $317 million, $304 million and $230 million for 2009, 2008 and 2007, respectively.
Capital expenditures for all periods primarily consisted of expansion of our capabilities in existing facilities, cold
drink equipment and IT investments for new systems. The increase in expenditures for 2009 compared with 2008
was primarily related to costs of a new manufacturing and distribution center in Victorville, California. The increase
in 2008 compared with 2007 was primarily related to early stage costs of a new manufacturing and distribution
center in Victorville, California. We continue to expect to incur discretionary annual capital expenditures, net of
proceeds from disposals, in an amount equal to approximately 5% of our net sales which we expect to fund through
cash provided by operating activities.
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