Dr Pepper Snapple Group Reports Third Quarter 2009 Results

Reported net sales down 4%. Net sales, as adjusted, up 2% with BCS volume growing 4%. Year-to-date, company generated $701 million of cash from operations and repaid $480 million of debt.

9 Nov 2009 --- Dr Pepper Snapple Group, Inc. reported third quarter 2009 earnings of $0.59 per share compared to $0.41 per share in the prior year period. Earnings per share were $0.54 compared to $0.45 excluding separation-related costs and restructuring items. Year-to-date the company reported earnings of $1.73 per share compared to $1.21 per share in the prior year period. Year-to-date earnings per share were $1.53 compared to $1.46 excluding distribution agreement changes, separation-related costs, and restructuring items.

For the quarter, reported net sales were down 4%. Net sales increased 2% on a currency neutral basis and excluding the loss of Hansen product distribution. Pricing actions taken earlier in the year combined with 4% sales volume growth were offset by negative mix from higher sales of carbonated soft drink (CSD) concentrate and value juice. Segment operating profit, as adjusted, increased 31% reflecting lower packaging, ingredient and transportation costs, operating efficiencies, and favorable comparisons to discounts and inventory adjustments in the prior year period. Reported income from operations was $272 million compared to $213 million in the prior year period.

DPS President and CEO Larry Young said, "While the economy is showing some signs of recovery, it's still too early to see this translate into higher beverage sales. For the quarter, liquid refreshment beverage trends remained negative. Against this backdrop, we once again demonstrated the power of our portfolio and the flexibility of our routes to market, posting solid top-line and strong bottom-line growth. A year and a half into our life as a public company, we're proud of what we have accomplished so far. Our priorities and strategies remain unchanged and continue to support long-term sustainable growth."

For the quarter, BCS volume increased 4% with CSDs growing 5% and non-carbonated beverages (NCB) up slightly.

In CSDs, Dr Pepper volume increased 3%. "Core 4" brands - 7UP, Sunkist soda, A&W and Canada Dry - were down 3%. Canada Dry and 7UP grew 4% and 1%, respectively, while A&W was down 1% and Sunkist soda declined double-digits. Crush volume more than doubled, adding 13 million cases, on expanded third-party distribution in the U.S. and the launch of Crush value offerings in Mexico. Fountain foodservice volume increased 2%. Penafiel increased 10% on expanded distribution and a restage of Penafiel flavors.

In NCBs, Hawaiian Punch volume increased 3%, lapping strong double-digit growth in the prior year. Pressure on the company's premium products continued. Snapple declined 6%, but improved sequentially for the second straight quarter.

By geography, U.S. and Canada volume increased 4%, and in Mexico and the Caribbean, volume increased 9%.

Across all measured channels, the company grew U.S. CSD dollar share 1.1 percentage points and flavored CSD dollar share by 1.6 percentage points year-to-date.

Sales volume

For the quarter, sales volume increased 3%. Sales volume, as adjusted, increased 4% and was in-line with BCS volume. Year-to-date adjusted sales volume and BCS volume increased 4% each.

Beverage Concentrates

Net sales for the quarter increased 14% reflecting sales volume growth led by expanded Crush distribution and favorable comparisons to certain discounts in the prior year period. Mid-single-digit price increases taken at the beginning of the year were partially offset by higher coupon spending and increased fountain foodservice contractual discounts. Segment operating profit increased 25% reflecting net sales growth and favorable comparisons to inventory adjustments in the prior year period, partially offset by increased marketplace investments and higher compensation-related costs.

Packaged Beverages

Net sales for the quarter decreased 1% reflecting a 1% decline in sales volume. Mid-single-digit declines in premium-priced beverages and double-digit declines in Sunkist soda were partially offset by a low single-digit increase in Hawaiian Punch. Price increases in CSDs and Snapple, taken earlier in the year, were offset by the impact of negative mix. Segment operating profit increased 42% due to lower packaging, ingredient and transportation costs and continued operating efficiencies, partially offset by higher marketing, SAP upgrade and handheld roll-out expenses.

Latin America Beverages

Net sales for the quarter increased 9% reflecting sales volume growth driven by route expansion, the new Crush value offerings and the restage of Penafiel flavors. Segment operating profit was flat as net sales growth was offset by higher selling and distribution costs related to new routes and the negative impact of channel mix.

Corporate and other items

For the quarter, corporate costs totaled $65 million including $3 million of unrealized commodity-related mark-to-market gains as well as continued productivity office investments. Corporate costs in 2008 were $69 million, including $9 million related to one-time transaction and separation-related costs.

Net interest expense decreased $6 million principally reflecting a lower debt balance.

The effective tax rate was 38%. This included a tax expense of $3 million related to certain tax items indemnified by Cadbury. During the quarter, we also recorded one-time, separation-related benefits of $13 million, net of taxes, driven by indemnified audit settlements and foreign tax items.