PLANO, Texas, July 27, 2016 /PRNewswire/ -- Dr Pepper Snapple Group, Inc. (NYSE: DPS) reported second quarter 2016 EPS of $1.39 compared to $1.14 in the prior year period. Core EPS were $1.25, up 11% compared to $1.13 in the prior year period. Year-to-date, the company reported earnings of $2.35 per diluted share compared to $1.95 per diluted share in the prior year period. Core EPS were $2.18, up 12% compared to $1.94 in the prior year period.

For the quarter, reported net sales increased 2% on favorable product and package mix, net price increases and a 1% increase in sales volumes, which were partially offset by unfavorable segment mix. Net sales growth was further reduced by 2 percentage points of unfavorable foreign currency translation. Reported segment operating profit (SOP) increased 5%, or $24 million, on net sales growth, lower commodity costs, ongoing productivity improvements and lower logistics costs, which were partially offset by increases in certain operating costs including a one-time charge of $4 million related to a transition of a certain employee benefit program. Unfavorable foreign currency translation further reduced SOP growth by 2 percentage points.

Reported income from operations for the quarter was $412 million, which included $25 million in unrealized commodity mark-to-market gains. Reported income from operations was $369 million in the prior year period, which included $5 million in unrealized commodity mark-to-market gains. Core income from operations for the quarter was $387 million, up 6%, and represented 22.8% of net sales compared to 22.1% in the prior year period.

Year-to-date, reported net sales increased 2%. Reported income from operations was $725 million, including $32 million in unrealized commodity mark-to-market gains. Foreign currency translation negatively impacted reported net sales by 2% and reported income from operations by 1%. Reported income from operations in the prior year period was $639 million, which included $4 million in unrealized commodity mark-to-market gains. Core income from operations was $693 million, up 9%, representing 21.8% of net sales compared to 20.5% in the prior year.

DPS President and CEO Larry Young said, "Our teams delivered another solid quarter of growth in what continues to be a competitive industry. We focused relentlessly on driving integrated communication and execution across our key priority brands."

Young continued, "Our partnerships with allied brands are driving meaningful growth, and Rapid Continuous Improvement (RCI) continues to provide tangible financial benefits to the business."

Net sales and SOP in the tables and commentary below are presented on a currency neutral basis. Refer to the Definitions section of this press release for details on how the company calculates currency neutral metrics. For a reconciliation of non-GAAP to GAAP measures see pages A-5 through A-10 accompanying this release.

BCS Volume
For the quarter, BCS volume increased 1%, with carbonated soft drinks (CSDs) increasing 1% and non-carbonated beverages (NCBs) increasing 2%.

By geography, U.S. and Canada volume was flat, and Mexico and the Caribbean volume increased 6%.

In CSDs, Squirt increased 8% in the quarter on strong growth in both the U.S. and Mexico, and Schweppes grew 9% on increased promotional activity at a large retailer. Peñafiel and Crush each grew 4%. Brand Dr Pepper decreased 1%, as growth in our fountain foodservice business was more than offset by declines in diet. Our Core 4 brands decreased 1%, as a mid-single-digit increase in Canada Dry was more than offset by a 10% decrease in 7UP and low-single-digit decreases in both A&W and Sunkist soda. Fountain foodservice volume increased 1% in the quarter.

In NCBs, our water category grew 25% on strong growth in Bai brands, Aguafiel and FIJI. Clamato increased 14% in the quarter on distribution gains and increased promotional activity, while Hawaiian Punch decreased 5% primarily on price increases on single-serve packages. Snapple decreased 2%, as growth from product innovation was more than offset by the effect a year ago of liquidating certain Snapple inventories.  Mott's was flat in the quarter, as growth in sauce was fully offset by decreases in juice.

Sales Volume
Sales volumes increased 1% in the quarter and year-to-date.

Beverage Concentrates
Net sales increased 4% in the quarter on concentrate price increases taken earlier in the year and a 1% increase in concentrate shipments. Lower discounts further increased net sales as favorable trade accrual adjustments were partially offset by increases related to our fountain foodservice business. SOP increased 4% driven by net sales growth, which was partially offset by increases in marketing investments and certain operating costs.

Packaged Beverages
Net sales increased 3% in the quarter on favorable product and package mix and price increases, which were partially offset by lower contract manufacturing volumes. SOP increased 11% on net sales growth, lower commodity and logistics costs and ongoing productivity improvements. These increases were partially offset by increases in certain operating costs, including a one-time charge of $4 million related to a transition of a certain employee benefit program.

Latin America Beverages
Net sales increased 10% in the quarter on a 6% increase in sales volumes, favorable product mix and higher net pricing. SOP was flat in the quarter, as the segment incurred $5 million of higher U.S. dollar denominated input costs which caused a 19% decline in SOP. The aforementioned foreign currency transaction cost taken together with increases in certain operating and logistics costs collectively offset net sales growth and ongoing productivity improvements.

Corporate and Other Items
For the quarter, corporate costs totaled $52 million, which included $25 million in unrealized commodity mark-to-market gains. Corporate costs in the prior year period were $70 million, which included $5 million in unrealized commodity mark-to-market gains.

Other income increased $23 million in the quarter as a result of a $21 million gain on the extinguishment of a multi-employer pension plan withdrawal liability.

Net interest expense increased $5 million in the quarter driven by higher debt balances and refinancing of certain debt in the prior year.

For the quarter, the reported effective tax rate was 35.3%. The effective tax rate in the prior year period was 35.5%.

Cash Flow
Year-to-date, the company generated $407 million of cash from operating activities net of the $35 million multi-employer pension plan settlement payment, compared to $349 million in the prior year period. Capital spending totaled $68 million compared to $42 million in the prior year period. The company returned $493 million to shareholders in the form of stock repurchases ($303 million) and dividends ($190 million).

2016 Full Year Guidance
The company continues to expect full year reported net sales to be up approximately 2% and now expects core EPS to be in the $4.27 to $4.35 range. Collectively, foreign currency translation and transaction are expected to continue to negatively impact net sales by approximately 1% and are now expected to negatively impact core EPS growth by approximately 3%.

Packaging and ingredient costs are now expected to decrease COGS by approximately 1% on a constant volume/mix basis.

The company continues to expect its core tax rate to be approximately 35.5%.

The company continues to expect capital spending to be approximately 3% of net sales.

The company continues to expect to repurchase $650 million to $700 million of its common stock.

Definitions
Bottler case sales (BCS) volume: Sales of finished beverages, in equivalent 288 fluid ounce cases, sold by the company and its bottling partners to retailers and independent distributors and excludes contract manufacturing volume. Volume for products sold by the company and its bottling partners is reported on a monthly basis, with the second quarter comprising April, May and June.

Sales volume: Sales of concentrates and finished beverages, in equivalent 288 fluid ounce cases, shipped by the company to its bottlers, retailers and independent distributors and includes contract manufacturing volume.

Pricing refers to the impact of list price changes.

Unrealized mark-to-market: We recognize the change in the fair value of open commodity derivative positions between periods in corporate unallocated expenses, as these instruments do not qualify for hedge accounting treatment. As the underlying commodity is delivered, the realized gains and losses are subsequently reflected in the segment results.

EPS represents diluted earnings per share.

Core financial measures are determined utilizing reported financial numbers adjusted for the unrealized mark-to-market impact of commodity derivatives and certain items that are excluded for comparison to prior year periods.

Core metrics are determined based on the core financial measures.

Net sales and Segment Operating Profit, as adjusted to currency neutral: Net sales and Segment Operating Profit are calculated on a currency neutral basis by converting our current-period local currency financial results using the prior-period foreign currency exchange rates.

Forward-Looking Statements
This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including, in particular, statements about future events, future financial performance including earnings estimates, plans, strategies, expectations, prospects, competitive environment, regulation, and cost and availability of raw materials. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words "may," "will," "expect," "anticipate," "believe," "estimate," "plan," "intend" or the negative of these terms or similar expressions. These forward-looking statements have been based on our current views with respect to future events and financial performance. Our actual financial performance could differ materially from those projected in the forward-looking statements due to the inherent uncertainty of estimates, forecasts and projections, and our financial performance may be better or worse than anticipated. Given these uncertainties, you should not put undue reliance on any forward-looking statements. All of the forward-looking statements are qualified in their entirety by reference to the factors discussed under "Risk Factors" in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2015, and our other filings with the Securities and Exchange Commission. Forward-looking statements represent our estimates and assumptions only as of the date that they were made. We do not undertake any duty to update the forward-looking statements, and the estimates and assumptions associated with them, after the date of this release, except to the extent required by applicable securities laws. 

Conference Call
At 9 a.m. (CDT) today, the company will host a conference call with investors to discuss second quarter results and the outlook for 2016. The conference call and slide presentation will be accessible live through DPS's website at http://www.drpeppersnapple.com and will be archived for replay for a period of 14 days.

In discussing financial results and guidance, the company may refer to certain non-GAAP measures. Reconciliations of any such non-GAAP measures to the most directly comparable financial measures in accordance with GAAP can be found on pages A-5 through A-10 accompanying this release and under "Financial News" on the company's website at http://www.drpeppersnapple.com in the "Investors" section.

For additional information about Dr Pepper Snapple Group, please reference the "DPS Overview" presentation slideshow under "Events and Presentations" on the company's website at http://www.drpeppersnapple.com in the "Investors" section.

About Dr Pepper Snapple Group
Dr Pepper Snapple Group (NYSE: DPS) is a leading producer of flavored beverages in North America and the Caribbean. Our success is fueled by more than 50 brands that are synonymous with refreshment, fun and flavor. We have six of the top 10 non-cola soft drinks, and 13 of our 14 leading brands are No. 1 or No. 2 in their flavor categories. In addition to our flagship Dr Pepper and Snapple brands, our portfolio includes 7UP, A&W, Canada Dry, Clamato, Crush, Hawaiian Punch, Mott's, Mr & Mrs T mixers, Peñafiel, Rose's, Schweppes, Squirt and Sunkist soda. To learn more about our iconic brands and Plano, Texas-based company, please visit www.DrPepperSnapple.com. For our latest news and updates, follow us at www.Facebook.com/DrPepperSnapple or www.Twitter.com/DrPepperSnapple.

DR PEPPER SNAPPLE GROUP, INC.
RECONCILIATION OF GAAP AND NON-GAAP INFORMATION
(Unaudited)

The company reports its financial results in accordance with U.S. GAAP. However, management believes that certain non-GAAP measures that reflect the way management evaluates the business may provide investors with additional information regarding the company's results, trends and ongoing performance on a comparable basis. Specifically, investors should consider the following with respect to our quarterly results:

Net sales and Segment Operating Profit, as adjusted to currency neutral: Net sales and Segment Operating Profit are calculated on a currency neutral basis by converting our current-period local currency financial results using the prior-period foreign currency exchange rates.

Free Cash Flow: Free cash flow is defined as net cash provided by operating activities adjusted for capital spending and certain items excluded for comparison to prior year periods. For the six months ended June 30, 2016 and 2015, there were no certain items excluded for comparison to prior year periods.

Core earnings: Core earnings is defined as net income adjusted for the unrealized mark-to-market impact of commodity derivatives and certain items that are excluded for comparison to prior year periods. The certain item excluded for the three and six months ended June 30, 2016 is a gain on the extinguishment of a multi-employer withdrawal liability. The certain item excluded for the three and six months ended June 30, 2015, is an adjustment to a previously disclosed legal provision.

The tables on the following pages provide these reconciliations.