Reported EPS were $0.81 for the quarter.
Core EPS were $0.81 for the quarter, up 9%.
Net sales increased 4% for the
quarter.
Year-to-date, the company returned $214
million to shareholders.
Dr Pepper Snapple Group, Inc. (NYSE: DPS) reported first quarter
2015 EPS of $0.81 compared to $0.78 in the prior year period, an
increase of 4%. Core EPS were also $0.81, compared to $0.74 in the
prior year, an increase of 9%.
For the quarter, reported net sales increased 4%, as a sales
volume increase of 2% and favorable segment and product mix were
partially offset by 1 percentage point of unfavorable foreign
currency translation. Reported segment operating profit (SOP)
increased 7%, or $23 million, on net sales growth, ongoing
productivity improvements and a planned reduction in marketing
investments. On a currency neutral basis, SOP increased 10%.
Reported income from operations for the quarter was $270
million, up 4% compared to the prior year period, including a $1
million unrealized commodity mark-to-market loss. Reported income
from operations was $260 million in the prior year period,
including $12 million of unrealized commodity mark-to-market gains.
Core income from operations was $271 million, up 9% compared to the
prior year period.
DPS President and CEO Larry Young said, “We had a strong start
to 2015. Our teams continued to persevere though a challenging
environment by executing against our key priorities of building our
brands with consumers and executing with excellence in the
marketplace. We grew both dollar and volume share in CSDs in
Nielsen-measured markets, outperforming the category. We expanded
distribution and availability across our tea and juice portfolios
and launched relevant innovation to address consumers’ changing
needs. Our Rapid Continuous Improvement (RCI) capabilities continue
to develop across the organization and are helping to drive
top-line growth, and we still have a tremendous amount of runway
ahead of us.”
EPS reconciliation First Quarter 2015
2014 Percent
Change
Reported EPS $0.81 $0.78 4 Unrealized commodity
mark-to-market net (gain) - (0.04) ------ ------ Core EPS $0.81
$0.74 9
EPS – earnings per share
Net sales and SOP in the tables and commentary below are
presented on a currency neutral basis. For a reconciliation
of non-GAAP to GAAP measures see pages A-5 through A-8 accompanying
this release.
Summary of 2015 results
(Percent change)
First Quarter As Reported
CurrencyNeutral
BCS Volume 3 3 Sales Volume 2 2 Net
Sales 4 5 SOP 7 10
BCS - bottler case sales
BCS Volume
For the quarter, BCS volume increased 3% with carbonated soft
drinks (CSDs) increasing 3% and non-carbonated beverages (NCBs)
increasing 5%.
By geography, U.S. and Canada volume increased 2%, and Mexico
and the Caribbean volume increased 13%.
In CSDs, Peñafiel increased 20% on distribution gains. Our Core
4 brands increased 4%, as a double-digit increase in Canada Dry was
partially offset by low-single-digit declines in Sunkist soda and
7UP. A&W was flat in the quarter. Squirt increased 15%, and
Schweppes increased 8%. These increases were partially offset by a
1% decline in brand Dr Pepper on continued declines in diet.
Fountain foodservice volume increased 1% in the quarter.
In NCBs, Hawaiian Punch volume increased 7% on increased
promotional activity and package innovation. Clamato increased 20%,
and our water category increased 9%. Snapple increased 5%, driven
primarily by high-single-digit growth in Snapple Premium, which was
partially offset by our de-emphasis of our value products.
Sales Volume
Sales volumes increased 2% for the quarter.
2015 Segment results (Percent Change) First
Quarter As Reported Currency Neutral
SalesVolume
NetSales
SOP
SalesVolume
NetSales
SOP
Beverage Concentrates (2) 1 5 (2)
2 6 Packaged Beverages 4 5 8
4 5 10 Latin America Beverages 13
2 31 13 14 89 Total 2
4 7 2 5 10
Beverage Concentrates
Net sales for the quarter increased 2%, as concentrate price
increases taken at the beginning of the year and lower discounts in
the quarter were partially offset by a 2% decline in concentrate
shipments. SOP increased 6% on net sales growth, a planned
reduction in marketing investments and lower IT costs.
Packaged Beverages
Net sales for the quarter increased 5%, as a sales volume
increase of 4% and favorable product mix were partially offset by
increased promotional activity in the quarter. SOP increased 10% on
net sales growth and ongoing productivity improvements.
Latin America Beverages
Net sales for the quarter increased 14%, driven primarily by a
13% increase in sales volumes. SOP increased 89% as net sales
growth and ongoing productivity improvements were partially offset
by increases in logistics costs and other operating expenses.
Corporate and Other Items
For the quarter, corporate costs totaled $71 million, including
a $1 million unrealized commodity mark-to-market loss. Corporate
costs in the prior year period were $57 million, including a $12
million unrealized commodity mark-to-market gain.
Net interest expense increased $2 million for the quarter
compared to the prior year.
For the quarter, the reported effective tax rate was 35.7%. The
prior year effective tax rate was 34.3%, as a $2 million deferred
tax benefit due to a New York State law change decreased the
effective tax rate by 0.9%.
Cash Flow
For the quarter, the company generated $101 million of cash from
operating activities compared to $129 million in the prior year
period. Capital spending totaled $20 million compared to $37
million in the prior year period. The company returned $214 million
to shareholders in the form of stock repurchases ($135 million) and
dividends ($79 million).
2015 Full-Year Guidance
The company continues to expect full-year reported net sales to
be up approximately 1% and core EPS to be in the $3.80 to $3.88
range after the impact of foreign currency, which is now expected
to negatively impact net sales and core EPS growth by approximately
1% and 3%, respectively.
Packaging and ingredient costs are expected to decrease COGS by
about 1% on a constant volume/mix basis.
The company expects 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 expects to repurchase $500 million to $550 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.
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, 2014, 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 10 a.m. (CDT) today, the company will host a conference call
with investors to discuss first quarter results and the outlook for
2015. 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 Press Releases"
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.
DR PEPPER SNAPPLE GROUP, INC. CONDENSED
CONSOLIDATED STATEMENTS OF INCOME For the Three Months Ended
March 31, 2015 and 2014 (Unaudited, in millions, except per
share data) For the Three Months Ended
March 31, 2015
2014 Net sales $ 1,451 $ 1,398
Cost of sales
602 554
Gross
profit 849 844 Selling, general and administrative
expenses
552 554 Depreciation and amortization
27 29
Other operating expense, net
— 1
Income from operations 270 260 Interest expense
27 26 Interest income
— (1 ) Other income, net
(1 ) (1 )
Income before provision for
income taxes and equity in earnings of unconsolidated
subsidiaries 244 236 Provision for income taxes
87 81 Income before equity in earnings
of unconsolidated subsidiaries
157 155 Equity in earnings of
unconsolidated subsidiaries, net of tax
—
—
Net income $ 157 $ 155
Earnings per common share: Basic $
0.82 $ 0.78
Diluted 0.81 0.78
Weighted
average common shares outstanding: Basic 193.0
197.9
Diluted 194.6 199.5
A-1
DR PEPPER SNAPPLE GROUP, INC. CONDENSED
CONSOLIDATED BALANCE SHEETS As of March 31, 2015 and
December 31, 2014 (Unaudited, in millions, except share and
per share data) March 31, December 31,
2015 2014 Assets
Current assets: Cash and cash equivalents
$ 93 $ 237
Accounts receivable: Trade, net
572 556 Other
65 61
Inventories
228 204 Deferred tax assets
73 67 Prepaid
expenses and other current assets
163
86 Total current assets
1,194 1,211 Property, plant
and equipment, net
1,115 1,141 Investments in unconsolidated
subsidiaries
13 14 Goodwill
2,990 2,990 Other
intangible assets, net
2,680 2,684 Other non-current assets
193 159 Non-current deferred tax assets
67
74 Total assets
$ 8,252 $
8,273
Liabilities and Stockholders' Equity Current
liabilities: Accounts payable
$ 350 $ 289 Deferred
revenue
64 64 Short-term borrowings and current portion of
long-term obligations
504 3 Income taxes payable
50
10 Other current liabilities
587 672
Total current liabilities
1,555 1,038 Long-term
obligations
2,113 2,588 Non-current deferred tax liabilities
828 801 Non-current deferred revenue
1,232 1,250
Other non-current liabilities
303 302
Total liabilities
6,031 5,979 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,
192,342,028 and 192,957,696 shares issued and outstanding for 2015
and 2014, respectively
2 2 Additional paid-in capital
546 658 Retained earnings
1,835 1,771 Accumulated
other comprehensive loss
(162 ) (137 )
Total stockholders' equity
2,221 2,294
Total liabilities and stockholders' equity
$
8,252 $ 8,273
A-2
DR PEPPER SNAPPLE GROUP, INC. CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS For the Three Months
Ended March 31, 2015 and 2014 (Unaudited, in millions)
For the Three Months Ended March 31,
2015 2014
Operating activities: Net income
$ 157 $ 155
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation expense
48 50
Amortization expense
8 10 Amortization of deferred revenue
(16 ) (16 ) Employee stock-based compensation expense
9 11 Deferred income taxes
15 14 Other, net
(17 ) (19 ) Changes in assets and liabilities, net of
effects of acquisition: Trade accounts receivable
(19
) 6 Other accounts receivable
(4 ) (5 )
Inventories
(26 ) (26 ) Other current and non-current
assets
(81 ) (66 ) Other current and non-current
liabilities
(99 ) (55 ) Trade accounts payable
67 32 Income taxes payable
59 38
Net cash provided by operating activities
101 129
Investing activities: Purchase of property, plant and
equipment
(20 ) (37 ) Purchase of cost method
investment
(15 ) — Proceeds from disposals of
property, plant and equipment
1 — Other, net
(6 ) (1 ) Net cash used in investing
activities
(40 ) (38 )
Financing activities:
Net issuance of commercial paper
— 85 Repurchase of shares
of common stock
(135 ) (60 ) Cash paid for shares not
yet received
— (90 ) Dividends paid
(79 ) (75
) Tax withholdings related to net share settlements of certain
stock awards
(26 ) (15 ) Proceeds from stock options
exercised
19 24 Excess tax benefit on stock-based
compensation
19 8 Net cash used
in financing activities
(202 ) (123 )
Cash and
cash equivalents — net change from: Operating, investing and
financing activities
(141 ) (32 ) Effect of exchange
rate changes on cash and cash equivalents
(3 ) (1 )
Cash and cash equivalents at beginning of period
237
153 Cash and cash equivalents at end of period
$ 93 $ 120
A-3
DR PEPPER SNAPPLE GROUP, INC. OPERATIONS BY
OPERATING SEGMENT For the Three Months Ended March 31, 2015
and 2014 (Unaudited, in millions)
For the Three Months EndedMarch
31,
2015 2014
Segment Results – Net sales Beverage Concentrates
$
285 $ 281 Packaged Beverages
1,053 1,006 Latin
America Beverages
113 111
Net
sales $ 1,451 $ 1,398
For the Three Months EndedMarch
31,
2015 2014 Segment
Results – SOP Beverage Concentrates
$ 183 $ 174
Packaged Beverages
141 131 Latin America Beverages
17 13 Total SOP
341 318
Unallocated corporate costs
71 57 Other operating expense,
net
— 1
Income from
operations 270 260 Interest expense, net
27 25
Other income, net
(1 ) (1 )
Income
before provision for income taxes and equity in earnings of
unconsolidated subsidiaries $ 244 $ 236
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 on
a currency neutral basis.
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, 2015 and 2014, 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, 2015
and 2014, there were no certain items 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, 2015 Beverage
Packaged Latin
America
Percent change Concentrates Beverages
Beverages Total Reported net sales 1 % 5 % 2 %
4 % Impact of foreign currency 1 % — % 12 % 1 %
Net sales, as
adjusted to currency neutral 2 % 5 % 14 % 5 %
For the
Three Months Ended March 31, 2015 Beverage
Packaged Latin
America
Percent change Concentrates Beverages
Beverages Total Reported SOP 5 % 8 % 31 % 7 %
Impact of foreign currency 1 % 2 % 58 % 3 %
SOP, as adjusted to
currency neutral 6 % 10 % 89 % 10 %
RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO
FREE CASH FLOW (Unaudited, in millions) For
the Three Months Ended March 31,
2015 2014 Change
Net cash provided by operating activities $
101 $ 129 $ (28 ) Purchase of property, plant and equipment
(20 ) (37 )
Free Cash Flow
$ 81 $ 92 $ (11 )
A-6
RECONCILIATION OF NET INCOME TO CORE EARNINGS
(Unaudited, in millions, except per share data)
For the Three Months Ended March 31, 2015 Reported
Mark toMarket
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-7
RECONCILIATION OF NET INCOME TO CORE EARNINGS -
(Continued) (Unaudited, in millions, except per share
data) For the Three Months Ended March 31, 2014
Reported
Mark toMarket
Core Net sales $ 1,398 $ — $ 1,398 Cost of sales 554
12 566 Gross profit 844 (12 ) 832 Selling, general and
administrative expenses 554 — 554 Depreciation and amortization 29
— 29 Other operating expense, net 1 — 1 Income from operations 260
(12 ) 248 Interest expense 26 — 26 Interest income (1 ) — (1 )
Other income, net (1 ) — (1 ) Income before provision for income
taxes and equity in earnings of unconsolidated subsidiaries 236 (12
) 224 Provision for income taxes 81 (4 ) 77 Income before equity in
earnings of unconsolidated subsidiaries 155 (8 ) 147 Equity in
earnings of unconsolidated subsidiaries, net of tax — — — Net
income $ 155 $ (8 ) $ 147 Diluted earnings per common share
$ 0.78 $ (0.04 ) $ 0.74 Effective tax rate 34.3 % 34.4 % Operating
margin 18.6 % 17.7 %
A-8
Dr Pepper Snapple Group, Inc.Media RelationsChris Barnes,
972-673-5539orInvestor RelationsHeather Catelotti,
972-673-5869
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