PLANO, Texas, April 26, 2017 /PRNewswire/ -- Dr Pepper Snapple
Group, Inc. (NYSE: DPS) reported first quarter 2017 EPS of
$0.96, which included a $0.10 per diluted share gain on the market value
increase on the company's initial equity investment in Bai Brands
and a $0.10 per diluted
share tax benefit associated with a favorable accounting change
related to stock compensation. Reported EPS were $0.96 in the prior year period. Core EPS were
$1.01 for the quarter, including the
two aforementioned items. $0.07 of
the $0.10 tax gain was included in
the company's previous guidance, while the $0.10 gain on the market value increase of the
investment in Bai was not included in the company's previous
guidance. Core EPS were $0.94 in the
prior year period.
DPS President and CEO Larry Young
said, "Our teams executed on our strategy of unlocking growth
across our priority brands through integrated communication and
execution in the quarter. We outperformed the CSD category and grew
both dollar and volume share in IRi measured markets. We closed on
our acquisition of Bai at the end of January and have been
providing them with the resources they need to continue to drive
strong growth on the brand. Our allied brand strategy continues to
be a solid contributor to growth and our continued development of
Rapid Continuous Improvement is making us better everyday."
For the quarter, sales volumes increased 1%, inclusive of the
Bai acquisition. The addition of Bai sales to third party
distributors added 0.2% to sales volume growth. Reported net sales
increased 2%, including the Bai acquisition, which accounted for
about 1 percentage point of the net sales growth. Organic net sales
growth was driven by just over one-and-a-half percentage points of
favorable mix and price, and an increase in organic volume. Net
sales was reduced by over 1 percentage point of unfavorable foreign
currency translation and unfavorable segment mix, combined.
Gross profit increased $18 million
in the quarter on a favorable $15
million comparison of unrealized commodity mark-to-market
gains and $7 million of incremental
gross profit from the Bai acquisition, which included the effects
of deferring the recognition of $9
million of gross profit on shipments of Bai product still in
our inventory at the end of the quarter. Gross profit was also
impacted by favorable commodity costs and flow-through from organic
net sales growth. Gross profit was reduced by increases in
manufacturing costs, in part driven by higher utility costs in
Mexico, and unfavorable foreign
currency translation and transaction, combined.
Selling, general and administrative expenses (SG&A)
increased $75 million in the quarter.
The acquisition of Bai added $41
million, including $19 million
in transaction expenses and $11
million of marketing investments that included the Bai Super
Bowl commercial. SG&A also increased on an unfavorable
$18 million comparison of unrealized
commodity mark-to-market activity, inflationary increases in
certain operating expenses, additional planned investment behind
our DSD front-line sales, delivery and merchandising workforce and
a $9 million increase in planned
marketing investments behind our other priority brands. SG&A
benefited from lower management incentive compensation expenses and
the favorable comparison to a $4
million arbitration award that was recorded in the prior
year.
Other income increased $28 million
in the quarter due to the gain on the market value increase on the
company's initial equity investment in Bai.
Income from Operations declined by $28
million, or 9% in the quarter. The results of Bai's
operations, including transaction expenses, contributed
$34 million of this decline,
partially offset by the $28 million
gain on the company's initial equity investment.
EPS
reconciliation
|
First
Quarter
|
2017
|
2016
|
Percent
Change
|
Reported
EPS
|
$0.96
|
$0.96
|
-
|
|
|
|
|
Unrealized commodity
mark-to-market gain
|
(0.02)
|
(0.02)
|
|
|
|
|
|
Bai transaction and
integration expenses
|
0.07
|
-
|
|
|
------
|
------
|
------
|
Core EPS
|
$1.01
|
$0.94
|
7
|
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-8
accompanying this release.
Summary of 2017
results
(Percent
change)
|
First
Quarter
|
As
Reported
|
Currency
Neutral
(Translation)
|
BCS Volume
|
1
|
1
|
Sales
Volume
|
1
|
1
|
Net Sales
|
2
|
2
|
SOP
|
(10)
|
(10)
|
BCS Volume
For the quarter, BCS volume increased 1%, with carbonated soft
drinks (CSDs) increasing 1% and non-carbonated beverages (NCBs)
decreasing 2%. By geography, U.S. and Canada volume was flat, and Mexico and the Caribbean volume increased 3%.
In CSDs, Dr Pepper increased 1% driven by growth in our fountain
foodservice business that was partially offset by losses in TEN.
Canada Dry grew by 5%, and Schweppes grew by 8%, both on continued
growth in the ginger ale and sparkling water categories. Peñafiel
increased 5%, and Squirt grew 1%. These increases were partially
offset by declines in A&W and 7UP, which both decreased 2%, as
slight growth in 7UP in the U.S. was more than offset by declines
in the Caribbean. Other CSDs
declined 1%. Fountain foodservice volume increased 4% in the
quarter.
In NCBs, Snapple declined 6%, primarily due to promotional
activity timing, and Mott's declined 2% as growth in sauce was more
than offset by declines in juice. Bai increased 80% on the
acquisition and continued growth in our existing distribution,
which increased 26% in the quarter. Our growth allied brands, now
excluding Bai, grew 33% on strong distribution gains in BODYARMOR,
Core and FIJI, as well as on
BODYARMOR innovation. Clamato was flat in the quarter and other
NCBs declined 9%, led by Hawaiian Punch.
Sales Volume
Sales volumes increased 1% in the quarter.
2017 Segment
results
(Percent Change)
|
First
Quarter
|
|
|
As
Reported
|
Currency
Neutral
(Translation)
|
Sales
Volume
|
Net
Sales
|
SOP
|
Net
Sales
|
SOP
|
Beverage
Concentrates
|
2
|
2
|
(1)
|
2
|
(1)
|
Packaged
Beverages
|
(1)
|
2
|
(19)
|
2
|
(19)
|
Latin America
Beverages
|
3
|
(5)
|
(27)
|
6
|
(20)
|
Total
|
1
|
2
|
(10)
|
2
|
(10)
|
Beverage Concentrates
Net sales increased 2% in the quarter driven by concentrate price
increases taken at the beginning of the year and a 2% increase in
concentrate shipments, which were partially offset by higher
discounts due to timing, primarily related to our fountain
foodservice business. SOP declined 1% on a planned increase in
marketing investments of $7 million,
which was partially offset by contributions from net sales
growth.
Packaged Beverages
Net sales increased 2% in the quarter on favorable product and
package mix, mostly due to continued strong growth in our allied
brands and growth from the Bai acquisition, partially offset by a
decline in our organic volume. SOP decreased 19% as results for the
two months of the acquired Bai business, excluding the distribution
profits within our distribution system, was a loss of $17 million, including $11
million of marketing investments, principally the Bai Super
Bowl commercial, and the effects of deferring the recognition of
$9 million of gross profit on
shipments of Bai product still in our inventory at the end of the
quarter.
Additionally, inflationary increases in certain operating
expenses and planned increases behind our DSD front-line workforce
were incurred, along with a planned increase in organic marketing
investments supporting our other priority brands. SOP was further
reduced by adverse mix in our base business, primarily as Snapple
volumes declined in the quarter.
Latin America Beverages
Net sales increased 6% in the quarter on a 3% increase in sales
volumes and favorable pricing. SOP declined 20% in the quarter as
the segment incurred $3 million of
higher U.S. dollar denominated input costs, which caused a 20%
decline in SOP. SOP was further reduced by increases in
manufacturing costs, in part driven by higher utility costs in
Mexico, as well as by increases in
certain other operating expenses. Collectively these increases more
than offset the contributions from net sales growth and a favorable
comparison to a $4 million
arbitration award that was recorded in the prior year.
Corporate and Other Items
For the quarter, corporate costs totaled $81
million, which included $17
million in Bai acquisition costs and $4 million of unrealized commodity mark-to-market
gains. Corporate costs in the prior year period were $64 million, which included $7 million of unrealized commodity mark-to-market
gains.
Net interest expense increased $6
million in the quarter, primarily driven by a higher debt
balance associated with the Bai acquisition.
For the quarter, the reported effective tax rate was 28.6%,
which included an $18 million tax
benefit associated with a favorable accounting change related to
stock compensation. The effective tax rate in the prior year period
was 35.2%.
Cash Flow
For the quarter, the company generated $97
million of cash from operating activities compared to
$197 million in the prior year. Cash
declined by $100 million including
$95 million caused by timing of trade
and income tax payments. Capital spending totaled $16 million compared to $27 million in the prior year period. The company
returned $125 million to shareholders
in the form of stock repurchases ($28
million) and dividends ($97
million).
2017 Full Year Guidance includes the following items:
- Organic volume growth is now expected to be just over 1%; total
volume growth is expected to be approximately 2%, inclusive of the
Bai acquisition, which closed on January
31,
2017.
- Net sales growth is now expected to be about 4%, including
approximately 1 percentage point of negative foreign currency
translation and also includes the Bai acquisition, which is now
expected to add approximately 2 percentage points to growth.
- The impact of the Bai acquisition is now expected to be only
$0.02 dilutive to Core EPS, inclusive
of the $0.10 gain recorded in the
first quarter.
- Collectively, foreign currency translation and transaction are
now expected to reduce Core EPS by $0.07, primarily driven by the Mexican peso.
- We continue to expect an uncertain economic and consumer
environment in Mexico that reduces
our 2017 Core EPS expectation by $0.04.
- Excluding the Bai acquisition, we continue to expect packaging
and ingredient costs to be inflationary by approximately 0.5% on a
constant volume/mix basis.
- The company now expects to invest an incremental $10 million in marketing investments above its
previous guidance.
- The company now expects its full year core tax rate to be
approximately 34%.
- The company continues to expect to repurchase shares of its
common stock of $450 million to $500
million.
- The company continues to expect capital spending to be
approximately 3% of net sales.
- Taking the above items into consideration, the company now
expects 2017 Core EPS in the $4.56 to
$4.66 range.
Non-GAAP Financial Measures
This Press Release may contain certain forward-looking non-GAAP
financial measures, as defined in Regulation G, relating to
forward-looking results. We have not provided a reconciliation of
the forward-looking non-GAAP financial measures included therein to
the closest equivalent GAAP financial measure because, due
primarily to variability and difficulty in making accurate
forecasts and projection, not all of the information necessary to
forecast and quantify the exact amount of the items excluded from
the non-GAAP financial measures that will be included in the
closest equivalent GAAP financial measure was or is available to us
without unreasonable efforts.
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.
Organic: Represents the incremental impact to our results from
our pre-existing business prior to the acquisition of Bai.
Bai acquisition or acquisition of Bai: Refers to our acquisition
of the Bai Brands business by DPS, which was consummated on
January 31, 2017. In part
because we were an investor in Bai Brands and were their largest
distributor, there were many financial aspects of the acquisition,
which impacted our financial statements and our accounting for the
transaction as explained in this Press Release.
Pricing refers to the impact of list price changes.
Unrealized mark-to-market: We recognize the change in the fair
value of open commodity and interest rate derivative positions not
designated as hedges in accordance with U.S. GAAP. As the
underlying commodity is delivered, the realized gains and losses
associated with commodity derivatives 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 and interest rate 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, 2016, 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 2017. 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 seven of the top 10
non-cola soft drinks, and nine of our 10 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,
Bai, Canada Dry, Clamato, Crush, Hawaiian Punch, IBC, 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, 2017 and 2016
|
(Unaudited, in
millions, except per share data)
|
|
|
For
the
|
|
Three Months
Ended
|
|
March
31,
|
|
2017
|
|
2016
|
Net
sales
|
$
|
1,510
|
|
|
$
|
1,487
|
|
Cost of
sales
|
607
|
|
|
602
|
|
Gross
profit
|
903
|
|
|
885
|
|
Selling, general and
administrative expenses
|
621
|
|
|
546
|
|
Depreciation and
amortization
|
25
|
|
|
26
|
|
Other operating
income, net
|
(28)
|
|
|
—
|
|
Income from
operations
|
285
|
|
|
313
|
|
Interest
expense
|
40
|
|
|
33
|
|
Interest
income
|
(1)
|
|
|
—
|
|
Other income,
net
|
(2)
|
|
|
(1)
|
|
Income before
provision for income taxes and equity in earnings of unconsolidated
subsidiaries
|
248
|
|
|
281
|
|
Provision for income
taxes
|
71
|
|
|
99
|
|
Income before equity
in earnings of unconsolidated subsidiaries
|
177
|
|
|
182
|
|
Equity in earnings of
unconsolidated subsidiaries, net of tax
|
—
|
|
|
—
|
|
Net
income
|
$
|
177
|
|
|
$
|
182
|
|
Earnings per
common share:
|
|
|
|
Basic
|
$
|
0.97
|
|
|
$
|
0.97
|
|
Diluted
|
0.96
|
|
|
0.96
|
|
Weighted average
common shares outstanding:
|
|
|
|
Basic
|
183.4
|
|
|
187.6
|
|
Diluted
|
184.6
|
|
|
189.0
|
|
|
|
|
|
|
|
A-1
|
DR PEPPER SNAPPLE
GROUP, INC.
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
As of March 31,
2017 and December 31, 2016
|
(Unaudited, in
millions, except share and per share data)
|
|
|
March
31,
|
|
December
31,
|
|
2017
|
|
2016
|
Assets
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
73
|
|
|
$
|
1,787
|
|
Restricted cash and
restricted cash equivalents
|
87
|
|
|
—
|
|
Accounts
receivable:
|
|
|
|
Trade, net
|
606
|
|
|
595
|
|
Other
|
55
|
|
|
51
|
|
Inventories
|
246
|
|
|
202
|
|
Prepaid expenses and
other current assets
|
180
|
|
|
101
|
|
Total current
assets
|
1,247
|
|
|
2,736
|
|
Property, plant and
equipment, net
|
1,125
|
|
|
1,138
|
|
Investments in
unconsolidated subsidiaries
|
23
|
|
|
23
|
|
Goodwill
|
3,560
|
|
|
2,993
|
|
Other intangible
assets, net
|
3,784
|
|
|
2,656
|
|
Other non-current
assets
|
206
|
|
|
183
|
|
Non-current deferred
tax assets
|
63
|
|
|
62
|
|
Total
assets
|
$
|
10,008
|
|
|
$
|
9,791
|
|
Liabilities and
Stockholders' Equity
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$
|
353
|
|
|
$
|
303
|
|
Deferred
revenue
|
64
|
|
|
64
|
|
Short-term borrowings
and current portion of long-term obligations
|
10
|
|
|
10
|
|
Income taxes
payable
|
24
|
|
|
4
|
|
Other current
liabilities
|
696
|
|
|
670
|
|
Total current
liabilities
|
1,147
|
|
|
1,051
|
|
Long-term
obligations
|
4,467
|
|
|
4,468
|
|
Non-current deferred
tax liabilities
|
842
|
|
|
812
|
|
Non-current deferred
revenue
|
1,101
|
|
|
1,117
|
|
Other non-current
liabilities
|
258
|
|
|
209
|
|
Total
liabilities
|
7,815
|
|
|
7,657
|
|
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, 183,795,277 and
183,119,843 shares issued and outstanding as of March 31, 2017 and
December 31, 2016, respectively
|
2
|
|
|
2
|
|
Additional paid-in
capital
|
61
|
|
|
95
|
|
Retained
earnings
|
2,336
|
|
|
2,266
|
|
Accumulated other
comprehensive loss
|
(206)
|
|
|
(229)
|
|
Total stockholders'
equity
|
2,193
|
|
|
2,134
|
|
Total liabilities and
stockholders' equity
|
$
|
10,008
|
|
|
$
|
9,791
|
|
|
A-2
|
DR PEPPER SNAPPLE
GROUP, INC.
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
For the Three
Months Ended March 31, 2017 and 2016
|
(Unaudited, in
millions)
|
|
|
For
the
|
|
Three Months
Ended
|
|
March
31,
|
|
2017
|
|
2016
|
Operating
activities:
|
|
|
|
Net income
|
$
|
177
|
|
|
$
|
182
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
Depreciation
expense
|
49
|
|
|
48
|
|
Amortization
expense
|
11
|
|
|
8
|
|
Amortization of
deferred revenue
|
(16)
|
|
|
(16)
|
|
Employee stock-based
compensation expense
|
6
|
|
|
11
|
|
Deferred income
taxes
|
30
|
|
|
16
|
|
Gain on step
acquisition of unconsolidated subsidiaries
|
(28)
|
|
|
—
|
|
Unrealized gains on
economic hedges
|
(5)
|
|
|
(7)
|
|
Other, net
|
4
|
|
|
2
|
|
Changes in assets and
liabilities, net of effects of acquisition:
|
|
|
|
Trade accounts
receivable
|
18
|
|
|
(5)
|
|
Other accounts
receivable
|
5
|
|
|
1
|
|
Inventories
|
(16)
|
|
|
(25)
|
|
Other current and
non-current assets
|
(85)
|
|
|
(82)
|
|
Other current and
non-current liabilities
|
(92)
|
|
|
(70)
|
|
Trade accounts
payable
|
19
|
|
|
81
|
|
Income taxes
payable
|
20
|
|
|
53
|
|
Net cash provided by
operating activities
|
97
|
|
|
197
|
|
Investing
activities:
|
|
|
|
Acquisition of
business
|
(1,548)
|
|
|
—
|
|
Cash acquired in step
acquisition of unconsolidated subsidiaries
|
3
|
|
|
—
|
|
Purchase of property,
plant and equipment
|
(16)
|
|
|
(27)
|
|
Purchase of
intangible assets
|
(1)
|
|
|
—
|
|
Investment in
unconsolidated subsidiaries
|
(1)
|
|
|
(6)
|
|
Proceeds from
disposals of property, plant and equipment
|
1
|
|
|
1
|
|
Other, net
|
(7)
|
|
|
(8)
|
|
Net cash used in
investing activities
|
(1,569)
|
|
|
(40)
|
|
Financing
activities:
|
|
|
|
Repayment of senior
unsecured notes
|
—
|
|
|
(500)
|
|
Repurchase of shares
of common stock
|
(28)
|
|
|
(179)
|
|
Dividends
paid
|
(97)
|
|
|
(90)
|
|
Tax withholdings
related to net share settlements of certain stock awards
|
(30)
|
|
|
(31)
|
|
Proceeds from stock
options exercised
|
17
|
|
|
7
|
|
Deferred financing
charges paid
|
(1)
|
|
|
—
|
|
Capital lease
payments
|
(3)
|
|
|
(2)
|
|
Net cash used in
financing activities
|
(142)
|
|
|
(795)
|
|
Cash, cash
equivalents, restricted cash and restricted cash equivalents — net
change from:
|
|
|
|
Operating, investing
and financing activities
|
(1,614)
|
|
|
(638)
|
|
Effect of exchange
rate changes on cash, cash equivalents, restricted cash and
restricted cash equivalents
|
3
|
|
|
2
|
|
Cash, cash
equivalents, restricted cash and restricted cash equivalents at
beginning of period
|
1,787
|
|
|
911
|
|
Cash, cash
equivalents, restricted cash and restricted cash equivalents at end
of period
|
$
|
176
|
|
|
$
|
275
|
|
|
A-3
|
DR PEPPER SNAPPLE
GROUP, INC.
|
OPERATIONS BY
OPERATING SEGMENT
|
For the Three
Months Ended March 31, 2017 and 2016
|
(Unaudited,
in millions)
|
|
|
For the Three
Months Ended
March 31,
|
|
2017
|
|
2016
|
Segment Results –
Net sales
|
|
|
|
Beverage
Concentrates
|
$
|
294
|
|
|
$
|
287
|
|
Packaged
Beverages
|
1,118
|
|
|
1,097
|
|
Latin America
Beverages
|
98
|
|
|
103
|
|
Net
sales
|
$
|
1,510
|
|
|
$
|
1,487
|
|
|
|
For the Three
Months Ended
March 31,
|
|
2017
|
|
2016
|
Segment Results –
SOP
|
|
|
|
Beverage
Concentrates
|
$
|
186
|
|
|
$
|
187
|
|
Packaged
Beverages
|
141
|
|
|
175
|
|
Latin America
Beverages
|
11
|
|
|
15
|
|
Total SOP
|
338
|
|
|
377
|
|
Unallocated corporate
costs
|
81
|
|
|
64
|
|
Other operating
income, net
|
(28)
|
|
|
—
|
|
Income from
operations
|
285
|
|
|
313
|
|
Interest expense,
net
|
39
|
|
|
33
|
|
Other income,
net
|
(2)
|
|
|
(1)
|
|
Income before
provision for income taxes and equity in earnings of unconsolidated
subsidiaries
|
$
|
248
|
|
|
$
|
281
|
|
|
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 three months ended March 31, 2017
and 2016, 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 interest rate derivatives not designated as hedges
in accordance with U.S. GAAP and certain items that are excluded
for comparison to prior year periods, adjusted for the tax impact.
Tax impact is determined based upon an approximate rate for each
item. For the three months ended March 31,
2017, we excluded the impact of transaction and integration
expenses associated with the Bai Brands Merger. For the three
months ended March 31, 2016, 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, 2017
|
|
|
Beverage
|
|
Packaged
|
|
Latin
America
|
|
|
Percent
change
|
|
Concentrates
|
|
Beverages
|
|
Beverages
|
|
Total
|
Reported net
sales
|
|
2
|
%
|
|
2
|
%
|
|
(5)
|
%
|
|
2
|
%
|
Impact of foreign
currency
|
|
—
|
%
|
|
—
|
%
|
|
11
|
%
|
|
—
|
%
|
Net sales, as
adjusted to currency neutral
|
|
2
|
%
|
|
2
|
%
|
|
6
|
%
|
|
2
|
%
|
|
|
|
For the Three
Months Ended March 31, 2017
|
|
|
Beverage
|
|
Packaged
|
|
Latin
America
|
|
|
Percent
change
|
|
Concentrates
|
|
Beverages
|
|
Beverages
|
|
Total
|
Reported
SOP
|
|
(1)
|
%
|
|
(19)
|
%
|
|
(27)
|
%
|
|
(10)
|
%
|
Impact of foreign
currency
|
|
—
|
%
|
|
—
|
%
|
|
7
|
%
|
|
—
|
%
|
SOP, as adjusted
to currency neutral
|
|
(1)
|
%
|
|
(19)
|
%
|
|
(20)
|
%
|
|
(10)
|
%
|
RECONCILIATION OF
NET CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH
FLOW
|
(Unaudited, in
millions)
|
|
|
|
For
the
|
|
|
|
|
Three Months
Ended
|
|
|
|
|
March
31,
|
|
|
|
|
2017
|
|
2016
|
|
Change
|
Net cash provided
by operating activities
|
|
$
|
97
|
|
|
$
|
197
|
|
|
$
|
(100)
|
|
Purchase of property,
plant and equipment
|
|
(16)
|
|
|
(27)
|
|
|
|
Free Cash
Flow
|
|
$
|
81
|
|
|
$
|
170
|
|
|
$
|
(89)
|
|
|
A-6
|
RECONCILIATION OF
CERTAIN REPORTED ITEMS TO NON-GAAP CORE MEASURES
|
(Unaudited, in
millions, except per share data)
|
|
|
For the Three
Months Ended March 31, 2017
|
|
Reported
|
|
Mark to
Market
|
|
Transaction
&
Integration
Expenses
|
|
Total
Adjustments
|
|
Core
|
Cost of
sales
|
$
|
607
|
|
|
$
|
18
|
|
|
$
|
—
|
|
|
$
|
18
|
|
|
$
|
625
|
|
Gross
profit
|
903
|
|
|
(18)
|
|
|
—
|
|
|
(18)
|
|
|
885
|
|
Gross
margin
|
59.8
|
%
|
|
(1.2)
|
%
|
|
—
|
|
|
(1.2)
|
%
|
|
58.6
|
%
|
Selling, general and
administrative expenses
|
$
|
621
|
|
|
$
|
(14)
|
|
|
$
|
(19)
|
|
|
$
|
(33)
|
|
|
$
|
588
|
|
Income from
operations
|
285
|
|
|
(4)
|
|
|
19
|
|
|
15
|
|
|
300
|
|
Operating
margin
|
18.9
|
%
|
|
(0.3)
|
%
|
|
1.3
|
%
|
|
1.0
|
%
|
|
19.9
|
%
|
Interest
expense
|
$
|
40
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
41
|
|
Income before
provision for income taxes and equity in earnings of unconsolidated
subsidiaries
|
248
|
|
|
(5)
|
|
|
19
|
|
|
14
|
|
|
262
|
|
Provision for income
taxes
|
71
|
|
|
(2)
|
|
|
7
|
|
|
5
|
|
|
76
|
|
Effective tax
rate
|
28.6
|
%
|
|
(0.2)
|
%
|
|
0.6
|
%
|
|
0.4
|
%
|
|
29.0
|
%
|
Net income
|
$
|
177
|
|
|
$
|
(3)
|
|
|
$
|
12
|
|
|
$
|
9
|
|
|
$
|
186
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported
EPS
|
|
|
|
|
|
|
|
Core
EPS
|
Diluted earnings per
common share
|
$
|
0.96
|
|
|
$
|
(0.02)
|
|
|
$
|
0.07
|
|
|
$
|
0.05
|
|
|
$
|
1.01
|
|
FX
Translation
|
|
$
|
—
|
|
Currency Neutral Core
EPS
|
|
$
|
1.01
|
|
|
A-7
|
RECONCILIATION OF
CERTAIN REPORTED ITEMS TO NON-GAAP CORE MEASURES -
(Continued)
|
(Unaudited, in
millions, except per share data)
|
|
|
For the Three
Months Ended March 31, 2016
|
|
Reported
|
|
Mark to
Market
|
|
Core
|
Cost of
sales
|
$
|
602
|
|
|
$
|
3
|
|
|
$
|
605
|
|
Gross
profit
|
$
|
885
|
|
|
$
|
(3)
|
|
|
$
|
882
|
|
Gross
margin
|
59.5
|
%
|
|
(0.2)
|
%
|
|
59.3
|
%
|
Selling, general and
administrative expenses
|
$
|
546
|
|
|
$
|
4
|
|
|
$
|
550
|
|
Income from
operations
|
$
|
313
|
|
|
$
|
(7)
|
|
|
$
|
306
|
|
Operating
margin
|
21.0
|
%
|
|
(0.4)
|
%
|
|
20.6
|
%
|
Income before
provision for income taxes and equity in earnings of unconsolidated
subsidiaries
|
$
|
281
|
|
|
$
|
(7)
|
|
|
$
|
274
|
|
Provision for income
taxes
|
$
|
99
|
|
|
$
|
(2)
|
|
|
$
|
97
|
|
Effective tax
rate
|
35.2
|
%
|
|
0.2
|
%
|
|
35.4
|
%
|
Net income
|
$
|
182
|
|
|
$
|
(5)
|
|
|
$
|
177
|
|
|
|
|
|
|
|
|
Reported
EPS
|
|
|
|
Core
EPS
|
Diluted earnings per
common share
|
$
|
0.96
|
|
|
$
|
(0.02)
|
|
|
$
|
0.94
|
|
|
A-8
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/dr-pepper-snapple-group-reports-first-quarter-2017-results-300445529.html
SOURCE Dr Pepper Snapple Group, Inc.