Snapple 2009 Annual Report Download - page 36

Some local and regional governments and school boards have enacted, or have proposed to enact, regulations
restricting the sale of certain types of soft drinks in schools. Any violations or changes of regulations could have a
material adverse effect on our profitability, or disrupt the production or distribution of our products, and negatively
affect our business and financial performance. In addition, taxes imposed on the sale of certain of our products by
federal, state, local and foreign governments could cause consumers to shift away from purchasing our products.
For example, some members of the United States federal government have raised the possibility of a federal tax on
the sale of certain “sugared” beverages, including non-diet soft drinks, fruit drinks, teas, and flavored waters, to help
pay for the cost of healthcare reform. Some United States state governments are also considering similar taxes. If
enacted, such taxes could materially affect our business and financial results.
Our distribution agreements with our allied brands could be terminated.
Hansen Natural Corporation and glacéau terminated their distribution agreements with us in 2008 and 2007,
respectively. We are subject to a risk of other allied brands, such as FIJI and AriZona, terminating their distribution
agreements with us, which could negatively affect our business and financial performance.
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.
We base our assessments, estimates and disclosures on the information available to us at the time and rely on legal
and management judgment. Actual outcomes or losses may differ materially from assessments and estimates.
Actual settlements, judgments or resolutions of these claims or proceedings may negatively affect our business and
financial performance. For more information, see Note 20 of the Notes to our Audited Consolidated Financial
Statements.
Benefits cost increases could reduce our profitability.
Our profitability is substantially affected by the costs of pension, postretirement, employee medical costs 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. 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
affect on our business and financial performance.
Costs for our raw materials may increase substantially.
The principal raw materials we use in our business are aluminum cans and ends, glass bottles, PET bottles and
caps, paperboard packaging, sweeteners, juice, fruit, water and other ingredients. Additionally, conversion of raw
materials into our products for sale also uses electricity and natural gas. The cost of the raw materials can fluctuate
substantially. 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. 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. Continued price increases could exert pressure on our
costs and we may not be able to pass along any such increases to our customers or consumers, which could
negatively affect our business and financial performance.
Certain raw materials we use are available from a limited number of suppliers and shortages could
occur.
Some raw materials we use, such as aluminum cans and ends, glass bottles, PET bottles, sweeteners and other
ingredients, are sourced from industries characterized by a limited supply base. If our suppliers are unable or
unwilling to meet our requirements, we could suffer shortages or substantial cost increases. Changing suppliers can
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