01—Abstract
Summary
Summary of the 10-K filed February 19, 2015. Cited figures are marked; the original filing is the authoritative source.
Dr Pepper Snapple Group, Inc. reported net sales of $6.121 billiona for 2014, up $124 million, or approximately 2%, from $5.997 billion in 2013, and net income of $703 million, up $79 million, or approximately 13%.
Diluted earnings per share rose to $3.56b from $3.05. Income from operations increased $134 million to $1.180 billion, driven by higher gross profit and the absence of the prior-year $56 million multi-employer pension plan withdrawal charge, partly offset by higher SG&A expenses. Gross margin improved to 59.3% from 58.3%.
The company, a non-alcoholic beverage brand owner, manufacturer and distributor in the U.S., Canada and Mexico, operates three segments: Beverage Concentrates (net sales of $1.228 billionc, SOP of $790 million), Packaged Beverages ($4.361 billion net sales, SOP of $636 million) and Latin America Beverages ($532 million net sales, SOP of $78 million). The filing states a 20.5% share of the U.S. CSD market in 2014 by retail sales and that approximately 84% of volume came from brands ranked #1 or #2 in their category. Cash provided by operating activities rose to $1.022 billion, and the company repurchased $400 million of stock and paid $317 million in dividends.
The company declared aggregate 2014 dividends of $1.64d per share, up from $1.52. In February 2015 the Board authorized an additional $1 billion of share repurchases, and the first-quarter 2015 dividend was $0.48 per share.
Management expects 2015 net sales to be up approximately 1% and commodity costs to be down approximately 1% on a constant volume/mix basis. Total indebtedness was $2.591 billion at year-end, and debt ratings were Baa1 (Moody's) and BBB+ (S&P), both with stable outlooks.
02—Key points
Key Highlights
- Net sales of $6.121 billion, up $124 million (approximately 2%) from 2013
- Net income of $703 million, up $79 million (approximately 13%); diluted EPS of $3.56 versus $3.05
- Income from operations rose 13% to $1.180 billion; gross margin expanded to 59.3% from 58.3%
- Packaged Beverages SOP rose to $636 million from $525 million, lapping the 2013 $56 million pension withdrawal charge
- Operating cash flow of $1.022 billion; capital expenditures of $170 million, or about 3% of net sales per management's stated target
- Dividends declared of $1.64 per share (up from $1.52), with a $0.48 quarterly dividend declared for Q1 2015 and an additional $1 billion share repurchase authorized in early 2015
- Total indebtedness of $2.591 billion; debt ratings Baa1 (stable) from Moody's and BBB+ (stable) from S&P
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2014, Keurig Dr Pepper kept $0.11.
- Revenue$6.12B100.0%
- Cost of revenue−$2.49B40.7%
- Gross profit$3.63B59.3%
- Operating costs−$2.45B40.0%
- Operating income$1.18B19.3%
- Interest, other & tax−$477.0M7.8%
- Net income$703.0M11.5%
Where FY2014 revenue went
$6.12B- Cost of revenue: $2.49B, 41% of revenue
- SG&A: $2.33B, 38% of revenue
- Net income: $703.0M, 11% of revenue
- R&D: $18.0M, 0.3% of revenue
- Other operating costs: $98.0M, 1.6% of revenue
- Interest, other & tax: $477.0M, 7.8% of revenue
Kept 11% as net incomeNet income $703.0M · 11%R&D $18.0M · 0.3%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2014filed February 19, 2015Financial Statements
FY2014 against FY2013
| Line item | FY2014FY2013 | Change |
|---|---|---|
| Revenue | $6.12B$6.00B | +2.1% |
| Cost of Revenue | $2.49B$2.50B | −0.3% |
| Gross Profit | $3.63B$3.50B | +3.8% |
| R&D Expenses | $18.00M$21.00M | −14.3% |
| SG&A Expenses | $2.33B$2.27B | +2.7% |
| Operating Income | $1.18B$1.05B | +12.8% |
| Interest Expense | $109.00M$123.00M | −11.4% |
| Net Income | $703.00M$624.00M | +12.7% |
| EPS (Basic) | $3.59$3.08 | +16.6% |
| EPS (Diluted) | $3.56$3.05 | +16.7% |
| Shares Outstanding (Basic) | 195.80M202.90M | −3.5% |
| Shares Outstanding (Diluted) | 197.40M204.50M | −3.5% |
05—Questions
Frequently Asked Questions
How did Dr Pepper Snapple Group perform in 2014?
Net sales rose approximately 2% to $6.121 billion, and net income rose approximately 13% to $703 million. Diluted EPS was $3.56, compared with $3.05 in 2013. Income from operations increased $134 million to $1.180 billion, mainly from higher gross profit and the absence of the prior-year $56 million multi-employer pension plan withdrawal charge.
Which segment contributed most to results?
Packaged Beverages had net sales of $4.361 billion and SOP of $636 million, up $111 million from $525 million, largely because the prior year included a $56 million withdrawal charge. Beverage Concentrates generated $1.228 billion in net sales and $790 million in SOP, and Latin America Beverages generated $532 million in net sales and $78 million in SOP.
What did the company say about its outlook for 2015?
The company believes net sales for 2015 could be up approximately 1% compared with 2014, and commodity costs could be down approximately 1% on a constant volume/mix basis. It expects 2015 capital expenditures, net of disposal proceeds, of approximately 3% of net sales.
How is the company returning cash to shareholders?
In 2014 the company repurchased 6.8 million shares for approximately $400 million and paid $317 million in dividends. Dividends declared totaled $1.64 per share. In February 2015 the Board authorized an additional $1 billion of share repurchases, and the Q1 2015 dividend was $0.48 per share. The filing notes that repurchases and dividends are not guaranteed and remain subject to Board determination.
What are the main risks identified in the filing?
Risks include shifting consumer preferences toward health and wellness, new or proposed beverage taxes (including Mexico's one peso per liter tax effective January 1, 2014, and Berkeley's one cent per ounce tax effective January 1, 2015), intense competition from Coca-Cola and PepsiCo, reliance on large retailers such as WalMart (about 12% of consolidated net sales), dependence on third-party bottlers, commodity cost volatility, and possible goodwill and intangible impairments, with $5.674 billion of goodwill and other intangibles at year-end.
06—Continue