Dr Pepper Snapple Group Reports Second Quarter 2008 EPS of $0.42; Excluding Certain Items EPS was $0.60

Year-to-date the company earned $0.80 per share compared to $0.81 per share in the prior year period. Excluding restructuring and separation related items, the Company earned $1.01 per share, an increase of 16% compared to the same period last year.

14/08/08 Dr Pepper Snapple Group, Inc. reported second quarter 2008 earnings of $0.42 per share compared to $0.54 per share in the prior year period. The Company's results reflect the impact of certain related party transactions with Cadbury that continued until separation on May 7, 2008. Excluding restructuring costs in both years and transaction and separation related costs in the second quarter of 2008, the Company earned $0.60 per share, an increase of 7% compared to the same period last year. Net sales increased 1%, as higher pricing more than offset sales volume declines. Segment operating profit declined 2%, primarily due to the absence of glaceau distribution. Income from operations declined 4%. Year-to-date the company earned $0.80 per share compared to $0.81 per share in the prior year period. Excluding restructuring and separation related items, the Company earned $1.01 per share, an increase of 16% compared to the same period last year.

DPS President and CEO Larry Young said, "It's no secret that the beverage industry continues to face significant headwinds. Higher prices at the gas pump and at retailers across the country have impacted our consumers and their shopping habits. At DPS, we will continue to look for ways to leverage our strong flavor portfolio, customer partnerships and vertically integrated business model to expand our distribution footprint and provide preferred and affordable brands to more consumers in more outlets.

"During the quarter, we marked the official separation of our business from Cadbury on May 7, 2008. So in addition to winning on the streets, our corporate teams worked tirelessly to separate the business and establish our stand-alone financial statements. There's still a lot left to do, but I am immensely proud of the progress we have made."

Volume declined 4% reflecting higher pricing and a challenging macro-economic environment. Carbonated soft drinks (CSDs) declined 3% and non-carbonated beverages (NCBs) declined 8%.

In CSDs, Dr Pepper volume declined 1%. "Core 4" brands -- 7UP, Sunkist, A&W and Canada Dry -- declined 5% driven primarily by 7UP, as it cycled the final stages of launch support for 7UP with 100% Natural Flavors and the re-launch of Diet 7UP. In Mexico, Squirt and Penafiel declined high single-digits reflecting necessary pricing taken towards the end of first quarter 2008.

In NCBs, Hawaiian Punch volume increased low double-digits and Mott's was up 4%. Snapple declined mid single-digits as it cycled significant promotional activity in the prior year period, which for profitability reasons, was not repeated in 2008. In Mexico, Aguafiel declined 21% reflecting high single-digit price increases and a more competitive environment. The loss of the distribution agreement for glaceau products (November 2007) reduced NCB growth by 8 percentage points in the quarter.

In North America, volume declined 3% and in Mexico and the Caribbean, volume declined 9%.

Sales Volume

Sales volume was down 3% reflecting BCS declines which were partially offset by a change in the timing of concentrate price increases from April in 2007 to February in 2008.

Net sales

Net sales increased 1% as mid single-digit price increases more than offset sales volume declines and a slight negative shift in mix. Beverage Concentrates and Finished Goods price/mix increased low single-digits, Bottling Group price/mix increased mid single-digits and Mexico and the Caribbean price/mix increased low double-digits. The acquisition of SeaBev in July 2007 positively impacted net sales growth by 2 percentage points, while the loss of the distribution agreement for glaceau products negatively impacted net sales growth by 4 percentage points.

Across all measured channels, as reported by ACNielsen, the Company continues to lead the CSD category with U.S. dollar share up 0.4 percentage points year-to-date.

Segment operating profit, corporate and other

Gross profit was flat for the quarter reflecting net sales gains offset by higher commodity costs. COGS per case increased 6%. The net impact of the SeaBev acquisition and absence of glaceau reduced COGS per case growth by 4 percentage points.

Segment operating profit declined 2%. The loss of the distribution agreement for glaceau products negatively impacted segment operating profit growth by 4 percentage points. The acquisition of SeaBev had no impact to segment operating profit.

Income from operations decreased 4% reflecting segment operating profit declines and the net impact of: lower unallocated general and administrative expenses; lower stock-based compensation expenses; favorable gains in other adjustments versus a loss last year; and transaction and other one-time separation costs totaling $20 million. Restructuring costs related to previously announced actions were $14 million for the quarter.

Net interest expense increased $21 million as the Company incurred $24 million of fees and interest expense in connection with the termination of a bridge loan facility established to effect the separation from Cadbury.

The effective tax rate for the quarter was 42.6%, which included $10 million of items that were mainly identified on separation as we established our stand-alone financial statements and $2 million related to certain tax items that are indemnified by Cadbury. Year-to-date the effective tax rate was 40.8%, which included $13 million of separation related and indemnified items.

2008 full-year guidance

The Company continues to expect 3% to 5% net sales growth. The Company now expects earnings per share of at least $1.65, which assumes commodity cost inflation, interest rates and tax rate as noted below. The earnings per share guidance includes approximately $0.29 per share comprising transaction and separation related costs ($0.08 per share), bridge loan fees and net interest in connection with the spin-off from Cadbury ($0.06 per share), previously announced restructuring costs ($0.10 per share) and separation related tax items ($0.04 per share). Excluding these items, the Company expects earnings per share of at least $1.94.

In line with previous guidance, the Company expects commodity cost inflation to increase COGS by approximately 6% and fuel to add approximately $40 million to distribution costs which are recorded in SG&A.

While the company is realizing substantially all of the benefits from its 2007 restructuring actions, these benefits are being offset by the higher fuel costs, the consolidation impact of the SeaBev acquisition and new stand-alone costs arising from the spin-off.

On May 7, 2008 DPS completed its separation from Cadbury. On this date, all payables to and loans from Cadbury were settled. The net balance due to Cadbury was paid using the proceeds of new unsecured senior credit totaling $3.9 billion. Based on current LIBOR, the 2008 blended interest rate on the new capital structure is approximately 6.3%, which includes 50 basis points related to the amortization of certain fees and expenses associated with establishing the new facilities. Cash will be managed to the liquidity needs of the business, with excess cash being used to pay down debt. We expect interest income for the remainder of the year to be minimal.

The earnings per share guidance assumes a full-year 2008 tax rate of about 40%, which includes approximately $10 million of charges related to certain tax items that are indemnified by Cadbury. A corresponding amount to reflect the indemnity is recorded as other income. Combined, these two items have no impact on our total results. The full year tax rate also includes $11 million of items that were mainly identified on separation as we established our stand-alone financial statements.