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46
Interest Rate Risk
We centrally manage our debt portfolio through the use of interest rate swaps and monitor our mix of fixed-rate and variable
rate debt. At December 31, 2013, the carrying value of our fixed-rate debt, excluding capital leases, was $2,453 million, $720
million of which is designated as fair value hedges and exposed to variability in interest rates.
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, 2013:
Sensitivity Analysis
Change in Fair Value
Hypothetical
Change in Interest
Rates
Annual Impact to
Interest Expense
Other Current and
Non-current Assets
Other Non-current
Liabilities Total Debt
1-percent decrease(1) $ — $24 million increase $29 million decrease $53 million increase
1-percent increase $7 million increase $17 million decrease $45 million increase $62 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. Our weighted average LIBOR rate as of December 31, 2013 was 0.26%. As LIBOR has not historically
fallen below 0.17%, our estimate of the annual impact to interest expense reflects this assumption if our hypothetical change
in the interest rate fell below the historical threshold.
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,
2013 was a net liability of $12 million.
As of December 31, 2013, 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 $30 million to our income
from operations for the year ending December 31, 2014.