receiving such interest payments as income effectively connected with the conduct by the Non-U.S. Holder of a trade or business within the U.S. (and, if an income tax treaty applies to the Non-U.S. Holder, as income attributable to a permanent establishment of the Non-U.S. Holder in the U.S.).
In order to satisfy the certification requirement, the Non-U.S. Holder must provide a properly completed IRS Form W-8BEN or Form W-8BEN-E (or any applicable successor form) that provides the Non-U.S.
Holder'sHolder’s name and address and certifies under penalties of perjury that the Non-U.S. Holder is not a U.S. person. Alternatively, in a case where a security clearing organization, bank or other financial institution holds the
exchange notesNew Notes in the ordinary course of its trade or business on behalf of the Non-U.S. Holder, the certification requirements provide that the applicable withholding agent receive from the financial institution a certification under penalties of perjury that a properly completed IRS Form W-8BEN or Form W-8BEN-E (or any applicable successor form) has been received by it, or by another such financial institution, from the Non-U.S. Holder, and that a copy of such a form be furnished to the applicable withholding agent. Special rules apply to foreign partnerships, estates and trusts, and in certain circumstances, certifications as to foreign status of partners, trust owners, or beneficiaries may be required to be provided to the applicable withholding agent. In addition, special rules apply to payments made through a qualified intermediary.
A Non-U.S. Holder that cannot satisfy the requirements described in the preceding paragraphs generally will be subject to U.S. federal withholding tax at the rate of 30%, unless (i) the Non-U.S. Holder provides a properly completed IRS Form W-8BEN or Form W-8BEN-E (or any applicable successor form) and other required documentation evidencing its entitlement to an exemption from (or a reduction of) withholding under an applicable income tax treaty, or (ii) payments of interest on the
exchange notesNew Notes are effectively connected with the conduct by the Non-U.S. Holder of a trade or business in the U.S. (and, in the event that an income tax treaty is applicable, payments of interest are also attributable to a U.S. permanent establishment maintained by the Non-U.S. Holder) and the Non-U.S. Holder meets the certification requirement discussed at the end of the following paragraph.
If the payments of interest on
an exchange notea New Note are effectively connected with the conduct by a Non-U.S. Holder of a trade or business in the U.S. (and, if an income tax treaty applies, if the payments of interest are also attributable to a permanent establishment maintained by the Non-U.S. Holder in the U.S.), such payments will be subject to U.S. federal income tax on a net basis at the rates applicable to U.S. persons generally. If the Non-U.S. Holder is a corporation for U.S. federal income purposes, that portion of its earnings and profits that is effectively connected with its U.S. trade or business (and, if an income tax treaty applies, is attributable to the Non-U.S.
Holder'sHolder’s permanent establishment in the U.S.) also may be subject to a branch profits tax at the rate of 30%, unless an applicable income tax treaty provides for a lower rate. If payments are subject to U.S. federal income tax on a net basis in accordance with the rules described in the preceding two sentences, such payments will not be subject to U.S. federal withholding tax so long as the Non-U.S. Holder provides the applicable withholding agent with a properly completed and executed IRS Form W-8ECI (or suitable substitute or successor form).
The certifications described above must be provided to the applicable withholding agent prior to the payment of interest and must generally be updated periodically. If a Non-U.S. Holder does not timely provide the applicable withholding agent with the required certifications, but the Non-U.S. Holder qualifies for a reduced rate under an applicable income tax treaty, the Non-U.S. Holder may obtain a refund of any excess amounts withheld if the Non-U.S. Holder timely provides the required information or appropriate claim form to the IRS. Non-U.S. Holders should consult their tax advisors regarding any applicable income tax treaties, which may provide for an exemption from, or reduced
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rate of, U.S. federal withholding or branch profits tax, or other rules different from those described above.
Sale, Exchange, or Disposition of
an Exchangea New Note
Subject to the discussions under
"—“—Information Reporting and Backup
Withholding"Withholding” and
"—“—FATCA
Withholding"Withholding” below, any gain realized by a Non-U.S. Holder on the sale, exchange, redemption, retirement or other disposition of
an exchange notea New Note generally will not be subject to U.S. federal income tax, unless:
such gain is effectively connected with the conduct by such Non-U.S. Holder of a trade or business within the U.S. (and, if an income tax treaty applies, such gain is also attributable to a permanent establishment maintained by the Non-U.S. Holder in the U.S.); or
•the Non-U.S. Holder is an individual who is present in the U.S. for 183 days or more in the taxable year of the disposition and certain other conditions are satisfied.
If the gain on a disposition of
an exchange notea New Note is effectively connected with the conduct by a Non-U.S. Holder of a trade or business in the U.S. (and, if an income tax treaty applies, if the gain is also attributable to a permanent establishment maintained by the Non-U.S. Holder in the U.S.), such gain will generally be subject to U.S. federal income tax at regular graduated income tax rates applicable to U.S. Holders. If the Non-U.S. Holder is a corporation, that portion of its earnings and profits that is effectively connected with its U.S. trade or business (and, if an income tax treaty applies, is attributable to the Non-U.S.
Holder'sHolder’s permanent establishment in the U.S.) also may be subject to a branch profits tax at a 30% rate, unless an applicable income tax treaty provides for a lower rate. A Non-U.S. Holder described in the second bullet point above will be subject to a flat U.S. federal income tax at a 30% rate (or, if an income tax treaty applies, such lower rate as is specified under the treaty) on the gain derived from the sale or other disposition, which may be offset by U.S. source capital losses.
Any amount allocable to accrued and unpaid interest generally will be taxable as interest and may be subject to the rules discussed above under
"—“—Taxation of Interest on
an Exchangea New Note.
"”
Information Reporting and Backup Withholding
Any payments of interest on the
exchange notesNew Notes to a Non-U.S. Holder will generally be reported to the IRS and to the Non-U.S. Holder. Copies of these information returns also may be made available under the provisions of a specific treaty or other agreement to the tax authorities of the country in which the Non-U.S. Holder resides.
Backup withholding and certain additional information reporting generally will not apply to payments of interest with respect to which either the requisite certification, as described under
"—“—Taxation of Interest on
an Exchange Note"a New Note” above (e.g., a properly completed and executed IRS Form W-8BEN or Form W-8BEN-E), has been received or an exemption otherwise has been established, provided that the applicable withholding agent has no actual knowledge or reason to know that the holder is, in fact, a U.S. person or that the conditions of any other exemption are not, in fact, satisfied.
The payment of the proceeds from the disposition of the exchange notesNew Notes by or through the U.S. office of any broker, U.S. or foreign, will be subject to information reporting and backup withholding unless the Non-U.S. Holder certifies as to its non-U.S. status (e.g., by furnishing the broker with a properly completed and executed IRS Form W-8BEN or Form W-8BEN-E) or otherwise establishes an exemption, provided that the broker does not have actual knowledge or reason to know that the holder is a U.S. person or that the conditions of any other exemption are not, in fact, satisfied. The payment of the proceeds from the disposition of the exchange notesNew Notes by or through a non-U.S. office of a
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non-U.S. broker will not be subject to information reporting or backup withholding unless the non-U.S. broker has certain types of relationships with the U.S. (a "U.S.“
U.S. related person"person”). In the case of the payment of the proceeds from the disposition of the exchange notesNew Notes by or through a non-U.S. office of a broker that is either a U.S. person or a U.S. related person, the Treasury Regulations require information reporting and backup withholding on the payment unless the broker has documentary evidence in its files that the beneficial owner is a Non-U.S. Holder and the broker has no knowledge or reason to know to the contrary. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be credited against the Non-U.S.
Holder'sHolder’s U.S. federal income tax liability, and the Non-U.S. Holder may be entitled to a refund of amounts withheld in excess of the Non-U.S.
Holder'sHolder’s U.S. federal income tax liability provided such Non-U.S. Holder timely furnishes the required information to and/or files the necessary returns or claims with the IRS. We cannot refund amounts once withheld.
Sections 1471 through 1474 of the Code and applicable Treasury Regulations thereunder (commonly referred to as "FATCA"“FATCA”) generally impose a withholding tax at a 30% rate on payments to a "foreign“foreign financial institution"institution” or a "non-financial“non-financial foreign entity"entity” (each as defined in the Code), unless: (1) in the case of a foreign financial institution, such institution enters into an agreement with the Treasury Department to withhold on certain payments and to collect substantial information regarding U.S. account holders, including certain account holders that are foreign entities with U.S. owners, (2) in the case of a non-financial foreign entity, such entity provides the withholding agent with a certification that it does not have any "substantial“substantial United States owners"owners” (as defined in the Code) or a certification identifying its direct or indirect substantial United States owners, or (3) the foreign financial institution or non-financial foreign entity otherwise qualifies for an exemption from these rules and provides appropriate documentation (such as an IRS Form W-8BEN-E). An intergovernmental agreement between the U.S. and the non-U.S. entity'sentity’s jurisdiction may modify these requirements. Withholding under these rules (if applicable) applies to payments of interest on the exchange notes and, after December 31, 2018, to payments of gross proceeds from the sale, exchange, redemption, retirement or other disposition of the exchange notes. Non-U.S. Holders, and U.S. Holders holding the exchange notesNew Notes through a non-U.S. intermediary, should consult their tax advisors regarding the potential application of FATCA to the exchange notes.New Notes.
THE PRECEDING SUMMARY OF MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS IS FOR GENERAL INFORMATION ONLY AND IS NOT LEGAL OR TAX ADVICE. ACCORDINGLY, HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS ON THE U.S. FEDERAL, STATE, LOCAL, AND FOREIGN TAX CONSEQUENCES OF THEIR EXCHANGE OF ADDITIONALOLD NOTES FOR EXCHANGENEW NOTES AND THE OWNERSHIP AND DISPOSITION OF THE EXCHANGENEW NOTES, AND ON THE CONSEQUENCES OF ANY CHANGES IN APPLICABLE LAW.
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Based on interpretations by the staff of the SEC in no-action letters issued to third parties, we believe that you may transfer
exchange notesNew Notes issued under the exchange offer in exchange for the
additional notesOld Notes if:
any exchange notesNew Notes to be received by you will be acquired in the ordinary course of your business; and
you have no arrangement or understanding with any person or entity to participate in the distribution (within the meaning of the Securities Act) of the
exchange notesNew Notes in violation of the provisions of the Securities Act.
You may not participate in the exchange offer unless:
you are not an "affiliate,"“affiliate,” as defined in Rule 405 under the Securities Act, of us or our Subsidiary Guarantors; and
•
if you are a broker-dealer that will receive
exchange notesNew Notes for your own account in exchange for
additional notesOld Notes that were acquired as a result of market-making or other trading activities, then you agree to deliver this prospectus (or, to the extent permitted by law, make this prospectus available to purchasers) in connection with any resale of the
exchange notes.New Notes.
Each broker-dealer that receives
exchange notesNew Notes for its own account pursuant to the exchange offer must acknowledge that it will deliver this prospectus in connection with any resale of such
exchange notes.New Notes. To date, the staff of the SEC has taken the position that broker-dealers may fulfill their prospectus delivery requirements with respect to transactions involving an exchange of securities such as this exchange offer, other than a resale of an unsold allotment from the original sale of the
additional notes,Old Notes, with this prospectus. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of
exchange notesNew Notes received for their own account in exchange for
additional notesOld Notes where such
additional notesOld Notes were acquired as a result of market-making activities or other trading activities. We have agreed that, for a period ending on ,
2018,2019, we will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. In addition, until such date, all dealers effecting transactions in
exchange notesNew Notes may be required to deliver this prospectus.
We are entitled under the registration rights agreements to suspend the use of this prospectus by broker-dealers if, in our good faith determination, the continued effectiveness of the registration statement and the use of this prospectus would require the public disclosure of material non-public information.
If we suspend the use of this prospectus, the period referred to above during which we have agreed to make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with certain resales, will be extended by a number of days equal to the period of the suspension and we and the
Subsidiary Guarantors will pay additional interest, if required, pursuant to the registration rights agreements.
If you wish to exchange notesNew Notes for your additional notesOld Notes in the exchange offer, you will be required to make representations to us as described in "The“The Exchange Offer—Procedures for Tendering—Your Representations to Us"Us” in this prospectus. As indicated in the letter of transmittal, you will be deemed to have made these representations by tendering your additional notesOld Notes in the exchange offer. In addition, if you are a broker-dealer who receives exchange notesNew Notes for your own account in exchange for additional notesOld Notes that were acquired by you as a result of market-making activities or other trading activities, you will be required to acknowledge, in the same manner, that you will deliver this prospectus in connection with any resale by you of such exchange notes.New Notes.
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We will not receive any proceeds from any sale of exchange notesNew Notes by broker-dealers. Exchange notesNew Notes received by broker-dealers for their own account pursuant to the exchange offer may be sold from time to time in one or more transactions:
•in the over-the-counter market;
•in negotiated transactions;
through the writing of options on the exchange notes;New Notes; or
•a combination of such methods of resale; at market prices prevailing at the time of resale, at prices related to such prevailing market prices or at negotiated prices.
Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer or the purchasers of any such
exchange notes.New Notes. Any broker-dealer that resells
exchange notesNew Notes that were received by it for its own account pursuant to the exchange offer and any broker or dealer that participates in a distribution of such
exchange notesNew Notes may be deemed to be an
"underwriter"“underwriter” within the meaning of the Securities Act and any profit on any such resale of
exchange notesNew Notes and any commission or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. Each letter of transmittal states that by acknowledging that it will deliver and by delivering this prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter"“underwriter” within the meaning of the Securities Act.
For a period of 180 days after the consummation of the exchange offer, the Company will promptly send additional copies of this prospectus and any amendment or supplement to this prospectus to any broker-dealer that requests such documents as provided in the Letterletter of Transmittal.transmittal. The Company has agreed to pay all expenses incident to the exchange offer (including the expenses of one counsel for the holders of the additional notes)Old Notes) other than commissions or concessions of any brokers or dealers and will indemnify the holders of the additional notesOld Notes (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act.
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LEGAL MATTERS
Baker Botts L.L.P. has issued an opinion
Certain matters with respect to the validity of the
legality of the exchange notes.New Notes will be passed upon for us by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York.
The consolidated financial statements incorporated in this prospectus by reference from
Dr Pepper Snapple Group, Inc.'sKDP’s Annual Report on Form 10-K for the year ended December 31,
20172018 and the effectiveness of
Dr Pepper Snapple Group, Inc.'sKDP’s internal control over financial reporting have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their reports, which are incorporated herein by reference. Such consolidated financial statements have been so incorporated in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing.
The audited historical financial statements of Maple Parent Holdings Corp. formerly known as Keurig Green Mountain, Inc. and its subsidiaries (Predecessor) for the period from September 28, 2014 through September 26, 2015 included in this Prospectus have been so included in reliance on the report of PricewaterhouseCoopers LLP, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.
INDEPENDENT AUDITORS
The consolidated financial statements of Maple Parent Holdings, Corp. and its subsidiaries, as of September 30, 2017 (Successor) and September 24, 2016 (Successor), andincorporated in this prospectus by reference from DPS’ Annual Report on Form 10-K for the period September 25, 2016 to September 30,year ended December 31, 2017 (Successor), the period December 4, 2015 to September 24, 2016 (Successor), and the period September 27, 2015 to March 2, 2016 (Predecessor), included in this Prospectus have been audited by Deloitte & Touche LLP, an independent auditors,registered public accounting firm, as stated in their report, and are includedwhich is incorporated herein by reference. Such consolidated financial statements have been so incorporated in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This prospectus
and documents incorporatedcontains or incorporates by reference
into this prospectus contain certain "forward-looking statements"“forward-looking statements” within the meaning of
federalapplicable securities laws
with respectand regulations. These forward-looking statements can generally be identified by the use of words such as “anticipate,” “expect,” “believe,” “could,” “estimate,” “feel,” “forecast,” “intend,” “may,” “plan,” “potential,” “project,” “should,” “will,” “would,” and similar words, phrases or expressions and variations or negatives of these words, although not all forward-looking statements contain these identifying words. Forward-looking statements by their nature address matters that are, to
the businesses, strategies and plans of DPS and Maple and the combined company following the Transaction, their expectations relating to the Transaction and thedifferent degrees, uncertain, including, in particular, statements about future events, future financial
conditionperformance, plans, strategies, expectations, prospects, competitive environment, regulation, labor matters and
performanceavailability of raw materials, such as statements regarding the estimated or anticipated future results of the combined company following the
Transaction. Statements included in or incorporated by reference into this prospectus that are not historical facts, including statements aboutDPS Merger, the
beliefs and expectationsanticipated benefits of the
management of each of DPS
and Maple, are forward-looking statements. Words such as "believes," "plans," "anticipates," "estimates," "expects," "intends," "aims," "potential," "will," "would," "could," "considered," "likely," "estimate" and variations of these words and similar future or conditional expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. These forward-looking statements may include, without limitation, statements regarding the completion of the Transaction, expectedMerger, including estimated synergies and other benefits, including tax, financial and strategic benefits, to the combined company and the respective stockholders of DPS and Maple of the Transaction, the expected tax consequences to holders of DPS common stock and the combined company common stock and the expected accounting treatment for the Transactioncost savings, and other statements that are not historical facts.
Forward-looking These statements estimates and projections are based on management's current beliefs and assumptions, are not guarantees of performance and may prove to be inaccurate. While DPS and Maple believe these expectations, assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond the control of DPS and Maple. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend upon future circumstances that may or may not occur. Actual results may differ materially from the current expectations of DPSour management with respect to future events and Maple, depending uponfinancial performance and are not predictions of actual performance.
These forward-looking statements are subject to a number of
factors affecting their businessesrisks and
uncertainties regarding our business and actual financial performance could differ materially from that projected in the forward-looking statements due to the inherent uncertainty of estimates, forecasts and projections, and our financial performance may be better or worse than anticipated. These risks
associated with the successful execution of the Transaction and
the integration and performance of their businesses following the Transaction. These factorsuncertainties include, but are not limited
to, risks and uncertainties detailed in DPS' periodic public filings withto: (i) the
SEC, including those discussed inimpact the
section of this prospectus entitled "Risk Factors" and in the section entitled "Risk Factors" in DPS's Annual Report on Form 10-K for the fiscal year ended December 31, 2017 ("2017 Form 10-K"), and in subsequent filings by DPS with the SEC, and the following factors:•stockholders may not approve the Stockholder Approvals;
•regulatory and other required approvalssignificant additional debt incurred in connection with the TransactionDPS Merger may prevent or substantially delayhave on our ability to operate our business; (ii) risks relating to the consummationintegration of historical Keurig and DPS operations, products and employees into our combined company and assumption of certain potential liabilities of Keurig and the possibility that the anticipated synergies and other benefits of the Transaction;
•the closing of the Transaction is subject to many conditions, and if these conditions are not satisfied or waived, the TransactionDPS Merger, including cost savings, will not be completed;
•- realized or will not be realized within the
terminationexpected timeframe; (iii) our status as a “controlled company” within the meanings of the Merger Agreement and the failure to consummate the Transaction could negatively impact DPS and its future operations;
•DPS stockholders will have a minority ownership after the Transaction and exercise less influence;
•the composition of the Board will change following the Transaction;
•the combined company will be a "controlled company" following the Transaction and will relyNYSE; including our reliance on exemptions from certain corporate governance requirements, including having fewer independent directors on its board of directors or board committees following the Transaction;
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•following the completion of the Transaction, JAB Holding Company S.à.r.l., through its affiliate, Sponsor, will be the combined company's largest stockholder and will have the ability to exercise significant influence over decisions requiring the combined company's stockholders' approval;
•DPS and Keurig will be subject to certain operating restrictions until, and business uncertainties until and following, the consummation of the Transaction;
•restrictions on DPS's ability to pursue other alternatives to the Transaction;
•DPS stockholders' investment could be materially and adversely affected if the due diligence of Keurig was inadequate or if unexpected risks related to Keurig materialize;
•completion of the Transaction may require consents or trigger change in control or other provisions in certain agreements to which DPS is a party;
•the unaudited pro forma condensed combined financial statements and prospective financial information included in this prospectus are presented for illustrative purposes onlystandards and the actual financial conditionsignificantly less influence that our pre-DPS Merger holders now have on the Company; and results of operations of(iv) risks relating to our business and the industries in which our combined company following the Transaction may differ materially;
•DPS may waive one oroperates. These risks and uncertainties, as well as other risks and uncertainties, are more of the conditions to the Transaction without resoliciting its stockholders' approval;
•the lack of a public market for Maple shares makes it difficult to evaluate the fairness of the Transaction and the stockholders of Maple may receive considerationfully discussed in the Transaction that is more than the fair market value of the Maple shares;
•uncertainties regarding the tax characterization and treatment of the special cash dividend;
•expected combination benefits from the Transaction may not be fully realized;
•integration of the combined businesses of DPS and Keurig may not be successful or may be more challenging than anticipated;
•Maple and DPS will incur direct and indirect costs as a result of the Transaction;
•following the completion of the Transaction, the combined company will incur significant additional indebtedness which could adversely affect it;
•restrictions on the combined company from indebtedness agreements entered into in connection with the Transaction may affect business operations;
•the market price for the combined company's common stock may be affected by factors different than those that historically have affected DPS's common stock;
•following the completion of the Transaction, the combined company will assume certain potential liabilities relating to Keurig;
•additional risks associated with the coffee and appliance business and operations in new geographical regions;
•changes in consumer preferences, trends and health concerns;
•changes in the cost of and supply of commodities used in our or, following the Transaction, the combined company's business;
•dependence on a small number of large retailers for a significant portion of our or, following the Transaction, the combined company's sales;
•loss of key personnel;
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•dependence on third-party bottling and distribution companies;
•reliance on the performance of a limited number of suppliers, manufacturers and other fulfillment companies;
•ability to successfully integrate and manage our or, following the Transaction, the combined company's acquired businesses or brands;
•operating in highly competitive markets and our or, following the Transaction, the combined company's ability to compete with companies with significant financial resources;
•fluctuations in foreign currency exchange rates;
•fluctuations in our or, following the Transaction, the combined company's tax obligations, including transfer pricing;
•disruptions to information systems and third-party service providers;
•disruptions to manufacturing and distribution facilities;
•litigation claims or legal proceedings against us or, following the Transaction, the combined company;
•failure to comply with U.S. and international laws and regulations in the countries in which we or, following the Transaction, the combined company operate;
•weather, natural disasters, climate changes and the availability of water;
•seasonality of DPS's and Keurig's businesses;
•our or, following the Transaction, the combined company's products meeting health and safety standards or contamination of our or, following the Transaction, the combined company's products;
•recession, financial and credit market disruptions and other economic conditions;
•increases in cost of employee benefits;
•strikes or work stoppages;
•infringement of our or, following the Transaction, the combined company's intellectual property rights by third parties, intellectual property claims against us or, following the Transaction, the combined company or adverse events regarding licensed intellectual property;
•the need for substantial investment and restructuring at our or, following the Transaction, the combined company's manufacturing, distribution and other facilities;
•our or, following the Transaction, the combined company's ability to retain or recruit qualified personnel;
•Keurig's financial performance is, and, following the Transaction, the combined company's financial performance will be, highly dependent upon the sales of Keurig® brewing systems and pods;
•failure to maintain strategic relationships with well-recognized brands/brand owners and private label brands could adversely impact Keurig's and, following the Transaction, the combined company's future growth and business;
•obsolete inventory may result in reduced prices or write-downs; and
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•reliance on independent certification for a number of DPS's, Keurig's and, following the Transaction, the combined company's products. Loss of any independent certifications could harm DPS's, Keurig's and, following the Transaction, the combined company's businesses.
Consequently, all of the forward-looking statements Maple or DPS make in this prospectus are qualified by the information contained in or incorporated by reference into this prospectus, including, but not limited to, (i) the information contained under this heading, (ii) the information discussed in the“Risk Factors” section of this prospectus entitled "Risk Factors" and (iii)in the information discussed underCompany’s filings with the section entitled "Risk Factors" in DPS' 2017SEC, including our Annual Report on Form 10-K filed with the SEC on February 28, 2019, and our subsequent filings by DPS with the SEC. SeeWhile the section entitled "Where You Can Find More Information"lists of risk factors presented here and in our public filings are considered representative, no such list should be considered to be a complete statement of all potential risks and uncertainties. Given these uncertainties, you should not put undue reliance on any forward-looking statements. Any forward-looking statement made herein speaks only as of the date of this prospectus.
Neither Maple nor DPS isdocument. We are under anyno obligation to, and each expressly disclaimsdisclaim any obligation to, update alter or otherwise revisealter any forward-looking statements, whether written or oral, that may be made from time to time, whether as a result of new information, futuresubsequent events or otherwise, except as required by law. Persons reading this prospectus are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.
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INDEX TO FINANCIAL STATEMENTS
| | |
| | Page |
|---|
Maple Parent Holdings Corp.
| | |
Consolidated Financial Statements
| | |
Independent Auditors' Report
| | F-2 |
Report of the Independent Registered Public Accounting Firm
| | F-4 |
Consolidated Successor Balance Sheets as of December 30, 2017, September 30, 2017 and September 24, 2016
| | F-5 |
Consolidated Statements of Operations for the Predecessor periods ending March 2, 2016 and September 26, 2015 and Successor periods ending September 30, 2017 and September 24, 2016, and interim periods (unaudited) ending December 30, 2017 and December 24, 2016
| | F-6 |
Consolidated Statements of Comprehensive Income for the Predecessor periods ending March 2, 2016 and September 26, 2015 and Successor periods ending December 30, 2017 (unaudited), September 30, 2017 and September 24, 2016
| | F-7 |
Consolidated Statements of Changes in Stockholders' Equity for the Predecessor periods ending March 2, 2016 and September 26, 2015 and Successor periods ending December 30, 2017 (unaudited), September 30, 2017 and September 24, 2016
| | F-8 |
Consolidated Statements of Cash Flows for the Predecessor periods ending March 2, 2016 and September 26, 2015 and Successor periods ending September 30, 2017 and September 24, 2016, and interim periods (unaudited) ending December 30, 2017 and December 24, 2016
| | F-10 |
Notes to Consolidated Financial Statements
| | F-11 |
Unaudited Pro Forma Financial Information
| | F-63 |
Pro Forma Combined Balance Sheet as of December 31, 2017
| | F-65 |
Pro Forma Combined Statement of Income for the twelve months ended December 31, 2017
| | F-66 |
Notes to Unaudited Pro Forma Combined Financial Information
| | F-67 |
applicable laws or regulations.
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INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of Maple Parent Holdings Corp.
Waterbury, VT.
We have audited the accompanying consolidated financial statements of Maple Parent Holdings Corp. and its subsidiaries (the "Company"), which comprise the consolidated balance sheets as of September 30, 2017 (Successor) and September 24, 2016 (Successor), and the related consolidated statements of operations, comprehensive income, changes in stockholders' equity, and cash flows for the period September 25, 2016 to September 30, 2017 (Successor), the period December 4, 2015 to September 24, 2016 (Successor), and the period September 27, 2015 to March 2, 2016 (Predecessor), and the related notes to the consolidated financial statements.
Management's Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
Auditors' Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Maple Parent Holding Corp. and its subsidiaries as of September 30, 2017 (Successor) and September 24, 2016 (Successor), and the results of their operations and their cash flows for the period September 25, 2016 to September 30, 2017 (Successor), the period December 4, 2015 to September 24, 2016 (Successor), and the period September 27, 2015 to March 2, 2016 (Predecessor), in accordance with accounting principles generally accepted in the United States of America.
Table of Contents
Emphasis of Matter
As discussed in Note 1 to the consolidated financial statements, on March 3, 2016, the Company acquired Keurig Green Mountain, Inc. and its subsidiaries (Keurig). As the operations of Keurig succeeded to substantially all of the operations of the Company, Keurig is presented as the predecessor entity for purposes of these consolidated financial statements.
Other Matter
The interim financial information of the Company as of December 30, 2017 (Successor) and for the periods October 1, 2017 to December 30, 2017 (Successor) and September 25, 2016 to December 24, 2016 (Successor) were reviewed by us and our report thereon, dated March 7, 2018, stated we were not aware of any material modifications that should be made to that information for it to be in conformity with accounting principles generally accepted in the United States of America. However, a review is substantially less in scope than an audit and does not provide a basis for the expression of an opinion on the interim financial information as a whole.
/s/ Deloitte & Touche LLP
March 7, 2018
Boston, MA
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Board of Directors and the Stockholders of Maple Parent Holdings Corp.
In our opinion, the consolidated statements of operations, comprehensive income, changes in stockholders equity and cash flows for the period from September 28, 2014 to September 26, 2015 present fairly, in all material respects, the results of operations and cash flows of Maple Parent Holdings Corp. (formerly known as Keurig Green Mountain, Inc.) and its subsidiaries (Predecessor) for the period from September 28, 2014 to September 26, 2015, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
November 18, 2015
Table of Contents
Maple Parent Holdings Corp.
Consolidated Balance Sheets
(Dollars in thousands)
| | | | | | | | | | |
| | Successor | |
|---|
| | December 30,
2017 | | September 30,
2017 | | September 24,
2016 | |
|---|
| | (Unaudited)
| |
| |
| |
|---|
Assets | | | | | | | | | | |
Current assets: | | | | | | | | | | |
Cash, cash equivalents, and restricted cash | | $ | 95,037 | | $ | 348,607 | | $ | 437,913 | |
Receivables, less uncollectible accounts and return allowances of $31,325, $29,977 and $39,251, respectively | | | 482,705 | | | 447,433 | | | 457,768 | |
Inventories | | | 383,817 | | | 473,677 | | | 579,032 | |
Income taxes receivable | | | 45,450 | | | 76,558 | | | 51,630 | |
Other current assets | | | 49,270 | | | 43,034 | | | 34,564 | |
| | | | | | | | | | | |
Total current assets | | | 1,056,279 | | | 1,389,309 | | | 1,560,907 | |
Fixed assets, net | | | 789,817 | | | 799,667 | | | 960,927 | |
Intangibles, net | | | 3,833,780 | | | 3,861,944 | | | 4,048,139 | |
Goodwill | | | 9,818,615 | | | 9,828,589 | | | 10,012,196 | |
Deferred income taxes, net | | | 27,203 | | | 27,199 | | | 118 | |
Long-term restricted cash | | | 269 | | | 271 | | | 271 | |
Investments in unconsolidated Subsidiaries | | | 97,389 | | | 101,284 | | | — | |
Other long-term assets | | | 120,399 | | | 97,360 | | | 26,915 | |
| | | | | | | | | | | |
Total assets | | $ | 15,743,751 | | $ | 16,105,623 | | $ | 16,609,473 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Liabilities and Stockholders' Equity | | | | | | | | | | |
Current liabilities: | | | | | | | | | | |
Current portion of long-term debt | | $ | 219,073 | | $ | 219,076 | | $ | 186,247 | |
Current portion of capital lease and financing obligations | | | 6,084 | | | 6,159 | | | 3,210 | |
Accounts payable | | | 1,579,716 | | | 1,433,797 | | | 513,596 | |
Accrued expenses | | | 201,397 | | | 231,139 | | | 284,615 | |
Income tax payable | | | 3,080 | | | 14,598 | | | 5,422 | |
Deferred revenue | | | 2,971 | | | 2,715 | | | 3,107 | |
Other current liabilities | | | 5,736 | | | 6,410 | | | 12,170 | |
| | | | | | | | | | | |
Total current liabilities | | | 2,018,057 | | | 1,913,894 | | | 1,008,367 | |
Long-term debt, less current portion | | | 3,063,970 | | | 3,659,957 | | | 5,506,911 | |
Long-term debt, related party | | | 1,815,000 | | | 1,815,000 | | | 1,815,000 | |
Capital lease and financing obligations, less current portion | | | 97,088 | | | 98,519 | | | 111,284 | |
Deferred income taxes, net | | | 1,030,993 | | | 1,515,093 | | | 1,517,291 | |
Other long-term liabilities | | | 56,564 | | | 56,487 | | | 74,782 | |
Employee redeemable non-controlling interest and mezzanine equity awards | | |
265,089 | | |
218,792 | | |
66,002 | |
Stockholders' equity: | | |
| | |
| | |
| |
Class A Common Stock | | | 62 | | | 62 | | | 62 | |
Class B Common Stock | | | 20 | | | 20 | | | 20 | |
Additional paid-in capital | | | 6,384,918 | | | 6,384,918 | | | 6,384,918 | |
Retained earnings | | | 913,365 | | | 336,798 | | | 99,334 | |
Accumulated other comprehensive income | | | 98,625 | | | 106,083 | | | 25,502 | |
| | | | | | | | | | | |
Total stockholders' equity | | $ | 7,396,990 | | $ | 6,827,881 | | $ | 6,509,836 | |
| | | | | | | | | | | |
Total liabilities and stockholders' equity | | $ | 15,743,751 | | $ | 16,105,623 | | $ | 16,609,473 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
Table of Contents
Maple Parent Holdings Corp.
Consolidated Statements of Operations
(Dollars in thousands)
| | | | | | | | | | | | | | | | | | | | | |
| | Successor | |
| | Predecessor | |
|---|
| | October 1,
2017 to
December 30,
2017
(Unaudited) | | September 25,
2016 to
December 24,
2016
(Unaudited) | | September 25,
2016 to
September 30,
2017 | | December 4,
2015 to
September 24,
2016 | |
| | September 27,
2015 to
March 2,
2016 | | September 28,
2014 to
September 26,
2015 | |
|---|
Net sales | | $ | 1,170,521 | | $ | 1,213,644 | | $ | 4,269,254 | | $ | 2,293,203 | | | | $ | 2,025,389 | | $ | 4,520,031 | |
Cost of sales | | | 655,584 | | | 669,778 | | | 2,238,790 | | | 1,219,710 | | | | | 1,354,218 | | | 2,912,507 | |
| | | | | | | | | | | | | | | | | | | | | | |
Gross profit | | | 514,937 | | | 543,866 | | | 2,030,464 | | | 1,073,493 | | | | | 671,171 | | | 1,607,524 | |
Selling, general and administrative expenses | | | 211,891 | | | 203,264 | | | 836,174 | | | 439,288 | | | | | 334,422 | | | 826,850 | |
Transportation and warehouse costs | | | 66,295 | | | 75,927 | | | 249,600 | | | 134,519 | | | | | — | | | — | |
Transaction Costs | | | — | | | — | | | — | | | 102,412 | | | | | 187,242 | | | — | |
Restructuring expenses | | | 6,660 | | | 624 | | | 45,200 | | | 3,907 | | | | | 3,000 | | | 15,250 | |
| | | | | | | | | | | | | | | | | | | | | | |
Operating income | | | 230,091 | | | 264,051 | | | 899,490 | | | 393,367 | | | | | 146,507 | | | 765,424 | |
Other income (loss), net | | | (3,720 | ) | | (1,048 | ) | | (904 | ) | | 2,176 | | | | | 2,291 | | | 1,123 | |
Gain (loss) on financial instruments, net | | | 19,322 | | | 31,400 | | | 13,677 | | | (14,355 | ) | | | | 1,473 | | | 8,077 | |
Gain (loss) on foreign currency, net | | | (5,302 | ) | | 53,721 | | | 32,495 | | | 4,881 | | | | | (2,326 | ) | | (22,166 | ) |
Loss on extinguishment of debt | | | (5,050 | ) | | (30,721 | ) | | (85,348 | ) | | (4,555 | ) | | | | (6,393 | ) | | — | |
Interest expense—Related Party | | | (25,161 | ) | | (25,161 | ) | | (99,825 | ) | | (59,622 | ) | | | | — | | | — | |
Interest expense | | | (27,781 | ) | | (65,418 | ) | | (192,497 | ) | | (157,728 | ) | | | | (2,855 | ) | | (1,882 | ) |
| | | | | | | | | | | | | | | | | | | | | | |
Income before income taxes | | | 182,399 | | | 226,824 | | | 567,088 | | | 164,164 | | | | | 138,697 | | | 750,576 | |
Income tax benefit (expense) | | | 436,949 | | | (81,893 | ) | | (184,426 | ) | | (54,697 | ) | | | | (38,665 | ) | | (251,948 | ) |
| | | | | | | | | | | | | | | | | | | | | | |
Net Income | | $ | 619,348 | | $ | 144,931 | | $ | 382,662 | | $ | 109,467 | | | | $ | 100,032 | | $ | 498,628 | |
| | | | | | | | | | | | | | | | | | | | | | |
Net Income attributable to noncontrolling interests | | $ | 7,103 | | $ | 1,750 | | $ | 4,958 | | $ | — | | | | $ | — | | $ | 353 | |
| | | | | | | | | | | | | | | | | | | | | | |
Net Income Attributable to Maple Parent Holdings Corp. | | $ | 612,245 | | $ | 143,181 | | $ | 377,704 | | $ | 109,467 | | | | $ | 100,032 | | $ | 498,275 | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
Table of Contents
Maple Parent Holdings Corp.
Consolidated Statements of Comprehensive Income
(Dollars in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Successor | |
| | Predecessor | |
|---|
| |
| |
| |
| |
| |
| | September 27, 2015 to March 2, 2016 | | September 28, 2014 to September 26, 2015 | |
|---|
| | October 1,
2017 to
December 30,
2017 | | September 25,
2016 to
December 24,
2016 | | September 25,
2016 to
September 30,
2017 | | December 4,
2015 to
September 24,
2016 | |
| |
|---|
| |
| | Pre-tax | | Tax
(expense)
benefit | | After-tax | | Pre-tax | | Tax
(expense)
benefit | | After-tax | |
|---|
| | (Unaudited)
| | (Unaudited)
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
|---|
Net income | | $ | 619,348 | | $ | 144,931 | | $ | 382,662 | | $ | 109,467 | | | | | | | | | | $ | 100,032 | | | | | | | | $ | 498,628 | |
Other comprehensive income (loss): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Cash flow hedges: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Unrealized gains (losses) arising during the period | | | — | | | — | | | — | | | — | | | | | 599 | | | (160 | ) | | 439 | | | 1,135 | | | (342 | ) | | 793 | |
Gains (losses) reclassified to net income | | | — | | | — | | | — | | | — | | | | | (861 | ) | | 304 | | | (557 | ) | | (14,894 | ) | | 5,994 | | | (8,900 | ) |
Foreign currency translation adjustments | | | (7,538 | ) | | (39,397 | ) | | 81,747 | | | 25,502 | | | | | (9,212 | ) | | — | | | (9,212 | ) | | (137,469 | ) | | — | | | (137,469 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other comprehensive income (loss) | | | (7,538 | ) | | — | | | 81,747 | | | 25,502 | | | | | (9,474 | ) | | 144 | | | (9,330 | ) | | (151,228 | ) | | 5,652 | | | (145,576 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total comprehensive income | | $ | 611,810 | | $ | 105,534 | | $ | 464,409 | | $ | 134,969 | | | | | | | | | | $ | 90,702 | | | | | | | | $ | 353,052 | |
Comprehensive (income) loss attributable to noncontrolling interest | | | (7,103 | ) | | (1,750 | ) | | (4,958 | ) | | — | | | | | | | | | | | — | | | | | | | | | (13 | ) |
Foreign currency translation adjustments attributable to noncontrolling interest | | | 80 | | | 140 | | | (1,166 | ) | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Comprehensive income attributable to Maple Parent Holdings Corp. | | $ | 604,787 | | $ | 103,924 | | $ | 458,285 | | $ | 134,969 | | | | | | | | | | $ | 90,702 | | | | | | | | $ | 353,039 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
Table of Contents
Maple Parent Holdings Corp.
Consolidated Statements of Changes in Stockholders' Equity
(Dollars in thousands, except for shares)
Successor
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | Class A | | Class B | |
| |
| |
| |
| |
|---|
| | Common Stock | | Common Stock | |
| |
| | Accumulated
other
comprehensive
income (loss) | |
| |
|---|
| | Additional
paid-in
capital | | Retained
earnings | | Stockholders'
Equity | |
|---|
| | Shares | | Amount | | Shares | | Amount | |
|---|
Balance at December 4, 2015 | | | 1,000 | | $ | — | | | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | |
Proceeds from issuance of common stock | | | 6,212,120 | | | 62 | | | 1,987,880 | | | 20 | | | 6,384,918 | | | — | | | — | | | 6,385,000 | |
Adjustment of non-controlling interests to fair value | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Dividends paid | | | — | | | — | | | — | | | — | | | — | | | (10,133 | ) | | | | | (10,133 | ) |
Net income | | | — | | | — | | | — | | | — | | | — | | | 109,467 | | | — | | | 109,467 | |
Change in other comprehensive income | | | — | | | — | | | — | | | — | | | — | | | — | | | 25,502 | | | 25,502 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at September 24, 2016 | | | 6,213,120 | | $ | 62 | | | 1,987,880 | | $ | 20 | | $ | 6,384,918 | | $ | 99,334 | | $ | 25,502 | | $ | 6,509,836 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Adjustment of non-controlling interests to fair value | | | — | | | — | | | — | | | — | | | — | | | (86,382 | ) | | | | | (86,382 | ) |
Dividends paid | | | — | | | — | | | — | | | — | | | | | | (53,858 | ) | | | | | (53,858 | ) |
Net income attributable to Maple Parent Holdings Corp. | | | — | | | — | | | — | | | — | | | — | | | 377,704 | | | — | | | 377,704 | |
Change in other comprehensive income | | | — | | | — | | | — | | | — | | | — | | | — | | | 80,581 | | | 80,581 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at September 30, 2017 | | | 6,213,120 | | $ | 62 | | | 1,987,880 | | $ | 20 | | $ | 6,384,918 | | $ | 336,798 | | $ | 106,083 | | $ | 6,827,881 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Dividends paid (Unaudited) | | | — | | | — | | | — | | | — | | | — | | | (11,089 | ) | | | | | (11,089 | ) |
Adjustment of non-controlling interests to fair value | | | — | | | — | | | — | | | — | | | — | | | (24,589 | ) | | | | | (24,589 | ) |
Net income attributable to Maple Parent Holdings Corp. (Unaudited) | | | — | | | — | | | — | | | — | | | — | | | 612,245 | | | — | | | 612,245 | |
Change in other comprehensive income (Unaudited) | | | — | | | — | | | — | | | — | | | — | | | — | | | (7,458 | ) | | (7,458 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at December 30, 2017 (Unaudited) | | | 6,213,120 | | $ | 62 | | | 1,987,880 | | $ | 20 | | $ | 6,384,918 | | $ | 913,365 | | $ | 98,625 | | $ | 7,396,990 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
Table of Contents
Maple Parent Holdings Corp.
Consolidated Statements of Changes in Stockholders' Equity (Continued)
(Dollars in thousands, except for shares)
Predecessor
| | | | | | | | | | | | | | | | | | | |
| | Common Stock | |
| |
| | Accumulated
other
comprehensive
income (loss) | |
| |
|---|
| | Additional
paid-in
capital | | Retained
earnings | | Stockholders'
Equity | |
|---|
| | Shares | | Amount | |
|---|
Balance at September 27, 2014 | | | 162,318,246 | | $ | 16,232 | | $ | 1,808,881 | | $ | 1,687,619 | | $ | (54,051 | ) | $ | 3,458,681 | |
Options exercised | | | 1,520,757 | | | 152 | | | 16,406 | | | — | | | — | | | 16,558 | |
Issuance of common stock under employee stock purchase plan | | | 183,546 | | | 18 | | | 12,696 | | | — | | | — | | | 12,714 | |
Restricted stock awards and units | | | 215,662 | | | 22 | | | (22 | ) | | — | | | — | | | — | |
Repurchase of common stock | | | (11,028,955 | ) | | (1,103 | ) | | (1,032,218 | ) | | — | | | — | | | (1,033,321 | ) |
Stock compensation expense | | | — | | | — | | | 31,934 | | | — | | | — | | | 31,934 | |
Tax benefit from equity-based compensation plans | | | — | | | — | | | 40,846 | | | — | | | — | | | 40,846 | |
Deferred compensation expense | | | — | | | — | | | 537 | | | — | | | — | | | 537 | |
Adjustment of redeemable noncontrolling interests to redemption value | | | — | | | — | | | — | | | 7,560 | | | — | | | 7,560 | |
Cash dividends declared | | | — | | | — | | | — | | | (179,175 | ) | | — | | | (179,175 | ) |
Other comprehensive loss, net of tax | | | — | | | — | | | — | | | — | | | (145,251 | ) | | (145,251 | ) |
Net income | | | — | | | — | | | — | | | 498,275 | | | — | | | 498,275 | |
| | | | | | | | | | | | | | | | | | | | |
Balance at September 26, 2015 | | | 153,209,256 | | $ | 15,321 | | $ | 879,060 | | $ | 2,014,279 | | $ | (199,302 | ) | $ | 2,709,358 | |
Options exercised | | | 505,339 | | | 50 | | | 11,823 | | | — | | | — | | | 11,873 | |
Issuance of restricted stock awards and units | | | 188,468 | | | 19 | | | (19 | ) | | — | | | — | | | — | |
Stock based compensation | | | — | | | — | | | 14,980 | | | — | | | — | | | 14,980 | |
Reclassification of stock compensation to liability | | | — | | | — | | | (38,814 | ) | | — | | | — | | | (38,814 | ) |
Issuance of common stock under employee stock purchase plan | | | 106,322 | | | 10 | | | 4,800 | | | — | | | — | | | 4,810 | |
Excess tax benefits share-based compensation—windfall | | | — | | | — | | | 4,772 | | | — | | | — | | | 4,772 | |
Dividends paid | | | — | | | — | | | — | | | (48,551 | ) | | — | | | (48,551 | ) |
Other comprehensive loss, net of tax | | | — | | | — | | | — | | | — | | | (9,330 | ) | | (9,330 | ) |
Net income | | | — | | | — | | | — | | | 100,032 | | | — | | | 100,032 | |
Repurchase of common stock | | | (4,364,186 | ) | | (436 | ) | | (234,598 | ) | | — | | | — | | | (235,035 | ) |
| | | | | | | | | | | | | | | | | | | | |
Balance at March 2, 2016 | | | 149,645,199 | | $ | 14,964 | | $ | 642,004 | | $ | 2,065,760 | | $ | (208,632 | ) | $ | 2,514,095 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
Table of Contents
Maple Parent Holdings Corp.
Consolidated Statements of Cash Flows
(Dollars in thousands)
| | | | | | | | | | | | | | | | | | | | | |
| | Successor | |
| | Predecessor | |
|---|
| | October 1, 2017 to
December 30, 2017
(Unaudited) | | September 25,
2016 to
December 24, 2016
(Unaudited) | | September 25,
2016 to
September 30,
2017 | | December 4,
2015 to
September 24,
2016 | |
| | September 27,
2015 to
March 2,
2016 | | September 28,
2014 to
September 26,
2015 | |
|---|
Cash flows from operating activities: | | | | | | | | | | | | | | | | | | | | | |
Net income | | $ | 619,348 | | $ | 144,931 | | $ | 382,662 | | $ | 109,467 | | | | $ | 100,032 | | $ | 498,628 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | | | | | | | | | | | | | | | |
Depreciation and amortization of fixed assets | | | 32,639 | | | 33,577 | | | 142,341 | | | 69,715 | | | | | 102,521 | | | 217,515 | |
Amortization of intangibles | | | 28,651 | | | 24,232 | | | 96,257 | | | 55,015 | | | | | 21,276 | | | 48,148 | |
Amortization of deferred financing fees | | | 3,652 | | | 5,189 | | | 17,733 | | | 12,539 | | | | | 594 | | | 4,606 | |
Deferred income taxes | | | (483,901 | ) | | 11 | | | 15,675 | | | (23,817 | ) | | | | (5,733 | ) | | (8,591 | ) |
Deferred compensation and stock compensation | | | 15,356 | | | 21,274 | | | 57,577 | | | 5,658 | | | | | 140,605 | | | 32,471 | |
Excess tax benefits from equity-based compensation plans | | | — | | | — | | | — | | | — | | | | | (4,772 | ) | | (40,843 | ) |
Provision for doubtful accounts | | | 113 | | | 133 | | | 261 | | | 1,535 | | | | | 752 | | | 5,452 | |
Loss on extinguishment of debt | | | 5,050 | | | 30,721 | | | 85,348 | | | 4,555 | | | | | 6,393 | | | — | |
Unrealized (gain) loss on foreign currency | | | 4,650 | | | (51,765 | ) | | (41,230 | ) | | (5,789 | ) | | | | (16,235 | ) | | (2,862 | ) |
Asset impairment and non-cash restructuring | | | 5,919 | | | — | | | 15,732 | | | — | | | | | 8,393 | | | 16,256 | |
Provision for sales returns | | | 19,095 | | | 26,819 | | | 65,463 | | | 46,497 | | | | | 54,624 | | | 114,392 | |
Unrealized (gain) loss on derivatives | | | (19,322 | ) | | (31,400 | ) | | 3,937 | | | 14,355 | | | | | (1,473 | ) | | (20,959 | ) |
Acquisition costs | | | — | | | — | | | — | | | — | | | | | 59,088 | | | — | |
Other non-cash | | | 5,575 | | | (42 | ) | | 10,958 | | | 5,551 | | | | | 41 | | | 10,563 | |
Changes in assets and liabilities, net of acquisitions | | | | | | | | | | | | | | | | | | | | | |
Receivables | | | (54,525 | ) | | (44,686 | ) | | (54,084 | ) | | (83,900 | ) | | | | 40,613 | | | (24,303 | ) |
Inventories | | | 89,243 | | | 147,743 | | | 108,445 | | | (43,151 | ) | | | | 175,380 | | | 128,423 | |
Income tax payable/receivable, net | | | 19,769 | | | 68,307 | | | (15,936 | ) | | (31,558 | ) | | | | 40,767 | | | (64,337 | ) |
Other current assets | | | (8,909 | ) | | (6,396 | ) | | (9,258 | ) | | 21,117 | | | | | 42,785 | | | (23,573 | ) |
Other long-term assets, net | | | 4,247 | | | 798 | | | (96 | ) | | (14,193 | ) | | | | 808 | | | 2,369 | |
Accounts payable and accrued expenses | | | 97,934 | | | 64,993 | | | 871,080 | | | 186,594 | | | | | 76,844 | | | (155,922 | ) |
Payment of acquisition related costs | | | — | | | — | | | (10,144 | ) | | (59,088 | ) | | | | — | | | — | |
Other current liabilities | | | 258 | | | (864 | ) | | (6,137 | ) | | (8,552 | ) | | | | 445 | | | (1,191 | ) |
Other long-term liabilities | | | 105 | | | 882 | | | 11,835 | | | 17,033 | | | | | (13,168 | ) | | 18,620 | |
| | | | | | | | | | | | | | | | | | | | | | |
Net cash provided by operating activities | | | 384,947 | | | 434,457 | | | 1,748,419 | | | 279,583 | | | | | 830,580 | | | 754,862 | |
Cash flows from investing activities: | | | | | | | | | | | | | | | | | | | | | |
Capital expenditures for fixed assets | | | (29,497 | ) | | (21,325 | ) | | (66,044 | ) | | (32,657 | ) | | | | (78,648 | ) | | (411,099 | ) |
Maturity of short-term investment | | | — | | | — | | | — | | | — | | | | | — | | | 100,000 | |
Acquisition, net of cash | | | — | | | — | | | — | | | (13,716,813 | ) | | | | — | | | (180,698 | ) |
Formation of JV | | | — | | | — | | | 250,000 | | | — | | | | | — | | | 765 | |
Other investing activities | | | 12,023 | | | (559 | ) | | (4,345 | ) | | (22,128 | ) | | | | 4,479 | | | (7,399 | ) |
| | | | | | | | | | | | | | | | | | | | | | |
Net cash (used)/provided by investing activities | | | (17,474 | ) | | (21,884 | ) | | 179,611 | | | (13,771,598 | ) | | | | (74,169 | ) | | (498,431 | ) |
Cash flows from financing activities: | | | | | | | | | | | | | | | | | | | | | |
Net change in revolving line of credit | | | (100,000 | ) | | 300,000 | | | 100,000 | | | — | | | | | (330,000 | ) | | 330,000 | |
Proceeds from issuance of related party note | | | — | | | — | | | — | | | 1,815,000 | | | | | — | | | — | |
Proceeds from issuance of common stock | | | — | | | — | | | — | | | 6,385,000 | | | | | — | | | — | |
Proceeds from issuance of common stock under compensation plans | | | (8 | ) | | — | | | — | | | — | | | | | 16,685 | | | 29,272 | |
Repurchase of shares | | | — | | | — | | | — | | | — | | | | | (235,035 | ) | | (1,033,321 | ) |
Excess tax benefits from equity-based compensation plans | | | — | | | — | | | — | | | — | | | | | 4,772 | | | 40,843 | |
Proceeds from (cash distributions to) redeemable NCI shareholders | | | — | | | — | | | 4,642 | | | 60,344 | | | | | (4,411 | ) | | | |
Proceeds from borrowings of long-term debt | | | — | | | — | | | 1,200,000 | | | 5,946,679 | | | | | — | | | | |
Deferred financing fees | | | — | | | — | | | (5,213 | ) | | (122,235 | ) | | | | — | | | (4,123 | ) |
Cross currency swap | | | — | | | (8,645 | ) | | (86,828 | ) | | 12,700 | | | | | — | | | | |
Payments on capital lease and financing obligations | | | (3,610 | ) | | — | | | (14,663 | ) | | (1,468 | ) | | | | (36,945 | ) | | (2,823 | ) |
Repayment of long-term debt | | | (504,689 | ) | | (1,024,524 | ) | | (3,168,158 | ) | | (146,764 | ) | | | | — | | | (158,730 | ) |
Dividends paid | | | (11,393 | ) | | (8,878 | ) | | (55,303 | ) | | (10,133 | ) | | | | (92,599 | ) | | (175,707 | ) |
Other financing | | | 10 | | | (2,011 | ) | | — | | | (2,227 | ) | | | | 35,334 | | | 2,710 | |
| | | | | | | | | | | | | | | | | | | | | | |
Net cash (used)/provided by financing activities | | | (619,690 | ) | | (744,058 | ) | | (2,025,523 | ) | | 13,936,896 | | | | | (642,199 | ) | | (971,879 | ) |
Effect of exchange rate changes on cash and cash equivalents | | | (1,355 | ) | | (9,378 | ) | | 8,187 | | | (6,697 | ) | | | | 16,578 | | | 13,568 | |
Net (decrease)/increase in cash and cash equivalents | | | (253,572 | ) | | (340,863 | ) | | (89,306 | ) | | 438,184 | | | | | 130,790 | | | (701,880 | ) |
Cash, cash equivalents, and restricted cash at beginning of period | | | 348,878 | �� | | 437,913 | | | 438,184 | | | — | | | | | 59,334 | | | 761,214 | |
| | | | | | | | | | | | | | | | | | | | | | |
Cash, cash equivalents, and restricted cash at end of period | | $ | 95,306 | | $ | 97,050 | | $ | 348,878 | | $ | 438,184 | | | | $ | 190,124 | | $ | 59,334 | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Supplemental disclosures of cash flow information: | | | | | | | | | | | | | | | | | | | | | |
Cash paid for interest (net of amounts capitalized) | | $ | 24,383 | | $ | 31,474 | | $ | 166,921 | | $ | 155,959 | | | | $ | 4,582 | | $ | (2,785 | ) |
Cash paid for related party interest | | $ | 25,161 | | $ | 50,323 | | $ | 124,986 | | $ | 34,460 | | | | $ | — | | $ | — | |
Cash paid for income taxes | | $ | 25,682 | | $ | 12,061 | | $ | 158,520 | | $ | 92,489 | | | | $ | 17,444 | | $ | 320,239 | |
Dividends declared not paid at the end of each period | | | | | | | | | | | | | | | | | | | $ | 44,048 | |
Fixed asset purchases included in accounts payable and not disbursed at the end of the period | | $ | 18,911 | | $ | 4,491 | | $ | 6,106 | | $ | 18,139 | | | | $ | 11,984 | | $ | 32,122 | |
Noncash financing and investing activity: | | | | | | | | | | | | | | | | | | | | | |
Fixed assets acquired under capital | | | | | | | | | | | | | | | | | | | $ | 375 | |
The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
Table of Contents
Maple Parent Holdings Corp.
Notes to Consolidated Financial Statements
1. Nature of Business and Organization
Maple Parent Holdings Corp. ("Maple"), through its indirect subsidiary Keurig Green Mountain, Inc. ("Keurig" and together with Maple in these Notes to Consolidated Financial Statements, the "Maple Company") is a leader in the brewing system and specialty coffee businesses in the United States and Canada.
On December 4, 2015, JAB Holding Company S.a.r.l ("JAB") formed an indirect wholly-owned subsidiary, Maple Holdings Acquisition Corp. ("Maple acquisition merger sub"). On February 19, 2016, Maple was formed by JAB and capitalized with a contribution of $6,385 million of cash from JAB. On March 3, 2016, Maple, through Maple acquisition merger sub, acquired Keurig and its subsidiaries for $13.9 billion (the "Keurig Acquisition") (see Note 3, Acquisition). In contemplation of the acquisition, JAB had agreed with Mondelez International, Inc. ("Mondelez") that it would acquire a 24.24% interest in Maple, which was consummated March 7, 2016. The March 7, 2016 transaction occurred between JAB and Mondelez. The Keurig Acquisition closed March 3, 2016.
As the operations of Keurig succeeded to substantially all of the operations of Maple, Keurig is presented as the predecessor entity for purposes of these consolidated financial statements. Subsequent to the Keurig Acquisition, the consolidated statements of operations include amortization expense relating to the fair value adjustments and depreciation expense based on the fair value of Keurig's property, plant and equipment that had previously been carried at historical cost less accumulated depreciation. Therefore, financial information prior to the acquisition is not comparable to the financial information subsequent to the acquisition. As a result, the financial statements and certain note presentations are separated into two distinct periods, the periods of Keurig before the consummation of the Keurig Acquisition (labeled "Predecessor") and the periods of Maple Company subsequent to and including the acquisition (labeled "Successor"), to indicate the application of the different basis of accounting between the periods presented. The predecessor period began on September 27, 2014 and concluded on March 2, 2016. The successor period began on December 4, 2015, the incorporation date of Maple acquisition merger sub and includes Keurig as of and from the acquisition date of March 3, 2016. Between December 4, 2015 and March 3, 2016, Maple Parent Holdings incurred transaction costs associated with the acquisition of Keurig of approximately $54.3 million, net of tax. Operations did not commence until the acquisition of Keurig on March 3, 2016.
Maple Company distributes its products through two channels: at-home ("AH") and away-from-home ("AFH"). The Company sells brewers, accessories, and sources, produces and sells coffee, hot cocoa, teas and other beverages in K-Cup®, Vue®, Rivo®, K-Carafe™, and K-Mug™ pods ("pods") and coffee in more traditional packaging including bags and fractional packages under a variety of brands to retailers including supermarkets, department stores, mass merchandisers, club stores, and convenience stores; to restaurants, hospitality accounts, office coffee distributors, and partner brand owners; and to consumers through its website. A large part of the Maple Company's distribution to major retailers is processed by fulfillment entities which receive and fulfill sales orders and invoice certain retailers primarily in the AH channel. Maple Company also earns royalty income from pods sold by two third-party licensed roasters.
Maple's fiscal year ends on the last Saturday in September. The successor fiscal year 2017 consists of fifty-three weeks and ended on September 30, 2017. Fiscal year 2016 represents the successor and predecessor periods December 4, 2015 to September 24, 2016 and September 27, 2015 to March 2, 2016, respectively. The predecessor fiscal year 2015 consists of fifty-two weeks and ended September 26, 2015.
Table of Contents
Maple Parent Holdings Corp.
Notes to Consolidated Financial Statements (Continued)
1. Nature of Business and Organization (Continued)
These consolidated financial statements and related disclosures also contain unaudited interim consolidated financial statements and related disclosures as of December 30, 2017 and for the 13 weeks ended December 30, 2017 and December 24, 2016, respectively. These unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial information. Accordingly, they do not include all of the information and disclosures required by U.S. GAAP for complete consolidated financial statements. The unaudited interim consolidated financial information have been prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, reflect all adjustments of a normal recurring nature considered necessary to present fairly the Maple Company's financial position and results of its operations and its cash flows. The results of operations for the interim periods presented are not necessarily indicative of the results that may be expected for the respective full fiscal years.
2. Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires Maple to make estimates and assumptions that affect amounts reported in the accompanying consolidated financial statements. Significant estimates and assumptions by management affect Maple's inventory, deferred tax assets and liabilities, allowance for sales returns, warranty reserves, accrued restructuring and other certain accrued expenses, goodwill, intangible and long-lived assets and stock-based compensation.
Although Maple regularly assesses these estimates, actual results could differ from these estimates. Changes in estimates are recorded in the period they become known. Maple bases its estimates on historical experience and various other assumptions that it believes to be reasonable under the circumstances.
Principles of Consolidation
The consolidated financial statements include the accounts of Maple and all of the entities in which Maple has a controlling financial interest. All intercompany transactions and accounts are eliminated in consolidation. Certain employees hold shares in Maple Parent Corp., a wholly owned subsidiary of Maple, through Maple's Executive Ownership Plan. Based on the terms of the Executive Ownership Plan agreements, including the right of holders to put vested shares of Maple Parent Corp. back to Maple during certain periods, the non-controlling interest related to shares held by employees is presented within the "mezzanine" section on the Consolidated Balance Sheets.
Business Combinations
Maple uses the acquisition method of accounting for business combinations and recognizes assets acquired and liabilities assumed measured at their fair values on the date acquired. Goodwill represents the excess of the purchase price over the fair value of the net assets. The fair values of the assets and liabilities acquired are determined based upon Maple's valuation. The valuation involves making significant estimates and assumptions, which are based on detailed financial models, including the projection of future cash flows, the weighted average cost of capital and any cost savings that are expected to be derived in the future.
Table of Contents
Maple Parent Holdings Corp.
Notes to Consolidated Financial Statements (Continued)
2. Significant Accounting Policies (Continued)
Cash and Cash Equivalents
Maple considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents include money market funds, which are carried at cost, plus dividends, which approximates fair value. Maple does not believe that it is subject to any unusual credit or market risk.
Restricted Cash and Cash Equivalents
Restricted cash and cash equivalents represent cash that is not available for use in Maple's operations. Restrictions primarily relate to amounts held in escrow for medical claims, and rental deposits on buildings. As of December 30, 2017, September 30, 2017 and September 24, 2016, Maple had restricted cash and cash equivalents of $5.0 million, $0.6 million and $1.4 million, respectively.
Equity Investments
Equity investments are accounted for using the equity method of accounting if the investment gives Maple the ability to exercise significant influence, but not control, over an investee.
Maple evaluates the equity method investments for impairment annually and when facts and circumstances indicate that the carrying value of such investments may not be recoverable. Maple reviews several factors to determine whether the loss is other than temporary, such as the financial condition and near-term prospects of the investee, and whether the Maple Company has the intent to sell or will more likely than not be required to sell before the investment's anticipated recovery. If a decline in fair value is determined to be other than temporary, an impairment charge is recorded in net earnings.
Allowance for Doubtful Accounts
A provision for doubtful accounts is provided based on a combination of historical experience, specific identification and customer credit risk where there are indications that a specific customer may be experiencing financial difficulties.
Inventories
Inventories consist primarily of green and roasted coffee, including coffee in pods and purchased finished goods such as brewing systems and packaging materials. Inventories are stated at the lower of cost or market. Cost is being measured using standard cost method which approximates FIFO (first-in, first-out). Maple regularly reviews whether the net realizable value of its inventory is lower than its carrying value. If the valuation shows that the net realizable value is lower than the carrying value, Maple takes a charge to cost of sales and directly reduces the carrying value of the inventory.
Maple estimates any required write downs for inventory obsolescence by examining its inventories on a quarterly basis to determine if there are indicators that the carrying values exceed net realizable value. Indicators that could result in additional inventory write downs include age of inventory, damaged inventory, slow moving products and products at the end of their life cycles. While management believes that inventory is appropriately stated at the lower of cost or market, significant judgment is involved in determining the net realizable value of inventory.
Table of Contents
Maple Parent Holdings Corp.
Notes to Consolidated Financial Statements (Continued)
2. Significant Accounting Policies (Continued)
Financial Instruments
Maple enters into various types of financial instruments in the normal course of business. Fair values are estimated based on assumptions concerning the amount and timing of estimated future cash flows and assumed discount rates reflecting varying degrees of perceived risk. Cash, cash equivalents, accounts receivable, accounts payable and accrued expenses are reported at carrying value and approximate fair value due to the short maturity of these instruments. Long-term debt is also reported at carrying value, which approximates fair value due to the fact that the interest rate on the debt is based on variable interest rates that approximate current market rates.
The fair values of derivative financial instruments have been determined using market information and valuation methodologies. Changes in assumptions or estimates could affect the determination of fair value; however, management does not believe any such changes would have a material impact on the Company's financial condition, results of operations or cash flows. The fair values of derivative financial instruments are disclosed in Note 12,Fair Value Measurements, in the consolidated financial statements.
Derivative Instruments
Maple enters into over-the-counter and other derivative contracts based on coffee futures ("coffee futures") to hedge against price increases in price-to-be-coffee purchase commitments and anticipated coffee purchases. Coffee purchases are generally denominated in the U.S. dollar. Maple also enters into interest rate swap agreements to mitigate interest rate risk associated with Maple's variable-rate borrowings and foreign currency forward contracts to hedge the purchase and payment of certain green coffee purchase commitments as well as certain recognized liabilities in currencies other than Maple's functional currency.
Maple also occasionally enters into certain foreign currency forward contracts to hedge certain exposures that are not designated as hedging instruments for accounting purposes. These contracts are recorded at fair value, with the changes in fair value recognized in the consolidated statements of operations.
Maple does not engage in speculative transactions, nor does it hold derivative instruments for trading purposes. See Note 11,Derivative Financial Instruments and Note 14,Stockholders' Equity in the consolidated financial statements for further information.
Deferred Financing Costs
Deferred financing costs consist primarily of commitment fees and loan origination fees and are being amortized over the respective life of the applicable debt using a method that approximates the effective interest rate method. Deferred financing costs, which are recorded as a reduction of debt, are included in Note 10,Long-Term Debt and in the accompanying consolidated balance sheets as of December 30, 2017, September 30, 2017 and September 24, 2016 were $46.1 million, $54.8 million, and $108.6 million respectively.
Goodwill and Intangibles
Goodwill is tested for impairment annually. Goodwill is assigned to reporting units for purposes of impairment testing. A reporting unit is the same as an operating segment or one level below an
Table of Contents
Maple Parent Holdings Corp.
Notes to Consolidated Financial Statements (Continued)
2. Significant Accounting Policies (Continued)
operating segment. Maple may assess qualitative factors to determine if it is more likely than not (i.e., a likelihood of more than 50%) that the fair value of a reporting unit is less than its carrying amount, including goodwill. If Maple determines that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, no further testing is necessary. If, however, Maple determines that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, Maple performs the first step of a two-step goodwill impairment test. The assessment of qualitative factors is optional and at Maple's discretion. Maple may bypass the qualitative assessment for any reporting unit in any period and perform the first step of the quantitative goodwill impairment test. Maple may resume performing the qualitative assessment in any subsequent period. The first step is a comparison of each reporting unit's fair value to its carrying value. Maple estimates fair value based on the income approach, using discounted cash flows, with consideration given to the market approach, using the guideline company method and comparable transaction method. The reporting unit's discounted cash flows require significant management judgment with respect to sales forecasts, gross margin percentages, selling, operating, and general and administrative ("SG&A") expenses, capital expenditures and the selection and use of an appropriate discount rate. The projected sales, gross margin and SG&A expense rate assumptions and capital expenditures are based on Maple's annual business plan or other forecasted results. Discount rates reflect market-based estimates of the risks associated with the projected cash flows directly resulting from the use of those assets in operations. The market approach uses observable market data such as comparable companies in similar lines of business that are publicly traded or which are part of a public or private transaction (to the extent available). The estimates of fair value of reporting units are based on the best information available as of the date of the assessment. If the carrying value of a reporting unit exceeds its estimated fair value in the first step, a second step is performed, which requires Maple to allocate the fair value of the reporting unit derived in the first step to the fair value of the reporting unit's net assets, with any fair value in excess of amounts allocated to such net assets representing the implied fair value of goodwill for that reporting unit. If the implied fair value of the goodwill is less than the book value, goodwill is impaired and is written down to the implied fair value amount.
In fiscal year 2017, Maple changed its annual impairment testing date from the end of the fiscal year to July 1st to better align to when forecast data is shared with its shareholders. The change in impairment testing date has no impact on the financial statements. In addition, Maple has early adopted ASU 2017-04Intangibles—Goodwill and Other. Under the new standard, if the carrying value of the reporting unit exceeds its fair value an impairment charge will be recorded in current earnings for the difference up to the carrying value of the goodwill recorded. All other aspects of Maple's annual goodwill impairment test remain the same.
Impairment of Long-Lived Assets
When facts and circumstances indicate that the carrying values of long-lived assets, including fixed assets, may be impaired, an evaluation of recoverability is performed by comparing the carrying value of the assets, at an asset group level, to undiscounted projected future cash flows in addition to other quantitative and qualitative analysis. When assessing impairment, property, plant and equipment assets are grouped at the lowest level for which there are identifiable cash flows that are largely independent of other groups of assets. Upon indication that the carrying value of such assets may not be recoverable, Maple recognizes an impairment loss as a charge against current operations based upon an assessment of fair value of such assets. Long-lived assets to be disposed of are reported at the lower of
Table of Contents
Maple Parent Holdings Corp.
Notes to Consolidated Financial Statements (Continued)
2. Significant Accounting Policies (Continued)
the carrying amount or fair value, less estimated costs to sell. Maple makes judgments related to the expected useful lives of long-lived assets and its ability to realize undiscounted cash flows in excess of the carrying amounts of such assets which are affected by factors such as the ongoing maintenance and improvements of the assets, changes in economic conditions and changes in operating performance.
Fixed Assets
Fixed assets are carried at cost, net of accumulated depreciation. Expenditures for maintenance, repairs and renewals of minor items are expensed as incurred. Expenditures for refurbishments and improvements that significantly improve the productive capacity or extend the useful life of an asset are capitalized. Depreciation is calculated using the straight-line method over the assets' estimated useful lives. The cost and accumulated depreciation for fixed assets sold, retired, or otherwise disposed of are relieved from the accounts, and the resulting gains and losses are reflected in operating income in the consolidated statements of operations.
Depreciation costs of manufacturing and distribution assets are included in cost of sales on the consolidated statements of operations. Depreciation costs of other assets are included in selling, general and administrative expenses on the consolidated statements of operations.
For financial reporting purposes, depreciation is computed on a straight-line basis over the estimated useful lives as follows:
| | |
Asset Class
| | Useful Life in Years |
|---|
Production equipment | | 2 - 15 |
Coffee service equipment | | 3 - 7 |
Computer equipment and software | | 2 - 8 |
Land | | Indefinite |
Building and building improvements | | 5 - 39 |
Furniture and fixtures | | 2 - 10 |
Vehicles | | 2 - 15 |
Leasehold improvements | | 2 - 15 or remaining life of lease, whichever is less |
Assets acquired under capital leases | | 2 - 10 |
Leases
Occasionally, the Maple Company is involved in the construction of leased properties. Due to the extent and nature of that involvement, the Maple Company is deemed the owner during the construction period and is required to capitalize the construction costs on the consolidated balance sheet along with a corresponding financing obligation for the project costs that are incurred by the lessor. Upon completion of the project, a sale-leaseback analysis is performed to determine if the Maple Company can record a sale to remove the assets and related obligation and record the lease as either an operating or capital lease obligation. If the Maple Company is precluded from derecognizing the assets when construction is complete due to continuing involvement beyond a normal leaseback, the lease is accounted for as a financing transaction and the recorded asset and related financing obligation remain on the consolidated balance sheet. Accordingly, the asset is depreciated over its estimated useful life in accordance with Maple's policy. If the Maple Company is not considered the owner of the land, a portion of the lease payments is allocated to ground rent and treated as an operating lease. The
Table of Contents
Maple Parent Holdings Corp.
Notes to Consolidated Financial Statements (Continued)
2. Significant Accounting Policies (Continued)
portion of the lease payment allocated to ground rental expense is based on the fair value of the land at the commencement of construction. Lease payments allocated to the buildings are recognized as reductions to the financing obligation and interest expense. See Note 19,Commitments and Contingencies for further information.
Leases that qualify as capital leases are recorded at the lower of the fair value of the asset or the present value of the future minimum lease payments over the lease term generally using Maple's incremental borrowing rate. Assets leased under capital leases are included in fixed assets and generally are depreciated over the lease term. Lease payments under capital leases are recognized as a reduction of the capital lease obligation and interest expense.
All other leases are considered operating leases. Assets subject to an operating lease are not recorded on the balance sheet. Lease payments are recognized on a straight-line basis as rent expense over the expected lease term.
Accounts Payable
The Maple Company entered into an agreement with a third party to allow participating suppliers to track payment obligations from the Maple Company, and if elected, sell payment obligations from the Maple Company to financial institutions. Suppliers can sell one or more of the Maple Company's payment obligations at their sole discretion and the rights and obligations of the Maple Company to its suppliers are not impacted. The Maple Company has no economic interest in a supplier's decision to enter into these agreements and no direct financial relationship with the financial institutions. The Maple Company's obligations to its suppliers, including amounts due and scheduled payment terms, are not impacted. As of December 30, 2017, September 30, 2017 and September 24, 2016, $1.3 billion, $1.2 billion, and $0, respectively, of the Maple Company's outstanding payment obligations is payable to suppliers who utilize these third party services.
Revenue Recognition
Revenue from sales of brewing systems, coffee and other specialty beverages in pods, and coffee in more traditional packaging including whole bean and ground coffee selections in bags and ground coffee in fractional packs is recognized when title and risk of loss passes to the customer, which generally occurs upon shipment or delivery of the product to the customer as defined by the contractual shipping terms. Shipping charges billed to customers are also recognized as revenue, and the related shipping costs are included in cost of sales. Cash received in advance of product delivery is recorded in deferred revenue, which is included in other current liabilities on the accompanying consolidated balance sheet, until earned.
The majority of the Maple Company's distribution to major retailers is processed by fulfillment entities. The fulfillment entities receive and fulfill sales orders and invoice certain retailers. All products shipped by the Maple Company to the fulfillment entities are owned by the Maple Company and included in inventories on the accompanying consolidated balance sheet. The Maple Company recognizes revenue when delivery of the product from the fulfillment entity to the retailer has occurred based on the contractual shipping terms and when all other revenue recognition criteria are met.
Sales of brewing systems, pods and other products are recognized net of any discounts, returns, allowances and sales incentives, including coupon redemptions and rebates. The Maple Company
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Maple Parent Holdings Corp.
Notes to Consolidated Financial Statements (Continued)
2. Significant Accounting Policies (Continued)
estimates the allowance for returns using an average return rate based on historical experience and an evaluation of contractual rights or obligations. The Maple Company routinely participates in trade promotion programs with customers, including customers whose sales are processed by the fulfillment entities, whereby customers can receive certain incentives and allowances which are recorded as a reduction to sales when the sales incentive is offered and committed to or, if the incentive relates to specific sales, at the later of when that revenue is recognized or the date at which the sales incentive is offered. These incentives include, but are not limited to, cash discounts. Allowances to customers that are directly attributable and supportable by customer promotional activities are recorded as selling expenses at the time the promotional activity occurs.
Roasters licensed by the Maple Company to manufacture and sell pods, both to the Maple Company for resale and to their other coffee customers, are obligated to pay a royalty to the Maple Company upon shipment to their customer. Maple records royalty revenue upon shipment of pods by licensed roasters to third-party customers as set forth under the terms and conditions of various licensing agreements. For shipments of pods to the Maple Company for resale, this royalty payment is recorded as a reduction to the carrying value of the related pods in inventory and as a reduction to cost of sales when sold through to third-party customers by the Maple Company.
Cost of Sales
Cost of sales for the Maple Company consists of the cost of raw materials including coffee beans, hot cocoa, flavorings and packaging materials; a portion of rental expense; production, which include salaries; stock compensation expense; merchandising personnel; leases and depreciation on facilities and equipment used in production; the cost of brewers manufactured by suppliers; receiving, inspection and internal transfer costs; warranty expense; freight-in, duties and certain third-party royalty charges.
Transportation and Warehouse Costs
The Maple Company elected to adopt an accounting policy to reflect Transportation and warehouse costs separately in the Consolidated Statements of Operations. Certain amounts have not been reclassified in the predecessor period, but $129.2 million and $303.3 million of these costs were included in Cost of Sales for the predecessor periods ending March 2, 2016 and September 26, 2015, respectively.
Product Warranty
The Maple Company provides for the estimated cost of product warranties in cost of sales, at the time product revenue is recognized. Warranty costs are estimated primarily using historical warranty information in conjunction with current engineering assessments applied to the Maple Company's expected repair or replacement costs. The estimate for warranties requires assumptions relating to expected warranty claims which are based on the Maple Company's historical claims and known current year factors.
Advertising Costs
The Maple Company expenses the costs of advertising the first time the advertising takes place. As of December 30, 2017, September 30, 2017 and September 24, 2016 prepaid advertising costs of $8.7 million, $9.6 million, and $3.2 million, respectively, were recorded, in Other current assets in the
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Maple Parent Holdings Corp.
Notes to Consolidated Financial Statements (Continued)
2. Significant Accounting Policies (Continued)
accompanying consolidated balance sheets. Advertising expense totaled $115 million and $50.5 million for the successor periods ending September 30, 2017 and September 24, 2016, respectively, and $53.8 million and $115.8 million for the predecessor periods ending March 2, 2016 and September 26, 2015, respectively.
Income Taxes
Maple recognizes deferred tax assets and liabilities for the expected future tax benefits or consequences of temporary differences between the financial statement carrying amounts of existing assets and liabilities, and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. Judgment is required in determining the provision for income taxes and related accruals, deferred tax assets and liabilities. These include establishing a valuation allowance related to the ability to realize certain deferred tax assets.
Accounting for uncertain tax positions also requires significant judgments, including estimating the amount, timing and likelihood of ultimate settlement. Although Maple believes that its estimates are reasonable, actual results could differ from these estimates. Maple uses a more-likely-than-not measurement attribute for all tax positions taken or expected to be taken on a tax return in order for those tax positions to be recognized in the consolidated financial statements.
Stock-Based Compensation
For the predecessor periods, Keurig measured the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. Equity awards consisted of stock options, restricted stock units ("RSUs"), and performance stock units ("PSUs"). The cost was recognized over the period during which an employee was required to provide service in exchange for the award.
Keurig measured the fair value of the predecessor stock options using the Black-Scholes option pricing model and certain assumptions, including the expected life of the stock options, an expected forfeiture rate and the expected volatility of its common stock. The expected life of options was estimated based on options vesting periods, contractual lives and Keurig's historical experience. The expected forfeiture rate was based on Keurig's historical employee turnover experience and future expectations. The risk-free interest rate was based on the U.S. Treasury rate over the expected life. Keurig used a blended historical volatility to estimate expected volatility at the measurement date. The fair value of RSUs and PSUs was based on the fair value of Keurig's common stock on the grant date.
For the successor periods, Maple records compensation expense for RSU awards of equity instruments based on the grant-date fair value of the award. Equity awards consist of RSUs in Maple Parent Corp., which generally fully vest on the four-year and six-month anniversary of the date of grant. The cost is recognized over the period during which an employee is required to provide service in exchange for the award.
Maple measures, on each reporting period, the fair value of stock purchased with financed non-recourse loans as stock options using the Black-Scholes option pricing model and certain assumptions, including the expected life of the stock options, and the expected volatility of its common stock. The expected life of options is estimated based on the term of the limited recourse loan. The
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Maple Parent Holdings Corp.
Notes to Consolidated Financial Statements (Continued)
2. Significant Accounting Policies (Continued)
expected forfeiture rate is based on the Maple Company's historical employee turnover experience and future expectations. The risk-free interest rate is based on the U.S. Treasury rate over the expected life.
Foreign Currency Translation and Transactions
The functional currency of the Maple Company's foreign subsidiaries in Luxembourg and Switzerland is the U.S. dollar. Monetary assets and liabilities related to the Maple Company's operations in Luxembourg and Switzerland are remeasured from the local currency into U.S. dollars at the exchange rates in effect at the end of the applicable fiscal reporting period. Non-monetary assets and liabilities are remeasured at historical exchange rates. Revenues and expenses are remeasured at average monthly exchange rates. All remeasurement gains and losses are included in the Maple Company's consolidated statements of operations, within the caption Gain (loss) on foreign currency, net.
The functional currency of the Maple Company's other foreign subsidiaries is the local currency of the subsidiary. The financial statements of these subsidiaries are translated into the Maple Company's reporting currency which is the U.S. dollar. Accordingly, the assets and liabilities of the Maple Company's foreign subsidiaries are translated into U.S. dollars using the exchange rate in effect at each balance sheet date. Revenue and expense accounts are generally translated using the average rate of exchange during the period. Foreign currency translation adjustments are accumulated as a component of other comprehensive income or loss as a separate component of stockholders' equity. Gains and losses arising from transactions denominated in currencies other than the functional currency of the entity are charged directly against earnings in the consolidated statement of operations. Gains and losses arising from transactions denominated in foreign currencies are primarily related to inter-company loans that have been determined to be temporary in nature, cash, long-term debt and accounts payable denominated in non-functional currencies.
Significant Customer Credit Risk and Supply Risk
The majority of the Maple Company's customers are located in the U.S. and Canada. Concentration of credit risk with respect to accounts receivable is limited due to the large number of customers in various channels comprising the Maple Company's customer base. The Maple Company does not require collateral from customers as ongoing credit evaluations of customers' payment histories are performed. The Maple Company maintains reserves for potential credit losses and such losses, in the aggregate, have not exceeded management's expectations.
The Maple Company procures the majority of the brewing systems it sells from one third-party brewing system manufacturer. Purchases from this brewing system manufacturer amounted to $206.6 million and $261.6 million for the successor periods ending September 30, 2017 and September 24, 2016, respectively, and $162.3 million and $443.1 million for the predecessor periods ending March 2, 2016 and September 26, 2015, respectively.
Research & Development
Generally, research and development charges are expensed as incurred. These expenses amounted to $62.4 million and $33.7 million for the successor periods ending September 30, 2017 and September 24, 2016, respectively, and $33.6 million and $84.7 million for the predecessor periods ending March 2, 2016 and September 26, 2015, respectively.
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Maple Parent Holdings Corp.
Notes to Consolidated Financial Statements (Continued)
2. Significant Accounting Policies (Continued)
Collaborative Arrangements
From time to time, the Maple Company enters into collaborative arrangements for the research and development ("R&D"), manufacture and/or commercialization of products and product candidates. These collaborations generally provide R&D cost sharing, and/or royalty payments. The Maple Company's collaboration agreements with third parties are performed with no guarantee of either technological or commercial success. No cost recoveries or royalties have been received to date under these arrangements.
Recent Accounting Pronouncements
In January 2017, the FASB issued Accounting Standards Update ("ASU") 2017-04Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment which, under this new guidance, an impairment charge, if triggered, is calculated as the difference between a reporting unit's carrying value and fair value, but it is limited to the carrying value of goodwill. This ASU is effective for fiscal years beginning after December 15, 2021. Maple has decided to early adopt this guidance on a prospective basis as of September 30, 2017. See Note 7,Goodwill and Intangible Assets.
In November 2016, the FASB issued Accounting Standards Update ("ASU") 2016-18Statement of Cash Flows (Topic 230): Restricted Cash which requires amounts generally described as restricted cash and restricted cash equivalents be included with cash and cash equivalents when reconciling the beginning and ending amounts shown on the statement of cash flows. The guidance will require application of a retrospective transition method to each period presented. This ASU is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. Maple has decided to early adopt this guidance on a retrospective basis in the Successor period to align with other internal reporting requirements. Adoption of this ASU is not reflected in the predecessor periods presented.
In October 2016, the FASB issued Accounting Standards Update ("ASU") 2016-16Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory which, requires entities to recognize the income tax impact of an intra-entity sale or transfer of an asset other than inventory when the sale or transfer occurs, rather than when the asset has been sold to an outside party. The guidance will require a modified retrospective application with a cumulative catch-up adjustment to opening retained earnings upon adoption. This ASU is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. Maple is currently evaluating the impact this guidance will have on our consolidated financial statements and the timing of adoption.
In May 2016, the FASB issued Accounting Standards Update ("ASU") 2016-15Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments which, is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. This ASU is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Maple Company is evaluating the impact this guidance will have on our consolidated financial statements and the timing of adoption.
In March 2016, the FASB issued Accounting Standards Update ("ASU") 2016-09Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting which, simplifies several aspects of the accounting for share-based payment award, including income tax consequences; classification of awards as either equity or liabilities; and classification on the statement of cash flows. This ASU is effective for fiscal years beginning after December 15, 2017, and the Maple Company has early adopted this guidance as of September 25, 2016. The adoption of this ASU did not have a material impact on the Maple Company's financial position, results of operations or liquidity.
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Maple Parent Holdings Corp.
Notes to Consolidated Financial Statements (Continued)
2. Significant Accounting Policies (Continued)
In February 2016, the FASB issued Accounting Standards Update ("ASU") 2016-02Leases (Topic 842) which provides guidance on the recognition and measurement of leases. Under the new guidance, lessees are required to recognize a lease liability, which represents the discounted obligation to make future minimum lease payments, and a corresponding right-of-use asset on the balance sheet for most leases. The guidance retains the current accounting for lessors and does not make significant changes to the recognition, measurement, and presentation of expenses and cash flows by a lessee. Enhanced disclosures will also be required to give financial statement users the ability to assess the amount, timing and uncertainty of cash flows arising from leases. The guidance will require modified retrospective application beginning with our 2021 fiscal year, with optional practical expedients. Early application is permitted. Maple is evaluating the impact this guidance will have on the consolidated financial statements.
In July 2015, the FASB issued Accounting Standards Update ("ASU") 2015-11Inventory (Topic 330): Simplifying the Measurement of Inventory which, requires entities to measure inventory at the lower of cost or net realizable value. Net realizable value is defined as the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. ASU 2015-11 is effective for fiscal years, beginning after December 15, 2016. Early adoption is permitted. The adoption of this ASU did not have a material impact on Maple's financial position, results of operations or liquidity.
In May 2014, the FASB issued Accounting Standards Update ("ASU") 2014-09,Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09"). ASU 2014-09 supersedes the revenue recognition requirements in ASC Topic 605,Revenue Recognition, and most industry-specific guidance. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new standard will require Maple to separate performance obligations within a contract, determine total transaction costs, and ultimately allocate the transaction costs across the established performance obligations. In August 2015, the FASB issued ASU No. 2015-14, "Revenue from Contracts with Customers"(Topic 606): Deferral of the Effective Date, which delays the effective date of ASU 2014-09 by one year. ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2018, under either full or modified retrospective adoption, with early adoption permitted for annual reporting periods beginning after December 15, 2016. Maple is assessing the potential effects of these changes on Maple's net income, financial position, cash flows and disclosures. The new standard is applicable to Maple beginning with its fiscal year 2020.
3. Acquisition
Acquisition by JAB Holding Company
On March 3, 2016, Maple indirectly acquired all of the outstanding equity of Keurig for USD $13.9 billion. As a result of the transaction Keurig became an indirect subsidiary of Maple.
Keurig entered into a definitive merger agreement under which a JAB-led investor group would acquire Keurig for $92.00 per share in cash, representing a total equity value of $13.9 billion. The agreement was unanimously approved by Keurig's Board of Directors, with the per share purchase price of $92.00, representing a premium of approximately 77.9% over Keurig's closing stock price on December 4, 2015. On February 24, 2016, the transaction was approved by Keurig's stockholders. As a
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Maple Parent Holdings Corp.
Notes to Consolidated Financial Statements (Continued)
3. Acquisition (Continued)
result of the completion of the acquisition, Keurig's common stock ceased trading on the NASDAQ Global Select Market before the opening of market on March 3, 2016. Under the terms of the transaction, Keurig stockholders received $92.00 per share in cash for each share they owned.
This acquisition was accounted for under the acquisition method of accounting, resulting in the allocation of the total purchase price consideration of $13.9 billion to the cost of the assets acquired, including intangible assets and liabilities assumed based on their estimated fair values at the acquisition date. The excess of the total purchase price over the fair value of assets acquired and the liabilities assumed is recorded as goodwill. The goodwill arising from the acquisition consists largely of Keurig's commercial potential and the value of Keurig's assembled workforce.
The estimates of the fair value of the assets or rights acquired and liabilities assumed at the date of acquisition are subject to adjustment during the measurement period (up to one year from the acquisition date). The purchase price allocation was finalized in February 2017, at which time, the Maple Company made final purchase price allocation adjustments related to the pre-acquisition fixed assets, accrued expenses, deferred tax assets and goodwill resulting in a net decrease to goodwill of $45.1 million.
For the successor period ended September 24, 2016 and predecessor period ended March 2, 2016, the Maple Company recognized transaction costs of $102 million and $187 million, respectively. Transaction costs generally included personnel-related costs associated with the change in control, cash settlements of previously unvested stock-based awards and other acquisition-related charges.
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Maple Parent Holdings Corp.
Notes to Consolidated Financial Statements (Continued)
3. Acquisition (Continued)
The following table summarizes the consideration paid for the acquired assets and the final acquisition accounting for the fair values of the assets recognized and liabilities assumed in the consolidated balance sheets at the acquisition date (in thousands).
| | | | | | | | | | |
| |
| |
| | September 30,
2017 | |
|---|
| | September 24,
2016 | |
| |
|---|
| |
| | Final
Purchase
Price
Allocation | |
|---|
| | Purchase
Price
Allocation | | Measurement
Period
Adjustment | |
|---|
Cash | | $ | 215,432 | | | | | $ | 215,432 | |
Current Assets (excluding cash and inventory) | | | 578,735 | | | — | | | 578,735 | |
Inventory | | | 534,874 | | | — | | | 534,874 | |
Fixed assets | | | 992,137 | | | (1,046 | ) | | 991,091 | |
Acquired technology | | | 1,245,690 | | | — | | | 1,245,690 | |
Customer relationships | | | 243,198 | | | — | | | 243,198 | |
Trade names | | | 2,605,155 | | | — | | | 2,605,155 | |
Favorable leases | | | 7,360 | | | 540 | | | 7,900 | |
Goodwill | | | 9,991,229 | | | (45,073 | ) | | 9,946,156 | |
Other long-term assets | | | 13,305 | | | — | | | 13,305 | |
Accounts payable and accrued expenses | | | (753,184 | ) | | (800 | ) | | (753,984 | ) |
Capital lease | | | (118,198 | ) | | — | | | (118,198 | ) |
Deferred tax liability | | | (1,601,057 | ) | | 46,379 | | | (1,554,678 | ) |
Other long-term liabilities | | | (29,301 | ) | | — | | | (29,301 | ) |
| | | | | | | | | | | |
Total estimated fair value of assets acquired | | $ | 13,925,375 | | $ | — | | $ | 13,925,375 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Amortizable intangible assets acquired, valued at the date of the acquisition, include approximately $126.5 million for amortizing trademarks and trade names, $1,245.7 million for acquired technology, $243.2 million for customer relationships and $7.4 million for favorable leases. Indefinite lived intangible assets acquired include $2,478.7 million for the Keurig and Green Mountain trademarks which is not amortized. Amortizable intangible assets are amortized on a straight-line basis over their respective useful lives, with the weighted-average amortization period being 14.5 years.
The cost of the acquisition in excess of the fair market value of the tangible and intangible assets acquired less liabilities assumed represents acquired goodwill. The goodwill and intangible assets recognized are not deductible for tax purposes.
4. Restructuring Programs
2017 Castroville Closure
In May 2017, the Maple Company looked at its capacity across the manufacturing network and determined that, geographically, it could improve matching capacity to its customer base. As a result, in May 2017, the Maple Company announced it was closing the Castroville, California manufacturing site on May 18, 2017. As a result of the decision the Maple Company had a reduction in workforce of 183 employees. This restructuring program resulted in cumulative pre-tax restructuring charges of
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Maple Parent Holdings Corp.
Notes to Consolidated Financial Statements (Continued)
4. Restructuring Programs (Continued)
$21.6 million, primarily related to costs associated with employee terminations and asset related costs as of September 30, 2017.
2017 Business Realignment
In June 2017, the Maple Company determined that its strategic priorities had shifted and as a result has redesigned its organizational structure. Approximately 500 employees were affected by changing roles, responsibilities or reporting lines, and 140 of those employees were notified that their roles were being eliminated. This restructuring program resulted in cumulative pre-tax restructuring charges of $12.2 million, primarily related to costs associated with severance and employee terminations as of September 30, 2017.
2017 Keurig 2.0 Exit
In August 2017 the Maple Company determined due to shifting demand and strategic priorities that it would stop producing and selling its Keurig K2.0 brewer models. Costs associated with this restructuring event include accelerated depreciation on all 2.0 molds and tooling equipment as well as costs associated with obsolete inventory on hand totaling $10.0 million as of September 30, 2017. Additional accelerated depreciation of $6.0 million was recognized in the successor quarter ended December 30, 2017.
2016 Kold Restructuring
In June 2016 the Maple Company announced it was discontinuing its first generation Kold platform. In connection with this announcement the Maple Company notified employees in its Kold manufacturing and related support teams that it was implementing a restructuring program that would include a reduction in force. Additionally, the Maple Company also notified select other employees that their roles would be eliminated in an effort to adjust the workforce to eliminate redundancy and improve efficiency. In connection with this restructuring program 123 roles were eliminated. This program was completed in fiscal year 2017. This restructuring program resulted in cumulative pre-tax restructuring charges of $1.0 million.
Canadian Business Unit Restructuring
In October 2015, Keurig's Canadian Business Unit initiated a multi-year productivity program intended to reduce structural costs and streamline organization structures to drive efficiency. In connection with the program the Canadian operations undertook a review of its Van Houtte Coffee Services business and consolidated its third-party logistics activities in Ontario into one location. This program was completed in fiscal year 2017. This restructuring program resulted in cumulative pre-tax restructuring charges of $3.6 million.
2015 Productivity Plan
On July 31, 2015, Keurig's Board of Directors approved a productivity program intended to reduce structural costs and streamline organization structures to drive efficiency. A pretax restructuring charge of $15.3 million was recorded in the fourth quarter of fiscal 2015, the first fiscal quarter of the program, of which $11.5 million represents employee severance related costs that will be settled in cash.
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Maple Parent Holdings Corp.
Notes to Consolidated Financial Statements (Continued)
4. Restructuring Programs (Continued)
Consolidated accrued restructuring consisted of the following (in thousands) as of:
Successor
| | | | | | | | | | |
| | Severance | | Other(a) | | Total | |
|---|
Balance, as of March 3, 2016 | | $ | 2,925 | | $ | 2,184 | | $ | 5,109 | |
Restructuring charges | | | 3,364 | | | 543 | | | 3,907 | |
Cash paid | | | (3,946 | ) | | (1,134 | ) | | (5,080 | ) |
Other expenses | | | 28 | | | (200 | ) | | (172 | ) |
| | | | | | | | | | | |
Balance, as of September 24, 2016 | | | 2,371 | | | 1,393 | | | 3,764 | |
Restructuring charges | | | 16,328 | | | 28,872 | | | 45,200 | |
Cash paid | | | (11,063 | ) | | (4,786 | ) | | (15,849 | ) |
Other expenses | | | — | | | (21,490 | ) | | (21,490 | ) |
| | | | | | | | | | | |
Balance, as of September 30, 2017 | | $ | 7,636 | | $ | 3,989 | | $ | 11,625 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
(a)Primarily reflects activities associated with the closure of our facilities, including contract termination costs, asset write-downs, and accelerated depreciation.
Predecessor
| | | | | | | | | | |
| | Severance | | Other(a) | | Total | |
|---|
Balance, as of September 26, 2015 | | $ | 8,533 | | $ | 341 | | $ | 8,874 | |
Restructuring charges | | | 324 | | | 2,676 | | | 3,000 | |
Cash paid | | | (5,917 | ) | | (501 | ) | | (6,418 | ) |
Other | | | (15 | ) | | (332 | ) | | (347 | ) |
| | | | | | | | | | | |
Balance, as of March 2, 2016 | | $ | 2,925 | | $ | 2,184 | | $ | 5,109 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | ��� |
(a)Primarily reflects activities associated with the closure of Maple's facilities, including contract termination costs and asset write-downs.
5. Inventories
Inventories consisted of the following (in thousands) as of:
| | | | | | | | | | |
| | Successor | |
|---|
| | December 30, 2017 | | September 30, 2017 | | September 24, 2016 | |
|---|
| | (Unaudited)
| |
| |
| |
|---|
Raw materials and supplies | | $ | 121,627 | | $ | 125,048 | | $ | 147,986 | |
Finished goods | | | 262,190 | | | 348,629 | | | 431,046 | |
| | | | | | | | | | | |
| | $ | 383,817 | | $ | 473,677 | | $ | 579,032 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
As of September 30, 2017, the Maple Company had $228 million in green coffee purchase commitments, of which approximately 82% had a fixed price. These commitments primarily extend
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Maple Parent Holdings Corp.
Notes to Consolidated Financial Statements (Continued)
5. Inventories (Continued)
through fiscal 2018. The value of the variable portion of these commitments was calculated using an average coffee contract price of $1.59 per pound at September 30, 2017. In addition to its green coffee commitments, the Maple Company had approximately $107.3 million in fixed price brewer and related accessory purchase commitments and $593.6 million in production raw materials commitments at September 30, 2017. The Maple Company believes, based on relationships established with its suppliers, that the risk of non-delivery on such purchase commitments is remote.
As of September 30, 2017, minimum future inventory purchase commitments were as follows (in thousands):
| | | | |
Fiscal Year | | Inventory
Purchase
Obligations(1) | |
|---|
2018 | | $ | 768,270 | |
2019 | | | 100,868 | |
2020 | | | 59,712 | |
2021 | | | — | |
2022 | | | — | |
| | | | | |
| | $ | 928,850 | |
| | | | | |
| | | | | |
| | | | | |
(1)Certain purchase obligations are determined based on a contractual percentage of forecasted volumes.
6. Fixed Assets
Fixed assets consisted of the following (in thousands) as of:
| | | | | | | | | | |
| | Successor | |
|---|
| | December 30,
2017 | | September 30,
2017 | | September 24,
2016 | |
|---|
| | (Unaudited)
| |
| |
| |
|---|
Production equipment | | $ | 441,295 | | $ | 437,998 | | $ | 425,529 | |
Computer equipment and software | | | 167,512 | | | 167,021 | | | 128,440 | |
Land, building and building improvements | | | 225,365 | | | 224,267 | | | 260,116 | |
Leasehold improvements | | | 60,616 | | | 59,543 | | | 65,997 | |
Assets acquired under capital leases | | | 30,227 | | | 30,227 | | | 32,327 | |
Other | | | 56,035 | | | 54,464 | | | 48,012 | |
Construction-in-progress | | | 62,403 | | | 42,894 | | | 70,379 | |
| | | | | | | | | | | |
Total fixed assets | | $ | 1,043,453 | | $ | 1,016,414 | | $ | 1,030,800 | |
Accumulated depreciation | | | (253,636 | ) | | (216,747 | ) | | (69,873 | ) |
| | | | | | | | | | | |
| | $ | 789,817 | | $ | 799,667 | | $ | 960,927 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Assets acquired under capital leases, (included in the above table) net of accumulated amortization were $25.0 million, $25.7 million and $30.1 million at December 30, 2017, September 30, 2017 and September 24, 2016, respectively.
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Maple Parent Holdings Corp.
Notes to Consolidated Financial Statements (Continued)
6. Fixed Assets (Continued)
Included within the Other category in the table above are Coffee Service Equipment, Vehicles and Furniture and Fixtures.
Total depreciation and amortization expense relating to all fixed assets was $142.3 million and $70 million for the successor periods ending September 30, 2017 and September 24, 2016, respectively, and $102.5 million and $217.5 million for the predecessor periods ending March 2, 2016 and September 26, 2015, respectively. Total depreciation and amortization expense relating to all fixed assets was $32.6 million and $33.6 million for the interim successor periods ending December 30, 2017 and December 24, 2016, respectively.
Assets classified as construction-in-progress are not depreciated, as they are not ready for productive use.
For the successor periods ending September 30, 2017 and September 24, 2016, $0.8 million and $1.9 million, respectively, of interest expense was capitalized, along with $5.7 million and $21.7 million for the predecessor periods ending March 2, 2016 and September 26, 2015, respectively. For the interim successor periods ending December 30, 2017 and December 24, 2016, $0.1 million and $0.5 million, respectively, of interest expense was capitalized.
7. Goodwill and Intangible Assets
The following represented the change in the carrying amount of goodwill for the successor period (in thousands):
| | | | |
| | Total | |
|---|
Balance as of March 3, 2016 | | $ | 9,991,229 | |
Foreign currency effect | | | 20,967 | |
| | | | | |
Balance as of September 24, 2016 | | | 10,012,196 | |
Measurement period adjustment | | | (45,073 | ) |
Disposals—Kold sale | | | (202,797 | ) |
Foreign currency effect | | | 64,263 | |
| | | | | |
Balance as of September 30, 2017 | | | 9,828,589 | |
Foreign currency effect (Unaudited) | | | (9,974 | ) |
| | | | | |
Balance as of December 30, 2017 (Unaudited) | | $ | 9,818,615 | |
| | | | | |
| | | | | |
| | | | | |
Indefinite-lived intangible assets consisted of the following (in thousands) as of:
| | | | | | | | | | |
| | Successor | |
|---|
| | December 30,
2017 | | September 30,
2017 | | September 24,
2016 | |
|---|
| | (Unaudited)
| |
| |
| |
|---|
Trade names | | $ | 2,478,671 | | $ | 2,478,671 | | $ | 2,478,671 | |
Table of Contents
Maple Parent Holdings Corp.
Notes to Consolidated Financial Statements (Continued)
7. Goodwill and Intangible Assets (Continued)
Maple conducted its most recent annual impairment test of goodwill and indefinite-lived intangible assets as of July 1, 2017. For the goodwill impairment test, Maple applied the guidance in ASU 2017-04 (see Note 2,Significant Accounting Policies). The Company estimated the fair value of its reporting units based on the income approach, using the discounted cash flow method, with consideration given to the market approach, using both the guideline company method and comparable transaction method. A number of significant assumptions and estimates are involved in the application of the discounted cash flow method, including discount rate, sales volume and prices, costs to produce and working capital changes. The market approach uses observable market data such as comparable companies in similar lines of business that are publicly traded or which are part of a public or private transaction (to the extent available). For the indefinite-lived intangible assets impairment test, the fair value of the trade name was estimated using the Relief-from-Royalty Method. This method estimates the savings in royalties Maple would otherwise have had to pay if it did not own the trade name and had to license the trade name from a third-party with rights of use substantially equivalent to ownership. The fair value of the trade name is the present value of the future estimated after-tax royalty payments avoided by ownership, discounted at an appropriate, risk-adjusted rate of return. There was no impairment of goodwill or indefinite-lived intangible assets in the predecessor or successor periods.
Intangible Assets Subject to Amortization
Definite-lived intangible assets consisted of the following (in thousands) as of:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| |
| | Successor | |
|---|
| | December 30, 2017 | |
| | September 30, 2017 | |
| | September 24, 2016 | |
|---|
| | Useful
Life in
Years | | Gross
Carrying
Amount | | Accumulated
Amortization | | Net
Carrying
Amount | |
| | Gross
Carrying
Amount | | Accumulated
Amortization | | Net
Carrying
Amount | |
| | Gross
Carrying
Amount | | Accumulated
Amortization | | Net
Carrying
Amount | |
|---|
| |
| |
| |
|---|
| |
| |
| |
|---|
| |
| | (Unaudited)
| |
| |
| |
| |
| |
| |
| |
| |
| |
|---|
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
|---|
Acquired technology | | 16 | | $ | 1,145,690 | | $ | (108,794 | ) | $ | 1,036,896 | | | | $ | 1,145,690 | | $ | (90,557 | ) | $ | 1,055,133 | | | | $ | 1,245,690 | | $ | (35,152 | ) | $ | 1,210,538 | |
Customer relationships | | 2 - 11 | | | 246,780 | | | (40,898 | ) | | 205,882 | | | | | 247,254 | | | (34,520 | ) | | 212,734 | | | | | 244,265 | | | (12,226 | ) | | 232,039 | |
Trade names | | 9 | | | 128,770 | | | (23,987 | ) | | 104,783 | | | | | 129,073 | | | (20,404 | ) | | 108,669 | | | | | 127,167 | | | (7,220 | ) | | 119,947 | |
Favorable leases | | 10 | | | 7,918 | | | (1,504 | ) | | 6,414 | | | | | 7,900 | | | (1,163 | ) | | 6,737 | | | | | 7,360 | | | (416 | ) | | 6,944 | |
Brewer Development | | 3 | | | 1,142 | | | (8 | ) | | 1,134 | | | | | — | | | — | | | — | | | | | — | | | — | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | | $ | 1,530,300 | | $ | (175,191 | ) | $ | 1,355,109 | | | | $ | 1,529,917 | | $ | (146,644 | ) | $ | 1,383,273 | | | | $ | 1,624,482 | | $ | (55,014 | ) | $ | 1,569,468 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Definite-lived intangible assets are amortized on a straight-line basis over the period of expected economic benefit. Total amortization expense was $96.3 million and $55.0 million for the successor periods ending September 30, 2017 and September 24, 2016, respectively, and $21.3 million and $48.1 million for the predecessor periods ending March 2, 2016 and September 26, 2015. Total amortization expense was $28.7 million and $24.2 million for the interim successor periods December 30, 2017 and December 24, 2016. The amortization expense is included in Selling, general and administrative expenses in the consolidated statements of operations, with the exception of Brewer Development amortization, which is included in cost of goods sold.
The weighted average remaining life for definite-lived intangibles at September 30, 2017 is 13.6 years.
Table of Contents
Maple Parent Holdings Corp.
Notes to Consolidated Financial Statements (Continued)
7. Goodwill and Intangible Assets (Continued)
The estimated aggregate amortization expense over each of the next five years and thereafter, is as follows (in thousands):
| | | | |
Fiscal Year | |
| |
|---|
2018 | | $ | 129,376 | |
2019 | | | 126,791 | |
2020 | | | 126,791 | |
2021 | | | 127,225 | |
2022 | | | 127,546 | |
Thereafter | | | 745,544 | |
| | | | | |
Total | | $ | 1,383,273 | |
| | | | | |
| | | | | |
| | | | | |
8. Equity Investments
On March 3, 2017, the Maple Company formed a joint venture with Anheuser-Busch InBev ("ABI") that will focus on developing and launching an in-home alcohol drink system. Under the terms of the transaction agreement, the Maple Company contributed its existing Kold assets and liabilities along with all outstanding shares of MDS Holdings p.l.c. (Bevyz) with a net book value of $357 million to Bedford Systems, LLC in exchange for a 30% interest. ABI contributed $250 million to the investment which was immediately distributed to the Maple Company in exchange for a 70% interest.
In addition, as the net assets contributed to the investment were determined to qualify as a business in accordance with ASC 810Consolidations, the Maple Company recognized a gain of $4.6 million based on the difference between the net book value of the assets contributed, the total value of the cash consideration received and the fair value of the Maple Company's investment. This was recorded within Other income (loss), net in the statements of operations.
The Maple Company's carrying value of its equity method investments as of December 30, 2017 and September 30, 2017 was $97.4 million and $101.3 million, respectively and is recorded within Other long-term assets on the Consolidated Balance Sheets.
9. Product Warranties
The Maple Company offers a one-year warranty on all Keurig® brewing systems it sells. The Maple Company provides for the estimated cost of product warranties, primarily using historical information and current repair or replacement costs, at the time product revenue is recognized.
Product warranties are included in Accrued expenses in the accompanying consolidated balance sheets. The carrying amount is $13.2 million, $10.3 million and $15.5 million as of December 30, 2017, September 30, 2017 and September 24, 2016, respectively.
For the successor periods ending September 30, 2017 and September 24, 2016 the Maple Company recovered $1.4 million and $0.6 million, respectively, and $0.5 million and $1.3 million for the predecessor periods ending March 2, 2016 and September 26, 2015, respectively as reimbursement from suppliers related to warranty issues.
Table of Contents
Maple Parent Holdings Corp.
Notes to Consolidated Financial Statements (Continued)
10. Long-Term Debt
On March 3, 2016, Keurig entered into a Credit Agreement with JPMorgan Chase Bank, N.A., as administrative agent and as collateral agent (the "Administrative Agent"), and the lenders party thereto from time to time (the "Credit Agreement").
Under the Credit Agreement, inclusive of the incremental amendments noted below Keurig maintains secured credit facilities consisting of (i) a $700 million revolving credit facility (the "Revolving Facility"), and (ii) a Term A loan facility in the original principal amount of $4.275 billion (the "Term A Facility"). The Term B loan facility, originally consisting of a U.S. dollar denominated tranche of $1.875 billion and an euro denominated tranche in the principal amount of €842 million was extinguished on March 13, 2017. The initial proceeds of the Term A Facility and Term B Facility were used by the Maple Company for several purposes, including refinancing all outstanding indebtedness of Keurig under Keurig's former Credit Agreement, dated June 29, 2015, with Bank of America, N.A, as administrative agent, funding a portion of the consideration for the acquisition and paying fees, costs, and expenses related to the transactions in the Keurig Acquisition, including the equity contributions.
Maple also has outstanding term loans with two related-parties, Maple Holdings B.V. and Mondelez, with a combined principal balance of $1.8 billion which bear an interest rate of 5.5% and mature in 2023. Maple paid interest of $125 million and $34.5 million for the successor periods ended September 30, 2017 and September 24, 2016, respectively, due on term loans from Maple Holdings B.V. and Mondelez. For the interim successor period ended December 30, 2017 Maple paid interest on these loans of $25.2 million, and no interest was paid during the interim successor period ended December 24, 2016. No interest was accrued related to the loans from Maple Holdings B.V. and Mondelez as of December 30, 2017 or September 30, 2017, and $25.2 million was accrued within Other Current Liabilities as of September 24, 2016.
Long-term debt outstanding consists of the following (in thousands) as of:
| | | | | | | | | | |
| | Successor | |
|---|
| | December 30,
2017 | | September 30,
2017 | | September 24,
2016 | |
|---|
| | (Unaudited)
| |
| |
| |
|---|
Revolver | | $ | — | | $ | 100,000 | | $ | — | |
Term Loan A | | | 3,329,185 | | | 3,833,369 | | | 3,135,313 | |
Term Loan B | | | — | | | — | | | 1,770,562 | |
Term Loan B EUR | | | — | | | — | | | 942,866 | |
Term Loan—Maple B.V. | | | 1,375,000 | | | 1,375,000 | | | 1,375,000 | |
Term Loan—Mondelez | | | 440,000 | | | 440,000 | | | 440,000 | |
Deferred financing fees | | | (46,142 | ) | | (54,844 | ) | | (108,594 | ) |
Original issue discount | | | — | | | — | | | (47,765 | ) |
Other | | | — | | | 508 | | | 776 | |
| | | | | | | | | | | |
Total long-term debt | | $ | 5,098,043 | | $ | 5,694,033 | | $ | 7,508,158 | |
Less current portion | | | 219,073 | | | 219,076 | | | 186,247 | |
| | | | | | | | | | | |
Long-term portion | | $ | 4,878,970 | | $ | 5,474,957 | | $ | 7,321,911 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Table of Contents
Maple Parent Holdings Corp.
Notes to Consolidated Financial Statements (Continued)
10. Long-Term Debt (Continued)
Interest Rate and Fees
Borrowings under Keurig's Term A Facility and the Revolving Facility of the original Credit Agreement (entered into on March 3, 2016) bear interest at a rate per annum equal to (i) in the case of LIBOR loans, LIBOR plus 2.25%, with stepdowns based on total net leverage levels to as low as 1.25% at total net leverage levels less than 2.50x and (ii) in the case of base rate loans, the base rate plus 1.25%, with stepdowns based on total net leverage levels to as low as 0.25% at total net leverage levels less than 2.50x. Borrowings under the Second Amendment, bear interest at a rate per annum equal to (i) in the case of LIBOR loans, LIBOR plus 2.00%, with stepdowns based on total net leverage levels to as low as 1.25% at total net leverage levels less than 3.50x and (ii) in the case of base rate loans, the base rate plus 1.00%, with stepdowns based on total net leverage levels to as low as 0.25% at total net leverage levels less than 3.50x. In addition to paying interest on the loans outstanding under the Credit Agreement, Keurig is also required to pay customary commitment and letter of credit fees.
Representations and Warranties; Certain Covenants
The Credit Agreement contains customary representations and warranties, and affirmative and negative covenants. Further, the Credit Agreement contains a financial covenant, which applies solely with respect to the Revolving Facility and Term A Facility, requiring that Keurig not exceed the then applicable maximum total net leverage ratio, which is tested at the end of each calendar quarter. Maple has remained compliant with these covenants for all periods presented.
Events of Default
The Credit Agreement contains customary events of default (including, among others, payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to certain material indebtedness, certain bankruptcy events, material judgments and change of control), which, subject to certain grace periods and exceptions, permit the lenders to accelerate the loans and terminate the commitments under the Credit Agreement or exercise other specified remedies upon the occurrence of such events of default.
Guarantees and Security
All obligations under the Credit Agreement are unconditionally guaranteed by Keurig and all of Keurig's direct and indirect wholly-owned domestic subsidiaries, other than certain excluded subsidiaries (collectively, the "Guarantors"). All obligations under the Credit Agreement and the related guarantees are secured by a perfected first-priority security interest in substantially all of the tangible and intangible assets of Keurig and the Guarantors, as well as a perfected first-priority pledge of the equity interests of Keurig, all of the equity interests of the wholly-owned domestic subsidiaries of Keurig and 65% of the equity interests of the first tier foreign subsidiaries of the Guarantors, in each case, subject to customary exceptions.
Incremental Amendments
On March 24, 2016, Keurig, the Guarantors, the Administrative Agent and Bank of China (Luxembourg) S.A. ("Bank of China") entered into an amendment to the Credit Agreement, whereby Bank of China provided Keurig with a $100 million incremental Term A loan, which was structured as
Table of Contents
Maple Parent Holdings Corp.
Notes to Consolidated Financial Statements (Continued)
10. Long-Term Debt (Continued)
an increase in the aggregate principal amount of the Term A Facility, having identical terms and conditions as the existing Term A Facility. In conjunction with the amendment, Keurig notified its lenders that it would use the proceeds from the incremental Term A facility to prepay its USD Term B Facility borrowings in the principal amount of $100 million on March 24, 2016.
On March 13, 2017, Keurig, the Guarantors, the Administrative Agent and multiple banks (Citibank NA, Bank of America, NA, JPMorgan, RBC and Wells Fargo) entered into an amendment to the Credit Agreement, whereby the Term Loan B debt (both USD and EUR) was extinguished and an incremental $1.2 billion was added to the Term Loan A. The Amendment included a $200 million revolving facility. The structure of the Amendment replicates the existing Term Loan A agreement. As a result of the 2017 refinancing, Maple recognized a loss on extinguishment of debt in March 2017 of $42.8 million which was primarily related to deferred financing fees and original issue discount on Term Loan B. This was recorded within Other income (loss), net in the consolidated statements of operations.
Deferred Financing Fees
The deferred financing fees are amortized as interest expense over the life of the respective loan using the effective interest rate method.
Maple's average effective interest rate as of September 30, 2017, and September 24, 2016 was 2.68% , 3.60%, respectively, excluding amortization of deferred financing charges and the effect of interest swap agreements, which do not meet the criteria for hedge accounting.
Mandatory Prepayments
The Credit Agreement requires Keurig to pay, subject to certain exceptions, outstanding term loans with:
•100% of net cash proceeds above $7.5 million of certain asset sales, subject to reinvestment rights and certain other exceptions. In accordance with this requirement if Keurig sells assets above this threshold and does not reinvest the proceeds from the sale in other assets, then Keurig could be required to make a mandatory prepayment with the cash from the asset sale.
•75% (subject to step-downs to 50%, 25% and 0% based upon first lien net leverage ratio levels of 4.25x, 3.75x and 3.25x, respectively) of Keurig's annual excess cash flow. In accordance with this requirement if Keurig has excess cash flow as defined in the agreement at the end of its fiscal year, then a percentage of that excess would be required to be used for a mandatory prepayment. The required percentage is based on Keurig's leverage ratio.
•The Credit Agreement also requires Keurig to prepay outstanding revolving loans and cash collateralize, "backstop" or replace outstanding letters of credit if at any time the aggregate amount of outstanding revolving loans, unreimbursed letter of credit drawings and outstanding letters of credit under the Credit Agreement exceed the aggregate amount of revolving commitments then in effect, in an aggregate amount equal to such excess. This condition ensures that the outstanding amount of revolving loans do not exceed Keurig's revolving loan commitment. Letters of credit are included. If the balance of the loan commitments exceeds the loan balance Keurig would be required to make a correction to this condition to ensure that the loans are equivalent to the commitments.
Table of Contents
Maple Parent Holdings Corp.
Notes to Consolidated Financial Statements (Continued)
10. Long-Term Debt (Continued)
Voluntary Prepayments
Keurig is permitted to voluntarily prepay any outstanding loans under the Credit Agreement at any time without premium or penalty, other than customary "breakage" costs with respect to LIBOR loans. As a result of these payments made during fiscal year 2017 and interim successor period December 30, 2017, Keurig recognized a loss on extinguishment of debt of $42.5 million and $5.0 million, respectively, within Other income (loss), net in the consolidated statements of operations.
Maturities; Amortization
Borrowings under the Term A Facility and the Revolving Facility mature in March 2021. The Term A Facility requires mandatory principal repayments of 5% per annum of the initial and subsequent Term A loan borrowings, payable in equal pro-rata quarterly installments, which results in annual repayments of $220 million.
Scheduled maturities as of September 30, 2017 of long-term debt are as follows (in thousands):
| | | | |
Fiscal Year | |
| |
|---|
2018 | | $ | 219,073 | |
2019 | | | 218,932 | |
2020 | | | 218,750 | |
2021 | | | 3,277,122 | |
2022 | | | — | |
Thereafter | | | 1,815,000 | |
| | | | | |
| | $ | 5,748,877 | |
| | | | | |
| | | | | |
| | | | | |
11. Derivative Financial Instruments
The Maple Company is exposed to certain risks relating to ongoing business operations. The primary risks that are mitigated by financial instruments are interest rate risk, commodity price risk and foreign currency exchange rate risk. The Maple Company uses interest rate and coffee swaps to mitigate interest rate and coffee price risk associated with the Maple Company's variable-rate borrowings and coffee purchases. The Maple Company also enters into coffee futures contracts to hedge future coffee purchase commitments of green coffee with the objective of minimizing cost risk due to market fluctuations and uses foreign currency forward contracts to hedge the purchase and payment of green coffee purchase commitments denominated in non-functional currencies. Although the Maple Company does not meet the criteria for cash flow hedge accounting, the Maple Company believes that these instruments are effective in achieving its objective of providing certainty in the future price of commodities purchased for use in the Maple Company's supply chain.
As of September 24, 2016, the Maple Company had an amortizing cross currency swap with an original notional amount of €842 million. On March 9, 2017, the Maple Company voluntarily terminated the cross currency swap with the retirement of its EUR denominated debt. Therefore, in fiscal year 2017 the Maple Company recorded a realized loss of $60.6 million within Gain (loss) on financial instruments, net in the consolidated statements of operations in connection with this termination primarily attributable to the impact of exchange rates between the euro and U.S. dollar. See Note 10,Long-Term Debt for additional discussion on the retirement of euro denominated debt.
Table of Contents
Maple Parent Holdings Corp.
Notes to Consolidated Financial Statements (Continued)
11. Derivative Financial Instruments (Continued)
The Maple Company is exposed to interest rate risk associated with USD variable rate debt. On March 3, 2016, the Maple Company entered into $2.85 billion in interest rate swaps where the Maple Company receives a variable rate and pays a fixed rate on these swaps with years ranging from two to seven years. In fiscal years 2018-2020, $150 million of the total notional will mature each year, $2.1 billion in 2021 and $300 million in 2023. These swaps are not amortized. The Maple Company also occasionally enters into certain foreign currency forward contracts to hedge certain exposures that are not designated as hedging instruments for accounting purposes. At September 30, 2017, the Maple Company had open foreign currency forward contracts with a total notional of $458 million. In fiscal year 2018, $173 million of the total notional will mature, with the remaining $285 million in 2024. These contracts are recorded at fair value, with the changes in fair value recognized in the consolidated statements of operations.
The Maple Company does not hold or use derivative financial instruments for trading or speculative purposes.
The Maple Company is exposed to credit loss in the event of nonperformance by the counterparties to these financial instruments, however, nonperformance is not anticipated.
The following table summarizes the fair value of the Maple Company's derivatives included on the consolidated balance sheets (in thousands) as of:
| | | | | | | | | | | |
| | Successor | |
|
|---|
| | December 30,
2017 | | September 30,
2017 | | September 24,
2016 | | Balance Sheet
Classification |
|---|
| | (Unaudited)
| |
| |
| |
|
|---|
Derivatives not designated as hedges: | | | | | | | | | | | |
Interest rate swaps | | $ | — | | $ | — | | $ | (6,484 | ) | Other long-term liabilities |
Interest rate swaps | | | 87,088 | | | 67,871 | | | 368 | | Other long-term assets |
Coffee swaps | | | — | | | 352 | | | 810 | | Other current assets |
Coffee swaps | | | (1,003 | ) | | — | | | — | | Other current liabilities |
Coffee futures | | | 237 | | | — | | | — | | Other current assets |
FX forward contracts | | | — | | | — | | | 524 | | Other current assets |
FX forward contracts | | | (4,970 | ) | | (6,410 | ) | | — | | Other short-term liabilities |
Cross currency swaps | | | — | | | — | | | (21,964 | ) | Other long-term liabilities |
| | | | | | | | | | | | |
Total | | $ | 81,352 | | $ | 61,813 | | $ | (26,746 | ) | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Table of Contents
Maple Parent Holdings Corp.
Notes to Consolidated Financial Statements (Continued)
11. Derivative Financial Instruments (Continued)
Net gains/losses on financial instruments not designated as hedges for accounting purposes are as follows (in thousands):
| | | | | | | | | | | | | | | | | | | |
| | Successor | | Predecessor | |
|---|
| | October 1,
2017 to
December 30,
2017 | | September 25,
2016 to
December 24,
2016 | | September 25,
2016 to
September 30,
2017 | | December 4,
2015 -
September 24,
2016 | | September 27,
2015 to
March 2,
2016 | | September 28,
2014 to
September 26,
2015 | |
|---|
| | (Unaudited)
| | (Unaudited)
| |
| |
| |
| |
| |
|---|
Net gain (loss) on cross currency swap | | $ | — | | $ | (56,450 | ) | $ | (47,252 | ) | $ | (24,673 | ) | $ | 1,473 | | $ | 9,344 | |
Net gain on interest rate swaps | | | 19,217 | | | 90,024 | | | 73,987 | | | (6,115 | ) | | — | | | 516 | |
Net gain (loss) on coffee futures | | | 237 | | | (3,373 | ) | | (6,025 | ) | | 448 | | | — | | | — | |
Net gain (loss) on coffee swaps | | | (1,355 | ) | | (1,370 | ) | | (538 | ) | | — | | | — | | | — | |
Net gain (loss) on FX forward contracts | | | 1,579 | | | 2,569 | | | (6,495 | ) | | 15,985 | | | — | | | — | |
| | | | | | | | | | | | | | | | | | | | |
Total | | $ | 19,678 | | $ | 31,400 | | $ | 13,677 | | $ | (14,355 | ) | $ | 1,473 | | $ | 9,860 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
12. Fair Value Measurements
The Maple Company measures fair value as the selling price that would be received for an asset, or paid to transfer a liability, in the principal or most advantageous market on the measurement date. The hierarchy established by the Financial Accounting Standards Board prioritizes fair value measurements based on the types of inputs used in the valuation technique. The inputs are categorized into the following levels:
Level 1—Observable inputs such as quoted prices in active markets for identical assets or liabilities.
Level 2—Inputs other than quoted prices that are observable, either directly or indirectly, which include quoted prices for similar assets or liabilities in active markets and quoted prices for identical assets or liabilities in markets that are not active.
Level 3—Unobservable inputs not corroborated by market data, therefore requiring the entity to use the best available information, including management assumptions.
Table of Contents
Maple Parent Holdings Corp.
Notes to Consolidated Financial Statements (Continued)
12. Fair Value Measurements (Continued)
The following table summarizes the fair values and the levels used in fair value measurements for the Company's financial (liabilities) assets (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Successor | |
|---|
| | December 30, 2017
(Unaudited) | | September 30, 2017 | | September 24, 2016 | |
|---|
| | Fair Value Measurements
Using | | Fair Value Measurements
Using | | Fair Value Measurements
Using | |
|---|
| | Level 1 | | Level 2 | | Level 3 | | Level 1 | | Level 2 | | Level 3 | | Level 1 | | Level 2 | | Level 3 | |
|---|
Derivatives: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest rate swaps | | $ | — | | $ | 87,088 | | $ | — | | $ | — | | $ | 67,871 | | $ | — | | $ | — | | $ | (6,484 | ) | $ | — | |
Interest rate swaps | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 368 | | | — | |
Coffee swaps | | | — | | | (1,003 | ) | | — | | | | | | | | | | | | | | | | | | | |
Coffee futures | | | — | | | 237 | | | — | | | — | | | 352 | | | — | | | — | | | 810 | | | — | |
Cross currency swap | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (21,964 | ) | | — | |
Foreign currency forward contracts | | | — | | | (4,970 | ) | | — | | | — | | | (6,410 | ) | | — | | | — | | | 524 | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | — | | $ | 81,352 | | $ | — | | $ | — | | $ | 61,813 | | $ | — | | $ | — | | $ | (26,746 | ) | $ | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Level 2 derivative financial instruments use inputs that are based on market data of identical (or similar) instruments, including forward prices for commodities, interest rates curves and spot prices that are in observable markets.
Derivatives
As of December 30, 2017, September 30, 2017 and September 24, 2016 the amount of loss estimated by the Maple Company due to credit risk associated with the derivatives for all significant concentrations was not material based on the factors of an industry recovery rate and a calculated probability of default.
Table of Contents
Maple Parent Holdings Corp.
Notes to Consolidated Financial Statements (Continued)
13. Income Taxes
Income before income taxes and the provision for income taxes consist of the following (in thousands):
| | | | | | | | | | | | | | | |
| | Successor | |
| | Predecessor | |
|---|
| | September 25,
2016 to
September 30,
2017 | | December 4,
2015 to
September 24,
2016 | |
| | September 27,
2015 to
March 2, 2016 | | September 28,
2014 to
September 26,
2015 | |
|---|
Income before income taxes: | | | | | | | | | | | | | | | |
Domestic | | $ | 391,523 | | $ | 73,467 | | | | $ | 88,626 | | $ | 668,729 | |
Foreign | | | 175,565 | | | 90,697 | | | | | 50,071 | | | 81,847 | |
| | | | | | | | | | | | | | | | |
Total income before income taxes | | $ | 567,088 | | $ | 164,164 | | | | $ | 138,697 | | $ | 750,576 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Income tax expense: | | | | | | | | | | | | | | | |
United States federal: | | | | | | | | | | | | | | | |
Current | | | 86,757 | | | 50,109 | | | | | 29,458 | | | 179,137 | |
Deferred | | | 17,294 | | | (21,153 | ) | | | | (1,106 | ) | | (975 | ) |
| | | | | | | | | | | | | | | | |
| | | 104,051 | | | 28,956 | | | | | 28,352 | | | 178,162 | |
State and local: | | | | | | | | | | | | | | | |
Current | | | 15,169 | | | 6,698 | | | | | (6,674 | ) | | 44,707 | |
Deferred | | | (3,020 | ) | | (2,859 | ) | | | | 2,626 | | | (1,877 | ) |
| | | | | | | | | | | | | | | | |
| | | 12,149 | | | 3,839 | | | | | (4,048 | ) | | 42,830 | |
| | | | | | | | | | | | | | | | |
Total United States | | | 116,200 | | | 32,795 | | | | | 24,304 | | | 220,992 | |
| | | | | | | | | | | | | | | | |
Foreign: | | | | | | | | | | | | | | | |
Current | | | 66,825 | | | 21,609 | | | | | 17,402 | | | 52,165 | |
Deferred | | | 1,401 | | | 293 | | | | | (3,041 | ) | | (21,209 | ) |
| | | | | | | | | | | | | | | | |
Total foreign | | | 68,226 | | | 21,902 | | | | | 14,361 | | | 30,956 | |
| | | | | | | | | | | | | | | | |
Total income tax expense | | $ | 184,426 | | $ | 54,697 | | | | $ | 38,665 | | $ | 251,948 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Table of Contents
Maple Parent Holdings Corp.
Notes to Consolidated Financial Statements (Continued)
13. Income Taxes (Continued)
Net deferred tax liabilities consist of the following (in thousands) as of:
| | | | | | | |
| | Successor | |
|---|
| | September 30,
2017 | | September 24,
2016 | |
|---|
Deferred tax assets: | | | | | | | |
Federal benefit of state deferred items | | $ | 91,047 | | $ | 93,008 | |
Equity method investments | | | 75,252 | | | — | |
Net operating loss | | | 53,502 | | | 3,959 | |
Tax credit carryforwards | | | 37,594 | | | 5,195 | |
Accrued expenses | | | 23,533 | | | 33,076 | |
Share-based compensation | | | 18,768 | | | 2,395 | |
Inventories and related reserves | | | 3,718 | | | 10,448 | |
Capital losses | | | 3,149 | | | — | |
Debt issuance costs | | | 1,468 | | | — | |
Property, plant and equipment | | | 871 | | | 5,720 | |
Derivative instruments | | | 474 | | | 5,625 | |
Intercompany Interest | | | — | | | 7,208 | |
Other | | | 378 | | | — | |
Total deferred tax assets | | | 309,754 | | | 166,634 | |
Valuation allowances | | | (44,161 | ) | | (1,743 | ) |
| | | | | | | | |
Total deferred tax assets, net of valuation allowances | | $ | 265,593 | | $ | 164,891 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Deferred tax liabilities: | | | | | | | |
Trademarks and other intangible assets | | | (1,592,951 | ) | | (1,680,177 | ) |
Property, plant and equipment | | | (120,870 | ) | | — | |
Derivative instruments | | | (34,892 | ) | | — | |
Prepaid expenses | | | (4,744 | ) | | (1,887 | ) |
Other | | | (30 | ) | | — | |
| | | | | | | | |
Total deferred tax liabilities | | | (1,753,487 | ) | | (1,682,064 | ) |
| | | | | | | | |
Net deferred tax liabilities | | $ | (1,487,894 | ) | $ | (1,517,173 | ) |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Table of Contents
Maple Parent Holdings Corp.
Notes to Consolidated Financial Statements (Continued)
13. Income Taxes (Continued)
A reconciliation for continuing operations between the amount of reported income tax expense and the amount computed using the U.S. Federal Statutory rate of 35% as of September 30, 2017 and September 24, 2016, respectively, is as follows:
| | | | | | | | | | | | | | | |
| | Successor | |
| | Predecessor | |
|---|
| | September 25,
2016 to
September 30,
2017 | | March 3,
2016 to
September 24,
2016 | |
| | September 27,
2015 to
March 2,
2016 | | September 28,
2014 to
September 26,
2015 | |
|---|
Tax at U.S. federal statutory rate | | | 35.00 | % | | 35.00 | % | | | | 35.00 | % | | 35.00 | % |
State taxes (net of federal) | | | 3.66 | % | | 3.34 | % | | | | 3.16 | % | | 4.65 | % |
Permanent items | | | (5.28 | )% | | (6.92 | )% | | | | 2.68 | % | | (2.76 | )% |
Foreign rate difference | | | (1.25 | )% | | (5.86 | )% | | | | (2.96 | )% | | (2.08 | )% |
Tax credits | | | (35.18 | )% | | (1.18 | )% | | | | (3.41 | )% | | (0.12 | )% |
Valuation allowance for deferred tax assets | | | 3.65 | % | | — | % | | | | — | % | | — | % |
U.S. taxation of foreign earnings | | | 30.00 | % | | — | % | | | | — | % | | — | % |
Deferred rate change | | | (0.43 | )% | | (3.56 | )% | | | | 1.14 | % | | — | % |
State refund | | | (0.16 | )% | | — | % | | | | (14.84 | )% | | — | % |
Uncertain tax positions | | | 2.81 | % | | 11.58 | % | | | | 7.41 | % | | — | % |
Provincial taxes | | | — | % | | — | % | | | | — | % | | 1.42 | % |
Other | | | (0.31 | )% | | 0.93 | % | | | | (0.30 | )% | | (2.54 | )% |
| | | | | | | | | | | | | | | | |
Tax at effective rates | | | 32.51 | % | | 33.33 | % | | | | 27.88 | % | | 33.57 | % |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
The Maple Company's effective income tax rates were –239.56% and 36.10% for the three months ended December 30, 2017 and December 24, 2016, respectively. The effective income tax rate is based upon estimated income before income taxes for the year, by jurisdiction, and estimated permanent tax adjustments. For the three months ended December 30, 2017, the tax provision included net discrete tax benefit of $484 million, of which $484 million comprised the impact of the enactment of H.R. 1 (the "Act"), commonly referred to as the Tax Cuts and Jobs Act of 2017.
The Maple Company recognizes deferred tax assets to the extent that the Maple Company believes these assets are more likely than not to be realized. In making such a determination, the Maple Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. The Maple Company has remeasured its deferred taxes at a blended rate of 24.51% for temporary differences that will reverse during the first tax reporting period ending September 28, 2018 following enactment and remeasured the remaining deferred at the 21% long term rate.
As of December 30, 2017, the Maple Company has a U.S. tax credit carryforward of $22.4 million that will expire in fiscal year 2028, against which the Company has provided a valuation allowance of $15.2 million. As of December 30, 2017, September 30, 2017 and September 24, 2016, the Maple Company has loss carryforwards, a portion with no expiration dates, in various non-U.S. jurisdictions and a portion that will expire in fiscal year 2034, with tax benefits totaling $55.5 million, $52.5 million and $2.9 million, respectively. The majority of the non-U.S. loss carryforwards represent local country net operating losses. Based upon earnings history and future plans, the Maple Company has concluded it is more likely than not that a portion of these foreign loss carryforwards will not be realized. As of December 30, 2017, September 30, 2017 and September 24, 2016, the Maple Company has provided
Table of Contents
Maple Parent Holdings Corp.
Notes to Consolidated Financial Statements (Continued)
13. Income Taxes (Continued)
valuation allowances of $27.7 million, $28.9 million and $1.7 million, respectively, against certain of these carryforwards.
The Tax Cuts and Jobs Act was enacted on December 22, 2017. The Act reduces the US federal corporate tax rate from 35% to 21%, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and creates new taxes on certain foreign sourced earnings. At December 30, 2017, the Maple Company had not completed its accounting for the tax effects of enactment of the Act; however, in certain cases, as described below, the Maple Company has made a reasonable estimate of the effects on its existing deferred tax balances and the one-time transition tax. For the items for which it was able to determine a reasonable estimate, the Maple Company recognized a provisional amount of $9.4 million, excluding remeasurement of deferred tax assets and liabilities, which is included as a component of income tax expense from continuing operations. In all cases, the Maple Company will continue to make and refine its calculations as additional analysis is completed. In addition, the Maple Company's estimates may also be affected as it gains a more thorough understanding of the tax law.
Provisional amounts
Deferred tax assets and liabilities: Maple Parent remeasured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is either 24.51% or 21%. However, Maple Company is still analyzing certain aspects of the Tax Cuts and Jobs Act and refining our calculations, which could potentially affect the measurement of these balances or potentially give rise to new deferred tax amounts. The provisional amount recorded related to the remeasurement of our deferred tax balance was $493.3 million.
Foreign tax effects
One-time transition tax: The one-time transition tax is based on our total post-1986 earnings and profits (E&P) that we previously deferred from US income taxes. We recorded a provisional amount for our one-time transition tax liability for $16.9 million on earnings of certain foreign subsidiaries which brought up foreign tax credits of $7.5 million, resulting in a net increase in income tax expense of $9.4 million. We have not yet completed our calculation of the total post-1986 E&P for these foreign subsidiaries. Further, the transition tax is based in part on the amount of those earnings held in cash and other specified assets. This amount may change when we finalize the calculation of post-1986 foreign E&P previously deferred from US federal taxation and finalize the amounts held in cash or other specified assets. No additional income taxes have been provided for any remaining undistributed foreign earnings not subject to the transition tax, or any additional outside basis difference inherent in these entities, as these amounts continue to be indefinitely reinvested in foreign operations.
The Maple Company is afforded, provided certain requirements are satisfied, a reduced tax rate for its Swiss procurement company under a mixed company ruling from the Swiss tax authorities and as a result has recorded a reduction in tax liability of $4.4 million and $1.7 million for the successor periods ending September 30, 2017 and September 24, 2016, respectively, $1.2 million for the predecessor period ending March 2, 2016. The reduced rates from the ruling are effective through December 31, 2018.
The Maple Company records uncertain tax positions in accordance with ASC 740 on the basis of a two-step process whereby (1) we determine whether it is more likely than not that the tax positions will
Table of Contents
Maple Parent Holdings Corp.
Notes to Consolidated Financial Statements (Continued)
13. Income Taxes (Continued)
be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.
The total amount of unrecognized tax benefits as of December 30, 2017, September 30, 2017 and September 24, 2016 were $33.2 million, $33.2 million, and $21 million, respectively. The amounts of unrecognized tax benefits that would impact the effective tax rate if resolved in favor of the Company are $33.2 million, $33.2 million, and $21 million at December 30, 2017, September 30, 2017 and September 24, 2016, respectively. As a result of acquisitions in prior years, the Company is indemnified for $6.7 million of the total reserve balance, with a total indemnification pool of $6.7 million. If these unrecognized tax benefits are resolved in favor of the Maple Company, the associated indemnification receivable, recorded in other long-term assets on the consolidated balance sheets, would be reduced accordingly.
As of December 30, 2017, September 30, 2017, and September 24, 2016, accrued interest of $5.9 million, $5.4 million, and $4 million, respectively, and no accrued penalties were included in the consolidated balance sheets related to unrecognized tax benefits. The Maple Company recognizes interest and penalties in income tax expense. Income tax expense included $0.5 million, $1.5 million and $0.7 million of interest for the periods ending December 30, 2017, September 30, 2017 and September 24, 2016, respectively. No penalties were recorded in income tax expense for the periods ending December 30, 2017, September 30, 2017 and September 24, 2016.
The Maple Company released $3.9 million and $0.1 million of unrecognized tax benefits during the periods ended September 30, 2017 and September 24, 2016, respectively, due to the expiration of the statute of limitations. As of December 30, 2017 the Maple Company expects to release $10.2 million of unrecognized tax benefits in Fiscal Year 2018 due to the expiration of the statute of limitations.
A reconciliation of increases and decreases in unrecognized tax benefits is as follows for September 24, 2016 to December 30, 2017 (in thousands):
| | | | | | | | | | |
| | Successor | |
|---|
| | December 30,
2017 | | September 30,
2017 | | September 24,
2016 | |
|---|
| | (Unaudited)
| |
| |
| |
|---|
Beginning balance of unrecognized tax benefits | | $ | 33,225 | | $ | 20,966 | | $ | 19,768 | |
Increases related to prior period tax positions | | | — | | | 18,191 | | | 1,236 | |
Decreases related to prior period tax positions | | | — | | | (6,235 | ) | | (130 | ) |
Increases related to current period tax positions | | | — | | | — | | | — | |
Decreases related to current period tax positions | | | — | | | — | | | — | |
Increases from effects of foreign currency exchange rates | | | (30 | ) | | 303 | | | 92 | |
| | | | | | | | | | | |
Gross tax contingencies—balance | | $ | 33,195 | | $ | 33,225 | | $ | 20,966 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
The Maple Company intends to submit a mutual agreement procedure ("MAP") request to the Canada-U.S. competent authorities for the 2012 and 2013 fiscal years. The Maple Company is currently under examination, or may be subject to examination, by various jurisdictions inside and outside the
Table of Contents
Maple Parent Holdings Corp.
Notes to Consolidated Financial Statements (Continued)
13. Income Taxes (Continued)
U.S. as well as U.S. states for fiscal years 2010 through 2016. The Maple Company believes it has appropriately provided for all tax contingencies.
14. Stockholders' Equity
Common Stock
Successor
Maple has class A and class B common stock. Class A represents the ownership interest held by JAB through its affiliate, Maple Holdings B.V.. Class B represents the ownership interest held by Mondelez through its affiliate, Mondelez International Holdings LLC. Class A and class B shareholders have entered into a Maple Shareholders' Agreement. Under the Maple Shareholders' Agreement, JAB is entitled to seven board seats, Mondelez is entitled to two board seats, and the Maple CEO is entitled to one seat. In addition, the Maple board may nominate an independent industry expert as an additional director for a total of 11 members. The Maple board will each have one vote except that one of Mondelez's two directors will be entitled to two votes. Mondelez has certain minority protection rights, including veto rights over specified decisions relating to the combined business. JAB and Mondelez have agreed not to transfer their shares in Maple before July 2018. Thereafter, either party may initiate a public offering process for its shares, subject, in the case of a proposed transfer by Mondelez, to a right of first offer in favor of JAB. Subject to certain exceptions, each of the parties to the Maple Shareholders' Agreement has agreed not to compete with the business of Maple for the duration of the Maple Shareholders' Agreement and for two years after such party ceases to be a party to the agreement.
Common Stock Dividends
Successor
Maple declared and paid dividends of $11.4 million, $55.3 million and $10.1 million to its shareholders in the successor periods ending December 30, 2017, September 30, 2017 and September 24, 2016, respectively, which includes dividends paid to NCI shareholders as quantified in Note 15.
Predecessor
During the first quarter of fiscal 2016, Keurig declared a quarterly dividend of $0.325 per common share, or $48.5 million in the aggregate, paid on February 16, 2016 to stockholders of record on January 15, 2016. In the predecessor period Keurig paid aggregate dividends of approximately $92.6 million.
Stock Repurchase Program
Predecessor
On July 31, 2015, the Keurig Board of Directors authorized the repurchase of up to an additional $1 billion of Keurig's outstanding common stock over the following two years, at such times and prices as determined by Keurig's management (the "July 2015 repurchase authorization"). At various times
Table of Contents
Maple Parent Holdings Corp.
Notes to Consolidated Financial Statements (Continued)
14. Stockholders' Equity (Continued)
beginning in fiscal 2012, and including the July 2015 repurchase authorization, Keurig's Board of Directors authorized Keurig to repurchase a total of $3.5 billion of Keurig's common stock.
Prior to the Keurig Acquisition in March 2016, Keurig repurchased 4,364,186 shares on the open market for approximately $235 million.
Accumulated Other Comprehensive Income (Loss)
The following tables provide the changes in the components of accumulated other comprehensive income (loss), net of tax (in thousands):
Successor
| | | | |
| | Accumulated
Other
Comprehensive
Income (Loss) | |
|---|
Balance at March 3, 2016 | | $ | — | |
Foreign currency exchange impact | | | 25,502 | |
| | | | | |
Balance at September 24, 2016 | | $ | 25,502 | |
Foreign currency exchange impact | | | 80,581 | |
| | | | | |
Balance at September 30, 2017 | | $ | 106,083 | |
Foreign currency exchange impact (Unaudited) | | | (7,458 | ) |
| | | | | |
Balance at December 30, 2017 (Unaudited) | | $ | 98,625 | |
| | | | | |
| | | | | |
| | | | | |
Predecessor
| | | | | | | | | | |
| | Cash Flow Hedges | | Translation | | Accumulated
Other
Comprehensive
Income (Loss) | |
|---|
Balance at September 27, 2014 | | $ | 8,952 | | $ | (63,003 | ) | $ | (54,051 | ) |
Other comprehensive loss during the period | | $ | (8,107 | ) | $ | (137,129 | ) | $ | (145,236 | ) |
Foreign currency exchange impact on cash flow hedges | | $ | (15 | ) | $ | — | | $ | (15 | ) |
| | | | | | | | | | | |
Balance at September 26, 2015 | | $ | 830 | | $ | (200,132 | ) | $ | (199,302 | ) |
Other comprehensive loss during the period | | | (118 | ) | | — | | | (118 | ) |
Foreign currency exchange impact | | | 20 | | | (9,232 | ) | | (9,212 | ) |
| | | | | | | | | | | |
Balance at March 2, 2016 | | $ | 732 | | $ | (209,364 | ) | $ | (208,632 | ) |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Table of Contents
Maple Parent Holdings Corp.
Notes to Consolidated Financial Statements (Continued)
15. Employee Redeemable Non-Controlling Interest and Mezzanine Equity Awards
In August 2016, Keurig introduced the Executive Ownership Plan ("EOP"), under which certain employees can invest in shares of Keurig's immediate parent, Maple Parent Corporation, a wholly owned subsidiary of Maple. The EOP also provides the non-controlling interest shareholders with the right to put their shares back to the Company at fair value during certain periods. Since redemption of these shares is subject to certain conditions at the option of the holder, the fair value of the redeemable non-controlling interest and equity awards are classified within the "mezzanine equity" section of the Consolidated Balance Sheets.
The employee non-controlling interest represents the redemption value of shares purchased with cash. The mezzanine equity awards (recorded at fair value) include shares purchased with loans and the portion of restricted stock units for which compensation expense has been recognized. These put rights terminate upon an initial public offering or merger into a public company, when employees would then be able to sell shares in the open market.
Shares financed through loans are treated as options, and accordingly neither the shares nor the notes are recorded on the Consolidated Balance Sheets. The fair value of the options is recorded in mezzanine equity awards.
A summary of the activity under the EOP is presented below:
| | | | | | | | | | |
| | Successor | |
|---|
| | October 1,
2017 to
December 30,
2017 | | September 25,
2016 to
September 30,
2017 | | December 4,
2015 to
September 24,
2016 | |
|---|
| | (Unaudited)
| |
| |
| |
|---|
Balance, beginning of period | | $ | 218,792 | | $ | 66,002 | | $ | — | |
Net income attributable to noncontrolling interests | | | 7,103 | | | 4,958 | | | — | |
Stock Based Compensation | | | 15,356 | | | 57,577 | | | 5,658 | |
Proceeds from (cash distributions to) redeemable NCI shareholders | | | — | | | 4,642 | | | 60,344 | |
Adjustment of non-controlling interests to fair value | | | 24,589 | | | 86,382 | | | — | |
Dividends paid to NCI shareholders | | | (304 | ) | | (1,445 | ) | | — | |
Currency translation adjustment and other | | | (447 | ) | | 676 | | | — | |
| | | | | | | | | | | |
Ending balance | | $ | 265,089 | | $ | 218,792 | | $ | 66,002 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
16. Employee Compensation Plans
Predecessor
Equity-Based Incentive Plans
On March 6, 2014, Keurig registered shares of common stock pursuant to the 2014 Omnibus Plan (the "2014 Plan"), which replaced the 2006 Incentive Plan (the "2006 Plan") and increased the total shares of common stock authorized for issuance to 8 million (the "Fungible Pool Limit"). Both plans provided for the issuance of several types of share-based incentive compensation including stock options, stock appreciation rights, restricted stock, restricted stock units and performance stock units. Stock options and stock appreciation rights were counted against the Fungible Pool Limit as 1.0
Table of Contents
Maple Parent Holdings Corp.
Notes to Consolidated Financial Statements (Continued)
16. Employee Compensation Plans (Continued)
Fungible Pool Unit. Both the 2014 Plan and 2006 Plan required the exercise price for all awards requiring exercise to be no less than 100% of fair market value per share of common stock on the date of grant, with certain provisions which increase the option exercise price of an incentive stock option to 110% of the fair market value of the common stock if the grantee owns in excess of 10% of Keurig's common stock at the date of grant.
Options under the 2006 Plan and 2014 Plan became exercisable over periods determined by Keurig's Board of Directors, generally in the range of three to four years.
Option activity is summarized as follows:
| | | | | | | |
| | Number of
Shares | | Weighted Average
Exercise Price
(per share) | |
|---|
Outstanding at September 27, 2014 | | | 3,436,727 | | $ | 25.24 | |
Granted | | | 201,798 | | $ | 137.31 | |
Exercised | | | (1,520,757 | ) | $ | 10.89 | |
Forfeited/expired | | | (77,799 | ) | $ | 80.75 | |
Outstanding at September 26, 2015 | | | 2,039,969 | | $ | 44.91 | |
Granted | | | 666,763 | | $ | 52.98 | |
Exercised | | | (505,339 | ) | $ | 23.50 | |
Forfeited/expired(1) | | | (31,655 | ) | $ | 69.86 | |
| | | | | | | | |
Outstanding at March 2, 2016 | | | 2,169,738 | | $ | 52.01 | |
| | | | | | | | |
Exercisable at March 2, 2016 | | | 1,062,377 | | $ | 39.97 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
(1)At the time of Keurig Acquisition 204,510 shares were not exercised due to the grants being "out of the money". These shares were forfeited at the effective time of the Keurig Acquisition and therefore are not included in the table above.
All outstanding options of Keurig became fully vested in connection with the Keurig Acquisition and settled for cash as part of the acquisition consideration.
The following table summarizes information about stock options that had vested at September 26, 2015:
| | | | | | | |
Number of options outstanding | | Weighted average
remaining
contractual life
(in years) | | Weighted average
exercise price | |
|---|
2,036,855 | | | 5.5 | | $ | 44.83 | |
The following table summarizes information about stock options that had vested at March 2, 2016:
| | | | | | | |
Number of options outstanding | | Weighted average
remaining
contractual life
(in years) | | Weighted average
exercise price | |
|---|
2,158,996 | | | 6.9 | | $ | 51.97 | |
Table of Contents
Maple Parent Holdings Corp.
Notes to Consolidated Financial Statements (Continued)
16. Employee Compensation Plans (Continued)
The following table summarizes information about stock options exercisable at September 26, 2015:
| | | | | | | |
Number of options exercisable | | Weighted average
remaining
contractual life
(in years) | | Weighted average
exercise price | |
|---|
1,413,283 | | | 4.4 | | $ | 28.82 | |
The following table summarizes information about stock options exercisable at March 2, 2016:
| | | | | | | |
Number of options exercisable | | Weighted average
remaining
contractual life
(in years) | | Weighted average
exercise price | |
|---|
1,062,377 | | | 4.8 | | $ | 39.97 | |
Compensation expense is recognized only for those options expected to vest, with forfeitures estimated based on Keurig's historical employee turnover experience and future expectations.
Keurig used a blend of recent and historical volatility to estimate expected volatility at the measurement date. The expected life of options is estimated based on options vesting periods, contractual lives and an analysis of Keurig's historical experience.
The intrinsic value of options exercised during the predecessor periods ended March 2, 2016 and September 26, 2015, were approximately $31 million and $107 million, respectively. Keurig's policy during the predecessor periods was to issue new shares upon exercise of stock options.
The grant-date fair value of employee share options and similar instruments is estimated using the Black-Scholes option-pricing model with the following assumptions for grants issued during the predecessor periods ending March 2, 2016 and September 26, 2015.
| | | | |
| | March 2, 2016 | | September 26, 2015 |
|---|
Average expected life | | 5.5 years | | 5.5 years |
Average volatility | | 60% | | 57% |
Dividend yield | | 2.45% | | 0.84% |
Risk-free interest rate | | 1.68% | | 1.61% |
Weighted average grant date fair value | | $23.50 | | $66.19 |
Restricted Stock Units and Other Awards
Keurig awarded RSUs, and PSUs to eligible employees (each, a "Grantee") which entitle the Grantee to receive shares of Keurig's common stock. RSUs and PSUs are awards denominated in units that are settled in shares of Keurig's common stock upon vesting. The fair value of RSUs, and PSUs was based on the closing price of Keurig's common stock on the grant date. Compensation expense for RSUs was recognized ratably over a Grantee's service period. Compensation expense for PSUs was also recognized over a Grantee's service period, but only if and when Keurig concluded that it was probable (more than likely) the performance condition(s) will be achieved. The assessment of probability of achievement was performed each quarter based on the relevant facts and circumstances at that time, and if the estimated grant-date fair value changes as a result of that assessment, the cumulative effect of the change on current and prior periods is recognized in the period of change. In addition, Keurig
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Maple Parent Holdings Corp.
Notes to Consolidated Financial Statements (Continued)
16. Employee Compensation Plans (Continued)
previously awarded deferred cash awards ("DCAs") to Grantees which entitle a Grantee to receive cash paid over time upon vesting. The vesting of DCAs was conditioned on a Grantee's continuing employment. These awards vested over periods determined by Keurig's Board of Directors, generally in the range of three to four years for RSUs, and DCAs, and three years for PSUs.
The following table summarizes the number and weighted average grant-date fair value of nonvested RSUs:
| | | | | | | | | | |
| | Share Units | | Weighted Average Grant-
Date Fair Value | | Weighted Average
Remaining
Contractual Life
(in Years) | |
|---|
Nonvested, September 27, 2014 | | | 409,173 | | $ | 86.50 | | | 3.26 | |
Granted | | | 154,064 | | $ | 116.80 | | | | |
Vested | | | (128,465 | ) | $ | 65.96 | | | | |
Forfeited | | | (20,359 | ) | $ | 114.12 | | | | |
| | | | | | | | | | | |
Nonvested, September 26, 2015 | | | 414,413 | | $ | 102.78 | | | 2.23 | |
Granted | | | 317,126 | | $ | 55.90 | | | | |
Vested | | | (108,237 | ) | $ | 74.92 | | | | |
Forfeited | | | (16,468 | ) | $ | 92.44 | | | | |
| | | | | | | | | | | |
Nonvested, March 2, 2016 | | | 606,834 | | $ | 83.53 | | | 2.34 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
As of March 2, 2016, total RSUs expected to vest totaled 599,213 million shares with an intrinsic value of $55.1 million.
All of the RSU's of Keurig became fully vested in connection with the acquisition and were settled for cash as part of the acquisition consideration.
The total intrinsic value of RSUs converted to shares of common stock during the predecessor periods ending March 2, 2016 and September 26, 2015 were $6 million and $15.5 million, respectively.
The following table summarizes the number and weighted average grant-date fair value of unvested PSUs based on the target award amounts in the PSU agreements as of September 26, 2015:
| | | | | | | |
| | Share Units | | Weighted Average Grant-
Date Fair Value | |
|---|
Outstanding on September 27, 2014 | | | 195,782 | | $ | 67.38 | |
Granted | | | 45,216 | | $ | 138.08 | |
Converted | | | (75,421 | ) | $ | 41.52 | |
Forfeited | | | (5,451 | ) | $ | 124.73 | |
Actual performance change(1) | | | (52,528 | ) | $ | 91.59 | |
| | | | | | ��� | | |
Outstanding on September 26, 2015(2) | | | 107,598 | | $ | 78.43 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
(1)Reflects the net number of PSUs above and below target levels based on actual performance measured at the end of the performance period
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Maple Parent Holdings Corp.
Notes to Consolidated Financial Statements (Continued)
16. Employee Compensation Plans (Continued)
(2)The outstanding PSUs, for which the performance period has not ended as of September 26, 2015, at the threshold award and maximum award levels, were 65,392 and 149,804, respectively. Does not include shares underlying the performance stock units granted in fiscal 2014 as the performance period has concluded and the threshold performance criteria was not achieved.
The following table summarizes the number and weighted average grant-date fair value of unvested PSUs based on the target award amounts in the PSU agreements as of March 2, 2016:
| | | | | | | |
| | Share Units | | Weighted Average Grant-
Date Fair Value | |
|---|
Outstanding on September 26, 2015 | | | 107,598 | | $ | 78.43 | |
Granted | | | 55,873 | | $ | 88.78 | |
Converted | | | (65,392 | ) | $ | 39.98 | |
Forfeited | | | (1,219 | ) | $ | 139.01 | |
| | | | | | | | |
Outstanding on March 2, 2016(1) | | | 96,860 | | $ | 110.09 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
(1)All of the PSUs became fully vested at target in connection with the acquisition and were settled for cash as part of the acquisition consideration.
Employee Stock Purchase Plan
On March 6, 2014, Keurig registered shares pursuant to the 2014 Amended and Restated Employee Stock Purchase Plan ("2014 ESPP") which replaced the Amended and Restated Employee Stock Purchase Plan ("2008 ESPP"). Under these plans eligible employees could purchase shares of Keurig's common stock, subject to certain limitations, at the lesser of 85 percent of the beginning or ending withholding period fair market value as defined in the plan. There were two six-month withholding periods in each fiscal year. In connection with the Keurig Acquisition the 2014 ESPP was terminated.
The grant-date fair value of employees' purchase rights granted during the predecessor periods ending March 2, 2016 and September 26, 2015, under Keurig's ESPP was estimated using the Black-Scholes option-pricing model with the following assumptions:
| | | | |
| | March 2, 2016 | | September 26, 2015 |
|---|
Average expected life | | 6 months | | 6 months |
Average volatility | | 57% | | 35% |
Dividend yield | | 2.20% | | 1.55% |
Risk-free interest rate | | 0.10% | | 0.10% |
Weighted average grant date fair value | | $16.27 | | $20.28 |
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Maple Parent Holdings Corp.
Notes to Consolidated Financial Statements (Continued)
16. Employee Compensation Plans (Continued)
Stock-Based Compensation Expense
Stock-based compensation expense recognized in the consolidated statements of operations in the predecessor periods ending March 2, 2016 and September 26, 2015 (in thousands):
| | | | | | | |
| | March 2, 2016 | | September 26, 2015 | |
|---|
Options | | | 76,854 | | | 13,464 | |
RSUs/PSUs/RSAs | | | 61,317 | | | 14,746 | |
Equity stock plan | | | 1,950 | | | 3,724 | |
| | | | | | | | |
Total stock-based compensation expense recognized in the Consolidated Statements of Operations | | $ | 140,121 | | $ | 31,934 | |
| | | | | | | | |
Total related tax benefit | | $ | 54,502 | | $ | 12,065 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
As a result of the Keurig Acquisition the vesting of each Keurig in-the-money option, RSU, PSU, and deferred cash award that was outstanding immediately prior to the acquisition was fully accelerated. As of the effective date of the acquisition, each share issued under the 2014 Plan, 2014 ESPP Plan, 2008 ESPP Plan and 2006 Plan, was terminated, and each holder was then entitled to receive an amount in cash equal to $92.00, with option holders receiving this amount less the applicable exercise price. Keurig recognized $125.4 million in share based compensation expense as a result of the accelerated vesting and plan terminations, which is included in the $140.1 million stock-based compensation expense.
Successor
In September 2016, Maple Subsidiary, the direct parent of Keurig and a subsidiary of Maple introduced a new employee compensation program. The program is comprised of an Executive Ownership Plan ("EOP") which allows certain designated employees the right to acquire an ownership interest in Maple Subsidiary; and a Long Term Incentive Plan ("LTIP") under which certain designated employees may be granted awards in the form of restricted stock units in Maple Subsidiary. RSUs are awards denominated in units that are settled in shares of Maple Subsidiary upon vesting. In general, RSUs vest based on a Grantee's continuing employment. The fair value of these awards is based on the most recent valuation of Maple Subsidiary at the time of grant. Compensation expense is recognized ratably over a Grantee's service period. These awards generally fully vest on the four year six-month anniversary of the date of grant.
Matching Awards
Eligible employees who made a pre-established minimum investment in Maple subsidiary under the EOP are eligible to receive a matching award grant of RSUs which vest in a similar manner to the RSU awards granted under the LTIP. These matching awards are valued and expensed in the same manner as other RSU grants.
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Maple Parent Holdings Corp.
Notes to Consolidated Financial Statements (Continued)
16. Employee Compensation Plans (Continued)
The following table summarizes the number and weighted average grant-date fair value of nonvested RSU's:
| | | | | | | | | | |
| | Share Units | | Weighted Average Grant-
Date Fair Value | | Weighted Average
Remaining
Contractual Life
(in Years) | |
|---|
Nonvested, March 3, 2016 | | | — | | $ | — | | | — | |
Granted | | | 167,118 | | | 1,000 | | | 4.5 | |
| | | | | | | | | | | |
Nonvested, September 24, 2016 | | | 167,118 | | $ | 1,000 | | | 4.5 | |
| | | | | | | | | | | |
Granted | | | 17,877 | | | 1,812 | | | | |
Vested | | | (1,000 | ) | | 1,000 | | | | |
Forfeited | | | (17,567 | ) | | 1,052 | | | | |
| | | | | | | | | | | |
Nonvested, September 30, 2017 | | | 166,428 | | $ | 1,082 | | | 3.6 | |
| | | | | | | | | | | |
Granted | | | | | | | | | | |
Vested | | | 1 | | | 1,000 | | | | |
Forfeited | | | (1,829 | ) | | 1,134 | | | | |
| | | | | | | | | | | |
Nonvested, December 30, 2017 | | | 164,600 | | | 3,216 | | | 3.6 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Loans to Employees
Eligible employees were provided the option to finance a portion of their investment under the EOP with a loan from Maple Subsidiary. All loans outstanding as of September 30, 2017 are limited recourse loans which may be pre-paid by participants at any time. In consideration of these terms the Maple Company treats these financed shares in Maple Subsidiary as a similar instrument to a share option and records stock based compensation based upon the fair value at each balance sheet date using the Black-Scholes option-pricing model with the following assumptions for purchased shares in Maple Subsidiary. The risk-free interest rate is based on the implied yield available on U.S. Treasury zero-coupon issues with an equivalent remaining term. The dividend yield assumption is based on the Maple Company's anticipated cash dividend payouts. If redeemed, total outstanding shares financed through non-recourse loans would result in a cash obligation, net of outstanding balances on the non-recourse loans, to Keurig of $26.7 million, $20.9 million and $0 million as of December 30. 2017, September 30, 2017 and September 24, 2016, respectively.
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Maple Parent Holdings Corp.
Notes to Consolidated Financial Statements (Continued)
16. Employee Compensation Plans (Continued)
Stock-Based Compensation Expense
Stock-based compensation expense recognized in the consolidated statements of operations in the successor periods ending December 30, 2017, December 24, 2016, September 30, 2017, and September 24, 2016 (in thousands):
| | | | | | | | | | | | | |
| | Successor | |
|---|
| | December 30, 2017 | | December 24, 2016 | | September 30, 2017 | | September 24, 2016 | |
|---|
| | (Unaudited)
| | (Unaudited)
| |
| |
| |
|---|
RSUs | | $ | 9,945 | | $ | 9,087 | | $ | 40,792 | | $ | 906 | |
Purchased Shares with Loans | | | 5,411 | | | 12,187 | | | 16,785 | | | 4,752 | |
| | | | | | | | | | | | | | |
Total stock-based compensation expense recognized in the Consolidated Statements of Operations | | $ | 15,356 | | $ | 21,274 | | $ | 57,577 | | $ | 5,658 | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
Total related tax benefit | | $ | 2,971 | | $ | 3,614 | | $ | 16,162 | | $ | 360 | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
As of September 30, 2017, total unrecognized compensation cost related to all non-vested stock-based compensation arrangements was approximately $141.2 million. This unrecognized cost is expected to be recognized over a weighted-average period of approximately 3.5 years.
17. Employee Retirement Plans
Defined Contribution Plans
The Maple Company has a defined contribution plan which meets the requirements of section 401(k) of the Code. All full-time U.S. employees of Keurig who are at least 18 years of age and have completed one month of service, and U.S. employees of Keurig who are not full-time employees but are at least 18 years of age and have completed one year of service, are eligible to participate in the plan. The plan allows employees to defer a portion of their salary on a pre-tax basis and Keurig matches 100% on the first 1% of eligible compensation, and then 60% on up to the next 5% of eligible compensation, capped at the Internal Revenue Service limits. The Maple Company contributions to the plan were $11.2 million and $6.3 million for the successor periods ending September 30, 2017 and September 24, 2016, respectively, and $4.1 million and $10.5 million for the predecessor periods ending March 2, 2016 and September 26, 2015.
The Maple Company also has several Canadian Group Registered Retirement Savings Plans ("GRRSP") and a Deferred Profit Sharing Plan ("DPSP"). Under these plans, employees can contribute a certain percentage of their salary and the Maple Company can also make annual contributions to the plans. The Maple Company contributions to the Canadian plans were $1.3 million and $0.4 million for the successor periods ending September 30, 2017 and September 24, 2016, respectively, and $0.8 million and $1.3 million for the predecessor periods ending March 2, 2016 and September 26, 2015.
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Maple Parent Holdings Corp.
Notes to Consolidated Financial Statements (Continued)
17. Employee Retirement Plans (Continued)
Defined Benefit Plans
The Maple Company has a supplementary defined benefit retirement plan and a supplementary employee retirement plan (collectively the "Plans") for certain management employees in Canada. The cost of the Plans is calculated according to actuarial methods that encompass management's best estimate regarding the future evolution of salary levels, the age of retirement of salaried employees and other actuarial factors. These Plans are not funded and there are no plan assets. Future benefits will be paid from the funds of the Maple Company.
At September 30, 2017 and September 24, 2016, the projected benefit obligation was $1.4 million and $1.1 million, respectively. These amounts are classified in Other long-term liabilities. Net periodic pension benefit/(expense) was $(0.2) million and $(0.1) million for the successor periods ending September 30, 2017 and September 24, 2016, respectively, and $0.1 million and $(.01) million for the predecessor periods ending March 2, 2016 and September 26, 2015.
18. Deferred Compensation
Predecessor
The Amended and Restated 2002 Deferred Compensation Plan, adopted October 1, 2015 (the "2002 Deferred Compensation Plan"), permitted certain highly compensated officers and employees of Keurig and non-employee directors to defer eligible compensation payable for services rendered to the Company. Participants could elect to receive deferred compensation in the form of cash payments or shares of Keurig common stock on the date or dates selected by the participant or on such other date or dates specified in the 2002 Deferred Compensation Plan. The 2002 Deferred Compensation Plan was in effect for compensation earned on or after September 29, 2002. The administrator of the plan did not designate any officers or employees as eligible participants. During the predecessor period between September 27, 2015 and March 2, 2016, rights to acquire 2,337 shares of Keurig common stock were granted and vested, and 14,048 rights to shares of Common Stock were exercised. During the fiscal year ended September 26, 2015, rights to acquire 4,844 shares of Keurig common stock were granted and vested, and 12,568 rights to shares of Keurig common stock were exercised.
Effective January 1, 2015 Keurig also adopted an annual deferred compensation benefit plan for Vice Presidents and above. The annual deferred compensation plan was a non-qualified deferred compensation plan which provided additional retirement benefits to select executives by providing for an annual deferred compensation benefit equal to 4% of the executive's compensation that exceeded certain Internal Revenue Service limits applicable to the Company's 401(k) plan. Keurig recognized $0.3 million and $0.1 million in expenses for the annual non-qualified deferred compensation plan in the predecessor periods ended March 2, 2016 and September 26, 2015, respectively. These plans were terminated as part of the Keurig Acquisition on March 3, 2016.
19. Commitments and Contingencies
Lease Commitments
The Maple Company leases office and retail space, production, distribution and service facilities, and certain equipment under various non-cancellable operating leases, with terms ranging from one to twenty years. Property leases normally require payment of a minimum annual rental plus a pro-rata share of certain landlord operating expenses. Total rent expense, under all operating leases,
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Maple Parent Holdings Corp.
Notes to Consolidated Financial Statements (Continued)
19. Commitments and Contingencies (Continued)
approximated $23.1 million and $12.7 million for the successor periods ending September 30, 2017 and September 24, 2016, respectively. For the predecessor periods ending March 2, 2016 and September 26, 2015, total rent expense under all operating leases approximated $15.8 million and $20.0 million, respectively. The Maple Company has subleases relating to certain of its operating leases. Sublease income for predecessor and successor periods was not material.
In addition, the Maple Company leases a manufacturing facility which is accounted for as a capital lease. The initial term of the lease is fifteen years with six additional renewal terms of five years each at the Maple Company's option. The lease requires payment of a minimum annual rental and the Maple Company is responsible for property taxes, insurance and operating expenses.
In June 2012, Keurig entered into an arrangement to lease approximately 425,000 square feet located in Burlington, Massachusetts.
Due to the Maple Company's involvement in the Burlington, Massachusetts construction project, including its obligations to fund certain costs of construction exceeding amounts incurred by the lessor, the Maple Company was deemed to be the owner of the project, which includes a pre-existing structure on the site, even though the Maple Company is not the legal owner. Accordingly, total project costs incurred during construction were capitalized along with a corresponding financing obligation for the project costs that were incurred by the lessor. In addition, the Maple Company capitalized the estimated fair value of the pre-existing structure of $4.1 million at the date construction commenced as construction-in-progress with a corresponding financing obligation. Upon completion of the project, the Maple Company has continued involvement beyond a normal leaseback, and therefore, has not recorded a sale or derecognized the assets. As a result, the lease is accounted for as a financing transaction and the recorded asset and related financing obligation remains on the consolidated balance sheets. Additionally, the Maple Company has similar arrangements related to two properties in South Burlington, Vermont and has recorded the assets and a related financing obligation in a similar manner.
As of September 30, 2017, future minimum lease payments under financing obligations, capital lease obligations and non-cancellable operating leases as well as minimum payments to be received under non-cancellable subleases are as follows (in thousands):
| | | | | | | | | | | | | |
Fiscal Year | | Capital Leases | | Operating Leases | | Subleases | | Financing
Obligations | |
|---|
2018 | | $ | 3,518 | | $ | 11,812 | | $ | (493 | ) | $ | 11,966 | |
2019 | | | 3,838 | | | 10,452 | | | (503 | ) | | 11,209 | |
2020 | | | 3,838 | | | 9,562 | | | (517 | ) | | 11,419 | |
2021 | | | 3,838 | | | 8,646 | | | (196 | ) | | 11,419 | |
2022 | | | 3,838 | | | 7,097 | | | (88 | ) | | 11,419 | |
Thereafter | | | 16,629 | | | 10,604 | | | (243 | ) | | 84,447 | |
| | | | | | | | | | | | | | |
Total | | $ | 35,499 | | $ | 58,173 | | $ | (2,040 | ) | $ | 141,879 | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
Less: amount representing interest | | | (11,216 | ) | | | | | | | | (45,856 | ) |
| | | | | | | | | | | | | | |
Present value of future minimum lease payments | | $ | 24,283 | | | | | | | | $ | 96,023 | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
Table of Contents
Maple Parent Holdings Corp.
Notes to Consolidated Financial Statements (Continued)
19. Commitments and Contingencies (Continued)
The financing obligations in the table above primarily represent the portion of the future minimum lease payments which have been allocated to the facilities in Burlington, Massachusetts and will be recognized as reductions to the financing obligation and as interest expense.
Legal Proceedings
Litigation Relating to Concluded Merger of Keurig
From December 15, 2015 through January 19, 2016, four putative class action lawsuits were filed in the Court of Chancery of the State of Delaware against Keurig, the then-current members of the Keurig Board, Acorn, Acquisition Sub, JAB and JAB Holding, relating to the proposed acquisition of Keurig by JAB. On January 29, 2016, the actions were consolidated under the caption In re Keurig Green Mountain, Inc. Stockholders Litig., Consol. C.A. 11815-CB (Del. Ch.). The consolidated action alleged that the members of the Keurig Board of Directors breached their fiduciary duties by, among other things, (i) initiating a process to sell Keurig that undervalued it, (ii) capping the price of Keurig at an amount that did not adequately reflect its true value, (iii) failing to sufficiently inform themselves of Keurig's value or disregarding that value, (iv) committing to the proposed transaction at the expense of any alternate potential acquirers, and (v) making false and misleading proxy disclosures. The consolidated action also alleged that Keurig, Acorn, Maple merger sub, JAB and JAB Holding aided and abetted those alleged breaches of fiduciary duties by the members of the Keurig Board of Directors. On March 11, 2016, the court entered a stipulated order dismissing the action with prejudice with respect to the named plaintiffs and without prejudice as to other members of the class, and on July 26, 2016, the court denied the plaintiffs' application for an award of attorney's fees and ordered the action closed for all purposes.
On January 27, 2016, a putative class action lawsuit (Montanio v. Keurig Green Mountain, Inc., Case No. 5:16-cv-00019-gwc) was filed in the United States District Court for the District of Vermont against Keurig, the then-current members of the Keurig Board of Directors, Acorn, Maple merger sub and JAB. The complaint alleges, among other things, (i) that the defendants violated federal securities laws by disseminating a proxy statement that was allegedly false and misleading, and which allegedly failed to disclose facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading and (ii) that the Keurig directors violated federal securities laws in exercising control over individuals alleged to have disseminated the proxy statement that was allegedly false and misleading. The complaint seeks, among other things, an order that the action may be maintained as a class action, certification of the plaintiff as a representative of the class and plaintiff's counsel as class counsel, a declaration that the proxy was materially false and misleading and in violation of certain federal securities laws, injunctive relief, rescissory damages in favor of the plaintiff and the class, and the fees and costs associated with the litigation. On March 29, 2016, the court appointed the plaintiff who filed the action as lead plaintiff, and in June 2016, the defendants moved to dismiss the action. On February 16, 2017 the court granted the motion and dismissed the case with prejudice. Plaintiffs filed a motion for reconsideration, which the court denied on August 28, 2017. The time for appeal expired on September 27, 2017 with no appeal being taken.
Prop 65 Litigation
On May 9, 2011, an organization named Council for Education and Research on Toxics ("CERT"), purporting to act in the public interest, filed suit in Los Angeles Superior Court (Council for Education
Table of Contents
Maple Parent Holdings Corp.
Notes to Consolidated Financial Statements (Continued)
19. Commitments and Contingencies (Continued)
and Research on Toxics v. Brad Barry LLC, et al., Case No. BC461182) against several companies, including the Company, that roast, package, or sell coffee in California. The Brad Barry complaint alleges that coffee contains the chemical acrylamide and that the Company and the other defendants are required to provide warnings under section 25249.6 of the California Safe Drinking Water and Toxics Enforcement Act, better known as Proposition 65. Acrylamide is not added to coffee, but forms in trace amounts (parts per billion) as part of a chemical reaction that occurs in the coffee bean when it is roasted. Therefore, it is present in all roasted coffee. To date, the Company is unaware of any reliable method for reducing acrylamide levels in coffee without adversely affecting the quality of the product. The Brad Barry action has been consolidated for all purposes with another Proposition 65 case filed by CERT on April 13, 2010 over allegations of acrylamide in "ready to drink" coffee sold in restaurants, convenience stores, and donut shops. (Council for Education and Research on Toxics v. Starbucks Corp., et al., Case No. BC 415759). Keurig was not named in the Starbucks complaint. Keurig has joined a joint defense group ("JDG") organized to address CERT's allegations, and Keurig intends to vigorously defend against these allegations. The court ordered the case phased for discovery and trial. Trial of the first phase of the case commenced on September 8, 2014 and was limited to three affirmative defenses shared by all defendants in both cases.
All other claims and defenses were deferred for subsequent phases if defendants did not prevail on the three Phase 1 defenses. On September 1, 2015, the trial court issued an interlocutory ruling adverse to defendants on all Phase 1 defenses. Litigation of the last remaining affirmative defense and remedies (i.e., Phase 2) commenced in earnest in January 2016. Fact discovery was completed on May 31, 2017. Expert discovery was completed in August 2017. Trial on the remaining affirmative defense to liability commenced on September 5, 2017, with live testimony completed on October 3, 2017. Post-trial briefing on this defense was completed on January 19, 2018 and the court is expected to issue its ruling within the next 90 days. The ruling will determine whether a trial on remedies and other issues is necessary. Thus, the court has not set any further trial date or proceedings on remedies or other issues.
Stockholder Litigation
A consolidated putative securities fraud class action is presently pending against Keurig and two of its former officers and directors. During fiscal year 2017, the plaintiffs in one other previously-filed derivative action agreed to voluntarily dismiss their claims with prejudice on December 7, 2016.
The pending putative securities fraud class action, captioned Louisiana Municipal Police Employees' Retirement System ("LAMPERS") v. Green Mountain Coffee Roasters, Inc., et al., Civ. No. 2:11-cv-00289, was filed in the United States District Court for the District of Vermont before the Honorable William K. Sessions, III. Plaintiffs' amended complaint alleged violations of the federal securities laws in connection with the Company's disclosures relating to its revenues and its inventory accounting practices. The amended complaint seeks compensatory damages, attorneys' fees, costs, and such other relief as the court should deem just and proper, on behalf of a class of all purchasers of the Company's common stock between February 2, 2011 and November 9, 2011. The initial complaint filed in the action on November 29, 2011, included counts for alleged violations of (1) Sections 11, 12(a)(2) and 15 of the Securities Act of 1933, as amended, (the "Securities Act") against the Company, certain of its officers and directors, and the Company's underwriters in connection with a May 2011 secondary common stock offering; and (2) Section 10(b) of the Exchange Act and Rule 10b-5 against the Company and the officer defendants, and for violation of Section 20(a) of the Exchange Act against the officer defendants. Pursuant to the Private Securities Litigation Reform Act of 1995 (the "PSLRA"),
Table of Contents
Maple Parent Holdings Corp.
Notes to Consolidated Financial Statements (Continued)
19. Commitments and Contingencies (Continued)
15 U.S.C. § 78u-4(a)(3), plaintiffs had until January 30, 2012 to move the court to serve as lead plaintiff of the putative class. Competing applications were filed and the court appointed Louisiana Municipal Police Employees' Retirement System, Sjunde AP-Fonden, Board of Trustees of the City of Fort Lauderdale General Employees' Retirement System, Employees' Retirement System of the Government of the Virgin Islands, and Public Employees' Retirement System of Mississippi as lead plaintiffs' counsel on April 27, 2012. Pursuant to a schedule approved by the court, plaintiffs filed their amended complaint on October 22, 2012, and plaintiffs filed a corrected amended complaint on November 5, 2012. Plaintiffs' amended complaint did not allege any claims under the Securities Act against the Company, its officers and directors, or the Company's underwriters in connection with the May 2011 secondary common stock offering. Defendants moved to dismiss the amended complaint on March 1, 2013, and on December 20, 2013, the court issued an order dismissing the amended complaint with prejudice. On January 21, 2014, plaintiffs filed a notice of appeal of the court's December 20, 2013 order in the United States Court of Appeals for the Second Circuit. Pursuant to a schedule entered by the appeals court, briefing on the appeal was completed on June 23, 2014. The Second Circuit heard oral argument on the appeal on December 1, 2014. On July 24, 2015, the Second Circuit issued an opinion vacating the district court's dismissal of the amended complaint and remanding the action to the district court. On September 29, 2015, defendants answered the complaint. On July 21, 2017, the court certified the class as requested. Fact and expert discovery are now completed. Summary judgment briefing concluded on December 15, 2017. No trial date has been set in the matter.
The putative stockholder derivative action, a consolidated action captioned In re Green Mountain Coffee Roasters, Inc. Derivative Litigation, Civ. No. 2:10-cv-00233, premised on the same allegations asserted in the now dismissed Horowitz v. Green Mountain Coffee Roasters, Inc., Civ. No. 2:10-cv-00227 securities class action complaint, the LAMPERS action described above, and the now dismissed action captioned Fifield v. Green Mountain Coffee Roasters, Inc., Civ. No. 2:12-cv-00091, was filed in the United States District Court for the District of Vermont before the Honorable William K. Sessions, III. On November 29, 2010, the federal court entered an order consolidating two actions and appointing the firms of Robbins Umeda LLP and Shuman Law Firm as co-lead plaintiffs' counsel. On February 23, 2011, the federal court approved a stipulation filed by the parties providing for a temporary stay of that action until the court ruled on defendants' motions to dismiss the consolidated complaint in the Horowitz putative securities fraud class action. On March 7, 2012, the federal court approved a further joint stipulation continuing the temporary stay until the court either denied a motion to dismiss the Horowitz putative securities fraud class action or the Horowitz putative securities fraud class action was dismissed with prejudice. On April 27, 2012, the federal court entered an order consolidating the stockholder derivative action captioned Himmel v. Robert P. Stiller, et al., with two additional putative derivative actions, Musa Family Revocable Trust v. Robert P. Stiller, et al., Civ. No. 2:12-cv-00029, and Laborers Local 235 Benefit Funds v. Robert P. Stiller, et al., Civ. No. 2:12-cv- 00042. On November 14, 2012, the federal court entered an order consolidating an additional stockholder derivative action, captioned Henry Cargo v. Robert P. Stiller, et al., Civ. No. 2:12-cv-00161, and granting plaintiffs leave to lift the stay for the limited purpose of filing a consolidated complaint. The consolidated complaint was asserted nominally on behalf of the Company against certain of its officers and directors. The consolidated complaint asserted claims for breach of fiduciary duty, waste of corporate assets, unjust enrichment, contribution, and indemnification and seeks compensatory damages, injunctive relief, restitution, disgorgement, attorney's fees, costs, and such other relief as the court should deem just and proper. On May 14, 2013, the court approved a
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Maple Parent Holdings Corp.
Notes to Consolidated Financial Statements (Continued)
19. Commitments and Contingencies (Continued)
joint stipulation filed by the parties providing for a temporary stay of the proceedings until the conclusion of the appeal in the Horowitz putative securities fraud class action. On August 1, 2013, after the plaintiffs in the Horowitz putative securities fraud class action dismissed their appeal with prejudice, the parties filed a further joint stipulation continuing the temporary stay until the court either denied a motion to dismiss the LAMPERS putative securities fraud class action or the LAMPERS putative securities fraud class action was dismissed with prejudice, which the court approved on August 2, 2013. On February 24, 2014, the court approved a further joint stipulation filed by the parties continuing the temporary stay until the appeals court ruled on the pending appeal in the LAMPERS putative securities fraud class action. The Second Circuit's July 24, 2015 decision on the LAMPERS appeal described above lifted the temporary stay. On December 7, 2016, the plaintiffs filed a stipulation voluntarily dismissing the consolidated action with prejudice.
The Maple Company and the other defendants intend to continue to vigorously defend the LAMPERS matter. Additional lawsuits may be filed and, at this time, the Maple Company is unable to predict the outcome of the pending LAMPERS lawsuit, the possible loss or range of loss, if any, associated with the resolution of that lawsuit, or any potential effect that it may have on the Maple Company or its operations.
Antitrust Litigation
On February 11, 2014, TreeHouse Foods, Inc., Bay Valley Foods, LLC, and Sturm Foods, Inc. filed suit against Green Mountain Coffee Roasters, Inc. and Keurig, Inc. in the U.S. District Court for the Southern District of New York (TreeHouse Foods, Inc. et al. v. Green Mountain Coffee Roasters, Inc. et al., No. 1:14-cv-00905-VSB). The TreeHouse complaint asserted claims under the federal antitrust laws and various state laws, contending that the Company has monopolized alleged markets for single serve coffee brewers and single serve coffee pods, including through its contracts with suppliers and distributors and in connection with the launch of the Keurig® 2.0. The TreeHouse complaint sought monetary damages, declaratory relief, injunctive relief, and attorneys' fees.
On March 13, 2014, JBR, Inc. (d/b/a Rogers Family Company) filed suit against Keurig Green Mountain, Inc. in the U.S. District Court for the Eastern District of California (JBR, Inc. v. Keurig Green Mountain, Inc., No. 2:14-cv-00677-KJM-CKD). The claims asserted and relief sought in the JBR complaint were substantially similar to the claims asserted and relief sought in the TreeHouse complaint.
Additionally, beginning on March 10, 2014, twenty-seven putative class actions asserting similar claims and seeking similar relief were filed on behalf of purported direct and indirect purchasers of the Company's products in various federal district courts. On June 3, 2014, the Judicial Panel on Multidistrict Litigation (the "JPML") granted a motion to transfer these various actions, including the TreeHouse and JBR actions, to a single judicial district for coordinated or consolidated pre-trial proceedings. An additional class action on behalf of indirect purchasers, originally filed in the Circuit Court of Faulkner County, Arkansas (Julie Rainwater et al. v. Keurig Green Mountain, Inc., No. 23CV-15-818), was similarly transferred on November 10, 2015. The actions are now pending before Judge Vernon S. Broderick in the Southern District of New York (In re: Keurig Green Mountain Single-Serve Coffee Antitrust Litigation, No. 1:14-md-02542-VSB) (the "Multidistrict Antitrust Litigation").
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Maple Parent Holdings Corp.
Notes to Consolidated Financial Statements (Continued)
19. Commitments and Contingencies (Continued)
On August 11, 2014, JBR filed a motion for a preliminary injunction, which the Company opposed. After a hearing, the district court in the Multidistrict Antitrust Litigation denied JBR's motion by order dated September 19, 2014. JBR appealed, and on October 26, 2015, the Court of Appeals affirmed the district court's denial of JBR's motion for a preliminary injunction.
Consolidated putative class action complaints by direct purchaser and indirect purchaser plaintiffs were filed on July 24, 2014. The Company filed motions to dismiss these complaints and the complaints in the TreeHouse and JBR actions on October 6, 2014. On November 25, 2014, all plaintiffs filed amended complaints and on February 2, 2015 the Company again moved to dismiss. On November 29, 2017, the district court denied the Company's motions to dismiss the amended complaints in the TreeHouse, JBR, and direct purchaser actions. The district court, by the same order, partially granted the Company's motion to dismiss the amended complaint in the indirect purchaser action and dismissed five claims seeking injunctive relief. The district court has not yet issued a decision on the remaining claims asserted in the indirect purchaser action. Discovery in the Multidistrict Antitrust Litigation has commenced.
On September 30, 2014, a statement of claim was filed against the Company and Keurig Canada Inc. in Ontario, Canada by Club Coffee L.P. ("Club Coffee"), a Canadian manufacturer of single serve beverage pods, claiming damages of CDN $600 million and asserting a breach of competition law and false and misleading statements by the Company. Following the filing by the Company and Keurig Canada of a notice of motion for a motion to strike the claims made by Club Coffee for failure to state a reasonable cause of action, on August 31, 2015 Club Coffee filed a second amended statement of claim against the Company and Keurig Canada Inc. claiming the same amount of damages as in the original statement of claim.
The Maple Company intends to vigorously defend all of the pending lawsuits. At this time, the Company is unable to predict the outcome of these lawsuits, the potential loss or range of loss, if any, associated with the resolution of these lawsuits or any potential effect they may have on the Company or its operations.
Employment Class Action
A putative employment class action, captioned Alvaro Sanchez v. Keurig Green Mountain, Inc. and Does 1 - 100, was filed against Keurig in the Superior Court of California County of Monterey on July 14, 2015. The complaint alleges that the Company failed to pay proper wages and provide certain breaks to non-exempt temporary employees assigned by a temporary staffing agency to the Company's processing plant located in Castroville, California during the class period (which is defined as the period of time beginning four years before the commencement of the action through the date on which judgment on the action becomes final). The complaint seeks alleged damages, attorneys' fees, penalties, and injunctive and equitable relief on behalf of the putative class. The Maple Company filed its Answer denying all substantive allegations and removed the lawsuit to the United States District Court for the Northern District of California. Although the Maple Company strongly denies the allegations, it participated in a mediation in July 2017 and reached a settlement to resolve all claims on a classwide basis (subject to court approval) for approximately $92,000, inclusive of attorneys' fees. A hearing on the motion for preliminary approval of the class action settlement is scheduled for March 22, 2018.
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Maple Parent Holdings Corp.
Notes to Consolidated Financial Statements (Continued)
19. Commitments and Contingencies (Continued)
Product Liability
In November 2014, Keurig informed the U.S. Consumer Safety Commission (the "CPSC") and Health Canada that it identified a potential issue involving certain Keurig® MINI Plus (non-reservoir) brewers (K10 and B31 models), where on very rare occasions, hot liquid could escape the brewer. On December 23, 2014 Keurig issued a recall for its Keurig® MINI Plus brewers. On April 17, 2015 the CPSC notified Keurig that it had commenced a routine investigation of the recall and on September 9, 2016 the CPSC indicated to Keurig that they had concluded their investigation. The Division of Compliance for the CPSC concluded that Keurig failed to timely report the defect and would recommend to the CPSC that a "substantial civil penalty" be imposed on Keurig. The parties agreed on a $5.8 million fine and entered into a settlement agreement.
20. Related Party
Keurig acquired a 30% investment in Bedford Systems, LLC in March 2017; the remaining 70% is owned by ABI. There were no material transactions between the Maple Company and ABI in fiscal year 2017, except as described in Note 8,Equity investments. The Maple Company charged approximately $0.2 million for providing transition services to Bedford Systems LLC as of September 30, 2017. In addition, the Maple Company shares several board members with ABI.
Maple Subsidiary received $11.8 million and $60 million of cash from employees for new purchases of stock in the successor periods ending September 30, 2017 and September 24, 2016, respectively.
Please refer to footnote 10—Long-Term Debt, for a description of the Maple BV and Mondelez loans.
Additionally, as a result of Keurig's purchase by JAB, Keurig has certain common ownership with Peet's Coffee, Caribou Coffee, and Krispy Kreme.
Peet's Coffee
Keurig manufactures portion packs containing a selection of coffee and tea varieties under Peet's brands for sale in the United States and Canada. As part of this agreement Peet's issues purchase orders to the Company for portion packs to be supplied to Peet's and sold in select channels. In turn Keurig places purchase orders for Peet's raw materials to manufacture portion packs for sale by Keurig in select channels. The Company had sales of $45.3 million and $20.5 million for the successor periods ending September 30, 2017 and September 24, 2016, respectively, and $10.4 million for the predecessor period, with receivable balances of $1.3 million as of September 30, 2017 and $17.9 million as of September 24, 2016. The Maple Company also pays a royalty to Peet's for the use of its trademark in the Keurig system and accrued royalty payments of $0.2 million and $0.1 million as of September 30, 2017 and September 24, 2016, respectively. Additionally, the Maple Company accrued $1.4 million and $0.6 million for marketing related amounts due to Peet's under the terms of its agreement as of September 30, 2017 and September 24, 2016 respectively.
Caribou Coffee
Keurig licenses the Caribou trademark for use in the Keurig system in the Maple Company owned channels. The Company recorded royalty expense of $8.6 million and $3.9 million in the successor periods as of September 30, 2017 and September 24, 2016, respectively. Subsequent to the acquisition
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Maple Parent Holdings Corp.
Notes to Consolidated Financial Statements (Continued)
20. Related Party (Continued)
by JAB, Keurig also made purchases of raw materials of $13.6 million and $9.5 million, as of September 30, 2017 and September 24, 2016, respectively. The Maple Company accrued royalty payments of $1.4 million and $0.8 million, as of September 30, 2017 and September 24, 2016, respectively. Additionally, the Maple Company had amounts due to Caribou of $1.4 million and $1.4 million as of September 30, 2017 and September 24, 2016, respectively, for the purchase of coffee, tea and other hot beverage products which Keurig packages into Caribou branded portion packs for resale.
Krispy Kreme
Keurig licenses Krispy Kreme trademarks for use in the Keurig system in the Keurig owned channels. The Maple Company recorded royalty expense of approximately $1 million and $0.5 million for the successor periods as of September 30, 2017 and September 24, 2016, respectively. The Maple Company did not make any purchases of raw materials throughout fiscal year 2017 and made $0.3 million in purchases of raw materials in the successor period ending September 24, 2016. As of September 30, 2017 and September 24, 2016 the Maple Company has accrued royalty payments of $0.3 million and $0.2 million, respectively.
21. Subsequent Events
The Consolidated financial statements reflect management's evaluation of subsequent events through March 7, 2018, the date the Consolidated financial statements were available to be issued.
Announcement of Pending Merger with DPSG
On January 29, 2018, Maple entered into an Agreement and plan of merger (the "Merger Agreement") by and among Maple, Dr Pepper Snapple Group, Inc. ("DPSG") and Salt Merger Sub Inc. ("Merger Sub"), whereby Merger Sub will be merged with and into Maple, with Maple surviving the merger as a wholly-owned subsidiary of DPSG (the "Transaction"). For financial reporting and accounting purposes, Maple will be the acquirer of DPSG upon completion of the Transaction.
In consideration for the transaction, each share of common stock of Maple issued and outstanding immediately prior to the closing of the transaction (the "Effective Time") shall be converted into the right to receive a number of fully paid and nonassessable shares of common stock of DPSG determined pursuant to an exchange ratio set forth in the Merger Agreement (the "Acquisition Shares").
The Merger Agreement indicates that Maple will provide a cash purchase consideration of approximately $18 billion.
As a result of the transactions, the stockholders of Maple as of immediately prior to the Effective Time will own approximately 87% of DPSG's common stock, on a fully diluted basis, following the closing and the stockholders of DPSG as of immediately prior to the Effective Time will own approximately 13% of DPSG's common stock, on a fully diluted basis.
The completion of the transactions requires the approval of the holders of DPSG's common stock of (i) an amendment to the DPSG' certificate of incorporation to increase the number of authorized shares of common stock and to change DPSG's name to "Keurig Dr Pepper Inc." and (ii) the issuance of the Acquisition Shares pursuant to the Merger Agreement (collectively, the "Stockholder Approvals").
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Maple Parent Holdings Corp.
Notes to Consolidated Financial Statements (Continued)
21. Subsequent Events (Continued)
In addition to the Stockholder Approvals, the completion of the Transactions will depend upon a number of conditions being satisfied or waived, including, among others, obtaining all required regulatory approvals, authorization of the listing on the New York Stock Exchange of the Acquisition Shares, the absence of any injunction prohibiting the consummation of the Transaction and absence of any legal requirements enacted by any court or other governmental entity since the date of the Merger Agreement that remain in effect prohibiting consummation of the Transaction. The obligation of each party to consummate the Transaction is also conditioned on the other party's representations and warranties being true and correct (subject to certain materiality exceptions) and the other party having performed in all material respects its obligations under the Merger Agreement.
The Merger Agreement may be terminated at any time prior to the Effective Time, whether before or after receipt of the Stockholder Approvals or the effectiveness of Maple's stockholder consent or Merger Sub stockholder consent, by the mutual written consent of the parties, by either Maple or DPSG if the closing of the Transactions does not occur by October 29, 2018 or stockholder approvals are not obtained or a final and nonappealable government order prohibiting the closing of the Transaction is in place, or by Maple or DPSG in connection with certain breaches of the Merger Agreement by DPSG or Maple, respectively.
If the Merger Agreement is terminated by DPSG pursuant to DPSG accepting a superior proposal and entering into an alternative acquisition agreement, by Maple if the DPSG Board of Directors changes its recommendation to stockholders to approve the Stockholder Approvals or fails to reaffirm such recommendation following receipt or public announcement of a competing acquisition proposal within five business days after Maple's request to do so, or by either DPSG or Maple because the closing does not occur by October 29, 2018 and there is an acquisition proposal outstanding at the time of such termination and within twelve months of termination of the Merger Agreement DPSG consummates or enters into an agreement with respect to an acquisition proposal, DPSG shall pay to Maple a termination fee in the amount of $700 million. If the Merger Agreement is terminated by DPSG because Maple is unable to obtain required financing on the terms required by the Merger Agreement, Maple shall pay to DPSG a reverse termination fee in the amount of $700 million.
Maple has agreements with its financial advisors in relation to the pending Transactions with DPSG. Maple agreed to pay fees of approximately $87 million subject to consummation of the Transactions.
On February 28, 2018, Maple entered (1) a Term Loan Agreement among Maple, the lenders party thereto (the "Term Lenders"), the other financial institutions party thereto and JP Morgan Chase Bank, N/A., as administrative agent, pursuant to which the Term Lenders have committed to provide $2.7 billion of a senior unsecured term loan facility (the "Term Loan Facility") for the purpose of funding (i) the merger and (ii) fees and expenses related to the merger and (2) a Credit Agreement among Maple, the lenders party thereto (the "Revolving Lenders"), the other financial institutions party thereto and JP Morgan Chase Bank, N/A., as administrative agent, pursuant to which the Revolving Lenders have committed to provide the $2.4 billion of revolving commitments (the "Revolving Credit Facilities"), for the purpose of funding (i) the merger, (ii) fees and expenses related to the merger, (iii) repayment of DPSG's and Maple's existing credit facilities and (iv) general corporate needs.
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UNAUDITED PRO FORMA FINANCIAL INFORMATION
The unaudited pro forma combined financial information is presented to illustrate the estimated effects of the pending merger between Maple and DPSG and the other Merger Transactions, as further described below, based on the historical financial position and results of operations of Maple and DPSG. It is presented as follows:
•The unaudited pro forma combined balance sheet as of December 31, 2017 was prepared based on (i) the historical audited consolidated balance sheet of DPSG as of December 31, 2017 and (ii) the historical unaudited consolidated balance sheet of Maple as of December 30, 2017.
•The unaudited pro forma combined statement of income for the twelve months ended December 31, 2017 was prepared based on (i) the historical audited consolidated statement of income of DPSG for the fiscal year ended December 31, 2017 and (ii) the historical audited consolidated statement of income of Maple for the fiscal year ended September 30, 2017, and the historical unaudited consolidated statements of income of Maple for the thirteen weeks ended December 30, 2017 and December 24, 2016. For purposes of preparing the statement of income of Maple for the trailing twelve months ended December 30, 2017 used in the unaudited pro forma combined statement of income, Maple's results for the year ended September 30, 2017 were combined with its results for the thirteen weeks ended December 30, 2017 and its results for the thirteen weeks ended December 24, 2016 were subtracted.
DPSG operates on a fiscal year that ends on December 31 of each year. Maple operates on a 52- or 53-week fiscal year that ends on the last Saturday in September. Maple's twelve months ended December 30, 2017 was a 53-week period. Subsequent to the merger, the combined company is expected to adopt a fiscal year that ends on December 31 of each year.
The merger will be accounted for as a reverse acquisition using the acquisition method of accounting in accordance with ASC 805. Maple will be the acquirer solely for financial accounting purposes. The unaudited pro forma combined financial information set forth below primarily gives effect to the following (the "Merger Transactions"):
•adjustments to conform the accounting policies of DPSG to those of Maple;
•the consummation of the merger;
•the application of the acquisition method of accounting in connection with the merger, which includes the estimated special cash dividend to the holders of record of the outstanding shares of DPSG common stock as of a record date immediately prior to the effective time of the merger;
•the financing of the Bridge Facility, the Term Loan Facility and the Revolving Credit Facilities in connection with the merger;
•the funding of the Equity Commitment and the issuance of new equity in connection with the merger; and
•transaction costs in connection with the merger and related financing.
In addition, with respect to the unaudited pro forma combined statement of income, the unaudited pro forma adjustments are expected to have a continuing impact on the combined company's results of operations. Assumptions underlying the pro forma adjustments are described in the accompanying notes, which should be read in conjunction with the unaudited pro forma financial information. The unaudited pro forma combined balance sheet data gives effect to the Merger Transactions as if they had occurred on December 31, 2017. The selected unaudited pro forma combined statement of income data for the year ended December 31, 2017 gives effect to the Merger Transactions as if they had occurred on January 1, 2017.
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The unaudited pro forma combined financial information has been presented for informational purposes only and is not necessarily indicative of what the combined company's financial position or results of operations actually would have been had the Merger Transactions been completed as of the dates indicated. In addition, the unaudited pro forma combined financial information does not purport to project the future financial position or operating results of the combined company. The historical consolidated financial information has been adjusted in the accompanying unaudited pro forma combined financial information to give effect to unaudited pro forma events that are directly attributable to the Merger Transactions, factually supportable and, with respect to the unaudited pro forma combined statement of income, expected to have a continuing impact on the results of operations of the combined company. The accompanying unaudited pro forma combined statement of income does not include any pro forma adjustments to reflect certain expected financial benefits of the merger, such as tax savings, cost synergies or revenue synergies, or the anticipated costs to achieve those benefits, including the cost of integration activities, or restructuring actions which may be achievable or the impact of any non-recurring activity and one-time transaction related costs.
The unaudited pro forma combined financial information has been prepared using the acquisition method of accounting under existing GAAP standards, which are subject to change. Maple will be deemed the acquirer in the merger for accounting purposes and DPSG will be treated as the acquiree, based on a number of factors considered at the time of preparation of this proxy statement. The acquisition accounting is dependent upon certain valuations and other studies that have yet to progress to a stage where there is sufficient information for a definitive measurement. The combined company will complete the valuations and other studies upon completion of the Merger Transactions and will finalize the purchase price allocation as soon as practicable within the measurement period, but in no event later than one year following the closing date of the merger. The assets and liabilities of DPSG and other pro forma adjustments have been measured based on various preliminary estimates using assumptions that we believe are reasonable, based on information that is currently available. Accordingly, the pro forma adjustments are preliminary. Differences between these preliminary estimates and the final acquisition accounting will occur and could be significant, and these differences could have a material impact on the accompanying unaudited pro forma combined financial information and the combined company's future results of operation and financial position.
The unaudited pro forma combined financial information has been compiled in a manner consistent with the accounting policies adopted by Maple. Upon completion of the merger, the combined company will perform a detailed review of DPSG's accounting policies. As a result of that review, the combined company may identify additional differences between the accounting policies of the two companies that, when conformed, could have a material impact on the consolidated financial statements of the combined company. Additionally, certain financial information of DPSG as presented in its historical consolidated financial statements has been reclassified to conform to the historical presentation in Maple's consolidated financial statements for purposes of preparation of the unaudited pro forma combined financial information. Transactions between Maple and DPSG during the periods presented in the unaudited pro forma combined financial information were not significant.
This unaudited pro forma combined financial information was derived from and should be read in conjunction with the accompanying notes, as well as the following historical consolidated financial statements and the related notes of Maple and DPSG:
•Separate historical financial statements of Maple as of and for the fiscal year ended September 30, 2017, and as of and for the thirteen weeks ended December 30, 2017 and December 24, 2016, and the related notes included elsewhere in this proxy statement;
•Separate historical financial statements of DPSG as of and for the year ended December 31, 2017 and the related notes in DPSG's 2017 Form 10-K and incorporated by reference into this proxy statement.
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Pro Forma Combined Balance Sheet
As of December 31, 2017
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Assets | | | | | | | | | | | | | | | | | | | | |
Current assets: | | | | | | | | | | | | | | | | | | | | |
Cash and cash equivalents | | $ | 61 | | $ | 95 | | $ | — | | | | $ | (155 | ) | 5(b) | | $ | 1 | |
Restricted cash and restricted cash equivalents | | | 18 | | | — | | | — | | | | | — | | | | | 18 | |
Accounts receivable: | | | | | | | | | | | | | | | | | | | | |
Trade, net | | | 668 | | | 483 | | | — | | | | | — | | | | | 1,151 | |
Other | | | 42 | | | — | | | (42 | ) | 4(a) | | | — | | | | | — | |
Inventories | | | 229 | | | 384 | | | (24 | ) | 4(b) | | | 32 | | 5(c) | | | 621 | |
Income taxes receivable | | | — | | | 45 | | | — | | | | | — | | | | | 45 | |
Prepaid expenses and other current assets | | | 99 | | | 49 | | | 66 | | 4(a) 4(b) | | | — | | | | | 214 | |
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Total current assets | | | 1,117 | | | 1,056 | | | — | | | | | (123 | ) | | | | 2,050 | |
Property, plant and equipment, net | | | 1,198 | | | 790 | | | — | | | | | — | | | | | 1,988 | |
Investments in unconsolidated subsidiaries | | | 24 | | | 97 | | | — | | | | | 47 | | 5(d) | | | 168 | |
Goodwill | | | 3,561 | | | 9,819 | | | — | | | | | 6,075 | | 5(e) | | | 19,455 | |
Other intangible assets, net | | | 3,781 | | | 3,834 | | | — | | | | | 16,306 | | 5(f) | | | 23,921 | |
Other non-current assets | | | 279 | | | 120 | | | — | | | | | — | | | | | 399 | |
Deferred tax assets | | | 62 | | | 27 | | | — | | | | | — | | | | | 89 | |
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Total assets | | $ | 10,022 | | $ | 15,743 | | $ | — | | | | $ | 22,305 | | | | $ | 48,070 | |
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Liabilities and Stockholders' Equity | | | | | | | | | | | | | | | | | | | | |
Current liabilities: | | | | | | | | | | | | | | | | | | | | |
Accounts payable | | $ | 365 | | $ | 1,580 | | $ | — | | | | $ | — | | | | $ | 1,945 | |
Accrued Expenses | | | — | | | 201 | | | 592 | | 4(c) | | | 205 | | 5(h) | | | 998 | |
Deferred revenue | | | 64 | | | 3 | | | — | | | | | (64 | ) | 5(g) | | | 3 | |
Short-term borrowings and current portion of long-term obligations | | | 79 | | | 219 | | | (13 | ) | 4(d) | | | — | | | | | 285 | |
Current portion of capital lease and financing obligations | | | — | | | 6 | | | 13 | | 4(d) | | | — | | | | | 19 | |
Income taxes payable | | | 11 | | | 3 | | | — | | | | | — | | | | | 14 | |
Other current liabilities | | | 719 | | | 6 | | | (592 | ) | 4(c) | | | — | | | | | 133 | |
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Total current liabilities | | | 1,238 | | | 2,018 | | | — | | | | | 141 | | | | | 3,397 | |
Long-term obligations | | | 4,400 | | | 3,064 | | | (170 | ) | 4(e) | | | 9,832 | | 5(i) | | | 17,126 | |
Long-term obligations—related party | | | — | | | 1,815 | | | — | | | | | (1,815 | ) | 5(j) | | | — | |
Capital lease and financing obligations, less current | | | — | | | 97 | | | 170 | | 4(e) | | | — | | | | | 267 | |
Deferred tax liabilities | | | 614 | | | 1,031 | | | — | | | | | 4,713 | | 5(k) | | | 6,358 | |
Non-current deferred revenue | | | 1,055 | | | — | | | — | | | | | (1,055 | ) | 5(g) | | | — | |
Other non-current liabilities | | | 264 | | | 57 | | | — | | | | | — | | | | | 321 | |
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Total liabilities | | | 7,571 | | | 8,082 | | | — | | | | | 11,816 | | | | | 27,469 | |
Commitments and contingencies | | | | | | | | | | | | | | | | | | | | |
Employee Redeemable non-controlling interest and mezzanine equity awards | | | — | | | 265 | | | — | | | | | (265 | ) | 5(l) | | | — | |
Stockholders' equity: | | | | | | | | | | | | | | | | | | | | |
Preferred stock | | | — | | | — | | | — | | | | | — | | | | | — | |
Common stock | | | 2 | | | — | | | — | | | | | 12 | | 5(l) | | | 14 | |
Additional paid-in capital | | | — | | | 6,385 | | | — | | | | | 13,346 | | 5(l) | | | 19,731 | |
Retained earnings | | | 2,651 | | | 913 | | | — | | | | | (2,806 | ) | 5(l) | | | 758 | |
Accumulated other comprehensive income (loss) | | | (202 | ) | | 98 | | | — | | | | | 202 | | 5(l) | | | 98 | |
| | | | | | | | | | | | | | | | | | | | | |
Total stockholders' equity | | | 2,451 | | | 7,396 | | | — | | | | | 10,754 | | | | | 20,601 | |
| | | | | | | | | | | | | | | | | | | | | |
Total liabilities and stockholders' equity | | $ | 10,022 | | $ | 15,743 | | $ | — | | | | $ | 22,305 | | | | $ | 48,070 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
See the accompanying notes to the unaudited pro forma condensed combined financial information.
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Pro Forma Combined Statement of Income
Twelve months ended December 31, 2017
| | | | | | | | | | | | | | | | | | | | |
| | Historical | |
| |
| |
| |
| |
| |
|---|
| | For the twelve months ended | |
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| |
| |
| |
|---|
| | December 31,
2017 | | December 30,
2017
(unaudited) | |
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| |
| |
| |
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(in millions, except share and per share data)
| | Dr Pepper
Snapple
Group, Inc. | | Maple
Parent
Holdings Corp. | | Reclassification | |
| | Pro Forma
Merger
Adjustments | |
| | Pro Forma
Combined | |
|---|
Net sales | | $ | 6,690 | | $ | 4,226 | | $ | — | | | | $ | (64 | ) | 6(a) | | $ | 10,852 | |
Cost of sales | | | 2,695 | | | 2,224 | | | — | | | | | — | | | | $ | 4,919 | |
| | | | | | | | | | | | | | | | | | | | | |
Gross profit | | | 3,995 | | | 2,002 | | | — | | | | | (64 | ) | | | | 5,933 | |
Selling, general and administrative expenses | | | 2,556 | | | 845 | | | (744 | ) | 4(f)4(g)4(h) | | | — | | | | | 2,657 | |
Transportation and warehousing expenses | | | — | | | 240 | | | 843 | | 4(f) | | | — | | | | | 1,083 | |
Depreciation and amortization | | | 102 | | | — | | | (102 | ) | 4(h) | | | — | | | | | — | |
Other operating (income) expense, net | | | (51 | ) | | — | | | — | | | | | — | | | | | (51 | ) |
Restructuring expenses | | | — | | | 51 | | | 3 | | 4(g) | | | — | | | | | 54 | |
| | | | | | | | | | | | | | | | | | | | | |
Income from operations | | | 1,388 | | | 866 | | | — | | | | | (64 | ) | | | | 2,190 | |
Interest expense | | | 164 | | | 155 | | | 1 | | 4(i) | | | 307 | | 6(b) | | | 627 | |
Interest expense—Related Party | | | — | | | 100 | | | — | | | | | (100 | ) | 6(c) | | | — | |
Interest income | | | (3 | ) | | — | | | 3 | | 4(j) | | | — | | | | | — | |
Loss on early extinguishment of debt | | | 62 | | | 59 | | | — | | | | | — | | | | | 121 | |
(Gain) loss on financial instruments, net | | | — | | | (2 | ) | | (1 | ) | 4(i) | | | — | | | | | (3 | ) |
(Gain) loss on foreign currency, net | | | — | | | 27 | | | — | | | | | — | | | | | 27 | |
Other loss (income), net | | | (8 | ) | | 5 | | | (3 | ) | 4(j) | | | — | | | | | (6 | ) |
| | | | | | | | | | | | | | | | | | | | | |
Income before provision (benefit) for income taxes and equity in loss of unconsolidated subsidiaries | | | 1,173 | | | 522 | | | — | | | | | (271 | ) | | | | 1,424 | |
Provision (benefit) for income taxes | | | 95 | | | (335 | ) | | — | | | | | (105 | ) | 6(d) | | | (345 | ) |
| | | | | | | | | | | | | | | | | | | | | |
Income before equity in loss of unconsolidated subsidiaries | | | 1,078 | | | 857 | | | — | | | | | (166 | ) | | | | 1,769 | |
Equity in loss of unconsolidated subsidiaries, net of tax | | | (2 | ) | | — | | | — | | | | | — | | | | | (2 | ) |
| | | | | | | | | | | | | | | | | | | | | |
Net income | | | 1,076 | | | 857 | | | — | | | | | (166 | ) | | | | 1,767 | |
| | | | | | | | | | | | | | | | | | | | | |
Net income attributable to employee redeemable non-controlling interest and mezzanine equity awards | | | — | | | (10 | ) | | — | | | | | 10 | | 6(e) | | | — | |
| | | | | | | | | | | | | | | | | | | | | |
Net Income Attributable to the Combined Company | | $ | 1,076 | | $ | 847 | | $ | — | | | | $ | (156 | ) | | | $ | 1,767 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Earnings per common share: | | | | | | | | | | | | | | | | | | | | |
Basic | | $ | 5.91 | | | | | | | | | | | | | | | $ | 1.27 | |
Diluted | | | 5.89 | | | | | | | | | | | | | | | | 1.26 | |
Weighted average common shares outstanding: | | | | | | | | | | | | | | | | | | | | |
Basic | | | 182.0 | | | | | | | | | | | 1,207.8 | | | | | 1,389.8 | |
Diluted | | | 182.8 | | | | | | | | | | | 1,222.9 | | | | | 1,405.7 | |
See the accompanying notes to the unaudited pro forma condensed combined financial information.
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NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
1. Description of the Merger Transactions
On January 29, 2018, DPSG entered into the merger agreement by and among DPSG, Maple and Merger Sub. Pursuant to the terms of the merger agreement, Merger Sub will be merged with and into Maple, with Maple surviving the merger as a wholly owned subsidiary of DPSG. For financial reporting and accounting purposes, Maple will be the acquirer of DPSG upon completion of the merger.
Maple is the indirect parent of Keurig, a leading producer of specialty coffee and innovative single-serve brewing systems. The combined businesses will create Keurig Dr Pepper Inc., a new beverage company of scale with a portfolio of iconic consumer brands and expanded distribution capability to reach virtually every point of sale in North America.
In consideration for the merger, each share of Maple common stock issued and outstanding immediately prior to the effective time shall be converted into the right to receive a number of fully paid and nonassessable shares of DPSG common stock pursuant to an exchange ratio set forth in the merger agreement, which is the product of (i) 6.6923 and (ii) the quotient obtained by dividing the number of fully diluted DPSG shares by the number of fully diluted Maple shares, each calculated in accordance with the merger agreement as of the close of business on the business day immediately preceding the closing date and after giving effect to the Maple Parent Restructuring, subject to any withholding of taxes required by law. See Note 5 for the exchange ratio used in the pro forma financial information.
The merger agreement provides that DPSG will declare a special cash dividend equal to $103.75 per share, subject to any withholding of taxes required by law, payable to holders of its common stock as of the record date for the special cash dividend.
As a result of the merger, the holders of equity interests of Maple as of immediately prior to the effective time will collectively own approximately 87% of the outstanding shares of the common stock of the combined company, on a fully diluted basis, and the holders of DPSG common stock as of immediately prior to the effective time will collectively own approximately 13% of the outstanding shares of the common stock of the combined company, on a fully diluted basis.
Maple expects to finance the special cash dividend payable to DPSG stockholders, as well as other fees and expenses related to the merger and the other Merger Transactions, primarily through debt financing, the issuance of equity to the Sponsor and cash on hand. As such, Maple has already secured an Equity Commitment from the Sponsor and commitments for the Bridge Facility and for a new Term Loan Facility and new Revolving Credit Facilities, each as described further elsewhere in this proxy statement in the section entitled "The Merger—Financing Matters."
2. Basis of Presentation
The unaudited pro forma combined financial information is prepared in accordance with Article 11 of SEC Regulation S-X. The historical consolidated financial information has been adjusted in the accompanying unaudited pro forma combined financial information to give effect to unaudited pro forma events that are:
•directly attributable to the merger;
•factually supportable; and
•with respect to the unaudited pro forma combined statement of income, expected to have a continuing impact on the results of operations of the combined company.
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NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION (Continued)
2. Basis of Presentation (Continued)
The merger will be treated as a business combination for accounting purposes, with Maple as the deemed accounting acquirer and DPSG as the deemed acquiree. Therefore, the historical basis of Maple's assets and liabilities will not be affected by the merger. In identifying Maple as the acquiring entity, the companies took into account the structure of the merger, relative outstanding share ownership and the composition of the combined company's board of directors.
The unaudited pro forma combined financial information was prepared using the acquisition method of accounting in accordance with ASC 805, which requires, among other things, that assets acquired and liabilities assumed in a business combination be recognized at their fair values as of the acquisition date.
The acquisition method of accounting uses the fair value concepts defined in ASC 820, "Fair Value Measurement" ("ASC 820"). Fair value is defined in ASC 820 as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Market participants are assumed to be buyers or sellers in the most advantageous market for the asset or liability. Fair value measurement for an asset assumes the highest and best use by these market participants.
Fair value measurements can be highly subjective and it is possible the application of reasonable judgment could develop different assumptions resulting in a range of alternative estimates using the same facts and circumstances.
Fair value estimates were determined based on preliminary discussions between Maple and DPSG management, due diligence efforts and information available in public filings. The allocation of the aggregate merger consideration used in the preliminary unaudited pro forma combined financial information is based on preliminary estimates. The estimates and assumptions are subject to change as of the effective time of the merger. The final determination of the allocation of the aggregate merger consideration will be based on the actual tangible and intangible assets and the liabilities of DPSG at the effective time of the merger. Refer to Note 6 for additional information.
For pro forma purposes, the valuation of consideration transferred is based on, amongst other things, the number of DPSG common stock outstanding as of December 31, 2017. Refer to Note 5 for additional information. This is used for pro forma purposes only. The consideration transferred will ultimately be based on the number of DPSG common stock outstanding as of immediately prior to the effective time, which could materially change.
DPSG operates on a fiscal year that ends on December 31 of each year. Maple operates on a 52- or 53-week fiscal year that ends on the last Saturday in September. Subsequent to the merger, the combined company will adopt a fiscal year ending on December 31.
The selected unaudited pro forma combined balance sheet data gives effect to the Merger Transactions as if they had occurred on December 31, 2017. The selected unaudited pro forma combined statement of income data for the year ended December 31, 2017, gives effect to the Merger Transactions as if they had occurred on January 1, 2017.
The unaudited pro forma combined financial information is presented solely for informational purposes and is not necessarily indicative of the combined results of operations or financial position that might have been achieved for the periods or dates indicated, nor is it necessarily indicative of the future results of the combined company. The unaudited pro forma combined financial information has not been adjusted to give effect to certain expected financial benefits of the merger, such as tax savings,
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NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION (Continued)
2. Basis of Presentation (Continued)
cost synergies or revenue synergies, or the anticipated costs to achieve these benefits, including the cost of integration activities. The unaudited pro forma combined financial information does not reflect possible adjustments related to restructuring or integration activities that have yet to be determined or transaction or other costs following the combination that are not expected to have a continuing impact on the business of the combined company. Further, one-time transaction-related expenses anticipated to be incurred prior to, or concurrent with, the closing of the merger are not included in the unaudited pro forma combined statement of income. However, the impact of such transaction expenses is reflected in the unaudited pro forma combined balance sheet as a decrease to retained earnings and as an increase to accrued expenses.
3. Accounting Policies
The unaudited pro forma combined financial information has been compiled in a manner consistent with the accounting policies of Maple. Following the merger, the combined company will conduct a review of accounting policies of DPSG in an effort to determine if differences in accounting policies require further reclassification of results of operations or reclassification of assets or liabilities to conform to Maple's accounting policies and classifications. As a result of that review, the combined company may identify differences among the accounting policies of the companies that, when conformed, could have a material impact on the unaudited pro forma combined financial information.
4. DPSG Reclassifications
Certain financial information of DPSG has been reclassified or classified to conform to the historical presentation in Maple's consolidated financial statements as set forth below.
Reclassification and classification of the unaudited pro forma combined balance sheet as of December 31, 2017:
A.Other Receivables / Prepaid Expenses and Other Current Assets
Current assets of $42 million were reclassified from "Other receivables" to "Prepaid expenses and other current assets", as other receivables are included in prepaid expenses and other current assets in Maple's balance sheet presentation.
B.Inventories / Prepaid Expenses and Other Current Assets
Spare parts inventories of $24 million were reclassified from "Inventories" to "Prepaid expenses and other current assets" to conform to Maple's balance sheet presentation.
C.Other Current Liabilities / Accrued Expenses
Current liabilities of $592 million were reclassified from "Other current liabilities" to "Accrued expenses" for certain operating expenses, which excludes dividends payable, derivative instruments and liabilities associated with the Bai Brands merger, to conform to Maple's balance sheet presentation.
Table of Contents
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION (Continued)
4. DPSG Reclassifications (Continued)
D.Short-Term Borrowings and Current Portion of Long-Term Obligations / Current Portion of Capital Lease and Financing Obligations
Current liabilities of $13 million related to capital leases were reclassified from "Short-term borrowings and current portion of long-term obligations" to the "Current portion of capital lease financing" to conform to Maple's balance sheet presentation.
E.Long-Term Obligations / Capital Lease and Financing Obligations, Less Current
Long-term obligations of $170 million related to capital leases were reclassified from "Long-term obligations" to "Capital lease and financing obligations, less current" to conform to Maple's balance sheet presentation.
Reclassification and classification of the unaudited pro forma combined statement of income for the year ended December 31, 2017:
F.Selling, General and Administrative Expenses / Transportation and Warehousing Expenses
Transportation and warehousing expenses of $843 million were reclassified from "Selling, general and administrative expenses" to "Transportation and warehousing expenses" to conform to Maple's statement of income presentation.
G.Selling, General and Administrative Expenses / Restructuring Expenses
Restructuring expenses of $3 million were reclassified from "Selling, general and administrative expenses" to "Restructuring expenses" to conform to Maple's statement of income presentation.
H.Depreciation and Amortization / Selling, General and Administrative Expenses
Depreciation and amortization expenses of $102 million were reclassified from "Depreciation and amortization" to "Selling, general and administrative expenses" to conform to Maple's statement of income presentation.
I.Interest Expense / Gain on Financial Instruments, Net
Gains of $1 million associated with economic interest rate hedges were reclassified from "Interest expense" to "Gain on financial instruments, net" to conform to Maple's statement of income presentation.
J.Interest Income / Other Loss (Income), Net
Interest income of $3 million was reclassified from "Interest income" to "Other loss (income), net" to conform to Maple's statement of income presentation.
5. Unaudited Pro Forma Combined Balance Sheet Adjustments
The following provides explanations of the various adjustments to the unaudited pro forma combined balance sheet.
Pursuant to the Equity Commitment, Maple will issue new shares of its common stock to the Sponsor to finance the transaction for aggregate gross proceeds of $9,000 million, which will be used to
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NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION (Continued)
5. Unaudited Pro Forma Combined Balance Sheet Adjustments (Continued)
fund, in part the special cash dividend. As further described in Note 1, each share of Maple common stock issued and outstanding immediately prior to the effective time of the merger will be converted into a number of newly issued shares of Keurig Dr Pepper common stock pursuant to the exchange ratio described in Note 1. Below is a preliminary estimate of the purchase consideration to DPSG stockholders and the allocation of the purchase price to acquired identifiable assets and assumed liabilities.
| | | | |
(in millions)
| | Amounts as of the
Transaction Date | |
|---|
Purchase consideration | | | | |
Preliminary estimate of fair value of DPSG common shares outstanding | | $ | 20,895 | |
Preliminary estimate of fair value of stock-based awards to vest at close | | | 314 | |
| | | | | |
Fair value of total estimated consideration transferred | | $ | 21,209 | |
| | | | | |
Historical book value of net assets acquired | | | | |
Book value of net assets acquired at December 31, 2017 | | $ | 2,451 | |
Adjusted for: | | | | |
Adjustments to reflect preliminary fair value of assets acquired and liabilities assumed: | | | | |
Inventories | | | 32 | |
Investment in unconsolidated subsidiaries | | | 47 | |
Other intangible assets | | | 16,306 | |
Deferred revenue | | | 64 | |
Long-term debt | | | (108 | ) |
Deferred tax liabilities | | | (4,713 | ) |
Non-current deferred revenue | | | 1,055 | |
Goodwill | | | 6,075 | |
| | | | | |
Estimate of consideration expected to be transferred | | $ | 21,209 | |
| | | | | |
| | | | | |
| | | | | |
A.Preliminary Estimate of Fair Value of DPSG Common Shares Outstanding
The total estimated merger consideration is calculated as follows:
| | | | |
(in millions, except share and per share data)
| |
| |
|---|
Number of shares of DPSG common stock outstanding | | | 179,743,028 | |
Outstanding Share-based awards to vest at close | | | 2,697,909 | |
| | | | | |
Total shares of DPSG common stock outstanding as of closing of the merger | | | 182,440,937 | |
DPSG share price as of February 28, 2018 | | $ | 116.25 | |
| | | | | |
Preliminary Estimate of fair value of common shares | | $ | 21,209 | |
| | | | | |
| | | | | |
| | | | | |
DPSG's share price was used because, as a privately held company, Maple does not have a readily observable market price at the time of this proxy statement. When evaluating the trading value of DPSG common stock as an estimate of the fair value of equity consideration exchanged, management determined that the trading value of DPSG common stock includes the value of the special cash dividend. Subsequent to the announcement of the merger, the DPSG stock increased to a price reflective of the special cash dividend and the dilution to equity value of existing shares that will result
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NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION (Continued)
5. Unaudited Pro Forma Combined Balance Sheet Adjustments (Continued)
from the issuance of additional shares upon consummation of the merger. Since the special cash dividend has not yet been declared and the record date for the special cash dividend will not occur until the close of business on the business day immediately preceding the closing date of the merger, and since holders of DPSG common stock as of such record date will receive the special cash dividend for each share of DPSG common stock held by such holder, while continuing to own the same shares of DPSG common stock held by such holders as of time of such record date, the value of the special cash dividend continues to be reflected in the trading price (i.e., DPSG common stock is not currently trading ex-dividend).
A 20% increase to the DPSG share price would increase the fair value by $4.24 billion, and a 20% decrease in share price would decrease the fair value by $4.24 billion, both with a corresponding change to goodwill. The actual fair value will fluctuate until the closing date of the merger and the final valuation could differ significantly from the current estimate. If these fluctuations were to occur before the effective time of the merger, adjustments to reflect the preliminary fair values and goodwill would be:
| | | | | | | |
Share Price Sensitivity Analysis (in millions) | | 20% increase in
DPSG share price | | 20% decrease in
DPSG share price | |
|---|
Preliminary fair value of common shares issued | | $ | 25,074 | | $ | 16,716 | |
Preliminary fair value of replacement stock-based awards | | | 376 | | | 251 | |
Preliminary fair value adjustment to goodwill | | | 10,317 | | | 1,833 | |
B.Cash and Cash Equivalents
Cash and cash equivalents have been adjusted for the following:
| | | | |
(in millions)
| |
| |
|---|
Equity Investment by Sponsor(1) | | $ | 9,000 | |
Proceeds from Financing(2) | | | 12,400 | |
Proceeds from short-term borrowing against New Credit Facilities(3) | | | 703 | |
Pay-down of existing Keurig Green Mountain debt | | | (3,329 | ) |
Special Cash Dividend Payment(4) | | | (18,929 | ) |
| | | | | |
Total pro forma adjustment to cash and cash equivalents | | $ | (155 | ) |
| | | | | |
| | | | | |
| | | | | |
(1)Represents funds provided by the Sponsor in an amount of $9,000 million.
(2)Represents the amount expected to be issued by Maple.
(3)In the event that Maple planned distributions related to the special cash dividend and pay-down of existing debt would exceed cash on hand, Maple has multiple options available to secure additional funds, including but not limited to cash flow from operations and additional investment from the Sponsor. While Maple anticipates that cash flow from operations, in addition to the planned loan issuance will provide sufficient liquidity to fund the special cash dividend, pro forma rules prohibit the inclusion of certain of these more likely anticipated cash flows as adjustments in the combined pro forma financial statements above. Accordingly, this adjustment reflects a draw on Maple's committed revolving credit facility to fund any deficit as a result of other pro forma cash adjustments above.
(4)Represents the estimated special cash dividend to the holders of record of the outstanding shares of DPSG common stock as of a record date immediately prior to the effective time of the merger of $103.75 per share in respect of such shares of DPSG common stock held by them.
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NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION (Continued)
5. Unaudited Pro Forma Combined Balance Sheet Adjustments (Continued)
C.Inventories
Represents an adjustment of $32 million based on the preliminary fair value estimate as part of purchase accounting.
D.Investments and unconsolidated subsidiaries
Represents an adjustment of $47 million to increase the carrying value of DPSG's investment in unconsolidated subsidiaries to reflect the fair value of these investments based on the most recent orderly equity transaction.
E.Goodwill
Represents the excess of the purchase price over the preliminary fair value of the underlying net tangible and identifiable intangible assets net of liabilities and is estimated to be $9,636 million, which is an increase of $6,075 million over DPSG's book value of goodwill prior to the merger. The estimated goodwill to be recognized is attributable to operational and general and administrative cost synergies resulting from the warehouse and transportation integration, direct procurement savings on overlapping materials, purchasing scale on indirect spend categories and optimization of duplicate positions and processes. The combined company may also enjoy revenue synergies, driven by a strong portfolio of brands with exposure to higher growth segments and the ability to leverage our collective distribution strength. The goodwill created in the merger is not expected to be deductible for tax purposes.
F.Other Intangible Assets
Represents adjustments to record the preliminary estimated fair value of intangibles of approximately $20,087 million, which is an increase of $16,306 million over DPSG's book value of other intangible assets prior to the merger. The general categories of the acquired identified intangible assets are expected to be the following:
| | | | | | | | | | | | |
(in millions)
| | Estimated Useful
Life | | DPSG Historical
Carrying Value | | Estimated Fair
Value
Adjustment | | Estimated Fair
Value | |
|---|
Brands | | Indefinite | | $ | 3,694 | | $ | 16,306 | | $ | 20,000 | |
Distribution rights | | Indefinite | | | 32 | | | — | | | 32 | |
Customer relationships | | 7 years | | | 27 | | | — | | | 27 | |
Non-compete agreements | | 2 - 4 years | | | 20 | | | — | | | 20 | |
Allied brand distribution rights | | 5 - 15 years | | | 8 | | | — | | | 8 | |
| | | | | | | | | | | | | |
Total | | | | $ | 3,781 | | $ | 16,306 | | $ | 20,087 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
The fair value estimate for all identifiable intangible assets is preliminary and is based on assumptions that market participants would use in pricing an asset, based on the most advantageous market for the asset (i.e., its highest and best use). This preliminary fair value estimate could include assets that are not intended to be used, may be sold, or are intended to be used in a manner other than their best use. The final determination of fair value of intangible assets, as well as estimated useful lives, remains subject to change. The finalization may have a material impact on the valuation of intangible assets and the purchase price allocation, which is expected to be finalized subsequent to the merger.
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NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION (Continued)
5. Unaudited Pro Forma Combined Balance Sheet Adjustments (Continued)
G.Current and Non-current Deferred Revenue
Represents the reduction to current and non-current deferred revenue, which includes $64 million and $1,055 million related to the fair value adjustments for DPSG which were required to be made in purchase price accounting as no continuing performance obligations by DPSG exist for the arrangements with PepsiCo and Coca-Cola.
H.Accrued Expenses
Represents an adjustment of $205 million to accrue for the transaction costs and accrued deferred financing fees of Maple and DPSG.
I.Long Term Obligations
Long term obligations have been adjusted for the following:
| | | | |
(in millions)
| |
| |
|---|
Proceeds from Financing | | $ | 12,400 | |
Pay down of existing Keurig Green Mountain Debt | | | (3,329 | ) |
Short-term borrowing against New Credit Facilities(1) | | | 703 | |
Deferred Debt Issuance Costs (net) | | | (50 | ) |
Fair value adjustment to increase DPSG existing debt(2) | | | 108 | |
| | | | | |
Total | | $ | 9,832 | |
| | | | | |
| | | | | |
| | | | | |
(1)Refer to 5 (B) above.
(2)Represents the estimated fair value adjustment of $108 million related to DPSG's historical long-term debt, being assumed by Maple in the transaction. The trading value of DPSG's outstanding long-term debt as of December 31, 2017 was used to estimate the fair value of this debt at $4,333 million, or $108 million in excess of the carrying value of $4,225 million.
J.Long Term Obligations—Related Party
Represents the capitalization of related party debt of $1,815 million with the Sponsor and Mondelēz LLC into additional paid in capital prior to the merger.
K.Deferred Tax Liabilities
Represents the estimated adjustment of $4,431 million related to DPSG's historical deferred tax liabilities deemed to be assumed by Maple in the merger and the adjustment of $282 million to write-off the deferred tax asset associated with the deferred revenue pro forma adjustment. The estimate of deferred taxes was determined based on the changes in the book basis of the net assets to be acquired compared to the historical basis reflected in DPSG's historical financial statements. A weighted average statutory rate of 26.50% was applied. This estimate of deferred income tax is preliminary and is subject to change based on the combined company's final determination of the assets acquired and liabilities assumed by jurisdiction and their respective fair values, adjustments to valuation allowances, and the applicable jurisdictional tax rate.
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NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION (Continued)
5. Unaudited Pro Forma Combined Balance Sheet Adjustments (Continued)
L.Total Stockholders' Equity
Represents the elimination of DPSG common stock, retained earnings, and accumulated other comprehensive loss, as well as the following adjustments to reflect the capital structure of the combined company:
a.Removal of Maple Employee redeemable non-controlling interest and mezzanine equity awards of $265 million related to shares held by certain employees in the Keurig Green Mountain, Inc. Executive Ownership Plan which will be converted into shares of the combined company upon the merger.
b.An increase in common stock of $12 million represents the adjustment to the aggregate historical par value of Maple and DPSG, to reflect 1.39 billion shares outstanding at a total par value of $14 million ($0.01 par value per share) calculated as follows:
| | | | |
(in millions, except share and per share data)
| |
| |
|---|
Shares of DPSG common stock outstanding | | | 179,743,028 | |
Outstanding share-based awards to vest at close | | | 2,697,909 | |
| | | | | |
Total shares of DPSG common stock outstanding as of merger close | | | 182,440,937 | |
| | | | | |
Shares of Maple common stock outstanding | | | 8,200,000 | |
Shares of Maple common stock issued for equity investment by the Sponsor | | | 4,222,795 | |
Shares of Maple Sub common stock outstanding converted to Maple common stock | | | 90,151 | |
| | | | | |
Total shares of Maple common stock outstanding at effective time of the merger | | | 12,512,946 | |
Exchange Ratio(1) | | | 96.308 | |
| | | | | |
Number of combined company shares expected to be issued to the Sponsor and Mondelēz LLC as of closing of the merger | | | 1,205,096,803 | |
| | | | | |
Total estimated combined company shares following the closing of the merger | | | 1,387,537,740 | |
Par value per share | | $ | 0.01 | |
| | | | | |
Common stock total par value at merger | | $ | 14 | |
| | | | | |
| | | | | |
| | | | | |
(1)The exchange ratio above is computed as of December 31, 2017. Under the terms of the merger agreement, the exchange ratio will be based on the number of shares of DPSG common stock and Maple common stock outstanding, on a fully diluted basis, at the close of business on the business day immediately preceding the closing date. The exchange ratio in the table above assumes the impact of the equity investment by the Sponsor as the pro forma adjustment to the combined balance sheet.
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NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION (Continued)
5. Unaudited Pro Forma Combined Balance Sheet Adjustments (Continued)
c.Adjustments to additional paid in capital as follows:
| | | | |
(in millions)
| |
| |
|---|
Merger consideration | | $ | 21,209 | |
Special Dividend payment | | | (18,929 | ) |
Equity investment by Sponsor | | | 9,000 | |
Capitalization of related party debt(1) | | | 1,815 | |
Elimination of historical Maple Employee redeemable non-controlling interest and mezzanine equity awards | | | 265 | |
Par value common stock | | | (14 | ) |
| | | | | |
Total | | $ | 13,346 | |
| | | | | |
| | | | | |
| | | | | |
(1)Represents the adjustment related to the capitalization of related party debt with the Sponsor and Mondelēz LLC as of December 31, 2017—refer to Note 5(J).
d.Adjustments to retained earnings as follows:
| | | | |
(in millions)
| |
| |
|---|
Elimination of historical DPSG retained earnings | | $ | (2,651 | ) |
Maple transaction costs(1) | | | (100 | ) |
DPSG transaction costs(1) | | | (55 | ) |
| | | | | |
Total | | $ | (2,806 | ) |
| | | | | |
| | | | | |
| | | | | |
(1)Represents the adjustment related to transaction costs, primarily advisory fees to be paid at closing of the merger.
e.Eliminate $202 million of historical accumulated comprehensive loss on DPSG.
6. Statement of Income Adjustments
The following provides explanations of the various adjustments to the unaudited pro forma combined statement of income.
A.Net Sales
Represents a decrease of $64 million to net sales to remove the historical deferred revenue associated with the arrangements with PepsiCo and Coca-Cola, which were eliminated in the fair value adjustments for DPSG in purchase price accounting.
B.Interest Expense
Represents an increase to interest expense of $307 million, comprised of (i) $272 million of additional interest expense calculated at an assumed rate of 3.25%, representing the applicable London Interbank Offer Rate plus 125 basis points estimated to coincide with the timing of the completion of the merger, plus an estimated 3.88% on the $8,000 million aggregate principal amount of senior unsecured term loans under the Bridge Facility, (ii) an increase of $56 million related to amortization of deferred financing fees incurred by Maple in connection with the Term Loan Facility and Revolving Credit Facilities and (iii) a decrease of $21 million as a result of the step-up in fair value of existing
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NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION (Continued)
6. Statement of Income Adjustments (Continued)
DPSG debt, which is recognized as a reduction to interest expense over the remaining term of the existing debt.
A1/8 percent increase or decrease in the interest rates assumed above would result in an aggregate increase or decrease to interest expense of $53 million in the period.
C.Interest Expense—Related Party
Represents a decrease of $100 million due to the capitalization of related party debt of $1,815 million with Mondelēz LLC into additional paid in capital to reflect the capital structure of the combined company.
D.Provision for Income Taxes
Represents the income tax effect for unaudited pro forma combined statement of income adjustments related to the merger using a 38.80% weighted average statutory tax rate for the year ended December 31, 2017. Because the adjustments contained in this unaudited pro forma combined financial information are based on estimates, the effective tax rate will likely vary from the effective rate in periods subsequent to the merger. Additionally, certain adjustments reflect transactions that will occur within legal entities located in jurisdictions which are subject to valuation allowances and a tax benefit is not expected to be realized on a more likely than not basis. Adjustments to established deferred tax assets and liabilities as well as the recognition of additional deferred tax assets and liabilities upon detailed analysis of the acquired assets and assumed liabilities may occur in conjunction with the finalization of the purchase accounting, and these items could be material.
The TCJA was enacted on December 22, 2017, which reduced the U.S. federal statutory tax rate from 35% to 21% effective January 1, 2018, which should be considered going forward.
E.Net Income Attributable to Employee Redeemable Non-controlling Interest and Mezzanine Equity Awards ("Non-controlling Interest")
Represents an increase of $10 million to net income attributable to non-controlling interest as the Maple Non-controlling Interest was eliminated to reflect the capital structure of the combined company.
7. Earnings per Share
The unaudited pro forma weighted average number of basic shares outstanding is calculated by adding the number of combined company shares expected to be issued to the Sponsor after giving effect to the pre-closing Maple conversion ratio and the historical weighted average number of basic shares of DPSG, which will remain outstanding as shares in the combined company on a 1:1 basis.
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NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION (Continued)
7. Earnings per Share (Continued)
The unaudited pro forma weighted average number of basic and diluted shares outstanding is calculated as follows:
| | | | |
(in millions)
| |
| |
|---|
Weighted average DPSG shares outstanding—basic
| | | 182.0 | |
Adjusted for:
| | | | |
DPSG unvested stock options, restricted stock units, performance stock units and dividend equivalent units as of December 31, 2017(1)
| | | 2.7 | |
Maple shares outstanding as of December 31, 2017
| | | 1,205.1 | |
| | | | |
Adjusted weighted average shares outstanding—basic
| | | 1,389.8 | |
| | | | |
| | | | |
| | | | |
(1)In accordance with the terms of the individual award agreements, all unvested stock options, restricted stock units, performance stock units and dividend equivalent units will vest immediately upon the closing of the merger.
| | | | |
(in millions)
| |
| |
|---|
Pro forma weighted basic shares outstanding
| | | 1,389.8 | |
Dilutive impact of DPSG awards outstanding
| | | — | |
Dilutive impact of Maple awards outstanding
| | | 15.9 | |
| | | | |
Adjusted weighted average shares outstanding—diluted
| | | 1,405.7 | |
| | | | |
| | | | |
| | | | |
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ANNEX A
Any and All Outstanding 3.430%3.551% Senior Notes due 2027
2021
Issued on June 15, 2017
and
May 25, 2018,
Any and All Outstanding 4.500%4.057% Senior Notes due 2045
2023
Issued on
June 15, 2017May 25, 2018,
Any and All Outstanding 4.417% Senior Notes due 2025
Issued on May 25, 2018,
Any and All Outstanding 4.597% Senior Notes due 2028
Issued on May 25, 2018,
Any and All Outstanding 4.985% Senior Notes due 2038
Issued on May 25, 2018,
and
Any and All Outstanding 5.085% Senior Notes due 2048
Issued on May 25, 2018
Keurig Dr Pepper
Snapple Group, Inc.
Pursuant to the Exchange Offer and Prospectus dated ,
20182019
The Exchange Agent for the Exchange Offer is:
By Registered
or& Certified Mail
Wells Fargo Bank, N.A.
|
|
| Corporate Trust Operations |
| MAC N9300-070 |
| 600 South Fourth Street |
| Minneapolis, MN 55402 |
Corporate Trust OperationsMAC N9300-070P.O. Box 1517Minneapolis, MN 55480By
AirRegular Mail or Courier
Service |
|
| Wells Fargo Bank, N.A. |
| Corporate Trust Operations |
| MAC N9300-070 |
| 600 South Fourth Street |
| Minneapolis, MN 55402 |
|
|
| In Person by Hand Only |
|
| Wells Fargo Bank, N.A. |
| Corporate Trust Operations |
| MAC N9300-070 |
| 600 South Fourth Street |
| Minneapolis, MN 55402 |
MAC N9300-070
600 Fourth Street South, 7th Floor
Facsimile Transmission
(877) 407-4679
612-667-6282
Confirm by Telephone:
(800) 344-5128
IF YOU WISH TO EXCHANGE CURRENTLY OUTSTANDING (i)
3.430%3.551% SENIOR NOTES DUE
20272021 ISSUED ON
JUNE 15, 2017MAY 25, 2018 FOR AN EQUAL AGGREGATE PRINCIPAL AMOUNT OF
3.430%3.551% SENIOR NOTES DUE
20272021 REGISTERED UNDER THE SECURITIES ACT,
OR (ii)
4.500%4.057% SENIOR NOTES DUE
20452023 ISSUED ON
JUNE 15, 2017MAY 25, 2018 FOR AN EQUAL AGGREGATE PRINCIPAL AMOUNT OF
4.500%4.057% SENIOR NOTES DUE
20452023 REGISTERED UNDER THE SECURITIES ACT, (iii) 4.417% SENIOR NOTES DUE 2025 ISSUED ON MAY 25, 2018 FOR AN EQUAL AGGREGATE PRINCIPAL AMOUNT OF 4.417% SENIOR NOTES DUE 2025 REGISTERED UNDER THE SECURITIES ACT, (iv) 4.597% SENIOR NOTES DUE 2028 ISSUED ON MAY 25, 2018 FOR AN EQUAL AGGREGATE PRINCIPAL AMOUNT OF 4.597% SENIOR NOTES DUE 2028 REGISTERED UNDER THE SECURITIES ACT, (v) 4.985% SENIOR NOTES DUE 2038 ISSUED ON MAY 25, 2018 FOR AN EQUAL AGGREGATE PRINCIPAL AMOUNT OF 4.985% SENIOR NOTES DUE 2038 REGISTERED UNDER THE SECURITIES ACT OR (vi) 5.085% SENIOR NOTES DUE 2048 ISSUED ON MAY 25, 2018 FOR AN EQUAL AGGREGATE PRINCIPAL AMOUNT OF 5.085% SENIOR NOTES DUE 2048 REGISTERED UNDER THE SECURITIES ACT, IN EACH CASE, PURSUANT TO THE EXCHANGE OFFER, YOU MUST VALIDLY TENDER (AND NOT WITHDRAW) OUTSTANDING NOTES TO THE EXCHANGE AGENT PRIOR TO
11:595:00 P.M. NEW YORK CITY TIME ON ,
20182019 BY CAUSING AN
AGENT'SAGENT’S MESSAGE TO BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO SUCH TIME.
The undersigned hereby acknowledges receipt of the prospectus, dated , 20182019 (the "Prospectus"“Prospectus”), of Keurig Dr Pepper Snapple Group, Inc., a Delaware corporation (the "Company"“Company”), and this Letter of Transmittal (the "Letter“Letter of Transmittal"Transmittal”), which together describe the Company'sCompany’s offer (the "Exchange Offer"“Exchange Offer”) pursuant to the Securities Act of 1933, as amended (the "Securities Act"“Securities Act”), to exchange its issued and outstanding 3.430%3.551% Senior Notes due 20272021 issued on May 25, 2018 (the "2027 Additional Notes"“Old 2021 Notes”) for a like principal amount of its 3.430%3.551% Senior Notes due 20272021 registered under the Securities Act issued
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on June 15, 2017 (the "2027 Exchange Notes"“
New 2021 Notes”) and, its issued and outstanding 4.500%4.057% Senior Notes due 20452023 issued on June 15, 2017May 25, 2018 (the "2045 Additional Notes" and, together with the 2027 Additional“Old 2023 Notes the "Additional Notes"”) for a like principal amount of its 4.500%4.057% Senior Notes due 20452023 registered under the Securities Act (the "2045 Exchange Notes"“New 2023 Notes”), its issued and outstanding 4.417% Senior Notes due 2025 issued on May 25, 2018 (the “Old 2025 Notes”) for a like principal amount of its 4.417% Senior Notes due 2025 registered under the Securities Act (the “New 2025 Notes”), its issued and outstanding 4.597% Senior Notes due 2028 issued on May 25, 2018 (the “Old 2028 Notes”) for a like principal amount of its 4.597% Senior Notes due 2028 registered under the Securities Act (the “New 2028 Notes”), its issued and outstanding 4.985% Senior Notes due 2038 issued on May 25, 2018 (the “Old 2038 Notes”) for a like principal amount of its 4.985% Senior Notes due 2038 registered under the Securities Act (the “New 2038 Notes”) and its issued and outstanding 5.085% Senior Notes due 2048 issued on May 25, 2018 (the “Old 2048 Notes” and, together with the 2027 ExchangeOld 2021 Notes, the "Exchange Notes"Old 2023 Notes, the Old 2025 Notes, the Old 2028 Notes and the Old 2038 Notes, the “Old Notes”) for a like principal amount of its 5.085% Senior Notes due 2048 registered under the Securities Act (the “New 2048 Notes” and, together with the New 2021 Notes, the New 2023 Notes, the New 2025 Notes, the New 2028 Notes and the New 2038 Notes, the “New Notes”). The Company reserves the right, at any time or from time to time, to extend the Exchange Offer at its discretion, in which event the term
"Expiration Time"“Expiration Time” shall mean the latest time and date to which the Company extends the Exchange Offer. To extend the Exchange Offer, the Company will notify the Exchange Agent of any extension. The Company will notify the holders of
AdditionalOld Notes of the extension via a press release issued no later than 9:00 a.m. New York City time on the business day after the previously scheduled Expiration Time.
This Letter of Transmittal is to be used by holders of the AdditionalOld Notes. Tender of AdditionalOld Notes is to be made according to the Automated Tender Offer Program ("ATOP"(“ATOP”) of The Depository Trust Company ("DTC"(“DTC”) pursuant to the procedures set forth in the Prospectus under the caption "The“The Exchange Offer—ProceduresOffer-Procedures for Tendering."” DTC
participants that are accepting the Exchange Offer must transmit their acceptance to DTC, which will verify the acceptance and execute a book-entry delivery to the Exchange
Agent'sAgent’s DTC account. DTC will then send a computer-generated message known as an
"agent's message"“agent’s message” to the exchange agent for its acceptance. For you to validly tender your
AdditionalOld Notes in the Exchange Offer, the Exchange Agent must receive, prior to the Expiration Time, an
agent'sagent’s message under the ATOP procedures that confirms that:
DTC has received your instructions to tender your AdditionalOld Notes; and
•
you agree to be bound by the terms of this Letter of Transmittal.
By using the ATOP procedures to tender AdditionalOld Notes, you will not be required to deliver this Letter of Transmittal to the Exchange Agent. However, you will be bound by its terms, and you will be deemed to have made the acknowledgments and the representations and warranties it contains, just as if you had signed it.
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PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
Ladies and Gentlemen:
1. By tendering Additional Notes in the Exchange Offer, you acknowledge receipt of the Prospectus and this Letter of Transmittal.
2. By tendering Additional Notes in the Exchange Offer, you represent and warrant that you have full authority to tender the Additional Notes described above and will, upon request, execute and deliver any additional documents deemed by the Company to be necessary or desirable to complete the tender of Additional Notes.
3. The tender of the Additional Notes pursuant to all of the procedures set forth in the Prospectus will constitute an agreement between you and the Company as to the terms and conditions set forth in the Prospectus.
4. The Exchange Offer is being made in reliance upon interpretations contained in no-action letters issued to third parties by the staff of the Securities and Exchange Commission (the "Commission"), including Exxon Capital Holdings Corp., Commission No-Action Letter (available May 13, 1988), Morgan Stanley & Co., Inc., Commission No-Action Letter (available June 5, 1991) and Shearman & Sterling, Commission No-Action Letter (available July 2, 1993), that the Exchange Notes issued in exchange for the Additional Notes pursuant to the Exchange Offer may be offered for resale, resold and otherwise transferred by holders thereof (other than a broker-dealer who purchased Additional Notes exchanged for such Exchange Notes directly from the Company to resell pursuant to Rule 144A or any other available exemption under the Securities Act of 1933, as amended (the "Securities Act") and any such holder that is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act), without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such Exchange Notes are acquired in the ordinary course of such holders' business and such holders are not participating in, and have no arrangement with any person to participate in, the distribution of such Exchange Notes.
5. By tendering Additional Notes in the Exchange Offer, you represent and warrant that:
a. the Exchange Notes acquired pursuant to the Exchange Offer are being obtained in the ordinary course of your business, whether or not you are the holder;
b. neither you nor any such other person is engaging in or intends to engage in a distribution of such Exchange Notes;
c. neither you nor any such other person has an arrangement or understanding with any person to participate in the distribution of such Exchange Notes;
d. neither you nor any such other person is an "affiliate," as such term is defined under Rule 405 promulgated under the Securities Act, of the Company or the Guarantors; and
e. if you are a broker-dealer that will receive Exchange Notes for your own account in exchange for Additional Notes, you acquired those Additional Notes as a result of market-making activities or other trading activities and you will deliver the prospectus, as required by law, in connection with any resale of the Exchange Notes.
6. If you are a broker-dealer that will receive Exchange Notes for your own account in exchange for Additional Notes that were acquired as a result of market-making activities or other trading activities, you acknowledge, by tendering Additional Notes in the Exchange Offer, that you will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such Exchange Notes; however, by so acknowledging and by delivering a prospectus, you will not be deemed to admit that you are an "underwriter" within the meaning of the Securities Act. If you are a broker-
| |
| (1) | By tendering Old Notes in the Exchange Offer, you acknowledge receipt of the Prospectus and this Letter of Transmittal. |
| |
| (2) | By tendering Old Notes in the Exchange Offer, you represent and warrant that you have full authority to tender the Old Notes described above and will, upon request, execute and deliver any additional documents deemed by the Company to be necessary or desirable to complete the tender of Old Notes. |
| |
| (3) | The tender of the Old Notes pursuant to all of the procedures set forth in the Prospectus will constitute an agreement between you and the Company as to the terms and conditions set forth in the Prospectus. |
| |
| (4) | The Exchange Offer is being made in reliance upon interpretations contained in no-action letters issued to third parties by the staff of the Securities and Exchange Commission (the “Commission”), including Exxon Capital Holdings Corp., Commission No-Action Letter (available May 13, 1988), Morgan Stanley & Co., Inc., Commission No-Action Letter (available June 5, 1991) and Shearman & Sterling, Commission No-Action Letter (available July 2, 1993), that the New Notes issued in exchange for the Old Notes pursuant to the Exchange Offer may be offered for resale, resold and otherwise transferred by holders thereof (other than a broker-dealer who purchased Old Notes exchanged for such New Notes directly from the Company to resell pursuant to Rule 144A or any other available exemption under the Securities Act of 1933, as amended (the “Securities Act”) and any such holder that is an “affiliate” of the Company within the meaning of Rule 405 under the Securities Act), without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such New Notes are acquired in the ordinary course of such holders’ business and such holders are not participating in, and have no arrangement with any person to participate in, the distribution of such New Notes. |
| |
| (5) | By tendering Old Notes in the Exchange Offer, you represent and warrant that: |
| |
| (a) | the New Notes acquired pursuant to the Exchange Offer are being obtained in the ordinary course of your business, whether or not you are the holder; |
| |
| (b) | neither you nor any such other person is engaging in or intends to engage in a distribution of such New Notes; |
| |
| (c) | neither you nor any such other person has an arrangement or understanding with any person to participate in the distribution of such New Notes; |
| |
| (d) | neither you nor any such other person is an “affiliate,” as such term is defined under Rule 405 promulgated under the Securities Act, of the Company or the Subsidiary Guarantors; and |
| |
| (e) | if you are a broker-dealer that will receive New Notes for your own account in exchange for Old Notes, you acquired those Old Notes as a result of market-making activities or other trading activities and you will deliver the prospectus, as required by law, in connection with any resale of the New Notes. |
| |
| (6) | If you are a broker-dealer that will receive New Notes for your own account in exchange for Old Notes that were acquired as a result of market-making activities or other trading activities, you acknowledge, by tendering Old Notes in the Exchange Offer, that you will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such New Notes; however, by so acknowledging and by delivering a prospectus, you will not be deemed to admit that you are an “underwriter” within the meaning of the Securities Act. If you are a broker-dealer and Old Notes held for your own account were not acquired as a result of market-making or other trading activities, such Old Notes cannot be exchanged pursuant to the Exchange Offer. |
| |
| (7) | Any of your obligations hereunder shall be binding upon your successors, assigns, executors, administrators, trustees in bankruptcy and legal and personal representatives. |
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dealer and Additional Notes held for your own account were not acquired as a result of market-making or other trading activities, such Additional Notes cannot be exchanged pursuant to the Exchange Offer.
7. Any of your obligations hereunder shall be binding upon your successors, assigns, executors, administrators, trustees in bankruptcy and legal and personal representatives.
o
CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.
If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of ExchangeNew Notes. If the undersigned is a broker-dealer that will receive ExchangeNew Notes for its own account in exchange for AdditionalOld Notes that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus in connection with any resale of such ExchangeNew Notes; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter"“underwriter” within the meaning of the Securities Act.
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FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1.Book-Entry Confirmations. Any confirmation of a book-entry transfer to the Exchange
Agent'sAgent’s account at DTC of
AdditionalOld Notes tendered by book-entry transfer (a
"Book-Entry Confirmation"“Book-Entry Confirmation”), as well as an
agent'sagent’s message, and any other documents required by this Letter of Transmittal, must be received by the Exchange Agent at its address set forth herein prior to
11:595:00 P.M. New York City time on ,
2018.2019.
Tenders of
AdditionalOld Notes will be accepted only in
minimum denominations of $2,000 and integral multiples of $1,000 in excess thereof. The entire principal amount of
AdditionalOld Notes delivered to the Exchange Agent will be deemed to have been tendered unless otherwise communicated to the Exchange Agent. If the entire principal amount of all
AdditionalOld Notes is not tendered, then
AdditionalOld Notes for the principal amount of
AdditionalOld Notes not tendered and
ExchangeNew Notes issued in exchange for any
AdditionalOld Notes accepted will be delivered to the holder via the facilities of DTC promptly after the
AdditionalOld Notes are accepted for exchange.
The Company will determine in its sole discretion all questions as to the validity, form, eligibility, time of receipt, acceptance of tendered AdditionalOld Notes and withdrawal of tendered AdditionalOld Notes. The Company'sCompany’s determination will be final and binding. The Company reserves the absolute right to reject any AdditionalOld Notes not properly tendered or any AdditionalOld Notes the Company'sCompany’s acceptance of which might, in the opinion of counsel for the Company, be unlawful. The Company also reserves the absolute right to waive any defect, irregularities or conditions of tender as to particular AdditionalOld Notes. The Company'sCompany’s interpretation of the terms and conditions of the Exchange Offer (including the instructions on this Letter of Transmittal) will be final and binding on all parties. Unless waived, all defects or irregularities in connection with tenders of AdditionalOld Notes must be cured within such time as the Company shall determine. Although the Company intends to notify holders of defects or irregularities with respect to tenders of AdditionalOld Notes, neither the Company, the Exchange Agent, nor any other person will incur any liability for failure to give such notification. Tenders of AdditionalOld Notes will not be deemed made until such defects or irregularities have been cured or waived. Any AdditionalOld Notes received by the Exchange Agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned by the Exchange Agent to the tendering holder promptly following the Expiration Time.
Offer to Exchange
up to
$100,000,000 of 3.430% Senior Notes due 2027
that have been registered under the Securities Act of 1933
for any and all outstanding
$100,000,000 of 3.430% Senior Notes due 2027
that have not been registered under the Securities Act of 1933
and up to
$300,000,000 of 4.500% Senior Notes due 2045
that have been registered under the Securities Act of 1933
for any and all outstanding
$300,000,000 of 4.500% Senior Notes due 2045
that have not been registered under the Securities Act of 1933
PROSPECTUS
, 2018
Until , 2018, all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
This prospectus incorporates by reference business and financial information about us that is not included in or delivered with this prospectus. The information incorporated by reference is deemed to be part of this prospectus, except for any information superseded by information in this prospectus. The information incorporated by reference is an important part of this prospectus, and information that we file later with the Securities and Exchange Commission (the "SEC") will automatically update and supersede this information. You may request a copy of any document incorporated by reference in this prospectus (including exhibits to those documents specifically incorporated by reference in this document), at no cost by visiting our website at www.drpeppersnapplegroup.com or by writing or calling us at Dr Pepper Snapple Group, Inc., 5301 Legacy Drive, Plano, Texas 75024, Attn: Investor Relations, Telephone: (972) 673-7000.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM
Item 20.
Indemnification of Directors and Officers
Officers.
Set forth below is a description of certain provisions of the Amended and Restated Certificate of Incorporation, as amended to date (the "Certificate“Certificate of Incorporation"Incorporation”) of Dr Pepper Snapple Group, Inc. (the "Company")the Company and the Delaware General Corporation Law (the "DGCL"“DGCL”). This description is intended as a summary only and is qualified in its entirety by reference to the Certificate of Incorporation and the DGCL.DELAWARE GENERAL CORPORATION LAW
Delaware General Corporation Law
Section 145 of the DGCL provides that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that the person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership or other enterprise, against all expenses (including
attorneys'attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by them in connection with such action, suit or proceeding if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interest of the corporation and, with respect to any criminal action or proceeding, if he or she had no reasonable cause to believe their conduct was unlawful. Section 145 further provides that a corporation similarly may indemnify any such person serving in any such capacity who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor, against expenses (including
attorneys'attorneys’ fees) actually and reasonably incurred in connection with the defense or settlement of the action or suit if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation, except that no indemnification may be made against expenses in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation, unless and only to the extent that the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such court shall deem proper.
CERTIFICATE OF INCORPORATION
Certificate of Incorporation
Limitation on Liability of Directors
Pursuant to authority conferred by Section 102 of the DGCL, Article Seventh of our Certificate of Incorporation eliminates the personal liability of directors to us or our stockholders for monetary damages for breach of fiduciary duty, including, without limitation, directors serving on committees of our board of directors, except to the extent such exemption from liability or limitation thereof is not permitted under the DGCL.
Indemnification and Insurance
In accordance with Section 145 of the DGCL, Article Eighth of the Certificate of Incorporation grants our directors and officers a right to indemnification for all expenses, liabilities and losses relating to civil, criminal, administrative or investigative actions, suits or proceedings to which they are a party (other than an action or suit by us or in our right, in which case our directors and officers have a right to indemnification for all expenses, except in respect of any claim, issue or matter as to which such officer or director is adjudged to be liable to us) (1) by reason of the fact that they are or were our
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directors or officers, (2) by reason of the fact that, while they are or were our directors or officers, they are or were serving at our request as directors or officers of another corporation, partnership, joint venture, trust or entity or (3) by reason of any action alleged to have been taken or omitted in such person'sperson’s capacity as our director or officer or in any other capacity while serving at our request as directors or officers of another corporation, partnership, joint venture, trust or entity.
Article Eighth of the Certificate of Incorporation further provides for the mandatory advancement of expenses incurred by officers and directors in defending such proceedings in advance of their final disposition upon delivery to us by the indemnitee of an undertaking to repay all amounts so advanced if it is ultimately determined that such indemnitee is not entitled to be indemnified under Article Eighth. We may not indemnify or make advance payments to any person in connection with proceedings initiated against us by such person without the authorization of our board of directors.
In addition, Article Eighth of the Certificate of Incorporation provides that directors and officers therein described shall be indemnified to the fullest extent permitted by the DGCL, and if the DGCL is subsequently amended to expand further the indemnification or advancements permitted, then we shall indemnify such directors and officers to the fullest extent permitted by the DGCL, as so amended.
Article Eighth of the Certificate of Incorporation allows the indemnification to continue after an indemnitee has ceased to be our director or officer and to inure to the benefit of the
indemnitee'sindemnitee’s heirs, executors and administrators.
Article Eighth of the Certificate of Incorporation further provides that the right to indemnification is not exclusive of any other right that any indemnitee may be entitled under any law, any agreement or vote of stockholders or disinterested directors or otherwise.
The Certificate of Incorporation authorizes us to purchase insurance for our directors and officers and persons who serve at our request as directors, officers, employees or agents of another corporation, partnership, joint venture, trust or entity against any liability incurred in such capacity, whether or not we would have the power to indemnify such persons against such expense or liability under the DGCL. We intend to maintain insurance coverage for our officers and directors as well as insurance coverage to reimburse us for potential costs of our corporate indemnification of directors and
officers. ITEMofficers
The Exhibits listed on the accompanying Index to Exhibits preceding the signature pages hereto are filed as part of, or incorporated by reference into, this registration statement.
ITEM
Item 22.
Undertakings
The undersigned registrants hereby undertake:
1. To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933, as amended;
(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Securities and Exchange Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume
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and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.
2. That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
3. To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
4. That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser, if such registrant is subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
5. That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser: (i) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424; (ii) any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant; (iii) the portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and (iv) any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
6. Undertakings.
The undersigned registrant hereby
undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. 7. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions or otherwise, the registrant has been advised that in the opinion of the Securities and
undertakes:
| |
| (1) | To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: |
| |
| (i) | To include any prospectus required by section 10(a)(3) of the Securities Act of 1933; |
| |
| (ii) | To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and |
| |
| (iii) | To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. |
| |
| (2) | That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof |
| |
| (3) | To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. |
| |
| (4) | That, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant’s annual reports pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
| |
| (5) | Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. |
| |
| (6) | That, for purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. |
| |
| (7) | That, for the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
| |
| (8) | To respond to requests for information that is incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request. |
| |
| (9) | To supply by means of post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective. |
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Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is therefore unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933, and will be governed by the final adjudication of such issue.
8. To respond to requests for information that is incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request.
9. To supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective.
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EXHIBIT INDEX
TO EXHIBITS | |
| |
| Exhibit
Number | | No. | Description |
|---|
| 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) and incorporated herein by reference). |
| Agreement and Plan of Merger, dated as of November 21, 2016, by and among Bai Brands LLC, Dr Pepper Snapple Group, Inc., Superfruit Merger Sub, LLC and Fortis Advisors LLC (filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K (filed on November 23, 2016) and incorporated herein by reference). |
| Amendment No. 1, dated as of January 31, 2017, to the Agreement and Plan of Merger, dated as of November 21, 2016, by and among Bai Brands LLC, Dr Pepper Snapple Group, Inc., Superfruit Merger Sub, LLC and Fortis Advisors LLC (filed as Exhibit 2.2 to the Company’s Current Report on Form 8-K (filed on January 31, 2017) and incorporated herein by reference). |
| Agreement and Plan of Merger, dated as of January 29, 2018, by and among Dr Pepper Snapple Group, Inc., Maple Parent Holdings Corp. and Salt Merger Sub, Inc. (filed as Exhibit 2.1 to the Company'sCompany’s Current Report on Form 8-K (filed on January 31, 2018) and incorporated herein by reference). |
| | | |
| 3.1 | | Amended and Restated Certificate of Incorporation of Dr Pepper Snapple Group, Inc. (filed as Exhibit 3.1 to the Company'sCompany’s Current Report on Form 8-K (filed on May 12, 2008) and incorporated herein by reference). |
| | | |
| 3.2 | | Certificate of Amendment to Amended and Restated Certificate of Incorporation of Dr Pepper Snapple Group, Inc. effective as of May 17, 2012 (filed as Exhibit 3.2 to the Company'sCompany’s Quarterly Report on Form 10-Q (filed on July 26, 2012) and incorporated herein by reference). |
| | | |
| 3.3 | | Certificate of Second Amendment to Amended and Restated Certificate of Incorporation of Dr Pepper Snapple Group, Inc. effective as of May 19, 2016 (filed as Exhibit 3.1 to the Company'sCompany’s Current Report on Form 8-K (filed on May 20, 2016) and incorporated herein by reference). |
| | | |
| 3.4 | | Certificate of Third Amendment to the Amended and Restated By-LawsCertificate of Incorporation of Dr Pepper Snapple Group, Inc. effective as of January 25, 2016July 9, 2018 (filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K (filed on July 9, 2018) and incorporated herein by reference). |
| Amended and Restated By-Laws of Keurig Dr Pepper Inc. effective as of July 9, 2018 (filed as Exhibit 3.2 to the Company'sCompany’s Current Report on Form 8-K (filed January 25, 2016)on July 9, 2018) and incorporated herein by reference). |
| | | Indenture, dated April 30, 2008, between Dr Pepper Snapple Group, Inc. and Wells Fargo Bank, N.A. (filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K (filed on May 1, 2008) and incorporated herein by reference). |
| 4.1Form of 7.45% Senior Notes due 2038 (filed as Exhibit 4.4 to the Company’s Current Report on Form 8-K (filed on May 1, 2008) and incorporated herein by reference). |
| | Supplemental Indenture, dated as of December 15, 2009, betweenMay 7, 2008, among Dr Pepper Snapple Group, Inc., the Companysubsidiary guarantors named therein and Wells Fargo Bank, N.A., as trustee (filed as Exhibit 4.1 to the Company'sCompany’s Current Report on Form 8-K filed(filed on December 23, 2009May 12, 2008) and incorporated herein by reference). |
| | | Second Supplemental Indenture dated March 17, 2009, to be effective as of December 31, 2008, among Splash Transport, Inc., as a subsidiary guarantor, Dr Pepper Snapple Group, Inc., and Wells Fargo Bank, N.A., as trustee (filed as Exhibit 4.8 to the Company’s Annual Report on Form 10-K (filed on March 26, 2009) and incorporated herein by reference). |
| 4.2Third Supplemental Indenture, dated October 19, 2009, among 234DP Aviation, LLC, as a subsidiary guarantor; Dr Pepper Snapple Group, Inc., and Wells Fargo Bank, N.A., as trustee (filed as Exhibit 4.9 to the Company’s Quarterly Report on Form 10-Q (filed on November 5, 2009) and incorporated herein by reference). |
| Fourth Supplemental Indenture, dated as of January 31, 2017, among Bai Brands LLC, a New Jersey limited liability company, 184 Innovations Inc., a Delaware corporation (each as a new subsidiary guarantor under the Indenture dated April 30, 2008 (as referenced in Item 4.1 in this Exhibit Index)), Dr Pepper Snapple Group, Inc., each other then-existing Guarantor under the Indenture and Wells Fargo, National Bank, N.A., as trustee (filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K (filed on February 2, 2017) and incorporated herein by reference). |
|
| |
| Exhibit No. | Description |
| Indenture, dated as of December 15, 2009, between Dr Pepper Snapple Group, Inc. and Wells Fargo Bank, N.A., as trustee (filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K (filed on December 23, 2009) and incorporated herein by reference). |
| Second Supplemental Indenture, dated as of January 11, 2011, among Dr Pepper Snapple Group, Inc., the guarantors party thereto and Wells Fargo Bank, N.A., as trustee (filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K (filed on January 11, 2011) and incorporated herein by reference). |
| Third Supplemental Indenture, dated as of November 15, 2011, among Dr Pepper Snapple Group, Inc., the guarantors party thereto and Wells Fargo Bank, N.A., as trustee (filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K (filed on November 15, 2011) and incorporated herein by reference). |
| 3.20% Senior Note due 2021 (in global form), dated November 15, 2011, in the principal amount 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). |
| Fourth Supplemental Indenture, dated as of November 20, 2012, among Dr Pepper Snapple Group, Inc., the guarantors party thereto and Wells Fargo Bank, N.A., as trustee (filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K (filed on November 20, 2012) and incorporated herein by reference). |
| 2.00% Senior Note due 2020 (in global form), dated November 20, 2012, in the principal amount of $250 million (filed as Exhibit 4.2 to the Company’s Current Report on Form 8-K (filed on November 20, 2012) and incorporated herein by reference). |
| 2.70% Senior Note due 2022 (in global form), dated November 20, 2012, in the principal amount of $250 million (filed as Exhibit 4.3 to the Company’s Current Report on Form 8-K (filed on November 20, 2012) and incorporated herein by reference). |
| Fifth Supplemental Indenture, dated as of November 9, 2015, among Dr Pepper Snapple Group, Inc., the guarantors party thereto and Wells Fargo Bank, N.A., as trustee (filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K (filed on November 10, 2015) and incorporated herein by reference). |
| 3.40% Senior Note due 2025 (in global form), dated November 9, 2015, in the principal amount of $500,000,000 (filed as Exhibit 4.2 to the Company’s Current Report on Form 8-K (filed on November 10, 2015) and incorporated herein by reference). |
| 4.50% Senior Note due 2045 (in global form), dated November 9, 2015, in the principal amount of $250,000,000 (filed as Exhibit 4.3 to the Company’s Current Report on Form 8-K (filed on November 10, 2015) and incorporated herein by reference). |
| Sixth Supplemental Indenture, dated as of September 16, 2016, among Dr Pepper Snapple Group, Inc., the guarantors party thereto and Wells Fargo Bank, N.A., as trustee (filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K (filed on September 16, 2016) and incorporated herein by reference). |
| 2.55% Senior Note due 2026 (in global form), dated September 16, 2016, in the principal amount of $400,000,000 (filed as Exhibit 4.2 to the Company’s Current Report on Form 8-K (filed on September 16, 2016) and incorporated herein by reference). |
| Seventh Supplemental Indenture, dated as of December 14, 2016, among Dr Pepper Snapple Group, Inc., the guarantors party thereto and Wells Fargo Bank, N.A., as trustee (filed as Exhibit 4.1 to the Company'sCompany’s Current Report on Form 8-K (filed on December 14, 2016) and incorporated herein by reference). |
| | | 2.53% Senior Note due 2021 (in global form), dated December 14, 2016, in the principal amount of $250,000,000 (filed as Exhibit 4.2 to the Company’s Current Report on Form 8-K (filed on December 14, 2016) and incorporated herein by reference). |
| 3.13% Senior Note due 2023 (in global form), dated December 14, 2016, in the principal amount of $500,000,000 (filed as Exhibit 4.3 to the Company’s Current Report on Form 8-K (filed on December 14, 2016) and incorporated herein by reference). |
| 3.43% Senior Note due 2027 (in global form), dated December 14, 2016, in the principal amount of $400,000,000 (filed as Exhibit 4.4 to the Company’s Current Report on Form 8-K (filed on December 14, 2016) and incorporated herein by reference). |
| 4.42% Senior Note due 2046 (in global form), dated December 14, 2016, in the principal amount of $400,000,000 (filed as Exhibit 4.5 to the Company’s Current Report on Form 8-K (filed on December 14, 2016) and incorporated herein by reference). |
|
| |
| Exhibit No. | Description |
| Eighth Supplemental Indenture, dated as of November 9, 2015,January 31, 2017, among Bai Brands LLC, a New Jersey limited liability company, 184 Innovations Inc., a Delaware corporation (each as a new subsidiary guarantor under the Indenture dated April 30, 2008 (as referenced in Item 4.1 in this Exhibit Index), Dr Pepper Snapple Group, Inc., each other then-existing Guarantor under the guarantors party theretoIndenture) and Wells Fargo, National Bank, N.A., as trustee (filed as Exhibit 4.14.2 to the Company'sCompany’s Current Report on Form 8-K (filed on November 10, 2015)February 2, 2017) and incorporated herein by reference). |
| | | |
| 4.4 | | Ninth Supplemental Indenture, dated as of June 15, 2017, among Dr Pepper Snapple Group, Inc., the guarantors party thereto, and Wells Fargo Bank, N.A., as trustee (filed as Exhibit 4.1 to the Company'sCompany’s Current Report on Form 8-K (filed on June 15, 2017) and incorporated herein by reference). |
| | | |
| 4.5 | | RegistrationInvestor Rights Agreement dated June 15, 2017, betweenby and among Keurig Dr Pepper Snapple Group, Inc., and the guarantors partyholders listed on Schedule A thereto, Morgan Stanley & Co. LLC, Goldman Sachs & Co. LLC, and J.P. Morgan Securities LLCdated as of July 9, 2018 (filed as Exhibit 4.24.1 to the Company'sCompany’s Current Report on Form 8-K (filed on June 15, 2017)July 9, 2018) and incorporated herein by reference). |
| | | Base Indenture, dated as of May 25, 2018 between Maple Escrow Subsidiary and Wells Fargo Bank, N.A. as trustee (filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K (filed on July 9, 2018) and incorporated herein by reference). |
| 5.1 | * | OpinionFirst Supplemental Indenture (including the form of Baker Botts L.L.P.note), dated as of May 25, 2018, among Maple Escrow Subsidiary, Inc. and Maple Parent Holdings Corp. as parent guarantor, and Wells Fargo Bank, N.A., as trustee relating to the 2021 Notes (filed as Exhibit 4.2 to the Company’s Current Report on Form 8-K (filed on July 9, 2018) and incorporated herein by reference). |
| | | Second Supplemental Indenture (including the form of note), dated as of May 25, 2018, among Maple Escrow Subsidiary, Inc. and Maple Parent Holdings Corp. as parent guarantor, and Wells Fargo Bank, N.A., as trustee relating to the 2023 Notes (filed as Exhibit 4.3 to the Company’s Current Report on Form 8-K (filed on July 9, 2018) and incorporated herein by reference). |
| 12.1Third Supplemental Indenture (including the form of note), dated as of May 25, 2018, among Maple Escrow Subsidiary, Inc. and Maple Parent Holdings Corp. as parent guarantor, and Wells Fargo Bank, N.A., as trustee relating to the 2025 Notes (filed as Exhibit 4.4 to the Company’s Current Report on Form 8-K (filed on July 9, 2018) and incorporated herein by reference). |
| Fourth Supplemental Indenture (including the form of note), dated as of May 25, 2018, among Maple Escrow Subsidiary, Inc. and Maple Parent Holdings Corp. as parent guarantor, and Wells Fargo Bank, N.A., as trustee relating to the 2028 Notes (filed as Exhibit 4.5 to the Company’s Current Report on Form 8-K (filed on July 9, 2018) and incorporated herein by reference). |
| ComputationFifth Supplemental Indenture (including the form of Rationote), dated as of EarningsMay 25, 2018, among Maple Escrow Subsidiary, Inc. and Maple Parent Holdings Corp. as parent guarantor, and Wells Fargo Bank, N.A., as trustee relating to Fixed Chargesthe 2038 Notes (filed as Exhibit 4.6 to the Company’s Current Report on Form 8-K (filed on July 9, 2018) and incorporated herein by reference). |
| Sixth Supplemental Indenture (including the form of note), dated as of May 25, 2018, among Maple Escrow Subsidiary, Inc. and Maple Parent Holdings Corp. as parent guarantor, and Wells Fargo Bank, N.A., as trustee relating to the 2048 Notes (filed as Exhibit 4.7 to the Company’s Current Report on Form 8-K (filed on July 9, 2018) and incorporated herein by reference). |
| Seventh Supplemental Indenture, dated as of July 9, 2018, among Keurig Dr Pepper Inc., the subsidiary guarantors thereto, and Wells Fargo Bank, N.A., as trustee (filed as Exhibit 4.8 to the Company’s Current Report on Form 8-K (filed on July 9, 2018) and incorporated herein by reference). |
| Registration Rights Agreement, dated as of May 25, 2018, among Maple Escrow Subsidiary, Inc. and J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Goldman Sachs & Co. LLC and Citigroup Global Markets Inc., as representative of the several purchasers of the Notes (filed as Exhibit 4.9 to the Company’s Current Report on Form 8-K (filed on July 9, 2018) and incorporated herein by reference). |
| Joinder to the Registration Rights Agreement, dated as of May 25, 2018, among Maple Escrow Subsidiary, Inc. and J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Goldman Sachs & Co. LLC and Citigroup Global Markets Inc., as representative of the several purchasers of the Notes (filed as Exhibit 4.10 to the Company’s Current Report on Form 8-K (filed on July 9, 2018) and incorporated herein by reference). |
| 4.37 | Form of New 2021 Note as filed with the First Supplemental Indenture in Exhibit 4.28 above. |
| 4.38 | Form of New 2023 Note as filed with the Second Supplemental Indenture in Exhibit 4.29 above |
| 4.39 | Form of New 2025 Note as filed with the Third Supplemental Indenture in Exhibit 4.30 above |
| 4.40 | Form of New 2028 Note as filed with the Fourth Supplemental Indenture in Exhibit 4.31 above |
|
| |
| Exhibit No. | Description |
| 4.41 | Form of New 2038 Note as filed with the Fifth Supplemental Indenture in Exhibit 4.32 above |
| 4.42 | Form of New 2048 Note as filed with the Sixth Supplemental Indenture in Exhibit 4.33 above |
| Opinion and consent of General Counsel |
| Opinion and consent of Skadden, Arps, Slate, Meagher & Flom LLP. |
| Term Loan Agreement, dated as of February 8, 2019, among Keurig Dr Pepper Inc., the banks party thereto and JPMorgan Chase, Bank, N.A., as administrative agent (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K (filed on February 11, 2019) and incorporated herein by reference). |
| Credit Agreement, dated as of February 28, 2018, among Maple Parent Holdings Corp., the banks and issuers of credit party thereto and JPMorgan Chase Bank, N.A., as administrative agent (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K (filed on July 9, 2018) and incorporated herein by reference). |
| Borrower Joinder (Term Loan Agreement), dated as of July 9, 2018, among Keurig Dr Pepper Inc., Maple Parent Holdings Corp. and JPMorgan Chase Bank, N.A., as administrative agent (filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K (filed on July 9, 2018) and incorporated herein by reference). |
| Borrower Joinder (Credit Agreement), dated as of July 9, 2018, among Keurig Dr Pepper Inc., Maple Parent Holdings Corp. and JPMorgan Chase Bank, N.A. as administrative agent (filed as Exhibit 10.4 to the Company’s Current Report on Form 8-K (filed on July 9, 2018) and incorporated herein by reference). |
| Amended and Restated Employment Agreement, dated as of July 2, 2018, by and between Keurig Green Mountain, Inc. and Robert J. Gamgort (filed as Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q (filed on November 8, 2018) and incorporated herein by reference). |
| Employment Agreement, dated as of April 12, 2016, by and between Keurig Green Mountain, Inc. and Ozan Dokmecioglu. |
| Restricted Stock Unit Award Terms and Conditions under the Keurig Dr Pepper Omnibus Incentive Plan of 2009 (filed as Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q (filed on November 8, 2018) and incorporated herein by reference). |
| Matching Restricted Stock Unit Award Terms and Conditions under the Keurig Dr Pepper Omnibus Incentive Plan of 2009 (filed as Exhibit 10.8 to the Company’s Quarterly Report on Form 10-Q (filed on November 8, 2018) and incorporated herein by reference). |
| Directors’ Restricted Stock Unit Award Terms and Conditions under the Keurig Dr Pepper Omnibus Incentive Plan of 2009 (filed as Exhibit 10.9 to the Company’s Quarterly Report on Form 10-Q (filed on November 8, 2018) and incorporated herein by reference). |
| Subsidiaries of the Company (incorporated herein by reference to Exhibit 12.1 to21.1 of the Company's Annual Report onCompany’s Form 10-K filed on February 14,for the year ended December 31, 2018). |
| | | |
| 23.1 | * | Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm.independent registered public accounting firm for the Registrant. |
|
| | |
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Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the Town of Burlington, State of Massachusetts, on April 18, 2019.
KEURIG DR PEPPER INC.
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Table
POWERS OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Robert J. Gamgort, Ozan Dokmecioglu and James L. Baldwin, Jr. and each of
Contents
SIGNATURES
them, as such person’s true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution for such person and in such person’s name, place and stead, in any and all capacities, to sign and file (1) any and all amendments (including post-effective amendments) to this registration statement, with all exhibits thereto, and other documents in connection therewith and (2) a registration statement, and any and all amendments thereto, relating to the offering covered hereby filed pursuant to Rule 462 under the Securities Act, with the SEC, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact, agent or their substitutes may lawfully do or cause to be done by virtue hereof. This power of attorney may be signed in any number of counterparts, each of which shall constitute an original and all of which, taken together, shall constitute one Power of Attorney.
Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
|
| | |
| Signature | Title | Date |
| | |
| /s/ Robert J. Gamgort | Executive Chairman, Chief Executive Officer and President (Principal Executive Officer) | April 18, 2019 |
| Robert J. Gamgort |
/s/ Ozan Dokmecioglu | Chief Financial Officer (Principal Financial Officer) | April 18, 2019 |
| Ozan Dokmecioglu |
| /s/ Angela Stephens | Controller (Principal Accounting Officer) | April 18, 2019 |
| Angela Stephens |
| /s/ Olivier Goudet | Director | April 18, 2019 |
| Olivier Goudet |
| /s/ Peter Harf | Director | April 18, 2019 |
| Peter Harf |
| /s/ Genevieve Hovde | Director | April 18, 2019 |
| Genevieve Hovde |
| /s/ Anna-Lena Kamenetzky | Director | April 18, 2019 |
| Anna-Lena Kamenetzky |
| /s/ Paul S. Michaels | Director | April 18, 2019 |
| Paul S. Michaels |
| /s/ Pamela Patsley | Director | April 18, 2019 |
| Pamela Patsley |
| /s/ Gerhard Pleuhs | Director | April 18, 2019 |
| Gerhard Pleuhs |
| /s/ Fabien Simon | Director | April 18, 2019 |
| Fabien Simon |
| /s/ Robert Singer | Director | April 18, 2019 |
| Robert Singer |
| /s/ Dirk Van de Put | Director | April 18, 2019 |
| Dirk Van de Put |
| /s/ Larry D. Young | Director | April 18, 2019 |
| Larry D. Young |
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, each registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-4 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the Town of Burlington, State of Massachusetts, on April 18, 2019.
234DP AVIATION, LLC
A & W CONCENTRATE COMPANY
AMERICAS BEVERAGES MANAGEMENT GP
BAI BRANDS LLC
BEVERAGES DELAWARE INC.
DP BEVERAGES INC.
DPS AMERICAS BEVERAGES, LLC
DPS BEVERAGES, INC.
DPS HOLDINGS INC.
DR PEPPER/SEVEN-UP BEVERAGE SALES COMPANY
DR PEPPER/SEVEN UP MANUFACTURING COMPANY
DR PEPPER/SEVEN UP, INC.
MOTT’S DELAWARE LLC
MOTT’S LLP
MSSI LLC
NANTUCKET ALLSERVE, LLC
SNAPPLE BEVERAGE CORP.
THE AMERICAN BOTTLING COMPANY
|
| | | | |
| | By: | /s/ Ozan Dokmecioglu |
| | | Ozan Dokmecioglu |
| | | Chief Financial Officer |
POWERS OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Robert J. Gamgort, Ozan Dokmecioglu and James L. Baldwin, Jr. and each of them, as such person’s true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution for such person and in such person’s name, place and stead, in any and all capacities, to sign and file (1) any and all amendments (including post-effective amendments) to this registration statement, with all exhibits thereto, and other documents in connection therewith and (2) a registration statement, and any and all amendments thereto, relating to the offering covered hereby filed pursuant to Rule 462 under the Securities Act, with the SEC, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact, agent or their substitutes may lawfully do or cause to be done by virtue hereof. This power of attorney may be signed in any number of counterparts, each of which shall constitute an original and all of which, taken together, shall constitute one Power of Attorney.
Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
|
| | |
| Signature | Title | Date |
| | |
| /s/ Robert J. Gamgort | Executive Chairman, Chief Executive Officer and President (Principal Executive Officer) | April 18, 2019
|
| Robert J. Gamgort |
| /s/ Ozan Dokmecioglu | Chief Financial Officer (Principal Financial Officer) | April 18, 2019
|
| Ozan Dokmecioglu |
| /s/ Angela Stephens | Controller (Principal Accounting Officer) | April 18, 2019
|
| Angela Stephens |
| /s/ James L. Baldwin, Jr. | Chief Legal Officer, General Counsel and Secretary | April 18, 2019
|
| James L. Baldwin, Jr. |
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-4 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the CityTown of Plano,Burlington, State of Texas,Massachusetts, on March 21, 2018.April 18, 2019.
SPLASH TRANSPORT, INC.
|
| | | | |
| | DR PEPPER SNAPPLE GROUP, INC.By: | /s/ Fernando Cortes |
| | By:
| Fernando Cortes |
| | /s/ JAMES L. BALDWIN
James L. Baldwin
Executive Vice | President & General Counsel |
Each person whose signature appears below constitutes and appoints Larry D. Young, Martin M. EllenRobert J. Gamgort, Ozan Dokmecioglu and James L. Baldwin and each of them, as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for such person and in his or her name, place and stead, in any and all capacities, to sign any or all further amendments (including post-effective amendments) to this registration statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. This Power of Attorney may be signed in any number of counterparts, each of which shall constitute an original and all of which, taken together, shall constitute one Power of Attorney. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated and on the
2118 day of
March, 2018.April, 2019.
| | |
SIGNATURE
| | TITLE
|
|---|
|
|
|
/s/ LARRY D. YOUNG
Larry D. Young | | President, Chief Executive Officer and Director (Principal Executive Officer) |
/s/ MARTIN M. ELLEN
Martin M. Ellen |
|
Executive Vice President and Chief Financial Officer (Principal Financial Officer) |
/s/ ANGELA A. STEPHENS
Angela A. Stephens |
|
Senior Vice President and Controller (Principal Accounting Officer) |
/s/ WAYNE R. SANDERS
Wayne R. Sanders |
|
Chairman of the Board |
II-7
Table of Contents
| | |
SIGNATURE
| | TITLE
|
|---|
|
|
|
/s/ DAVID E. ALEXANDER
David E. Alexander | | Director |
/s/ ANTONIO CARILLO
Antonio Carillo |
|
Director |
/s/ JOSÉ GUTIÉRREZ
José Gutiérrez |
|
Director |
/s/ PAMELA H. PATSLEY
Pamela H. Patsley |
|
Director |
/s/ RONALD G. ROGERS
Ronald G. Rogers |
|
Director |
/s/ DUNIA A. SHIVE
Dunia A. Shive |
|
Director |
/s/ M. ANNE SZOSTAK
M. Anne Szostak |
|
Director |
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Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, each registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-4 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Plano, State of Texas, on March 21, 2018.
| | | | |
| SIGNATURE | | 184 Innovations, Inc.TITLE |
| | 234DP AVIATION, LLC |
| | A & W CONCENTRATE COMPANY |
| | AMERICAS BEVERAGES MANAGEMENT GP |
| | AMTRANS, INC. |
| | Bai Brands LLC |
| | BEVERAGES DELAWARE INC. |
| | DP BEVERAGES INC. |
| | DPS AMERICAS BEVERAGES, LLC |
| | DPS BEVERAGES, INC. |
| | DPS HOLDINGS INC. |
| | DR PEPPER/SEVEN-UP BEVERAGE SALES COMPANY |
| | DR PEPPER/SEVEN UP MANUFACTURING COMPANY |
| | DR PEPPER/SEVEN UP, INC. |
| | MOTT'S DELAWARE LLC |
| | MOTT'S LLP |
| | MSSI LLC |
| | NANTUCKET ALLSERVE, LLC |
| | SNAPPLE BEVERAGE CORP. |
| | THE AMERICAN BOTTLING COMPANY |
|
|
By: |
|
/s/ Larry D. Young
Larry D. Young
Fernando Cortes | President and Chief Executive Officer |
II-9
Table of Contents
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Larry D. Young, Martin M. Ellen and James L. Baldwin and each of them, as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for such person and in his or her name, place and stead, in any and all capacities, to sign any or all further amendments (including post-effective amendments) to this registration statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. This Power of Attorney may be signed in any number of counterparts, each of which shall constitute an original and all of which, taken together, shall constitute one Power of Attorney.
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated and on the 21 day of March, 2018.
Director
| | |
SIGNATURE
| | TITLE
|
|---|
|
|
|
/s/ LARRY D. YOUNG
Larry D. Young | | President, Chief Executive Officer and Director
(Principal Executive Officer)
|
Fernando Cortes |
/s/ MARTIN M. ELLEN
Martin M. EllenDan Morrell |
|
Executive Vice President and Chief Financial Officer (Principal Financial Officer) |
/s/ ANGELA A. STEPHENS
Angela A. Stephens |
|
Senior Vice President and Controller (Principal Accounting Officer) |
/s/ JAMES L. BALDWIN
James L. Baldwin |
|
Executive Vice President & General Counsel |
II-10
Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-4 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Plano, State of Texas, on March 21, 2018.
| | | | |
| | SPLASH TRANSPORT, INC. |
|
|
By: |
|
/s/ DERRY HOBSON
Derry Hobson
President |
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Larry D. Young, Martin M. Ellen and James L. Baldwin and each of them, as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for such person and in his or her name, place and stead, in any and all capacities, to sign any or all further amendments (including post-effective amendments) to this registration statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. This Power of Attorney may be signed in any number of counterparts, each of which shall constitute an original and all of which, taken together, shall constitute one Power of Attorney.
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated and on the 21 day of March, 2018.
| | |
SIGNATURE
| | TITLE
|
|---|
|
|
|
/s/ DERRY HOBSON
Derry Hobson | | President and Director
(Principal Executive Officer) |
/s/ GREG COLLINS
Greg Collins |
|
Senior Vice President and DirectorTreasurer
(Principal Financial Officer and Principal
Accounting Officer) |
Dan Morrell |
/s/ LISA DALFONSO
Lisa Dalfonso |
|
Senior Vice President, Secretary and SecretaryDirector |
Lisa Dalfonso |
/s/ ARTHUR SWANSON
Arthur Swanson |
|
Vice President, and Assistant Secretary and Director |
| Arthur Swanson |
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