Snapple 2010 Annual Report Download - page 33

We depend on third party bottling and distribution companies for a portion of our business.
Net sales from our Beverage Concentrates segment represent sales of beverage concentrates to third party bottling companies
that we do not own. The Beverage Concentrates segment's net sales generate a portion of our overall net sales. Some of these
bottlers are our competitors, as PepsiCo purchased PBG and PASand Coca-Cola acquired CCE’sNorth AmericanBottling Business
during 2010. The majority of these bottlers’ business comes from selling either their own products or our competitors’ products.
In addition, some of the products we manufacture are distributed by third parties. As independent companies, these bottlers and
distributors make their own business decisions. They may have the right to determine whether, and to what extent, they produce
and distribute our products, our competitors’ products and their own products. They may devote more resources to other products
or take other actions detrimental to our brands. In most cases, they are able to terminate their bottling and distribution arrangements
with us without cause. We may need to increase support for our brands in their territories and may not be able to pass on price
increases to them. Their financial condition could also be adversely affected by conditions beyond our control and our business
could suffer. Deteriorating economic conditions could negatively impact the financial viability of third party bottlers. Any of these
factors could negatively affect our business and financial performance.
Our financial results may be negatively impacted by recession, financial and credit market disruptions and other economic
conditions.
Customer and consumer demand for our products may be impacted by recession or other economic downturn in the U.S.,
Canada, Mexico or the Caribbean, which could result in a reduction in our sales volume and/or switching to lower price offerings.
Similarly, disruptions in financial and credit markets may impact our ability to manage normal commercial relationships with our
customers, suppliers and creditors. These disruptions could have 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.
We could also face increased counterparty risk for our cash investments and our hedge arrangements. Declines in the securities
and credit markets could also affect our pension fund, which in turn could increase funding requirements.
Determinations in the future that a significant impairment of the value of our goodwill and other indefinite lived intangible
assets has occurred could have a material adverse effect on our results of operations.
As of December 31, 2010,wehad$8.9 billion of total assets, of which approximately $5.7 billion were intangible assets.
Intangible assets include goodwill, and other intangible assets in connection with brands, bottler agreements, distribution rights
and customer relationships. We conduct impairment tests on goodwill and all indefinite lived intangible assets annually, as of
December 31, or more frequently if circumstances indicate that the carrying amount of an asset may not be recoverable. If the
carrying amount of an intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.
There was no impairment required based upon our annual impairment analysis performed as of December 31, 2010. For additional
information about these intangible assets, see “Critical Accounting Estimates — Goodwill and Other Indefinite Lived Intangible
Assets” in Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations,” and our Audited
Consolidated Financial Statements included in Item 8, “Financial Statements and Supplementary Data,” in this Annual Report on
Form 10-K.
The impairment tests require us to make an estimate of the fair value of intangible assets. Since a number of factors may
influence determinations of fair value of intangible assets, we are unable to predict whether impairments of goodwill or other
indefinite lived intangibles will occur in the future. Any such impairment would result in us recognizing a non-cash charge in our
Consolidated Statements of Operations, which may adversely affect our results of operations.
Our total indebtedness could affect our operations and profitability.
We maintain levels of debt we consider prudent based on our cash flows. As of December 31, 2010, our total indebtedness
was $2,094 million. Subsequent to December 31, 2010, the Company issued an additional $500 million of senior unsecured notes.
This amount of debt could have important consequences to us and our investors, including:
• requiring a portion of our cash flow from operations to make interest payments on this debt; and
• increasing our vulnerability to general adverse economic and industry conditions, which could impact our debt maturity
profile.
While we believe we will have the ability to service our debt and will have access to additional sources of capital in the future
if and when needed, that will depend upon our results of operations and financial position at the time, the then-current state of the
credit and financial markets, and other factors that may be beyond our control.
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