Snapple 2013 Annual Report Download - page 82

Download and view the complete annual report

Please find page 82 of the 2013 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 133

  • 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

DR PEPPER SNAPPLE GROUP, INC.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
72
An unused commitment fee is payable quarterly to the lenders on the unused portion of the commitments of the Revolver
equal to 0.08% to 0.20% per annum, depending upon the Company's debt ratings. The Company incurred $1 million in unused
commitment fees during the year ended December 31, 2013. There were no significant unused commitment fees incurred during
the year ended December 31, 2012.
Shelf Registration Statement
On February 7, 2013, the Company's Board of Directors (the "Board") authorized the Company to issue up to $1,500 million
of securities from time to time. Subsequently, the Company filed a "well-known seasoned issuer" shelf registration statement with
the Securities and Exchange Commission, effective May 23, 2013, which registered an indeterminable amount of securities for
future sales. As of December 31, 2013, the Company had not issued any securities under this shelf registration statement.
Letters of Credit Facilities
In addition to the portion of the Revolver reserved for issuance of letters of credit, the Company has incremental letters of
credit facilities. Under these facilities, $90 million is available for the issuance of letters of credit, $63 million of which was utilized
as of December 31, 2013 and $27 million of which remains available for use.
10. 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 Company manages these risks through a variety of strategies, including the use of interest rate contracts, foreign exchange
forward contracts, commodity forward and future contracts and supplier pricing agreements. DPS does not hold or issue derivative
financial instruments for trading or speculative purposes.
INTEREST RATES
Fair Value Hedges
The Company is exposed to the risk of changes in the fair value of certain fixed-rate debt attributable to changes in interest
rates and manages these risks through the use of receive-fixed, pay-variable interest rate swaps.
In December 2010, the Company entered into an interest rate swap having a notional amount of $100 million and maturing
in May 2038 in order to effectively convert a portion of the 2038 Notes from fixed-rate debt to floating-rate debt and designated
it as a fair value hedge. The assessment of hedge effectiveness is made by comparing the cumulative change in the fair value of
the hedged item attributable to changes in the benchmark interest rate with the cumulative changes in the fair value of the interest
rate swap, with any ineffectiveness recorded in earnings as interest expense during the period incurred. As of December 31, 2013
and 2012, the impact of the fair value hedge on the 2038 Notes increased the carrying value by $2 million and $22 million,
respectively.
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 convert fixed-rate, long-term debt to floating rate debt. These swaps were
entered into upon the issuance of the 2019 and 2021 Notes, and were accounted for as fair value hedges and qualified for the
shortcut method of accounting under U.S. GAAP. As of December 31, 2013 and 2012, the impact of the fair value hedge on the
2019 and 2021 Notes decreased the carrying value by $11 million and increased the carrying value by $8 million, respectively.
In November 2012, the Company entered into five interest rate swaps having an aggregate notional amount of $120 million
and maturing in January 2020 in order to effectively convert fixed-rate, long-term debt to floating rate debt. These swaps were
entered into upon the issuance of the 2020 Notes, and were accounted for as fair value hedges and qualified for the shortcut method
of accounting under U.S. GAAP. As of December 31, 2013 and 2012, the impact of the fair value hedge on the 2020 Notes decreased
the carrying value by $7 million and $1 million, respectively.