Snapple 2013 Annual Report Download - page 24

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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, we currently participate in four multi-employer pension plans in the United States. The plans we participate in
have collective bargaining agreements, which will expire at various dates through 2016. In the event that it becomes probable that
we intend to withdraw from participation in any of these plans, U.S. GAAP would require us to record a withdrawal liability if it
is estimable, which may be material and could negatively impact our financial performance in the applicable periods. Our pension
expense for U.S. multi-employer plans totaled $63 million for the year ended December 31, 2013, which included a withdrawal
charge of $56 million as we intend to withdraw from the Soft Drink Industry Local Union 710 Pension Fund during our upcoming
collective bargaining session.
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, 2013, we had $8,201 million of total assets, of which approximately $5,682 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 October 1, 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
October 1, 2013. For additional information about these intangible assets, see "Critical Accounting Estimates — Goodwill and
Other Indefinite-Lived Intangible Assets" and "Management's Discussion and Analysis of Financial Condition and Results of
Operations," in Item 7 and our Audited Consolidated Financial Statements included in Item 8, "Financial Statements and
Supplementary Data," in this Annual Report on Form 10-K.
The impairment tests require us to make an estimate of the fair value of our reporting units and other intangible assets. An
impairment could be recorded as a result of changes in assumptions, estimates or circumstances, some of which are beyond our
control. Factors which could result in an impairment include, but are not limited to: (i) reduced demand for our products; (ii) higher
commodity prices; (iii) lower prices for our products or increased marketing as a result of increased competition; and (iv) significant
disruptions to our operations as a result of both internal and external events. Since a number of factors may influence determinations
of fair value of intangible assets, we are unable to predict whether impairments of goodwill or other indefinite-lived intangibles
will occur in the future. Any such impairment would result in us recognizing a non-cash charge in our Consolidated Statements
of Income, which could increase our effective tax rate and adversely affect our results of operations.
Our total indebtedness could affect our operations and profitability.
We maintain levels of debt we consider prudent based on our actual and expected cash flows. As of December 31, 2013, our
total indebtedness was $2,574 million
This amount of debt could have important consequences to us and our investors, including:
• requiring a portion of our cash flow from operations to make interest payments on this debt; and
• increasing our vulnerability to general adverse economic and industry conditions, which could impact our debt maturity
profile.
While we believe we will have the ability to service our debt and will have access to additional sources of capital in the future
if and when needed, that will depend upon our results of operations and financial position at the time, the then-current state of the
credit and financial markets and other factors that may be beyond our control.