Dr Pepper Snapple Group Reports Third Quarter 2015 Results
Reported EPS were $1.05 for the quarter, up 9%. Core EPS were $1.08 for the quarter, up 10%.
Net sales increased 3% for the quarter and year-to-date.
Foreign currency translation reduced Net Sales by 2% and Reported EPS by 2% in the quarter.
Company raises guidance and now expects full-year 2015 Core EPS in the $3.92 to $3.98 range.
Oct 22, 2015

PLANO, Texas, Oct. 22, 2015 /PRNewswire/ -- Dr Pepper Snapple Group, Inc. (NYSE: DPS) reported third quarter 2015 EPS of $1.05 compared to $0.96 in the prior year period. Core EPS were $1.08, up 10%, compared to $0.98 in the prior year period. Year-to-date, the company reported earnings of $3.00 per diluted share compared to $2.79 per share in the prior year period.  Core EPS were $3.02, up 9%, compared to $2.77 in the prior year period.

For the quarter, reported net sales increased 3% on a 3% increase in sales volumes, favorable product and package mix and price increases. This was partially offset by 2 percentage points of unfavorable foreign currency translation and higher discounts primarily related to our fountain foodservice business. Reported segment operating profit (SOP) increased 8%, or $30 million, on net sales growth, lower commodity costs and ongoing productivity improvements, partially offset by increases in certain operating costs and 2 percentage points of unfavorable foreign currency translation.

Reported income from operations for the quarter was $337 million, including $9 million in unrealized commodity mark-to-market losses. Reported income from operations was $316 million in the prior year period, including $2 million in unrealized commodity mark-to-market losses. Core income from operations for the quarter was $347 million, up 9%, or 21.3% of net sales compared to 20.1% in the prior year period.

Year-to-date, reported net sales increased 3%, and reported income from operations was $976 million, including $5 million of unrealized commodity mark-to-market losses. Foreign currency translation negatively impacted reported net sales and reported income from operations by 2%. Reported income from operations was $924 million in the prior year period, including $10 million of unrealized commodity mark-to-market gains. Core income from operations year-to-date was $983 million, up 8%, or 20.8% of net sales compared to 19.8% in the prior year period.

DPS President and CEO Larry Young said, "We posted yet another quarter of solid top-line and bottom-line results, with both our CSD and non-carbonated beverage portfolios performing well."

Young continued, "We gained both dollar and volume share in the CSD and shelf-stable juice categories in Nielsen measured markets, and we're seeing financial benefits from our marketing investments and innovation. Rapid Continuous Improvement (RCI) continues to underpin how we operate on a daily basis, and we have a long runway of further improvement opportunities."

 

EPS reconciliation

Third Quarter

Year-to-Date

2015

2014

Percent

Change

2015

2014

Percent

Change

Reported EPS

$1.05

$0.96

9

$3.00

$2.79

8

Unrealized commodity mark-to-market net loss / (gain)

 

Items affecting comparability

- Litigation provision

- Separation related

 

Core EPS

 

0.03

 

 

-

-

------

$1.08

0.01

 

 

-

0.01

------

$0.98

 

 

 

------

10

0.01

 

 

0.01

-

-----

$3.02

 

(0.03)

 

 

-

0.01

-----

$2.77

 

 

 

------

9

EPS – earnings per share

 

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)

Third Quarter

YTD

Third Quarter

YTD

BCS Volume

2

2

2

2

Sales Volume

3

2

3

2

Net Sales

3

3

5

5

SOP

8

7

10

8

BCS - bottler case sales

 

BCS Volume

For the quarter, BCS volume increased 2% with carbonated soft drinks (CSDs) increasing 2% and non-carbonated beverages (NCBs) increasing 4%.

By geography, U.S. and Canada volume increased 1%, and Mexico and the Caribbean volume increased 8%.

In CSDs, Peñafiel increased 14% in the quarter on increased promotional activity and distribution gains. Schweppes grew 11% while Squirt increased 5%. Brand Dr Pepper and Crush were flat in the quarter. Our Core 4 brands were also flat in the quarter as a high-single-digit increase in Canada Dry was offset by mid-single-digit declines in 7UP and Sunkist soda and a low-single-digit decline in A&W. Fountain foodservice volume increased 2% in the period.

In NCBs, our water category grew 16% primarily on growth in Bai 5 and FIJI. Clamato increased 15% primarily on distribution gains. Snapple grew 5% driven primarily by product innovation. Mott's was flat in the quarter and Hawaiian Punch decreased 1%.

Sales Volume
Sales volumes increased 3% for the quarter and 2% year-to-date.

2015 Segment results
(Percent Change)

Third Quarter

   

As Reported

Currency Neutral

Sales Volume

Net Sales

SOP

Net Sales

SOP

Beverage Concentrates

3

1

2

2

4

Packaged Beverages

2

5

14

6

15

Latin America Beverages

8

(10)

9

10

32

Total

3

3

8

5

10

 

2015 Segment results
(Percent Change)

Year-to-Date

   

As Reported

Currency Neutral

Sales Volume

Net Sales

SOP

Net Sales

SOP

Beverage Concentrates

-

1

4

2

5

Packaged Beverages

2

4

10

5

10

Latin America Beverages

9

(6)

15

9

32

Total

2

3

7

5

8

 

Beverage Concentrates
Net sales increased 2% in the quarter driven by a 3% increase in concentrate shipments, concentrate prices taken earlier in the year and favorable product mix, which were partially offset by higher discounts primarily related to our fountain foodservice business. SOP increased 4% on net sales growth and lower marketing costs, which were partially offset by increases in certain operating expenses.

Packaged Beverages
Net sales increased 6% for the quarter on favorable product mix, price increases and a 2% increase in sales volumes. SOP increased 15% on net sales growth, lower commodity costs and ongoing productivity improvements, which were partially offset by increases in certain operating expenses.

Latin America Beverages
Net sales increased 10% in the quarter driven by an 8% increase in sales volumes and favorable mix. SOP increased 32% on net sales growth, ongoing productivity improvements and lower commodity 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.

Corporate and Other Items
For the quarter, corporate costs totaled $83 million, which included $9 million of unrealized commodity mark-to-market losses. Corporate costs in the prior year period were $76 million, which included $2 million of unrealized commodity mark-to-market losses.

Net interest expense increased $1 million in the quarter.

For the quarter, the reported effective tax rate was 34.4%. The effective tax rate in the prior year period was 34.0%.

Cash Flow
Year-to-date, the company generated $723 million of cash from operating activities compared to $769 million in the prior year. Capital spending totaled $71 million compared to $103 million in the prior year period. The company returned $668 million to shareholders in the form of stock repurchases ($404 million) and dividends ($264 million).

2015 Full-Year Guidance
The company now expects full-year reported net sales to be up approximately 2% and core EPS to be in the $3.92 to $3.98 range. Collectively, foreign currency translation and transaction are now expected to negatively impact net sales and core EPS growth by approximately 2% and 5%, respectively.

Packaging and ingredient costs are now expected to decrease COGS by approximately 2% 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 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.

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 third 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.

For additional information about Dr Pepper Snapple Group, please reference the "DPS Overview" presentation slideshow under "Events and Presentations" on the company's website at http://www.drpeppersnapple.com in the "Investors" section.

About Dr Pepper Snapple Group
Dr Pepper Snapple Group (NYSE: DPS) is a leading producer of flavored beverages in North America and the Caribbean. Our success is fueled by more than 50 brands that are synonymous with refreshment, fun and flavor. We have 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 Nine Months Ended September 30, 2015 and 2014

(Unaudited, in millions, except per share data)

       
 

For the

 

For the

 

Three Months Ended

 

Nine Months Ended

 

September 30,

 

September 30,

 

2015

 

2014

 

2015

 

2014

Net sales

$

1,630

   

$

1,583

   

$

4,736

   

$

4,612

 

Cost of sales

673

   

658

   

1,949

   

1,877

 

Gross profit

957

   

925

   

2,787

   

2,735

 

Selling, general and administrative expenses

592

   

581

   

1,730

   

1,727

 

Depreciation and amortization

26

   

28

   

79

   

86

 

Other operating expense (income), net

2

   

   

2

   

(2)

 

Income from operations

337

   

316

   

976

   

924

 

Interest expense

28

   

27

   

83

   

80

 

Interest income

   

   

(1)

   

(1)

 

Other expense, net

1

   

4

   

1

   

2

 

Income before provision for income taxes and equity in earnings of unconsolidated subsidiaries

308

   

285

   

893

   

843

 

Provision for income taxes

106

   

97

   

314

   

291

 

Income before equity in earnings of unconsolidated subsidiaries

202

   

188

   

579

   

552

 

Equity in earnings of unconsolidated subsidiaries, net of tax

   

   

   

1

 

Net income

$

202

   

$

188

   

$

579

   

$

553

 

Earnings per common share:

             

Basic

$

1.06

   

$

0.97

   

$

3.02

   

$

2.81

 

Diluted

1.05

   

0.96

   

3.00

   

2.79

 

Weighted average common shares outstanding:

             

Basic

190.4

   

194.8

   

191.6

   

196.4

 

Diluted

191.5

   

196.2

   

192.8

   

197.8

 
 

A-1

 

DR PEPPER SNAPPLE GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

As of September 30, 2015 and December 31, 2014

(Unaudited, in millions, except share and per share data)

 

September 30,

 

December 31,

 

2015

 

2014

Assets

Current assets:

     

Cash and cash equivalents

$

207

   

$

237

 

Accounts receivable:

     

Trade, net

571

   

556

 

Other

57

   

61

 

Inventories

201

   

204

 

Deferred tax assets

73

   

67

 

Prepaid expenses and other current assets

113

   

86

 

Total current assets

1,222

   

1,211

 

Property, plant and equipment, net

1,077

   

1,141

 

Investments in unconsolidated subsidiaries

31

   

14

 

Goodwill

2,988

   

2,990

 

Other intangible assets, net

2,673

   

2,684

 

Other non-current assets

172

   

159

 

Non-current deferred tax assets

62

   

74

 

Total assets

$

8,225

   

$

8,273

 

Liabilities and Stockholders' Equity

Current liabilities:

     

Accounts payable

$

310

   

$

289

 

Deferred revenue

64

   

64

 

Short-term borrowings and current portion of long-term obligations

505

   

3

 

Income taxes payable

25

   

10

 

Other current liabilities

685

   

672

 

Total current liabilities

1,589

   

1,038

 

Long-term obligations

2,130

   

2,588

 

Non-current deferred tax liabilities

846

   

801

 

Non-current deferred revenue

1,198

   

1,250

 

Other non-current liabilities

265

   

302

 

Total liabilities

6,028

   

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, 189,112,688 and 192,957,696 shares issued and outstanding for 2015 and 2014, respectively

2

   

2

 

Additional paid-in capital

313

   

658

 

Retained earnings

2,072

   

1,771

 

Accumulated other comprehensive loss

(190)

   

(137)

 

Total stockholders' equity

2,197

   

2,294

 

Total liabilities and stockholders' equity

$

8,225

   

$

8,273

 
 

A-2

 

DR PEPPER SNAPPLE GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Nine Months Ended September 30, 2015 and 2014

(Unaudited, in millions)

 

For the

 

Nine Months Ended

 

September 30,

 

2015

 

2014

Operating activities:

     

Net income

$

579

   

$

553

 

Adjustments to reconcile net income to net cash provided by operating activities:

     

Depreciation expense

143

   

148

 

Amortization expense

25

   

26

 

Amortization of deferred revenue

(48)

   

(48)

 

Employee stock-based compensation expense

33

   

35

 

Deferred income taxes

27

   

33

 

Other, net

(7)

   

(20)

 

Changes in assets and liabilities, net of effects of acquisition:

     

Trade accounts receivable

(25)

   

15

 

Other accounts receivable

3

   

(6)

 

Inventories

(2)

   

8

 

Other current and non-current assets

(33)

   

(49)

 

Other current and non-current liabilities

(35)

   

24

 

Trade accounts payable

25

   

49

 

Income taxes payable

38

   

1

 

Net cash provided by operating activities

723

   

769

 

Investing activities:

     

Purchase of property, plant and equipment

(71)

   

(103)

 

Purchase of intangible assets

(1)

   

(1)

 

Investment in unconsolidated subsidiaries

(20)

   

 

Purchase of cost method investment

(15)

   

 

Proceeds from disposals of property, plant and equipment

12

   

7

 

Other, net

   

(3)

 

Net cash used in investing activities

(95)

   

(100)

 

Financing activities:

     

Net issuance of commercial paper

   

(65)

 

Repurchase of shares of common stock

(404)

   

(276)

 

Dividends paid

(264)

   

(237)

 

Tax withholdings related to net share settlements of certain stock awards

(27)

   

(16)

 

Proceeds from stock options exercised

28

   

32

 

Excess tax benefit on stock-based compensation

22

   

9

 

Other, net

(3)

   

 

Net cash used in financing activities

(648)

   

(553)

 

Cash and cash equivalents — net change from:

     

Operating, investing and financing activities

(20)

   

116

 

Effect of exchange rate changes on cash and cash equivalents

(10)

   

(3)

 

Cash and cash equivalents at beginning of period

237

   

153

 

Cash and cash equivalents at end of period

$

207

   

$

266

 
 

A-3

 

DR PEPPER SNAPPLE GROUP, INC.

OPERATIONS BY OPERATING SEGMENT

For the Three and Nine Months Ended September 30, 2015 and 2014

 (Unaudited, in millions)

 
 

For the Three Months Ended September 30,

 

For the Nine Months Ended September 30,

 

2015

 

2014

 

2015

 

2014

Segment Results – Net sales

             

Beverage Concentrates

$

308

   

$

306

   

$

923

   

$

914

 

Packaged Beverages

1,193

   

1,134

   

3,434

   

3,294

 

Latin America Beverages

129

   

143

   

379

   

404

 

Net sales

$

1,630

   

$

1,583

   

$

4,736

   

$

4,612

 
 
 
 

For the Three Months Ended September 30,

 

For the Nine Months Ended September 30,

 

2015

 

2014

 

2015

 

2014

Segment Results – SOP

             

Beverage Concentrates

$

204

   

$

200

   

$

609

   

$

588

 

Packaged Beverages

194

   

170

   

525

   

478

 

Latin America Beverages

24

   

22

   

68

   

59

 

Total SOP

422

   

392

   

1,202

   

1,125

 

Unallocated corporate costs

83

   

76

   

224

   

203

 

Other operating expense (income), net

2

   

   

2

   

(2)

 

Income from operations

337

   

316

   

976

   

924

 

Interest expense, net

28

   

27

   

82

   

79

 

Other expense, net

1

   

4

   

1

   

2

 

Income before provision for income taxes and equity in earnings of unconsolidated subsidiaries

$

308

   

$

285

   

$

893

   

$

843

 
 

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 nine months ended September 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 nine months ended September 30, 2015, is an adjustment to a previously disclosed litigation provision. The certain items excluded for the three and nine months ended September 30, 2014, are separation-related charges.

 

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 September 30, 2015

   

Beverage

 

Packaged

 

Latin

America

   

Percent change

 

Concentrates

 

Beverages

 

Beverages

 

Total

Reported net sales

 

1

%

 

5

%

 

(10)

%

 

3

%

Impact of foreign currency

 

1

%

 

1

%

 

20

%

 

2

%

Net sales, as adjusted to currency neutral

 

2

%

 

6

%

 

10

%

 

5

%

     
   

For the Three Months Ended September 30, 2015

   

Beverage

 

Packaged

 

Latin

America

   

Percent change

 

Concentrates

 

Beverages

 

Beverages

 

Total

Reported SOP

 

2

%

 

14

%

 

9

%

 

8

%

Impact of foreign currency

 

2

%

 

1

%

 

23

%

 

2

%

SOP, as adjusted to currency neutral

 

4

%

 

15

%

 

32

%

 

10

%

     
   

For the Nine Months Ended September 30, 2015

   

Beverage

 

Packaged

 

Latin

America

   

Percent change

 

Concentrates

 

Beverages

 

Beverages

 

Total

Reported net sales

 

1

%

 

4

%

 

(6)

%

 

3

%

Impact of foreign currency

 

1

%

 

1

%

 

15

%

 

2

%

Net sales, as adjusted to currency neutral

 

2

%

 

5

%

 

9

%

 

5

%

     
   

For the Nine Months Ended September 30, 2015

   

Beverage

 

Packaged

 

Latin

America

   

Percent change

 

Concentrates

 

Beverages

 

Beverages

 

Total

Reported SOP

 

4

%

 

10

%

 

15

%

 

7

%

Impact of foreign currency

 

1

%

 

%

 

17

%

 

1

%

SOP, as adjusted to currency neutral

 

5

%

 

10

%

 

32

%

 

8

%

 

 

RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW

(Unaudited, in millions)

   

For the

   
   

Nine Months Ended

   
   

September 30,

   
   

2015

 

2014

 

Change

Net cash provided by operating activities

 

$

723

   

$

769

   

$

(46)

 

Purchase of property, plant and equipment

 

(71)

   

(103)

     

Free Cash Flow

 

$

652

   

$

666

   

$

(14)

 
 

A-6

 

RECONCILIATION OF NET INCOME TO CORE EARNINGS

(Unaudited, in millions, except per share data)

 
 

For the Three Months Ended September 30, 2015

 

Reported

 

Mark to Market

 

Litigation Provision

 

Total Adjustments

 

Core

 

Impact of foreign currency translation

 

Currency Neutral Core

Net sales

$

1,630

   

$

   

$

   

$

   

$

1,630

   

$

39

   

$

1,669

 

Cost of sales

673

   

(7)

   

   

(7)

   

666

   

17

   

683

 

Gross profit

957

   

7

   

   

7

   

964

   

22

   

986

 

Selling, general and administrative expenses

592

   

(2)

   

(1)

   

(3)

   

589

   

13

   

602

 

Depreciation and amortization

26

   

   

   

   

26

   

   

26

 

Other operating expense (income), net

2

   

   

   

   

2

   

   

2

 

Income from operations

337

   

9

   

1

   

10

   

347

   

9

   

356

 

Interest expense

28

   

   

   

   

28

   

1

   

29

 

Interest income

   

   

   

   

   

   

 

Other expense, net

1

   

   

   

   

1

   

2

   

3

 

Income before provision for income taxes and equity in earnings of unconsolidated subsidiaries

308

   

9

   

1

   

10

   

318

   

6

   

324

 

Provision for income taxes

106

   

4

   

1

   

5

   

111

   

2

   

113

 

Income before equity in earnings of unconsolidated subsidiaries

202

   

5

   

   

5

   

207

   

4

   

211

 

Equity in earnings of unconsolidated subsidiaries, net of tax

   

   

   

   

   

   

 

Net income

$

202

   

$

5

   

$

   

$

5

   

$

207

   

$

4

   

$

211

 
                           

Diluted earnings per common share

$

1.05

   

$

0.03

   

$

   

$

0.03

   

$

1.08

   

$

0.02

   

$

1.10

 

Effective tax rate

34.4

%

             

34.9

%

       

Operating margin

20.7

%

             

21.3

%

       

A-7

 

RECONCILIATION OF NET INCOME TO CORE EARNINGS - (Continued)

(Unaudited, in millions, except per share data)

   
   
 

For the Three Months Ended September 30, 2014

 

Reported

 

Mark to Market

 

Separation Related

 

Total Adjustments

 

Core

Net sales

$

1,583

   

$

   

$

   

$

   

$

1,583

 

Cost of sales

658

   

4

   

   

4

   

662

 

Gross profit

925

   

(4)

   

   

(4)

   

921

 

Selling, general and administrative expenses

581

   

(6)

   

   

(6)

   

575

 

Depreciation and amortization

28

   

   

   

   

28

 

Other operating expense (income), net

   

   

   

   

 

Income from operations

316

   

2

   

   

2

   

318

 

Interest expense

27

   

   

   

   

27

 

Interest income

   

   

   

   

 

Other expense, net

4

   

   

(4)

   

(4)

   

 

Income before provision for income taxes and equity in earnings of unconsolidated subsidiaries

285

   

2

   

4

   

6

   

291

 

Provision for income taxes

97

   

1

   

2

   

3

   

100

 

Income before equity in earnings of unconsolidated subsidiaries

188

   

1

   

2

   

3

   

191

 

Equity in earnings of unconsolidated subsidiaries, net of tax

   

   

   

   

 

Net income

$

188

   

$

1

   

$

2

   

$

3

   

$

191

 
                   

Diluted earnings per common share

$

0.96

   

$

0.01

   

$

0.01

   

$

0.02

   

$

0.98

 

Effective tax rate

34.0

%

             

34.4

%

Operating margin

20.0

%

             

20.1

%

 

A-8

 

RECONCILIATION OF NET INCOME TO CORE EARNINGS - (Continued)

(Unaudited, in millions, except per share data)

 
 

For the Nine Months Ended September 30, 2015

 

Reported

 

Mark to Market

 

Litigation Provision

 

Total Adjustments

 

Core

 

Impact of foreign currency translation

 

Currency Neutral Core

Net sales

$

4,736

   

$

   

$

   

$

   

$

4,736

   

$

86

   

$

4,822

 

Cost of sales

1,949

   

(11)

   

   

(11)

   

1,938

   

38

   

1,976

 

Gross profit

2,787

   

11

   

   

11

   

2,798

   

48

   

2,846

 

Selling, general and administrative expenses

1,730

   

6

   

(2)

   

4

   

1,734

   

29

   

1,763

 

Depreciation and amortization

79

   

   

   

   

79

   

1

   

80

 

Other operating expense (income), net

2

   

   

   

   

2

   

   

2

 

Income from operations

976

   

5

   

2

   

7

   

983

   

18

   

1,001

 

Interest expense

83

   

   

   

   

83

   

1

   

84

 

Interest income

(1)

   

   

   

   

(1)

   

   

(1)

 

Other expense, net

1

   

   

   

   

1

   

4

   

5

 

Income before provision for income taxes and equity in earnings of unconsolidated subsidiaries

893

   

5

   

2

   

7

   

900

   

13

   

913

 

Provision for income taxes

314

   

2

   

1

   

3

   

317

   

4

   

321

 

Income before equity in earnings of unconsolidated subsidiaries

579

   

3

   

1

   

4

   

583

   

9

   

592

 

Equity in earnings of unconsolidated subsidiaries, net of tax

   

   

   

   

   

   

 

Net income

$

579

   

$

3

   

$

1

   

$

4

   

$

583

   

$

9

   

$

592

 
                           

Diluted earnings per common share

$

3.00

   

$

0.01

   

$

0.01

   

0.02

   

$

3.02

   

$

0.05

   

$

3.07

 

Effective tax rate

35.2

%

             

35.2

%

       

Operating margin

20.6

%

             

20.8

%

       
 

A-9

 

RECONCILIATION OF NET INCOME TO CORE EARNINGS - (Continued)

(Unaudited, in millions, except per share data)

 
 

For the Nine Months Ended September 30, 2014

 

Reported

 

Mark to Market

 

Separation Related

 

Total Adjustments

 

Core

Net sales

$

4,612

   

$

   

$

   

$

   

$

4,612

 

Cost of sales

1,877

   

15

   

   

15

   

1,892

 

Gross profit

2,735

   

(15)

   

   

(15)

   

2,720

 

Selling, general and administrative expenses

1,727

   

(5)

   

   

(5)

   

1,722

 

Depreciation and amortization

86

   

   

   

   

86

 

Other operating expense (income), net

(2)

   

   

   

   

(2)

 

Income from operations

924

   

(10)

   

   

(10)

   

914

 

Interest expense

80

   

   

   

   

80

 

Interest income

(1)

   

   

   

   

(1)

 

Other expense, net

2

   

   

(4)

   

(4)

   

(2)

 

Income before provision for income taxes and equity in earnings of unconsolidated subsidiaries

843

   

(10)

   

4

   

(6)

   

837

 

Provision for income taxes

291

   

(3)

   

2

   

(1)

   

290

 

Income before equity in earnings of unconsolidated subsidiaries

552

   

(7)

   

2

   

(5)

   

547

 

Equity in earnings of unconsolidated subsidiaries, net of tax

1

   

   

   

   

1

 

Net income

$

553

   

$

(7)

   

$

2

   

$

(5)

   

548

 
                   

Diluted earnings per common share

$

2.79

   

$

(0.03)

   

$

0.01

   

$

(0.02)

   

$

2.77

 

Effective tax rate

34.5

%

             

34.6

%

Operating margin

20.0

%

             

19.8

%

 

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.

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