PLANO, Texas--(BUSINESS WIRE)--Dr Pepper Snapple Group, Inc. (NYSE: DPS) reported fourth quarter 2012 EPS of $0.81 compared to $0.77 in the prior year period. Excluding unrealized commodity mark-to-market losses in both years and certain items affecting comparability in the prior year period, Core EPS were $0.82 compared to $0.84 in the prior year.
For the quarter, reported net sales increased 2% reflecting favorable price/mix, partially offset by a 1% decline in sales volumes. Foreign currency added approximately 1 percentage point to net sales growth. Reported segment operating profit (SOP) increased 5%, or $19 million, as the contributions from net sales growth, ongoing productivity improvements and lower marketing investments were partially offset by planned increases in labor and benefits and a higher LIFO inventory provision of $6 million. The year ago quarter included an $18 million provision for a certain legal matter. Reported income from operations for the quarter was $292 million, including $1 million of unrealized commodity mark-to-market losses. Reported income from operations was $271 million in the prior year period, including $7 million of unrealized commodity mark-to-market losses and the previously disclosed legal provision.
For the year, reported net sales increased 2%. Reported income from operations was $1,092 million, compared to $1,024 million in the prior year period. For the year, the company reported earnings of $2.96 per diluted share compared to $2.74 per diluted share in the prior year period. Excluding a $17 million unrealized commodity mark-to-market gain in the current year and a $23 million unrealized commodity mark-to-market loss in the prior year period and certain items affecting comparability in both years, Core EPS were $2.92 compared to $2.85 in the prior year period.
DPS President and CEO Larry Young said, “As I look back on 2012, I am proud of the team’s continuing ability to outperform the CSD category, growing dollar share as measured by Nielsen and closing distribution gaps across CSDs, teas and juices.”
Young continued, “Our employees have embraced Rapid Continuous Improvement (RCI), and it continues to drive tangible operational and financial improvements. Moving forward, nothing is more important than reinvigorating the CSD category and giving lapsed consumers a reason to come back to the brands they know and love. Our new TEN platform provides consumers the great taste and full mouth-feel of a regular CSD, but with only 10 calories per 12 ounce serving. These products have been well-received by both consumers and our retail and bottling partners and, collectively with Dr Pepper TEN, give us great confidence that we can bring excitement and lapsed users back to the category.”
| EPS reconciliation | Fourth Quarter | Full Year | ||||||||||||||||
| 2012 | 2011 |
Percent
Change |
2012 | 2011 |
Percent
Change |
|||||||||||||
| Reported EPS | $0.81 | $0.77 | 5 | $2.96 | $2.74 | 8 | ||||||||||||
|
Unrealized commodity mark-to-market net (gain)/loss |
0.01 | 0.02 | (0.04) | 0.06 | ||||||||||||||
| Items affecting comparability | ||||||||||||||||||
|
- Depreciation adjustment on capital lease |
- | - | 0.02 | - | ||||||||||||||
| - Foreign deferred tax benefit | - | - | (0.02) | - | ||||||||||||||
| - Legal Provision | - | 0.05 | - | 0.05 | ||||||||||||||
| ------ | ------ | ------ | ------ | ------ | ------ | |||||||||||||
| Core EPS | $0.82 | $0.84 | (2) | $2.92 | $2.85 | 2 | ||||||||||||
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-10 accompanying this release.
|
Summary of 2012 results
(Percent change) |
As Reported | Currency Neutral | ||||||||||
|
Fourth
Quarter |
Full Year |
Fourth
Quarter |
Full Year | |||||||||
| BCS Volume | - | (1) | - | (1) | ||||||||
| Sales Volume | (1) | (2) | (1) | (2) | ||||||||
| Net Sales | 2 | 2 | 1 | 2 | ||||||||
| SOP | 5 | 2 | 5 | 3 | ||||||||
BCS - bottler case sales
BCS Volume
For the quarter, both carbonated soft drinks (CSDs) and non-carbonated beverages (NCBs) BCS volume was flat.
In CSDs, Dr Pepper volume decreased 1% as we cycled the national rollout of Dr Pepper TEN in the prior year period. Our Core 5 brands increased 3% led by a high-single digit increase in Canada Dry. Sunkist soda and A&W increased low-single digits, while Sun Drop declined by a mid-single digit. 7UP was flat in the quarter. All other CSD brands increased 1% for the quarter. Fountain foodservice volume grew 1%, cycling 5% volume growth in the prior year period.
In NCBs, Clamato grew 34%, Aguafiel increased 6% and Mott’s posted a 2% increase in volume. Snapple grew 1% in the quarter, cycling 10% growth in the prior year. These increases were offset by an 8% decline in Hawaiian Punch volumes.
By geography, U.S. and Canada volume was flat and Mexico and the Caribbean volume increased 8%.
For the year, BCS volume decreased 1%. CSD volume was flat and NCBs declined 5%. Dr Pepper volumes were flat, as growth from the 2011 launch of Dr Pepper TEN and new availabilities in fountain foodservice offset declines in the base business. The Core 5 brands were flat as a mid-single digit increase in Canada Dry was offset by a double-digit decline in Sun Drop and low-single digit declines in 7UP and Sunkist soda. A&W volume was flat for the year. All other CSD brands were flat for the year. Fountain foodservice volume grew 3% cycling a mid-single digit increase in the prior year. In NCBs, Hawaiian Punch declined 17% and Mott’s volume declined 7% as retail pricing increased on both brands. These declines were partially offset by a 15% increase in Clamato and a 3% increase in Snapple driven by both packaging and product innovation. By geography, U.S. and Canada volume decreased 1% and Mexico and Caribbean volume increased 2%.
Sales volume
Sales volume decreased 1% for the quarter and 2% for the year.
|
2012 Segment results |
As Reported | |||||||||||||||||
| Fourth Quarter | Full Year | |||||||||||||||||
|
Sales |
Net |
SOP |
Sales |
Net |
SOP |
|||||||||||||
| Beverage Concentrates | (2) | 2 | 5 | (2) | 2 | (1) | ||||||||||||
| Packaged Beverages | (1) | - | 2 | (2) | 2 | 4 | ||||||||||||
| Latin America Beverages | 8 | 11 | 56 | 2 | - | 19 | ||||||||||||
| Total | (1) | 2 | 5 | (2) | 2 | 2 | ||||||||||||
|
2012 Segment results |
Currency Neutral | |||||||||||||||||
| Fourth Quarter | Full Year | |||||||||||||||||
|
Sales |
Net |
SOP |
Sales |
Net |
SOP |
|||||||||||||
| Beverage Concentrates | (2) | 2 | 5 | (2) | 2 | (1) | ||||||||||||
| Packaged Beverages | (1) | - | 3 | (2) | 2 | 4 | ||||||||||||
| Latin America Beverages | 8 | 7 | 56 | 2 | 5 | 50 | ||||||||||||
| Total | (1) | 1 | 5 | (2) | 2 | 3 | ||||||||||||
Beverage Concentrates
Net sales for the quarter increased 2% as concentrate price increases taken earlier in the year and favorable mix were offset by a 2% volume decline with lower concentrate buy-in ahead of the 2013 price increase. SOP increased 5% reflecting net sales growth and lower marketing investments as we cycled the national launch of Dr Pepper TEN in the prior year period.
Packaged Beverages
Net sales were flat for the quarter as a 1% volume decline and higher trade spending were offset by favorable product and package mix. SOP increased 3% on a favorable legal provision comparison and ongoing productivity improvements that were partially offset by certain increases in labor and benefits costs and a higher LIFO inventory provision of $6 million.
Latin America Beverages
Net sales for the quarter increased 7% reflecting an 8% increase in sales volumes. SOP increased 56% reflecting net sales growth and favorable operating leverage from ongoing RCI productivity improvements partially offset by higher commodity costs.
Corporate and other items
For the quarter, corporate costs totaled $73 million, including a $1 million unrealized commodity mark-to-market loss. Corporate costs in the prior year period were $76 million, including a $7 million unrealized commodity mark-to-market loss.
For the year, corporate costs totaled $261 million, including $17 million of unrealized commodity mark-to-market gains. Corporate costs in the prior year period were $306 million, including a $23 million unrealized commodity mark-to-market loss.
Net interest expense increased $2 million for the quarter compared to the prior year, as the company refinanced low floating rate debt in November 2011.
For the quarter, the effective tax rate was 35.4%. For the year, the effective tax rate was 35.7% compared to 34.6% in the prior year, which included a $19 million benefit related to the PepsiCo, Inc. (PepsiCo) and The Coca-Cola Company (Coca-Cola) transactions.
Cash flow
For the year, the company generated $458 million of cash from operating activities, after making tax payments of $531 million related to the PepsiCo and Coca-Cola licensing agreements. Capital spending totaled $193 million compared to $215 million in the prior year period. The company returned $684 million to shareholders in the form of stock repurchases ($400 million) and dividends ($284 million).
Dividend Increase
Today the company announced that its Board of Directors declared a quarterly dividend of $0.38 per share on the company’s common stock – a 12% increase in the dividend rate. The dividend is payable in U.S. dollars on April 5, 2013, to shareholders of record as of close of business on March 15, 2013.
2013 full year guidance
The company expects full year reported net sales growth of approximately 3% and diluted earnings per share to be in the $3.04 to $3.12 range, excluding the impact of commodity mark-to-market gains and losses.
Brand investments associated with the launch of our TEN platform are expected to exceed $30 million.
Packaging and ingredient costs are expected to increase COGS by 2%, on a constant volume/mix basis.
The company expects its effective tax rate to be approximately 37%.
The company expects capital spending to be approximately 3.5% of net sales.
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 fourth quarter comprising October, November and December.
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 Earnings is defined as earnings adjusted for the unrealized mark-to-market impact of commodity derivatives and certain items that are excluded for comparison to prior year periods.
Core EPS represents core earnings per share.
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, 2011, 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. (CST) today, the company will host a conference call with investors to discuss fourth quarter and full year results and the outlook for 2013. 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 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. | ||||||||||||||||||||
| CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||||||||||
| For the Three and Twelve Months Ended December 31, 2012 and 2011 | ||||||||||||||||||||
| (Unaudited, in millions except per share data) | ||||||||||||||||||||
| For the | For the | |||||||||||||||||||
| Three Months Ended | Twelve Months Ended | |||||||||||||||||||
| December 31, | December 31, | |||||||||||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||||||||||
| Net sales | $ | 1,484 | $ | 1,461 | $ | 5,995 | $ | 5,903 | ||||||||||||
| Cost of sales | 605 | 604 | 2,500 | 2,485 | ||||||||||||||||
| Gross profit | 879 | 857 | 3,495 | 3,418 | ||||||||||||||||
| Selling, general and administrative expenses | 555 | 553 | 2,268 | 2,257 | ||||||||||||||||
| Depreciation and amortization | 29 | 31 | 124 | 126 | ||||||||||||||||
| Other operating expense, net | 3 | 2 | 11 | 11 | ||||||||||||||||
| Income from operations | 292 | 271 | 1,092 | 1,024 | ||||||||||||||||
| Interest expense | 31 | 29 | 125 | 114 | ||||||||||||||||
| Interest income | (1 | ) | (1 | ) | (2 | ) | (3 | ) | ||||||||||||
| Other income, net | (1 | ) | (3 | ) | (9 | ) | (12 | ) | ||||||||||||
| Income before provision for income taxes and equity in earnings of unconsolidated subsidiaries | 263 | 246 | 978 | 925 | ||||||||||||||||
| Provision for income taxes | 93 | 80 | 349 | 320 | ||||||||||||||||
| Income before equity in earnings of unconsolidated subsidiaries | 170 | 166 | 629 | 605 | ||||||||||||||||
| Equity in earnings of unconsolidated subsidiaries, net of tax | — | — | — | 1 | ||||||||||||||||
| Net income | $ | 170 | $ | 166 | $ | 629 | $ | 606 | ||||||||||||
| Earnings per common share: | ||||||||||||||||||||
| Basic | $ | 0.82 | $ | 0.78 | $ | 2.99 | $ | 2.77 | ||||||||||||
| Diluted | 0.81 | 0.77 | 2.96 | 2.74 | ||||||||||||||||
| Weighted average common shares outstanding: | ||||||||||||||||||||
| Basic | 207.6 | 216.0 | 210.6 | 218.7 | ||||||||||||||||
| Diluted | 209.4 | 218.2 | 212.3 | 221.2 | ||||||||||||||||
| Cash dividends declared per common share | $ | 0.34 | $ | 0.32 | $ | 1.36 | $ | 1.21 | ||||||||||||
|
A-1 |
||||||||||||||||||||
| DR PEPPER SNAPPLE GROUP, INC. | |||||||||
| CONSOLIDATED BALANCE SHEETS | |||||||||
| As of December 31, 2012 and 2011 | |||||||||
| (Unaudited, in millions except share and per share data) | |||||||||
| December 31, | December 31, | ||||||||
| 2012 | 2011 | ||||||||
| Assets | |||||||||
| Current assets: | |||||||||
| Cash and cash equivalents | $ | 366 | $ | 701 | |||||
| Accounts receivable: | |||||||||
| Trade, net | 552 | 585 | |||||||
| Other | 50 | 50 | |||||||
| Inventories | 197 | 212 | |||||||
| Deferred tax assets | 66 | 96 | |||||||
| Prepaid expenses and other current assets | 104 | 113 | |||||||
| Total current assets | 1,335 | 1,757 | |||||||
| Property, plant and equipment, net | 1,202 | 1,152 | |||||||
| Investments in unconsolidated subsidiaries | 14 | 13 | |||||||
| Goodwill | 2,983 | 2,980 | |||||||
| Other intangible assets, net | 2,684 | 2,677 | |||||||
| Other non-current assets | 580 | 573 | |||||||
| Non-current deferred tax assets | 130 | 131 | |||||||
| Total assets | $ | 8,928 | $ | 9,283 | |||||
| Liabilities and Stockholders' Equity | |||||||||
| Current liabilities: | |||||||||
| Accounts payable | $ | 283 | $ | 265 | |||||
| Deferred revenue | 65 | 65 | |||||||
| Current portion of long-term obligations | 250 | 452 | |||||||
| Income taxes payable | 45 | 530 | |||||||
| Other current liabilities | 589 | 603 | |||||||
| Total current liabilities | 1,232 | 1,915 | |||||||
| Long-term obligations | 2,554 | 2,256 | |||||||
| Non-current deferred tax liabilities | 630 | 586 | |||||||
| Non-current deferred revenue | 1,386 | 1,449 | |||||||
| Other non-current liabilities | 846 | 814 | |||||||
| Total liabilities | 6,648 | 7,020 | |||||||
| Commitments and contingencies | |||||||||
| Stockholders' equity: | |||||||||
| Preferred stock, $.01 par value, 15,000,000 shares authorized, no shares issued | — | — | |||||||
| Common stock, $.01 par value, 800,000,000 shares authorized, 205,292,657 and 212,130,239 shares issued and outstanding for 2012 and 2011, respectively | 2 | 2 | |||||||
| Additional paid-in capital | 1,308 | 1,631 | |||||||
| Retained earnings | 1,080 | 740 | |||||||
| Accumulated other comprehensive loss | (110 | ) | (110 | ) | |||||
| Total stockholders' equity | 2,280 | 2,263 | |||||||
| Total liabilities and stockholders' equity | $ | 8,928 | $ | 9,283 | |||||
|
A-2 |
|||||||||
| DR PEPPER SNAPPLE GROUP, INC. | ||||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||
| For the Twelve Months Ended December 31, 2012 and 2011 | ||||||||||
| (Unaudited, in millions) | ||||||||||
| For the | ||||||||||
| Twelve Months Ended | ||||||||||
| December 31, | ||||||||||
| 2012 | 2011 | |||||||||
| Operating activities: | ||||||||||
| Net income |
$ |
629 |
$ | 606 | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||
| Depreciation expense |
203 |
198 | ||||||||
| Amortization expense |
37 |
34 | ||||||||
| Amortization of deferred revenue |
(65 |
) |
(65 | ) | ||||||
| Employee stock-based compensation expense |
35 |
34 | ||||||||
| Deferred income taxes |
91 |
(498 | ) | |||||||
| Other, net |
(18 |
) |
24 | |||||||
| Changes in assets and liabilities: | ||||||||||
| Trade accounts receivable |
36 |
(55 | ) | |||||||
| Other accounts receivable |
1 |
(18 | ) | |||||||
| Inventories |
17 |
29 | ||||||||
| Other current and non-current assets |
(21 |
) |
(21 | ) | ||||||
| Other current and non-current liabilities |
(29 |
) |
1 | |||||||
| Trade accounts payable |
10 |
(30 | ) | |||||||
| Income taxes payable |
(468 |
) |
521 | |||||||
| Net cash provided by operating activities |
458 |
760 | ||||||||
| Investing activities: | ||||||||||
| Purchase of property, plant and equipment |
(193 |
) |
(215 | ) | ||||||
| Purchase of intangible assets |
(7 |
) |
(3 | ) | ||||||
| Investments in unconsolidated subsidiaries |
— |
(2 | ) | |||||||
| Proceeds from disposals of property, plant and equipment |
7 |
3 | ||||||||
| Net cash used in investing activities |
(193 |
) |
(217 | ) | ||||||
| Financing activities: | ||||||||||
| Proceeds from senior unsecured notes and senior unsecured credit facility |
500 |
1,000 | ||||||||
| Repayment of senior unsecured notes and senior unsecured credit facility |
(450 |
) |
(400 | ) | ||||||
| Repurchase of shares of common stock |
(400 |
) |
(522 | ) | ||||||
| Dividends paid |
(284 |
) |
(251 | ) | ||||||
| Proceeds from stock options exercised |
22 |
20 | ||||||||
| Excess tax benefit on stock-based compensation |
16 |
10 | ||||||||
| Deferred financing charges paid |
(4 |
) |
(6 | ) | ||||||
| Other, net |
(3 |
) |
(3 | ) | ||||||
| Net cash used in financing activities |
(603 |
) |
(152 | ) | ||||||
| Cash and cash equivalents — net change from: | ||||||||||
| Operating, investing and financing activities |
(338 |
) |
391 | |||||||
| Effect of exchange rate changes on cash and cash equivalents |
3 |
(5 | ) | |||||||
| Cash and cash equivalents at beginning of year |
701 |
315 | ||||||||
| Cash and cash equivalents at end of year |
$ |
366 |
$ | 701 | ||||||
| Supplemental cash flow disclosures of non-cash investing and financing activities: | ||||||||||
| Capital expenditures included in other current liabilities |
$ |
73 |
$ | 53 | ||||||
| Dividends declared but not yet paid |
70 |
68 | ||||||||
| Capital lease additions |
49 |
— | ||||||||
| Supplemental cash flow disclosures: | ||||||||||
| Interest paid |
$ |
115 |
$ | 104 | ||||||
| Income taxes paid |
724 |
278 | ||||||||
|
A-3 |
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| DR PEPPER SNAPPLE GROUP, INC. | |||||||||||||||||||||
| OPERATIONS BY OPERATING SEGMENT | |||||||||||||||||||||
| For the Three and Twelve Months Ended December 31, 2012 and 2011 | |||||||||||||||||||||
| (Unaudited, in millions) | |||||||||||||||||||||
|
For the Three Months Ended |
For the Twelve Months Ended |
||||||||||||||||||||
| 2012 | 2011 | 2012 | 2011 | ||||||||||||||||||
| Segment Results – Net sales | |||||||||||||||||||||
| Beverage Concentrates | $ | 333 | $ | 325 | $ | 1,221 | $ | 1,193 | |||||||||||||
| Packaged Beverages | 1,044 | 1,040 | 4,358 | 4,292 | |||||||||||||||||
| Latin America Beverages | 107 | 96 | 416 | 418 | |||||||||||||||||
| Net sales | $ | 1,484 | $ | 1,461 | $ | 5,995 | $ | 5,903 | |||||||||||||
|
For the Three Months Ended |
For the Twelve Months Ended |
||||||||||||||||||||
| 2012 | 2011 | 2012 | 2011 | ||||||||||||||||||
| Segment Results – SOP | |||||||||||||||||||||
| Beverage Concentrates | $ | 223 | $ | 212 | $ | 774 | $ | 779 | |||||||||||||
| Packaged Beverages | 131 | 128 | 539 | 519 | |||||||||||||||||
| Latin America Beverages | 14 | 9 | 51 | 43 | |||||||||||||||||
| Total SOP | 368 | 349 | 1,364 | 1,341 | |||||||||||||||||
| Unallocated corporate costs | 73 | 76 | 261 | 306 | |||||||||||||||||
| Other operating expense, net | 3 | 2 | 11 | 11 | |||||||||||||||||
| Income from operations | 292 | 271 | 1,092 | 1,024 | |||||||||||||||||
| Interest expense, net | 30 | 28 | 123 | 111 | |||||||||||||||||
| Other income, net | (1 | ) | (3 | ) | (9 | ) | (12 | ) | |||||||||||||
| Income before provision for income taxes and equity in earnings of unconsolidated subsidiaries | $ | 263 | $ | 246 | $ | 978 | $ | 925 | |||||||||||||
|
A-4 |
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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: 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. The certain item excluded for the twelve months ended December 31, 2012 and 2011, relates to the tax payments resulting from the licensing agreements with PepsiCo and Coca-Cola.
Core Earnings: Core Earnings is defined as Reported Earnings 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 twelve months ended December 31, 2012, are (i) a separation-related foreign deferred tax benefit and (ii) a depreciation adjustment associated with the reassessment of a capital lease executed prior to the separation from Cadbury. The certain item excluded for the twelve months ended December 31, 2011, is a legal provision related to a previously disclosed legal matter.
The tables on the following pages provide these reconciliations.
A-5
| RECONCILIATION OF NET SALES AND SOP | ||||||||||||
| AS REPORTED TO AS ADJUSTED | ||||||||||||
| (Unaudited) | ||||||||||||
| For the Three Months Ended December 31, 2012 | ||||||||||||
| Beverage | Packaged |
Latin
America |
||||||||||
| Percent change | Concentrates | Beverages | Beverages | Total | ||||||||
| Reported net sales | 2% | — | 11% | 2% | ||||||||
| Impact of foreign currency | — | — | (4)% | (1)% | ||||||||
| Net sales, as adjusted | 2% | — | 7% | 1% | ||||||||
| For the Three Months Ended December 31, 2012 | ||||||||||||
| Beverage | Packaged |
Latin
America |
||||||||||
| Percent change | Concentrates | Beverages | Beverages | Total | ||||||||
| Reported segment operating profit | 5% | 2% | 56% | 5% | ||||||||
| Impact of foreign currency | — | 1% | — | — | ||||||||
| Segment operating profit, as adjusted | 5% | 3% | 56% | 5% | ||||||||
| For the Twelve Months Ended December 31, 2012 | ||||||||||||
| Beverage | Packaged |
Latin
America |
||||||||||
| Percent change | Concentrates | Beverages | Beverages | Total | ||||||||
| Reported net sales | 2% | 2% | — | 2% | ||||||||
| Impact of foreign currency | — | — | 5% | — | ||||||||
| Net sales, as adjusted | 2% | 2% | 5% | 2% | ||||||||
| For the Twelve Months Ended December 31, 2012 | ||||||||||||
| Beverage | Packaged |
Latin
America |
||||||||||
| Percent change | Concentrates | Beverages | Beverages | Total | ||||||||
| Reported segment operating profit | (1)% | 4% | 19% | 2% | ||||||||
| Impact of foreign currency | — | — | 31% | 1% | ||||||||
| Segment operating profit, as adjusted | (1)% | 4% | 50% | 3% | ||||||||
| RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW | |||||||||||||||
| (Unaudited, in millions) | |||||||||||||||
| For the | |||||||||||||||
| Twelve Months Ended | |||||||||||||||
| December 31, | |||||||||||||||
| 2012 | 2011 | Change | |||||||||||||
| Net Cash Provided by Operating Activities |
$ |
458 |
$ | 760 | $ | (302 | ) | ||||||||
| Purchase of property, plant and equipment |
(193 |
) |
(215 | ) | |||||||||||
| Tax payments resulting from the licensing arrangements with PepsiCo and Coca-Cola |
531 |
54 | |||||||||||||
| Free Cash Flow |
$ |
796 |
$ | 599 | $ | 197 | |||||||||
|
A-6 |
|||||||||||||||
| RECONCILIATION OF NET INCOME TO CORE EARNINGS | ||||||||||||||
| (Unaudited, in millions except per share data) | ||||||||||||||
| For the Three Months Ended December 31, 2012 | ||||||||||||||
| Reported | Mark to Market | Core | ||||||||||||
| Net sales | $ | 1,484 | $ | — | $ | 1,484 | ||||||||
| Cost of sales | 605 | — | 605 | |||||||||||
| Gross profit | 879 | — | 879 | |||||||||||
|
Selling, general and administrative expenses |
555 | (1 | ) | 554 | ||||||||||
| Depreciation and amortization | 29 | — | 29 | |||||||||||
| Other operating expense, net | 3 | — | 3 | |||||||||||
| Income from operations | 292 | 1 | 293 | |||||||||||
| Interest expense | 31 | — | 31 | |||||||||||
| Interest income | (1 | ) | — | (1 | ) | |||||||||
| Other income, net | (1 | ) | — | (1 | ) | |||||||||
| Income before provision for income taxes and equity in earnings of unconsolidated subsidiaries | 263 | 1 | 264 | |||||||||||
| Provision for income taxes | 93 | — | 93 | |||||||||||
| Income before equity in earnings of unconsolidated subsidiaries | 170 | 1 | 171 | |||||||||||
| Equity in earnings of unconsolidated subsidiaries, net of tax | — | — | — | |||||||||||
| Net income | $ | 170 | $ | 1 | $ | 171 | ||||||||
| Earnings per common share: | ||||||||||||||
| Diluted | $ | 0.81 | $ | 0.01 | $ | 0.82 | ||||||||
|
A-7 |
||||||||||||||
| RECONCILIATION OF NET INCOME TO CORE EARNINGS - (Continued) | |||||||||||||||||||
| (Unaudited, in millions except per share data) | |||||||||||||||||||
| For the Three Months Ended December 31, 2011 | |||||||||||||||||||
| Reported | Mark to Market | Legal Provision | Core | ||||||||||||||||
| Net sales | $ | 1,461 | $ | — | $ | — | $ | 1,461 | |||||||||||
| Cost of sales | 604 | (8 | ) | — | 596 | ||||||||||||||
| Gross profit | 857 | 8 | — | 865 | |||||||||||||||
| Selling, general and administrative expenses | 553 | 1 | (18 | ) | 536 | ||||||||||||||
| Depreciation and amortization | 31 | — | — | 31 | |||||||||||||||
| Other operating expense, net | 2 | — | — | 2 | |||||||||||||||
| Income from operations | 271 | 7 | 18 | 296 | |||||||||||||||
| Interest expense | 29 | — | — | 29 | |||||||||||||||
| Interest income | (1 | ) | — | — | (1 | ) | |||||||||||||
| Other income, net | (3 | ) | — | — | (3 | ) | |||||||||||||
| Income before provision for income taxes and equity in earnings of unconsolidated subsidiaries | 246 | 7 | 18 | 271 | |||||||||||||||
| Provision for income taxes | 80 | 3 | 7 | 90 | |||||||||||||||
| Income before equity in earnings of unconsolidated subsidiaries | 166 | 4 | 11 | 181 | |||||||||||||||
| Equity in earnings of unconsolidated subsidiaries, net of tax | — | — | — | — | |||||||||||||||
| Net income | $ | 166 | $ | 4 | $ | 11 | $ | 181 | |||||||||||
| Earnings per common share: | |||||||||||||||||||
| Diluted | $ | 0.77 | $ | 0.02 | $ | 0.05 | $ | 0.84 | |||||||||||
|
A-8 |
|||||||||||||||||||
| RECONCILIATION OF NET INCOME TO CORE EARNINGS - (Continued) | |||||||||||||||||||||||||||||
| (Unaudited, in millions except per share data) | |||||||||||||||||||||||||||||
| For the Twelve Months Ended December 31, 2012 | |||||||||||||||||||||||||||||
| Reported | Mark to Market | Depreciation Adjustment | Foreign Deferred Tax | Total Adjustments | Core | ||||||||||||||||||||||||
| Net sales | $ | 5,995 | $ | — | $ | — | $ | — | $ | — | $ | 5,995 | |||||||||||||||||
| Cost of sales | 2,500 | 15 | (2 | ) | — | 13 | 2,513 | ||||||||||||||||||||||
| Gross profit | 3,495 | (15 | ) | 2 | — | (13 | ) | 3,482 | |||||||||||||||||||||
| Selling, general and administrative expenses | 2,268 | 2 | — | — | 2 | 2,270 | |||||||||||||||||||||||
| Depreciation and amortization | 124 | — | (6 | ) | — | (6 | ) | 118 | |||||||||||||||||||||
| Other operating expense, net | 11 | — | — | — | — | 11 | |||||||||||||||||||||||
| Income from operations | 1,092 | (17 | ) | 8 | — | (9 | ) | 1,083 | |||||||||||||||||||||
| Interest expense | 125 | — | — | — | — | 125 | |||||||||||||||||||||||
| Interest income | (2 | ) | — | — | — | — | (2 | ) | |||||||||||||||||||||
| Other income, net | (9 | ) | — | — | — | — | (9 | ) | |||||||||||||||||||||
| Income before provision for income taxes and equity in earnings of unconsolidated subsidiaries | 978 | (17 | ) | 8 | — | (9 | ) | 969 | |||||||||||||||||||||
| Provision for income taxes | 349 | (6 | ) | 3 | 4 | 1 | 350 | ||||||||||||||||||||||
| Income before equity in earnings of unconsolidated subsidiaries | 629 | (11 | ) | 5 | (4 | ) | (10 | ) | 619 | ||||||||||||||||||||
| Equity in earnings of unconsolidated subsidiaries, net of tax | — | — | — | — | — | — | |||||||||||||||||||||||
| Net income | $ | 629 | $ | (11 | ) | $ | 5 | $ | (4 | ) | $ | (10 | ) | $ | 619 | ||||||||||||||
| Earnings per common share: | |||||||||||||||||||||||||||||
| Diluted | $ | 2.96 | $ | (0.04 | ) | $ | 0.02 | $ | (0.02 | ) | $ | (0.04 | ) | $ | 2.92 | ||||||||||||||
|
A-9 |
|||||||||||||||||||||||||||||
| RECONCILIATION OF NET INCOME TO CORE EARNINGS - (Continued) | |||||||||||||||||||
| (Unaudited, in millions except per share data) | |||||||||||||||||||
| For the Twelve Months Ended December 31, 2011 | |||||||||||||||||||
| Reported | Mark to Market | Legal Provision | Core | ||||||||||||||||
| Net sales | $ | 5,903 | $ | — | $ | — | $ | 5,903 | |||||||||||
| Cost of sales | 2,485 | (22 | ) | — | 2,463 | ||||||||||||||
| Gross profit | 3,418 | 22 | — | 3,440 | |||||||||||||||
| Selling, general and administrative expenses | 2,257 | (1 | ) | (18 | ) | 2,238 | |||||||||||||
| Depreciation and amortization | 126 | — | — | 126 | |||||||||||||||
| Other operating expense, net | 11 | — | — | 11 | |||||||||||||||
| Income from operations | 1,024 | 23 | 18 | 1,065 | |||||||||||||||
| Interest expense | 114 | — | — | 114 | |||||||||||||||
| Interest income | (3 | ) | — | — | (3 | ) | |||||||||||||
| Other income, net | (12 | ) | — | — | (12 | ) | |||||||||||||
| Income before provision for income taxes and equity in earnings of unconsolidated subsidiaries | 925 | 23 | 18 | 966 | |||||||||||||||
| Provision for income taxes | 320 | 9 | 7 | 336 | |||||||||||||||
| Income before equity in earnings of unconsolidated subsidiaries | 605 | 14 | 11 | 630 | |||||||||||||||
| Equity in earnings of unconsolidated subsidiaries, net of tax | 1 | — | — | 1 | |||||||||||||||
| Net income | $ | 606 | $ | 14 | $ | 11 | $ | 631 | |||||||||||
| Earnings per common share: | |||||||||||||||||||
| Diluted | $ | 2.74 | $ | 0.06 | $ | 0.05 | $ | 2.85 | |||||||||||
|
A-10 |
|||||||||||||||||||