01—Abstract
Summary
Summary of the 10-K filed March 1, 2010. Cited figures are marked; the original filing is the authoritative source.
Dr Pepper Snapple Group, Inc. reported net sales of $5.53 billiona for 2009, down $179 million (3%) from $5.71 billion in 2008, primarily due to the termination of the Hansen Natural Corporation distribution agreement and unfavorable foreign currency rates in Mexico.
Net income rebounded to $555 millionb, or $2.17 per diluted share, compared with a net loss of $312 million (a $1.23 per-share loss) in 2008, which had included $1.04 billion of non-cash impairment charges. Income from operations was $1,085 million versus a loss of $168 million the prior year. Cash provided by operating activities rose to $865 million, and the company ended 2009 with $280 million of cash and total indebtedness of $2,971 million.
The company's three segments are Beverage Concentrates (net sales of about $1.06 billionc, segment operating profit of $683 million), Packaged Beverages (net sales of $4.11 billion, operating profit of $573 million) and Latin America Beverages (net sales of $357 million, operating profit of $54 million). The company describes itself as the #1 flavored CSD company in the United States, with a 21.0% share of the U.S. CSD market in 2009 according to The Nielsen Company. Management declared its first cash dividend of $0.15 per share in the fourth quarter of 2009, followed by a second $0.15 dividend in February 2010, and the Board authorized up to $1 billion in share repurchases.
A significant subsequent event was the February 26, 2010 completion of licensing certain brands to PepsiCo after PepsiCo's acquisitions of The Pepsi Bottling Group and PepsiAmericas. The company received a one-time cash payment of $900 milliond, which will be recorded as deferred revenue and recognized as net sales over an estimated 25-year customer relationship life. The company used part of the proceeds to reduce total debt obligations to $2.55 billion.
02—Key points
Key Highlights
- Net sales of $5,531 million in 2009, down $179 million or 3% from 2008, due largely to the Hansen distribution agreement termination and unfavorable foreign currency in Mexico.
- Net income of $555 million ($2.17 diluted EPS) versus a 2008 net loss of $312 million, which included $1,039 million of non-cash impairment charges; no impairment was recorded in 2009.
- Gross margin of 59.6% in 2009 versus 54.6% in 2008, with gross profit up $177 million on lower commodity costs and price increases.
- Operating cash flow of $865 million in 2009, up from $709 million in 2008.
- Agreement with PepsiCo delivered a one-time $900 million cash payment on February 26, 2010, used in part to reduce total debt to $2.55 billion.
- Board declared first quarterly dividend of $0.15 per share in late 2009 and a second $0.15 dividend in February 2010; share repurchase authorization increased to $1 billion.
- Total indebtedness of $2,971 million at year-end 2009, with the Term Loan A fully repaid in December 2009 and $850 million of senior notes issued.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2009, Keurig Dr Pepper kept $0.10.
- Revenue$5.53B100.0%
- Cost of revenue−$2.23B40.4%
- Gross profit$3.30B59.6%
- Operating costs−$2.21B40.0%
- Operating income$1.08B19.6%
- Interest, other & tax−$530.0M9.6%
- Net income$555.0M10.0%
Where FY2009 revenue went
$5.53B- Cost of revenue: $2.23B, 40% of revenue
- SG&A: $2.13B, 39% of revenue
- Net income: $555.0M, 10% of revenue
- R&D: $15.0M, 0.3% of revenue
- Other operating costs: $62.0M, 1.1% of revenue
- Interest, other & tax: $530.0M, 9.6% of revenue
Kept 10% as net incomeNet income $555.0M · 10%R&D $15.0M · 0.3%Other operating costs $62.0M · 1.1%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2009filed March 1, 2010Financial Statements
FY2009 against FY2008
| Line item | FY2009FY2008 | Change |
|---|---|---|
| Revenue | $5.53B$5.71B | −3.1% |
| Cost of Revenue | $2.23B$2.59B | −13.7% |
| Gross Profit | $3.30B$3.12B | +5.7% |
| R&D Expenses | $15.00M$17.00M | −11.8% |
| SG&A Expenses | $2.13B$2.08B | +2.9% |
| Operating Income | $1.08B-$168.00M | +745.8% |
| Interest Expense | $243.00M$257.00M | −5.4% |
| Net Income | $555.00M-$312.00M | +277.9% |
| EPS (Basic) | $2.18$-1.23 | +277.2% |
| EPS (Diluted) | $2.17$-1.23 | +276.4% |
| Shares Outstanding (Basic) | 254.20M254.00M | +0.1% |
| Shares Outstanding (Diluted) | 255.20M254.00M | +0.5% |
05—Questions
Frequently Asked Questions
What drove the swing from a net loss in 2008 to net income in 2009?
The filing attributes the increase of $867 million, or 278%, in net income primarily to the absence of impairment of goodwill and intangible assets in 2009, which had totaled $1,039 million in 2008, along with favorable commodity costs in the current year.
How did the Hansen Natural Corporation termination affect results?
The termination of the Hansen distribution agreement reduced 2009 net sales by $218 million and reduced Packaged Beverages SOP by approximately $40 million. The filing also notes a one-time gain of $62 million related to the termination of distribution agreements.
What is the significance of the PepsiCo agreement?
On February 26, 2010, the company completed the licensing of Dr Pepper, Crush, Schweppes and other brands to PepsiCo following PepsiCo's acquisitions of PBG and PepsiAmericas, receiving a one-time $900 million cash payment. The payment will be recognized as net sales ratably over an estimated 25-year customer relationship, and the initial agreement term is 20 years with automatic 20-year renewals subject to performance conditions.
How much debt does the company carry and how is it being managed?
Total indebtedness was $2,971 million as of December 31, 2009. The company issued $850 million of 1.70% and 2.35% senior notes in December 2009 and used proceeds to repay the Term Loan A, and it made $405 million of optional revolver repayments after year-end. Following the PepsiCo payment, total debt was reduced to $2.55 billion.
What is the company's capital return policy?
The company declared its first cash dividend of $0.15 per share in the fourth quarter of 2009 and a second $0.15 dividend in February 2010, but the filing states that the Board has not adopted a formal dividend policy. The Board authorized share repurchases of up to $200 million in November 2009 and an additional $800 million in February 2010, for a total of $1 billion.
06—Continue