Snapple 2011 Annual Report Download - page 57

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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's confectionery 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 estimates will be reflected in our Consolidated Statements of Income 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 11 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 trends and uncertainties may also impact liquidity:
• changes in economic factors could impact consumers' purchasing powers;
• 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;
• continued repurchases of our outstanding common stock and payment of dividends;
• seasonality of our operating cash flows could impact short-term liquidity;
• 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;
• ability to refinance our $450 million of 2.35% senior notes due December 21, 2012 (the "2012 Notes");
• tax payments of approximately $531 million due primarily in the first quarter of 2012 as a result of the agreements with
PepsiCo and Coca-Cola.
Financing Arrangements
The following is a description of our current financing arrangements as of December 31, 2011. The summaries of the senior
unsecured notes, the senior unsecured credit facility and the commercial paper program are qualified in their entirety by the specific
terms and provisions of the indentures governing the senior unsecured notes, the senior unsecured credit agreement and the
commercial paper program dealer agreement, copies of which are included as exhibits herein.
Senior Unsecured Notes
The indentures governing the senior unsecured notes, among other things, limit our ability to incur indebtedness secured by
principal properties, to enter into certain sale and leaseback transactions and to enter into certain mergers or transfers of substantially
all of our assets. The senior unsecured notes are guaranteed by substantially all of our existing and future direct and indirect
domestic subsidiaries. As of December 31, 2011, we were in compliance with all covenant requirements.