Snapple 2010 Annual Report Download - page 87

DR PEPPER SNAPPLE GROUP, INC.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
3. Accounting for the Separation from Cadbury
Upon separation, effectiveMay 7, 2008, DPS became an independent company,which established a new consolidated reporting
structure. For the periods prior to May 7, 2008, the Company's consolidated financial information has been prepared on a “carve-
out” basis from Cadbury’s consolidated financial statements using the historical results of operations, assets and liabilities,
attributable to Cadbury’s Americas Beverages business and including allocations of expenses from Cadbury. The results may not
be indicative of the Company's future performance and may not reflect DPS’ financial performance had DPS been an independent
publicly-traded company during those prior periods.
In connection with the separation from Cadbury,the Company entered into a Separation and Distribution Agreement, Transition
Services Agreement, TaxSharing and Indemnification Agreement (“Tax Indemnity Agreement”)and Employee Matters Agreement
with Cadbury, each dated as of May 1, 2008.
Items Impacting the Consolidated Statements of Operations
The following transactions related to the Company’s separation from Cadbury were included in the Consolidated Statements
of Operations for the years ended December 31, 2010, 2009 and 2008 (in millions):
Transaction costs and other one time separation costs(1)
Costs associated with the bridge loan facility(2)
Incremental tax (benefit) expense related to separation, excluding indemnified taxes
Impact of Cadbury tax election
2010
$—
—
4
(1)
2009
$—
—
(5)
—
2008
$33
24
11
5
____________________________
(1) DPS incurred transaction costs and other one time separation costs of $33 million for the year ended December 31, 2008.
These costs are included in selling, general and administrative expenses in the Consolidated Statements of Operations.
(2) The Company incurred $24 million of costs for the year ended December 31, 2008, associated with the $1.7 billion bridge
loan facility which was entered into to reduce financing risks and facilitate Cadbury’s separation of the Company. Financing
fees of $21 million, which were expensed when the bridge loan facility was terminated on April 30, 2008, and $5 million of
interest expense were included as a component of interest expense, partially offset by $2 million in interest income while in
escrow.
Items Impacting Income Taxes
The consolidated financial statements present the taxes of the Company’s stand-alone business and contain certain taxes
transferred to DPS at separation in accordance with the Tax Indemnity Agreement. This agreement provides for the transfer to
DPS of taxes related to an entity that was part of Cadbury’s confectionery business and therefore not part of DPS’ historical
consolidated financial statements. The consolidated financial statements also reflect that the Tax Indemnity Agreement requires
Kraft to indemnify DPS for these taxes. These taxes and the associated indemnity may change over time as estimates of the amounts
change. Changes in estimates will be reflected when facts change and those changes in estimate will be reflected in the Company’s
Consolidated Statements of Operations at the time of the estimate change. In addition, pursuant to the terms of the Tax Indemnity
Agreement, if DPS breaches certain covenants or other obligations or DPS is involved in certain change-in-control transactions,
Kraft may not be required to indemnify the Company for any of these unrecognized tax benefits that are subsequently realized.
See Note 12 for further information regarding the tax impact of the separation.
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