Snapple 2012 Annual Report Download - page 32

14
There is growing political and scientific sentiment that increased concentrations of carbon dioxide and other greenhouse gases
in the atmosphere are influencing global weather patterns ("global warming"). Concern over climate change, including global
warming, has led to legislative and regulatory initiatives directed at limiting greenhouse gas (GHG) emissions. For example,
proposals that would impose mandatory requirements on GHG emissions continue to be considered by policy makers in the
countries in which we operate. Laws enacted that directly or indirectly affect our production, distribution, packaging, cost of raw
materials, fuel, ingredients and water could all negatively impact our business and financial results.
We also may be faced with water availability risks. Water is the main ingredient in substantially all of our products. Climate
change may cause water scarcity and a deterioration of water quality in areas where we maintain operations. The competition for
water among domestic, agricultural and manufacturing users is increasing in the countries where we operate, and as water becomes
scarcer or the quality of the water deteriorates, we may incur increased production costs or face manufacturing constraints which
could negatively affect our business and financial performance. Even where water is widely available, water purification and waste
treatment infrastructure limitations could increase costs or constrain our operations.
Costs for raw materials and energy costs may increase substantially.
The principal raw materials we use in our products are aluminum cans and ends, glass bottles, PET bottles and caps, paperboard
packaging, sweeteners, juice, fruit, water and other ingredients. The cost of such raw materials can fluctuate substantially. Under
many of our supply arrangements, the price we pay for raw materials fluctuates along with certain changes in underlying
commodities costs, such as aluminum in the case of cans, natural gas in the case of glass bottles, resin in the case of PET bottles
and caps, corn in the case of sweeteners and pulp in the case of paperboard packaging.
In addition, we use a significant amount of energy in our business. We are significantly impacted by increases in fuel costs
due to the large truck fleet we operate in our distribution businesses and our use of third party carriers. Additionally, conversion
of raw materials into our products for sale uses electricity and natural gas.
Continued price increases could exert pressure on our costs and we may not be able to effectively hedge or pass along any
such increases to our customers or consumers. Price increases we pass along to our customers or consumers could reduce demand
for our products. Such increases could negatively affect our business and financial performance.
Increases in our cost of benefits and multi-employer plan withdrawal liabilities in the future could reduce our profitability.
Our profitability is substantially affected by costs for employee health care, pension and other retirement programs and other
benefits. In recent years, these costs have increased significantly due to factors such as increases in health care costs, declines in
investment returns on pension assets and changes in discount rates used to calculate pension and related liabilities. These factors
plus the enactment of the Patient Protection and Affordable Care Act in March 2010 will continue to put pressure on our business
and financial performance. Although we actively seek to control increases in costs, there can be no assurance that we will succeed
in limiting future cost increases, and continued upward pressure in costs could have a material adverse effect on our business and
financial performance.
Additionally, the Company currently participates in four multi-employer pension plans in the United States. Our pension
expense for U.S. multi-employer plans totaled $5 million for the year ended December 31, 2012. The plans we participate in have
collective bargaining agreements, which will expire at various points through 2016. In the event that we or, in the case of one
multi-employer pension plan, another large employer withdraw from participation in any of these plans, then applicable law could
require us to record a withdrawal liability, which may be material and could negatively impact our financial performance in the
applicable periods.
Determinations in the future that a significant impairment of the value of our goodwill and other indefinite lived intangible
assets has occurred and could have a material adverse effect on our results of operations.
As of December 31, 2012, we had $8,928 million of total assets, of which approximately $5,667 million were goodwill and
other intangible assets. Intangible assets include both definite and indefinite lived 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, 2012. 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.