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Dr. Pepper Snapple Group, Inc. (DPS)
Q2 2009 Earnings Call
August 13, 2009 11:00 am ET
Aly Noormohamed – Senior Vice President Finance and Investor Relations
Larry D. Young – President and Chief Executive Officer
John O. Stewart – Chief Financial Officer
Kaumil Gajrawala - UBS
Judy Hong - Goldman Sachs & Company, Inc.
Mark Swartzberg - Stifel Nicolaus & Company, Inc.
Damian Witkowski - Gabelli & Company
Andrew Kieley - Deutsche Bank Securities
Previous Statements by DPS
» Dr. Pepper Snapple Group, Inc. Q1 2009 Earnings Call Transcript
» Dr. Pepper Snapple Group F3Q08 (Qtr End 9/30/08) Earnings Call Transcript
» Dr Pepper Snapple Group, Inc. Q2 2008 Earnings Call Transcript
It is now my pleasure to introduce Mr. Aly Noormohamed, Senior Vice President Finance and Investor Relations. Sir you may begin.
Thank you 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 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 John Stewart, our CFO. Following our prepared remarks we will open the call for your questions.
With that let me turn the call over to Larry.
Thanks Aly and good morning everyone. I am sure many of you have questions regarding what impact the acquisition of the two Pepsi bottlers may or may not have for our business. What this transaction clearly shows is the strategic importance and growth potential of the North American beverage market. In this context, DPS’ existing advantages are clear. We are the undisputed leader in flavored CSD’s, the number one juice and juice drink manufacturer by volume and number on in premium teas We have broad and flexible route to markets that we believe strike a good balance between company-owned DSD and our bottling partners.
Our journey to create a fully integrated packaged beverage business did not start a week ago. It started in earnest in October 2007 and after 20 months of hard work our integration is nearing completion. With a leading brand portfolio and distribution flexibility we believe we are well positioned to exploit the significant per capita development opportunities that are out there. Single serve availability, award winning innovation and 360 degree consumer communications will ensure our brands are top of mind and always close at hand.
Our crush cost mindset will also ensure we manage the leanest and most efficient operating model possible. As I have said before, our guiding principle is to always do what is best for our brands, our customers, our consumers and ultimately you, our stockholders. We are reviewing a number of possible strategic options that build on our already strong growth prospects. As I am sure you will appreciate, discussions with customers or potential customers are something best handled in private.
Therefore it would be premature and certainly inappropriate for us to further comment on this transaction for the time being. We will come back to you with more news when we have something to share.
Now turning to our second quarter I am pleased to report strong results across all our segments. This continues the momentum we established in the first quarter. We are seeing greater economic stability with LRB trends improving sequentially. Against this backdrop consumers are still seeking out flavored CSD’s and value offerings and we expect these trends to continue.
Our flexible routes to market have allowed us to effectively navigate a challenging macroeconomic environment. Our CDS’s and value juices continue to perform well and pricing remains rational. For both the quarter and year-to-date and on an adjusted basis volume grew 4%. Net sales grew 3% and 4% respectively. Segment operating profit as adjusted was up 16% for the quarter and 17% year-to-date.
CSD volume grew 4% in the quarter. Dr. Pepper volume grew 4% led by Cherry which we reformulated to target the light user. Crush more than doubled in volume, adding three points to overall CSD growth on expanded distribution. We also benefited from the shift of Easter into the second quarter as well as strong support for our Fourth of July promotions. Our CSD volume growth was partially offset by continued de-stocking of certain bottlers in Mexico, especially with Squirt.
In the quarter our fountain volume was down less than 1% at a time when QSR traffic was down 2%. Year-to-date our fountain volume was up 1%. This reflects a continuing shift to flavors which now account for 53% of all regular CSD fountain service. Adding to the win at McDonalds we recently announced the expansion of Diet Dr. Pepper to all 2,200 Jack in the Box restaurants. We expect to complete this roll out by the end of 2009. We are targeting to have regular Dr. Pepper in 100% of McDonalds and Diet Dr. Pepper in 50% of McDonalds by the end of 2010.