Snapple 2009 Annual Report Download - page 69

Download and view the complete annual report

Please find page 69 of the 2009 Snapple annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 160

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157
  • 158
  • 159
  • 160

Off-Balance Sheet Arrangements
There are no off-balance sheet arrangements that have or are reasonably likely to have a current or future
material effect on our results of operations, financial condition, liquidity, capital expenditures or capital resources.
Other Matters
Agreement with PepsiCo, Inc.
On December 8, 2009, DPS agreed to license certain brands to PepsiCo, Inc. (“PepsiCo”) on closing of
PepsiCo’s proposed acquisitions of PBG and PAS.
Under the new licensing agreements, PepsiCo will distribute Dr Pepper, Crush and Schweppes in the
U.S. territories where these brands are currently distributed by PBG and PAS. The same will apply for Dr Pepper,
Crush, Schweppes, Vernors and Sussex in Canada; and Squirt and Canada Dry in Mexico.
Under the agreements, DPS will receive a one-time cash payment of $900 million. The new agreement will
have an initial period of twenty years with automatic twenty year renewal periods, and will require PepsiCo to meet
certain performance conditions. The payment will be recorded as deferred revenue, which 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 will begin distributing certain owned
and licensed brands, including Sunkist soda, Squirt, Vernors, Canada Dry and Hawaiian Punch, that were previously
distributed by PBG and PAS.
On February 26, 2010, the Company completed the licensing of those brands to PepsiCo following PepsiCo’s
acquisitions of PBG and PAS.
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.
Revenue Recognition
We recognize sales revenue when all of the following have occurred: (1) delivery; (2) persuasive evidence of an
agreement exists; (3) pricing is fixed or determinable; and (4) collection is reasonably assured. Delivery is not
considered to have occurred until the title and the risk of loss passes to the customer according to the terms of the
contract between the customer and us. The timing of revenue recognition is largely dependent on contract terms. For
sales to customers that are designated in the contract as free-on-board destination, revenue is recognized when the
product is delivered to and accepted at the customer’s delivery site. Net sales are reported net of costs associated
with customer marketing programs and incentives, as described below, as well as sales taxes and other similar taxes.
Customer Marketing Programs and Incentives
The Company offers a variety of incentives and discounts to bottlers, customers and consumers through
various programs to support the distribution of its products. These incentives and discounts include cash discounts,
price allowances, volume based rebates, product placement fees and other financial support for items such as trade
promotions, displays, new products, consumer incentives and advertising assistance. These incentives and
discounts are reflected as a reduction of gross sales to arrive at net sales. The aggregate deductions from gross
sales recorded in relation to these programs were approximately $3,419 million, $3,057 million and $3,159 million
49