01—Abstract
Summary
Summary of the 10-K filed February 23, 2016. Cited figures are marked; the original filing is the authoritative source.
Dr Pepper Snapple Group, Inc. reported net sales of $6.28 billiona for 2015, up from $6.12 billion in 2014, with net income of $764 million, or $3.97 diluted earnings per share, compared with $703 million and $3.56 in 2014.
Income from operations rose $118 million to $1,298 millionb. Volume (BCS) increased 2%, with the U.S. and Canada up 1% and Mexico and the Caribbean up 8%. Gross margin held at 59.3%, and SG&A expenses fell $21 million.
Management cited favorable product and package mix, higher branded volumes and higher pricing as the main drivers of the net sales increase, partly offset by $115 millionc of unfavorable foreign currency translation. The company generated $991 million of operating cash flow in 2015 and spent $179 million on capital expenditures. It returned $521 million through share repurchases and paid $355 million in dividends.
It issued $750 milliond of senior unsecured notes in November 2015 and repaid the $500 million 2016 Notes at maturity in January 2016. Total indebtedness was $3,382 million at year end, and cash and equivalents rose to $911 million. The Board declared a $0.53 quarterly dividend in early 2016, about 10% above the prior quarter, and authorized an additional $1 billion of share repurchases on February 11, 2016, with the company expecting to repurchase $650 million to $700 million in 2016.
For 2016, management said it believes net sales could increase approximately 1% over 2015, that commodity costs are expected to be flat on a constant volume/mix basis, and that capital expenditures will be about 3% of net sales. Key risks named in the filing include consumer shifts away from CSDs toward NCBs, dependence on large retailers (Walmart was about 12% of consolidated net sales), reliance on third-party bottlers, commodity and fuel cost volatility, and a $7 million impairment of the Garden Cocktail brand in 2015.
02—Key points
Key Highlights
- Net sales rose to $6,282 million in 2015 from $6,121 million in 2014, driven by favorable product and package mix, higher branded volumes and higher pricing, partly offset by $115 million of unfavorable foreign currency translation.
- Net income increased to $764 million ($3.97 diluted EPS) from $703 million ($3.56 diluted EPS), and income from operations increased $118 million to $1,298 million.
- Volume (BCS) increased 2%, with Mexico and the Caribbean up 8% and the U.S. and Canada up 1%.
- Operating cash flow was $991 million, with $179 million of capital expenditures, $521 million of share repurchases and $355 million of dividend payments.
- The company issued $750 million of senior unsecured notes in November 2015 and repaid the $500 million 2016 Notes at maturity in January 2016; total indebtedness was $3,382 million at year end.
- The Board authorized an additional $1 billion of share repurchases on February 11, 2016, with $650 million to $700 million expected to be repurchased in 2016, and declared a $0.53 quarterly dividend, about 10% above the prior quarter.
- Management expects 2016 net sales to increase approximately 1% and commodity costs to be flat on a constant volume/mix basis.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2015, Keurig Dr Pepper kept $0.12.
- Revenue$6.28B100.0%
- Cost of revenue−$2.56B40.7%
- Gross profit$3.72B59.3%
- Operating costs−$2.42B38.6%
- Operating income$1.30B20.7%
- Interest, other & tax−$534.0M8.5%
- Net income$764.0M12.2%
Where FY2015 revenue went
$6.28B- Cost of revenue: $2.56B, 41% of revenue
- SG&A: $2.31B, 37% of revenue
- Net income: $764.0M, 12% of revenue
- R&D: $19.0M, 0.3% of revenue
- Other operating costs: $93.0M, 1.5% of revenue
- Interest, other & tax: $534.0M, 8.5% of revenue
Kept 12% as net incomeNet income $764.0M · 12%R&D $19.0M · 0.3%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2015filed February 23, 2016Financial Statements
FY2015 against FY2014
| Line item | FY2015FY2014 | Change |
|---|---|---|
| Revenue | $6.28B$6.12B | +2.6% |
| Cost of Revenue | $2.56B$2.49B | +2.7% |
| Gross Profit | $3.72B$3.63B | +2.6% |
| R&D Expenses | $19.00M$18.00M | +5.6% |
| SG&A Expenses | $2.31B$2.33B | −0.9% |
| Operating Income | $1.30B$1.18B | +10.0% |
| Interest Expense | $117.00M$109.00M | +7.3% |
| Net Income | $764.00M$703.00M | +8.7% |
| EPS (Basic) | $4.00$3.59 | +11.4% |
| EPS (Diluted) | $3.97$3.56 | +11.5% |
| Shares Outstanding (Basic) | 190.90M195.80M | −2.5% |
| Shares Outstanding (Diluted) | 192.40M197.40M | −2.5% |
05—Questions
Frequently Asked Questions
What drove the increase in net sales and profit in 2015?
Net sales increased $161 million, or approximately 3%, driven by favorable product and package mix, higher branded sales volumes, favorable segment mix and higher pricing, partly offset by $115 million in unfavorable foreign currency translation. Income from operations rose $118 million, due primarily to higher gross profit and lower SG&A expenses, partly offset by a $7 million non-cash charge for the Garden Cocktail brand impairment.
How is the company returning cash to shareholders?
In 2015 the company repurchased $521 million of common stock and paid $355 million in dividends. Dividends declared were $1.92 per share in 2015, up from $1.64 in 2014. In February 2016 the Board authorized an additional $1 billion of repurchases and expects to repurchase $650 million to $700 million in 2016. Management says repurchases and dividends are subject to Board determination and there is no assurance they will continue.
How leveraged is the company and how is its debt structured?
Total indebtedness, excluding capital lease obligations, was $3,382 million as of December 31, 2015, including senior unsecured notes of $3,246 million carrying value and capital leases of $136 million. The company issued $500 million of 3.40% notes due 2025 and $250 million of 4.50% notes due 2045 in November 2015. Debt ratings were Baa1 (Moody's) and BBB+ (S&P), both with stable outlooks. Cash and cash equivalents were $911 million at year end.
What are the main risks to the business highlighted in the filing?
The filing cites shifting consumer preferences away from regular CSDs toward NCBs and health-driven demand, competition from Coca-Cola and PepsiCo (about 46% of the U.S. LRB market by retail sales), reliance on large retailers such as Walmart (about 12% of consolidated net sales), dependence on third-party bottlers, commodity and fuel cost volatility, foreign currency exposure in Mexico and Canada, and the impact of beverage taxes such as Mexico's sugar tax and Berkeley's distribution tax.
06—Continue