Dr Pepper Snapple Group, Inc (DPS)

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Dr Pepper Snapple Group (DPS)

Q4 2012 Earnings Call

February 13, 2013 11:00 am ET

Executives

Carolyn Ross - Vice President of Investor Relations

Larry D. Young - Chief Executive Officer, President, Director, Member of Special Award Committee and Member of Capital Transaction Committee

Martin M. Ellen - Chief Financial Officer and Executive Vice President

Analysts

Judy E. Hong - Goldman Sachs Group Inc., Research Division

Stephen Powers - Sanford C. Bernstein & Co., LLC., Research Division

Bryan D. Spillane - BofA Merrill Lynch, Research Division

Kevin M. Grundy - Morgan Stanley, Research Division

Kaumil S. Gajrawala - UBS Investment Bank, Research Division

Mark D. Swartzberg - Stifel, Nicolaus & Co., Inc., Research Division

Presentation

Operator

Good morning, and welcome to Dr Pepper Snapple Group's Fourth Quarter and Full Year 2012 Earnings Conference Call. [Operator Instructions] Today's call is being recorded and includes a slide presentation, which can be accessed at www.drpeppersnapple.com. The call and slides will also be available for replay and download after the call has ended. [Operator Instructions]

It is now my pleasure to introduce Carolyn Ross, Vice President, Investor Relations. Carolyn, you may begin.

Carolyn Ross

Thank you, Jackie, and good morning, everyone. Before we begin, I would like to direct your attention to the Safe Harbor statement and remind you that this conference call contains forward-looking statements, including statements concerning our future financial and operational performance. These forward-looking statements should also be considered in connection with cautionary statements and disclaimers contained in the Safe Harbor statement in this morning's earnings press release and our SEC filings. Our actual performance could differ materially from these statements, and we undertake no duty to update these forward-looking statements.

During this call, we may reference certain non-GAAP financial measures that reflect the way we evaluate the business, and which we believe provide useful information for investors. Reconciliations of those non-GAAP measures to GAAP can be found in our earnings press release and on the Investor Relations page at www.drpeppersnapple.com.

This morning's prepared remarks will be made by Larry Young, Dr Pepper Snapple Group's President and CEO; and Marty Ellen, our CFO. Following our prepared remarks, we will open the call for your questions.

With that, let me turn the call over to Larry.

Larry D. Young

Thanks, Carolyn, and good morning, everyone. As I'm sure you read in this morning's press release, we had a solid finish to 2012, a year marked with economic uncertainty and cautious consumer spending. And today, we announced a 12% increase to our quarterly dividend to $0.38 per share, our fifth increase since becoming a public company, further demonstrating our commitment to return our excess cash, free cash to our shareholders over time.

Before I review results for the quarter, let me recap some of our wins in 2012. Our team once again persevered in a highly competitive environment and executed against our very focused strategy.

We increased distribution and availability on our key brands and packages, with CSDs ACV up 0.5 in grocery and up 0.2 in convenience.

In grocery, Mott's juice posted a gain of 1.8 points, and Snapple gained 4.3 points. And while shelf space remains tight, our Snapple 16-ounce glass package gained 6.7 points in the convenience channel.

We also increased our trial and sampling occasions, with just over 45,000 new fountain availabilities and 14,000 net new cold drink equipment placements, giving more consumers the opportunity to enjoy our flavorful brands when they are away from home.

We invested behind our well-loved brands, with market investments up $21 million, or 5%, versus 2011. And our marketing team continues to raise the bar, ensuring that our program not only builds awareness and brand equity, but also drives consumer purchases.

With a full year support behind Dr Pepper TEN, the Dr Pepper trademark grew dollar share by 0.2 in Nielsen channels. Dr Pepper TEN now holds a 0.3 share of the CSD category, and more importantly, has brought new and lapsed consumers back to the category.

Through its first year of launch, over 55% of Dr Pepper TEN's volume was incremental to the CSD category, and it grew Dr Pepper trademark household penetration by 3 million households. Based on this early success, we introduced TEN versions of 7UP, Sunkist, A&W, Canada Dry and RC in select test markets, and I'll talk about those results in just a few moments.

We launched Snapple Diet Half 'n Half Lemonade Iced Tea, and it quickly became the fourth fastest selling product in the Snapple portfolio. And we continue to engage our consumers in new and innovative ways.

Our Core 5 Facebook credits program was the first of its kind in the marketplace, and we made every consumer of our Core 5 20-ounce bottles a winner by placing Facebook credits under the caps, which they can redeem for music, games and more.

We partnered with America's Got Talent, the #1-rated summer show, and gave our consumers a chance to win a VIP trip to see the talent finale. And we owned the college football season, giving deserving students a chance to win $100,000 in tuition to make their college dreams come true.

Rapid Continuous Improvement is becoming the foundation of how we operate, and I'm pleased with the level of engagement we're seeing among our employees. Since launching RCI, over 3,000 of our people have participated in over 200 kaizen events, and we've identified over $116 million of annualized cash productivity.

And finally, we returned $684 million to our shareholders in 2012, with $400 million in share repurchase and $284 million in dividends.

Read the rest of this transcript for free on seekingalpha.com