Snapple 2014 Annual Report Download - page 50

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47
The following table is an estimate of the impact to the fair value hedges that could result from hypothetical interest rate
changes during the term of the financial instruments, based on debt levels as of December 31, 2014:
Sensitivity Analysis
Hypothetical Change in Interest Rates Annual Impact to Interest Expense Change in Fair Value (2)
1-percent decrease(1) $ — $62 million increase
1-percent increase $7 million increase $55 million decrease
____________________________
(1) We pay an average floating rate, which fluctuates periodically, based on LIBOR and a credit spread, as a result of designated
fair value hedges on certain debt instruments. See Note 9 of the Notes to our Audited Consolidated Financial Statements for
further information. As LIBOR would not fall below zero, we did not calculate the hypothetical change in the interest rate.
(2) The change in fair value would impact the carrying value of our unsecured senior notes with an equal offset to our derivative
instrument positions. See Notes 8 and 11 of the Notes to our Audited Consolidated Financial Statements for quantification of
those positions.
Commodity Risks
We are subject to market risks with respect to commodities because our ability to recover increased costs through higher
pricing may be limited by the competitive environment in which we operate. Our principal commodities risks relate to our purchases
of PET, diesel fuel, corn (for high fructose corn syrup), aluminum, sucrose, apple juice concentrate, apples and natural gas (for
use in processing and packaging).
We utilize commodities forward and future contracts and supplier pricing agreements to hedge the risk of adverse movements
in commodity prices for limited time periods for certain commodities. The fair market value of these contracts as of December 31,
2014 was a net liability of $26 million.
As of December 31, 2014, the impact of a 10% change (up or down) in market prices for these commodities where the risk
of adverse movements has not been hedged is estimated to be an increase or decrease of approximately $21 million to our income
from operations for the year ending December 31, 2015.