Dr Pepper Snapple Group Reports Net Sales Increased 4% for the Quarter

Net sales for the quarter were up 4% reflecting low-single digit price increases and 2 percentage points of growth from brands repatriated under the Coca-Cola licensing agreements.

Jul 28 2011 --- Dr Pepper Snapple Group, Inc. reported second quarter 2011 diluted earnings of $0.77 per share compared to $0.74 per share in the prior year period. Year-to-date, the company reported earnings of $1.27 per diluted share compared to $1.09 per share in the prior year period. Excluding a separation-related foreign deferred tax charge, diluted earnings per share in the prior year-to-date period were $1.14.

For the quarter, reported net sales increased 4%. Price/mix added approximately 2 percentage points to net sales growth while revenue recognized under The Coca-Cola Company (Coca-Cola) licensing agreements and the favorable impact of repatriated brands added 1 percentage point. Reported segment operating profit (SOP) decreased 4% as net sales growth and ongoing supply chain productivity benefits were more than offset by higher packaging, ingredient and transportation costs. Marketing investments increased $4 million. Foreign currency added 1 percentage point each to net sales and SOP growth. Reported income from operations for the quarter was $290 million compared to $310 million in the prior year period.

Year-to-date, reported net sales increased 5% and reported income from operations was $492 million compared to $497 million in the prior year period.

DPS President and CEO Larry Young said, “Once again our portfolio of leading, consumer-preferred brands demonstrated resilience despite continued macroeconomic and consumer pressures. Our teams remain committed to executing our focused strategy, ensuring our products are top of mind and close at hand. To cover higher input costs, we are raising prices and driving incremental productivity through our developing Rapid Continuous Improvement capabilities. We do so with a goal of delivering value to our customers and ensuring we’re investing for the long-term health of this business.”

BCS Volume

For the quarter, BCS volume was flat with both carbonated soft drinks (CSDs) and non-carbonated beverages (NCBs) flat.

In CSDs, Sun Drop added 2 million cases, Canada Dry volume grew double digits and Peñafiel grew mid-single digits. Dr Pepper volume declined 2% cycling strong retailer-led promotional activity in the prior year period. Sunkist soda declined double digits while 7UP and A&W declined low-single digits. Fountain foodservice volume grew 4%.

In NCBs, Snapple volume grew 8% and Hawaiian Punch was flat. Mott’s volume declined 10% as net pricing increased double digits.

By geography, U.S. and Canada CSD volume was flat while NCB volume declined 1%. In Mexico and the Caribbean, CSD volume grew 3% while NCB volume grew 12%.

Year-to-date through June and across all measured channels, U.S. CSD dollar share declined 0.2 percentage points but remains 0.3 percentage points higher than the same period two years ago.

Sales volume

For the quarter, sales volume was flat with branded sales volume flat and contract manufacturing up 3%.

 Beverage Concentrates

Net sales for the quarter were flat. Concentrate price increases taken earlier in the year and revenue recognized under the Coca-Cola licensing agreements added 6 percentage points to growth. This was offset by a 2% decline in volume related to repatriated brands and higher discounts, as the company cycled trade favorability in the prior year. SOP increased 3% reflecting flat net sales and lower marketing, as certain investments were deferred to the second half.

Packaged Beverages

Net sales for the quarter were up 4% reflecting low-single digit price increases and 2 percentage points of growth from brands repatriated under the Coca-Cola licensing agreements. SOP decreased 16% as net sales growth and ongoing supply chain productivity benefits were more than offset by higher packaging, ingredient and transportation costs.

Latin America Beverages

Net sales for the quarter increased 9% reflecting 5% volume growth and favorable product mix. SOP declined 11% as net sales growth was more than offset by higher packaging, ingredient and transportation costs.

Corporate and other items

For the quarter, corporate costs totaled $81 million, including $7 million of unrealized commodity-related mark-to-market losses. Corporate costs in the prior year period were $81 million including $5 million of unrealized commodity-related mark-to-market losses and $4 million pension-related costs.

For the quarter, productivity investments recorded in the segments, as well as corporate, were $2 million compared to $8 million in the prior year period.

Net interest expense was flat compared to the prior year.

For the quarter, the effective tax rate was 35.5% including a $6 million benefit related to the PepsiCo, Inc. (PepsiCo) and Coca-Cola transactions.