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Delaware
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98-0517725
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(State or other jurisdiction of
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(I.R.S. employer
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incorporation or organization)
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identification number)
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5301 Legacy Drive, Plano, Texas
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75024
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(Address of principal executive offices)
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(Zip code)
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Large Accelerated Filer
x
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Accelerated Filer
o
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Non-Accelerated Filer
o
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Smaller Reporting Company
o
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Emerging Growth Company
o
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(Do not check if a smaller reporting company)
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ITEM 1.
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Financial Statements (Unaudited)
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For the
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For the
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||||||||||||
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Three Months Ended
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Nine Months Ended
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||||||||||||
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September 30,
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September 30,
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||||||||||||
(in millions, except per share data)
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2017
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2016
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2017
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2016
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||||||||
Net sales
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$
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1,740
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$
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1,680
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$
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5,047
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$
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4,862
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Cost of sales
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707
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683
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2,032
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1,955
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Gross profit
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1,033
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997
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3,015
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2,907
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Selling, general and administrative expenses
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640
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603
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1,944
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1,739
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Depreciation and amortization
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26
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24
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76
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74
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Other operating income, net
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—
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(3
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)
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(30
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)
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(4
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)
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Income from operations
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367
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373
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1,025
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1,098
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||||
Interest expense
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40
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33
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124
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99
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Interest income
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(1
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)
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(1
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)
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(3
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)
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(2
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)
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Loss on early extinguishment of debt
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13
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—
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62
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—
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Other income, net
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(2
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)
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(2
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)
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(6
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)
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(25
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)
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Income before provision for income taxes and equity in earnings of unconsolidated subsidiaries
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317
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343
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848
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1,026
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Provision for income taxes
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114
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102
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279
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343
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Income before equity in earnings of unconsolidated subsidiaries
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203
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241
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569
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683
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Equity in loss of unconsolidated subsidiaries, net of tax
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—
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(1
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)
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(1
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)
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(1
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)
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Net income
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$
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203
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$
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240
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$
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568
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$
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682
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Earnings per common share:
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Basic
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$
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1.12
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$
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1.30
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$
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3.11
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$
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3.66
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Diluted
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1.11
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1.29
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3.09
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3.64
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Weighted average common shares outstanding:
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Basic
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181.4
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184.8
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182.7
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186.1
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Diluted
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182.1
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185.7
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183.5
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187.1
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Cash dividends declared per common share
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$
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0.58
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$
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0.53
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$
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1.74
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$
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1.59
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For the
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For the
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||||||||||||
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Three Months Ended
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Nine Months Ended
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September 30,
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September 30,
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(in millions)
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2017
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2016
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2017
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2016
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Comprehensive income
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$
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212
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$
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229
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$
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613
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$
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664
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September 30,
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December 31,
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(in millions, except share and per share data)
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2017
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2016
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Assets
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Current assets:
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Cash and cash equivalents
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$
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66
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$
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1,787
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Restricted cash and restricted cash equivalents
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89
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—
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Accounts receivable:
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Trade, net
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659
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595
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Other
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47
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51
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Inventories
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261
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202
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Prepaid expenses and other current assets
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144
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101
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Total current assets
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1,266
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2,736
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Property, plant and equipment, net
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1,129
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1,138
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Investments in unconsolidated subsidiaries
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24
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23
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Goodwill
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3,559
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2,993
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Other intangible assets, net
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3,786
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2,656
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Other non-current assets
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215
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183
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Deferred tax assets
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60
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62
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Total assets
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$
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10,039
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$
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9,791
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Liabilities and Stockholders' Equity
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Current liabilities:
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Accounts payable
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$
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387
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$
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303
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Deferred revenue
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64
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64
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Short-term borrowings and current portion of long-term obligations
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82
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10
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Income taxes payable
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10
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4
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Other current liabilities
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816
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670
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Total current liabilities
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1,359
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1,051
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Long-term obligations
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4,399
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4,468
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Deferred tax liabilities
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877
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812
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Non-current deferred revenue
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1,071
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1,117
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Other non-current liabilities
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204
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209
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Total liabilities
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7,910
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7,657
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Commitments and contingencies
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Stockholders' equity:
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Preferred stock, $0.01 par value, 15,000,000 shares authorized, no shares issued
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—
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—
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Common stock, $0.01 par value, 800,000,000 shares authorized, 180,640,432 and 183,119,843 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively
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2
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2
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Additional paid-in capital
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—
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95
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Retained earnings
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2,311
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2,266
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Accumulated other comprehensive loss
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(184
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)
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(229
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)
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Total stockholders' equity
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2,129
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2,134
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Total liabilities and stockholders' equity
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$
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10,039
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$
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9,791
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For the
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||||||
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Nine Months Ended
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||||||
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September 30,
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||||||
(in millions)
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2017
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2016
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||||
Operating activities:
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Net income
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$
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568
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$
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682
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Adjustments to reconcile net income to net cash provided by operating activities:
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Depreciation expense
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147
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142
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Amortization expense
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25
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24
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Amortization of deferred revenue
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(48
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)
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(48
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)
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Employee stock-based compensation expense
|
26
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|
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33
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|
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Deferred income taxes
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65
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|
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—
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Loss on early extinguishment of debt
|
62
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|
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—
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Gain on step acquisition of unconsolidated subsidiaries
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(28
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)
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(5
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)
|
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Gain on extinguishment of multi-employer plan withdrawal liability
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—
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(21
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)
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Unrealized gains on economic hedges
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(10
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)
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(41
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)
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Other, net
|
14
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5
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Changes in assets and liabilities, net of effects of acquisition:
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||||
Trade accounts receivable
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(34
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)
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(14
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)
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Other accounts receivable
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5
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(5
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)
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Inventories
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(29
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)
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(19
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)
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Other current and non-current assets
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(78
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)
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(61
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)
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Other current and non-current liabilities
|
—
|
|
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(48
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)
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Trade accounts payable
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41
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35
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Income taxes payable
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6
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|
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46
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|
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Net cash provided by operating activities
|
732
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705
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Investing activities:
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Acquisition of business
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(1,553
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)
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(15
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)
|
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Cash acquired in step acquisition of unconsolidated subsidiaries
|
3
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|
|
17
|
|
||
Purchase of property, plant and equipment
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(85
|
)
|
|
(110
|
)
|
||
Purchase of intangible assets
|
(5
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)
|
|
(1
|
)
|
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Investment in unconsolidated subsidiaries
|
(3
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)
|
|
(6
|
)
|
||
Purchase of cost method investment
|
—
|
|
|
(1
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)
|
||
Proceeds from disposals of property, plant and equipment
|
3
|
|
|
4
|
|
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Other, net
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(3
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)
|
|
(7
|
)
|
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Net cash used in investing activities
|
(1,643
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)
|
|
(119
|
)
|
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Financing activities:
|
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|
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Proceeds from issuance of senior unsecured notes
|
400
|
|
|
400
|
|
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Repayment of senior unsecured notes
|
(562
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)
|
|
(500
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)
|
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Net issuance of commercial paper
|
70
|
|
|
—
|
|
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Repurchase of shares of common stock
|
(320
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)
|
|
(460
|
)
|
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Dividends paid
|
(309
|
)
|
|
(288
|
)
|
||
Tax withholdings related to net share settlements of certain stock awards
|
(30
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)
|
|
(31
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)
|
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Proceeds from stock options exercised
|
20
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|
|
14
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|
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Premium (discount) on issuance of senior unsecured notes
|
16
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|
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(1
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)
|
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Proceeds from termination of interest rate swap
|
13
|
|
|
—
|
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Deferred financing charges paid
|
(5
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)
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|
(3
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)
|
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Capital lease payments
|
(8
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)
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(6
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)
|
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Other, net
|
(2
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)
|
|
(1
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)
|
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Net cash used in financing activities
|
(717
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)
|
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(876
|
)
|
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Cash, cash equivalents, restricted cash and restricted cash equivalents — net change from:
|
|
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|
||||
Operating, investing and financing activities
|
(1,628
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)
|
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(290
|
)
|
||
Effect of exchange rate changes on cash, cash equivalents, restricted cash and restricted cash equivalents
|
6
|
|
|
(1
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)
|
||
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period
|
1,787
|
|
|
911
|
|
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Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period
|
$
|
165
|
|
|
$
|
620
|
|
|
|
|
|
|
|
|
|
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|||||||||||
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|
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Accumulated
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|
|
|||||||||||
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Common Stock
|
|
Additional
|
|
|
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Other
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|
|||||||||||||
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Issued
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Paid-In
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Retained
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Comprehensive
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Total
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|||||||||||||
(in millions, except per share data)
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Shares
|
|
Amount
|
|
Capital
|
|
Earnings
|
|
Loss
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Equity
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|||||||||||
Balance as of January 1, 2017
|
183.1
|
|
|
$
|
2
|
|
|
$
|
95
|
|
|
$
|
2,266
|
|
|
$
|
(229
|
)
|
|
$
|
2,134
|
|
Shares issued under employee stock-based compensation plans and other
|
1.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
568
|
|
|
—
|
|
|
568
|
|
|||||
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
45
|
|
|
45
|
|
|||||
Dividends declared, $1.74 per share
|
—
|
|
|
—
|
|
|
2
|
|
|
(320
|
)
|
|
—
|
|
|
(318
|
)
|
|||||
Deemed capital contribution from former shareholders of Bai Brands LLC
|
—
|
|
|
—
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|||||
Stock options exercised and stock-based compensation
|
—
|
|
|
—
|
|
|
16
|
|
|
—
|
|
|
—
|
|
|
16
|
|
|||||
Common stock repurchases
|
(3.5
|
)
|
|
—
|
|
|
(117
|
)
|
|
(203
|
)
|
|
—
|
|
|
(320
|
)
|
|||||
Balance as of September 30, 2017
|
180.6
|
|
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
2,311
|
|
|
$
|
(184
|
)
|
|
$
|
2,129
|
|
1
.
|
General
|
•
|
The Company paid certain seller transaction costs, which included
$2 million
to reimburse Bai Brands for payments made on behalf of the Company for buyer acquisition-related costs, which were recorded as selling, general and administrative ("SG&A") expenses. The remainder of the seller transaction costs paid by the Company were accounted for by the Company as part of the consideration transferred.
|
•
|
Bai Brands had an executory contract as of
January 31, 2017
, which compensated certain counterparties with Profit Interest Units from Bai Brands (the “Predecessor PIUs”). The Predecessor PIUs were based upon the counterparties completing service requirements and various performance criteria. As a result of the Bai Brands Merger, these Predecessor PIUs have fully vested and were converted into cash as of
January 31, 2017
based upon the consideration paid by the Company to acquire Bai Brands. The cash was placed in escrow and will be released from escrow to the counterparties on certain anniversary dates as long as the counterparties are not in breach of the executory contract. Although none of the costs of these benefits have been paid by the Company, DPS will record SG&A expenses for the deferred compensation amounts payable to these counterparties by Bai Brands. For the
three and nine months ended September 30, 2017
, the Company recognized approximately
$2 million
and
$4 million
, respectively, of compensation expense related to performance on the executory contract. As of
September 30, 2017
, the total unrecognized compensation cost is
$9 million
and the period over which these costs are expected to be recognized is
12 months
.
|
(in millions)
|
Preliminary Purchase Price
|
||
Cash paid to consummate Bai Brands Merger, net of the Company's previous ownership interest
|
$
|
1,553
|
|
Remaining holdback placed in escrow
|
88
|
|
|
Less: Seller transaction costs reimbursed to Bai Brands for payments made on behalf of the Company for its acquisition-related costs
|
(2
|
)
|
|
Preliminary Purchase Price - Bai Brands
(1)
|
$
|
1,639
|
|
(1)
|
The preliminary purchase price excludes the impact of the Company's pre-existing ownership interest.
|
•
|
Initially,
$90 million
was held in escrow to secure indemnification obligations of the sellers relating to the accuracy of representations and warranties and a working capital adjustment. A working capital adjustment of
$11 million
, which represents the majority of the working capital adjustment with the exception of one matter, has been agreed upon with the former shareholders of Bai Brands. The Company is in the process of bringing the one remaining matter related to the working capital adjustment to arbitration under the terms of the Merger Agreement. The
$11 million
agreed-upon working capital adjustment will be released back to the Company from escrow upon completion of the arbitration
|
•
|
$9 million
of unrecognized compensation associated with the Predecessor PIUs related to the performance of certain counterparties, which will be held in escrow and released over the next
12 months
.
|
(in millions)
|
|
Fair Value
|
|
Useful Life
|
||
Property, plant & equipment
|
|
$
|
4
|
|
|
5 - 10 years
|
Customer relationships
|
|
30
|
|
|
7 years
|
|
Non-compete agreements
|
|
22
|
|
|
2 - 4 years
|
|
Brands
|
|
1,073
|
|
|
Indefinite
|
|
Goodwill
|
|
563
|
|
|
Indefinite
|
|
Assumed liabilities, net of acquired assets
|
|
(13
|
)
|
|
N/A
|
|
Total
|
|
$
|
1,679
|
|
|
|
|
For the Three Months Ended September 30,
|
|
For the Nine Months Ended September 30,
|
||||
(in millions)
|
2017
|
|
2017
|
||||
Net sales - Bai Brands
|
$
|
77
|
|
|
$
|
182
|
|
Intercompany sales to Packaged Beverages Excluding Bai
|
(56
|
)
|
|
(131
|
)
|
||
Incremental impact to consolidated net sales
|
$
|
21
|
|
|
$
|
51
|
|
|
For the Three Months Ended September 30,
|
|
For the Nine Months Ended September 30,
|
||||
(in millions)
|
2017
|
|
2017
|
||||
Net loss - Bai Brands
|
$
|
(2
|
)
|
|
$
|
(13
|
)
|
Impact of intercompany activity with Packaged Beverages Excluding Bai
(1)
|
(2
|
)
|
|
(9
|
)
|
||
Incremental impact to consolidated net income
|
$
|
(4
|
)
|
|
$
|
(22
|
)
|
(1)
|
Impact of intercompany activity includes the elimination of intercompany net sales and the deferral of gross profit recognition on shipments of product still in Packaged Beverages Excluding Bai inventory for the
three and nine months ended September 30, 2017
, net of tax.
|
3
.
|
Inventories
|
|
September 30,
|
|
December 31,
|
||||
(in millions)
|
2017
|
|
2016
|
||||
Raw materials
|
$
|
81
|
|
|
$
|
77
|
|
Spare parts
|
23
|
|
|
22
|
|
||
Work in process
|
7
|
|
|
5
|
|
||
Finished goods
|
185
|
|
|
130
|
|
||
Inventories at first in first out cost
|
296
|
|
|
234
|
|
||
Reduction to LIFO cost
|
(35
|
)
|
|
(32
|
)
|
||
Inventories
|
$
|
261
|
|
|
$
|
202
|
|
4
.
|
Prepaid Expenses and Other Current Assets and Other Current Liabilities
|
|
September 30,
|
|
December 31,
|
||||
(in millions)
|
2017
|
|
2016
|
||||
Prepaid expenses and other current assets:
|
|
|
|
||||
Customer incentive programs
|
$
|
50
|
|
|
$
|
24
|
|
Derivative instruments
|
21
|
|
|
19
|
|
||
Prepaid income taxes
|
14
|
|
|
18
|
|
||
Current assets held for sale
|
—
|
|
|
1
|
|
||
Other
|
59
|
|
|
39
|
|
||
Total prepaid expenses and other current assets
|
$
|
144
|
|
|
$
|
101
|
|
Other current liabilities:
|
|
|
|
||||
Customer rebates and incentives
|
$
|
308
|
|
|
$
|
280
|
|
Accrued compensation
|
113
|
|
|
134
|
|
||
Insurance liability
|
38
|
|
|
36
|
|
||
Interest accrual
|
45
|
|
|
24
|
|
||
Dividends payable
|
106
|
|
|
97
|
|
||
Derivative instruments
|
7
|
|
|
2
|
|
||
Holdback liability to former Bai Brands shareholders
(1)
|
78
|
|
|
—
|
|
||
Other
|
121
|
|
|
97
|
|
||
Total other current liabilities
|
$
|
816
|
|
|
$
|
670
|
|
(1)
|
Refer to Note 2 for additional information
on holdback liability to former Bai Brands shareholders as of
September 30,
2017
.
|
5
.
|
Goodwill and Other Intangible Assets
|
(in millions)
|
Beverage Concentrates
|
|
WD Reporting Unit
(1)
|
|
DSD Reporting Unit
(1)
|
|
Bai
|
|
Latin America Beverages
|
|
Total
|
||||||||||||
Balance as of January 1, 2016
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Goodwill
|
$
|
1,733
|
|
|
$
|
1,222
|
|
|
$
|
189
|
|
|
$
|
—
|
|
|
$
|
24
|
|
|
$
|
3,168
|
|
Accumulated impairment losses
|
—
|
|
|
—
|
|
|
(180
|
)
|
|
—
|
|
|
—
|
|
|
(180
|
)
|
||||||
|
1,733
|
|
|
1,222
|
|
|
9
|
|
|
—
|
|
|
24
|
|
|
2,988
|
|
||||||
Foreign currency impact
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3
|
)
|
|
(3
|
)
|
||||||
Acquisition activity
(2)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8
|
|
|
8
|
|
||||||
Balance as of December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Goodwill
|
1,733
|
|
|
1,222
|
|
|
189
|
|
|
—
|
|
|
29
|
|
|
3,173
|
|
||||||
Accumulated impairment losses
|
—
|
|
|
—
|
|
|
(180
|
)
|
|
—
|
|
|
—
|
|
|
(180
|
)
|
||||||
|
1,733
|
|
|
1,222
|
|
|
9
|
|
|
—
|
|
|
29
|
|
|
2,993
|
|
||||||
Foreign currency impact
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
3
|
|
||||||
Acquisition activity
(3)
|
—
|
|
|
—
|
|
|
—
|
|
|
563
|
|
|
—
|
|
|
563
|
|
||||||
Balance as of September 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Goodwill
|
1,733
|
|
|
1,222
|
|
|
189
|
|
|
563
|
|
|
32
|
|
|
3,739
|
|
||||||
Accumulated impairment losses
|
—
|
|
|
—
|
|
|
(180
|
)
|
|
—
|
|
|
—
|
|
|
(180
|
)
|
||||||
|
$
|
1,733
|
|
|
$
|
1,222
|
|
|
$
|
9
|
|
|
$
|
563
|
|
|
$
|
32
|
|
|
$
|
3,559
|
|
(1)
|
The Packaged Beverages Excluding Bai operating segment is comprised of two reporting units, the Direct Store Delivery ("
DSD
") system and the Warehouse Direct ("
WD
") system.
|
(2)
|
Goodwill was recorded to the Latin America Beverages reporting unit during 2016 as a result of the step acquisition of Industria Embotelladora de Bebidas Mexicanas and Embotelladora Mexicana de Agua, S.A. de C.V.
|
(3)
|
Goodwill was recorded to Bai during the
nine months ended September 30, 2017
as a result of the Bai Brands Merger.
Refer to Note 2 for additional information
about the Bai Brands Merger.
|
|
September 30, 2017
|
|
December 31, 2016
|
||||||||||||||||||||
|
Gross
|
|
Accumulated
|
|
Net
|
|
Gross
|
|
Accumulated
|
|
Net
|
||||||||||||
(in millions)
|
Amount
|
|
Amortization
|
|
Amount
|
|
Amount
|
|
Amortization
|
|
Amount
|
||||||||||||
Intangible assets with indefinite lives:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Brands
(1)
|
$
|
3,699
|
|
|
$
|
—
|
|
|
$
|
3,699
|
|
|
$
|
2,621
|
|
|
$
|
—
|
|
|
$
|
2,621
|
|
Distribution rights
(2)
|
32
|
|
|
—
|
|
|
32
|
|
|
27
|
|
|
—
|
|
|
27
|
|
||||||
Intangible assets with definite lives:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Customer relationships
(1)
|
106
|
|
|
(78
|
)
|
|
28
|
|
|
76
|
|
|
(76
|
)
|
|
—
|
|
||||||
Non-compete agreements
(1)
|
22
|
|
|
(1
|
)
|
|
21
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Distribution rights
|
16
|
|
|
(10
|
)
|
|
6
|
|
|
16
|
|
|
(8
|
)
|
|
8
|
|
||||||
Brands
|
29
|
|
|
(29
|
)
|
|
—
|
|
|
29
|
|
|
(29
|
)
|
|
—
|
|
||||||
Bottler agreements
|
19
|
|
|
(19
|
)
|
|
—
|
|
|
19
|
|
|
(19
|
)
|
|
—
|
|
||||||
Total
|
$
|
3,923
|
|
|
$
|
(137
|
)
|
|
$
|
3,786
|
|
|
$
|
2,788
|
|
|
$
|
(132
|
)
|
|
$
|
2,656
|
|
(1)
|
As a result of the Bai Brands Merger, the Company recorded indefinite lived brand assets of
$1,073 million
and definite lived non-compete agreements and customer relationships of
$22 million
and
$30 million
, respectively.
Refer to Note 2 for additional information
. The remaining
$5 million
increase in brands with indefinite lives is due to foreign currency translation.
|
(2)
|
In 2017, the Company reacquired certain indefinite lived distribution rights for
$5 million
.
|
|
|
Weighted Average Useful Life
|
Customer relationships
|
|
7 years
|
Non-compete agreements
|
|
4 years
|
Distribution rights
|
|
9 years
|
Total intangible assets with definite lives
|
|
6 years
|
|
For the Three Months Ended September 30,
|
|
For the Nine Months Ended September 30,
|
||||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Amortization expense for intangible assets with definite lives
|
$
|
2
|
|
|
$
|
1
|
|
|
$
|
5
|
|
|
$
|
3
|
|
Year
|
Aggregate Amortization Expense
(in millions)
|
||
October 1, 2017 through December 31, 2017
|
$
|
1
|
|
2018
|
16
|
|
|
2019
|
13
|
|
|
2020
|
9
|
|
|
2021
|
6
|
|
6
.
|
Debt
|
|
September 30,
|
|
December 31,
|
||||
(in millions)
|
2017
|
|
2016
|
||||
Senior unsecured notes
|
$
|
4,239
|
|
|
$
|
4,325
|
|
Capital lease obligations
|
172
|
|
|
153
|
|
||
Subtotal
|
4,411
|
|
|
4,478
|
|
||
Less - current portion
|
(12
|
)
|
|
(10
|
)
|
||
Long-term obligations
|
$
|
4,399
|
|
|
$
|
4,468
|
|
|
September 30,
|
|
December 31,
|
||||
(in millions)
|
2017
|
|
2016
|
||||
Commercial paper
|
$
|
70
|
|
|
$
|
—
|
|
Current portion of long-term obligations:
|
|
|
|
||||
Capital lease obligations
|
12
|
|
|
10
|
|
||
Short-term borrowings and current portion of long-term obligations
|
$
|
82
|
|
|
$
|
10
|
|
(in millions)
|
|
|
|
|
|
Principal Amount
|
|
Carrying Amount
|
||||||||
|
|
|
|
|
|
September 30,
|
|
September 30,
|
|
December 31,
|
||||||
Issuance
|
|
Maturity Date
|
|
Rate
|
|
2017
|
|
2017
|
|
2016
|
||||||
2018 Notes
|
|
May 1, 2018
|
|
6.82%
|
|
—
|
|
|
—
|
|
|
364
|
|
|||
2019 Notes
|
|
January 15, 2019
|
|
2.60%
|
|
250
|
|
|
250
|
|
|
249
|
|
|||
2020 Notes
|
|
January 15, 2020
|
|
2.00%
|
|
250
|
|
|
247
|
|
|
247
|
|
|||
2021-A Notes
|
|
November 15, 2021
|
|
3.20%
|
|
250
|
|
|
250
|
|
|
249
|
|
|||
2021-B Notes
|
|
November 15, 2021
|
|
2.53%
|
|
250
|
|
|
247
|
|
|
246
|
|
|||
2022 Notes
|
|
November 15, 2022
|
|
2.70%
|
|
250
|
|
|
269
|
|
|
273
|
|
|||
2023 Notes
|
|
December 15, 2023
|
|
3.13%
|
|
500
|
|
|
496
|
|
|
495
|
|
|||
2025 Notes
|
|
November 15, 2025
|
|
3.40%
|
|
500
|
|
|
495
|
|
|
495
|
|
|||
2026 Notes
|
|
September 15, 2026
|
|
2.55%
|
|
400
|
|
|
397
|
|
|
396
|
|
|||
2027 Notes
|
|
June 15, 2027
|
|
3.43%
|
|
500
|
|
|
498
|
|
|
397
|
|
|||
2038 Notes
|
|
May 1, 2038
|
|
7.45%
|
|
125
|
|
|
135
|
|
|
270
|
|
|||
2045 Notes
|
|
November 15, 2045
|
|
4.50%
|
|
550
|
|
|
558
|
|
|
247
|
|
|||
2046 Notes
|
|
December 15, 2046
|
|
4.42%
|
|
400
|
|
|
397
|
|
|
397
|
|
|||
|
|
|
|
|
|
$
|
4,225
|
|
|
$
|
4,239
|
|
|
$
|
4,325
|
|
(in millions)
|
Amount Utilized
|
|
Balances Available
|
||||
Revolver
|
$
|
—
|
|
|
$
|
430
|
|
Letters of credit
|
—
|
|
|
75
|
|
•
|
commodity prices affecting the cost of raw materials and fuels, which are recorded in cost of sales and
SG&A
expenses, respectively.
|
|
|
|
|
|
|
|
|
Impact to the carrying value
|
||||||||||
($ in millions)
|
|
|
|
|
|
Method of
|
|
|
|
of long-term debt
|
||||||||
|
|
Hedging
|
|
Number of
|
|
measuring
|
|
Notional
|
|
September 30,
|
|
December 31,
|
||||||
Period entered
|
|
relationship
|
|
instruments
|
|
effectiveness
|
|
value
|
|
2017
|
|
2016
|
||||||
November 2011
|
|
2019 Notes
|
|
2
|
|
Short cut method
|
|
$
|
100
|
|
|
$
|
—
|
|
|
$
|
—
|
|
November 2011
|
|
2021-A Notes
|
|
2
|
|
Short cut method
|
|
150
|
|
|
1
|
|
|
—
|
|
|||
November 2012
|
|
2020 Notes
|
|
5
|
|
Short cut method
|
|
120
|
|
|
(2
|
)
|
|
(2
|
)
|
|||
December 2016
|
|
2021-B Notes
|
|
2
|
|
Short cut method
|
|
250
|
|
|
(2
|
)
|
|
(2
|
)
|
|||
December 2016
|
|
2023 Notes
|
|
2
|
|
Short cut method
|
|
150
|
|
|
(1
|
)
|
|
(1
|
)
|
|||
January 2017
|
|
2022 Notes
(2)
|
|
4
|
|
Regression
|
|
250
|
|
|
21
|
|
|
24
|
|
|||
June 2017
|
|
2038 Notes
(1)
|
|
1
|
|
Regression
|
|
50
|
|
|
11
|
|
|
22
|
|
|||
|
|
|
|
|
|
|
|
$
|
1,070
|
|
|
$
|
28
|
|
|
$
|
41
|
|
(1)
|
In June 2017, and in connection with the partial redemption of the 2038 Notes, the Company modified and partially terminated the outstanding interest rate swap on the 2038 Notes with a notional amount of
$100 million
and maturing in May 2038. The modified interest rate swap has identical terms to the original interest rate swap, except for a reduced notional amount of
$50 million
. The Company received
$13 million
as settlement for the modification and partial termination of the swap.
|
(2)
|
In October 2016, the Company de-designated the hedging relationships between the four outstanding interest rate swaps and the 2022 Notes. The Company will amortize
$25 million
into earnings over the remaining term of the 2022 Notes which represents the increase to the carrying value of the debt upon de-designation consisting of changes in fair market value of the debt, pull to par adjustments and ineffectiveness recorded under the previous hedging relationship. The Company recorded the change in the fair value of the interest rate swaps after de-designation into interest expense.
|
(in millions)
|
Balance Sheet Location
|
|
September 30,
2017 |
|
December 31,
2016 |
||||
Assets:
|
|
|
|
|
|
||||
Derivative instruments designated as hedging instruments under U.S. GAAP:
|
|
|
|
|
|
||||
Interest rate contracts
|
Prepaid expenses and other current assets
|
|
$
|
2
|
|
|
$
|
6
|
|
Interest rate contracts
|
Other non-current assets
|
|
21
|
|
|
21
|
|
||
Derivative instruments not designated as hedging instruments under U.S. GAAP:
|
|
|
|
|
|
||||
Interest rate contracts
|
Prepaid expenses and other current assets
|
|
—
|
|
|
4
|
|
||
Commodity contracts
|
Prepaid expenses and other current assets
|
|
19
|
|
|
9
|
|
||
Interest rate contracts
|
Other non-current assets
|
|
—
|
|
|
8
|
|
||
Commodity contracts
|
Other non-current assets
|
|
14
|
|
|
12
|
|
||
Total assets
|
|
|
$
|
56
|
|
|
$
|
60
|
|
Liabilities:
|
|
|
|
|
|
||||
Derivative instruments designated as hedging instruments under U.S. GAAP:
|
|
|
|
|
|
||||
Interest rate contracts
|
Other current liabilities
|
|
$
|
4
|
|
|
$
|
1
|
|
Foreign exchange forward contracts
|
Other current liabilities
|
|
3
|
|
|
—
|
|
||
Interest rate contracts
|
Other non-current liabilities
|
|
1
|
|
|
7
|
|
||
Derivative instruments not designated as hedging instruments under U.S. GAAP:
|
|
|
|
|
|
||||
Commodity contracts
|
Other current liabilities
|
|
—
|
|
|
1
|
|
||
Commodity contracts
|
Other non-current liabilities
|
|
2
|
|
|
—
|
|
||
Total liabilities
|
|
|
$
|
10
|
|
|
$
|
9
|
|
|
Amount of Loss Recognized in
|
|
Amount of Loss Reclassified from AOCL into Income
|
|
Location of Loss Reclassified from AOCL into Income
|
||||
(in millions)
|
Other Comprehensive Loss ("OCI")
|
|
|
||||||
For the three months ended September 30, 2017:
|
|
|
|
|
|
||||
Interest rate contracts
|
$
|
—
|
|
|
$
|
(2
|
)
|
|
Interest expense
|
Foreign exchange forward contracts
|
—
|
|
|
(3
|
)
|
|
Cost of sales
|
||
Total
|
$
|
—
|
|
|
$
|
(5
|
)
|
|
|
|
|
|
|
|
|
||||
For the nine months ended September 30, 2017:
|
|
|
|
|
|
||||
Interest rate contracts
|
$
|
—
|
|
|
$
|
(6
|
)
|
|
Interest expense
|
Foreign exchange forward contracts
|
(10
|
)
|
|
(7
|
)
|
|
Cost of sales
|
||
Total
|
$
|
(10
|
)
|
|
$
|
(13
|
)
|
|
|
|
|
|
|
|
|
||||
For the three months ended September 30, 2016:
|
|
|
|
|
|
||||
Interest rate contracts
|
$
|
—
|
|
|
$
|
(2
|
)
|
|
Interest expense
|
Foreign exchange forward contracts
|
—
|
|
|
—
|
|
|
Cost of sales
|
||
Total
|
$
|
—
|
|
|
$
|
(2
|
)
|
|
|
|
|
|
|
|
|
||||
For the nine months ended September 30, 2016:
|
|
|
|
|
|
||||
Interest rate contracts
|
$
|
—
|
|
|
$
|
(6
|
)
|
|
Interest expense
|
Foreign exchange forward contracts
|
(1
|
)
|
|
(1
|
)
|
|
Cost of sales
|
||
Total
|
$
|
(1
|
)
|
|
$
|
(7
|
)
|
|
|
|
|
Amount of Gain
|
|
Location of Gain
|
||
(in millions)
|
|
Recognized in Income
|
|
Recognized in Income
|
||
For the three months ended September 30, 2017:
|
|
|
|
|
||
Interest rate contracts
|
|
$
|
3
|
|
|
Interest expense
|
Interest rate contracts
|
|
—
|
|
|
Loss on early extinguishment of debt
|
|
Total
|
|
$
|
3
|
|
|
|
|
|
|
|
|
||
For the nine months ended September 30, 2017:
|
|
|
|
|
||
Interest rate contracts
|
|
$
|
10
|
|
|
Interest expense
|
Interest rate contracts
|
|
13
|
|
|
Loss on early extinguishment of debt
|
|
Total
|
|
$
|
23
|
|
|
|
|
|
|
|
|
||
For the three months ended September 30, 2016:
|
|
|
|
|
||
Interest rate contracts
|
|
$
|
1
|
|
|
Interest expense
|
Total
|
|
$
|
1
|
|
|
|
|
|
|
|
|
||
For the nine months ended September 30, 2016:
|
|
|
|
|
||
Interest rate contracts
|
|
$
|
8
|
|
|
Interest expense
|
Total
|
|
$
|
8
|
|
|
|
|
|
Amount of Gain (Loss)
|
|
Location of Gain (Loss)
|
||
(in millions)
|
|
Recognized in Income
|
|
Recognized in Income
|
||
For the three months ended September 30, 2017:
|
|
|
|
|
||
Commodity contracts
(1)
|
|
$
|
11
|
|
|
Cost of sales
|
Commodity contracts
(1)
|
|
11
|
|
|
SG&A expenses
|
|
Total
|
|
$
|
22
|
|
|
|
|
|
|
|
|
||
For the nine months ended September 30, 2017:
|
|
|
|
|
||
Commodity contracts
(1)
|
|
$
|
28
|
|
|
Cost of sales
|
Commodity contracts
(1)
|
|
(8
|
)
|
|
SG&A expenses
|
|
Interest rate contracts
(2)
|
|
1
|
|
|
Interest expense
|
|
Total
|
|
$
|
21
|
|
|
|
|
|
|
|
|
||
For the three months ended September 30, 2016:
|
|
|
|
|
||
Commodity contracts
(1)
|
|
$
|
2
|
|
|
Cost of sales
|
Commodity contracts
(1)
|
|
1
|
|
|
SG&A expenses
|
|
Total
|
|
$
|
3
|
|
|
|
|
|
|
|
|
||
For the nine months ended September 30, 2016:
|
|
|
|
|
||
Commodity contracts
(1)
|
|
$
|
11
|
|
|
Cost of sales
|
Commodity contracts
(1)
|
|
9
|
|
|
SG&A expenses
|
|
Total
|
|
$
|
20
|
|
|
|
(1)
|
Commodity contracts include both realized and unrealized gains and losses.
|
(2)
|
Represents gains on the interest rate contracts related to the 2022 Notes prior to re-designation of hedging relationship in January 2017.
|
|
September 30,
|
|
December 31,
|
||||
(in millions)
|
2017
|
|
2016
|
||||
Other non-current assets:
|
|
|
|
||||
Customer incentive programs
|
$
|
80
|
|
|
$
|
57
|
|
Marketable securities - trading
|
46
|
|
|
35
|
|
||
Derivative instruments
|
35
|
|
|
41
|
|
||
Cost method investments
(1)
|
1
|
|
|
16
|
|
||
Non-current restricted cash and restricted cash equivalents
(2)
|
10
|
|
|
—
|
|
||
Other
|
43
|
|
|
34
|
|
||
Total other non-current assets
|
$
|
215
|
|
|
$
|
183
|
|
Other non-current liabilities:
|
|
|
|
||||
Long-term payables due to Mondelēz International, Inc.
|
$
|
17
|
|
|
$
|
21
|
|
Long-term pension and post-retirement liability
(3)
|
18
|
|
|
41
|
|
||
Insurance liability
|
59
|
|
|
67
|
|
||
Derivative instruments
|
3
|
|
|
7
|
|
||
Deferred compensation liability
|
46
|
|
|
35
|
|
||
Holdback liability to former Bai Brands shareholders
(2)
|
10
|
|
|
—
|
|
||
Acquired contingent liabilities
(2)
|
21
|
|
|
—
|
|
||
Other
|
30
|
|
|
38
|
|
||
Total other non-current liabilities
|
$
|
204
|
|
|
$
|
209
|
|
(1)
|
Decrease in cost method investments resulted from our consummation of the Bai Brands Merger, as we had a cost method investment in Bai Brands as of
December 31,
2016
.
Refer to Note 2 for additional information
regarding the Bai Brands Merger and treatment of our previously held interest in Bai Brands.
|
(2)
|
Refer to Note 2 for additional information
on non-current restricted cash and restricted cash equivalents, the corresponding holdback liability to former Bai Brands shareholders, and the acquired contingent liabilities, as of
September 30,
2017
.
|
(3)
|
Refer to Note 10 for additional information
regarding the remeasurement of one of the U.S. defined benefit pension plans as of September 30, 2017.
|
|
For the Three Months Ended September 30,
|
|
For the Nine Months Ended September 30,
|
||||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Employer contributions to funded U.S. pension plans
|
$
|
22
|
|
|
$
|
7
|
|
|
$
|
22
|
|
|
$
|
7
|
|
|
September 30, 2017
|
||||||||||
|
Quoted Prices in Active Markets for Identical Assets
|
|
Significant Other Observable Inputs
|
|
Significant Unobservable Inputs
|
||||||
(in millions)
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||
Commodity contracts
|
$
|
—
|
|
|
$
|
33
|
|
|
$
|
—
|
|
Interest rate contracts
|
—
|
|
|
23
|
|
|
—
|
|
|||
Marketable securities - trading
|
46
|
|
|
—
|
|
|
—
|
|
|||
Total assets
|
$
|
46
|
|
|
$
|
56
|
|
|
$
|
—
|
|
|
|
|
|
|
|
||||||
Commodity contracts
|
$
|
—
|
|
|
$
|
2
|
|
|
$
|
—
|
|
Interest rate contracts
|
—
|
|
|
5
|
|
|
—
|
|
|||
Foreign exchange forward contracts
|
—
|
|
|
3
|
|
|
—
|
|
|||
Total liabilities
|
$
|
—
|
|
|
$
|
10
|
|
|
$
|
—
|
|
|
December 31, 2016
|
||||||||||
|
Quoted Prices in Active Markets for Identical Assets
|
|
Significant Other Observable Inputs
|
|
Significant Unobservable Inputs
|
||||||
(in millions)
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||
Commodity contracts
|
$
|
—
|
|
|
$
|
21
|
|
|
$
|
—
|
|
Interest rate contracts
|
—
|
|
|
39
|
|
|
—
|
|
|||
Marketable securities - trading
|
35
|
|
|
—
|
|
|
—
|
|
|||
Total assets
|
$
|
35
|
|
|
$
|
60
|
|
|
$
|
—
|
|
|
|
|
|
|
|
||||||
Commodity contracts
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
—
|
|
Interest rate contracts
|
—
|
|
|
8
|
|
|
—
|
|
|||
Foreign exchange forward contracts
|
—
|
|
|
—
|
|
|
—
|
|
|||
Total liabilities
|
$
|
—
|
|
|
$
|
9
|
|
|
$
|
—
|
|
|
Fair Value Hierarchy Level
|
|
September 30, 2017
|
|
December 31, 2016
|
||||||||||||
(in millions)
|
|
Carrying Amount
|
|
Fair Value
|
|
Carrying Amount
|
|
Fair Value
|
|||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
||||||||
Cash and cash equivalents
(1)
|
1
|
|
$
|
66
|
|
|
$
|
66
|
|
|
$
|
1,787
|
|
|
$
|
1,787
|
|
Restricted cash and restricted cash equivalents
(1)
|
1
|
|
99
|
|
|
99
|
|
|
—
|
|
|
—
|
|
||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||
Commercial Paper
|
2
|
|
70
|
|
|
70
|
|
|
—
|
|
|
—
|
|
||||
Long-term debt – 2018 Notes
(2)
|
2
|
|
—
|
|
|
—
|
|
|
364
|
|
|
389
|
|
||||
Long-term debt – 2019 Notes
(2)
|
2
|
|
250
|
|
|
252
|
|
|
249
|
|
|
254
|
|
||||
Long-term debt – 2020 Notes
(2)
|
2
|
|
247
|
|
|
249
|
|
|
247
|
|
|
248
|
|
||||
Long-term debt – 2021-A Notes
(2)
|
2
|
|
250
|
|
|
257
|
|
|
249
|
|
|
256
|
|
||||
Long-term debt – 2021-B Notes
(2)
|
2
|
|
247
|
|
|
251
|
|
|
246
|
|
|
248
|
|
||||
Long-term debt – 2022 Notes
(2)
|
2
|
|
269
|
|
|
251
|
|
|
273
|
|
|
247
|
|
||||
Long-term debt – 2023 Notes
(2)
|
2
|
|
496
|
|
|
509
|
|
|
495
|
|
|
500
|
|
||||
Long-term debt – 2025 Notes
(2)
|
2
|
|
495
|
|
|
508
|
|
|
495
|
|
|
498
|
|
||||
Long-term debt – 2026 Notes
(2)
|
2
|
|
397
|
|
|
376
|
|
|
396
|
|
|
370
|
|
||||
Long-term debt – 2027 Notes
(2)
|
2
|
|
498
|
|
|
504
|
|
|
397
|
|
|
398
|
|
||||
Long-term debt – 2038 Notes
(2)
|
2
|
|
135
|
|
|
175
|
|
|
270
|
|
|
347
|
|
||||
Long-term debt – 2045 Notes
(2)
|
2
|
|
558
|
|
|
582
|
|
|
247
|
|
|
253
|
|
||||
Long-term debt – 2046 Notes
(2)
|
2
|
|
397
|
|
|
420
|
|
|
397
|
|
|
407
|
|
(1)
|
Cash equivalents and restricted cash equivalents are composed of certificates of deposit, money market funds, time deposits and other interest-bearing investments with original maturity dates of three months or less. Cash equivalents and restricted cash equivalents are recorded at cost, which approximates fair value.
|
(2)
|
The fair value amounts of long term debt were based on current market rates available to the
Company
. The difference between the fair value and the carrying value represents the theoretical net premium or discount that would be paid or received to retire all debt and related unamortized costs to be incurred at such date. The carrying amount includes the unamortized premium or discounts and issuance costs on the issuance of debt and impact of interest rate swaps designated as fair value hedges and other hedge related adjustments.
Refer to Note 7 for additional information
regarding the notes subject to fair value hedges.
|
|
For the Three Months Ended September 30,
|
|
For the Nine Months Ended September 30,
|
||||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Total stock-based compensation expense
|
$
|
10
|
|
|
$
|
11
|
|
|
$
|
26
|
|
|
$
|
33
|
|
Income tax benefit recognized in the Statements of Income
|
(4
|
)
|
|
(4
|
)
|
|
(9
|
)
|
|
(12
|
)
|
||||
Stock-based compensation expense, net of tax
|
$
|
6
|
|
|
$
|
7
|
|
|
$
|
17
|
|
|
$
|
21
|
|
|
Stock Options
|
|
Weighted Average Exercise Price
|
|
Weighted Average Remaining Contractual Term (Years)
|
|
Aggregate Intrinsic Value (in millions)
|
|||||
Outstanding as of January 1, 2017
|
1,342,921
|
|
|
$
|
70.83
|
|
|
7.93
|
|
$
|
27
|
|
Granted
|
423,745
|
|
|
94.62
|
|
|
|
|
|
|||
Exercised
|
(376,846
|
)
|
|
53.16
|
|
|
|
|
16
|
|
||
Forfeited or expired
|
(14,427
|
)
|
|
90.18
|
|
|
|
|
|
|||
Outstanding as of September 30, 2017
|
1,375,393
|
|
|
82.80
|
|
|
8.11
|
|
12
|
|
||
Exercisable as of September 30, 2017
|
559,491
|
|
|
70.53
|
|
|
7.16
|
|
10
|
|
|
RSUs
|
|
Weighted Average Grant Date Fair Value
|
|
Weighted Average Remaining Contractual Term (Years)
|
|
Aggregate Intrinsic Value (in millions)
|
|||||
Outstanding as of January 1, 2017
|
1,218,244
|
|
|
$
|
71.08
|
|
|
0.80
|
|
$
|
110
|
|
Granted
|
407,180
|
|
|
94.46
|
|
|
|
|
|
|||
Vested and released
|
(616,647
|
)
|
|
58.05
|
|
|
|
|
58
|
|
||
Forfeited
|
(48,320
|
)
|
|
89.89
|
|
|
|
|
|
|||
Outstanding as of September 30, 2017
|
960,457
|
|
|
88.41
|
|
|
1.06
|
|
85
|
|
|
PSUs
|
|
Weighted Average Grant Date Fair Value
|
|
Weighted Average Remaining Contractual Term (Years)
|
|
Aggregate Intrinsic Value (in millions)
|
|||||
Outstanding as of January 1, 2017
|
374,618
|
|
|
$
|
64.86
|
|
|
0.89
|
|
$
|
34
|
|
Granted
|
119,879
|
|
|
93.28
|
|
|
|
|
|
|||
Performance adjustment
(1)
|
146,807
|
|
|
76.17
|
|
|
|
|
|
|||
Vested and released
|
(296,821
|
)
|
|
51.78
|
|
|
|
|
28
|
|
||
Forfeited
|
(13,223
|
)
|
|
80.07
|
|
|
|
|
|
|||
Outstanding as of September 30, 2017
|
331,260
|
|
|
55.69
|
|
|
1.24
|
|
29
|
|
(1)
|
For
PSU
s which vested during the
nine months ended
September 30, 2017
, the Company awarded additional
PSU
s, as actual results measured at the end of the performance period exceeded target performance levels.
|
|
For the Three Months Ended September 30,
|
|
For the Nine Months Ended September 30,
|
||||||||||||
(in millions, except per share data)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Basic EPS:
|
|
|
|
|
|
|
|
||||||||
Net income
|
$
|
203
|
|
|
$
|
240
|
|
|
$
|
568
|
|
|
$
|
682
|
|
Weighted average common shares outstanding
|
181.4
|
|
|
184.8
|
|
|
182.7
|
|
|
186.1
|
|
||||
Earnings per common share — basic
|
$
|
1.12
|
|
|
$
|
1.30
|
|
|
$
|
3.11
|
|
|
$
|
3.66
|
|
Diluted EPS:
|
|
|
|
|
|
|
|
||||||||
Net income
|
$
|
203
|
|
|
$
|
240
|
|
|
$
|
568
|
|
|
$
|
682
|
|
Weighted average common shares outstanding
|
181.4
|
|
|
184.8
|
|
|
182.7
|
|
|
186.1
|
|
||||
Effect of dilutive securities:
|
|
|
|
|
|
|
|
||||||||
Stock options
|
0.2
|
|
|
0.2
|
|
|
0.2
|
|
|
0.2
|
|
||||
RSUs
|
0.4
|
|
|
0.7
|
|
|
0.5
|
|
|
0.7
|
|
||||
PSUs
|
0.1
|
|
|
—
|
|
|
0.1
|
|
|
0.1
|
|
||||
Weighted average common shares outstanding and common stock equivalents
|
182.1
|
|
|
185.7
|
|
|
183.5
|
|
|
187.1
|
|
||||
Earnings per common share — diluted
|
$
|
1.11
|
|
|
$
|
1.29
|
|
|
$
|
3.09
|
|
|
$
|
3.64
|
|
(in millions)
|
Foreign Currency Translation
|
|
Change in Pension Liability
|
|
Cash Flow Hedges
|
|
Accumulated Other Comprehensive Loss
|
||||||||
Balance as of July 1, 2017
|
$
|
(127
|
)
|
|
$
|
(36
|
)
|
|
$
|
(30
|
)
|
|
$
|
(193
|
)
|
OCI before reclassifications
|
1
|
|
|
3
|
|
|
—
|
|
|
4
|
|
||||
Amounts reclassified from AOCL
|
—
|
|
|
1
|
|
|
4
|
|
|
5
|
|
||||
Net current period OCI
|
1
|
|
|
4
|
|
|
4
|
|
|
9
|
|
||||
Balance as of September 30, 2017
|
$
|
(126
|
)
|
|
$
|
(32
|
)
|
|
$
|
(26
|
)
|
|
$
|
(184
|
)
|
(in millions)
|
Foreign Currency Translation
|
|
Change in Pension Liability
|
|
Cash Flow Hedges
|
|
Accumulated Other Comprehensive Loss
|
||||||||
Balance as of January 1, 2016
|
$
|
(125
|
)
|
|
$
|
(36
|
)
|
|
$
|
(34
|
)
|
|
$
|
(195
|
)
|
OCI before reclassifications
|
(39
|
)
|
|
(5
|
)
|
|
—
|
|
|
(44
|
)
|
||||
Amounts reclassified from AOCL
|
—
|
|
|
4
|
|
|
6
|
|
|
10
|
|
||||
Net current year OCI
|
(39
|
)
|
|
(1
|
)
|
|
6
|
|
|
(34
|
)
|
||||
Balance as of December 31, 2016
|
(164
|
)
|
|
(37
|
)
|
|
(28
|
)
|
|
(229
|
)
|
||||
OCI before reclassifications
|
38
|
|
|
3
|
|
|
(7
|
)
|
|
34
|
|
||||
Amounts reclassified from AOCL
|
—
|
|
|
2
|
|
|
9
|
|
|
11
|
|
||||
Net current period OCI
|
38
|
|
|
5
|
|
|
2
|
|
|
45
|
|
||||
Balance as of September 30, 2017
|
$
|
(126
|
)
|
|
$
|
(32
|
)
|
|
$
|
(26
|
)
|
|
$
|
(184
|
)
|
|
|
|
For the Three Months Ended September 30,
|
|
For the Nine Months Ended September 30,
|
||||||||||||
(in millions)
|
Location of Loss Reclassified from AOCL into Income
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Loss on cash flow hedges:
|
|
|
|
|
|
|
|
|
|
||||||||
Interest rate contracts
|
Interest expense
|
|
$
|
(2
|
)
|
|
$
|
(2
|
)
|
|
$
|
(6
|
)
|
|
$
|
(6
|
)
|
Foreign exchange forward contracts
|
Cost of sales
|
|
(3
|
)
|
|
—
|
|
|
(7
|
)
|
|
(1
|
)
|
||||
Total
|
|
|
(5
|
)
|
|
(2
|
)
|
|
(13
|
)
|
|
(7
|
)
|
||||
Income tax benefit
|
|
|
(1
|
)
|
|
(1
|
)
|
|
(4
|
)
|
|
(3
|
)
|
||||
Total
|
|
|
$
|
(4
|
)
|
|
$
|
(1
|
)
|
|
$
|
(9
|
)
|
|
$
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
||||||||
Defined benefit pension and postretirement plan items:
|
|
|
|
|
|
|
|
|
|
||||||||
Amortization of actuarial losses, net
|
SG&A expenses
|
|
$
|
(1
|
)
|
|
$
|
(1
|
)
|
|
$
|
(3
|
)
|
|
$
|
(3
|
)
|
Settlement loss
|
SG&A expenses
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
||||
Total
|
|
|
(2
|
)
|
|
(1
|
)
|
|
(4
|
)
|
|
(3
|
)
|
||||
Income tax benefit
|
|
|
(1
|
)
|
|
—
|
|
|
(2
|
)
|
|
(1
|
)
|
||||
Total
|
|
|
$
|
(1
|
)
|
|
$
|
(1
|
)
|
|
$
|
(2
|
)
|
|
$
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total reclassifications
|
|
|
$
|
(5
|
)
|
|
$
|
(2
|
)
|
|
$
|
(11
|
)
|
|
$
|
(6
|
)
|
|
September 30,
|
|
December 31,
|
||||
(in millions)
|
2017
|
|
2016
|
||||
Cash and cash equivalents
|
$
|
66
|
|
|
$
|
1,787
|
|
Restricted cash and restricted cash equivalents
(1)
|
89
|
|
|
—
|
|
||
Non-current restricted cash and restricted cash equivalents included in Other non-current assets
(1)
|
10
|
|
|
—
|
|
||
Total cash, cash equivalents, restricted cash and restricted cash equivalents shown in the unaudited Condensed Consolidated Statement of Cash Flows
|
$
|
165
|
|
|
$
|
1,787
|
|
(1)
|
Amounts included in restricted cash and restricted cash equivalents represent the holdback held in escrow in connection with the Bai Brands Merger.
Refer to Note 2 for additional information
on the Bai Brands Merger.
|
|
For the Nine Months Ended September 30,
|
||||||
(in millions)
|
2017
|
|
2016
|
||||
Supplemental cash flow disclosures of non-cash investing and financing activities:
|
|
|
|
||||
Dividends declared but not yet paid
|
$
|
106
|
|
|
$
|
97
|
|
Capital expenditures included in accounts payable and other current liabilities
|
19
|
|
|
14
|
|
||
Holdback liability for acquisition of business
|
88
|
|
|
—
|
|
||
Capital lease additions
|
28
|
|
|
17
|
|
||
Supplemental cash flow disclosures:
|
|
|
|
||||
Interest paid
|
$
|
88
|
|
|
$
|
59
|
|
Income taxes paid
|
221
|
|
|
301
|
|
•
|
The Beverage Concentrates segment reflects sales of the
Company
's branded concentrates and syrup to third-party bottlers primarily in the
U.S.
and Canada. Most of the brands in this segment are carbonated soft drink brands.
|
•
|
The Packaged Beverages Excluding Bai segment reflects sales in the
U.S.
and Canada from the manufacture and distribution of finished beverages and other products, including sales of the
Company
's own brands and third-party brands, through both the Direct Store Delivery system and the Warehouse Direct system.
|
•
|
The Bai segment reflects sales of Bai Brands finished goods to third party distributors, primarily in the U.S., as net sales to the Packaged Beverages Excluding Bai segment are eliminated in consolidation.
Refer to Note 2 for additional information
regarding the impact of Bai Brands on the Company's net sales presented in the
unaudited Condensed Consolidated
Statements of Income.
|
•
|
The Latin America Beverages segment reflects sales in Mexico, the Caribbean, and other international markets from the manufacture and distribution of concentrates, syrup and finished beverages.
|
|
For the Three Months Ended September 30,
|
|
For the Nine Months Ended September 30,
|
||||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Segment Results – Net sales
|
|
|
|
|
|
|
|
||||||||
Beverage Concentrates
|
$
|
334
|
|
|
$
|
323
|
|
|
$
|
984
|
|
|
$
|
952
|
|
Packaged Beverages
|
1,273
|
|
|
1,236
|
|
|
3,693
|
|
|
3,558
|
|
||||
Latin America Beverages
|
133
|
|
|
121
|
|
|
370
|
|
|
352
|
|
||||
Net sales
|
$
|
1,740
|
|
|
$
|
1,680
|
|
|
$
|
5,047
|
|
|
$
|
4,862
|
|
|
For the Three Months Ended September 30,
|
|
For the Nine Months Ended September 30,
|
||||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Segment Results – SOP
|
|
|
|
|
|
|
|
||||||||
Beverage Concentrates
|
$
|
218
|
|
|
$
|
205
|
|
|
$
|
641
|
|
|
$
|
622
|
|
Packaged Beverages
|
189
|
|
|
208
|
|
|
526
|
|
|
592
|
|
||||
Latin America Beverages
|
12
|
|
|
21
|
|
|
47
|
|
|
60
|
|
||||
Total SOP
|
419
|
|
|
434
|
|
|
1,214
|
|
|
1,274
|
|
||||
Unallocated corporate costs
|
52
|
|
|
64
|
|
|
219
|
|
|
180
|
|
||||
Other operating income, net
|
—
|
|
|
(3
|
)
|
|
(30
|
)
|
|
(4
|
)
|
||||
Income from operations
|
367
|
|
|
373
|
|
|
1,025
|
|
|
1,098
|
|
||||
Interest expense, net
|
39
|
|
|
32
|
|
|
121
|
|
|
97
|
|
||||
Loss on early extinguishment of debt
|
13
|
|
|
—
|
|
|
62
|
|
|
—
|
|
||||
Other income, net
|
(2
|
)
|
|
(2
|
)
|
|
(6
|
)
|
|
(25
|
)
|
||||
Income before provision for income taxes and equity in earnings of unconsolidated subsidiaries
|
$
|
317
|
|
|
$
|
343
|
|
|
$
|
848
|
|
|
$
|
1,026
|
|
|
September 30,
|
|
December 31,
|
||||
(in millions)
|
2017
|
|
2016
|
||||
Identifiable operating assets
|
|
|
|
|
|
||
Beverage Concentrates
|
$
|
4,163
|
|
|
$
|
4,108
|
|
Packaged Beverages
(1)
|
5,291
|
|
|
3,474
|
|
||
Latin America Beverages
|
351
|
|
|
312
|
|
||
Segment total
|
9,805
|
|
|
7,894
|
|
||
Corporate and other
(1)
|
210
|
|
|
1,874
|
|
||
Total identifiable operating assets
|
10,015
|
|
|
9,768
|
|
||
Investments in unconsolidated subsidiaries
|
24
|
|
|
23
|
|
||
Total assets
|
$
|
10,039
|
|
|
$
|
9,791
|
|
(1)
|
The primary driver of the change in identifiable operating assets from
December 31,
2016
to
September 30,
2017
in the Packaged Beverages segment and Corporate and other is the Bai Brands Merger.
Refer to Note 2 for additional information
about the Bai Brands Merger.
|
|
Condensed Consolidating Statements of Income
|
||||||||||||||||||
|
For the Three Months Ended September 30, 2017
|
||||||||||||||||||
(in millions)
|
Parent
|
|
Guarantors
|
|
Non-Guarantors
|
|
Eliminations
|
|
Total
|
||||||||||
Net sales
|
$
|
—
|
|
|
$
|
1,585
|
|
|
$
|
191
|
|
|
$
|
(36
|
)
|
|
$
|
1,740
|
|
Cost of sales
|
—
|
|
|
637
|
|
|
106
|
|
|
(36
|
)
|
|
707
|
|
|||||
Gross profit
|
—
|
|
|
948
|
|
|
85
|
|
|
—
|
|
|
1,033
|
|
|||||
Selling, general and administrative expenses
|
2
|
|
|
582
|
|
|
56
|
|
|
—
|
|
|
640
|
|
|||||
Depreciation and amortization
|
—
|
|
|
24
|
|
|
2
|
|
|
—
|
|
|
26
|
|
|||||
Other operating (income) expense, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Income from operations
|
(2
|
)
|
|
342
|
|
|
27
|
|
|
—
|
|
|
367
|
|
|||||
Interest expense
|
71
|
|
|
22
|
|
|
—
|
|
|
(53
|
)
|
|
40
|
|
|||||
Interest income
|
(19
|
)
|
|
(34
|
)
|
|
(1
|
)
|
|
53
|
|
|
(1
|
)
|
|||||
Loss on extinguishment of debt
|
13
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
13
|
|
|||||
Other (income) expense, net
|
(1
|
)
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
|||||
Income (loss) before provision (benefit) for income taxes and equity in earnings of subsidiaries
|
(66
|
)
|
|
355
|
|
|
28
|
|
|
—
|
|
|
317
|
|
|||||
Provision (benefit) for income taxes
|
(24
|
)
|
|
132
|
|
|
6
|
|
|
—
|
|
|
114
|
|
|||||
Income (loss) before equity in earnings of subsidiaries
|
(42
|
)
|
|
223
|
|
|
22
|
|
|
—
|
|
|
203
|
|
|||||
Equity in earnings of consolidated subsidiaries
|
245
|
|
|
22
|
|
|
—
|
|
|
(267
|
)
|
|
—
|
|
|||||
Equity in earnings of unconsolidated subsidiaries, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Net income
|
$
|
203
|
|
|
$
|
245
|
|
|
$
|
22
|
|
|
$
|
(267
|
)
|
|
$
|
203
|
|
|
Condensed Consolidating Statements of Income
|
||||||||||||||||||
|
For the Three Months Ended September 30, 2016
|
||||||||||||||||||
(in millions)
|
Parent
|
|
Guarantors
|
|
Non-Guarantors
|
|
Eliminations
|
|
Total
|
||||||||||
Net sales
|
$
|
—
|
|
|
$
|
1,547
|
|
|
$
|
167
|
|
|
$
|
(34
|
)
|
|
$
|
1,680
|
|
Cost of sales
|
—
|
|
|
632
|
|
|
85
|
|
|
(34
|
)
|
|
683
|
|
|||||
Gross profit
|
—
|
|
|
915
|
|
|
82
|
|
|
—
|
|
|
$
|
997
|
|
||||
Selling, general and administrative expenses
|
1
|
|
|
550
|
|
|
52
|
|
|
—
|
|
|
603
|
|
|||||
Depreciation and amortization
|
—
|
|
|
22
|
|
|
2
|
|
|
—
|
|
|
24
|
|
|||||
Other operating (income) expense, net
|
—
|
|
|
1
|
|
|
(4
|
)
|
|
—
|
|
|
(3
|
)
|
|||||
Income from operations
|
(1
|
)
|
|
342
|
|
|
32
|
|
|
—
|
|
|
373
|
|
|||||
Interest expense
|
58
|
|
|
17
|
|
|
—
|
|
|
(42
|
)
|
|
33
|
|
|||||
Interest income
|
(14
|
)
|
|
(27
|
)
|
|
(2
|
)
|
|
42
|
|
|
(1
|
)
|
|||||
Other (income) expense, net
|
12
|
|
|
(15
|
)
|
|
1
|
|
|
—
|
|
|
(2
|
)
|
|||||
Income (loss) before provision (benefit) for income taxes and equity in earnings of subsidiaries
|
(57
|
)
|
|
367
|
|
|
33
|
|
|
—
|
|
|
343
|
|
|||||
Provision (benefit) for income taxes
|
(21
|
)
|
|
113
|
|
|
10
|
|
|
—
|
|
|
102
|
|
|||||
Income (loss) before equity in earnings of subsidiaries
|
(36
|
)
|
|
254
|
|
|
23
|
|
|
—
|
|
|
241
|
|
|||||
Equity in earnings of consolidated subsidiaries
|
276
|
|
|
24
|
|
|
—
|
|
|
(300
|
)
|
|
—
|
|
|||||
Equity in earnings of unconsolidated subsidiaries, net of tax
|
—
|
|
|
(2
|
)
|
|
1
|
|
|
—
|
|
|
(1
|
)
|
|||||
Net income
|
$
|
240
|
|
|
$
|
276
|
|
|
$
|
24
|
|
|
$
|
(300
|
)
|
|
$
|
240
|
|
|
Condensed Consolidating Statements of Income
|
||||||||||||||||||
|
For the Nine Months Ended September 30, 2017
|
||||||||||||||||||
(in millions)
|
Parent
|
|
Guarantors
|
|
Non-Guarantors
|
|
Eliminations
|
|
Total
|
||||||||||
Net sales
|
$
|
—
|
|
|
$
|
4,639
|
|
|
$
|
520
|
|
|
$
|
(112
|
)
|
|
$
|
5,047
|
|
Cost of sales
|
—
|
|
|
1,859
|
|
|
285
|
|
|
(112
|
)
|
|
2,032
|
|
|||||
Gross profit
|
—
|
|
|
2,780
|
|
|
235
|
|
|
—
|
|
|
3,015
|
|
|||||
Selling, general and administrative expenses
|
5
|
|
|
1,782
|
|
|
157
|
|
|
—
|
|
|
1,944
|
|
|||||
Depreciation and amortization
|
—
|
|
|
70
|
|
|
6
|
|
|
—
|
|
|
76
|
|
|||||
Other operating income, net
|
—
|
|
|
(30
|
)
|
|
—
|
|
|
—
|
|
|
(30
|
)
|
|||||
Income from operations
|
(5
|
)
|
|
958
|
|
|
72
|
|
|
—
|
|
|
1,025
|
|
|||||
Interest expense
|
206
|
|
|
61
|
|
|
—
|
|
|
(143
|
)
|
|
124
|
|
|||||
Interest income
|
(53
|
)
|
|
(91
|
)
|
|
(2
|
)
|
|
143
|
|
|
(3
|
)
|
|||||
Loss on extinguishment of debt
|
62
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
62
|
|
|||||
Other (income) expense, net
|
(7
|
)
|
|
(2
|
)
|
|
3
|
|
|
—
|
|
|
(6
|
)
|
|||||
Income (loss) before provision (benefit) for income taxes and equity in earnings of subsidiaries
|
(213
|
)
|
|
990
|
|
|
71
|
|
|
—
|
|
|
848
|
|
|||||
Provision (benefit) for income taxes
|
(78
|
)
|
|
340
|
|
|
17
|
|
|
—
|
|
|
279
|
|
|||||
Income (loss) before equity in earnings of subsidiaries
|
(135
|
)
|
|
650
|
|
|
54
|
|
|
—
|
|
|
569
|
|
|||||
Equity in earnings of consolidated subsidiaries
|
703
|
|
|
54
|
|
|
—
|
|
|
(757
|
)
|
|
—
|
|
|||||
Equity in earnings of unconsolidated subsidiaries, net of tax
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|||||
Net income
|
$
|
568
|
|
|
$
|
703
|
|
|
$
|
54
|
|
|
$
|
(757
|
)
|
|
$
|
568
|
|
|
Condensed Consolidating Statements of Income
|
||||||||||||||||||
|
For the Nine Months Ended September 30, 2016
|
||||||||||||||||||
(in millions)
|
Parent
|
|
Guarantors
|
|
Non-Guarantors
|
|
Eliminations
|
|
Total
|
||||||||||
Net sales
|
$
|
—
|
|
|
$
|
4,475
|
|
|
$
|
486
|
|
|
$
|
(99
|
)
|
|
$
|
4,862
|
|
Cost of sales
|
—
|
|
|
1,811
|
|
|
243
|
|
|
(99
|
)
|
|
1,955
|
|
|||||
Gross profit
|
—
|
|
|
2,664
|
|
|
243
|
|
|
—
|
|
|
2,907
|
|
|||||
Selling, general and administrative expenses
|
2
|
|
|
1,583
|
|
|
154
|
|
|
—
|
|
|
1,739
|
|
|||||
Depreciation and amortization
|
—
|
|
|
69
|
|
|
5
|
|
|
—
|
|
|
74
|
|
|||||
Other operating income, net
|
—
|
|
|
1
|
|
|
(5
|
)
|
|
—
|
|
|
(4
|
)
|
|||||
Income from operations
|
(2
|
)
|
|
1,011
|
|
|
89
|
|
|
—
|
|
|
1,098
|
|
|||||
Interest expense
|
166
|
|
|
51
|
|
|
—
|
|
|
(118
|
)
|
|
99
|
|
|||||
Interest income
|
(40
|
)
|
|
(75
|
)
|
|
(5
|
)
|
|
118
|
|
|
(2
|
)
|
|||||
Other (income) expense, net
|
9
|
|
|
(39
|
)
|
|
5
|
|
|
—
|
|
|
(25
|
)
|
|||||
Income (loss) before provision (benefit) for income taxes and equity in earnings of subsidiaries
|
(137
|
)
|
|
1,074
|
|
|
89
|
|
|
—
|
|
|
1,026
|
|
|||||
Provision (benefit) for income taxes
|
(51
|
)
|
|
369
|
|
|
25
|
|
|
—
|
|
|
343
|
|
|||||
Income (loss) before equity in earnings of subsidiaries
|
(86
|
)
|
|
705
|
|
|
64
|
|
|
—
|
|
|
683
|
|
|||||
Equity in earnings of consolidated subsidiaries
|
768
|
|
|
65
|
|
|
—
|
|
|
(833
|
)
|
|
—
|
|
|||||
Equity in earnings of unconsolidated subsidiaries, net of tax
|
—
|
|
|
(2
|
)
|
|
1
|
|
|
—
|
|
|
(1
|
)
|
|||||
Net income
|
$
|
682
|
|
|
$
|
768
|
|
|
$
|
65
|
|
|
$
|
(833
|
)
|
|
$
|
682
|
|
|
Condensed Consolidating Statements of Comprehensive Income
|
||||||||||||||||||
|
For the Three Months Ended September 30, 2017
|
||||||||||||||||||
(in millions)
|
Parent
|
|
Guarantors
|
|
Non-Guarantors
|
|
Eliminations
|
|
Total
|
||||||||||
Comprehensive income (loss)
|
$
|
212
|
|
|
$
|
253
|
|
|
$
|
26
|
|
|
$
|
(279
|
)
|
|
$
|
212
|
|
|
Condensed Consolidating Statements of Comprehensive Income
|
||||||||||||||||||
|
For the Three Months Ended September 30, 2016
|
||||||||||||||||||
(in millions)
|
Parent
|
|
Guarantors
|
|
Non-Guarantors
|
|
Eliminations
|
|
Total
|
||||||||||
Comprehensive income (loss)
|
$
|
229
|
|
|
$
|
263
|
|
|
$
|
9
|
|
|
$
|
(272
|
)
|
|
$
|
229
|
|
|
Condensed Consolidating Statements of Comprehensive Income
|
||||||||||||||||||
|
For the Nine Months Ended September 30, 2017
|
||||||||||||||||||
(in millions)
|
Parent
|
|
Guarantors
|
|
Non-Guarantors
|
|
Eliminations
|
|
Total
|
||||||||||
Comprehensive income (loss)
|
$
|
613
|
|
|
$
|
744
|
|
|
$
|
90
|
|
|
$
|
(834
|
)
|
|
$
|
613
|
|
|
Condensed Consolidating Statements of Comprehensive Income
|
||||||||||||||||||
|
For the Nine Months Ended September 30, 2016
|
||||||||||||||||||
(in millions)
|
Parent
|
|
Guarantors
|
|
Non-Guarantors
|
|
Eliminations
|
|
Total
|
||||||||||
Comprehensive income (loss)
|
$
|
664
|
|
|
$
|
748
|
|
|
$
|
54
|
|
|
$
|
(802
|
)
|
|
$
|
664
|
|
|
Condensed Consolidating Balance Sheets
|
||||||||||||||||||
|
As of September 30, 2017
|
||||||||||||||||||
(in millions)
|
Parent
|
|
Guarantors
|
|
Non-Guarantors
|
|
Eliminations
|
|
Total
|
||||||||||
Current assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash and cash equivalents
|
$
|
—
|
|
|
$
|
16
|
|
|
$
|
50
|
|
|
$
|
—
|
|
|
$
|
66
|
|
Restricted cash and cash equivalents
|
—
|
|
|
89
|
|
|
—
|
|
|
—
|
|
|
89
|
|
|||||
Accounts receivable:
|
|
|
|
|
|
|
|
|
|
||||||||||
Trade, net
|
—
|
|
|
585
|
|
|
74
|
|
|
—
|
|
|
659
|
|
|||||
Other
|
7
|
|
|
36
|
|
|
4
|
|
|
—
|
|
|
47
|
|
|||||
Related party receivable
|
19
|
|
|
38
|
|
|
—
|
|
|
(57
|
)
|
|
—
|
|
|||||
Inventories
|
—
|
|
|
228
|
|
|
33
|
|
|
—
|
|
|
261
|
|
|||||
Prepaid expenses and other current assets
|
449
|
|
|
131
|
|
|
18
|
|
|
(454
|
)
|
|
144
|
|
|||||
Total current assets
|
475
|
|
|
1,123
|
|
|
179
|
|
|
(511
|
)
|
|
1,266
|
|
|||||
Property, plant and equipment, net
|
—
|
|
|
988
|
|
|
141
|
|
|
—
|
|
|
1,129
|
|
|||||
Investments in consolidated subsidiaries
|
8,832
|
|
|
344
|
|
|
—
|
|
|
(9,176
|
)
|
|
—
|
|
|||||
Investments in unconsolidated subsidiaries
|
—
|
|
|
24
|
|
|
—
|
|
|
—
|
|
|
24
|
|
|||||
Goodwill
|
—
|
|
|
3,535
|
|
|
24
|
|
|
—
|
|
|
3,559
|
|
|||||
Other intangible assets, net
|
—
|
|
|
3,733
|
|
|
53
|
|
|
—
|
|
|
3,786
|
|
|||||
Long-term receivable, related parties
|
3,259
|
|
|
5,957
|
|
|
—
|
|
|
(9,216
|
)
|
|
—
|
|
|||||
Other non-current assets
|
69
|
|
|
126
|
|
|
20
|
|
|
—
|
|
|
215
|
|
|||||
Deferred tax assets
|
18
|
|
|
—
|
|
|
60
|
|
|
(18
|
)
|
|
60
|
|
|||||
Total assets
|
$
|
12,653
|
|
|
$
|
15,830
|
|
|
$
|
477
|
|
|
$
|
(18,921
|
)
|
|
$
|
10,039
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Current liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Accounts payable
|
$
|
—
|
|
|
$
|
354
|
|
|
$
|
33
|
|
|
$
|
—
|
|
|
$
|
387
|
|
Related party payable
|
34
|
|
|
19
|
|
|
4
|
|
|
(57
|
)
|
|
—
|
|
|||||
Deferred revenue
|
—
|
|
|
70
|
|
|
1
|
|
|
(7
|
)
|
|
64
|
|
|||||
Short-term borrowings and current portion of long-term obligations
|
70
|
|
|
12
|
|
|
—
|
|
|
—
|
|
|
82
|
|
|||||
Income taxes payable
|
—
|
|
|
455
|
|
|
2
|
|
|
(447
|
)
|
|
10
|
|
|||||
Other current liabilities
|
159
|
|
|
603
|
|
|
54
|
|
|
—
|
|
|
816
|
|
|||||
Total current liabilities
|
263
|
|
|
1,513
|
|
|
94
|
|
|
(511
|
)
|
|
1,359
|
|
|||||
Long-term obligations to third parties
|
4,239
|
|
|
160
|
|
|
—
|
|
|
—
|
|
|
4,399
|
|
|||||
Long-term obligations to related parties
|
5,957
|
|
|
3,259
|
|
|
—
|
|
|
(9,216
|
)
|
|
—
|
|
|||||
Deferred tax liabilities
|
—
|
|
|
895
|
|
|
—
|
|
|
(18
|
)
|
|
877
|
|
|||||
Non-current deferred revenue
|
—
|
|
|
1,044
|
|
|
27
|
|
|
—
|
|
|
1,071
|
|
|||||
Other non-current liabilities
|
65
|
|
|
127
|
|
|
12
|
|
|
—
|
|
|
204
|
|
|||||
Total liabilities
|
10,524
|
|
|
6,998
|
|
|
133
|
|
|
(9,745
|
)
|
|
7,910
|
|
|||||
Total stockholders' equity
|
2,129
|
|
|
8,832
|
|
|
344
|
|
|
(9,176
|
)
|
|
2,129
|
|
|||||
Total liabilities and stockholders' equity
|
$
|
12,653
|
|
|
$
|
15,830
|
|
|
$
|
477
|
|
|
$
|
(18,921
|
)
|
|
$
|
10,039
|
|
|
Condensed Consolidating Balance Sheets
|
||||||||||||||||||
|
As of December 31, 2016
|
||||||||||||||||||
(in millions)
|
Parent
|
|
Guarantors
|
|
Non-Guarantors
|
|
Eliminations
|
|
Total
|
||||||||||
Current assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash and cash equivalents
|
$
|
—
|
|
|
$
|
1,736
|
|
|
$
|
51
|
|
|
$
|
—
|
|
|
$
|
1,787
|
|
Restricted cash and cash equivalents
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Accounts receivable:
|
|
|
|
|
|
|
|
|
|
||||||||||
Trade, net
|
—
|
|
|
540
|
|
|
55
|
|
|
—
|
|
|
595
|
|
|||||
Other
|
3
|
|
|
39
|
|
|
9
|
|
|
—
|
|
|
51
|
|
|||||
Related party receivable
|
15
|
|
|
37
|
|
|
—
|
|
|
(52
|
)
|
|
—
|
|
|||||
Inventories
|
—
|
|
|
178
|
|
|
24
|
|
|
—
|
|
|
202
|
|
|||||
Prepaid and other current assets
|
379
|
|
|
84
|
|
|
7
|
|
|
(369
|
)
|
|
101
|
|
|||||
Total current assets
|
397
|
|
|
2,614
|
|
|
146
|
|
|
(421
|
)
|
|
2,736
|
|
|||||
Property, plant and equipment, net
|
—
|
|
|
1,007
|
|
|
131
|
|
|
—
|
|
|
1,138
|
|
|||||
Investments in consolidated subsidiaries
|
8,067
|
|
|
302
|
|
|
—
|
|
|
(8,369
|
)
|
|
—
|
|
|||||
Investments in unconsolidated subsidiaries
|
—
|
|
|
23
|
|
|
—
|
|
|
—
|
|
|
23
|
|
|||||
Goodwill
|
—
|
|
|
2,972
|
|
|
21
|
|
|
—
|
|
|
2,993
|
|
|||||
Other intangible assets, net
|
—
|
|
|
2,609
|
|
|
47
|
|
|
—
|
|
|
2,656
|
|
|||||
Long-term receivable, related parties
|
3,209
|
|
|
5,077
|
|
|
—
|
|
|
(8,286
|
)
|
|
—
|
|
|||||
Other non-current assets
|
64
|
|
|
107
|
|
|
12
|
|
|
—
|
|
|
183
|
|
|||||
Deferred tax assets
|
20
|
|
|
—
|
|
|
62
|
|
|
(20
|
)
|
|
62
|
|
|||||
Total assets
|
$
|
11,757
|
|
|
$
|
14,711
|
|
|
$
|
419
|
|
|
$
|
(17,096
|
)
|
|
$
|
9,791
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Current liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Accounts payable
|
$
|
—
|
|
|
$
|
276
|
|
|
$
|
27
|
|
|
$
|
—
|
|
|
$
|
303
|
|
Related party payable
|
31
|
|
|
14
|
|
|
7
|
|
|
(52
|
)
|
|
—
|
|
|||||
Deferred revenue
|
—
|
|
|
63
|
|
|
1
|
|
|
—
|
|
|
64
|
|
|||||
Short-term borrowings and current portion of long-term obligations
|
—
|
|
|
10
|
|
|
—
|
|
|
—
|
|
|
10
|
|
|||||
Income taxes payable
|
—
|
|
|
372
|
|
|
1
|
|
|
(369
|
)
|
|
4
|
|
|||||
Other current liabilities
|
128
|
|
|
502
|
|
|
40
|
|
|
—
|
|
|
670
|
|
|||||
Total current liabilities
|
159
|
|
|
1,237
|
|
|
76
|
|
|
(421
|
)
|
|
1,051
|
|
|||||
Long-term obligations to third parties
|
4,325
|
|
|
143
|
|
|
—
|
|
|
—
|
|
|
4,468
|
|
|||||
Long-term obligations to related parties
|
5,077
|
|
|
3,209
|
|
|
—
|
|
|
(8,286
|
)
|
|
—
|
|
|||||
Deferred tax liabilities
|
(1
|
)
|
|
833
|
|
|
—
|
|
|
(20
|
)
|
|
812
|
|
|||||
Non-current deferred revenue
|
—
|
|
|
1,091
|
|
|
26
|
|
|
—
|
|
|
1,117
|
|
|||||
Other non-current liabilities
|
63
|
|
|
131
|
|
|
15
|
|
|
—
|
|
|
209
|
|
|||||
Total liabilities
|
9,623
|
|
|
6,644
|
|
|
117
|
|
|
(8,727
|
)
|
|
7,657
|
|
|||||
Total stockholders' equity
|
2,134
|
|
|
8,067
|
|
|
302
|
|
|
(8,369
|
)
|
|
2,134
|
|
|||||
Total liabilities and stockholders' equity
|
$
|
11,757
|
|
|
$
|
14,711
|
|
|
$
|
419
|
|
|
$
|
(17,096
|
)
|
|
$
|
9,791
|
|
|
Condensed Consolidating Statements of Cash Flows
|
||||||||||||||||||
|
For the Nine Months Ended September 30, 2017
|
||||||||||||||||||
(in millions)
|
Parent
|
|
Guarantors
|
|
Non-Guarantors
|
|
Eliminations
|
|
Total
|
||||||||||
Operating activities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Net cash (used in) provided by operating activities
|
$
|
(166
|
)
|
|
$
|
896
|
|
|
$
|
50
|
|
|
$
|
(48
|
)
|
|
$
|
732
|
|
Investing activities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Acquisition of business
|
—
|
|
|
(1,553
|
)
|
|
—
|
|
|
—
|
|
|
(1,553
|
)
|
|||||
Cash acquired in step acquisition of unconsolidated subsidiaries
|
—
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|||||
Purchase of property, plant and equipment
|
—
|
|
|
(76
|
)
|
|
(9
|
)
|
|
—
|
|
|
(85
|
)
|
|||||
Investment in unconsolidated subsidiaries
|
—
|
|
|
(3
|
)
|
|
—
|
|
|
—
|
|
|
(3
|
)
|
|||||
Purchase of intangible assets
|
—
|
|
|
(5
|
)
|
|
—
|
|
|
—
|
|
|
(5
|
)
|
|||||
Proceeds from disposals of property, plant and equipment
|
—
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|||||
Issuance of related party notes receivable
|
—
|
|
|
(881
|
)
|
|
—
|
|
|
881
|
|
|
—
|
|
|||||
Other, net
|
(6
|
)
|
|
3
|
|
|
—
|
|
|
—
|
|
|
(3
|
)
|
|||||
Net cash (used in) provided by investing activities
|
(6
|
)
|
|
(2,509
|
)
|
|
(9
|
)
|
|
881
|
|
|
(1,643
|
)
|
|||||
Financing activities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Proceeds from issuance of related party debt
|
881
|
|
|
—
|
|
|
—
|
|
|
(881
|
)
|
|
—
|
|
|||||
Proceeds from issuance of senior unsecured notes
|
400
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
400
|
|
|||||
Repayment of senior unsecured notes
|
(562
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(562
|
)
|
|||||
Net issuance of commercial paper
|
70
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
70
|
|
|||||
Repurchase of shares of common stock
|
(320
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(320
|
)
|
|||||
Dividends paid
|
(309
|
)
|
|
—
|
|
|
(48
|
)
|
|
48
|
|
|
(309
|
)
|
|||||
Tax withholdings related to net share settlements of certain stock awards
|
(30
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(30
|
)
|
|||||
Proceeds from stock options exercised
|
20
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
20
|
|
|||||
Premium (discount) on issuance of senior unsecured notes
|
16
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
16
|
|
|||||
Proceeds from termination of interest rate swap
|
13
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
13
|
|
|||||
Deferred financing charges paid
|
(5
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5
|
)
|
|||||
Capital lease payments
|
—
|
|
|
(8
|
)
|
|
—
|
|
|
—
|
|
|
(8
|
)
|
|||||
Other, net
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
|||||
Net cash (used in) provided by financing activities
|
172
|
|
|
(8
|
)
|
|
(48
|
)
|
|
(833
|
)
|
|
(717
|
)
|
|||||
Cash and cash equivalents — net change from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Operating, investing and financing activities
|
—
|
|
|
(1,621
|
)
|
|
(7
|
)
|
|
—
|
|
|
(1,628
|
)
|
|||||
Effect of exchange rate changes on cash and cash equivalents
|
—
|
|
|
—
|
|
|
6
|
|
|
—
|
|
|
6
|
|
|||||
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period
|
—
|
|
|
1,736
|
|
|
51
|
|
|
—
|
|
|
1,787
|
|
|||||
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period
|
$
|
—
|
|
|
$
|
115
|
|
|
$
|
50
|
|
|
$
|
—
|
|
|
$
|
165
|
|
|
Condensed Consolidating Statements of Cash Flows
|
||||||||||||||||||
|
For the Nine Months Ended September 30, 2016
|
||||||||||||||||||
(in millions)
|
Parent
|
|
Guarantors
|
|
Non-Guarantors
|
|
Eliminations
|
|
Total
|
||||||||||
Operating activities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Net cash (used in) provided by operating activities
|
$
|
(125
|
)
|
|
$
|
765
|
|
|
$
|
65
|
|
|
$
|
—
|
|
|
$
|
705
|
|
Investing activities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Acquisition of business
|
—
|
|
|
—
|
|
|
(15
|
)
|
|
—
|
|
|
(15
|
)
|
|||||
Cash acquired in step acquisition of unconsolidated subsidiaries
|
—
|
|
|
—
|
|
|
17
|
|
|
—
|
|
|
17
|
|
|||||
Purchase of property, plant and equipment
|
—
|
|
|
(79
|
)
|
|
(31
|
)
|
|
—
|
|
|
(110
|
)
|
|||||
Purchase of intangible assets
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
|||||
Purchase of cost method investment
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|||||
Investments in unconsolidated subsidiaries
|
—
|
|
|
(6
|
)
|
|
—
|
|
|
—
|
|
|
(6
|
)
|
|||||
Proceeds from disposals of property, plant and equipment
|
—
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|||||
Issuance of related party notes receivable
|
—
|
|
|
(1,002
|
)
|
|
—
|
|
|
1,002
|
|
|
—
|
|
|||||
Other, net
|
(7
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(7
|
)
|
|||||
Net cash (used in) provided by investing activities
|
(7
|
)
|
|
(1,084
|
)
|
|
(30
|
)
|
|
1,002
|
|
|
(119
|
)
|
|||||
Financing activities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Proceeds from issuance of related party debt
|
1,002
|
|
|
—
|
|
|
—
|
|
|
(1,002
|
)
|
|
—
|
|
|||||
Proceeds from issuance of senior unsecured notes
|
400
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
400
|
|
|||||
Repayment of senior unsecured notes
|
(500
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(500
|
)
|
|||||
Repurchase of shares of common stock
|
(460
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(460
|
)
|
|||||
Dividends paid
|
(288
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(288
|
)
|
|||||
Tax withholdings related to net share settlements of certain stock awards
|
(31
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(31
|
)
|
|||||
Proceeds from stock options exercised
|
14
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
14
|
|
|||||
Premium (discount) on issuance of senior unsecured notes
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|||||
Deferred financing charges paid
|
(3
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3
|
)
|
|||||
Capital lease payments
|
—
|
|
|
(6
|
)
|
|
—
|
|
|
—
|
|
|
(6
|
)
|
|||||
Other, net
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|||||
Net cash (used in) provided by financing activities
|
132
|
|
|
(6
|
)
|
|
—
|
|
|
(1,002
|
)
|
|
(876
|
)
|
|||||
Cash and cash equivalents — net change from:
|
|
|
|
|
|
|
|
|
|
||||||||||
Operating, investing and financing activities
|
—
|
|
|
(325
|
)
|
|
35
|
|
|
—
|
|
|
(290
|
)
|
|||||
Effect of exchange rate changes on cash and cash equivalents
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
|||||
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period
|
—
|
|
|
859
|
|
|
52
|
|
|
—
|
|
|
911
|
|
|||||
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period
|
$
|
—
|
|
|
$
|
534
|
|
|
$
|
86
|
|
|
$
|
—
|
|
|
$
|
620
|
|
•
|
Net income decreased
$37 million
driven primarily by the impact of the Bai Brands Merger, the loss on early extinguishment of debt as we completed a redemption of the remaining 2018 Notes during the three months ended
September 30, 2017
, the impact of a
$6 million
default by a supplier of resin to our operations in Mexico and the unfavorable comparison to the non-taxable gain of $5 million associated with the step-acquisition within our Latin America Beverages segment recorded in the prior year period.
|
•
|
During July 2017, we completed a redemption of the remainder of our 2018 Notes and retired, at a premium, an aggregate principal amount of approximately $301 million. The loss on early extinguishment of the 2018 Notes was $13 million, which decreased diluted earnings per share by $0.04 for both the
three and nine months ended September 30, 2017
.
|
•
|
On January 31, 2017, we completed the Bai Brands Merger. For the
three and nine months ended September 30, 2017
, the primary impacts of the Bai Brands Merger decreased diluted earnings per share in total by $0.07 and $0.22, respectively.
|
◦
|
The interest expense associated with the financing to complete the Bai Brands Merger, which decreased diluted earnings per share by $0.05 and $0.13 for the
three and nine months ended September 30, 2017
, respectively;
|
◦
|
The ongoing operations of Bai Brands, which decreased diluted earnings per share by $0.01 and $0.11 for the
three and nine months ended September 30, 2017
, respectively;
|
◦
|
The associated transaction and integration expenses, which decreased diluted earnings per share by $0.01 and $0.08 for the
three and nine months ended September 30, 2017
, respectively; and
|
◦
|
The gain on the step-acquisition of Bai Brands, which increased diluted earnings per share by
$0.10
for the nine months ended September 30, 2017.
|
•
|
While the recent hurricanes and earthquakes that hit the U.S. and Mexico during the third quarter of 2017 caused disruptions to our operations, we did not sustain any material loss of distribution or production. We continue to assess the impact of these events, which primarily occurred just before the end of our third quarter of 2017.
|
•
|
During the
three and nine months ended September 30, 2017
, we repurchased
1.6 million
and
3.5 million
shares of our common stock valued at approximately
$143 million
and
$320 million
, respectively.
|
|
For the Three Months Ended September 30,
|
|
|
|
|
|||||||||||||||
|
2017
|
|
2016
|
|
Dollar
|
|
Percentage
|
|||||||||||||
($ in millions)
|
Dollars
|
|
Percent
|
|
Dollars
|
|
Percent
|
|
Change
|
|
Change
|
|||||||||
Net sales
|
$
|
1,740
|
|
|
100.0
|
%
|
|
$
|
1,680
|
|
|
100.0
|
%
|
|
$
|
60
|
|
|
4
|
%
|
Cost of sales
|
707
|
|
|
40.6
|
|
|
683
|
|
|
40.7
|
|
|
24
|
|
|
4
|
|
|||
Gross profit
|
1,033
|
|
|
59.4
|
|
|
997
|
|
|
59.3
|
|
|
36
|
|
|
4
|
|
|||
Selling, general and administrative expenses
|
640
|
|
|
36.8
|
|
|
603
|
|
|
35.9
|
|
|
37
|
|
|
6
|
|
|||
Income from operations
|
367
|
|
|
21.1
|
|
|
373
|
|
|
22.2
|
|
|
(6)
|
|
|
(2
|
)
|
|||
Interest expense
|
40
|
|
|
2.3
|
|
|
33
|
|
|
2.0
|
|
|
7
|
|
|
21
|
|
|||
Loss on early extinguishment of debt
|
13
|
|
|
0.7
|
|
|
—
|
|
|
—
|
|
|
13
|
|
|
NM
|
|
|||
Effective tax rate
|
36.0
|
%
|
|
NM
|
|
|
29.7
|
%
|
|
NM
|
|
|
NM
|
|
|
NM
|
|
•
|
Favorable product and package mix, which increased net sales by
2.0%
;
|
•
|
$21 million
of acquired Bai Brands shipments to third parties since the Bai Brands Merger, which grew net sales by
1.5%
;
|
•
|
Increase in shipments, excluding the loss of the Rockstar distribution rights, raised net sales by
1.5%
;
|
•
|
Favorable foreign currency translation of
$9 million
, which raised net sales by
0.5%
;
|
•
|
Unfavorable segment mix, which decreased net sales by
1.0%
; and
|
•
|
The loss of the Rockstar distribution rights, which lowered net sales by
0.5%
.
|
•
|
Incremental profit margin benefit we experienced as a result of becoming the brand owner for Bai Brands and the acquired Bai Brands shipments to third parties since the Bai Brands Merger, which increased our gross margin by
1.20%
;
|
•
|
Favorable segment mix, which raised our gross margin by
0.30%
;
|
•
|
Favorable comparison of
$3 million
in our mark-to-market activity on commodity derivative contracts, which grew our gross margin by
0.20%
;
|
•
|
Ongoing productivity improvements, which increased our gross margin by
0.10%
;
|
•
|
Other manufacturing costs, which includes the impact of a
$6 million
default by a supplier of resin to our operations in Mexico, lowered our gross margin by
0.60%
;
|
•
|
Unfavorable product and package mix, which reduced our gross margin by
0.60%
;
|
•
|
The change in our
LIFO
inventory provision, driven primarily by apples, combined with higher commodity costs, led by packaging, decreased our gross margin by
0.30%
; and
|
•
|
Unfavorable foreign currency effects, which decreased our gross margin by
0.20%
.
|
|
For the Three Months Ended
|
||||||
|
September 30,
|
||||||
(in millions)
|
2017
|
|
2016
|
||||
Segment Results — Net sales
|
|
|
|
||||
Beverage Concentrates
|
$
|
334
|
|
|
$
|
323
|
|
Packaged Beverages
|
1,273
|
|
|
1,236
|
|
||
Latin America Beverages
|
133
|
|
|
121
|
|
||
Net sales
|
$
|
1,740
|
|
|
$
|
1,680
|
|
|
|
|
|
||||
|
For the Three Months Ended
|
||||||
|
September 30,
|
||||||
(in millions)
|
2017
|
|
2016
|
||||
Segment Results — SOP
|
|
|
|
||||
Beverage Concentrates
|
$
|
218
|
|
|
$
|
205
|
|
Packaged Beverages
|
189
|
|
|
208
|
|
||
Latin America Beverages
|
12
|
|
|
21
|
|
||
Total SOP
|
419
|
|
|
434
|
|
||
Unallocated corporate costs
|
52
|
|
|
64
|
|
||
Other operating income, net
|
—
|
|
|
(3
|
)
|
||
Income from operations
|
367
|
|
|
373
|
|
||
Interest expense, net
|
39
|
|
|
32
|
|
||
Loss on early extinguishment of debt
|
13
|
|
|
—
|
|
||
Other income, net
|
(2
|
)
|
|
(2
|
)
|
||
Income before provision for income taxes and equity in earnings of unconsolidated subsidiaries
|
$
|
317
|
|
|
$
|
343
|
|
|
For the Three Months Ended
|
|
|
|
|
|||||||||
|
September 30,
|
|
Dollar
|
|
Percentage
|
|||||||||
(in millions)
|
2017
|
|
2016
|
|
Change
|
|
Change
|
|||||||
Net sales
|
$
|
334
|
|
|
$
|
323
|
|
|
$
|
11
|
|
|
3
|
%
|
SOP
|
218
|
|
|
205
|
|
|
13
|
|
|
6
|
|
|
For the Three Months Ended
|
|
|
|
|
|||||||||
|
September 30,
|
|
Dollar
|
|
Percentage
|
|||||||||
(in millions)
|
2017
|
|
2016
|
|
Change
|
|
Change
|
|||||||
Net sales
|
$
|
1,273
|
|
|
$
|
1,236
|
|
|
$
|
37
|
|
|
3
|
%
|
SOP
|
189
|
|
|
208
|
|
|
(19
|
)
|
|
(9
|
)
|
|
For the Three Months Ended
|
|
|
|
|
|||||||||
|
September 30,
|
|
Dollar
|
|
Percent
|
|||||||||
(in millions)
|
2017
|
|
2016
|
|
Change
|
|
Change
|
|||||||
Net sales
|
$
|
133
|
|
|
$
|
121
|
|
|
$
|
12
|
|
|
10
|
%
|
SOP
|
12
|
|
|
21
|
|
|
(9
|
)
|
|
(43
|
)
|
|
For the Nine Months Ended September 30,
|
|
|
|
|
|||||||||||||||
|
2017
|
|
2016
|
|
Dollar
|
|
Percentage
|
|||||||||||||
($ in millions)
|
Dollars
|
|
Percent
|
|
Dollars
|
|
Percent
|
|
Change
|
|
Change
|
|||||||||
Net sales
|
$
|
5,047
|
|
|
100.0
|
%
|
|
$
|
4,862
|
|
|
100.0
|
%
|
|
$
|
185
|
|
|
4
|
%
|
Cost of sales
|
2,032
|
|
|
40.3
|
|
|
1,955
|
|
|
40.2
|
|
|
77
|
|
|
4
|
|
|||
Gross profit
|
3,015
|
|
|
59.7
|
|
|
2,907
|
|
|
59.8
|
|
|
108
|
|
|
4
|
|
|||
Selling, general and administrative expenses
|
1,944
|
|
|
38.5
|
|
|
1,739
|
|
|
35.8
|
|
|
205
|
|
|
12
|
|
|||
Other operating income, net
|
(30
|
)
|
|
(0.6
|
)
|
|
(4
|
)
|
|
(0.1
|
)
|
|
(26
|
)
|
|
NM
|
|
|||
Income from operations
|
1,025
|
|
|
20.3
|
|
|
1,098
|
|
|
22.6
|
|
|
(73
|
)
|
|
(7
|
)
|
|||
Interest expense
|
124
|
|
|
2.5
|
|
|
99
|
|
|
2.0
|
|
|
25
|
|
|
25
|
|
|||
Loss on early extinguishment of debt
|
62
|
|
|
1.2
|
|
|
—
|
|
|
—
|
|
|
62
|
|
|
NM
|
|
|||
Other income, net
|
(6
|
)
|
|
(0.1
|
)
|
|
(25
|
)
|
|
(0.5
|
)
|
|
19
|
|
|
NM
|
|
|||
Effective tax rate
|
32.9
|
%
|
|
NM
|
|
|
33.4
|
%
|
|
NM
|
|
|
NM
|
|
|
NM
|
|
•
|
Increase in shipments, excluding the loss of the Rockstar distribution rights, which grew net sales by
2.0%
;
|
•
|
Favorable product and package mix, which increased net sales by
1.5%
;
|
•
|
$51 million
of acquired Bai Brands shipments to third parties since the Bai Brands Merger, which raised net sales by
1.0%
;
|
•
|
Higher pricing and lower discounts as a result of a favorable comparison of the annual true-up of our estimated customer incentive liability, which increased net sales by
0.5%
;
|
•
|
Unfavorable segment mix, which reduced our net sales by
0.5%
; and
|
•
|
The loss of the Rockstar distribution rights, which lowered net sales by
0.5%
.
|
•
|
Unfavorable product and package mix, which reduced our gross margin by
0.6%
;
|
•
|
Increase in our other manufacturing costs, which includes the impact of a
$6 million
default by a supplier of resin to our operations in Mexico, reduced our gross margin by
0.5%
;
|
•
|
The change in our
LIFO
inventory provision, driven primarily by apples, combined with higher commodity costs, led by packaging, reduced our gross margin by
0.2%
;
|
•
|
Unfavorable foreign currency effects, which decreased our gross margin by
0.2%
;
|
•
|
Increase in our gross margin of
0.9%
related to the incremental profit margin benefit we experienced as a result of becoming the brand owner for Bai Brands and the acquired Bai Brands shipments to third parties since the Bai Brands Merger, partially offset by the $9 million initial profit in stock adjustment as a result of the Bai Brands Merger recorded during the first quarter of 2017;
|
•
|
Favorable segment mix, which raised our gross margin by
0.2%
;
|
•
|
Ongoing productivity improvements, which increased our gross margin by
0.2%
; and
|
•
|
Higher pricing and lower discounts as a primary result of a favorable comparison of the annual true-up of our estimated customer incentive liability, which raised our gross margin by
0.1%
.
|
|
For the Nine Months Ended
|
||||||
|
September 30,
|
||||||
(in millions)
|
2017
|
|
2016
|
||||
Segment Results — Net sales
|
|
|
|
||||
Beverage Concentrates
|
$
|
984
|
|
|
$
|
952
|
|
Packaged Beverages
|
3,693
|
|
|
3,558
|
|
||
Latin America Beverages
|
370
|
|
|
352
|
|
||
Net sales
|
$
|
5,047
|
|
|
$
|
4,862
|
|
|
|
|
|
||||
|
For the Nine Months Ended
|
||||||
|
September 30,
|
||||||
(in millions)
|
2017
|
|
2016
|
||||
Segment Results — SOP
|
|
|
|
||||
Beverage Concentrates
|
$
|
641
|
|
|
$
|
622
|
|
Packaged Beverages
|
526
|
|
|
592
|
|
||
Latin America Beverages
|
47
|
|
|
60
|
|
||
Total SOP
|
1,214
|
|
|
1,274
|
|
||
Unallocated corporate costs
|
219
|
|
|
180
|
|
||
Other operating income, net
|
(30
|
)
|
|
(4
|
)
|
||
Income from operations
|
1,025
|
|
|
1,098
|
|
||
Interest expense, net
|
121
|
|
|
97
|
|
||
Loss on early extinguishment of debt
|
62
|
|
|
—
|
|
||
Other income, net
|
(6
|
)
|
|
(25
|
)
|
||
Income before provision for income taxes and equity in earnings of unconsolidated subsidiaries
|
$
|
848
|
|
|
$
|
1,026
|
|
|
For the Nine Months Ended
|
|
|
|
|
|||||||||
|
September 30,
|
|
Dollar
|
|
Percent
|
|||||||||
(in millions)
|
2017
|
|
2016
|
|
Change
|
|
Change
|
|||||||
Net sales
|
$
|
984
|
|
|
$
|
952
|
|
|
$
|
32
|
|
|
3
|
%
|
SOP
|
641
|
|
|
622
|
|
|
19
|
|
|
3
|
|
|
For the Nine Months Ended
|
|
|
|
|
|||||||||
|
September 30,
|
|
Dollar
|
|
Percent
|
|||||||||
(in millions)
|
2017
|
|
2016
|
|
Change
|
|
Change
|
|||||||
Net sales
|
$
|
3,693
|
|
|
$
|
3,558
|
|
|
$
|
135
|
|
|
4
|
%
|
SOP
|
526
|
|
|
592
|
|
|
(66
|
)
|
|
(11
|
)
|
|
For the Nine Months Ended
|
|
|
|
|
|||||||||
|
September 30,
|
|
Dollar
|
|
Percent
|
|||||||||
(in millions)
|
2017
|
|
2016
|
|
Change
|
|
Change
|
|||||||
Net sales
|
$
|
370
|
|
|
$
|
352
|
|
|
$
|
18
|
|
|
5
|
%
|
SOP
|
47
|
|
|
60
|
|
|
(13
|
)
|
|
(22
|
)
|
•
|
our continued repurchases of our outstanding common stock pursuant to our repurchase programs;
|
•
|
our continued payment of dividends;
|
•
|
our continued capital expenditures;
|
•
|
seasonality of our operating cash flows could impact short-term liquidity;
|
•
|
our ability to issue unsecured commercial paper notes ("
Commercial Paper
") on a private placement basis up to a maximum aggregate amount outstanding at any time of
$500 million
;
|
•
|
our integration of Bai Brands following completion of the Bai Brands Merger;
|
•
|
fluctuations in our tax obligations;
|
•
|
future equity investments in allied brands; and
|
•
|
future mergers or acquisitions of regional bottling companies, distributors and/or distribution rights to further extend our geographic coverage.
|
Rating Agency
|
Long-Term Debt Rating
|
Commercial Paper Rating
|
Outlook
|
Date of Last Change
|
Moody's
|
Baa1
|
P-2
|
Stable
|
May 18, 2011
|
S&P
|
BBB+
|
A-2
|
Stable
|
November 13, 2013
|
|
For the Nine Months Ended
|
||||||
|
September 30,
|
||||||
(in millions)
|
2017
|
|
2016
|
||||
Net cash provided by operating activities
|
$
|
732
|
|
|
$
|
705
|
|
Net cash used in investing activities
|
(1,643
|
)
|
|
(119
|
)
|
||
Net cash used in financing activities
|
(717
|
)
|
|
(876
|
)
|
•
|
the repayment of the Company's 2018 Notes and a portion of the 2038 Notes of
$562 million
, which includes both the aggregate principal amounts of approximately
$364 million
of the 2018 Notes and
$125 million
of the 2038 Notes, as well as the tender offer premium of
$60 million
and the make whole premium of
$13 million
;
|
•
|
dividend payments of
$309 million
; and
|
•
|
stock repurchases of
$320 million
; which was partially offset by
|
•
|
the proceeds from the issuance of 2027 Notes and 2045 Notes, with an aggregate principal amount of
$400 million
and a premium of
$16 million
; and
|
•
|
the proceeds from the net issuance of
$70 million
commercial paper.
|
Total Shareholder Distributions
|
|
Our Board declared dividends aggregating $1.74 and $1.59 per share on outstanding common stock during the nine months ended September 30, 2017 and 2016, respectively, and we continued common stock repurchases based upon authorizations from our Board. Refer to Part II, Item 2 of this Quarterly Report on Form 10-Q for additional information regarding these repurchases.
|
|
The following chart details these payments during the nine months ended September 30, 2017 and 2016.
|
|
Payments Due in Year
|
||||||||||||||||||||||||||
(in millions)
|
Total
|
|
2017
|
|
2018
|
|
2019
|
|
2020
|
|
2021
|
|
After 2021
|
||||||||||||||
Senior unsecured notes
(1)(4)
|
$
|
4,225
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
250
|
|
|
$
|
250
|
|
|
$
|
500
|
|
|
$
|
3,225
|
|
Commercial paper
|
70
|
|
|
70
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Bai Brands Merger consideration
(2)
|
88
|
|
|
2
|
|
|
76
|
|
|
—
|
|
|
10
|
|
|
—
|
|
|
—
|
|
|||||||
Purchase obligations
(3)
|
992
|
|
|
374
|
|
|
283
|
|
|
148
|
|
|
96
|
|
|
36
|
|
|
55
|
|
|||||||
Interest payments
(4)
|
2,032
|
|
|
53
|
|
|
139
|
|
|
139
|
|
|
133
|
|
|
133
|
|
|
1,435
|
|
|||||||
Total
|
$
|
7,407
|
|
|
$
|
499
|
|
|
$
|
498
|
|
|
$
|
537
|
|
|
$
|
489
|
|
|
$
|
669
|
|
|
$
|
4,715
|
|
(1)
|
Amounts represent payment for the senior unsecured notes issued by us. Please refer to
Note 6 of the Notes to our Unaudited Condensed Consolidated Financial Statements
for further information.
|
(2)
|
Amounts represent the holdback liability to the former shareholders of Bai Brands, which is held in escrow. Please refer to
Note 2 of the Notes to our Unaudited Condensed Consolidated Financial Statements
for further information.
|
(3)
|
Amounts represent payments under agreements to purchase goods or services that are legally binding and that specify all significant terms, including capital obligations and long-term contractual obligations.
|
(4)
|
In July 2017, the Company redeemed the outstanding 2018 Notes and retired at a premium, an aggregate principal amount of approximately
$301 million
. The loss on early extinguishment of the 2018 Notes was approximately
$13 million
due primarily to a make-whole provision in the indenture governing the 2018 Notes. Please refer to
Note 6 of the Notes to our Unaudited Condensed Consolidated Financial Statements
for additional information.
|
Sensitivity Analysis
|
||||
Hypothetical Change in Interest Rates
(1)
|
|
Annual Impact to Interest Expense
|
|
Change in Fair Value
(2)
|
1-percent decrease
|
|
$11 million decrease
|
|
$52 million increase
|
1-percent increase
|
|
$11 million increase
|
|
$49 million decrease
|
(1)
|
We pay an average floating rate, which fluctuates periodically, based on
LIBOR
and a credit spread, as a result of designated fair value hedges on certain debt instruments. See
Note 7 of the Notes to our Unaudited Condensed Consolidated Financial Statements
for further information.
|
(in thousands, except per share data)
|
|
Number of Shares Purchased
|
|
Average Price Paid per Share
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
|
|
Maximum Dollar Value of Shares that May Yet be Purchased Under Publicly Announced Plans or Programs
(1)
|
||||||
Period
|
|
|
|
|
||||||||||
July 1, 2017 – July 31, 2017
|
|
549
|
|
|
$
|
90.11
|
|
|
549
|
|
|
$
|
905,630
|
|
August 1, 2017 – August 31, 2017
|
|
657
|
|
|
90.92
|
|
|
657
|
|
|
845,888
|
|
||
September 1, 2017 – September 30, 2017
|
|
386
|
|
|
90.67
|
|
|
386
|
|
|
810,874
|
|
||
For the quarter ended September 30, 2017
|
|
1,592
|
|
|
90.58
|
|
|
1,592
|
|
|
|
(1)
|
As previously disclosed, the
Board
has authorized us to repurchase an aggregate amount of up to
$5 billion
of our outstanding common stock in prior years. This column discloses the dollar value of shares available to be repurchased pursuant to these programs during the indicated time periods. As of
September 30, 2017
, there was a remaining balance of approximately
$811 million
authorized for repurchase that had not been utilized.
|
•
|
CEO: 2.5 times base salary
plus
target cash incentive bonus (collectively, the “cash compensation”);
|
•
|
CFO: 2.25 times cash compensation;
|
•
|
Presidents: 2.0 times cash compensation;
|
•
|
Executive Vice Presidents and CEO, Bai Brands: 1.5 times cash compensation; and
|
•
|
Senior Vice Presidents: 1.0 times cash compensation.
|
2.90% Senior Note due 2016 (in global form), dated January 11, 2011, in the principal amount of $500 million (filed as Exhibit 4.2 to the Company's Current Report on Form 8-K (filed on January 11, 2011) and incorporated herein by reference).
|
|
Third Supplemental Indenture, dated as of November 15, 2011, among Dr Pepper Snapple Group, Inc., the guarantors party thereto and Wells Fargo Bank, N.A., as trustee (filed as Exhibit 4.1 to the Company's Current Report on Form 8-K (filed on November 15, 2011) and incorporated herein by reference).
|
|
2.60% Senior Note due 2019 (in global form), dated November 15, 2011, in the principal amount of $250 million (filed as Exhibit 4.2 to the Company's Current Report on Form 8-K (filed on November 15, 2011) and incorporated herein by reference).
|
|
3.20% Senior Note due 2021 (in global form), dated November 15, 2011, in the principal amount of $250 million (filed as Exhibit 4.3 to the Company's Current Report on Form 8-K (filed on November 15, 2011) and incorporated herein by reference).
|
|
Fourth Supplemental Indenture, dated as of November 20, 2012, among Dr Pepper Snapple Group, Inc., the guarantors party thereto and Wells Fargo Bank, N.A., as trustee (filed as Exhibit 4.1 to the Company's Current Report on Form 8-K (filed on November 20, 2012) and incorporated herein by reference).
|
|
2.00% Senior Note due 2020 (in global form), dated November 20, 2012, in the principal amount of $250 million (filed as Exhibit 4.2 to the Company's Current Report on Form 8-K (filed on November 20, 2012) and incorporated herein by reference).
|
|
2.70% Senior Note due 2022 (in global form), dated November 20, 2012, in the principal amount of $250 million (filed as Exhibit 4.3 to the Company's Current Report on Form 8-K (filed on November 20, 2012) and incorporated herein by reference).
|
|
Fifth Supplemental Indenture, dated as of November 9, 2015, among Dr Pepper Snapple Group, Inc., the guarantors party thereto and Wells Fargo Bank, N.A., as trustee (filed as Exhibit 4.1 to the Company's Current Report on Form 8-K (filed on November 10, 2015) and incorporated herein by reference).
|
|
3.40% Senior Note due 2025 (in global form), dated November 9, 2015, in the principal amount of $500,000,000 (filed as Exhibit 4.2 to the Company's Current Report on Form 8-K (filed on November 10, 2015) and incorporated herein by reference).
|
|
4.50% Senior Note due 2045 (in global form), dated November 9, 2015, in the principal amount of $250,000,000 (filed as Exhibit 4.3 to the Company's Current Report on Form 8-K (filed on November 10, 2015) and incorporated herein by reference).
|
|
Sixth Supplemental Indenture, dated as of September 16, 2016, among Dr Pepper Snapple Group, Inc., the guarantors party thereto and Wells Fargo Bank, N.A., as trustee (filed as Exhibit 4.1 to the Company's Current Report on Form 8-K (filed on September 16, 2016) and incorporated herein by reference).
|
|
2.55% Senior Note due 2026 (in global form), dated September 16, 2016, in the principal amount of $400,000,000 (filed as Exhibit 4.2 to the Company's Current Report on Form 8-K (filed on September 16, 2016) and incorporated herein by reference).
|
|
Seventh Supplemental Indenture, dated as of December 14, 2016, among Dr Pepper Snapple Group, Inc., the guarantors party thereto and Wells Fargo Bank, N.A., as trustee (filed as Exhibit 4.1 to the Company's Current Report on Form 8-K (filed on December 14, 2016) and incorporated herein by reference).
|
|
2.53% Senior Note due 2021 (in global form), dated December 14, 2016, in the principal amount of $250,000,000 (filed as Exhibit 4.2 to the Company's Current Report on Form 8-K (filed on December 14, 2016) and incorporated herein by reference).
|
|
3.13% Senior Note due 2023 (in global form), dated December 14, 2016, in the principal amount of $500,000,000 (filed as Exhibit 4.3 to the Company's Current Report on Form 8-K (filed on December 14, 2016) and incorporated herein by reference).
|
|
3.43% Senior Note due 2027 (in global form), dated December 14, 2016, in the principal amount of $400,000,000 (filed as Exhibit 4.4 to the Company's Current Report on Form 8-K (filed on December 14, 2016) and incorporated herein by reference).
|
|
4.42% Senior Note due 2046 (in global form), dated December 14, 2016, in the principal amount of $400,000,000 (filed as Exhibit 4.5 to the Company's Current Report on Form 8-K (filed on December 14, 2016) and incorporated herein by reference).
|
|
Eighth Supplemental Indenture, dated as of January 31, 2017, among Bai Brands LLC, a New Jersey limited liability company, 184 Innovations Inc., a Delaware corporation (each as a new subsidiary guarantor under the Indenture dated April 30, 2008 (as referenced in Item 4.1 in this Exhibit Index), Dr Pepper Snapple Group, Inc., each other then-existing Guarantor under the Indenture) and Wells Fargo, National Bank, N.A., as trustee (filed as Exhibit 4.2 to the Company's Current Report on Form 8-K (filed on February 2, 2017) and incorporated herein by reference).
|
|
Ninth Supplemental Indenture, dated as of June 15, 2017, among Dr Pepper Snapple Group, Inc., the guarantors party thereto, and Wells Fargo Bank, N.A., as trustee (filed as Exhibit 4.1 to the Company's Current Report on Form 8-K (filed on June 15, 2017) and incorporated herein by reference).
|
Registration Rights Agreement, dated June 15, 2017, between Dr Pepper Snapple Group, Inc., Morgan Stanley & Co. LLC, Goldman Sachs & Co. LLC, and J.P. Morgan Securities LLC (filed as Exhibit 4.2 to the Company's Current Report on Form 8-K (filed on June 15, 2017) and incorporated herein by reference).
|
|
10.1
*
|
Severance Pay Plan for Executives, dated to be effective as of October 15, 2017.
|
12.1
*
|
Computation of Ratio of Earnings to Fixed Charges.
|
31.1
*
|
Certification of Chief Executive Officer of Dr Pepper Snapple Group, Inc. pursuant to Rule 13a-14(a) or 15d-14(a) promulgated under the Exchange Act.
|
31.2
*
|
Certification of Chief Financial Officer of Dr Pepper Snapple Group, Inc. pursuant to Rule 13a-14(a) or 15d-14(a) promulgated under the Exchange Act.
|
32.1
**
|
Certification of Chief Executive Officer of Dr Pepper Snapple Group, Inc. pursuant to Rule 13a-14(b) or 15d-14(b) promulgated under the Exchange Act, and Section 1350 of Chapter 63 of Title 18 of the United States Code.
|
32.2
**
|
Certification of Chief Financial Officer of Dr Pepper Snapple Group, Inc. pursuant to Rule 13a-14(b) or 15d-14(b) promulgated under the Exchange Act, and Section 1350 of Chapter 63 of Title 18 of the United States Code.
|
101*
|
The following financial information from Dr Pepper Snapple Group, Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2017 and 2016, (ii) Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2017 and 2016, (iii) Condensed Consolidated Balance Sheets as of September 30, 2017 and December 31, 2016, (iv) Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2017 and 2016, (v) Condensed Consolidated Statement of Changes in Stockholders' Equity for the nine months ended September 30, 2017, and (vi) the Notes to Condensed Consolidated Financial Statements.
|
|
Dr Pepper Snapple Group, Inc.
|
|
||
|
|
|
|
|
|
By:
|
/s/ Martin M. Ellen
|
|
|
|
|
|
|
|
|
Name:
|
|
Martin M. Ellen
|
|
|
Title:
|
|
Executive Vice President and Chief Financial
|
|
|
|
|
Officer of Dr Pepper Snapple Group, Inc.
|
|
Date: October 25, 2017
|
|
|
|
|
I.
|
PURPOSE
|
II.
|
DEFINITIONS
|
i.
|
willful failure to substantially perform the Participant’s duties with the Company;
|
ii.
|
breach of the Participant’s duty of loyalty toward the Company;
|
iii.
|
commission of an act of dishonesty toward the Company, theft of the Company’s corporate property, or usurpation of the Company’s corporate opportunities;
|
iv.
|
unethical business conduct including any violation of law connected with the Participant’s Employment; or
|
v.
|
conviction of any felony involving dishonest or immoral conduct.
|
III.
|
ELIGIBILITY; OTHER PLANS
|
IV.
|
SEVERANCE BENEFITS
|
1.
|
Qualifying Terminations
. A Participant will be eligible for severance benefits under the Plan only if the Participant’s employment is involuntarily terminated, none of the circumstances set forth in Section IV.A.2. apply, the Participant complies with all the conditions set forth in this Plan and the Severance Agreement, and the Participant timely executes and does not revoke the Release, as described in Section IV.B. below. For the avoidance of doubt, neither (a) changes in a Participant’s shift, hours, reporting relationships or duties nor (b) changes in a Participant’s compensation or benefits, will constitute an involuntary termination of employment for purposes of this Plan.
|
2.
|
Disqualifying Circumstances
. A Participant will
not
be eligible for severance benefits under the Plan if any of the following apply:
|
a.
|
A Participant dies, resigns, abandons his or her job, fails to timely return from an approved leave of absence or initiates termination on any similar basis;
|
b.
|
A Participant accepts employment with a successor employer where all of the following conditions are present: (i) the successor employer acquired from the Company substantially all of the assets or stock of a subsidiary, division, business unit, or other identifiable part of the Company’s business (the “acquired unit”), (ii) immediately prior to such acquisition, the Participant was employed with the acquired unit, and (iii) the loss of the Participant’s employment with the Company was in connection with such acquisition of the acquired unit by the successor;
|
c.
|
A Participant, whose position at a location is eliminated, is offered a Comparable Position by the Company, any affiliate of the Company or a successor to all or part of the Company’s business (including as part of an outsourcing arrangement);
|
d.
|
The employment of a Participant is terminated for Cause; or
|
e.
|
A Participant does not sign and return a Release within the time period prescribed in the Severance Agreement or revokes the Release within the applicable seven-day revocation period.
|
3.
|
Severance Benefits
. The Severance Agreement will specify the severance benefits applicable to the Participant as set forth in this Plan, including the applicable level and form of outplacement services. The Severance Agreement will also specify the time period required for the return of the Release, which shall be the number of days following the Termination Date prescribed by the Plan Administrator in its discretion, but in all events shall end no later than the date 60 days following the Termination Date.
|
B.
|
Severance Payment Formula
.
|
1.
|
The amount of a Participant’s lump-sum severance payment is determined by the Participant’s broad band level and Cash Compensation in the Participant’s current position as of the Participant’s Termination Date, as determined by the Plan Administrator pursuant to the schedule set forth below.
|
a.
|
CEO and BB00- BB03 Severance Formula
|
2.
|
The lump-sum severance payment under this Plan shall be reduced by any termination notice pay that a Participant may be eligible to receive under the federal Worker Adjustment Retraining and Notification Act (WARN) or any applicable state or local plant closing laws or laws requiring severance pay or benefits.
|
3.
|
Severance payments will be subject to statutory deductions, including withholding, and will be paid in a single lump sum payment. Severance payments will be made on the next normal payroll cycle after the later of (a) the Participant’s Termination Date and (b) the expiration of seven days after the execution and return of the Release without the Participant having revoked the Release; provided, however, that if the time period for the return of the Release specified in the Severance Agreement could result in the payment of a severance payment in one of two calendar years, the severance payment will be made in the later calendar year.
|
1.
|
After the Termination Date, the Participant may continue applicable medical, vision and/or dental benefit coverage pursuant to the
|
2.
|
If employee is an eligible Participant in the Dr Pepper Snapple Group, Inc. Omnibus Stock Incentive Plan of 2009, the Dr Pepper Snapple Group, Inc. Personal Pension Account Plan, the Dr Pepper Snapple Savings & Incentive Plan, or any other incentive, deferred compensation or retirement plan, the Participant’s rights upon termination of employment shall be as set forth in such plans.
|
1.
|
If a Participant is a participant in the Incentive Plan, such Participant will be eligible to receive a lump sum payment of any applicable Incentive Plan award on a pro-rata basis using as a numerator the number of full weeks worked during the calendar year as of the Participant’s Termination Date and a denominator of 52, less statutory deductions.
|
2.
|
The pro-rata Incentive Plan award will be subject to the Company’s performance relative to its performance goals under the Incentive Plan and the determination of performance relative to goals shall be entirely in the discretion of the Plan Administrator.
|
3.
|
Any Incentive Plan award will be payable at the same time in the calendar year following the Participant’s Termination Date if and when other participants under the Incentive Plan receive their payments; provided however that payment shall be made not later than March 15th of the calendar year following the year in which the Termination Date occurs.
|
1.
|
The Company will provide outplacement services such as, by way of example, resumé development, job search assistance and skills training. The actual amount and type of outplacement services depends on the
|
2.
|
The specific outplacement services offered to each broad band level are determined by the Company’s agreement with the outplacement services provider in effect as of the Participant’s Termination Date and may vary from region to region. Outplacement services cease at the earlier of when the Participant accepts an offer of employment or as specified in the Participant’s Severance Agreement.
|
1.
|
Participants on a Company-approved leave of absence, including short term disability leave, long term disability leave, Family and Medical Leave, or other approved paid or unpaid leaves of absence, are not eligible for severance benefits while on leave of absence.
|
2.
|
A Participant returning from an approved leave of absence of less than six months’ duration will become eligible for severance benefits upon return to active status if:
|
a.
|
A Participant would have been eligible for severance benefits if he or she had not been on an approved leave of absence of less than six months’ duration; or
|
b.
|
The Participant timely returns to work from an approved leave of absence of less than six month’s duration, the Participant’s position has been filled and there are no open Comparable Positions with the Company.
|
3.
|
A Participant on a leave of absence of more than six months’ duration is not eligible for severance benefits under the Plan under any circumstances.
|
V.
|
AMENDMENT OR TERMINATION
|
VI.
|
GOVERNING LAW; EXCLUSIVE VENUE
|
VII.
|
PLAN ADMINISTRATOR
|
VIII.
|
NO OTHER PLANS; REPRESENTATIONS CONTRARY TO THE PLAN
|
IX.
|
CLAIMS PROCEDURE
|
X.
|
Release of Claims.
|
XI.
|
EFFECTIVE DATE
|
|
For the Nine Months Ended September 30,
|
|
For the Years Ended December 31,
|
||||||||||||||||
|
2017
|
|
2016
|
|
2015
|
|
2014
|
|
2013
|
||||||||||
Calculation of fixed charges ratio:
|
|
|
|
|
|
|
|
|
|
||||||||||
Income before provision for income taxes, equity in earnings of unconsolidated subsidiaries and cumulative effect of change in accounting policy
(2)
|
$
|
848
|
|
|
$
|
1,283
|
|
|
$
|
1,184
|
|
|
$
|
1,073
|
|
|
$
|
542
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Add/(deduct):
|
|
|
|
|
|
|
|
|
|
||||||||||
Fixed charges
|
136
|
|
|
164
|
|
|
132
|
|
|
125
|
|
|
138
|
|
|||||
Amortization of capitalized interest
|
2
|
|
|
3
|
|
|
3
|
|
|
4
|
|
|
4
|
|
|||||
Capitalized interest
|
—
|
|
|
(3
|
)
|
|
(1
|
)
|
|
(2
|
)
|
|
(1
|
)
|
|||||
Total earnings available for fixed charges
|
$
|
986
|
|
|
$
|
1,447
|
|
|
$
|
1,318
|
|
|
$
|
1,200
|
|
|
$
|
683
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Fixed charges
:
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest expense
|
$
|
124
|
|
|
$
|
147
|
|
|
$
|
117
|
|
|
$
|
109
|
|
|
$
|
123
|
|
Capitalized interest
|
—
|
|
|
3
|
|
|
1
|
|
|
2
|
|
|
1
|
|
|||||
Interest component of rental expense
(1)
|
12
|
|
|
14
|
|
|
14
|
|
|
14
|
|
|
14
|
|
|||||
Total fixed charges
|
$
|
136
|
|
|
$
|
164
|
|
|
$
|
132
|
|
|
$
|
125
|
|
|
$
|
138
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Ratio of earnings to fixed charges
|
7.2x
|
|
|
8.8x
|
|
|
10.0x
|
|
|
9.6x
|
|
|
4.9x
|
|
(1)
|
Represents a reasonable estimate of the interest component of rental expense incurred by us.
|
(2)
|
Due to the completion of the IRS audit for our 2006-2008 federal income tax returns in August 2013, we recognized $430 million of other expense, net, as we no longer anticipate collecting amounts from Mondelēz. Additionally, in June 2013, a bill was enacted by the Canadian government, which reduced amounts amortized for income tax purposes. As a result, we recognized $38 million of indemnity income due to the reduction of our long-term liability to Mondelēz.
|
|
/s/ Larry D. Young
|
|
Date: October 25, 2017
|
Larry D. Young
|
|
|
President and Chief Executive Officer of
Dr Pepper Snapple Group, Inc.
|
|
1.
|
I have reviewed this
Quarterly
Report on Form
10-Q
of Dr Pepper Snapple Group, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
|
/s/ Martin M. Ellen
|
|
Date: October 25, 2017
|
Martin M. Ellen
|
|
|
Executive Vice President and Chief Financial Officer of
Dr Pepper Snapple Group, Inc.
|
|
(1)
|
the
Quarterly
Report on Form
10-Q
of the Company for the
third quarterly period
ended
September 30, 2017
, as filed with the Securities and Exchange Commission (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and
|
(2)
|
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
|
/s/ Larry D. Young
|
|
Date: October 25, 2017
|
Larry D. Young
|
|
|
President and Chief Executive Officer of
Dr Pepper Snapple Group, Inc.
|
|
(1)
|
the
Quarterly
Report on Form
10-Q
of the Company for the
third quarterly period
ended
September 30, 2017
, as filed with the Securities and Exchange Commission (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and
|
(2)
|
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
|
/s/ Martin M. Ellen
|
|
Date: October 25, 2017
|
Martin M. Ellen
|
|
|
Executive Vice President and Chief Financial Officer of Dr Pepper Snapple Group, Inc.
|
|