Attached files
| file | filename |
|---|---|
| 8-K - 8-K - Keurig Dr Pepper Inc. | form8kq42013pressrelease.htm |
 | Exhibit 99.1 | |||
FOR IMMEDIATE RELEASE | Contacts: | Media Relations Chris Barnes (972) 673-5539 | ||
Investor Relations Carolyn Ross, (972) 673-7935 | ||||
DR PEPPER SNAPPLE GROUP REPORTS FOURTH QUARTER AND FULL YEAR 2013 RESULTS
Reported EPS were $.78 for the quarter. Reported EPS were $3.05 for the year, up 3%.
Core EPS were $.97 for the quarter. Core EPS were $3.20 for the year, up 10%.
Net sales decreased 1% for the quarter and were flat for the full year.
Year-to-date, the company returned $702 million to shareholders.
Plano, TX, Feb. 12, 2014 - Dr Pepper Snapple Group, Inc. (NYSE: DPS) reported fourth quarter 2013 EPS of $0.78 compared to $0.81 in the prior year period. Core EPS were $0.97, up 18.3% compared to $0.82 in the prior year.
For the quarter, reported net sales decreased 1%. Sales volume declines of 4% and less favorable trade adjustments were partially offset by favorable mix and price. Reported segment operating profit (SOP) decreased 7%, or $27 million, as a $56 million non-cash charge due to our intention to withdraw from a multi-employer pension plan and the volume decline were partially offset by a year-over-year LIFO benefit of $25 million and favorable price and mix. Reported income from operations for the quarter was $264 million, including $3 million of unrealized commodity mark-to-market losses. Reported income from operations was $292 million in the prior year period, including $1 million of unrealized commodity mark-to-market losses. Core income from operations was $323 million, up 10.2% compared to the prior year period.
For the year, reported net sales were flat. Reported income from operations was $1,046 million, compared to $1,092 million in the prior year period. Core income from operations was $1,123 million, up 3.7% compared to the prior year period. For the year, the company reported earnings of $3.05 per diluted share compared to $2.96 per diluted share in the prior year period. Excluding a $16 million unrealized commodity mark-to-market loss in the current year and a $17 million unrealized commodity mark-to-market gain in the prior year period, and certain items affecting comparability in both years, Core EPS were $3.20 compared to $2.92 in the prior year period.
DPS President and CEO Larry Young said, “I am proud of the team’s ability to remain focused and execute against our strategy during a challenging year. We continued to gain distribution and availability across our key brands and packages and grew volume share and held dollar share in the highly competitive CSD category.”
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Young continued, “Our Core 4 and RC TEN platform is bringing lapsed consumer occasions back to the CSD category, and Rapid Continuous Improvement (RCI) continues to provide meaningful improvements while strengthening organizational capabilities. As we move into 2014, our teams will continue to build the TEN platform with programming focused on driving awareness and trial, provide consumers with balanced beverage options and execute with excellence in the marketplace.”
EPS reconciliation | Fourth Quarter | Full Year | ||||||||||||||||||
2013 | 2012 | Percent Change | 2013 | 2012 | Percent Change | |||||||||||||||
Reported EPS | $ | 0.78 | $ | 0.81 | (4) | $ | 3.05 | $ | 2.96 | 3 | ||||||||||
Unrealized commodity mark-to-market net loss | 0.01 | 0.01 | 0.05 | (0.04 | ) | |||||||||||||||
Items affecting comparability | ||||||||||||||||||||
Separation Related | — | — | (0.07 | ) | — | |||||||||||||||
Litigation Provision | — | — | (0.02 | ) | — | |||||||||||||||
Workforce Reduction Costs | — | — | 0.02 | — | ||||||||||||||||
Multi-employer Pension Plan Withdrawal | 0.18 | — | 0.17 | — | ||||||||||||||||
Foreign Deferred Tax Benefit | — | — | — | (0.02 | ) | |||||||||||||||
Depreciation adjustment on capital lease | — | — | — | 0.02 | ||||||||||||||||
Core EPS | $ | 0.97 | $ | 0.82 | 18 | $ | 3.20 | $ | 2.92 | 10 | ||||||||||
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 | ||||||
(Percent change) | Fourth Quarter | Full Year | Fourth Quarter | Full Year | ||||
BCS Volume | (2) | (2) | (2) | (2) | ||||
Sales Volume | (4) | (3) | (4) | (3) | ||||
Net Sales | (1) | — | (1) | — | ||||
SOP | (7) | — | (7) | — | ||||
BCS - bottler case sales
BCS Volume
For the quarter, BCS volume declined 2% with both carbonated soft drinks (CSDs) and non-carbonated beverages (NCBs) declining 2%.
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In CSDs, the category continued to face significant headwinds. Dr Pepper volume decreased 1%. Our Core 4 brands, which include TEN, declined 4% as a high-single digit decrease in 7UP and mid-single digit declines in Sunkist soda and A&W were partially offset by a mid-single digit increase in Canada Dry. Squirt and RC Cola both declined mid-single digits. Sun Drop declined double-digits while Peñafiel increased double-digits. Fountain foodservice volume increased 2% in the quarter.
In NCBs, Hawaiian Punch volume declined 8%. This decline was partially offset by a 3% increase in Snapple. Mott’s was flat in the quarter.
By geography, U.S. and Canada volume declined 2%, and Mexico and the Caribbean volume increased 4%.
For the year, BCS volume decreased 2% with both carbonated soft drinks (CSDs) and non-carbonated beverages (NCBs) declining 2%.
Dr Pepper volume decreased 2% and our Core 4 brands, which include TEN, declined 1% as mid-single digit declines in 7UP and Sunkist soda and a low-single digit decrease in A&W were partially offset by a mid-single digit increase in Canada Dry. Crush, Squirt and RC Cola all declined mid-single digits while Sun Drop declined double-digits. Peñafiel increased double-digits and Schweppes increased mid-single digits. Fountain foodservice volume was flat for the year.
In NCBs, Hawaiian Punch volume declined 9%. This decline was partially offset by a 2% increase in Snapple and a mid-single digit increase in Mott’s.
By geography, U.S. and Canada volume declined 2%, and Mexico and the Caribbean volume increased 3%.
Sales volume
Sales volume decreased 4% for the quarter and 3% for the year.
2013 Segment results | As Reported | ||||||||||
(Percent Change) | Fourth Quarter | Full Year | |||||||||
Sales | Net | Sales | Net | ||||||||
Volume | Sales | SOP | Volume | Sales | SOP | ||||||
Beverage Concentrates | (6) | (4) | (2) | (4) | 1 | 1 | |||||
Packaged Beverages | (2) | (2) | (18) | (3) | (1) | (3) | |||||
Latin America Beverages | 4 | 8 | 14 | 3 | 11 | 20 | |||||
Total | (4) | (1) | (7) | (3) | — | — | |||||
2013 Segment results | Currency Neutral | ||||||||||
(Percent Change) | Fourth Quarter | Full Year | |||||||||
Sales | Net | Sales | Net | ||||||||
Volume | Sales | SOP | Volume | Sales | SOP | ||||||
Beverage Concentrates | (6) | (3) | (1) | (4) | 1 | 1 | |||||
Packaged Beverages | (2) | (2) | (18) | (3) | (1) | (2) | |||||
Latin America Beverages | 4 | 9 | 14 | 3 | 8 | 5 | |||||
Total | (4) | (1) | (7) | (3) | — | — | |||||
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Beverage Concentrates
Net sales for the quarter decreased 3% as concentrate price increases taken earlier in the year and favorable mix were more than offset by a 6% volume decline and less favorable trade adjustments. SOP decreased 1% as the net sales decline was partially offset by lower marketing investments of $8 million.
Packaged Beverages
Net sales declined 2% for the quarter on a 2% volume decline, which was partially offset by favorable product and package mix. SOP decreased 18% as a $56 million non-cash charge due to our intention to withdraw from a multi-employer pension plan and the volume decline were partially offset by a year-over-year LIFO benefit of $24 million, lower people costs and favorable pricing.
Latin America Beverages
Net sales for the quarter increased 9% reflecting favorable mix and a 4% increase in sales volumes. SOP increased 14% as net sales growth and ongoing productivity improvements were partially offset by increases in people costs, commodity cost increases, higher marketing investments and increases in transportation and other manufacturing costs.
Corporate and other items
For the quarter, corporate costs totaled $73 million, including a $3 million unrealized commodity mark-to-market loss. Corporate costs in the prior year period were $73 million, including a $1 million unrealized commodity mark-to-market loss.
For the year, corporate costs totaled $309 million, including $16 million of unrealized commodity mark-to-market losses. Corporate costs in the prior year period were $261 million, including a $17 million unrealized commodity mark-to-market gain.
Net interest expense decreased $2 million for the quarter compared to the prior year.
For the quarter, the effective tax rate was 34.2%. For the year, the reported effective tax rate was a negative 14.9%, as the completion of an IRS audit decreased our effective tax rate by 50.4%. The effective tax rate in the prior year period was 35.7%.
Cash flow
For the year, the company generated $866 million of cash from operating activities compared to $482 million in the prior year period. The prior year period included tax payments of $531 million related to the PepsiCo and Coca-Cola licensing agreements. Capital spending totaled $179 million compared to $217 million in the prior year period. The company returned $702 million to shareholders in the form of stock repurchases ($400 million) and dividends ($302 million).
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2014 full year guidance
The company expects full year reported net sales to be flat to up 1% and Core EPS to be in the $3.38 to $3.46 range.
Packaging and ingredient costs are expected to decrease COGS by 2%, on a constant volume/mix basis.
The company expects its core tax rate to be approximately 35.5%.
The company expects capital spending to be approximately 3% of net sales.
The company expects to repurchase $375 million to $400 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 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 tax rate is defined as the effective tax rate on core earnings.
Core income from operations is defined as income from operations adjusted for the unrealized mark-to-market impact of commodity derivatives and certain items that are excluded for comparison to prior year periods.
Core operating margin is defined as the core income from operations divided by core net sales.
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
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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.
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 2014. 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.
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DR PEPPER SNAPPLE GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
For the Three and Twelve Months Ended December 31, 2013 and 2012
(Unaudited, in millions, except per share data)
For the | For the | ||||||||||||||
Three Months Ended | Year Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Net sales | $ | 1,463 | $ | 1,484 | $ | 5,997 | $ | 5,995 | |||||||
Cost of sales | 583 | 605 | 2,499 | 2,500 | |||||||||||
Gross profit | 880 | 879 | 3,498 | 3,495 | |||||||||||
Selling, general and administrative expenses | 527 | 555 | 2,272 | 2,268 | |||||||||||
Multi-employer pension plan withdrawal | 56 | — | 56 | — | |||||||||||
Depreciation and amortization | 29 | 29 | 115 | 124 | |||||||||||
Other operating expense, net | 4 | 3 | 9 | 11 | |||||||||||
Income from operations | 264 | 292 | 1,046 | 1,092 | |||||||||||
Interest expense | 29 | 31 | 123 | 125 | |||||||||||
Interest income | (1 | ) | (1 | ) | (2 | ) | (2 | ) | |||||||
Other expense (income), net | (1 | ) | (1 | ) | 383 | (9 | ) | ||||||||
Income before (benefit) provision for income taxes and equity in earnings of unconsolidated subsidiaries | 237 | 263 | 542 | 978 | |||||||||||
(Benefit) provision for income taxes | 81 | 93 | (81 | ) | 349 | ||||||||||
Income before equity in earnings of unconsolidated subsidiaries | 156 | 170 | 623 | 629 | |||||||||||
Equity in earnings of unconsolidated subsidiaries, net of tax | — | — | 1 | — | |||||||||||
Net income | $ | 156 | $ | 170 | $ | 624 | $ | 629 | |||||||
Earnings per common share: | |||||||||||||||
Basic | $ | 0.78 | $ | 0.82 | $ | 3.08 | $ | 2.99 | |||||||
Diluted | 0.78 | 0.81 | 3.05 | 2.96 | |||||||||||
Weighted average common shares outstanding: | |||||||||||||||
Basic | 199.9 | 207.6 | 202.9 | 210.6 | |||||||||||
Diluted | 201.5 | 209.4 | 204.5 | 212.3 | |||||||||||
A- 1
DR PEPPER SNAPPLE GROUP, INC.
CONSOLIDATED BALANCE SHEETS
As of December 31, 2013 and 2012
(Unaudited, in millions, except share and per share data)
December 31, | December 31, | ||||||
2013 | 2012 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 153 | $ | 366 | |||
Accounts receivable: | |||||||
Trade, net | 564 | 552 | |||||
Other | 58 | 50 | |||||
Inventories | 200 | 197 | |||||
Deferred tax assets | 66 | 66 | |||||
Prepaid expenses and other current assets | 78 | 104 | |||||
Total current assets | 1,119 | 1,335 | |||||
Property, plant and equipment, net | 1,173 | 1,202 | |||||
Investments in unconsolidated subsidiaries | 15 | 14 | |||||
Goodwill | 2,988 | 2,983 | |||||
Other intangible assets, net | 2,694 | 2,684 | |||||
Other non-current assets | 127 | 580 | |||||
Non-current deferred tax assets | 85 | 130 | |||||
Total assets | $ | 8,201 | $ | 8,928 | |||
Liabilities and Stockholders' Equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 271 | $ | 283 | |||
Deferred revenue | 65 | 65 | |||||
Short-term borrowings and current portion of long-term obligations | 66 | 250 | |||||
Income taxes payable | 33 | 45 | |||||
Other current liabilities | 595 | 589 | |||||
Total current liabilities | 1,030 | 1,232 | |||||
Long-term obligations | 2,508 | 2,554 | |||||
Non-current deferred tax liabilities | 755 | 630 | |||||
Non-current deferred revenue | 1,318 | 1,386 | |||||
Other non-current liabilities | 313 | 846 | |||||
Total liabilities | 5,924 | 6,648 | |||||
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, 197,979,971 and 205,292,657 shares issued and outstanding for 2013 and 2012, respectively | 2 | 2 | |||||
Additional paid-in capital | 970 | 1,308 | |||||
Retained earnings | 1,393 | 1,080 | |||||
Accumulated other comprehensive loss | (88 | ) | (110 | ) | |||
Total stockholders' equity | 2,277 | 2,280 | |||||
Total liabilities and stockholders' equity | $ | 8,201 | $ | 8,928 | |||
A- 2
DR PEPPER SNAPPLE GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Twelve Months Ended December 31, 2013 and 2012
(Unaudited, in millions)
For the | |||||||
Year Ended | |||||||
December 31, | |||||||
2013 | 2012 | ||||||
Operating activities: | |||||||
Net income | $ | 624 | $ | 629 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation expense | 196 | 203 | |||||
Amortization expense | 38 | 37 | |||||
Amortization of deferred revenue | (65 | ) | (65 | ) | |||
Employee stock-based compensation expense | 37 | 35 | |||||
Deferred income taxes | 138 | 91 | |||||
Other, net | 35 | (18 | ) | ||||
Changes in assets and liabilities, net of effects of acquisition: | |||||||
Trade accounts receivable | (13 | ) | 36 | ||||
Other accounts receivable | (9 | ) | 1 | ||||
Inventories | (3 | ) | 17 | ||||
Other current and non-current assets | 456 | (21 | ) | ||||
Other current and non-current liabilities | (556 | ) | (7 | ) | |||
Trade accounts payable | (6 | ) | 12 | ||||
Income taxes payable | (6 | ) | (468 | ) | |||
Net cash provided by operating activities | 866 | 482 | |||||
Investing activities: | |||||||
Acquisition of business | (10 | ) | — | ||||
Purchase of property, plant and equipment | (179 | ) | (217 | ) | |||
Purchase of intangible assets | (5 | ) | (7 | ) | |||
Proceeds from disposals of property, plant and equipment | 1 | 7 | |||||
Other, net | (2 | ) | — | ||||
Net cash used in investing activities | (195 | ) | (217 | ) | |||
Financing activities: | |||||||
Proceeds from senior unsecured notes | — | 500 | |||||
Repayment of senior unsecured notes | (250 | ) | (450 | ) | |||
Net issuance of commercial paper | 65 | — | |||||
Repurchase of shares of common stock | (400 | ) | (400 | ) | |||
Dividends paid | (302 | ) | (284 | ) | |||
Tax withholdings related to net share settlements of certain stock awards | (13 | ) | — | ||||
Proceeds from stock options exercised | 15 | 22 | |||||
Excess tax benefit on stock-based compensation | 6 | 16 | |||||
Deferred financing charges paid | — | (4 | ) | ||||
Other, net | (1 | ) | (3 | ) | |||
Net cash used in financing activities | (880 | ) | (603 | ) | |||
Cash and cash equivalents — net change from: | |||||||
Operating, investing and financing activities | (209 | ) | (338 | ) | |||
Effect of exchange rate changes on cash and cash equivalents | (4 | ) | 3 | ||||
Cash and cash equivalents at beginning of year | 366 | 701 | |||||
Cash and cash equivalents at end of year | $ | 153 | $ | 366 | |||
A- 3
DR PEPPER SNAPPLE GROUP, INC.
OPERATIONS BY OPERATING SEGMENT
For the Three and Twelve Months Ended December 31, 2013 and 2012
(Unaudited, in millions)
For the Three Months Ended December 31, | For the Twelve Months Ended December 31, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Segment Results – Net sales | |||||||||||||||
Beverage Concentrates | $ | 321 | $ | 333 | $ | 1,229 | $ | 1,221 | |||||||
Packaged Beverages | 1,026 | 1,044 | 4,306 | 4,358 | |||||||||||
Latin America Beverages | 116 | 107 | 462 | 416 | |||||||||||
Net sales | $ | 1,463 | $ | 1,484 | $ | 5,997 | $ | 5,995 | |||||||
For the Three Months Ended December 31, | For the Twelve Months Ended December 31, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Segment Results – SOP | |||||||||||||||
Beverage Concentrates | $ | 218 | $ | 223 | $ | 778 | $ | 774 | |||||||
Packaged Beverages | 107 | 131 | 525 | 539 | |||||||||||
Latin America Beverages | 16 | 14 | 61 | 51 | |||||||||||
Total SOP | 341 | 368 | 1,364 | 1,364 | |||||||||||
Unallocated corporate costs | 73 | 73 | 309 | 261 | |||||||||||
Other operating expense, net | 4 | 3 | 9 | 11 | |||||||||||
Income from operations | 264 | 292 | 1,046 | 1,092 | |||||||||||
Interest expense, net | 28 | 30 | 121 | 123 | |||||||||||
Other expense (income), net | (1 | ) | (1 | ) | 383 | (9 | ) | ||||||||
Income before (benefit) provision for income taxes and equity in earnings of unconsolidated subsidiaries | $ | 237 | $ | 263 | $ | 542 | $ | 978 | |||||||
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 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, 2013 and 2012, 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 three and twelve months ended December 31, 2013 are (i) separation-related charges, primarily the completion of the IRS audit, a separation-related foreign deferred tax charge and the associated impacts under the Tax Indemnity Agreement with Mondelēz, (ii) an adjustment to a previously disclosed legal provision, (iii) restructuring charges and (iv) a non-cash charge related to our intention to withdraw from a multi-employer pension plan. The certain items excluded for the three and 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 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 December 31, 2013 | ||||||||||||
Beverage | Packaged | Latin America | ||||||||||
Percent change | Concentrates | Beverages | Beverages | Total | ||||||||
Reported net sales | (4 | )% | (2 | )% | 8 | % | (1 | )% | ||||
Impact of foreign currency | 1 | % | — | % | 1 | % | — | % | ||||
Net sales, as adjusted to currency neutral | (3 | )% | (2 | )% | 9 | % | (1 | )% | ||||
For the Three Months Ended December 31, 2013 | ||||||||||||
Beverage | Packaged | Latin America | ||||||||||
Percent change | Concentrates | Beverages | Beverages | Total | ||||||||
Reported SOP | (2 | )% | (18 | )% | 14 | % | (7 | )% | ||||
Impact of foreign currency | 1 | % | — | % | — | % | — | % | ||||
SOP, as adjusted to currency neutral | (1 | )% | (18 | )% | 14 | % | (7 | )% | ||||
For the Twelve Months Ended December 31, 2013 | ||||||||||||
Beverage | Packaged | Latin America | ||||||||||
Percent change | Concentrates | Beverages | Beverages | Total | ||||||||
Reported net sales | 1 | % | (1 | )% | 11 | % | — | % | ||||
Impact of foreign currency | — | % | — | % | (3 | )% | — | % | ||||
Net sales, as adjusted to currency neutral | 1 | % | (1 | )% | 8 | % | — | % | ||||
For the Twelve Months Ended December 31, 2013 | ||||||||||||
Beverage | Packaged | Latin America | ||||||||||
Percent change | Concentrates | Beverages | Beverages | Total | ||||||||
Reported SOP | 1 | % | (3 | )% | 20 | % | — | % | ||||
Impact of foreign currency | — | % | 1 | % | (15 | )% | — | % | ||||
SOP, as adjusted to currency neutral | 1 | % | (2 | )% | 5 | % | — | % | ||||
RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW
(Unaudited, in millions)
For the | ||||||||||||
Twelve Months Ended | ||||||||||||
December 31, | ||||||||||||
2013 | 2012 | Change | ||||||||||
Net cash provided by operating activities | $ | 866 | $ | 482 | $ | 384 | ||||||
Purchase of property, plant and equipment | (179 | ) | (217 | ) | ||||||||
Tax payments resulting from the licensing arrangements with PepsiCo and Coca-Cola | — | 531 | ||||||||||
Free Cash Flow | $ | 687 | $ | 796 | $ | (109 | ) | |||||
A- 6
RECONCILIATION OF NET INCOME TO CORE EARNINGS
(Unaudited, in millions, except per share data)
For the Three Months Ended December 31, 2013 | |||||||||||||||||||
Reported | Mark to Market | Multi-employer Pension Plan Withdrawal | Total Adjustments | Core | |||||||||||||||
Net sales | $ | 1,463 | $ | — | $ | — | $ | — | $ | 1,463 | |||||||||
Cost of sales | 583 | (4 | ) | — | (4 | ) | 579 | ||||||||||||
Gross profit | 880 | 4 | — | 4 | 884 | ||||||||||||||
Selling, general and administrative expenses | 527 | 1 | — | 1 | 528 | ||||||||||||||
Multi-employer pension plan withdrawal | 56 | — | (56 | ) | (56 | ) | — | ||||||||||||
Depreciation and amortization | 29 | — | — | — | 29 | ||||||||||||||
Other operating expense, net | 4 | — | — | — | 4 | ||||||||||||||
Income from operations | 264 | 3 | 56 | 59 | 323 | ||||||||||||||
Interest expense | 29 | — | — | — | 29 | ||||||||||||||
Interest income | (1 | ) | — | — | — | (1 | ) | ||||||||||||
Other expense (income), net | (1 | ) | — | — | — | (1 | ) | ||||||||||||
Income before (benefit) provision for income taxes and equity in earnings of unconsolidated subsidiaries | 237 | 3 | 56 | 59 | 296 | ||||||||||||||
(Benefit) provision for income taxes | 81 | 1 | 21 | 22 | 103 | ||||||||||||||
Income before equity in earnings of unconsolidated subsidiaries | 156 | 2 | 35 | 37 | 193 | ||||||||||||||
Equity in earnings of unconsolidated subsidiaries, net of tax | — | — | — | — | — | ||||||||||||||
Net income | $ | 156 | $ | 2 | $ | 35 | $ | 37 | $ | 193 | |||||||||
Earnings per common share: | |||||||||||||||||||
Diluted | $ | 0.78 | $ | 0.01 | $ | 0.18 | $ | 0.19 | $ | 0.97 | |||||||||
Effective tax rate | 34.2 | % | 34.8 | % | |||||||||||||||
Operating margin | 18.0 | % | 22.1 | % | |||||||||||||||
A- 7
RECONCILIATION OF NET INCOME TO CORE EARNINGS - (Continued)
(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 expense (income), net | (1 | ) | — | (1 | ) | ||||||
Income before (benefit) provision for income taxes and equity in earnings of unconsolidated subsidiaries | 263 | 1 | 264 | ||||||||
(Benefit) 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 | |||||
Effective tax rate | 35.4 | % | 35.2 | % | |||||||
Operating margin | 19.7 | % | 19.7 | % | |||||||
A- 8
RECONCILIATION OF NET INCOME TO CORE EARNINGS - (Continued)
(Unaudited, in millions, except per share data)
For the Year Ended December 31, 2013 | |||||||||||||||||||||||||||||||
Reported | Mark to Market | Separation Related | Litigation Provision | Workforce Reduction Costs | Multi-employer Pension Plan Withdrawal | Total Adjustments | Core | ||||||||||||||||||||||||
Net sales | $ | 5,997 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 5,997 | |||||||||||||||
Cost of sales | 2,499 | (15 | ) | — | — | — | — | (15 | ) | 2,484 | |||||||||||||||||||||
Gross profit | 3,498 | 15 | — | — | — | — | 15 | 3,513 | |||||||||||||||||||||||
Selling, general and administrative expenses | 2,272 | (1 | ) | (4 | ) | 6 | (7 | ) | — | (6 | ) | 2,266 | |||||||||||||||||||
Multi-employer pension plan withdrawal | 56 | — | — | — | — | (56 | ) | (56 | ) | — | |||||||||||||||||||||
Depreciation and amortization | 115 | — | — | — | — | — | — | 115 | |||||||||||||||||||||||
Other operating expense, net | 9 | — | — | — | — | — | — | 9 | |||||||||||||||||||||||
Income from operations | 1,046 | 16 | 4 | (6 | ) | 7 | 56 | 77 | 1,123 | ||||||||||||||||||||||
Interest expense | 123 | — | — | — | — | — | — | 123 | |||||||||||||||||||||||
Interest income | (2 | ) | — | — | — | — | — | — | (2 | ) | |||||||||||||||||||||
Other expense (income), net | 383 | — | (392 | ) | — | — | — | (392 | ) | (9 | ) | ||||||||||||||||||||
Income before (benefit) provision for income taxes and equity in earnings of unconsolidated subsidiaries | 542 | 16 | 396 | (6 | ) | 7 | 56 | 469 | 1,011 | ||||||||||||||||||||||
(Benefit) provision for income taxes | (81 | ) | 6 | 411 | (2 | ) | 2 | 21 | 438 | 357 | |||||||||||||||||||||
Income before equity in earnings of unconsolidated subsidiaries | 623 | 10 | (15 | ) | (4 | ) | 5 | 35 | 31 | 654 | |||||||||||||||||||||
Equity in earnings of unconsolidated subsidiaries, net of tax | 1 | — | — | — | — | — | — | 1 | |||||||||||||||||||||||
Net income | $ | 624 | $ | 10 | $ | (15 | ) | $ | (4 | ) | $ | 5 | $ | 35 | $ | 31 | $ | 655 | |||||||||||||
Earnings per common share: | |||||||||||||||||||||||||||||||
Diluted | $ | 3.05 | $ | 0.05 | $ | (0.07 | ) | $ | (0.02 | ) | $ | 0.02 | $ | 0.17 | $ | 0.15 | $ | 3.20 | |||||||||||||
Effective tax rate | (14.9 | )% | 35.3 | % | |||||||||||||||||||||||||||
Operating margin | 17.4 | % | 18.7 | % | |||||||||||||||||||||||||||
A- 9
RECONCILIATION OF NET INCOME TO CORE EARNINGS - (Continued)
(Unaudited, in millions, except per share data)
For the Year 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 expense (income), net | (9 | ) | — | — | — | — | (9 | ) | |||||||||||||||
Income before (benefit) provision for income taxes and equity in earnings of unconsolidated subsidiaries | 978 | (17 | ) | 8 | — | (9 | ) | 969 | |||||||||||||||
(Benefit) 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 | ||||||||
Effective tax rate | 35.7 | % | 36.1 | % | |||||||||||||||||||
Operating margin | 18.2 | % | 18.1 | % | |||||||||||||||||||
A- 10