Snapple 2009 Annual Report Download - page 72

Download and view the complete annual report

Please find page 72 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

A change in the critical assumptions detailed above would not result in a change to the impairment charge
related to distribution rights.
The results of our annual impairment tests indicated that the fair value of our indefinite lived intangible assets
and goodwill not discussed above exceeded their carrying values and, therefore, were not impaired.
Based on triggering events in the second and third quarters of 2008, we performed interim impairment analyses
of the Snapple Brand and the DSD reporting unit’s goodwill and concluded there was no impairment as of June 30
and September 30, 2008, respectively. However, deteriorating economic and market conditions in the fourth quarter
triggered higher discount rates as well as lower volume and growth projections which drove the impairments of the
DSD reporting unit’s goodwill, Snapple brand and the DSD reporting unit’s distribution rights recorded in the fourth
quarter. Indicative of the economic and market conditions, our average stock price declined 19% in the fourth
quarter as compared to the average stock price from May 7, 2008, the date of our separation from Cadbury, through
September 30, 2008. The impairment of the distribution rights was attributed to insufficient net economic returns
above working capital, fixed assets and assembled workforce.
Definite Lived Intangible Assets
Definite lived intangible assets are those assets deemed by the management to have determinable finite useful
lives. Identifiable intangible assets with finite lives are amortized on a straight-line basis over their estimated useful
lives as follows:
Type of Intangible Asset Useful Life
Brands . . ......................................................... 5to15years
Bottler agreements .................................................. 5to15years
Customer relationships and contracts ..................................... 5to10years
Stock-Based Compensation
We account for our stock-based compensation plans under U.S. GAAP, which requires the recognition of
compensation expense in our Consolidated Statements of Operations related to the fair value of employee share-
based awards. Determining the amount of expense for stock-based compensation, as well as the associated impact to
our balance sheets and statements of cash flows, requires us to develop estimates of the fair value of stock-based
compensation expense. The most significant factors of that expense that require estimates or projections include the
expected volatility, expected lives and estimated forfeiture rates of stock-based awards. As we lack a meaningful set
of historical data upon which to develop valuation assumptions, we have elected to develop certain valuation
assumptions based on information disclosed by similarly-situated companies, including multi-national consumer
goods companies of similar market capitalization and large food and beverage industry companies which have
experienced an initial public offering since June 2001.
In accordance with U.S. GAAP, we recognize the cost of all unvested employee stock options on a straight-line
attribution basis over their respective vesting periods, net of estimated forfeitures. Prior to our separation from
Cadbury, we participated in certain employee share plans that contained inflation indexed earnings growth
performance conditions. These plans were accounted for under the liability method of U.S. GAAP. In accordance
with U.S. GAAP, a liability was recorded on the balance sheet until and, in calculating the income statement charge
for share awards, the fair value of each award was remeasured at each reporting date until awards vested. We no
longer participate in employee share plans that contain inflation indexed earnings growth performance conditions.
Pension and Postretirement Benefits
We have several pension and postretirement plans covering employees who satisfy age and length of service
requirements. There are eleven stand-alone non-contributory defined benefit pension plans and six stand-alone
postretirement plans. Depending on the plan, pension and postretirement benefits are based on a combination of
factors, which may include salary, age and years of service.
52