Dr Pepper Snapple Group Reports Second Quarter 2013 Results
Dr Pepper Snapple Group Reports Second Quarter 2013 Results
Reported EPS were $.76, down 8% for the quarter. Core EPS were $.84, down 1% for the quarter.
Year-to-date, the company returned $274 million to shareholders.
Net sales decreased 1% for the quarter. Year-to-date, net sales were flat.
Company reaffirms full year 2013 Core EPS in the $3.04 to $3.12 range.
PLANO, Texas--(BUSINESS WIRE)-- Dr Pepper Snapple Group, Inc. (NYS: DPS) reported second quarter 2013 EPS of $0.76 compared to $0.83 in the prior year period. Excluding unrealized commodity mark-to-market losses and certain items affecting comparability in both years, Core EPS were $0.84 compared to $0.85 in the prior year period. Year-to-date, the company reported earnings of $1.27 per diluted share compared to $1.31 per share in the prior year period. Excluding certain items affecting comparability and unrealized commodity mark-to-market losses in both years, Core EPS were $1.37 compared to $1.31 in the prior year period.
For the quarter, reported net sales decreased 1%. Sales volume declines of 4% were partially offset by 2 percentage points of favorable pricing and mix. Foreign currency increased net sales by just under 1 percentage point in the quarter. Reported segment operating profit (SOP) decreased 3%, or $11 million, as the net sales decline, commodity cost increases principally related to apples, a $9 million increase in marketing and a $4 million pre-spin related unclaimed property audit charge were partially offset by a year-over-year LIFO benefit of $11 million, ongoing productivity improvements and the favorable comparison associated with an $8 million depreciation adjustment in the prior year.
Reported income from operations for the quarter was $285 million, including $7 million of unrealized commodity mark-to-market losses. Reported income from operations was $300 million in the prior year period, including $6 million of unrealized commodity mark-to-market losses.
Year-to-date, reported net sales were flat and reported income from operations was $482 million, including $14 million of unrealized commodity mark-to-market losses. Reported income from operations was $492 million in the prior year period.
DPS President and CEO Larry Young said, "I am pleased with the perseverance of our people as they continued to execute our strategy amid a very challenging environment. During the quarter, our business was negatively impacted by unseasonably cold and wet weather, a cautious consumer and continued CSD category headwinds."
Young added, "Against this backdrop, we continued to gain both volume and dollar share in the CSD category and our TEN platform is performing in line with our expectations. Changing consumer behavior takes time, and we remain committed to giving consumers a reason to come back to the CSD category. With strong innovation and execution plans in place, I am encouraged about our opportunities for the remainder of 2013."
|EPS reconciliation||Second Quarter||Year-to-Date|
Unrealized commodity mark-to-market net loss
|Items affecting comparability|
|- Separation related||0.06||-||0.06||-|
|- Foreign deferred tax benefit||-||(0.02||)||-||(0.02||)|
- Depreciation adjustment on capital lease
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 2013 results|
|As Reported||Currency Neutral|
|Second Quarter||YTD||Second Quarter||YTD|
BCS - bottler case sales
For the quarter, BCS volume declined 3% with carbonated soft drinks (CSDs) declining 3% and non-carbonated beverages (NCBs) declining 2%.
In CSDs, Dr Pepper volume decreased 4%, as the CSD category continued to face significant headwinds. Our Core 4 brands declined 1% driven primarily by a high-single digit decrease in Sunkist soda and a mid-single digit decrease in 7UP, partially offset by a mid-single digit increase in Canada Dry. Crush and Sun Drop both experienced double-digit declines, and Squirt declined by a mid-single digit. These declines were partially offset by a mid-single digit increase in Peñafiel. Fountain foodservice volume declined 2%, cycling 3% volume growth in the prior year period.
In NCBs, Hawaiian Punch volume declined 7%. This decline was partially offset by a 4% increase in Snapple and a 2% increase in Mott's.
By geography, U.S. and Canada volume declined 4%, and Mexico and the Caribbean volume increased 2%.
For the quarter, sales volume decreased 4%. Year-to-date, sales volumes decreased 3%.
|2013 Segment results (Percent Change)||As Reported|
|Sales Volume||Net Sales|
|Sales Volume||Net Sales|
|Latin America Beverages||2||12||20||2||11||22|
|2013 Segment results (Percent Change)||Currency Neutral|
|Sales Volume||Net Sales|
|Sales Volume||Net Sales|
|Latin America Beverages||2||5||-||2||6||-|
Net sales for the quarter increased 2% as concentrate price increases taken earlier in the year, favorable mix and lower discounts were partially offset by a 5% volume decline. SOP decreased 4% on increased marketing investments of $11 million and a $2 million unclaimed property audit charge, which offset the contribution from net sales growth.
Net sales for the quarter decreased 2% as a 5% decline in sales volumes was partially offset by favorable pricing and mix. SOP decreased 3% as the sales volume decline and cost increases in commodities, principally related to apples, were partially offset by a year-over-year LIFO inventory benefit of $11 million, price increases and the favorable comparison associated with an $8 million depreciation adjustment in the prior year.
Latin America Beverages
Net sales for the quarter increased 5% reflecting favorable product mix and a 2% increase in sales volumes. SOP was flat as net sales growth and ongoing productivity improvements were offset by increases in commodities, logistics and other operating costs. SOP was further reduced by an increase in manufacturing costs, primarily driven by one-time severance expenses.
Corporate and other items
For the quarter, corporate costs totaled $81 million, including a $7 million unrealized commodity mark-to-market loss and a $2 million charge for the accelerated recognition of certain pension costs. Corporate costs in the prior year period were $77 million, including a $6 million unrealized commodity mark-to-market loss.
Net interest expense was flat compared to the prior year period.
For the quarter, the reported effective tax rate was 48.0%, including the impact of a non-cash Canadian tax law change that increased our effective tax rate by 12.3%. The effective tax rate in the prior year period was 34.3%, including a $4 million Canadian deferred tax benefit.
Year-to-date, the company generated $276 million of cash from operating activities. Capital spending totaled $61 million compared to $89 million in the prior year period. The company returned $274 million to shareholders in the form of stock repurchases ($126 million) and dividends ($148 million).
2013 full year guidance
The company now expects full year reported net sales growth of about 2% 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 and certain other items excluded from core results.
Brand investments associated with the launch of our TEN platform are expected to exceed $30 million.
With greater visibility to apple crops and the overall commodity basket, packaging and ingredient costs are now expected to increase COGS by about 1.5%, on a constant volume/mix basis. The company also expects to record a full year LIFO inventory benefit of approximately $30 million.
The company expects its core tax rate to be about 37%.
The company now expects capital spending to be approximately 3% of net sales.
Bottler case sales (BCS) volume: Sales of finished beverages, in equivalent 288 fluid ounce cases, sold by the company and its bottling partners to retailers and independent distributors and excludes contract manufacturing volume. Volume for products sold by the company and its bottling partners is reported on a monthly basis, with the second quarter comprising April, May and June.
Sales volume: Sales of concentrates and finished beverages, in equivalent 288 fluid ounce cases, shipped by the company to its bottlers, retailers and independent distributors and includes contract manufacturing volume.
Pricing refers to the impact of list price changes.
Unrealized mark-to-market: We recognize the change in the fair value of open commodity derivative positions between periods in corporate unallocated expenses, as these instruments do not qualify for hedge accounting treatment. As the underlying commodity is delivered, the realized gains and losses are subsequently reflected in the segment results.
EPS represents diluted earnings per share.
Core tax rate is defined as the effective tax rate on core earnings.
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.
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, 2012, 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.
At 10 a.m. (CDT) today, the company will host a conference call with investors to discuss second quarter results 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 (NYS: DPS) is a leading producer of flavored beverages in North America and the Caribbean. Our success is fueled by more than 50 brands that are synonymous with refreshment, fun and flavor. We have 6 of the top 10 non-cola soft drinks, and 13 of our 14 leading brands are No. 1 or No. 2 in their flavor categories. In addition to our flagship Dr Pepper and Snapple brands, our portfolio includes 7UP, A&W, Canada Dry, Clamato, Crush, Hawaiian Punch, Mott's, Mr & Mrs T mixers, Peñafiel, Rose's, Schweppes, Squirt and Sunkist soda. To learn more about our iconic brands and Plano, Texas-based company, please visit www.DrPepperSnapple.com. For our latest news and updates, follow us at www.Facebook.com/DrPepperSnapple or www.Twitter.com/DrPepperSnapple.
|DR PEPPER SNAPPLE GROUP, INC.|
|CONDENSED CONSOLIDATED STATEMENTS OF INCOME|
|For the Three and Six Months Ended June 30, 2013 and 2012|
|(Unaudited, in millions except per share data)|
|For the||For the|
|Three Months Ended||Six Months Ended|
|June 30,||June 30,|
|Cost of sales||676||685||1,266||1,269|
|Selling, general and administrative expenses||619||599||1,182||1,152|
|Depreciation and amortization||29||35||58||66|
|Other operating expense, net||2||2||3||4|
|Income from operations||285||300||482||492|
|Other income, net||(41||)||(1||)||(44||)||(4||)|
|Income before provision for income taxes and equity in earnings of unconsolidated subsidiaries||296||271||462||434|
|Provision for income taxes||142||93||202||154|
|Income before equity in earnings of unconsolidated subsidiaries||154||178||260||280|
|Equity in earnings of unconsolidated subsidiaries, net of tax||1||—||1||—|