01—Abstract
Summary
Summary of the 10-K filed February 22, 2012. Cited figures are marked; the original filing is the authoritative source.
Dr Pepper Snapple Group, Inc. (now Keurig Dr Pepper Inc.) reported net sales of $5.90 billiona for 2011, up $267 million, or 5%, from 2010, and net income of $606 million, up $78 million, or 15%.
Diluted earnings per share were $2.74b, versus $2.17 in 2010. The company describes itself as a leading integrated brand owner, manufacturer and distributor of non-alcoholic beverages in the U.S., Canada and Mexico, operating through three segments: Beverage Concentrates, Packaged Beverages and Latin America Beverages. Net sales were 89% U.S., 4% Canada and 7% Mexico and the Caribbean.
Cash flow from operations fell to $760 millionc from $2,535 million in 2010, mainly because 2010 included one-time nonrefundable cash receipts of $900 million from PepsiCo and $715 million from Coca-Cola, which were recorded as deferred revenue. The company also cited about $531 million of tax payments due primarily in the first quarter of 2012 as a result of those agreements. Total indebtedness was $2,712 million at December 31, 2011, and debt ratings were Baa1 (Moody's) and BBB (S&P), both stable.
Capital returns were significant: the company repurchased about 14 million shares for roughly $522 milliond in 2011, paid dividends of $1.21 per share, and the Board raised total share repurchase authorization to $3 billion in November 2011. The filing also reports no goodwill or intangible impairment at year-end 2011, and that Wal-Mart represented approximately 14% of consolidated net sales.
02—Key points
Key Highlights
- Net sales rose 5% to $5.90 billion in 2011, and net income rose 15% to $606 million.
- Diluted EPS was $2.74 in 2011, compared with $2.17 in 2010.
- Operating cash flow was $760 million, down from $2,535 million in 2010, which included one-time PepsiCo ($900 million) and Coca-Cola ($715 million) deferred-revenue receipts.
- Approximately $531 million of income tax payments are due primarily in Q1 2012 as a result of the PepsiCo and Coca-Cola agreements.
- The company repurchased about 14 million shares for roughly $522 million in 2011 and declared dividends of $1.21 per share, up from $0.90.
- Total aggregate share repurchase authorization was raised to $3 billion after a $1 billion increase on November 17, 2011.
- Total indebtedness was $2,712 million at December 31, 2011; the company had 21.1% of the U.S. CSD market by retail sales according to Nielsen.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2011, Keurig Dr Pepper kept $0.10.
- Revenue$5.90B100.0%
- Cost of revenue−$2.48B42.1%
- Gross profit$3.42B57.9%
- Operating costs−$2.39B40.6%
- Operating income$1.02B17.3%
- Interest, other & tax−$418.0M7.1%
- Net income$606.0M10.3%
Where FY2011 revenue went
$5.90B- Cost of revenue: $2.48B, 42% of revenue
- SG&A: $2.26B, 38% of revenue
- Net income: $606.0M, 10% of revenue
- R&D: $15.0M, 0.3% of revenue
- Other operating costs: $122.0M, 2.1% of revenue
- Interest, other & tax: $418.0M, 7.1% of revenue
Kept 10% as net incomeNet income $606.0M · 10%R&D $15.0M · 0.3%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2011filed February 22, 2012Financial Statements
FY2011 against FY2010
| Line item | FY2011FY2010 | Change |
|---|---|---|
| Revenue | $5.90B$5.64B | +4.7% |
| Cost of Revenue | $2.48B$2.24B | +10.8% |
| Gross Profit | $3.42B$3.39B | +0.7% |
| R&D Expenses | $15.00M$16.00M | −6.2% |
| SG&A Expenses | $2.26B$2.23B | +1.1% |
| Operating Income | $1.02B$1.02B | −0.1% |
| Interest Expense | $114.00M$128.00M | −10.9% |
| Net Income | $606.00M$528.00M | +14.8% |
| EPS (Basic) | $2.77$2.19 | +26.5% |
| EPS (Diluted) | $2.74$2.17 | +26.3% |
| Shares Outstanding (Basic) | 218.70M240.40M | −9.0% |
| Shares Outstanding (Diluted) | 221.20M242.60M | −8.8% |
05—Questions
Frequently Asked Questions
Why did operating cash flow fall so sharply in 2011?
Operating cash flow was $760 million in 2011 versus $2,535 million in 2010. The filing attributes the decline primarily to the receipt in 2010 of one-time nonrefundable payments of $900 million from PepsiCo and $715 million from Coca-Cola, which were recorded as deferred revenue. The 2011 figure was also reduced by $54 million of income tax payments tied to those licensing agreements.
What is the company's capital return policy and how much did it return in 2011?
The company says it expects to return excess cash flow to stockholders through share repurchases or dividends, subject to Board determination. In 2011 it repurchased about 14 million shares for roughly $522 million and paid dividends of $251 million in cash. Dividends declared were $1.21 per share in 2011, compared with $0.90 in 2010.
How concentrated is the company's customer base?
Wal-Mart Stores, Inc. was the largest customer, representing approximately 14% of consolidated net sales in 2011, and approximately 18% of Packaged Beverages segment net sales. PepsiCo and Coca-Cola were the two largest customers of the Beverage Concentrates segment, at approximately 29% and 20% of that segment's net sales, respectively.
What are the main debt-related considerations for investors?
Total indebtedness was $2,712 million at December 31, 2011. Senior unsecured notes issued in 2011 included $500 million of 2.90% notes due 2016 and $500 million of 2.60% and 3.20% notes due 2019 and 2021. The company also had $450 million of 2.35% notes due December 2012 and a $500 million revolving credit facility, with no borrowings outstanding at year-end. Debt ratings were Baa1 and BBB, both with stable outlooks.
06—Continue