Snapple 2008 Annual Report Download - page 38

We have a significant amount of outstanding debt, which could adversely affect our business and our
ability to meet our obligations.
As of December 31, 2008, our total indebtedness was $3,524 million. This significant amount of debt could
have important consequences to us and our investors, including:
• requiring a substantial portion of our cash flow from operations to make interest payments on this debt;
• increasing our vulnerability to general adverse economic and industry conditions;
• limiting our flexibility in planning for, or reacting to, changes in our business and the industry;
• placing us at a competitive disadvantage to our competitors that may not be as highly leveraged with debt as
we are; and
• limiting our ability to borrow additional funds as needed or take advantage of business opportunities as they
arise, pay cash dividends or repurchase common stock.
To the extent we become more leveraged or experience deteriorating economic conditions, the risks described
above would increase. Additionally, it may become more difficult to satisfy debt service and other obligations, the
cash flow available to fund capital expenditures, other corporate purposes and to grow our business could be
reduced and the future credit ratings of our debt could be downgraded, which could increase future debt costs. Our
actual cash requirements in the future may be greater than expected. Our cash flow from operations may not be
sufficient to repay at maturity all of the outstanding debt as it becomes due, and we may not be able to borrow
money, sell assets or otherwise raise funds on acceptable terms, or at all, to refinance our debt.
In addition, the credit agreement governing our debt contains covenants that, among other things, limit our
ability to incur debt at subsidiaries that are not guarantors, incur liens, merge or sell, transfer or otherwise dispose of
all or substantially all of our assets, make investments, loans, advances, guarantees and acquisitions, enter into
transactions with affiliates and enter into agreements restricting our ability to incur liens or the ability of our
subsidiaries to make distributions. The agreement also requires us to comply with certain affirmative and financial
covenants.
Our financial results may be negatively impacted by the recent global financial events.
The recent global financial events have resulted in the consolidation, failure or near failure of a number of
institutions in the banking, insurance and investment banking industries and have substantially reduced the ability
of companies to obtain financing. These events have also led to a substantial reduction in stock market valuations.
These events could have a number of different effects on our business, including:
• a reduction in consumer spending, which could result in a reduction in our sales volume;
• a negative impact on the ability of our customers to timely pay their obligations to us, thus reducing our cash
flow, or our vendors to timely supply materials;
• an increase in counterparty risk;
• an increased likelihood that one or more of our banking syndicates may be unable to honor its commitments
under our revolving credit facility; and
• restricted access to capital markets that may limit our ability to take advantage of business opportunities,
such as acquisitions.
Other events or conditions may arise directly or indirectly from the global financial events that could
negatively impact our business.
Litigation or legal proceedings could expose us to significant liabilities and damage our reputation.
We are party to various litigation claims and legal proceedings. We evaluate these claims and proceedings to
assess the likelihood of unfavorable outcomes and estimate, if possible, the amount of potential losses. We may
establish a reserve as appropriate based upon assessments and estimates in accordance with our accounting policies.
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