Snapple 2010 Annual Report Download - page 58

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Items Impacting Income Taxes
The consolidated financial statements present the taxes of our stand alone business and contain certain taxes transferred to us
at separation in accordance with the Tax Indemnity Agreement. This agreement provides for the transfer to us of taxes related to
an entity that was part of Cadbury’sconfectionery business and therefore not part of our historical consolidated financial statements.
The consolidated financial statements also reflect that the Tax Indemnity Agreement requires Cadbury to indemnify us for these
taxes. These taxes and the associated indemnity may change over time as estimates of the amounts change. Changes in estimates
will be reflected when facts change and those changes in estimate will be reflected in our Consolidated Statements of Operations
at the time of the estimate change. In addition, pursuant to the terms of the Tax Indemnity Agreement,if we breach certain covenants
or other obligations or we are involved in certain change-in-control transactions, Cadbury may not be required to indemnify us
for any of these unrecognized tax benefits that are subsequently realized.
Kraft acquired Cadbury on February 2, 2010 and, therefore, assumes responsibility for Cadbury’s indemnity obligations under
the terms of the Tax Indemnity Agreement.
Refer to Note 12 of the Notes to our Audited Consolidated Financial Statements for further information regarding the tax
impact of the separation.
Liquidity and Capital Resources
Trends and Uncertainties Affecting Liquidity
Customer and consumer demand for the Company's products may be impacted by recession or other economic downturn in
the United States, Canada, Mexico or the Caribbean, which could result in a reduction in our sales volume. Similarly, disruptions
in financial and credit markets may impact the Company's ability to manage normal commercial relationships with its 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.
The Company could also face increased counterparty risk for our cash investments and our hedge arrangements. Declines in
the securities and credit markets could also affect the Company's pension fund, which in turn could increase funding requirements.
We believe that the following recent transactions and trends and uncertainties may impact liquidity:
• changes in economic factors could impact consumers’ purchasing power;
• continued capital expenditures to upgrade our existing plants and distribution fleet of trucks, replace and expand our cold
drink equipment and make investments in IT systems;
• concentration of debt maturities and higher interest rates associated with older issuances;
on December 30, 2010, we completed a tender offer on a portion of the 2018 Notes and retired, at a premium,
an aggregate principal amount of approximately $476 million;
on January 11, 2011, we completed the issuance of $500 million aggregate principal amount of 2016 Notes;
• ability to issue unsecured commercial paper notes (the “Commercial Paper”) on a private placement basis up to a maximum
aggregate amount outstanding at any time of $500 million;
• receipts of one-time cash payments from PepsiCo and Coca-Cola;
on February 26, 2010, we received a one-time cash payment of $900 million for licensing certain brands to
PepsiCo, on completion of PepsiCo’s acquisition of PBG and PAS;
on October 4, 2010, we received a one-time payment of $715 million for licensing certain brands to Coca-Cola
as a result of Coca-Cola’s acquisition of CCE’s North American Bottling Business;
• tax payments of approximately $90 million and $500 million in 2011and 2012, respectively,resulting from the agreements
with PepsiCo and Coca-Cola.
Financing Arrangements
The following is a description of our current financing arrangements as of December 31, 2010. The summaries of the
senior unsecured notes, the senior unsecured credit facility and commercial paper program are qualified in their entirety by the
specific terms and provisions of the indenture governing the senior unsecured notes, the senior unsecured credit agreement and
the commercial paper program dealer agreement, respectively, copies of which are included as exhibits to this Annual Report
on Form 10-K.
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