Dr Pepper Snapple Group Reports Third Quarter 2017 Results
DPS President and CEO
For the quarter, sales volumes increased 1%, inclusive of the Bai acquisition. Reported net sales increased 4%, including the Bai acquisition, which accounted for over 1 percentage point of net sales growth. Total Bai brand sales growth contributed over 2 percentage points of net sales growth. Organic net sales growth was driven by favorable product and package mix, an increase in organic sales volumes, favorable foreign currency translation and price increases. These increases were partially offset by unfavorable segment mix, the termination of the
Reported gross profit margin increased 10 basis points primarily on a favorable
Selling, general and administrative expenses (SG&A) increased
Other operating income decreased
Reported income from operations declined by
The recent hurricanes and earthquakes in the
EPS reconciliation |
Third Quarter |
Year-to-Date |
||||
2017 |
2016 |
Percent Change |
2017 |
2016 |
Percent Change |
|
Reported EPS |
|
|
(14) |
|
|
(15) |
Unrealized commodity mark-to-market net gain |
(0.06) |
(0.03) |
(0.04) |
(0.13) |
||
Bai transaction and integration expenses |
0.01 |
- |
0.08 |
- |
||
Loss on early extinguishment of debt |
0.04 |
- |
0.23 |
- |
||
Legal entity restructuring |
- |
(0.09) |
- |
(0.09) |
||
Extinguishment gain |
- |
- |
- |
(0.07) |
||
------- |
------ |
------ |
------ |
------ |
------ |
|
Core EPS |
|
|
(6) |
|
|
- |
EPS – earnings per share |
Net sales and SOP in the tables and commentary below are presented on a currency neutral basis. Refer to the Definitions section of this press release for details on how the company calculates currency neutral metrics. For a reconciliation of non-GAAP to GAAP measures see pages A-5 through A-10 accompanying this release.
Summary of 2017 results |
As Reported |
Currency Neutral |
||
Third |
YTD |
Third |
YTD |
|
BCS Volume |
- |
1 |
- |
1 |
Sales Volume |
1 |
2 |
1 |
2 |
|
4 |
4 |
3 |
4 |
SOP |
(3) |
(5) |
(4) |
(5) |
BCS - bottler case sales |
BCS Volume
For the quarter, BCS volume was flat, with carbonated soft drinks (CSDs) decreasing 1% and non-carbonated beverages (NCBs) increasing 6%. By geography,
In CSDs, Dr Pepper decreased 2% with declines in both regular and diet due primarily to timing of orders for a large customer in fountain foodservice. 7UP decreased 8% driven by reduced retail activity compared to the prior year. Schweppes decreased 1% as declines in sparkling water were partially offset by continued growth in ginger ale. A&W decreased 1%, and other CSDs declined 3% primarily due to the loss of
In NCBs, Bai increased 108% on the acquisition and continued growth in our existing distribution. Our growth allied brands, now excluding Bai, grew 40% on strong distribution gains in BODYARMOR,
Sales Volume
Sales volumes increased 1% in the quarter and 2% year-to-date.
2017 Segment results |
Third Quarter |
||||||
As Reported |
Currency Neutral (Translation) |
||||||
Sales |
|
SOP |
|
SOP |
|||
Beverage Concentrates |
1 |
3 |
6 |
3 |
6 |
||
Packaged Beverages |
- |
3 |
(9) |
3 |
(9) |
||
Latin America Beverages |
2 |
10 |
(43) |
5 |
(43) |
||
Total |
1 |
4 |
(3) |
3 |
(4) |
2017 Segment results |
Year-to-Date |
||||||
As Reported |
Currency Neutral (Translation) |
||||||
Sales |
|
SOP |
|
SOP |
|||
Beverage Concentrates |
2 |
3 |
3 |
3 |
3 |
||
Packaged Beverages |
1 |
4 |
(11) |
4 |
(11) |
||
Latin America Beverages |
4 |
5 |
(22) |
7 |
(20) |
||
Total |
2 |
4 |
(5) |
4 |
(5) |
Beverage Concentrates
Net sales increased 3% in the quarter on concentrate price increases taken earlier in the year, a 1% increase in concentrate shipments and lower discounts. SOP increased 6% on net sales growth.
Packaged Beverages
Net sales increased 3% in the quarter on favorable product and package mix, mostly due to growth in our NCBs, including continued growth in our allied brands and growth from the Bai acquisition. This increase was partially offset by the loss of
Additionally, inflationary increases in other operating expenses, as well as planned increases in operating costs behind our DSD front-line workforce and an unfavorable change of
Latin America Beverages
Net sales increased 5% in the quarter on a 2% increase in sales volumes and higher pricing. SOP decreased 43% in the quarter primarily due to a
Corporate and Other Items
For the quarter, corporate costs totaled
Net interest expense increased
The company recognized a
For the quarter, the reported effective tax rate was 36.0%. The effective tax rate in the prior year period was 29.7%, which included a
Cash Flow
Year-to-date, the company generated
2017 Full Year Guidance includes the following items:
- Organic volume growth is now expected to be over 1%; total volume growth is still expected to be approximately 2%, inclusive of the Bai acquisition, which closed on
January 31, 2017 . - Net sales growth is still expected to be about 4.5%, including the Bai acquisition, which is now expected to add over 1 percentage point to growth.
- The impact of the Bai acquisition is now expected to be
$0.11 dilutive to Core EPS. - The recent hurricanes and earthquakes in the
U.S. andMexico are expected to reduce Core EPS by$0.02 . - Foreign currency transaction is expected to reduce Core EPS by
$0.02 , primarily driven by the Mexican peso. - Excluding the Bai acquisition, we expect packaging and ingredient costs to be inflationary by about 0.8% on a constant volume/mix basis, including the impact from higher resin prices in the fourth quarter.
- The company continues to expect 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
$4.50 to$4.57 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 third quarter comprising July, August and September.
Sales volume: Sales of concentrates and finished beverages, in equivalent 288 fluid ounce cases, shipped by the company to its bottlers, retailers and independent distributors and includes contract manufacturing volume.
Organic: Represents the incremental impact to our results from our pre-existing business prior to the acquisition of Bai.
Bai acquisition, the Bai acquisition or acquisition of Bai: Refers to our acquisition of the Bai Brands business by DPS, which was consummated on
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
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.
Loss on the recent hurricanes and earthquakes in the
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
Conference Call
At
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 "
For additional information about
About
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME |
|||||||||||||||
For the Three and Nine Months Ended |
|||||||||||||||
(Unaudited, in millions, except per share data) |
|||||||||||||||
For the |
For the |
||||||||||||||
Three Months Ended |
Nine Months Ended |
||||||||||||||
|
|
||||||||||||||
(in millions, except per share data) |
2017 |
2016 |
2017 |
2016 |
|||||||||||
Net sales |
$ |
1,740 |
$ |
1,680 |
$ |
5,047 |
$ |
4,862 |
|||||||
Cost of sales |
707 |
683 |
2,032 |
1,955 |
|||||||||||
Gross profit |
1,033 |
997 |
3,015 |
2,907 |
|||||||||||
Selling, general and administrative expenses |
640 |
603 |
1,944 |
1,739 |
|||||||||||
Depreciation and amortization |
26 |
24 |
76 |
74 |
|||||||||||
Other operating income, net |
— |
(3) |
(30) |
(4) |
|||||||||||
Income from operations |
367 |
373 |
1,025 |
1,098 |
|||||||||||
Interest expense |
40 |
33 |
124 |
99 |
|||||||||||
Interest income |
(1) |
(1) |
(3) |
(2) |
|||||||||||
Loss on early extinguishment of debt |
13 |
— |
62 |
— |
|||||||||||
Other income, net |
(2) |
(2) |
(6) |
(25) |
|||||||||||
Income before provision for income taxes and equity in earnings of unconsolidated subsidiaries |
317 |
343 |
848 |
1,026 |
|||||||||||
Provision for income taxes |
114 |
102 |
279 |
343 |
|||||||||||
Income before equity in earnings of unconsolidated subsidiaries |
203 |
241 |
569 |
683 |
|||||||||||
Equity in loss of unconsolidated subsidiaries, net of tax |
— |
(1) |
(1) |
(1) |
|||||||||||
Net income |
$ |
203 |
$ |
240 |
$ |
568 |
$ |
682 |
|||||||
Earnings per common share: |
|||||||||||||||
Basic |
$ |
1.12 |
$ |
1.30 |
$ |
3.11 |
$ |
3.66 |
|||||||
Diluted |
1.11 |
1.29 |
3.09 |
3.64 |
|||||||||||
Weighted average common shares outstanding: |
|||||||||||||||
Basic |
181.4 |
184.8 |
182.7 |
186.1 |
|||||||||||
Diluted |
182.1 |
185.7 |
183.5 |
187.1 |
|||||||||||
Cash dividends declared per common share |
$ |
0.58 |
$ |
0.53 |
$ |
1.74 |
$ |
1.59 |
A - 1
|
|||||||
CONDENSED CONSOLIDATED BALANCE SHEETS |
|||||||
As of |
|||||||
(Unaudited, in millions, except share and per share data) |
|||||||
|
|
||||||
(in millions, except share and per share data) |
2017 |
2016 |
|||||
Assets |
|||||||
Current assets: |
|||||||
Cash and cash equivalents |
$ |
66 |
$ |
1,787 |
|||
Restricted cash and restricted cash equivalents |
89 |
— |
|||||
Accounts receivable: |
|||||||
Trade, net |
659 |
595 |
|||||
Other |
47 |
51 |
|||||
Inventories |
261 |
202 |
|||||
Prepaid expenses and other current assets |
144 |
101 |
|||||
Total current assets |
1,266 |
2,736 |
|||||
Property, plant and equipment, net |
1,129 |
1,138 |
|||||
Investments in unconsolidated subsidiaries |
24 |
23 |
|||||
|
3,559 |
2,993 |
|||||
Other intangible assets, net |
3,786 |
2,656 |
|||||
Other non-current assets |
215 |
183 |
|||||
Deferred tax assets |
60 |
62 |
|||||
Total assets |
$ |
10,039 |
$ |
9,791 |
|||
Liabilities and Stockholders' Equity |
|||||||
Current liabilities: |
|||||||
Accounts payable |
$ |
387 |
$ |
303 |
|||
Deferred revenue |
64 |
64 |
|||||
Short-term borrowings and current portion of long-term obligations |
82 |
10 |
|||||
Income taxes payable |
10 |
4 |
|||||
Other current liabilities |
816 |
670 |
|||||
Total current liabilities |
1,359 |
1,051 |
|||||
Long-term obligations |
4,399 |
4,468 |
|||||
Deferred tax liabilities |
877 |
812 |
|||||
Non-current deferred revenue |
1,071 |
1,117 |
|||||
Other non-current liabilities |
204 |
209 |
|||||
Total liabilities |
7,910 |
7,657 |
|||||
Commitments and contingencies |
|||||||
Stockholders' equity: |
|||||||
Preferred stock, |
— |
— |
|||||
Common stock, |
2 |
2 |
|||||
Additional paid-in capital |
— |
95 |
|||||
Retained earnings |
2,311 |
2,266 |
|||||
Accumulated other comprehensive loss |
(184) |
(229) |
|||||
Total stockholders' equity |
2,129 |
2,134 |
|||||
Total liabilities and stockholders' equity |
$ |
10,039 |
$ |
9,791 |
A - 2
|
|||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
|||||||
For the Nine Months Ended |
|||||||
(Unaudited, in millions) |
|||||||
For the |
|||||||
Nine Months Ended |
|||||||
|
|||||||
(in millions) |
2017 |
2016 |
|||||
Operating activities: |
|||||||
Net income |
$ |
568 |
$ |
682 |
|||
Adjustments to reconcile net income to net cash provided by operating activities: |
|||||||
Depreciation expense |
147 |
142 |
|||||
Amortization expense |
25 |
24 |
|||||
Amortization of deferred revenue |
(48) |
(48) |
|||||
Employee stock-based compensation expense |
26 |
33 |
|||||
Deferred income taxes |
65 |
— |
|||||
Loss on early extinguishment of debt |
62 |
— |
|||||
Gain on step acquisition of unconsolidated subsidiaries |
(28) |
(5) |
|||||
Gain on extinguishment of multi-employer plan withdrawal liability |
— |
(21) |
|||||
Unrealized gains on economic hedges |
(10) |
(41) |
|||||
Other, net |
14 |
5 |
|||||
Changes in assets and liabilities, net of effects of acquisition: |
|||||||
Trade accounts receivable |
(34) |
(14) |
|||||
Other accounts receivable |
5 |
(5) |
|||||
Inventories |
(29) |
(19) |
|||||
Other current and non-current assets |
(78) |
(61) |
|||||
Other current and non-current liabilities |
— |
(48) |
|||||
Trade accounts payable |
41 |
35 |
|||||
Income taxes payable |
6 |
46 |
|||||
Net cash provided by operating activities |
732 |
705 |
|||||
Investing activities: |
|||||||
Acquisition of business |
(1,553) |
(15) |
|||||
Cash acquired in step acquisition of unconsolidated subsidiaries |
3 |
17 |
|||||
Purchase of property, plant and equipment |
(85) |
(110) |
|||||
Purchase of intangible assets |
(5) |
(1) |
|||||
Investment in unconsolidated subsidiaries |
(3) |
(6) |
|||||
Purchase of cost method investment |
— |
(1) |
|||||
Proceeds from disposals of property, plant and equipment |
3 |
4 |
|||||
Other, net |
(3) |
(7) |
|||||
Net cash used in investing activities |
(1,643) |
(119) |
|||||
Financing activities: |
|||||||
Proceeds from issuance of senior unsecured notes |
400 |
400 |
|||||
Repayment of senior unsecured notes |
(562) |
(500) |
|||||
Net issuance of commercial paper |
70 |
— |
|||||
Repurchase of shares of common stock |
(320) |
(460) |
|||||
Dividends paid |
(309) |
(288) |
|||||
Tax withholdings related to net share settlements of certain stock awards |
(30) |
(31) |
|||||
Proceeds from stock options exercised |
20 |
14 |
|||||
Premium (discount) on issuance of senior unsecured notes |
16 |
(1) |
|||||
Proceeds from termination of interest rate swap |
13 |
— |
|||||
Deferred financing charges paid |
(5) |
(3) |
|||||
Capital lease payments |
(8) |
(6) |
|||||
Other, net |
(2) |
(1) |
|||||
Net cash used in financing activities |
(717) |
(876) |
|||||
Cash, cash equivalents, restricted cash and restricted cash equivalents — net change from: |
|||||||
Operating, investing and financing activities |
(1,628) |
(290) |
|||||
Effect of exchange rate changes on cash, cash equivalents, restricted cash and restricted cash equivalents |
6 |
(1) |
|||||
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 |
$ |
165 |
$ |
620 |
A - 3
|
|||||||||||||||
OPERATIONS BY OPERATING SEGMENT |
|||||||||||||||
For the Three and Nine Months Ended |
|||||||||||||||
(Unaudited, in millions) |
|||||||||||||||
For the Three Months Ended |
For the Nine Months Ended |
||||||||||||||
(in millions) |
2017 |
2016 |
2017 |
2016 |
|||||||||||
Segment Results – Net sales |
|||||||||||||||
Beverage Concentrates |
$ |
334 |
$ |
323 |
$ |
984 |
$ |
952 |
|||||||
Packaged Beverages |
1,273 |
1,236 |
3,693 |
3,558 |
|||||||||||
Latin America Beverages |
133 |
121 |
370 |
352 |
|||||||||||
Net sales |
$ |
1,740 |
$ |
1,680 |
$ |
5,047 |
$ |
4,862 |
|||||||
For the Three Months Ended |
For the Nine Months Ended |
||||||||||||||
(in millions) |
2017 |
2016 |
2017 |
2016 |
|||||||||||
Segment Results – SOP |
|||||||||||||||
Beverage Concentrates |
$ |
218 |
$ |
205 |
$ |
641 |
$ |
622 |
|||||||
Packaged Beverages |
189 |
208 |
526 |
592 |
|||||||||||
Latin America Beverages |
12 |
21 |
47 |
60 |
|||||||||||
Total SOP |
419 |
434 |
1,214 |
1,274 |
|||||||||||
Unallocated corporate costs |
52 |
64 |
219 |
180 |
|||||||||||
Other operating income, net |
— |
(3) |
(30) |
(4) |
|||||||||||
Income from operations |
367 |
373 |
1,025 |
1,098 |
|||||||||||
Interest expense, net |
39 |
32 |
121 |
97 |
|||||||||||
Loss on early extinguishment of debt |
13 |
— |
62 |
— |
|||||||||||
Other income, net |
(2) |
(2) |
(6) |
(25) |
|||||||||||
Income before provision for income taxes and equity in earnings of unconsolidated subsidiaries |
$ |
317 |
$ |
343 |
$ |
848 |
$ |
1,026 |
A - 4
RECONCILIATION OF GAAP AND NON-GAAP INFORMATION
(Unaudited)
The company reports its financial results in accordance with
Net sales and Segment Operating Profit, as adjusted to currency neutral: Net sales and Segment Operating Profit are calculated on a currency neutral basis by converting our current-period local currency financial results using the prior-period foreign currency exchange rates.
Free Cash Flow: Free cash flow is defined as net cash provided by operating activities adjusted for capital spending and certain items excluded for comparison to prior year periods. For the nine months ended
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
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 |
||||||||||||
Beverage |
Packaged |
Latin |
||||||||||
Percent change |
Concentrates |
Beverages |
Beverages |
Total |
||||||||
Reported net sales |
3 |
% |
3 |
% |
10 |
% |
4 |
% |
||||
Impact of foreign currency |
— |
% |
— |
% |
(5) |
% |
(1) |
% |
||||
Net sales, as adjusted to currency neutral |
3 |
% |
3 |
% |
5 |
% |
3 |
% |
||||
For the Three Months Ended |
||||||||||||
Beverage |
Packaged |
Latin America |
||||||||||
Percent change |
Concentrates |
Beverages |
Beverages |
Total |
||||||||
Reported SOP |
6 |
% |
(9) |
% |
(43) |
% |
(3) |
% |
||||
Impact of foreign currency |
— |
% |
— |
% |
— |
% |
(1) |
% |
||||
SOP, as adjusted to currency neutral |
6 |
% |
(9) |
% |
(43) |
% |
(4) |
% |
||||
For the Nine Months Ended |
||||||||||||
Beverage |
Packaged |
Latin America |
||||||||||
Percent change |
Concentrates |
Beverages |
Beverages |
Total |
||||||||
Reported net sales |
3 |
% |
4 |
% |
5 |
% |
4 |
% |
||||
Impact of foreign currency |
— |
% |
— |
% |
2 |
% |
— |
% |
||||
Net sales, as adjusted to currency neutral |
3 |
% |
4 |
% |
7 |
% |
4 |
% |
||||
For the Nine Months Ended |
||||||||||||
Beverage |
Packaged |
Latin America |
||||||||||
Percent change |
Concentrates |
Beverages |
Beverages |
Total |
||||||||
Reported SOP |
3 |
% |
(11) |
% |
(22) |
% |
(5) |
% |
||||
Impact of foreign currency |
— |
% |
— |
% |
2 |
% |
— |
% |
||||
SOP, as adjusted to currency neutral |
3 |
% |
(11) |
% |
(20) |
% |
(5) |
% |
RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW |
||||||||||||
(Unaudited, in millions) |
||||||||||||
For the |
||||||||||||
Nine Months Ended |
||||||||||||
|
||||||||||||
2017 |
2016 |
Change |
||||||||||
Net cash provided by operating activities |
$ |
732 |
$ |
705 |
$ |
27 |
||||||
Purchase of property, plant and equipment |
(85) |
(110) |
||||||||||
Free Cash Flow |
$ |
647 |
$ |
595 |
$ |
52 |
A - 6
RECONCILIATION OF NET INCOME TO CORE EARNINGS |
|||||||||||||||||||||||
(Unaudited, in millions, except per share data) |
|||||||||||||||||||||||
For the Three Months Ended |
|||||||||||||||||||||||
Reported |
Mark to |
Transaction & |
Loss on Early |
Total |
Core |
||||||||||||||||||
Cost of sales |
$ |
707 |
$ |
8 |
$ |
— |
$ |
— |
$ |
8 |
$ |
715 |
|||||||||||
Gross profit |
1,033 |
(8) |
— |
— |
(8) |
1,025 |
|||||||||||||||||
Gross margin |
59.4 |
% |
(0.5) |
% |
— |
% |
— |
% |
(0.5) |
% |
58.9 |
% |
|||||||||||
Selling, general and administrative expenses |
$ |
640 |
$ |
10 |
$ |
(1) |
$ |
— |
$ |
9 |
$ |
649 |
|||||||||||
Income from operations |
367 |
(18) |
1 |
— |
(17) |
350 |
|||||||||||||||||
Operating margin |
21.1 |
% |
(1.0) |
% |
— |
% |
— |
% |
(1.0) |
% |
20.1 |
% |
|||||||||||
Interest expense |
$ |
40 |
$ |
— |
$ |
(1) |
$ |
— |
$ |
(1) |
$ |
39 |
|||||||||||
Loss on early extinguishment of debt |
13 |
— |
— |
(13) |
(13) |
— |
|||||||||||||||||
Income before provision for income taxes and equity in earnings of unconsolidated subsidiaries |
317 |
(18) |
2 |
13 |
(3) |
314 |
|||||||||||||||||
Provision for income taxes |
114 |
(6) |
1 |
4 |
(1) |
113 |
|||||||||||||||||
Effective tax rate |
36.0 |
% |
0.2 |
% |
— |
% |
(0.2) |
% |
— |
% |
36.0 |
% |
|||||||||||
Net income |
$ |
203 |
$ |
(12) |
$ |
1 |
$ |
9 |
$ |
(2) |
$ |
201 |
|||||||||||
Reported EPS |
Core EPS |
||||||||||||||||||||||
Diluted earnings per common share |
$ |
1.11 |
$ |
(0.06) |
$ |
0.01 |
$ |
0.04 |
$ |
(0.01) |
$ |
1.10 |
|||||||||||
FX Translation |
(0.01) |
||||||||||||||||||||||
Currency Neutral Core EPS |
$ |
1.09 |
A - 7
RECONCILIATION OF NET INCOME TO CORE EARNINGS - (Continued) |
|||||||||||||||||||
(Unaudited, in millions, except per share data) |
|||||||||||||||||||
For the Three Months Ended |
|||||||||||||||||||
Reported |
Mark to |
Legal Entity |
Total |
Core |
|||||||||||||||
Cost of sales |
$ |
683 |
$ |
5 |
$ |
— |
$ |
5 |
$ |
688 |
|||||||||
Gross profit |
997 |
(5) |
— |
(5) |
992 |
||||||||||||||
Gross margin |
59.3 |
% |
(0.3) |
% |
— |
% |
(0.3) |
% |
59.0 |
% |
|||||||||
Selling, general and administrative expenses |
$ |
603 |
$ |
4 |
$ |
— |
$ |
4 |
$ |
607 |
|||||||||
Income from operations |
373 |
(9) |
— |
(9) |
364 |
||||||||||||||
Operating margin |
22.2 |
% |
(0.5) |
% |
— |
% |
(0.5) |
% |
21.7 |
% |
|||||||||
Income before provision for income taxes and equity in earnings of unconsolidated subsidiaries |
$ |
343 |
$ |
(9) |
$ |
— |
$ |
(9) |
$ |
334 |
|||||||||
Provision for income taxes |
102 |
(3) |
17 |
14 |
116 |
||||||||||||||
Effective tax rate |
29.7 |
% |
(0.1) |
% |
5.1 |
% |
5.0 |
% |
34.7 |
% |
|||||||||
Net income |
$ |
240 |
$ |
(6) |
$ |
(17) |
$ |
(23) |
$ |
217 |
|||||||||
Reported EPS |
Core EPS |
||||||||||||||||||
Diluted earnings per common share |
$ |
1.29 |
$ |
(0.03) |
$ |
(0.09) |
$ |
(0.12) |
$ |
1.17 |
A - 8
RECONCILIATION OF NET INCOME TO CORE EARNINGS - (Continued) |
|||||||||||||||||||||||
(Unaudited, in millions, except per share data) |
|||||||||||||||||||||||
For the Nine Months Ended |
|||||||||||||||||||||||
Reported |
Mark to |
Transaction & |
Loss on Early |
Total |
Core |
||||||||||||||||||
Cost of sales |
$ |
2,032 |
$ |
20 |
$ |
— |
$ |
— |
$ |
20 |
$ |
2,052 |
|||||||||||
Gross profit |
3,015 |
(20) |
— |
— |
(20) |
2,995 |
|||||||||||||||||
Gross margin |
59.7 |
% |
(0.4) |
% |
— |
% |
— |
% |
(0.4) |
% |
59.3 |
% |
|||||||||||
Selling, general and administrative expenses |
$ |
1,944 |
$ |
(10) |
$ |
(21) |
$ |
— |
$ |
(31) |
$ |
1,913 |
|||||||||||
Income from operations |
1,025 |
(10) |
21 |
— |
11 |
1,036 |
|||||||||||||||||
Operating margin |
20.3 |
% |
(0.2) |
% |
0.4 |
% |
— |
% |
0.2 |
% |
20.5 |
% |
|||||||||||
Interest expense |
$ |
124 |
$ |
1 |
$ |
(1) |
$ |
— |
$ |
— |
$ |
124 |
|||||||||||
Loss on early extinguishment of debt |
62 |
— |
— |
(62) |
(62) |
— |
|||||||||||||||||
Income before provision for income taxes and equity in earnings of unconsolidated subsidiaries |
848 |
(11) |
22 |
62 |
73 |
921 |
|||||||||||||||||
Provision for income taxes |
279 |
(4) |
8 |
21 |
25 |
304 |
|||||||||||||||||
Effective tax rate |
32.9 |
% |
— |
% |
— |
% |
0.1 |
% |
0.1 |
% |
33.0 |
% |
|||||||||||
Net income |
$ |
568 |
$ |
(7) |
$ |
14 |
$ |
41 |
$ |
48 |
$ |
616 |
|||||||||||
Reported EPS |
Core EPS |
||||||||||||||||||||||
Diluted earnings per common share |
$ |
3.09 |
$ |
(0.04) |
$ |
0.08 |
$ |
0.23 |
$ |
0.27 |
$ |
3.36 |
|||||||||||
FX Translation |
— |
||||||||||||||||||||||
Currency Neutral Core EPS |
$ |
3.36 |
A - 9
RECONCILIATION OF NET INCOME TO CORE EARNINGS - (Continued) |
|||||||||||||||||||||||
(Unaudited, in millions, except per share data) |
|||||||||||||||||||||||
For the Nine Months Ended |
|||||||||||||||||||||||
Reported |
Mark to |
Extinguishment |
Legal Entity |
Total |
Core |
||||||||||||||||||
Cost of sales |
$ |
1,955 |
$ |
21 |
$ |
— |
$ |
— |
$ |
21 |
$ |
1,976 |
|||||||||||
Gross profit |
2,907 |
(21) |
— |
— |
(21) |
2,886 |
|||||||||||||||||
Gross margin |
59.8 |
% |
(0.4) |
% |
— |
% |
— |
% |
(0.4) |
% |
59.4 |
% |
|||||||||||
Selling, general and administrative expenses |
$ |
1,739 |
$ |
20 |
$ |
— |
$ |
— |
$ |
20 |
$ |
1,759 |
|||||||||||
Income from operations |
1,098 |
(41) |
— |
— |
(41) |
1,057 |
|||||||||||||||||
Operating margin |
22.6 |
% |
(0.9) |
% |
— |
% |
— |
% |
(0.9) |
% |
21.7 |
% |
|||||||||||
Other income, net |
$ |
(25) |
$ |
— |
$ |
21 |
$ |
— |
$ |
21 |
$ |
(4) |
|||||||||||
Income before provision for income taxes and equity in earnings of unconsolidated subsidiaries |
1,026 |
(41) |
(21) |
— |
(62) |
964 |
|||||||||||||||||
Provision for income taxes |
343 |
(15) |
(9) |
17 |
(7) |
336 |
|||||||||||||||||
Effective tax rate |
33.4 |
% |
(0.1) |
% |
(0.1) |
% |
1.7 |
% |
1.5 |
% |
34.9 |
% |
|||||||||||
Net income |
$ |
682 |
$ |
(26) |
$ |
(12) |
$ |
(17) |
$ |
(55) |
627 |
||||||||||||
Reported EPS |
Core EPS |
||||||||||||||||||||||
Diluted earnings per common share |
$ |
3.64 |
$ |
(0.13) |
$ |
(0.07) |
$ |
(0.09) |
$ |
(0.29) |
$ |
3.35 |
A - 10
Contacts: |
Media Relations |
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Investor Relations |
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