Dr Pepper Snapple Group, Inc. Reports Improved Fourth Quarter Earnings

Dr Pepper Snapple Group, Inc. reported fourth quarter 2010 diluted earnings of $0.49 per share compared to $0.44 per share in the prior year period. Excluding the loss on the early retirement of a portion of the 6.82 percent 2018 notes and certain tax-related items, diluted earnings per share were $0.67 compared to $0.44 in the prior year.

For the quarter, reported net sales increased 4 percent reflecting sales volume growth, positive pricing and deferred revenue recognized under the PepsiCo, Inc. (PepsiCo) and The Coca-Cola Co. (Coca-Cola) licensing agreements. Reported segment operating profit (SOP) increased 3 percent reflecting net sales growth and supply chain productivity benefits partially offset by a $19 million increase in marketing, higher packaging, ingredient and transportation costs and higher LIFO-related inventory provisions. Reported income from operations for the quarter was $268 million compared to $251 million in the prior year period.

For the year, reported net sales increased 2 percent. Excluding the loss on the early retirements of a portion of the 6.82 percent 2018 notes and certain tax-related items in the current year and a net gain on certain distribution agreement changes and separation-related tax benefits in the prior year, the company earned $2.40 per diluted share, an increase of 22 percent, compared to $1.97 in the prior year. On a reported basis, diluted earnings per share were $2.17 in both the current and prior year.

DPS President and CEO Larry Young said in a prepared statement, "As we look ahead, I'm encouraged by some of the improving trends we're seeing in consumer spending and in the economy generally and by the momentum of our brands and business. We accomplished a lot in 2010, from the opening of our regional center in Victorville, Calif., to the new licensing agreements with PepsiCo and Coca-Cola, to increased availability of our products in take-home, immediate consumption and fountain. With key foundational investments now behind us, we are focused on building our people capabilities and delivering even greater customer value through our developing rapid continuous improvement initiative. This, combined with strong innovation, the national launch of Sun Drop and continued marketplace investments, gives me great confidence in our ability to grow and enhance the returns of this business in 2011 and beyond."

For the quarter, BCS volume increased 1 percent with carbonated soft drinks (CSDs) growing 2 percent while non-carbonated beverages (NCBs) were flat.

In CSDs, Dr Pepper volume increased 3 percent. "Core 4" brands – 7UP, Sunkist soda, A&W and Canada Dry – declined 1 percent. Crush grew double digits and Canada Dry grew high-single digits while A&W and 7UP declined low-single digits. Sunkist soda and Penafiel declined high-single digits. Fountain foodservice volume increased 7 percent on increased Dr Pepper availability and a return to restaurant traffic growth.

In NCBs, Hawaiian Punch volume grew 3 percent and Snapple grew 4 percent. Mott's declined 6 percent as it lapped 23 percent growth in the prior year.

By geography, U.S. and Canada volume increased 2 percent while volume declined 2 percent in Mexico and the Caribbean.

For the year, BCS volume increased 2 percent. CSD volume grew 2 percent and NCBs grew 3 percent. Dr Pepper volume increased 3 percent and our "Core 4" brands declined 1 percent. Crush and Canada Dry grew double digits. Sunkist soda declined high-single digits, 7UP declined mid-single digits and A&W declined low-single digits. Fountain foodservice volume increased 5 percent on increased Dr Pepper availability. Hawaiian Punch volume grew 6 percent, Snapple grew 10 percent and Mott's grew 3 percent. By geography, U.S. and Canada volume increased 2 percent and Mexico and Caribbean volume also increased 2 percent.

Across all measured channels through December, as reported by The Nielsen Co., the company grew U.S. CSD dollar share by 0.4 percentage points and flavored CSD dollar share by 0.2 percentage points.