Snapple 2011 Annual Report Download

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Table of contents

  • Page 1

  • Page 2
    cont co n en nt ents t ts 1 LE T TER TO STO C K H O L D E R S 6 WE LEAD W I TH T H F L AVO R 8 WE COMPE TE D F F E R E N T LY Y 10 WE DELIVER S H A R E H O L DE R VA L U E 12 M P R OV N G OUR C O M M U N IT ITIES 119 STO C K H O L D E R NFO R M AT ON

  • Page 3
    ...space. We increased ACV on our core brands and packages in grocery by 8 percentage points for carbonated soft drinks (CSDs) and 2 percentage points for Snapple and Mott's. We also continued to grow per-capita consumption in targeted markets for Snapple, up 1.2 servings per person, and Canada Dry, up...

  • Page 4
    ... RCI projects across the company in 2011, improving productivity and freeing up resources to redirect toward growing distribution and availability and increasing per-capita consumption of our brands. Growing our Business In 2011, we implemented strategies to improve both price and mix across our CSD...

  • Page 5
    ...Compound annual growth rate includes changes in stock price since May 7, 2008, the day DPS became a publicly traded company on the New York Stock Exchange, and reinvestment of dividends. The Peer Group Index consists of the following companies: The Coca-Cola Co., PepsiCo, Inc., Monster Beverage Corp...

  • Page 6
    ... Strong marketing support behind our brands will continue, with compelling advertising, programming that addresses purchase barriers and campaigns that create awareness and trial. Using research on how consumers navigate stores and category aisles, we'll further refine our retail execution strategy...

  • Page 7
    Mott's is the No. 1 APPLE JUIC E and No. 1 APP LE SAUC E brand in the U.S. 5

  • Page 8
    6

  • Page 9
    ..., just four months after the national launch of Dr Pepper TEN, we began market testing additional TEN options, including 7UP, Canada Dry, Sunkist soda, A&W and RC Cola. Sun Drop is another example of how we're leading with ï¬,avor and reaching a new generation of citrus fans. A regional brand we...

  • Page 10
    ...in the last six years. With a 40 percent dollar share of ï¬, avored CSDs, we are the undisputed leader in this segment. Even so, DPS has opportunities across the U.S. to introduce new consumers to our ï¬, avor portfolio and increase drinking occasions for our core brands. To support long-term growth...

  • Page 11
    ... and effi ciencies in our direct store distribution. In 2011, Neuro added approximately 400,000 incremental cases to our volume, and Vita Coco added approximately 300,000 cases. Priority Brand Execution Our priority brand agreements ensure that Dr Pepper and Diet Dr Pepper are included in all core...

  • Page 12
    ... yield in today's market. Moreover, in 2010 and 2011, we repurchased $1.6 billion of our stock and expect to buy back $350 million to $375 million in 2012, subject to market conditions. consumers. Our goal is to grow the business organically, allowing us to continue to return excess free cash to...

  • Page 13
    ... focused on sales route and distribution optimization and inventory reduction. The Mexico City-Iztapalapa sales team nearly doubled the number of customers visited each day and improved sales efficiency from 49 to 97 percent. In addition, the LAB supply chain team reduced finished product and raw...

  • Page 14
    IMPROVING OUR COMMUNITIES At DPS, we believe in balancing the calories consumed with the energy expended on physical activity. We've introduced products with lower calories, such as our TEN products and our Mott's for Tots juices, as well as packaging to encourage portion control. We've also set a ...

  • Page 15
    DR PEPPER SNAPPLE GROUP, INC. RECONCILIATION OF GAAP AND NON-GAAP INFORMATION For the Twelve Months Ended December 31, 2011 and 2010 (Unaudited) The company reports its financial results in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). ...

  • Page 16
    (Intentionally Left Blank) 14

  • Page 17
    ... 30, 2011, the last business day of the registrant's most recently completed second fiscal quarter, was $9,097,082,652 (based on the closing sale price of the registrant's Common Stock on that date as reported on the New York Stock Exchange). As of February 17, 2012, there were 212,073,549 shares of...

  • Page 18
    (Intentionally Left Blank)

  • Page 19
    DR PEPPER SNAPPLE GROUP, INC. FORM 10-K For the Year Ended December 31, 2011 Page PART I. Item 1. Item 1A. Item 1B. Item 2. Item 3. Item 4. Business Risk Factors Unresolved Staff Comments Properties Legal Proceedings Mine Safety Disclosures 1 12 16 17 17 17 PART II. Item 5. Market for Registrant's...

  • Page 20
    ... and health concerns; maintaining our relationships with our large retail customers; dependence on third party bottling and distribution companies; recession, financial and credit market disruptions and other economic conditions; increases in the cost of commodities used in our business; litigation...

  • Page 21
    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 22
    ... Flavors include orange, diet and other fruits Brand began as the all-natural orange flavor drink in 1906 • • • #1 carbonated mineral water brand in Mexico Brand includes Flavors, Twist and Naturel Mexico's oldest mineral water • • Royal Crown Cola originated in Columbus, Ga. Flavors...

  • Page 23
    ... A full range of tea products including premium and value teas Brand also includes premium juices and juice drinks Founded in Brooklyn, New York in 1972 #1 fruit punch brand in the U.S. Brand includes a variety of fruit flavored and reduced calorie juice drinks Developed originally as an ice cream...

  • Page 24
    ...key brands are Dr Pepper, Canada Dry, 7UP, A&W, Sunkist soda, Crush and Sun Drop, and we also sell regional and smaller niche brands. In the CSD market we are primarily a manufacturer of beverage concentrates and fountain syrups. Beverage concentrates are highly concentrated proprietary flavors used...

  • Page 25
    ... the market with relatively low risk and capital investment. Increase presence in high margin channels and packages. We are focused on improving our product presence in high margin channels, such as convenience stores, vending machines and small independent retail outlets, through increased selling...

  • Page 26
    ... this segment we manufacture and sell beverage concentrates in the U.S. and Canada. Most of the brands in this segment are CSD brands. In 2011, our Beverage Concentrates segment had net sales of approximately $1.2 billion. Key brands include Dr Pepper, Crush, Canada Dry, Sunkist soda, Schweppes, 7UP...

  • Page 27
    ...by third party distributors. The raw materials used to manufacture our products include aluminum cans and ends, glass bottles, PET bottles and caps, paper products, sweeteners, juices, water and other ingredients. We sell our Packaged Beverages' products both through our Direct Store Delivery system...

  • Page 28
    ... sales ratably over the estimated 25-year life of the customer relationship. Customers We primarily serve two groups of customers: 1) bottlers and distributors and 2) retailers. Bottlers buy beverage concentrates from us and, in turn, they manufacture, bottle, sell and distribute finished beverages...

  • Page 29
    ... companies for use in connection with food, confectionery and other products. We also license certain brands, such as Dr Pepper and Snapple, to third parties for use in beverages in certain countries where we own the brand but do not otherwise operate our business. Marketing Our marketing strategy...

  • Page 30
    ... distribution centers and warehouses in Mexico. Our warehouses are generally located at or near bottling plants and are geographically dispersed to ensure product is available to meet consumer demand. We actively manage the sale, merchandising and transportation of our products using combination...

  • Page 31
    ... Digest Fact Book. We use Beverage Digest primarily to track market share information and broad beverage and channel trends. This annual publication provides a compilation of data supplied by beverage companies. Beverage Digest covers the following categories: CSDs, energy drinks, bottled water and...

  • Page 32
    ... us to provide larger, more tailored promotional and product delivery programs. If we and our bottlers and distributors do not successfully provide appropriate marketing, product, packaging, pricing and service to these retailers, our product availability, sales and margins could suffer. Certain...

  • Page 33
    ... raw materials we use in our business are aluminum cans and ends, glass bottles, PET bottles and caps, paperboard packaging, sweeteners, juice, fruit, water and other ingredients. Additionally, conversion of raw materials into our products for sale also uses electricity and natural gas. The cost...

  • Page 34
    ...the then-current state of the credit and financial markets, and other factors that may be beyond our control. Certain raw materials we use are available from a limited number of suppliers and shortages could occur. Some raw materials we use, such as aluminum cans and ends, glass bottles, PET bottles...

  • Page 35
    ... regulations apply to many aspects of our business including the manufacture, safety, labeling, transportation, advertising and sale of our products. See "Regulatory Matters" in Item 1, "Business," of this Annual Report on Form 10-K for more information regarding many of these laws and regulations...

  • Page 36
    ...production, distribution, packaging, cost of raw materials, fuel, ingredients, and water could all negatively impact our business and financial results. Changes in accounting standards could affect our reported financial results. The number of new accounting standards or pronouncements is increasing...

  • Page 37
    ... office buildings owned by our Packaged Beverages operating segment includes our corporate headquarters located in Plano, Texas. (2) The three manufacturing facilities owned by Latin America Beverages operating segment includes the manufacturing facility for our joint venture with Acqua Minerale San...

  • Page 38
    ...ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES In the United States, 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...

  • Page 39
    ... 31, 2011 For the quarter ended December 31, 2011 Number of Shares Purchased - 1,296 1,311 2,607 Average Price Paid per Share $ - 36.74 38.00 37.37 Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) - 1,296 1,311 2,607 Maximum Dollar Value of Shares that May...

  • Page 40
    ... Stock Exchange, with dividends reinvested. Comparison of Total Returns Assumes Initial Investment of $100 December 2011 The Peer Group Index consists of the following companies: The Coca-Cola Company ("Coca-Cola"), PepsiCo, Inc. ("PepsiCo"), Monster Beverage Corporation (formerly Hansen Natural...

  • Page 41
    ... in our consolidated financial statements beginning on its date of acquisition. As a result, our financial data is not comparable on a period-to-period basis. Fiscal Year 2011 2010 2009 2008(4) (in millions, except per share data) 2007(4) Statements of Income Data: Net sales Gross profit Income...

  • Page 42
    ... beverages ("NCBs"), including ready-to-drink teas, juices, juice drinks and mixers. Our brand portfolio includes popular CSD brands such as Dr Pepper, Sunkist soda, 7UP, A&W, Canada Dry, Crush, Squirt, Peñafiel and Schweppes, and NCB brands such as Snapple, Mott's, Hawaiian Punch, Clamato...

  • Page 43
    ... single-serve packages. Increased health consciousness. We believe the main beneficiaries of this trend include diet and low calorie drinks, ready-to-drink teas and bottled waters. Changes in lifestyle. We believe changes in lifestyle will continue to drive increased sales of single-serve beverages...

  • Page 44
    ... business. In this segment we manufacture and sell beverage concentrates in the U.S. and Canada. Most of the brands in this segment are CSD brands. In 2011, our Beverage Concentrates segment had net sales of approximately $1.2 billion. Key brands include Dr Pepper, Canada Dry, Crush, Schweppes, 7UP...

  • Page 45
    ...by third party distributors. The raw materials used to manufacture our products include aluminum cans and ends, glass bottles, PET bottles and caps, paper products, sweeteners, juices, water and other ingredients. We sell our Packaged Beverages' products both through our Direct Store Delivery system...

  • Page 46
    ...bottler inventory and manufacturing practices, and the timing of price increases and new product introductions. Results of Operations Executive Summary - 2011 Financial Overview and Recent Developments Net sales totaled $5.90 billion for the year ended December 31, 2011, an increase of $267 million...

  • Page 47
    ... America Beverages segment, Peñafiel and Squirt increased 4% and 3%, respectively. Dr Pepper volume was flat as sales volume in the prior year was driven by higher volumes a year ago caused by low holiday and summer pricing by a national account that did not recur in 2011 and higher retail pricing...

  • Page 48
    ...or approximately 5%, for the year ended December 31, 2011, compared with the year ended December 31, 2010. The increase was attributable to price increases, $61 million as a result of a higher net sales value per case driven by the repatriation of certain brands under the licensing arrangements with...

  • Page 49
    ... our business in three segments: Beverage Concentrates, Packaged Beverages and Latin America Beverages. The key financial measures management uses to assess the performance of our segments are net sales and SOP. The following tables set forth net sales and SOP for our segments for 2011 and 2010, as...

  • Page 50
    ...caused by low holiday and summer pricing by a national account that did not recur in 2011 and higher retail pricing in the second half of 2011. Packaged Beverages The following table details our Packaged Beverages segment's net sales and SOP for the year ended December 31, 2011 and 2010 (in millions...

  • Page 51
    ...to targeted marketing programs and distribution gains. These volume increases were partially offset by a 18% decrease in Crush volume driven by price increases. Net sales increased 9% for the year ended December 31, 2011, compared with year ended December 31, 2010, primarily due to favorable product...

  • Page 52
    ... sales to third party distributors. Squirt volume increased 5%. In NCBs, 10% growth in Snapple was due to the successful restage of the brand, the growth of value offerings and increased marketing. A 3% increase in Mott's was the result of new distribution and strong brand support. Additionally...

  • Page 53
    ... year ended December 31, 2010 compared with the year ended December 31, 2009. Significant drivers of the increase were primarily due to higher marketing spend related to targeted marketing, changes in foreign currency, unfavorable comparison of the changes in fair value of commodity derivatives used...

  • Page 54
    ... related to a Canadian change of law recognized and disclosed in the quarter ended March 31, 2010, were not a significant driver for the reduction in the effective tax rate from 2009. Results of Operations by Segment We report our business in three segments: Beverage Concentrates, Packaged Beverages...

  • Page 55
    ...digit increase in Canada Dry due to targeted marketing programs. Dr Pepper volumes declined 1%. Total NCB volume increased 6% as a result of a 12% increase in Snapple due to the successful restage of the brand, growth of value offerings and increased marketing. Hawaiian Punch and Mott's increased 11...

  • Page 56
    ... brands in the Caribbean from our Beverage Concentrates segment, a 10% increase in Squirt due to higher sales to third party bottlers, a 31% increase in Crush with the continued growth from the introduction of new flavors in a 2.3 liter value offering, as well as additional distribution routes added...

  • Page 57
    ... Customer and consumer demand for the Company's products may be impacted by recession or other economic downturn in the United States, Canada, Mexico or the Caribbean, which could result in a reduction in our sales volume. Similarly, disruptions in financial and credit markets may impact the Company...

  • Page 58
    ... September and December of each year in the case of any ABR loan. There were no borrowings during the year ended December 31, 2011. The average interest rate for borrowings during the year was 2.25% for the year ended December 31, 2010. An unused commitment fee is payable quarterly to the lenders on...

  • Page 59
    ...10 million as of December 31, 2011 and 2010, respectively. Current obligations related to our capital leases were $4 million and $3 million as of December 31, 2011 and 2010, respectively, and were included as a component of other current liabilities. Shelf Registration Statement On November 20, 2009...

  • Page 60
    ..., 2011. Trade receivables used $55 million as a result of increased sales in 2011 and accounts payable used $30...2011, the Company repaid $400 million of the 2011 Notes at maturity. 2010 Net cash flow used in financing activities for the year ended December 31, 2010 primarily consisted of common stock...

  • Page 61
    ... the year ended December 31, 2011 and 2010, the Company repurchased and retired approximately 14 million and 31 million shares of common stock valued at approximately $522 million and $1,113 million, respectively. Refer to Part II, Item 5 of this Annual Report on Form 10-K for additional information...

  • Page 62
    ...of Notes to Consolidated Financial Statements. We did not include our estimated contributions to our various single employer plans in the table above. In general, we are self-insured for large portions of many different types of claims. Our reserves for the Company's selfinsured losses are estimated...

  • Page 63
    ...Dr Pepper and Diet Dr Pepper brands in its Freestyle fountain program. The Freestyle fountain program agreement has a period of 20 years. Additionally, in certain U.S. territories where it has a distribution footprint, DPS is selling certain owned and licensed brands, including Canada Dry, Schweppes...

  • Page 64
    ... list price structure across locations. The impact of the change increased gross sales and related discounts by equal amounts on customer invoices. Net sales were not affected. The amounts of trade spend are larger in our Packaged Beverages segment than those related to other parts of our business...

  • Page 65
    ... factors: (1) the fair value of our goodwill, brands and distribution rights exceeded their carrying amounts by a substantial margin in the 2010 annual impairment analysis performed; (2) our business performance during 2011 was in line with our forecast used to estimate fair value in the impairment...

  • Page 66
    ... return on plan assets used to determine the net periodic pension costs would change the costs for the year ended December 31, 2011 by approximately $2 million each. Risk Management Programs We retain selected levels of property, casualty, workers' compensation, health and other business risks...

  • Page 67
    ... Statements and Supplementary Data" of this Annual Report on Form 10-K for a discussion of recent accounting standards and pronouncements. Acquisitions We may make future acquisitions. For example, we may make acquisitions of regional bottling companies, distributors, and distribution rights...

  • Page 68
    ..., sucrose, apple juice concentrate, and natural gas (for use in processing and packaging). We utilize commodities forward contracts and supplier pricing agreements to hedge the risk of adverse movements in commodity prices for limited time periods for certain commodities. The fair market value of...

  • Page 69
    ... as of December 31, 2011 and 2010 Consolidated Statements of Cash Flows for the years ended December 31, 2011, 2010 and 2009 Consolidated Statements of Changes in Stockholders' Equity for the years ended December 31, 2011, 2010 and 2009 Notes to Audited Consolidated Financial Statements 50 52 53 54...

  • Page 70
    ... of Dr Pepper Snapple Group, Inc. and subsidiaries (the "Company") as of December 31, 2011 and 2010, and the related consolidated statements of income, changes in stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2011. These financial statements are...

  • Page 71
    ... INDEPENDENT REGISTERED PUBLIC 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. (the "Company") as of December 31, 2011, based on criteria established in Internal...

  • Page 72
    DR PEPPER SNAPPLE GROUP, INC. CONSOLIDATED STATEMENTS OF INCOME For the Years Ended December 31, 2011, 2010 and 2009 (In millions, except per share data) For the year ended December 31, 2011 2010 2009 Net sales Cost of sales Gross profit Selling... part of these consolidated financial statements. 52

  • Page 73
    DR PEPPER SNAPPLE GROUP, INC. CONSOLIDATED BALANCE SHEETS As of December 31, 2011 and 2010 (In millions, except share and per share data) December 31, 2011 Assets Current assets: Cash and cash equivalents Accounts receivable: Trade, net Other Inventories Deferred tax assets Prepaid expenses and ...

  • Page 74
    DR PEPPER SNAPPLE GROUP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended December 31, 2011, 2010 and 2009 (In millions) For the Year Ended December 31, 2011 2010 2009 $ 606 198 34 (65) 34 (498) - 24 (55) (18) 29 (21) (30) 521 - 1 760 (215) (3) (2) 3 - - (217) 1,000 (400) (522) (251) ...

  • Page 75
    DR PEPPER SNAPPLE GROUP, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY For the Years Ended December 31, 2011, 2010 and 2009 (In millions, except per share data) Accumulated Common Stock Issued Shares Balance as of December 31, 2008 Shares issued under employee stockbased ...

  • Page 76
    ...beverages ("NCBs"), including ready-to-drink teas, juices, juice drinks and mixers. The Company's brand portfolio includes popular CSD brands such as Dr Pepper, Canada Dry, 7UP, Squirt, Crush, A&W, Sunkist soda, Peñafiel, Schweppes, and Sun Drop, and NCB brands such as Snapple, Hawaiian Punch, Mott...

  • Page 77
    ... Accounts Trade accounts receivable are recorded at the invoiced amount and do not bear interest. 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...

  • Page 78
    ... and market share of each brand. Management expects to acquire, hold and support brands for an indefinite period through consumer marketing and promotional support. The Company also considers factors such as its ability to continue to protect the legal rights that arise from these brand names...

  • Page 79
    ... 6 for additional information. Other Assets 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. These programs and...

  • Page 80
    ... due to their short-term nature. The fair value of long term debt as of December 31, 2011 and 2010, is based on quoted market prices for publicly traded securities. The Company estimates fair values of financial instruments measured at fair value in the financial statements on a recurring basis to...

  • Page 81
    ... its gross list price structure across locations. The impact of the change increased gross sales and related discounts by equal amounts on customer invoices. Net sales to the customers were not affected. The amounts of trade spend are larger in the Packaged Beverages segment than those related to...

  • Page 82
    ...expense in the Consolidated Statements of Income related to the fair value of employee share-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 83
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The following table sets forth exchange rate information for the periods and currencies indicated: Mexican Peso to U.S. Dollar Exchange Rate 2011 2010 2009 End of Year Rates 13.95 12.35 13.07 End of Year ...

  • Page 84
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Recently Adopted Provisions of U.S. GAAP In accordance with U.S. GAAP, certain fair value measurement disclosure requirements specific to the different classes of assets and liabilities, valuation ...

  • Page 85
    ...of December 31, 2011 and 2010. The Company's equity investment does not have a readily determinable fair value as the joint venture is not publicly traded. The Company's proportionate share of the net income resulting from its investment in the joint venture is reported under the line item captioned...

  • Page 86
    ... $8 million change in foreign currency translation rates. As of December 31, 2011, the weighted average useful life of intangible assets with finite lives was 9 years in total, consisting of 5 years for distribution rights, 10 years for both brands and customer relationships and 15 years for bottler...

  • Page 87
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 2011 Impairment Analysis Based on the Company's review of the facts and circumstances and updated assumptions, the Company did not recalculate the fair values for the annual impairment analysis for ...

  • Page 88
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 8. Long-term Obligations The following table summarizes the Company's long-term debt obligations as of December 31, 2011 and 2010 (in millions): December 31, December 31, 2011 2010 $ 2,701 $ 2,081 - - (452...

  • Page 89
    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 2.90% senior notes due January 15, 2016 (the "2016 Notes") at a discount of $1 million. ...

  • Page 90
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Commercial Paper Program On December 10, 2010, the Company entered into a commercial paper program under which the Company may issue unsecured commercial paper notes (the "Commercial Paper") on a private ...

  • Page 91
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 9. Derivatives 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 ...

  • Page 92
    ... Notes increased by $27 million. As of December 31, 2010, the carrying value of the 2038 Notes decreased by $2 million. In November 2011, the Company entered into four interest rate swaps having an aggregate notional amount of $250 million and durations ranging from seven to ten years in order to...

  • Page 93
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Foreign Exchange Cash Flow Hedges The Company's Canadian business purchases its inventory through transactions denominated and settled in U.S. Dollars, a currency different from the functional currency of ...

  • Page 94
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 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, 2011, and 2010 (in millions): Balance Sheet ...

  • Page 95
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 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 OCI for the years ended December ...

  • Page 96
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 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 ended December 31, 2011, 2010...

  • Page 97
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 10. 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, 2011, and 2010 (in ...

  • Page 98
    ... tax rate for the year ended December 31, 2011 was primarily driven by certain state and federal income tax benefits, principally the domestic manufacturing deduction, related to the PepsiCo and Coca-Cola licensing agreements executed in 2010. The impact of these benefits decreased the provision for...

  • Page 99
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Deferred tax assets (liabilities), as determined under U.S. GAAP, were comprised of the following as of December 31, 2011 and 2010 (in millions): December 31, 2011 Deferred income tax assets: Deferred ...

  • Page 100
    ...Company. The following is a reconciliation of the changes in the gross balance of unrecognized tax benefits for the three years ended December 31, 2011, 2010 and 2009 (in millions): December 31, 2011 Beginning Balance Increases related to tax positions taken during the current year Increases related...

  • Page 101
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 12. Fair Value of Financial Instruments 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 ...

  • Page 102
    ... are valued using quoted forward foreign exchange prices at the reporting date. Therefore, the Company has categorized these contracts as Level 2. As of December 31, 2011, and 2010, the Company did not have any assets or liabilities without observable market values that would require a high level...

  • Page 103
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The fair value of long term debt as of December 31, 2011 and 2010 was estimated based on quoted market prices for publicly traded securities. The difference between the fair value and the carrying value ...

  • Page 104
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Effective December 31, 2009, the Company also adopted the U.S. GAAP guidance on how companies should estimate the fair value of certain alternative investments and allows companies to use Net Asset Value ...

  • Page 105
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The following tables set forth amounts recognized in the Company's financial statements and the plans' funded status for the years ended December 31, 2011 and 2010 (in millions): Postretirement Medical ...

  • Page 106
    ...2010 2009 2011 2010 2009 Net Periodic Benefit Costs Service cost Interest cost Expected return on assets Amortization of actuarial loss Amortization of prior service cost Curtailments Settlements Net periodic benefit costs Changes Recognized in OCI Curtailment effects Settlement effects Current year...

  • Page 107
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The following table summarizes the expected future benefit payments cash activity for the Company's pension and postretirement medical plans in the future (in millions): 2012 $ 16 1 2013 $ 18 1 2014 $ 18 ...

  • Page 108
    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 foreign plans: Pension Plans 2011 2010 5.20% 6.06% 3.80% 3.83% ...

  • Page 109
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The Plans' asset allocation policy is reviewed at least annually. Factors considered when determining the appropriate asset allocation include changes in plan liabilities, an evaluation of market ...

  • Page 110
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Total Cash and cash equivalents Equity securities(1) U.S. Large-Cap equities(2) International equities (2) Fair Value Measurements at December 31, 2010 Quoted Prices in Significant Significant Active ...

  • Page 111
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Total Equity securities(1) U.S. Large-Cap equities(2) International equities Fixed income securities U.S. Corporate bonds(3) International bonds Total (3) (2) Fair Value Measurements at December 31, 2010...

  • Page 112
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Individually Significant Multi-employer Plans The Company participates in the following individually significant multi-employer plans as of December 31, 2011: Legal name of the plan Plan's Employee ...

  • Page 113
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Additionally, current participants in the SIP and SSP are eligible for an EDC which vests after three years of service with the Company. The EDC was adopted by the Company during the fourth quarter of ...

  • Page 114
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) DPS is required to estimate forfeitures at the time of grant and revise those estimates in subsequent periods if actual forfeitures differ from those estimates. The Company uses historical data to ...

  • Page 115
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The table below summarizes RSU and PSU activity for the year ended December 31, 2011. The fair value of restricted stock units is determined based on the number of units granted and the grant date price ...

  • Page 116
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Stock options, RSUs, PSUs and dividend equivalent units totaling 0.7 million and 0.4 million shares were excluded from the diluted weighted average shares outstanding for the years ended December 31, 2011...

  • Page 117
    ... Schweppes Bottling Group, Inc. (now The American Bottling Company), et al., as defendants. The defendants are subsidiaries of the Company. The complaint related to activities which principally occurred before the Company's spin off from Cadbury plc in 2008. On December 7, 2011, the jury returned...

  • Page 118
    ... U.S. and Canada. Most of the brands in this segment are carbonated soft drink brands. The Packaged Beverages segment reflects sales in the United States and Canada from the manufacture and distribution of finished beverages and other products, including sales of the Company's own brands and third...

  • Page 119
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) For the Year Ended December 31, 2011 2010 2009 Segment Results - SOP Beverage Concentrates Packaged Beverages Latin America Beverages Total SOP Unallocated corporate costs Other operating expense (income...

  • Page 120
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 2011 Total assets Beverage Concentrates Packaged Beverages Latin America Beverages Segment total Corporate and other Property, plant and equipment, net as reported Current assets as reported All other non...

  • Page 121
    ...of the Company's subsidiaries organized outside of the U.S. (collectively, the "NonGuarantors") guarantee the Notes. The following schedules present the financial information for the years ended December 31, 2011, 2010 and 2009, and as of December 31, 2011, and 2010, for Dr Pepper Snapple Group, Inc...

  • Page 122
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Condensed Consolidating Statement of Income For the Year Ended December 31, 2010 Parent Net sales Cost of sales Gross profit Selling, general and administrative expenses Depreciation and amortization ...

  • Page 123
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Condensed Consolidating Statement of Income For the Year Ended December 31, 2009 Parent Net sales Cost of sales Gross profit Selling, general and administrative expenses Depreciation and amortization ...

  • Page 124
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Condensed Consolidating Balance Sheet As of December 31, 2011 Parent Current assets: Cash and cash equivalents Accounts receivable: Trade, net Other Related party receivable Inventories Deferred tax ...

  • Page 125
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Condensed Consolidating Balance Sheet As of December 31, 2010 Parent Current assets: Cash and cash equivalents Accounts receivable: Trade, net Other Related party receivable Inventories Deferred tax ...

  • Page 126
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Condensed Consolidating Statement of Cash Flows For the Year Ended December 31, 2011 Parent Operating activities: Net cash provided by (used in) operating activities Investing activities: Purchase of ...

  • Page 127
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Condensed Consolidating Statement of Cash Flows For the Year Ended December 31, 2010 Parent Operating activities: Net cash provided by (used in) operating activities Investing activities: Purchase of ...

  • Page 128
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Condensed Consolidating Statement of Cash Flows For the Year Ended December 31, 2009 Parent Operating activities: Net cash provided by (used in) operating activities Investing activities: Purchase of ...

  • Page 129
    ...Dr Pepper and Diet Dr Pepper brands in its Freestyle fountain program. The Freestyle fountain program agreement has a period of 20 years. Additionally, in certain U.S. territories where it has a distribution footprint, DPS is selling certain owned and licensed brands, including Canada Dry, Schweppes...

  • Page 130
    DR PEPPER SNAPPLE GROUP, INC. NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 23. Selected Quarterly Financial Data (unaudited) The following table summarizes the Company's information on net sales, gross profit, net income and earnings per share by quarter for the years ended ...

  • Page 131
    ... independent registered public accounting firm, as stated in their attestation report, which is included in Item 8, "Financial Statements and Supplementary Data," of the Annual Report on Form 10-K. Changes in Internal Control Over Financial Reporting As of December 31, 2011, management has concluded...

  • Page 132
    ...Statements of Changes in Stockholders' Equity for the years ended December 31, 2011, 2010 and 2009 Notes to Consolidated Financial Statements for the years ended December 31, 2011, 2010 and 2009 Schedules Schedules are omitted because they are not required or applicable, or the required information...

  • Page 133
    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 134
    ... of $250 million (filed as Exhibit 4.3 to the Company's Current Report on Form 8-K (filed on November 15, 2011) and incorporated herein by reference). Transition Services Agreement between Cadbury Schweppes plc and Dr Pepper Snapple Group, Inc., dated as of May 1, 2008 (initially filed as Exhibit 10...

  • Page 135
    ... 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 136
    ... 101** The following financial information from Dr Pepper Snapple Group, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2011, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Statements of Income for the years ended December 31, 2011, 2010 and 2009, (ii...

  • Page 137
    ... thereunto duly authorized. Dr Pepper Snapple Group, Inc. By: Date: February 22, 2012 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 138
    ...Ronald G. Rogers Ronald G. Rogers Director By: Date: February 22, 2012 Name: Title: Jack L. Stahl Director /s/ Jack L. Stahl By: Date: February 22, 2012 Name: Title: /s/ M. Anne Szostak M. Anne Szostak Director By: Date: February 22, 2012 Name: Title: /s/ Mike Weinstein Mike Weinstein Director...

  • Page 139
    ... should contact the investor relations department at corporate headquarters at (972) 673-7000 or http://investor.drpeppersnapple.com/contactus.cfm. Trademark Information This publication contains many of our owned or licensed trademarks and trade names, which we refer to as our brands. Country Time...

  • Page 140
    7UP A&W AGUAFIEL CANADA DRY CLAMATO COUNTRY TIME CRUSH DEJA BLUE DR PEPPER HAWAIIAN PUNCH IBC MISTIC MOTT'S MR & MRS T NANTUCKET NECTARS PEÃ'AFIEL RC COLA REALEMON REALIME ROSE'S SCHWEPPES SNAPPLE SQUIRT STEWART'S SUN DROP SUNKIST SODA TAHITIAN TREAT VENOM ENERGY VERNORS WELCH'S YOO-HOO 5301 L ...