PLANO, Texas, July 23, 2015 /PRNewswire/ -- Dr Pepper Snapple
Group, Inc. (NYSE: DPS) reported second quarter 2015 EPS of
$1.14 compared to $1.06 in the prior year period. Core EPS were
$1.13, up 7%, compared to
$1.06 in the prior year period.
Year-to-date, the company reported earnings of $1.95 per diluted share compared to $1.84 per share in the prior year period.
Core EPS were $1.94, up 8%, compared
to $1.80 in the prior year
period.
For the quarter, reported net sales increased 1%, which included
favorable product, package and segment mix and a 1% increase in
sales volumes, partially offset by 2 percentage points of
unfavorable foreign currency translation. Reported segment
operating profit (SOP) increased 6%, or $24
million, on net sales growth, ongoing productivity
improvements and favorable commodity costs, partially offset by 1
percentage point of unfavorable foreign currency translation.
Reported income from operations for the quarter was $369 million, including $5
million in unrealized commodity mark-to-market gains.
Reported income from operations was $348
million in the prior year period. Core income from
operations was $365 million, up 5%
compared to the prior year period.
Year-to-date, reported net sales increased 3%, and reported
income from operations was $639
million, including $4 million
of unrealized commodity mark-to-market gains. Foreign currency
translation negatively impacted reported net sales by 1% and
reported income from operations by 2%. Reported income from
operations was $608 million in the
prior year period, including $12
million of unrealized commodity mark-to-market gains. Core
income from operations was $636
million, up 7% compared to the prior year period.
DPS President and CEO Larry Young
said, "We've had a good start to the year, and I'm proud of what
our teams have been able to accomplish in this competitive
environment. They remained focused on our strategy and continued to
deliver against our key priorities. Year-to-date, we grew volume
and dollar share in both the CSD and shelf-stable juice categories
in Nielsen measured markets and gained or held distribution and
availability across our portfolio."
Young continued, "We've brought innovation to the market that
addresses consumers' evolving needs, and Rapid Continuous
Improvement (RCI) continues to drive growth and productivity across
the business. I'm confident that our teams will continue to execute
against our plans for the balance of the year."
EPS
reconciliation
|
Second
Quarter
|
Year-to-Date
|
2015
|
2014
|
Percent
Change
|
2015
|
2014
|
Percent
Change
|
Reported
EPS
|
$1.14
|
$1.06
|
8
|
$1.95
|
$1.84
|
6
|
|
|
|
|
|
|
|
Unrealized commodity
mark-to-market net gain
|
(0.01)
|
-
|
|
(0.01)
|
(0.04)
|
|
|
|
|
|
|
|
|
Items affecting
comparability
- Litigation
provision
|
-
|
-
|
|
-
|
-
|
|
|
|
|
|
|
|
|
Core EPS
|
$1.13
|
$1.06
|
7
|
$1.94
|
$1.80
|
8
|
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-10 accompanying this release.
Summary of 2015
results
(Percent
change)
|
As
Reported
|
Currency
Neutral
(Translation)
|
Second
Quarter
|
YTD
|
Second
Quarter
|
YTD
|
BCS Volume
|
1
|
2
|
1
|
2
|
Sales
Volume
|
1
|
1
|
1
|
1
|
Net Sales
|
1
|
3
|
3
|
4
|
SOP
|
6
|
6
|
7
|
8
|
BCS - bottler case
sales
|
BCS Volume
For the quarter, BCS volume increased 1% with carbonated soft
drinks (CSDs) increasing 1% and non-carbonated beverages (NCBs)
increasing 3%.
By geography, U.S. and Canada
volume increased 1%, and Mexico
and the Caribbean volume increased
7%.
In CSDs, Peñafiel increased 12% in the quarter on increased
promotional activity and distribution gains. Squirt increased 6%,
while Schweppes increased 8%. Brand Dr Pepper grew 1% in the
quarter. Our Core 4 brands decreased 1%, as a mid-single-digit
increase in Canada Dry was more
than offset by mid-single-digit declines in 7UP, Sunkist soda and
A&W. Crush declined 4%, and fountain foodservice volume grew 4%
in the period.
In NCBs, Snapple increased 11% driven primarily by product
innovation. Our water category grew 6% primarily on growth in Bai 5
and FIJI, and Clamato increased 8%
on increased promotional activity. Hawaiian Punch increased 2% in
the quarter, and Mott's declined 7%, driven primarily by declines
in juice.
Sales Volume
For the quarter and year-to-date, sales volumes increased 1%.
2015 Segment
results (Percent Change)
|
As
Reported
|
Second
Quarter
|
Year-to-Date
|
Sales
Volume
|
Net
Sales
|
SOP
|
Sales
Volume
|
Net
Sales
|
SOP
|
Beverage
Concentrates
|
(1)
|
1
|
4
|
(2)
|
1
|
4
|
Packaged
Beverages
|
1
|
3
|
7
|
2
|
4
|
7
|
Latin America
Beverages
|
7
|
(9)
|
13
|
10
|
(4)
|
19
|
Total
|
1
|
1
|
6
|
1
|
3
|
6
|
|
2015 Segment
results (Percent Change)
|
Currency Neutral
(Translation)
|
Second
Quarter
|
Year-to-Date
|
Sales
Volume
|
Net
Sales
|
SOP
|
Sales
Volume
|
Net
Sales
|
SOP
|
Beverage
Concentrates
|
(1)
|
2
|
5
|
(2)
|
2
|
5
|
Packaged
Beverages
|
1
|
3
|
8
|
2
|
4
|
8
|
Latin America
Beverages
|
7
|
5
|
29
|
10
|
9
|
32
|
Total
|
1
|
3
|
7
|
1
|
4
|
8
|
Beverage Concentrates
Net sales increased 2% in the quarter driven by favorable product
mix and concentrate prices taken earlier in the year, which were
partially offset by a 1% decline in concentrate shipments and
higher discounts. SOP increased 5% on net sales growth and lower
marketing and information technology costs.
Packaged Beverages
Net sales for the quarter increased 3% on favorable price/mix of 2%
and a 1% increase in sales volumes. SOP increased 8% on net sales
growth, ongoing productivity improvements and favorable commodity
costs, partially offset by the cost of U.S. sourced products sold
in Canada. Due to the
strengthening of the U.S. dollar, the cost of those U.S. sourced
products sold in Canada decreased
SOP 2%.
Latin America Beverages
Net sales for the quarter increased 5% on a 7% increase in sales
volumes, which was partially offset by increased promotional
activity. SOP increased 29% on net sales growth, ongoing
productivity improvements and favorable commodity and manufacturing
costs, which were partially offset by the higher cost of certain
U.S. dollar denominated input costs as a result of the
strengthening U.S. dollar and higher logistics costs.
Corporate and Other Items
For the quarter, corporate costs totaled $70
million, which included $5
million in unrealized commodity mark-to-market gains and
increases in certain operating expenses. Corporate costs in the
prior year period were $70
million.
Net interest expense was flat in the quarter.
For the quarter, the reported effective tax rate was 35.5%. The
effective tax rate in the prior year period was 35.1%.
Cash Flow
Year-to-date, the company generated $349
million of cash from operating activities compared to
$438 million in the prior year.
Capital spending totaled $42 million
compared to $71 million in the prior
year period. The company returned $423
million to shareholders in the form of stock repurchases
($251 million) and dividends
($172 million).
2015 Full-Year Guidance
The company now expects full-year reported net sales to be up just
over 1% and core EPS to be in the $3.85 to
$3.93 range. Collectively, foreign currency translation and
transaction are now expected to negatively impact net sales and
core EPS growth by approximately 2% and 4%, respectively.
Packaging and ingredient costs are now expected to decrease COGS
by approximately 1.5% 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 $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 second quarter comprising April, May and June.
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, 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 second
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-10 accompanying this release and under "Financial News" 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 and
Six Months Ended June 30, 2015 and 2014
|
(Unaudited, in
millions, except per share data)
|
|
|
For
the
|
|
For
the
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
June
30,
|
|
June
30,
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
Net
sales
|
$
|
1,655
|
|
|
$
|
1,631
|
|
|
$
|
3,106
|
|
|
$
|
3,029
|
|
Cost of
sales
|
674
|
|
|
665
|
|
|
1,276
|
|
|
1,219
|
|
Gross
profit
|
981
|
|
|
966
|
|
|
1,830
|
|
|
1,810
|
|
Selling, general and
administrative expenses
|
586
|
|
|
592
|
|
|
1,138
|
|
|
1,146
|
|
Depreciation and
amortization
|
26
|
|
|
29
|
|
|
53
|
|
|
58
|
|
Other operating
income, net
|
—
|
|
|
(3)
|
|
|
—
|
|
|
(2)
|
|
Income from
operations
|
369
|
|
|
348
|
|
|
639
|
|
|
608
|
|
Interest
expense
|
28
|
|
|
27
|
|
|
55
|
|
|
53
|
|
Interest
income
|
(1)
|
|
|
—
|
|
|
(1)
|
|
|
(1)
|
|
Other expense
(income), net
|
1
|
|
|
(1)
|
|
|
—
|
|
|
(2)
|
|
Income before
provision for income taxes and equity in earnings of unconsolidated
subsidiaries
|
341
|
|
|
322
|
|
|
585
|
|
|
558
|
|
Provision for income
taxes
|
121
|
|
|
113
|
|
|
208
|
|
|
194
|
|
Income before equity
in earnings of unconsolidated subsidiaries
|
220
|
|
|
209
|
|
|
377
|
|
|
364
|
|
Equity in earnings of
unconsolidated subsidiaries, net of tax
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
Net
income
|
$
|
220
|
|
|
$
|
210
|
|
|
$
|
377
|
|
|
$
|
365
|
|
Earnings per
common share:
|
|
|
|
|
|
|
|
Basic
|
$
|
1.15
|
|
|
$
|
1.07
|
|
|
$
|
1.96
|
|
|
$
|
1.85
|
|
Diluted
|
1.14
|
|
|
1.06
|
|
|
1.95
|
|
|
1.84
|
|
Weighted average
common shares outstanding:
|
|
|
|
|
|
|
|
Basic
|
191.4
|
|
|
196.6
|
|
|
192.2
|
|
|
197.3
|
|
Diluted
|
192.4
|
|
|
197.8
|
|
|
193.5
|
|
|
198.6
|
|
|
A-1
|
DR PEPPER SNAPPLE
GROUP, INC.
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
As of June 30,
2015 and December 31, 2014
|
(Unaudited, in
millions, except share and per share data)
|
|
|
June
30,
|
|
December 31,
|
|
2015
|
|
2014
|
Assets
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
127
|
|
|
$
|
237
|
|
Accounts
receivable:
|
|
|
|
Trade, net
|
630
|
|
|
556
|
|
Other
|
63
|
|
|
61
|
|
Inventories
|
217
|
|
|
204
|
|
Deferred tax
assets
|
63
|
|
|
67
|
|
Prepaid expenses and
other current assets
|
159
|
|
|
86
|
|
Total current
assets
|
1,259
|
|
|
1,211
|
|
Property, plant and
equipment, net
|
1,095
|
|
|
1,141
|
|
Investments in
unconsolidated subsidiaries
|
13
|
|
|
14
|
|
Goodwill
|
2,989
|
|
|
2,990
|
|
Other intangible
assets, net
|
2,679
|
|
|
2,684
|
|
Other non-current
assets
|
165
|
|
|
159
|
|
Non-current deferred
tax assets
|
67
|
|
|
74
|
|
Total
assets
|
$
|
8,267
|
|
|
$
|
8,273
|
|
Liabilities and
Stockholders' Equity
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$
|
305
|
|
|
$
|
289
|
|
Deferred
revenue
|
64
|
|
|
64
|
|
Short-term borrowings
and current portion of long-term obligations
|
505
|
|
|
3
|
|
Income taxes
payable
|
58
|
|
|
10
|
|
Other current
liabilities
|
631
|
|
|
672
|
|
Total current
liabilities
|
1,563
|
|
|
1,038
|
|
Long-term
obligations
|
2,097
|
|
|
2,588
|
|
Non-current deferred
tax liabilities
|
831
|
|
|
801
|
|
Non-current deferred
revenue
|
1,216
|
|
|
1,250
|
|
Other non-current
liabilities
|
298
|
|
|
302
|
|
Total
liabilities
|
6,005
|
|
|
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, 190,925,830 and
192,957,696 shares issued and outstanding for 2015 and 2014,
respectively
|
2
|
|
|
2
|
|
Additional paid-in
capital
|
447
|
|
|
658
|
|
Retained
earnings
|
1,962
|
|
|
1,771
|
|
Accumulated other
comprehensive loss
|
(149)
|
|
|
(137)
|
|
Total stockholders'
equity
|
2,262
|
|
|
2,294
|
|
Total liabilities and
stockholders' equity
|
$
|
8,267
|
|
|
$
|
8,273
|
|
|
A-2
|
DR PEPPER SNAPPLE
GROUP, INC.
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
For the Six Months
Ended June 30, 2015 and 2014
|
(Unaudited, in
millions)
|
|
|
For
the
|
|
Six Months
Ended
|
|
June
30,
|
|
2015
|
|
2014
|
Operating
activities:
|
|
|
|
Net income
|
$
|
377
|
|
|
$
|
365
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
Depreciation
expense
|
96
|
|
|
99
|
|
Amortization
expense
|
16
|
|
|
18
|
|
Amortization of
deferred revenue
|
(32)
|
|
|
(32)
|
|
Employee stock-based
compensation expense
|
21
|
|
|
22
|
|
Deferred income
taxes
|
19
|
|
|
22
|
|
Other, net
|
(21)
|
|
|
(23)
|
|
Changes in assets and
liabilities, net of effects of acquisition:
|
|
|
|
Trade accounts
receivable
|
(78)
|
|
|
(25)
|
|
Other accounts
receivable
|
(2)
|
|
|
5
|
|
Inventories
|
(16)
|
|
|
(13)
|
|
Other current and
non-current assets
|
(77)
|
|
|
(53)
|
|
Other current and
non-current liabilities
|
(41)
|
|
|
(24)
|
|
Trade accounts
payable
|
18
|
|
|
48
|
|
Income taxes
payable
|
69
|
|
|
29
|
|
Net cash provided by
operating activities
|
349
|
|
|
438
|
|
Investing
activities:
|
|
|
|
Purchase of property,
plant and equipment
|
(42)
|
|
|
(71)
|
|
Purchase of
intangible assets
|
(1)
|
|
|
(1)
|
|
Purchase of cost
method investment
|
(15)
|
|
|
—
|
|
Proceeds from
disposals of property, plant and equipment
|
11
|
|
|
7
|
|
Other, net
|
—
|
|
|
(3)
|
|
Net cash used in
investing activities
|
(47)
|
|
|
(68)
|
|
Financing
activities:
|
|
|
|
Net issuance of
commercial paper
|
—
|
|
|
5
|
|
Repurchase of shares
of common stock
|
(251)
|
|
|
(206)
|
|
Cash paid for shares
not yet received
|
—
|
|
|
(50)
|
|
Dividends
paid
|
(172)
|
|
|
(157)
|
|
Tax withholdings
related to net share settlements of certain stock awards
|
(27)
|
|
|
(16)
|
|
Proceeds from stock
options exercised
|
22
|
|
|
28
|
|
Excess tax benefit on
stock-based compensation
|
20
|
|
|
8
|
|
Other, net
|
(1)
|
|
|
—
|
|
Net cash used in
financing activities
|
(409)
|
|
|
(388)
|
|
Cash and cash
equivalents — net change from:
|
|
|
|
Operating, investing
and financing activities
|
(107)
|
|
|
(18)
|
|
Effect of exchange
rate changes on cash and cash equivalents
|
(3)
|
|
|
—
|
|
Cash and cash
equivalents at beginning of period
|
237
|
|
|
153
|
|
Cash and cash
equivalents at end of period
|
$
|
127
|
|
|
$
|
135
|
|
|
A-3
|
DR PEPPER SNAPPLE
GROUP, INC.
|
OPERATIONS BY
OPERATING SEGMENT
|
For the Three and
Six Months Ended June 30, 2015 and 2014
|
(Unaudited, in
millions)
|
|
|
For the Three
Months Ended
June 30,
|
|
For the Six Months
Ended
June 30,
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
Segment Results –
Net sales
|
|
|
|
|
|
|
|
Beverage
Concentrates
|
$
|
330
|
|
|
$
|
327
|
|
|
$
|
615
|
|
|
$
|
608
|
|
Packaged
Beverages
|
1,188
|
|
|
1,154
|
|
|
2,241
|
|
|
2,160
|
|
Latin America
Beverages
|
137
|
|
|
150
|
|
|
250
|
|
|
261
|
|
Net
sales
|
$
|
1,655
|
|
|
$
|
1,631
|
|
|
$
|
3,106
|
|
|
$
|
3,029
|
|
|
|
For the Three
Months Ended
June 30,
|
|
For the Six Months
Ended
June 30,
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
Segment Results –
SOP
|
|
|
|
|
|
|
|
Beverage
Concentrates
|
$
|
222
|
|
|
$
|
214
|
|
|
$
|
405
|
|
|
$
|
388
|
|
Packaged
Beverages
|
190
|
|
|
177
|
|
|
331
|
|
|
308
|
|
Latin America
Beverages
|
27
|
|
|
24
|
|
|
44
|
|
|
37
|
|
Total SOP
|
439
|
|
|
415
|
|
|
780
|
|
|
733
|
|
Unallocated corporate
costs
|
70
|
|
|
70
|
|
|
141
|
|
|
127
|
|
Other operating
income, net
|
—
|
|
|
(3)
|
|
|
—
|
|
|
(2)
|
|
Income from
operations
|
369
|
|
|
348
|
|
|
639
|
|
|
608
|
|
Interest expense,
net
|
27
|
|
|
27
|
|
|
54
|
|
|
52
|
|
Other expense
(income), net
|
1
|
|
|
(1)
|
|
|
—
|
|
|
(2)
|
|
Income before
provision for income taxes and equity in earnings of unconsolidated
subsidiaries
|
$
|
341
|
|
|
$
|
322
|
|
|
$
|
585
|
|
|
$
|
558
|
|
|
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 six
months ended June 30, 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. The certain
item excluded for the three and six months ended June 30, 2015
is an adjustment to a previously disclosed legal provision. For
the three and six months ended June 30, 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 June 30, 2015
|
|
|
Beverage
|
|
Packaged
|
|
Latin
America
|
|
|
Percent
change
|
|
Concentrates
|
|
Beverages
|
|
Beverages
|
|
Total
|
Reported net
sales
|
|
1%
|
|
3%
|
|
(9)%
|
|
1%
|
Impact of foreign
currency
|
|
1%
|
|
—%
|
|
14%
|
|
2%
|
Net sales, as
adjusted to currency neutral
|
|
2%
|
|
3%
|
|
5%
|
|
3%
|
|
|
|
For the Three
Months Ended June 30, 2015
|
|
|
Beverage
|
|
Packaged
|
|
Latin
America
|
|
|
Percent
change
|
|
Concentrates
|
|
Beverages
|
|
Beverages
|
|
Total
|
Reported
SOP
|
|
4%
|
|
7%
|
|
13%
|
|
6%
|
Impact of foreign
currency
|
|
1%
|
|
1%
|
|
16%
|
|
1%
|
SOP, as adjusted
to currency neutral
|
|
5%
|
|
8%
|
|
29%
|
|
7%
|
|
|
|
For the Six Months
Ended June 30, 2015
|
|
|
Beverage
|
|
Packaged
|
|
Latin
America
|
|
|
Percent
change
|
|
Concentrates
|
|
Beverages
|
|
Beverages
|
|
Total
|
Reported net
sales
|
|
1%
|
|
4%
|
|
(4)%
|
|
3%
|
Impact of foreign
currency
|
|
1%
|
|
—%
|
|
13%
|
|
1%
|
Net sales, as
adjusted to currency neutral
|
|
2%
|
|
4%
|
|
9%
|
|
4%
|
|
|
|
For the Six Months
Ended June 30, 2015
|
|
|
Beverage
|
|
Packaged
|
|
Latin
America
|
|
|
Percent
change
|
|
Concentrates
|
|
Beverages
|
|
Beverages
|
|
Total
|
Reported
SOP
|
|
4%
|
|
7%
|
|
19%
|
|
6%
|
Impact of foreign
currency
|
|
1%
|
|
1%
|
|
13%
|
|
2%
|
SOP, as adjusted
to currency neutral
|
|
5%
|
|
8%
|
|
32%
|
|
8%
|
RECONCILIATION OF
NET CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH
FLOW
|
(Unaudited, in
millions)
|
|
|
|
For
the
|
|
|
|
|
Six Months
Ended
|
|
|
|
|
June
30,
|
|
|
|
|
2015
|
|
2014
|
|
Change
|
Net cash provided
by operating activities
|
|
$
|
349
|
|
|
$
|
438
|
|
|
$
|
(89)
|
|
Purchase of property,
plant and equipment
|
|
(42)
|
|
|
(71)
|
|
|
|
Free Cash
Flow
|
|
$
|
307
|
|
|
$
|
367
|
|
|
$
|
(60)
|
|
|
A-6
|
RECONCILIATION OF
NET INCOME TO CORE EARNINGS
|
(Unaudited, in
millions, except per share data)
|
|
|
For the Three
Months Ended June 30, 2015
|
|
Reported
|
|
Mark to
Market
|
|
Litigation
Provision
|
|
Total
Adjustments
|
|
Core
|
Net sales
|
$
|
1,655
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,655
|
|
Cost of
sales
|
674
|
|
|
(2)
|
|
|
—
|
|
|
(2)
|
|
|
672
|
|
Gross
profit
|
981
|
|
|
2
|
|
|
—
|
|
|
2
|
|
|
983
|
|
Selling, general and
administrative expenses
|
586
|
|
|
7
|
|
|
(1)
|
|
|
6
|
|
|
592
|
|
Depreciation and
amortization
|
26
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
26
|
|
Other operating
income, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Income from
operations
|
369
|
|
|
(5)
|
|
|
1
|
|
|
(4)
|
|
|
365
|
|
Interest
expense
|
28
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
28
|
|
Interest
income
|
(1)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1)
|
|
Other expense
(income), net
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
Income before
provision for income taxes and equity in earnings of unconsolidated
subsidiaries
|
341
|
|
|
(5)
|
|
|
1
|
|
|
(4)
|
|
|
337
|
|
Provision for income
taxes
|
121
|
|
|
(2)
|
|
|
—
|
|
|
(2)
|
|
|
119
|
|
Income before equity
in earnings of unconsolidated subsidiaries
|
220
|
|
|
(3)
|
|
|
1
|
|
|
(2)
|
|
|
218
|
|
Equity in earnings of
unconsolidated subsidiaries, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Net income
|
$
|
220
|
|
|
$
|
(3)
|
|
|
$
|
1
|
|
|
$
|
(2)
|
|
|
$
|
218
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per
common share
|
$
|
1.14
|
|
|
$
|
(0.01)
|
|
|
$
|
—
|
|
|
$
|
(0.01)
|
|
|
$
|
1.13
|
|
Effective tax
rate
|
35.5%
|
|
|
|
|
|
|
|
|
35.3%
|
|
Operating
margin
|
22.3%
|
|
|
|
|
|
|
|
|
22.1%
|
|
|
A-7
|
RECONCILIATION OF
NET INCOME TO CORE EARNINGS - (Continued)
|
(Unaudited, in
millions, except per share data)
|
|
|
For the Three
Months Ended June 30, 2014
|
|
Reported
|
|
Mark to
Market
|
|
Core
|
Net sales
|
$
|
1,631
|
|
|
$
|
—
|
|
|
$
|
1,631
|
|
Cost of
sales
|
665
|
|
|
(1)
|
|
|
664
|
|
Gross
profit
|
966
|
|
|
1
|
|
|
967
|
|
Selling, general and
administrative expenses
|
592
|
|
|
1
|
|
|
593
|
|
Depreciation and
amortization
|
29
|
|
|
—
|
|
|
29
|
|
Other operating
income, net
|
(3)
|
|
|
—
|
|
|
(3)
|
|
Income from
operations
|
348
|
|
|
—
|
|
|
348
|
|
Interest
expense
|
27
|
|
|
—
|
|
|
27
|
|
Interest
income
|
—
|
|
|
—
|
|
|
—
|
|
Other expense
(income), net
|
(1)
|
|
|
—
|
|
|
(1)
|
|
Income before
provision for income taxes and equity in earnings of unconsolidated
subsidiaries
|
322
|
|
|
—
|
|
|
322
|
|
Provision for income
taxes
|
113
|
|
|
—
|
|
|
113
|
|
Income before equity
in earnings of unconsolidated subsidiaries
|
209
|
|
|
—
|
|
|
209
|
|
Equity in earnings of
unconsolidated subsidiaries, net of tax
|
1
|
|
|
—
|
|
|
1
|
|
Net income
|
$
|
210
|
|
|
$
|
—
|
|
|
$
|
210
|
|
|
|
|
|
|
|
Diluted earnings per
common share
|
$
|
1.06
|
|
|
$
|
—
|
|
|
$
|
1.06
|
|
Effective tax
rate
|
35.1%
|
|
|
|
|
35.1%
|
|
Operating
margin
|
21.3%
|
|
|
|
|
21.3%
|
|
|
A-8
|
RECONCILIATION OF
NET INCOME TO CORE EARNINGS - (Continued)
|
(Unaudited, in
millions, except per share data)
|
|
|
For the Six Months
Ended June 30, 2015
|
|
Reported
|
|
Mark to
Market
|
|
Litigation
Provision
|
|
Total
Adjustments
|
|
Core
|
Net sales
|
$
|
3,106
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,106
|
|
Cost of
sales
|
1,276
|
|
|
(4)
|
|
|
—
|
|
|
(4)
|
|
|
1,272
|
|
Gross
profit
|
1,830
|
|
|
4
|
|
|
—
|
|
|
4
|
|
|
1,834
|
|
Selling, general and
administrative expenses
|
1,138
|
|
|
8
|
|
|
(1)
|
|
|
7
|
|
|
1,145
|
|
Multi-employer
pension plan withdrawal
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Depreciation and
amortization
|
53
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
53
|
|
Other operating
income, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Income from
operations
|
639
|
|
|
(4)
|
|
|
1
|
|
|
(3)
|
|
|
636
|
|
Interest
expense
|
55
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
55
|
|
Interest
income
|
(1)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1)
|
|
Other expense
(income), net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Income before
provision for income taxes and equity in earnings of unconsolidated
subsidiaries
|
585
|
|
|
(4)
|
|
|
1
|
|
|
(3)
|
|
|
582
|
|
Provision for income
taxes
|
208
|
|
|
(2)
|
|
|
—
|
|
|
(2)
|
|
|
206
|
|
Income before equity
in earnings of unconsolidated subsidiaries
|
377
|
|
|
(2)
|
|
|
1
|
|
|
(1)
|
|
|
376
|
|
Equity in earnings of
unconsolidated subsidiaries, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Net income
|
$
|
377
|
|
|
$
|
(2)
|
|
|
$
|
1
|
|
|
$
|
(1)
|
|
|
$
|
376
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per
common share
|
$
|
1.95
|
|
|
$
|
(0.01)
|
|
|
$
|
—
|
|
|
(0.01)
|
|
|
$
|
1.94
|
|
Effective tax
rate
|
35.6%
|
|
|
|
|
|
|
|
|
35.4%
|
|
Operating
margin
|
20.6%
|
|
|
|
|
|
|
|
|
20.5%
|
|
|
A-9
|
RECONCILIATION OF
NET INCOME TO CORE EARNINGS - (Continued)
|
(Unaudited, in
millions, except per share data)
|
|
|
For the Six Months
Ended June 30, 2014
|
|
Reported
|
|
Mark to
Market
|
|
Core
|
Net sales
|
$
|
3,029
|
|
|
$
|
—
|
|
|
$
|
3,029
|
|
Cost of
sales
|
1,219
|
|
|
11
|
|
|
1,230
|
|
Gross
profit
|
1,810
|
|
|
(11)
|
|
|
1,799
|
|
Selling, general and
administrative expenses
|
1,146
|
|
|
1
|
|
|
1,147
|
|
Multi-employer
pension plan withdrawal
|
—
|
|
|
—
|
|
|
—
|
|
Depreciation and
amortization
|
58
|
|
|
—
|
|
|
58
|
|
Other operating
income, net
|
(2)
|
|
|
—
|
|
|
(2)
|
|
Income from
operations
|
608
|
|
|
(12)
|
|
|
596
|
|
Interest
expense
|
53
|
|
|
—
|
|
|
53
|
|
Interest
income
|
(1)
|
|
|
—
|
|
|
(1)
|
|
Other expense
(income), net
|
(2)
|
|
|
—
|
|
|
(2)
|
|
Income before
provision for income taxes and equity in earnings of unconsolidated
subsidiaries
|
558
|
|
|
(12)
|
|
|
546
|
|
Provision for income
taxes
|
194
|
|
|
(4)
|
|
|
190
|
|
Income before equity
in earnings of unconsolidated subsidiaries
|
364
|
|
|
(8)
|
|
|
356
|
|
Equity in earnings of
unconsolidated subsidiaries, net of tax
|
1
|
|
|
—
|
|
|
1
|
|
Net income
|
$
|
365
|
|
|
$
|
(8)
|
|
|
357
|
|
|
|
|
|
|
|
Diluted earnings per
common share
|
$
|
1.84
|
|
|
$
|
(0.04)
|
|
|
$
|
1.80
|
|
Effective tax
rate
|
34.8%
|
|
|
|
|
34.8%
|
|
Operating
margin
|
20.1%
|
|
|
|
|
19.7%
|
|
|
A-10
|
Contacts:
|
Media
Relations
|
|
Chris Barnes, (972)
673-5539
|
|
|
|
Investor
Relations
|
|
Heather Catelotti,
(972) 673-5869
|
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SOURCE Dr Pepper Snapple Group, Inc.