01—Abstract
Summary
Summary of the 10-K filed February 21, 2013. Cited figures are marked; the original filing is the authoritative source.
Dr Pepper Snapple Group, Inc. is a leading integrated brand owner, manufacturer and distributor of non-alcoholic beverages in the U.S., Canada and Mexico, with a portfolio of flavored CSDs and NCBs.
In 2012 net sales were $5,995 milliona, up from $5,903 million in 2011, with 89% of net sales from the U.S. Net income rose to $629 million from $606 million, and diluted EPS was $2.96 versus $2.74. Income from operations increased to $1,092 million from $1,024 million, with gross margin of 58.3% compared with 57.9% a year earlier. The company operates three segments: Beverage Concentrates (net sales $1,221 million), Packaged Beverages ($4,358 million) and Latin America Beverages ($416 million).
Volume (BCS) decreased 1% for the year, with NCB volume down 5% while CSD volume was flat. Cash provided by operating activities fell to $458 millionb from $760 million, mainly due to $531 million of tax payments tied to the PepsiCo and Coca-Cola licensing agreements. Cash and cash equivalents ended the year at $366 million, and total indebtedness was $2,804 million.
Capital returns remained significant: the company repurchased 9.5 million shares for about $400 millionc and declared dividends of $1.36 per share, up from $1.21. Management also noted that a $250 million 6.12% note due May 2013 is expected to be refinanced in the second quarter of 2013, and that the Board declared a $0.38 quarterly dividend in the first quarter of 2013.
02—Key points
Key Highlights
- Net sales of $5,995 million, up $92 million, or 2%, from 2011, driven by price increases and favorable mix.
- Net income of $629 million and diluted EPS of $2.96, compared with $606 million and $2.74 in 2011.
- Gross margin improved to 58.3% from 57.9%, with income from operations up 7% to $1,092 million.
- Operating cash flow declined to $458 million from $760 million, primarily due to $531 million of tax payments related to the PepsiCo and Coca-Cola licensing agreements.
- Total indebtedness of $2,804 million; S&P affirmed the BBB rating with a positive outlook, and Moody's rating was Baa1 with a stable outlook.
- Repurchased 9.5 million shares for about $400 million in 2012, with $972 million remaining under the $3 billion Board authorization.
- Dividends declared rose to $1.36 per share from $1.21, and a $0.38 per share dividend was declared for the first quarter of 2013.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2012, Keurig Dr Pepper kept $0.10.
- Revenue$6.00B100.0%
- Cost of revenue−$2.50B41.7%
- Gross profit$3.50B58.3%
- Operating costs−$2.40B40.1%
- Operating income$1.09B18.2%
- Interest, other & tax−$463.0M7.7%
- Net income$629.0M10.5%
Where FY2012 revenue went
$6.00B- Cost of revenue: $2.50B, 42% of revenue
- SG&A: $2.27B, 38% of revenue
- Net income: $629.0M, 10% of revenue
- R&D: $21.0M, 0.4% of revenue
- Other operating costs: $114.0M, 1.9% of revenue
- Interest, other & tax: $463.0M, 7.7% of revenue
Kept 10% as net incomeNet income $629.0M · 10%R&D $21.0M · 0.4%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2012filed February 21, 2013Financial Statements
FY2012 against FY2011
| Line item | FY2012FY2011 | Change |
|---|---|---|
| Revenue | $6.00B$5.90B | +1.6% |
| Cost of Revenue | $2.50B$2.48B | +0.6% |
| Gross Profit | $3.50B$3.42B | +2.3% |
| R&D Expenses | $21.00M$15.00M | +40.0% |
| SG&A Expenses | $2.27B$2.26B | +0.5% |
| Operating Income | $1.09B$1.02B | +6.6% |
| Interest Expense | $125.00M$114.00M | +9.6% |
| Net Income | $629.00M$606.00M | +3.8% |
| EPS (Basic) | $2.99$2.77 | +7.9% |
| EPS (Diluted) | $2.96$2.74 | +8.0% |
| Shares Outstanding (Basic) | 210.60M218.70M | −3.7% |
| Shares Outstanding (Diluted) | 212.30M221.20M | −4.0% |
05—Questions
Frequently Asked Questions
What drove the increase in net sales and profitability in 2012?
Net sales increased $92 million, or about 2%, due to price increases and favorable mix, partly offset by lower sales volumes and unfavorable foreign currency. Net income rose $23 million, or 4%, to $629 million, and gross profit increased $77 million to $3,495 million.
Why did operating cash flow decline in 2012?
Net cash provided by operating activities fell $302 million to $458 million, primarily because of $531 million in tax payments resulting from the licensing agreements with PepsiCo and Coca-Cola. Favorable working capital changes partially offset this impact.
How is the company returning cash to shareholders?
In 2012 the company repurchased shares for $400 million and paid $284 million in dividends. Dividends declared per share increased to $1.36 from $1.21, and the Board declared a $0.38 per share dividend for the first quarter of 2013.
What debt maturities and financing plans does the company have?
The company repaid $450 million of 2.35% notes at maturity in December 2012 and issued $500 million of senior notes due 2020 and 2022. It intends to refinance $250 million of 6.12% notes due May 1, 2013, through commercial paper or senior notes during the second quarter of 2013. A $500 million revolving credit facility remained undrawn at year-end, with $493 million available.
What are the main risks and concentrations highlighted in the filing?
Key concentrations include WalMart, which represented approximately 13% of consolidated net sales, and PepsiCo and Coca-Cola, which together made up a large share of Beverage Concentrates segment sales. The filing also flags competition from Coca-Cola and PepsiCo, which hold about 61% of the U.S. LRB market by volume, along with raw material and commodity cost volatility and dependence on third-party bottlers.
06—Continue