DR PEPPER SNAPPLE GROUP PLANO, Texas, April 27, 2016 /PRNewswire/ -- Dr Pepper Snapple Group, Inc. (NYSE: DPS) reported first quarter 2016 EPS of $0.96 compared to $0.81 in the prior year period. Core EPS were $0.94, up 16%, compared to $0.81 in the prior year period.
For the quarter, reported net sales increased 2% on favorable product and package mix of 3%, price increases of 1% and a 1% increase in sales volumes. These increases were partially offset by 2 percentage points of unfavorable foreign currency translation. Net sales growth was also partially offset by unfavorable segment mix, as well as higher discounts, which were primarily related to our fountain foodservice business. Reported segment operating profit (SOP) increased 11%, or $36 million, on net sales growth, commodity deflation and planned lower marketing costs, partially offset by inflationary increases in certain operating expenses.
Reported income from operations for the quarter was $313 million, including $7 million in unrealized commodity mark-to-market gains. Reported income from operations was $270 million in the prior year period, including a $1 million unrealized commodity mark-to-market loss. Core income from operations for the quarter was $306 million, up 13%, representing 20.6% of net sales compared to 18.7% in the prior year period.
DPS President and CEO Larry Young said, "We're off to a good start this year. Our teams stayed focused on our strategy of unlocking growth across our priority brands through integrated communication and execution. We gained dollar share in both CSDs and sparkling waters in Nielsen measured markets and delivered both product and package innovation to meet consumers' evolving needs. Rapid Continuous Improvement (RCI) continues to enhance growth and productivity across the business."
EPS reconciliation First Quarter
------------------ -------------
2016 2015 Percent
Change
--- ------ ------
Reported EPS $0.96 $0.81 19
Unrealized commodity mark-to-market
gain (0.02) -
--- --- ---
Core EPS $0.94 $0.81 16
-------- ----- ----- ---
EPS - earnings per share
Net sales and SOP in the tables and commentary below are presented on a currency neutral basis. Beginning in the second quarter of 2015, we excluded the impact of realized gains and losses on foreign currency transactions from our currency neutral calculation. Refer to the Definitions section of this press release for details on how the company calculates currency neutral metrics. For a reconciliation of non-GAAP to GAAP measures see pages A-5 through A-8 accompanying this release.
Summary of 2016 results First Quarter
(Percent change)
---------------
As Reported Currency
Neutral
(Translation)
--- ------------
BCS Volume 2 2
---------- --- ---
Sales Volume 1 1
------------ --- ---
Net Sales 2 4
--------- --- ---
SOP 11 11
--- --- ---
BCS -bottler case
sales
BCS Volume
For the quarter, BCS volume increased 2%, with both carbonated soft drinks (CSDs) and non-carbonated beverages (NCBs) increasing 2%.
By geography, U.S. and Canada volume increased 2%, and Mexico and the Caribbean volume increased 6%.
In CSDs, brand Dr Pepper increased 4% driven by growth in our fountain foodservice business. Schweppes and Crush grew 10% and 6%, respectively, on increased promotional activity at a large retailer. Peñafiel grew 5%, and Squirt grew 3%. These increases were partially offset by our Core 4 brands, which decreased 3%, as a mid-single-digit increase in Canada Dry was more than offset by a double-digit decrease in 7UP, a mid-single-digit decrease in Sunkist soda and a low-single-digit decrease in A&W. Fountain foodservice volume increased 10% in the quarter, partially impacted by the timing of orders for a large customer.
In NCBs, our water category grew 22% on strong growth in Bai brands, Aguafiel and FIJI. Snapple grew 4%, while Clamato grew 10% primarily on increased promotional activity. Hawaiian Punch decreased 7% on higher single serve pricing, while Mott's declined 4% in the quarter.
Sales Volume
Sales volumes increased 1% in the quarter.
2016 Segment results First Quarter
(Percent Change)
---------------
As Reported Currency
Neutral
(Translation)
------------
Sales Net Sales SOP Net Sales SOP
Volume
------ ---
Beverage Concentrates 1 1 2 1 3
--------------------- --- --- --- --- ---
Packaged Beverages (1) 4 24 4 24
------------------ --- --- --- --- ---
Latin America Beverages 6 (9) (12) 6 -
----------------------- --- --- --- --- ---
Total 1 2 11 4 11
----- --- --- --- --- ---
Beverage Concentrates
Net sales increased 1% in the quarter driven by concentrate price increases taken at the beginning of the year and a 1% increase in concentrate shipments, which were partially offset by higher discounts, primarily related to our fountain foodservice business. SOP increased 3% on net sales growth and planned lower marketing costs, which were partially offset by increases in certain operating costs.
Packaged Beverages
Net sales increased 4% in the quarter on favorable product and package mix and price increases, partially offset by a 1% decline in sales volumes. SOP increased 24% on net sales growth and lower commodity, logistics and marketing costs, which were partially offset by increases in certain operating expenses.
Latin America Beverages
Net sales increased 6% in the quarter on a 6% increase in sales volumes. SOP was flat in the quarter, as net sales growth, lower commodity costs and ongoing productivity improvements were partially offset by the higher cost of certain U.S. dollar denominated input costs as a result of the strengthening U.S. dollar.
Furthermore, a $4 million arbitration award related to our Mexican joint venture reduced SOP growth by 24 percentage points in the quarter.
Corporate and Other Items
For the quarter, corporate costs totaled $64 million, which included $7 million in unrealized commodity mark-to-market gains. Corporate costs in the prior year period were $71 million, which included a $1 million unrealized commodity mark-to-market loss.
Net interest expense increased $6 million in the quarter primarily driven by higher debt balances and refinancing of certain debt in the prior year.
For the quarter, the reported effective tax rate was 35.2%. The effective tax rate in the prior year period was 35.7%.
Cash Flow
For the quarter, the company generated $177 million of cash from operating activities compared to $101 million in the prior year. Capital spending totaled $27 million compared to $20 million in the prior year period. The company returned $269 million to shareholders in the form of stock repurchases ($179 million) and dividends ($90 million).
2016 Full Year Guidance
The company now expects full year reported net sales to be up approximately 2% and core EPS to be at the high end of the previously communicated $4.20 to $4.30 range. Collectively, foreign currency translation and transaction are now expected to negatively impact net sales by approximately 1% and core EPS growth by about 2.5%.
Packaging and ingredient costs are now expected to decrease COGS by approximately 0.5% on a constant volume/mix basis.
The company continues to expect its core tax rate to be approximately 35.5%.
The company continues to expect capital spending to be approximately 3% of net sales.
The company continues to expect to repurchase $650 million to $700 million of its common stock.
Definitions
Bottler case sales (BCS) volume: Sales of finished beverages, in equivalent 288 fluid ounce cases, sold by the company and its bottling partners to retailers and independent distributors and excludes contract manufacturing volume. Volume for products sold by the company and its bottling partners is reported on a monthly basis, with the first quarter comprising January, February and March.
Sales volume: Sales of concentrates and finished beverages, in equivalent 288 fluid ounce cases, shipped by the company to its bottlers, retailers and independent distributors and includes contract manufacturing volume.
Pricing refers to the impact of list price changes.
Unrealized mark-to-market: We recognize the change in the fair value of open commodity derivative positions between periods in corporate unallocated expenses, as these instruments do not qualify for hedge accounting treatment. As the underlying commodity is delivered, the realized gains and losses are subsequently reflected in the segment results.
EPS represents diluted earnings per share.
Core financial measures are determined utilizing reported financial numbers adjusted for the unrealized mark-to-market impact of commodity derivatives and certain items that are excluded for comparison to prior year periods.
Core metrics are determined based on the core financial measures.
Net sales and Segment Operating Profit, as adjusted to currency neutral: Net sales and Segment Operating Profit are calculated on a currency neutral basis by converting our current-period local currency financial results using the prior-period foreign currency exchange rates. Beginning in the second quarter of 2015, we excluded the impact of realized gains and losses on foreign currency transactions from our currency neutral calculation.
Forward-Looking Statements
This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including, in particular, statements about future events, future financial performance including earnings estimates, plans, strategies, expectations, prospects, competitive environment, regulation, and cost and availability of raw materials. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words "may," "will," "expect," "anticipate," "believe," "estimate," "plan," "intend" or the negative of these terms or similar expressions. These forward-looking statements have been based on our current views with respect to future events and financial performance. Our actual financial performance could differ materially from those projected in the forward-looking statements due to the inherent uncertainty of estimates, forecasts and projections, and our financial performance may be better or worse than anticipated. Given these uncertainties, you should not put undue reliance on any forward-looking statements. All of the forward-looking statements are qualified in their entirety by reference to the factors discussed under "Risk Factors" in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2015, and our other filings with the Securities and Exchange Commission. Forward-looking statements represent our estimates and assumptions only as of the date that they were made. We do not undertake any duty to update the forward-looking statements, and the estimates and assumptions associated with them, after the date of this release, except to the extent required by applicable securities laws.
Conference Call
At 9 a.m. (CDT) today, the company will host a conference call with investors to discuss first quarter results and the outlook for 2016. The conference call and slide presentation will be accessible live through DPS's website at http://www.drpeppersnapple.com and will be archived for replay for a period of 14 days.
In discussing financial results and guidance, the company may refer to certain non-GAAP measures. Reconciliations of any such non-GAAP measures to the most directly comparable financial measures in accordance with GAAP can be found on pages A-5 through A-8 accompanying this release and under "Financial News" on the company's website at http://www.drpeppersnapple.com in the "Investors" section.
For additional information about Dr Pepper Snapple Group, please reference the "DPS Overview" presentation slideshow under "Events and Presentations" on the company's website at http://www.drpeppersnapple.com in the "Investors" section.
About Dr Pepper Snapple Group
Dr Pepper Snapple Group (NYSE: DPS) is a leading producer of flavored beverages in North America and the Caribbean. Our success is fueled by more than 50 brands that are synonymous with refreshment, fun and flavor. We have 6 of the top 10 non-cola soft drinks, and 13 of our 14 leading brands are No. 1 or No. 2 in their flavor categories. In addition to our flagship Dr Pepper and Snapple brands, our portfolio includes 7UP, A&W, Canada Dry, Clamato, Crush, Hawaiian Punch, Mott's, Mr & Mrs T mixers, Peñafiel, Rose's, Schweppes, Squirt and Sunkist soda. To learn more about our iconic brands and Plano, Texas-based company, please visit www.DrPepperSnapple.com. For our latest news and updates, follow us at www.Facebook.com/DrPepperSnapple or www.Twitter.com/DrPepperSnapple.
Contacts: Media Relations
Chris Barnes, (972)
673-5539
Investor Relations
Heather Catelotti, (972)
673-5869
DR PEPPER SNAPPLE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the Three Months Ended March 31, 2016 and 2015
(Unaudited, in millions, except per share data)
For the
Three Months Ended
March 31,
---------
2016 2015
---- ----
Net sales $1,487 $1,451
Cost of sales 602 602
--- ---
Gross profit 885 849
Selling, general
and
administrative
expenses 546 552
Depreciation and
amortization 26 27
Other operating
expense, net - -
--- ---
Income from
operations 313 270
Interest expense 33 27
Interest income - -
Other income, net (1) (1)
--- ---
Income before
provision for
income taxes and
equity in
earnings of
unconsolidated
subsidiaries 281 244
Provision for
income taxes 99 87
--- ---
Income before
equity in
earnings of
unconsolidated
subsidiaries 182 157
Equity in earnings
of unconsolidated
subsidiaries, net
of tax - -
--- ---
Net income $182 $157
==== ====
Earnings per common share:
Basic $0.97 $0.82
Diluted 0.96 0.81
Weighted average common shares
outstanding:
Basic 187.6 193.0
Diluted 189.0 194.6
A-1
DR PEPPER SNAPPLE GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
As of March 31, 2016 and December 31, 2015
(Unaudited, in millions, except share and per share data)
March 31, December 31,
2016 2015
---- ----
Assets
Current assets:
Cash and cash
equivalents $275 $911
Accounts receivable:
Trade, net 576 570
Other 53 58
Inventories 235 209
Prepaid
expenses and
other current
assets 144 69
--- ---
Total current
assets 1,283 1,817
Property,
plant and
equipment,
net 1,136 1,156
Investments in
unconsolidated
subsidiaries 36 31
Goodwill 2,988 2,988
Other
intangible
assets, net 2,662 2,663
Other non-
current
assets 193 150
Non-current
deferred tax
assets 66 64
--- ---
Total assets $8,364 $8,869
====== ======
Liabilities and
Stockholders' Equity
Current liabilities:
Accounts
payable $357 $277
Deferred
revenue 64 64
Short-term
borrowings
and current
portion of
long-term
obligations 8 507
Income taxes
payable 59 27
Other current
liabilities 688 708
--- ---
Total current
liabilities 1,176 1,583
Long-term
obligations 2,907 2,875
Non-current
deferred tax
liabilities 797 787
Non-current
deferred
revenue 1,166 1,181
Other non-
current
liabilities 216 260
--- ---
Total
liabilities 6,262 6,686
Commitments and contingencies
Stockholders' equity:
Preferred
stock, $0.01
par value,
15,000,000
shares
authorized,
no shares
issued - -
Common stock,
$0.01 par outstanding
value, for 2016 and
800,000,000 2015,
shares respectively
authorized,
186,694,160
and
187,841,509
shares issued
and 2 2
Additional
paid-in
capital 93 211
Retained
earnings 2,194 2,165
Accumulated
other
comprehensive
loss (187) (195)
---- ----
Total
stockholders'
equity 2,102 2,183
----- -----
Total
liabilities
and
stockholders'
equity $8,364 $8,869
====== ======
A-2
DR PEPPER SNAPPLE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2016 and 2015
(Unaudited, in millions)
For the
Three Months Ended
March 31,
---------
2016 2015
---- ----
Operating activities:
Net income $182 $157
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation expense 48 48
Amortization expense 8 8
Amortization of
deferred revenue (16) (16)
Employee stock-
based compensation
expense 11 9
Deferred income
taxes 16 15
Other, net (25) (17)
Changes in assets and liabilities,
net of effects of acquisition:
Trade accounts
receivable (5) (19)
Other accounts
receivable 1 (4)
Inventories (25) (26)
Other current and
non-current assets (82) (81)
Other current and
non-current
liabilities (70) (99)
Trade accounts
payable 81 67
Income taxes payable 53 59
--- ---
Net cash provided by
operating
activities 177 101
Investing activities:
Purchase of
property, plant and
equipment (27) (20)
Investment in
unconsolidated
subsidiaries (6) -
Purchase of cost
method investment - (15)
Proceeds from
disposals of
property, plant and
equipment 1 1
Other, net (8) (6)
Net cash used in
investing
activities (40) (40)
Financing activities:
Repayment of senior
unsecured notes (500) -
Repurchase of shares
of common stock (179) (135)
Dividends paid (90) (79)
Tax withholdings
related to net
share settlements
of certain stock
awards (31) (26)
Proceeds from stock
options exercised 7 19
Excess tax benefit
on stock-based
compensation 20 19
Capital lease
payments (2) (1)
Other, net - 1
Net cash used in
financing
activities (775) (202)
Cash and cash equivalents -net
change from:
Operating, investing
and financing
activities (638) (141)
Effect of exchange
rate changes on
cash and cash
equivalents 2 (3)
Cash and cash
equivalents at
beginning of period 911 237
--- ---
Cash and cash
equivalents at end
of period $275 $93
==== ===
A-3
DR PEPPER SNAPPLE GROUP, INC.
OPERATIONS BY OPERATING SEGMENT
For the Three Months Ended March 31, 2016 and 2015
(Unaudited, in millions)
For the Three Months Ended
March 31,
---------
2016 2015
---- ----
Segment Results - Net sales
Beverage Concentrates $287 $285
Packaged Beverages 1,097 1,053
Latin America Beverages 103 113
--- ---
Net sales $1,487 $1,451
====== ======
For the Three Months Ended
March 31,
---------
2016 2015
---- ----
Segment Results - SOP
Beverage Concentrates $187 $183
Packaged Beverages 175 141
Latin America Beverages 15 17
--- ---
Total SOP 377 341
Unallocated corporate
costs 64 71
Other operating expense,
net - -
--- ---
Income from operations 313 270
Interest expense, net 33 27
Other income, net (1) (1)
--- ---
Income before provision
for income taxes and
equity in earnings of
unconsolidated
subsidiaries $281 $244
==== ====
A-4
DR PEPPER SNAPPLE GROUP, INC.
RECONCILIATION OF GAAP AND NON-GAAP INFORMATION
(Unaudited)
The company reports its financial results in accordance with U.S. GAAP. However, management believes that certain non-GAAP measures that reflect the way management evaluates the business may provide investors with additional information regarding the company's results, trends and ongoing performance on a comparable basis. Specifically, investors should consider the following with respect to our quarterly results:
Net sales and Segment Operating Profit, as adjusted to currency neutral: Net sales and Segment Operating Profit are calculated on a currency neutral basis by converting our current-period local currency financial results using the prior-period foreign currency exchange rates. Beginning in the second quarter of 2015, we excluded the impact of realized gains and losses on foreign currency transactions from our currency neutral calculation.
Free Cash Flow: Free cash flow is defined as net cash provided by operating activities adjusted for capital spending and certain items excluded for comparison to prior year periods. For the three months ended March 31, 2016 and 2015, there were no certain items excluded for comparison to prior year periods.
Core earnings: Core earnings is defined as net income adjusted for the unrealized mark-to-market impact of commodity derivatives and certain items that are excluded for comparison to prior year periods. For the three months ended March 31, 2016 and 2015, there were no items other than mark-to-market excluded for comparison to prior year periods.
The tables on the following pages provide these reconciliations.
A-5
RECONCILIATION OF NET SALES AND SOP
AS REPORTED TO AS ADJUSTED TO CURRENCY NEUTRAL
(Unaudited)
For the Three Months Ended March 31, 2016
-----------------------------------------
Beverage Packaged Latin
America
Percent change Concentrates Beverages Beverages Total
-------------- ------------ --------- --------- -----
Reported net sales 1% 4% (9)% 2%
Impact of foreign
currency - % - % 15% 2%
--- --- --- --- --- ---
Net sales, as adjusted
to currency neutral 1% 4% 6% 4%
=== === === ===
For the Three Months Ended March 31, 2016
-----------------------------------------
Beverage Packaged Latin
America
Percent change Concentrates Beverages Beverages Total
-------------- ------------ --------- --------- -----
Reported SOP 2% 24% (12)% 11%
Impact of foreign
currency 1% - % 12% - %
--- --- --- --- --- ---
SOP, as adjusted to
currency neutral 3% 24% - % 11%
=== === === === ===
RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW
(Unaudited, in millions)
For the
Three Months Ended
March 31,
---------
2016 2015 Change
---- ---- ------
Net cash provided by
operating activities $177 $101 $76
Purchase of property,
plant and equipment (27) (20)
Free Cash Flow $150 $81 $69
==== ===
A-6
RECONCILIATION OF NET INCOME TO CORE EARNINGS
(Unaudited, in millions, except per share data)
For the Three Months Ended March 31, 2016
-----------------------------------------
Reported Mark to Market Core FX Translation Currency
Neutral
Core
----
Net sales $1,487 $ - $1,487 $21 $1,508
Cost of sales 602 3 605 9 614
Gross profit 885 (3) 882 12 894
Selling, general and
administrative
expenses 546 4 550 9 559
Depreciation and
amortization 26 - 26 - 26
Other operating
expense, net - - - - -
Income from operations 313 (7) 306 3 309
Interest expense 33 - 33 - 33
Interest income - - - - -
Other income, net (1) - (1) - (1)
Income before
provision for income
taxes and equity in
earnings of
unconsolidated
subsidiaries 281 (7) 274 3 277
Provision for income
taxes 99 (2) 97 1 98
Income before equity
in earnings of
unconsolidated
subsidiaries 182 (5) 177 2 179
Equity in earnings of
unconsolidated
subsidiaries, net of
tax - - - - -
Net income $182 $(5) $177 $2 $179
Diluted earnings per
common share $0.96 $(0.02) $0.94 $0.01 $0.95
Effective tax rate 35.2% 35.4% 35.4%
Operating margin 21.0% 20.6% 20.5%
A-7
RECONCILIATION OF NET INCOME TO CORE EARNINGS - (Continued)
(Unaudited, in millions, except per share data)
For the Three Months Ended March 31, 2015
-----------------------------------------
Reported Mark to Market Core
-------- -------------- ----
Net sales $1,451 $ - $1,451
Cost of sales 602 (2) 600
Gross profit 849 2 851
Selling, general and
administrative
expenses 552 1 553
Depreciation and
amortization 27 - 27
Other operating
expense, net - - -
Income from operations 270 1 271
Interest expense 27 - 27
Interest income - - -
Other income, net (1) - (1)
Income before
provision for income
taxes and equity in
earnings of
unconsolidated
subsidiaries 244 1 245
Provision for income
taxes 87 - 87
Income before equity
in earnings of
unconsolidated
subsidiaries 157 1 158
Equity in earnings of
unconsolidated
subsidiaries, net of
tax - - -
Net income $157 $1 $158
Diluted earnings per
common share $0.81 $ - $0.81
Effective tax rate 35.7% 35.5%
Operating margin 18.6% 18.7%
A-8
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SOURCE Dr Pepper Snapple Group, Inc.
