Dr. Pepper Snapple Q2 Profits Up Significantly

Segment operating profit, as adjusted, increased 16% reflecting lower commodity and fuel costs, operating benefits from higher volumes and a strong cost control focus. Reported income from operations was $297 million.

14 Aug 2009 Dr Pepper Snapple Group, Inc. has reported second quarter 2009 earnings of $0.62 per share. The company reported earnings of $0.42 per share in the prior year period, or $0.60 per share excluding certain items. Year-to-date the company reported earnings of $1.14 per share compared to $0.80 per share in the prior year period. Excluding net gains related to the Hansen contract termination settlement and the sale of certain distribution rights in the current year and restructuring, transaction and separation-related costs in the prior year, the company reported year-to-date earnings of $0.99 per share compared to $1.01 per share in the prior year period.

For the second quarter, reported net sales were down 4%. Excluding the loss of Hansen product distribution and on a currency neutral basis, net sales increased 3% reflecting solid pricing actions and 3% sales volume growth offset by negative mix from higher carbonated soft drink (CSD) concentrate and value juice sales. Segment operating profit, as adjusted, increased 16% reflecting lower commodity and fuel costs, operating benefits from higher volumes and a strong cost control focus. Reported income from operations was $297 million.

DPS President and CEO Larry Young said, "Our results continue to show the strength of our brands and the flexibility of our balanced routes to market. Despite a challenging macroeconomic backdrop, each of our segments posted solid net sales gains, grew liquid refreshment beverages value share and added new points of distribution. Our continuous improvement mindset and strong cost control focus, coupled with better than expected input costs, resulted in double-digit growth in segment operating profit on a comparable, currency neutral basis.

"As we look ahead, we remain confident that our advantaged portfolio will continue to deliver industry leading results. With a less onerous input cost environment, we will take full advantage of marketplace investment opportunities to support the long term health of our brands and will leverage our productivity office to drive further efficiencies in our business."

For the quarter, BCS volume increased 4% with CSDs growing 4% and non-carbonated beverages (NCB) growing 3%.

In CSDs, Dr Pepper volume was up 4%. "Core 4" brands - 7UP, Sunkist, A&W and Canada Dry - were down 2%. 7UP, Canada Dry and A&W were each down less than 1% and Sunkist declined high single digits. Expanded third party bottler distribution added 11 million cases to Crush, more than doubling this business. Fountain/foodservice volume declined less than 1% despite a 2% decline in quick service restaurant (QSR) foot traffic.

In NCBs, Hawaiian Punch volume increased 18% on continued strong promotional activities. Pressure on the company's premium products continued with volume down 12%. Snapple declined 15%, but improved sequentially following its restage and strong media support. Mott's juices and sauces increased 8% driven by promotional activity.

By geography, U.S. and Canada volume increased 4%, and in Mexico and the Caribbean, volume declined 1%.

Across all measured channels, the company grew U.S. CSD dollar share 1.0 percentage point and flavored CSD dollar share by 1.4 percentage points year-to-date.

For the quarter, sales volume increased 3% and was 1 percentage point below BCS volume. Year-to-date sales volume and BCS volume increased 4% each.

Net sales for the quarter increased 6% reflecting sales volume growth led by expanded Crush distribution. Mid-single-digit price increases taken at the beginning of the year were partially offset by higher fountain/foodservice contractual discounts and increased marketplace spending. Segment operating profit increased 8% reflecting net sales growth and cost efficiencies.

Net sales for the quarter increased 3% reflecting sales volume growth and solid pricing actions across CSDs, Snapple, and Mott's, partially offset by negative product mix. The improvement in sales volume was driven by double-digit growth in Hawaiian Punch and high-single-digit growth in Mott's, partially offset by double-digit declines in premium-priced beverages. Segment operating profit increased 36% reflecting net sales growth; lower packaging, ingredient and fuel costs; continued operating efficiencies; and strong cost controls.

Net sales for the quarter increased 3% reflecting favorable channel mix and the impact of company-owned route expansion, partially offset by declines in Squirt. Segment operating profit decreased 20% reflecting higher selling and distribution costs related to channel mix and new routes partially offset by net sales growth.

For the quarter, corporate costs totaled $61 million reflecting higher stand-alone costs, including stock-based compensation expenses, as well as productivity office investments and the absence of certain credits in the prior year. These cost increases were offset by $8 million of unrealized commodity-related mark-to-market gains. Corporate costs in 2008 were $64 million, including $20 million related to one-time transaction and separation-related costs.

Net interest expense decreased $31 million reflecting the absence of bridge loan fees and expenses and related party interest income both in the prior year.

The effective tax rate was 36.7%. This included a tax expense of $3 million related to certain tax items indemnified by Cadbury.

The company continues to expect full-year 2009 reported net sales to be down 2% to 4%. Excluding the loss of Hansen product distribution and on a currency neutral basis, the company continues to expect net sales to grow 2% to 4%.