DR PEPPER SNAPPLE GROUP PLANO, Texas, Oct. 27, 2016 /PRNewswire/ -- Dr Pepper Snapple Group, Inc. (NYSE: DPS) reported third quarter 2016 EPS of $1.29, including a $0.09 tax gain, compared to $1.05 in the prior year period. Core EPS were $1.17, up 8% compared to $1.08 in the prior year period. Year-to-date, the company reported earnings of $3.64 per diluted share compared to $3.00 per diluted share in the prior year period. Core EPS were $3.35, up 11% compared to $3.02 in the prior year period.
For the quarter, reported net sales of $1.68 billion increased 3% on favorable product and package mix, a 1% increase in sales volumes and higher pricing. Net sales growth was reduced in the quarter by 1 percentage point of unfavorable foreign currency translation. Reported segment operating profit (SOP) increased 3%, or $12 million, on net sales growth, lower logistics costs and ongoing productivity improvements, which were partially offset by a $16 million increase in planned marketing investments and increases in certain other operating expenses.
Reported income from operations for the quarter was $373 million, which included $9 million in unrealized commodity mark-to-market gains and a $5 million non-cash gain on the step-acquisition of our joint venture Aguafiel business in Mexico. Reported income from operations was $337 million in the prior year period, which included $9 million in unrealized commodity mark-to-market losses. Core income from operations for the quarter was $364 million, up 5%, and represented 21.7% of net sales compared to 21.3% in the prior year period.
Year-to-date, reported net sales of $4.86 billion increased 3%. Reported income from operations was $1.10 billion, including $41 million in unrealized commodity mark-to-market gains. Foreign currency translation negatively impacted reported net sales and reported income from operations by 1%. Reported income from operations in the prior year period was $976 million, which included $5 million in unrealized commodity mark-to-market losses. Core income from operations was $1.06 billion, up 8%, representing 21.7% of net sales compared to 20.8% in the prior year.
DPS President and CEO Larry Young said, "I'm proud of our teams for continuing to drive strong performance across our portfolio in a competitive and fragmented market."
Young continued, "We gained both dollar and volume share in our largest category, CSDs, in Nielsen measured markets, and our strategy of driving aligned communication and execution across our priority brands is driving positive results. Our allied brand partnerships are allowing us to compete in fast growing categories, and Rapid Continuous Improvement (RCI) continues to be the foundation on which the organization operates."
EPS
reconciliation Third Quarter Year-to-Date
-------------- ------------- ------------
2016 2015 Percent 2016 2015 Percent
Change Change
--- ------ --- ---
Reported
EPS $1.29 $1.05 23 $3.64 $3.00 21
Unrealized
commodity
mark-to-
market net
(gain)/loss 0.01
(0.03) 0.03 (0.13)
Items
affecting
comparability
-Legal
entity
restructuring --- - ---
-
Extinguishment
gain (0.09) - 8 (0.09) - 11
-
Litigation
provision - - (0.07) 0.01
- - - ---
Core EPS --- --- --- $3.02
$1.17 $1.08 $3.35
--- ----- ----- -----
EPS - earnings per share
Net sales and SOP in the tables and commentary below are presented on a currency neutral basis. 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-10 accompanying this release.
Summary of 2016 results As Reported Currency Neutral
(Translation)
(Percent change)
---------------
Third YTD Third YTD
Quarter Quarter
------- -------
BCS Volume 2 1 2 1
---------- --- --- --- ---
Sales Volume 1 1 1 1
------------ --- --- --- ---
Net Sales 3 3 4 4
--------- --- --- --- ---
SOP 3 6 3 7
--- --- --- --- ---
BCS -bottler case
sales
BCS Volume
For the quarter, BCS volume increased 2%, with carbonated soft drinks (CSDs) increasing 2% and non-carbonated beverages (NCBs) flat.
By geography, U.S. and Canada volume increased 1%, and Mexico and the Caribbean volume increased 4%.
In CSDs, Dr Pepper increased 1% driven by growth in both our fountain foodservice and bottle-can businesses. Our Core 4 brands increased 2%, as a mid-single-digit increase in Canada Dry and a low-single-digit increase in Sunkist were partially offset by low-single-digit decreases in A&W and 7UP. Squirt increased 7% in the quarter on strong growth in both the U.S. and Mexico, and Schweppes grew 9%. Crush grew 4%, and Peñafiel grew 1%. Fountain foodservice volume increased 2% in the quarter.
In NCBs, our water category grew 16% on strong growth in Bai brands, FIJI and Aguafiel. Clamato increased 5% in the quarter, and Snapple was flat. Hawaiian Punch decreased 6% primarily as a result of reduced promotional activity and higher pricing for our single-serve packages, and Mott's decreased 6% in the quarter, as growth in sauce was more than offset by decreases in juice.
Sales Volume
Sales volumes increased 1% in the quarter and year-to-date.
2016 Segment
results Third Quarter
(Percent
Change)
--------
As Reported Currency Neutral
(Translation)
------------
Sales Net Sales Net Sales
Volume
SOP SOP
--- --- ---
Beverage
Concentrates 1 5 - 5 -
------------- --- --- --- --- ---
Packaged
Beverages - 4 7 4 7
---------- --- --- --- --- ---
Latin America
Beverages 4 (6) (13) 5 (4)
------------- --- --- --- --- ---
Total 1 3 3 4 3
----- --- --- --- --- ---
2016 Segment
results Year-to-Date
(Percent
Change)
--------
As Reported Currency Neutral
(Translation)
------------
Sales Net Sales Net Sales
Volume
SOP SOP
--- --- ---
Beverage
Concentrates 1 3 2 3 2
------------- --- --- --- --- ---
Packaged
Beverages (1) 4 13 4 13
---------- --- --- --- --- ---
Latin America
Beverages 5 (7) (12) 7 -
------------- --- --- --- --- ---
Total 1 3 6 4 7
----- --- --- --- --- ---
Beverage Concentrates
Net sales increased 5% in the quarter on concentrate price increases taken earlier in the year, favorable product mix and a 1% increase in concentrate shipments. SOP was flat, as net sales growth was offset by a $10 million increase in planned marketing investments.
Packaged Beverages
Net sales increased 4% in the quarter on favorable product and package mix, lower discounts driven by a favorable trade accrual adjustment and higher pricing. SOP increased 7% on net sales growth, lower logistics costs and ongoing productivity improvements. These increases were partially offset by a $6 million increase in planned marketing investments and increases in certain other operating expenses.
Latin America Beverages
Net sales increased 5% in the quarter on higher net pricing and a 4% increase in sales volume. SOP was 4% lower in the quarter, as the segment incurred $3 million of higher U.S. dollar denominated input costs, which caused a 13% decline in SOP. The aforementioned foreign currency transaction cost taken together with increases in certain other operating expenses collectively more than offset net sales growth and ongoing productivity improvements.
Corporate and Other Items
For the quarter, corporate costs totaled $64 million, which included $9 million in unrealized commodity mark-to-market gains. Corporate costs in the prior year period were $83 million, which included $9 million in unrealized commodity mark-to-market losses.
Other income increased $5 million in the quarter as a result of a non-cash gain on the step-acquisition of our joint venture Aguafiel business in Mexico.
Net interest expense increased $4 million in the quarter driven by higher debt balances and the refinancing of certain debt in the prior year.
For the quarter, the reported effective tax rate was 29.7%, which included a $17 million tax benefit associated with a legal entity restructuring. The effective tax rate in the prior year period was 34.4%.
Cash Flow
Year-to-date, the company generated $683 million of cash from operating activities compared to $723 million in the prior year period. Capital spending totaled $110 million compared to $71 million in the prior year period. The company returned $748 million to shareholders in the form of stock repurchases ($460 million) and dividends ($288 million).
2016 Full Year Guidance
The company continues to expect full year reported net sales to be up approximately 2% and now expects core EPS to be in the $4.32 to $4.40 range. Collectively, foreign currency translation and transaction are expected to continue to negatively impact net sales by approximately 1% and core EPS growth by approximately 3%.
The company continues to expect packaging and ingredient costs to decrease COGS by approximately 1% on a constant volume/mix basis.
The company now expects its core tax rate to be approximately 35%.
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 third quarter comprising July, August and September.
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 non-GAAP financial measures and 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.
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 third 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-10 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 six 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 and Nine Months Ended September 30, 2016 and 2015
(Unaudited, in millions, except per share data)
For the For the
Three Months Ended Nine Months Ended
September 30, September 30,
2016 2015 2016 2015
---- ---- ---- ----
Net sales $1,680 $1,630 $4,862 $4,736
Cost of sales 683 673 1,955 1,949
--- --- ----- -----
Gross profit 997 957 2,907 2,787
Selling, general and
administrative expenses 603 592 1,739 1,730
Depreciation and
amortization 24 26 74 79
Other operating (income)
expense, net (3) 2 (4) 2
--- --- --- ---
Income from operations 373 337 1,098 976
Interest expense 33 28 99 83
Interest income (1) - (2) (1)
Other (income) expense, net (2) 1 (25) 1
--- --- --- ---
Income before provision for
income taxes and equity in
earnings of unconsolidated
subsidiaries 343 308 1,026 893
Provision for income taxes 102 106 343 314
--- --- --- ---
Income before equity in
earnings of unconsolidated
subsidiaries 241 202 683 579
Equity in earnings of
unconsolidated
subsidiaries, net of tax (1) - (1) -
--- --- --- ---
Net income $240 $202 $682 $579
==== ==== ==== ====
Earnings per common share:
Basic $1.30 $1.06 $3.66 $3.02
Diluted 1.29 1.05 3.64 3.00
Weighted average common shares outstanding:
Basic 184.8 190.4 186.1 191.6
Diluted 185.7 191.5 187.1 192.8
A-1
DR PEPPER SNAPPLE GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
As of September 30, 2016 and December 31, 2015
(Unaudited, in millions, except share and per share data)
September 30, December 31,
2016 2015
---- ----
Assets
Current assets:
Cash and cash equivalents $620 $911
Accounts receivable:
Trade, net 581 570
Other 59 58
Inventories 226 209
Prepaid expenses and other
current assets 116 69
--- ---
Total current assets 1,602 1,817
Property, plant and equipment,
net 1,124 1,156
Investments in unconsolidated
subsidiaries 24 31
Goodwill 2,994 2,988
Other intangible assets, net 2,657 2,663
Other non-current assets 210 150
Non-current deferred tax assets 62 64
--- ---
Total assets $8,673 $8,869
====== ======
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $311 $277
Deferred revenue 64 64
Short-term borrowings and
current portion of long-term
obligations 368 507
Income taxes payable 52 27
Other current liabilities 688 708
--- ---
Total current liabilities 1,483 1,583
Long-term obligations 2,956 2,875
Non-current deferred tax
liabilities 781 787
Non-current deferred revenue 1,134 1,181
Other non-current liabilities 190 260
--- ---
Total liabilities 6,544 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 value,
800,000,000 shares authorized,
183,789,060 and 187,841,509
shares issued and outstanding as
of September 30, 2016 and
December 31, 2015, respectively 2 2
Additional paid-in capital 94 211
Retained earnings 2,246 2,165
Accumulated other comprehensive
loss (213) (195)
---- ----
Total stockholders' equity 2,129 2,183
----- -----
Total liabilities and
stockholders' equity $8,673 $8,869
====== ======
A-2
DR PEPPER SNAPPLE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2016 and 2015
(Unaudited, in millions)
For the
Nine Months Ended
September 30,
-------------
(in millions) 2016 2015
---- ----
Operating activities:
Net income $682 $579
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation
expense 142 143
Amortization
expense 24 25
Amortization of
deferred revenue (48) (48)
Employee stock-
based
compensation
expense 33 33
Deferred income
taxes - 27
Gain on step
acquisition of
unconsolidated
subsidiaries (5) -
Gain on
extinguishment of
multi-employer
plan withdrawal
liability (21) -
Unrealized
(gain)/loss on
derivatives (41) 5
Other, net (17) (12)
Changes in assets and
liabilities, net of effects of
acquisition:
Trade accounts
receivable (14) (25)
Other accounts
receivable (5) 3
Inventories (19) (2)
Other current and
non-current
assets (61) (33)
Other current and
non-current
liabilities (48) (35)
Trade accounts
payable 35 25
Income taxes
payable 46 38
--- ---
Net cash provided
by operating
activities 683 723
Investing activities:
Acquisition of
business (15) -
Cash acquired in
step acquisition
of unconsolidated
subsidiaries 17 -
Purchase of
property, plant
and equipment (110) (71)
Purchase of
intangible assets (1) (1)
Investment in
unconsolidated
subsidiaries (6) (20)
Purchase of cost
method investment (1) (15)
Proceeds from
disposals of
property, plant
and equipment 4 12
Other, net (7) -
Net cash used in
investing
activities (119) (95)
Financing activities:
Proceeds from
issuance of
senior unsecured
notes 400 -
Repayment of
senior unsecured
notes (500) -
Repurchase of
shares of common
stock (460) (404)
Dividends paid (288) (264)
Tax withholdings
related to net
share settlements
of certain stock
awards (31) (27)
Proceeds from
stock options
exercised 14 28
Excess tax benefit
on stock-based
compensation 22 22
Deferred financing
charges paid (3) -
Capital lease
payments (6) (3)
Other, net (2) -
Net cash used in
financing
activities (854) (648)
Cash and cash equivalents -net
change from:
Operating,
investing and
financing
activities (290) (20)
Effect of exchange
rate changes on
cash and cash
equivalents (1) (10)
Cash and cash
equivalents at
beginning of
period 911 237
--- ---
Cash and cash
equivalents at
end of period $620 $207
==== ====
A-3
DR PEPPER SNAPPLE GROUP, INC.
OPERATIONS BY OPERATING SEGMENT
For the Three and Nine Months Ended September 30, 2016 and 2015
(Unaudited, in millions)
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
------------- -------------
2016 2015 2016 2015
---- ---- ---- ----
Segment Results - Net sales
Beverage Concentrates $323 $308 $952 $923
Packaged Beverages 1,236 1,193 3,558 3,434
Latin America Beverages 121 129 352 379
--- --- --- ---
Net sales $1,680 $1,630 $4,862 $4,736
====== ====== ====== ======
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
------------- -------------
2016 2015 2016 2015
---- ---- ---- ----
Segment Results - SOP
Beverage Concentrates $205 $204 $622 $609
Packaged Beverages 208 194 592 525
Latin America Beverages 21 24 60 68
--- --- --- ---
Total SOP 434 422 1,274 1,202
Unallocated corporate costs 64 83 180 224
Other operating (income)
expense, net (3) 2 (4) 2
--- --- --- ---
Income from operations 373 337 1,098 976
Interest expense, net 32 28 97 82
Other (income) expense, net (2) 1 (25) 1
--- --- --- ---
Income before provision for
income taxes and equity in
earnings of unconsolidated
subsidiaries $343 $308 $1,026 $893
==== ==== ====== ====
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.
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 nine months ended September 30, 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. The certain items excluded for the three and nine months ended September 30, 2016, are (i) a gain on the extinguishment of a multi-employer withdrawal liability and (ii) an income tax benefit driven by a restructuring of the ownership of our Canadian business. The certain item excluded for the three and nine months ended September 30, 2015, is an adjustment to a previously disclosed litigation provision.
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 September 30, 2016
---------------------------------------------
Beverage Packaged Latin
America
Percent change Concentrates Beverages Beverages Total
-------------- ------------ --------- --------- -----
Reported net sales 5% 4% (6)% 3%
Impact of foreign
currency - % - % 11% 1%
--- --- --- --- --- ---
Net sales, as adjusted
to currency neutral 5% 4% 5% 4%
=== === === ===
For the Three Months Ended September 30, 2016
---------------------------------------------
Beverage Packaged Latin
America
Percent change Concentrates Beverages Beverages Total
-------------- ------------ --------- --------- -----
Reported SOP - % 7% (13)% 3%
Impact of foreign
currency - % - % 9% - %
--- --- --- --- --- --- ---
SOP, as adjusted to
currency neutral - % 7% (4)% 3%
=== === === === ===
For the Nine Months Ended September 30, 2016
--------------------------------------------
Beverage Packaged Latin
America
Percent change Concentrates Beverages Beverages Total
-------------- ------------ --------- --------- -----
Reported net sales 3% 4% (7)% 3%
Impact of foreign
currency - % - % 14% 1%
--- --- --- --- --- ---
Net sales, as adjusted
to currency neutral 3% 4% 7% 4%
=== === === ===
For the Nine Months Ended September 30, 2016
--------------------------------------------
Beverage Packaged Latin
America
Percent change Concentrates Beverages Beverages Total
-------------- ------------ --------- ---------
Reported SOP 2% 13% (12)% 6%
Impact of foreign
currency - % - % 12% 1%
--- --- --- --- --- ---
SOP, as adjusted to
currency neutral 2% 13% - % 7%
=== === === === ===
RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW
(Unaudited, in millions)
For the
Nine Months Ended
September 30,
-------------
2016 2015 Change
---- ---- ------
Net cash provided by
operating activities $683 $723 $(40)
Purchase of property,
plant and equipment (110) (71)
Free Cash Flow $573 $652 $(79)
==== ====
A-6
RECONCILIATION OF NET INCOME TO CORE EARNINGS
(Unaudited, in millions, except per share data)
For the Three Months Ended September 30, 2016
---------------------------------------------
Reported Mark to Legal Entity Total Core Impact of Currency
Market Restructuring Adjustments foreign Neutral Core
currency
translation
---
Net sales $1,680 $ - $ - $ - $1,680 $15 $1,695
Cost of sales 683 5 - 5 688 8 696
Gross profit 997 (5) - (5) 992 7 999
Selling, general and
administrative
expenses 603 4 - 4 607 6 613
Depreciation and
amortization 24 - - - 24 1 25
Other operating
(income) expense, net (3) - - - (3) - (3)
Income from operations 373 (9) - (9) 364 - 364
Interest expense 33 - - - 33 - 33
Interest income (1) - - - (1) - (1)
Other (income)
expense, net (2) - - - (2) (1) (3)
Income before
provision for income
taxes and equity in
earnings of
unconsolidated
subsidiaries 343 (9) - (9) 334 1 335
Provision for income
taxes 102 (3) 17 14 116 - 116
Income before equity
in earnings of
unconsolidated
subsidiaries 241 (6) (17) (23) 218 1 219
Equity in earnings of
unconsolidated
subsidiaries, net of
tax (1) - - - (1) - (1)
Net income $240 $(6) $(17) $(23) $217 $1 $218
Diluted earnings per
common share $1.29 $(0.03) $(0.09) $(0.12) $1.17 $0.01 $1.18
Effective tax rate 29.7% 34.7%
Operating margin 22.2% 21.7%
A-7
RECONCILIATION OF NET INCOME TO CORE EARNINGS - (Continued)
(Unaudited, in millions, except per share data)
For the Three Months Ended September 30, 2015
---------------------------------------------
Reported Mark to Litigation Total Core
Market Provision Adjustments
---
Net sales $1,630 $ - $ - $ - $1,630
Cost of sales 673 (7) - (7) 666
Gross profit 957 7 - 7 964
Selling, general and
administrative
expenses 592 (2) (1) (3) 589
Depreciation and
amortization 26 - - - 26
Other operating
(income) expense, net 2 - - - 2
Income from operations 337 9 1 10 347
Interest expense 28 - - - 28
Interest income - - - - -
Other (income)
expense, net 1 - - - 1
Income before
provision for income
taxes and equity in
earnings of
unconsolidated
subsidiaries 308 9 1 10 318
Provision for income
taxes 106 4 1 5 111
Income before equity
in earnings of
unconsolidated
subsidiaries 202 5 - 5 207
Equity in earnings of
unconsolidated
subsidiaries, net of
tax - - - - -
Net income $202 $5 $ - $5 $207
Diluted earnings per
common share $1.05 $0.03 $ - $0.03 $1.08
Effective tax rate 34.4% 34.9%
Operating margin 20.7% 21.3%
A-8
RECONCILIATION OF NET INCOME TO CORE EARNINGS - (Continued)
(Unaudited, in millions, except per share data)
For the Nine Months Ended September 30, 2016
--------------------------------------------
Reported Mark to Extinguishment Legal Entity Total Core Impact of Currency
Market Gain Restructuring Adjustments foreign Neutral Core
currency
translation
---
Net sales $4,862 $ - $ - $ - $ - $4,862 $62 $4,924
Cost of sales 1,955 21 - - 21 1,976 30 2,006
Gross profit 2,907 (21) - - (21) 2,886 32 2,918
Selling, general and
administrative
expenses 1,739 20 - - 20 1,759 22 1,781
Depreciation and
amortization 74 - - - - 74 1 75
Other operating
(income) expense, net (4) - - - - (4) - (4)
Income from operations 1,098 (41) - - (41) 1,057 9 1,066
Interest expense 99 - - - - 99 - 99
Interest income (2) - - - - (2) - (2)
Other (income)
expense, net (25) - 21 - 21 (4) - (4)
Income before
provision for income
taxes and equity in
earnings of
unconsolidated
subsidiaries 1,026 (41) (21) - (62) 964 9 973
Provision for income
taxes 343 (15) (9) 17 (7) 336 2 338
Income before equity
in earnings of
unconsolidated
subsidiaries 683 (26) (12) (17) (55) 628 7 635
Equity in earnings of
unconsolidated
subsidiaries, net of
tax (1) - - - - (1) - (1)
Net income $682 $(26) $(12) $(17) $(55) $627 $7 $634
Diluted earnings per
common share $3.64 $(0.13) $(0.07) $(0.09) $(0.29) $3.35 $0.04 $3.39
Effective tax rate 33.4% 34.9%
Operating margin 22.6% 21.7%
A-9
RECONCILIATION OF NET INCOME TO CORE EARNINGS - (Continued)
(Unaudited, in millions, except per share data)
For the Nine Months Ended September 30, 2015
--------------------------------------------
Reported Mark to Litigation Total Core
Market Provision Adjustments
---
Net sales $4,736 $ - $ - $ - $4,736
Cost of sales 1,949 (11) - (11) 1,938
Gross profit 2,787 11 - 11 2,798
Selling, general and
administrative
expenses 1,730 6 (2) 4 1,734
Depreciation and
amortization 79 - - - 79
Other operating
(income) expense, net 2 - - - 2
Income from operations 976 5 2 7 983
Interest expense 83 - - - 83
Interest income (1) - - - (1)
Other (income)
expense, net 1 - - - 1
Income before
provision for income
taxes and equity in
earnings of
unconsolidated
subsidiaries 893 5 2 7 900
Provision for income
taxes 314 2 1 3 317
Income before equity
in earnings of
unconsolidated
subsidiaries 579 3 1 4 583
Equity in earnings of
unconsolidated
subsidiaries, net of
tax - - - - -
Net income $579 $3 $1 $4 583
Diluted earnings per
common share $3.00 $0.01 $0.01 $0.02 $3.02
Effective tax rate 35.2% 35.2%
Operating margin 20.6% 20.8%
A-10
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SOURCE Dr Pepper Snapple Group, Inc.
