Keurig Dr Pepper Inc (KDP) 2008 Q1 法說會逐字稿

Good morning and welcome to Dr. Pepper Snapple Group's First Quarter 2008 Earnings Conference call. Your lines have been placed on listen-only until the question and answer session. 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 download after the call has ended.

(OPERATOR INSTRUCTIONS)

It is now my pleasure to turn - to introduce Mr. [Aly Noormohamed], Senior Vice President of Investor Relations. Sir, you may begin.

Thank you, operator and good morning, everyone. Before we begin, I'd like to remind you that this call contains forward looking statements including statements concerning our financial performance, which should be considered in connection with cautionary statements and disclaimers contained in this morning's earnings release and our SEC report.

During this call, we will 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 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'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, Ali. On behalf of the 20,000 people working at Dr. Pepper Snapple, welcome to our first earnings call as a standalone company and thank you for spending a few minutes with us this morning.

Since our May 7 spin off, I find myself experiencing a number of firsts. This is a very exciting time for all of us. And as I walk the halls here in Plano or visit the teams out in the field, it is clear to me that the entire organization is energized and focused on growing sales and crushing costs.

Our industry and the economy as a whole continue to face significant headwinds, especially in the area of higher commodities and fuel costs. Our C&G customers are telling us that they are absorbing increase in trips to their gas stations, but the foot traffic into the stores is down significantly. As one of our bottlers put it, a decline in consumer mobility. We're also seeing increased frequency of visits to super centers.

While we're not immune to this hanging landscape, we are underdeveloped in a lot of the markets and channels we serve and we still believe that we have room to invest in our brands and grow our business.

We are encouraged by the discussions with our bottling partners and our retail partners, and collectively, we believe we have a solid innovation and marketing plans in place to support our business for the rest of '08 and beyond. Against this backdrop, we are proud of our accomplishments so far this year.

We raised $3.9 million in new financing, we completed the spin off of Cadbury Schweppes PLC, we brought in new talent that complimented our existing strong team and elevated our overall skill pool. We maintained pricing discipline as we cycles necessary pricing taken in 2007.

We expected our concentrate price increase two months earlier this year, compared with last year, taking pricing in February of '08. We continue to build distribution of our Snapple antioxidant product, which was launched last November. We are very encouraged by the results so far and the quality of our marketing plans over the summer.

As you saw in the press release this morning, we delivered solid revenue and segment operating profit results in the quarter. Declines in bottler case sales reflect a combination of factors.

Significant bottler price increases on CSDs in May of 2007 and a 10% price increase on Hawaiian Punch in April of 2007, the first price increase since we purchased the brand in 1998, are still being cycled in the first part of this year. There's been a modest step up in competitive activity, however, for the most part, we continue to see rational pricing behavior.

Trends in fountain food service, which you have heard our bottling partners discussing, have been disappointing. This impacts our flagship Dr. Pepper business and we are working hard to reverse this trend. The loss of our distribution agreement for [Glasso] products and finally, 7-Up declined 10% as it overlapped strong promotional activity in the first quarter of 2007.

While our overall volume trends were soft in the quarter, we were particularly pleased with the growth in our Squirt, Snapple, Motts, Monster and Fiji businesses as we added news and gained new distribution.

On the company owned distribution side, we continue to grow our mix of cold drink single serve offerings with volume up 12%, year to date. Strong pricing more than made up for the sales volume shortfall with net sales up 3%. The loss of Glasso reduced revenue growth in the quarter by three percentage points. On a full year basis, we expect this loss of Glasso distribution to reduce revenue growth four percentage points, with the majority of this unfavorable comparison occurring in the second and third quarters of 2008.

We continue to be very pleased with our SeaBev acquisition. It's performing in line with our expectations. We continue to gain ground through new points of distribution, new customers, co-drink placements and new SKUs. Our overall equipment effectiveness, our internal operating efficiency measure is up 4% since we purchased the business.

For the quarter, SeaBev added two percentage points of growth to net sales with only half the year to lap, we expect SeaBev to add one percentage point of growth to annual net sales.

Commodity costs remain a challenge for all of us in the industry. Coming in to w2007 we expected commodities to add about $160 million to our cost of sales line, driven principally by aluminum, apples and high fructose corn syrup.

Our procurement teams have done a magnificent job managing these costs and based on current estimates, we're tracking right in line with this number.

Where we've seen a dramatic increase versus our beginning of the year expectation is in the area of fuel costs, we expect this negative trend to continue for the rest of the year and adds cost to our transportation and warehouse lines in SG&A.

As you look at our margin growth for the quarter, what you're seeing is the [sertial] impact of losing a lower margin product like Glasso. As a purchased finished good, we earned 20 plus gross margin, versus 50 plus gross margin on products we make in the overall portfolio.

This structural advantage will continue through the contract termination in November and will be most evident in our second and third quarters and wind down in our fourth quarter as we overlap the contract termination.

SG&A grew 2%, the $14 million we realized from restructuring actions announced in '07 and a planned shift in marketing spend for the first quarter into the second and third quarter support Dr. Pepper, Sunkist and Snapple were offset by higher fuel costs and the full consolidation of the SeaBev acquisition.

The net of all this, the teams delivered solid results with segment operating profit up 5%. I'll let John cover below the line items in a second, but let me give you a quick peak under the tent in terms of what we have planned for the rest of 2008.

We have been very pleased with the innovation that we have launched recently. A&W and Sunkist floats, our rich creamy dairy based CSD continues to exceed our execrations, customers love it and we're selling everything we can make.

Canada Dry, Green Tea Ginger Ale, the first mainstream CSD with green tea and antioxidants is another big hit. Our customer praise scores are some of the best we've ever seen. In markets where this product is launched we're seeing reenergized Canada Dry trademark with volume up mid single digits.

Snapple Ox Water is another great example of the strength of marketing and our R&D teams. 16 weeks from concept to commercialization, we had this product ready to go the day our contract to distribute Glasso ended. Six months in, and this product continues to meet and in some markets beat our internal benchmarks.

In the markets we serve, our ACV distribution has reached 70% in grocery and we're now focused on building similar distribution levels in [Sea Store] which is at 30% today.

Venom, our piercing energy drink that bites back is taking the market by storm. Customers that have it are telling us that the packaging is driving huge trial and velocities are ahead of expectations. Venom comes in a striking, resealable, 16.9 ounce aluminum bottle, so consumers can enjoy the product on the go and of course, drink responsibly.

We are gaining authorization in key accounts and freeing up capacity to ensure can supply for all of our accounts. As exciting as the first half innovation has been, we still have lots more to come.

Snapple Mainstream Tea has moved from test market to national roll out, which started in May. Mainstream comes in six flavors. A variety of tea types is affordable and comes in a more convenient plastic package. In taste tests, it continues to beat the competition. This product allows us to access the larger cold filled tea market and get back the premium pricing in our premium line.

And speaking about premium, the entire premium line is going through a makeover, updated flavors, enhanced functionality and a whole new look, sporting contemporary graphics and a refined bottle. Look out for it later in the year.

Penafiel, our leading carbonated mineral water in Mexico is set for further expansion in the U.S. through our company owned routes and independent bottling partners. This number one brand brings a taste of home to the fast growing Hispanic base.

Dr. Pepper will kick off the college football season with a fun 21 ounce, football inspired textured bottle and some great tie ins and marketing that I'll share with you in a moment.

We're just days away from officially opening our state of the art R&D center here in Plano. This center puts some of the best flavor scientists on the doorstep of our marketing team. Side by side, these teams will take our robust innovation pipeline to a whole new level. Complementing the R&D center is the pilot plant that is being housed in our Irving Texas facility. Combined, we are building the capability to innovate stronger, better and faster.

Now, having great new products is only half the story. We need award wining marketing to make sure our products are top of mind when our consumers are shopping. Let me share just three of the programs we have in place over the summer.

As part of the summer long orange nation, initiative the Sunkist trademark will be supported with national media tie ins and MTV and a large internet presence on some of the top teen websites, such as Facebook.

In addition to media, Sunkist and all flavor brands will be running a one in six under the cap program where consumers will have a chance to win a free 20 ounce bottle of their favorite flavored brands. This is the largest under the cap program we've ever run on flavors and it comes at a time when consumers are looking for great value.

Dr. Pepper has a huge summer plan, leading off with the Indiana Jones, Kingdom of the Crystal Skull promotion, which runs through the end of June with national media and promotion support, including its own one in six under the cap promotion where consumers can win free product and Indiana Jones prizes.

Based on in store programs run or planned, this program is set to be one of the most supported merchandising activities our system has executed on Dr. Pepper. Starting in July, we begin a new Dr. Pepper campaign focused on the light user.

This campaign is a humorous Dr. Pepper way, teaches the consumers the benefits of drinking Dr. Pepper slowly to fully experience the 23 flavors of Dr. Pepper. This campaign will be supported with 12 million instant coupons behind the 2 liter display push and will be followed by our college football promotion, featuring the new football 12 ounce can, 21 ounce football bottle, national on pack, one in six promotions and the opportunity to win big ticket prizes on national TV during the halftime of the championship games.

With Snapple, our feet on the street will focus on growing the base at existing retailers and adding new accounts. With our complete Snapple tea, juice and water line up, as well as Venom, we have a great story to tell. In support of the entire Snapple franchise, we will distribute 25 million coupons, ample over 2 million bottles and through TV, radio and the internet, gain over 1 billion impressions.

Under the cap promotions, sampling and innovative package design and size are just some of the ways we will keep the consumer interested in our franchise. To address the issues of the lost trip or the lost purchase, especially in C&G, we are working with our retail partners on specific beverage tie ins, gas pump [toppers] and value priced packaging.

So, a good start to the year. We have opportunities to gain distribution in areas where we are underrepresented. We have strong innovation and great marketing. This gives us reason to feel good about our plans for '08 and beyond. Let me turn the call over to John, to walk you through our outlook for '08 in more detail.

Thanks, Larry and good morning, everyone. There are a number of items that we believe you should consider as you review our results today, so let me take a moment to review these with you.

First, for the first quarter of 2008, as you know, we operated as a subsidiary of Cadbury Schweppes PLC and our results for the quarter reflect the impact of related party transactions with Cadbury that continued until our separation on May 7th, 2008.

Second, we have presented pro forma earnings per share, taking the reported first quarter net income divided by the pro forma basic common shares outstanding as of the date of our spin off on May 7th, 2008.

As you review the tables attached to this morning's press release, as well as the 10Q which we expect to file later today, you will see underlying operating profit at the segment level, given the significant level of intercompany transactions that exist between our segment, we encourage you to look at our results in total and this is how the information has been presented in the press release.

Third, and also in connection with your review of the 10Q, we have eliminated the intercompany profit that had historically passed from our finished goods business to our bottling group following the consolidation of the Snapple distributor business into bottle group. This amounted to 12 million in the quarter and $54 million for the full year.

Finally, we're in the process of finalizing the presentation of our 2007 quarterly results under us GAAP. In addition to providing quarterly information, we will be looking to include details under adjustments and add a reconciliation from underling operating profit to income from operations. We hope to complete this work in the next few weeks and we'll then post this information to our website.

With that, let me now provide some perspective on below the line changes for the quarter and our outlook for the full year. As you saw in the press release, we had significant favorability in stock compensation and net interest in the quarter. The $13 million decrease in stock based compensation was driven by two factors, lower unvested shares outstanding and a reduced Cadbury share price compared with the same period last year.

Additionally, 2008 grants to DPS employees were delayed until the new DPS stock based plan was put in place in May 2008. For the full year, we expect stock compensation expense of $12 million, essentially in line with our estimates in the form 10.

Interest income and expense from January the 1st through May the 7th reflect related party transactions with Cadbury. Net interest expense declined to $21 million, in line with favorable changes in our due to, due from balances with our Cadbury parents.

Our effective tax rate increased 140 basis points to 38.7%. This increase related to tax restructuring actions that were taken as part of our separation. Reserves against these items were taken in the second and fourth quarter of 2007, resulting in an unfavorable comparison in the first quarter. On a full year basis, reserve movements will have minimal impact to our tax rate when compared to the prior year.

Moving on now to cash flow. For the quarter, cash from operations was down $25 million. However, trade working capital was favorable by $17 million, reflecting better cash collections, partly offset by the normalization of payments to our key suppliers. Favorable trade working capital was offset by the timing of restructuring payments and other accrual payments.

With so many moving parts in 2007 and 2008, we believe the comparisons between the two years below the revenue line is difficult. We're therefore providing a little more specificity on our 2008 numbers in the hope that this gives you a clearer picture of our business in this complex transition year.

Our EPS guidance of at least $1.67 is based on what we know today and specifically as it relates to the impact of commodity cost inflation, interest rates and tax rates. Our EPS guidance includes the impact of $0.24 per share, associated with one time separation and transaction costs, bridge loan fees and expenses, and restructuring charges previously announced. Our guidance assumes a slight decline in volumes, but this is inclusive of a one point decline resulting from the loss of distribution of Glasso Products.

We expect our non-carbonated beverage business to grow faster than our CSDs. Its important to note here that given the margin differences between the two businesses, all other things being equal, you should expect to see gross profit dollar gains, but gross margin declines as that makes - continues to shift. The pricing gains we experienced in the first quarter will normalize over the year as we overlap pricing that, for the most part, started in April of 2007.

In certain businesses where we're seeing additional cost pressure, we are looking at various options, including additional price increases. We are very sensitive to the current economic climate and its effect on our consumer.

The greater risk clearly remains the lost purchase or the lost shopping trip, versus the risk whether the consumer can bear the additional prices. Our net sales growth guidance remains unchanged and we expect it to be in the three to 5% range, and that's before any acquisitions we may make.

The loss of our distribution of Glasso products negatively impacts full year net sales growth by four percentage points and the consolidation of the SeaBev acquisition positively impacts net sales growth by one percentage point.

Despite the recent run up in certain commodities, taken as a whole, we continue to see commodity increases adding about six percentage points to cost of goods sold. Where we are seeing a much greater impact versus our beginning of the year plan estimates is in the area of fuel costs. Based on our latest estimates we expect total fuel costs to increase transportation and warehousing costs, which are recorded in our SG&A line by around $40 million as compared to 2007.

We are delivering the full savings form the restructuring actions we announced in October 2007. These savings are being offset by the higher fuel costs, the consolidation impact of the SeaBev acquisition and new headcount and other costs associated with being a stand alone company.

In line with the higher CapEx, we're also seeing a step up in depreciation and we expect full year's appreciation of approximately $140 million versus $120 million in 2007.

As Larry mentioned, we continue to invest in our brand through robust innovation and strong marketing activities. Our spend this year, however is biased more heavily in our second quarter. Below the line, we expect one time transaction and separation related costs, which were previously assumed to be incurred by Cadbury or included as part of the opening balance sheet, to total some $35 million. These costs include items such as our systems conversion to U.S. GAAP, recruitment for new stand along functions, new company branding and retention and other bonuses.

Additionally, we incurred $24 million related to fees and interest on our bridge loan, which we set up to secure financing at separation. Our blended average interest rat on the term loan A and bonds including the amortization of season expenses is approximately 6.3%.

Over time, as we pay down our term loan, assuming constant LIBOR, you should expect to see this blended rate increase towards 6.8% -- towards the 6.8% blended average rate of the bonds plus the amortization of fees and expenses.

Our full year tax rate is expected to be 59.6%, which includes $11 million related to tax charges that are indemnified by Cadbury as part of our tax sharing agreements. The indemnity income will be recorded in our other income line. So you should think of this item as having no impact on our total results. Essentially, our effective tax rate is grossed up for this amount, we believe you should consider the rate with and without the site.

On May the 7th, 2008, Dr. Pepper Snapple Group granted 1.3 million stock options and 1 million restricted stock units based on a value of $25.36. That was the volume weighted average price on our first day of trading.

Additionally, share plans under Cadbury for current BPS employees vested decided a further half million shares. The full year, 2008, dilution impact from these grants is approximately 0.3 percentage points to DPS.

Other than the separation related items I mentioned that will hit the second quarter and the usual beverage seasonality curve, there's very little else I would call out as you build your models for 2008.

In terms of cash flow, our priorities remain unchanged. First, use funds to invest in our business and second, pay down debt. Expect our cash flow to move in line with our earnings. We expect CapEx to be in the 5% of net sales range and we will look to buy excess cash flow to pay additional amounts of debt over and above the $165 million minimum obligations we have.

With the separation now complete, we're reviewing all our core processes and looking for ways to drive improvement. An immediate focus is to establish the overlays on our systems and controls which are currently on an IFRS basis to obtain a U.S. GAAP basis.

I'll say now that we'll maintain the IFRS under pinnings as you may be aware that we may well have to switch back to IFRS if this is mandated in the future. With that, let me turn the call back to Larry.

Thanks, John. So, in summary, a solid start to the year. We are confident in the strength of our brands and the passion of our people. As a brand owner, we have some of the most recognized consumer preferred brands in North America and Mexico.

Our brands are strong and we play in the sweet spot of CSDs. We will focus first and foremost on CSDs and at the same time, expand our presence in non-carb through our Snapple and our Motts franchises.

Our innovation pipeline and marketing programs are strong and will help deliver our volume objectives for the year. We are very excited about the year and the many years ahead. Operator, we are ready to take our first question.

(OPERATOR INSTRUCTIONS). Our first question is coming from [Bill Heckloriello] from Morgan Stanley.

Our first question is coming from Bill Heckloriello from Morgan Stanley. Please go ahead.

Hi, Larry. Congratulations on your first quarter.

Thanks, Bill.

Question on the volume side, as you look out balance of year, CSDs were down two in the first quarter and your non-carbs are down four excluding the Glasso loss, it sounds like you expect at least the non-carbs to be picking up so you can talk about how you see that playing out, Snapple was up three, but you're rolling out the Mainstream, how do you see the Snapple picking up as the year goes on? Thanks.

Yes, absolutely. Yes, for our first quarter, one of the things is the timing of our pricing so we're seeing our results come back in on the CSDs so we feel pretty confident with the programs we have out there, the marketing the timing that we're going to be able to come in with our CSD number.

And then, you're exactly right, on Snapple, the innovation we have behind Snapple, the pipeline with coming out with the mainstream, getting that nationally, getting it to our distributors and then also the - redoing the premium where we can not only get new excitement into it, but bring the price back where it should be.

In the past, we had to compete with the other mainstreams with our 12 pack premium. And now, we can get that price back where it should be. So that's where we're seeing the volume come in, we've got it laid out across the three quarters and it makes us very confident in our volume assumptions and where our pricing can be.

And you would see Snapple as you're rolling out the Mainstream and also in the antioxidant, filing in the distribution. You think you'll get toward double digit growth balance of year on that brand?

No, I don't think we'll get to double digit.

Okay, thanks.

Thank you. Your next question is coming from Jonathan Feeney of Wachovia. Please go ahead.

Good morning, thanks very much.

I wonder if you could just comment about, as you invest more behind the non-carbs and particularly - hoping those volumes sort of pick up. The impact it has across the holistically, across the advertising, marketing and bottling side, because by now - you've been pretty clear about what the impact is financially near term, but I can't help but that that - shifting more and more in the mix towards these brands and away from the core four, is something that deleverages a lot of the competitive advantage that you have, and that inevitably leads over the long run to, I guess, more volatility and profits. I mean, could you comment about that strategically and do you think that's right, or - and if so, what can be done about it?

Absolutely, and as I just mentioned in our presentation. I mean our major focus is our CSDs, I mean that's where we put our focus, but if you look at the mix, I mean our mix on the non-carbs is much lighter than some of our competitors and we're setting at about a 20%.

So, I mean, we've got a lot of room for growth there to be able to play in where the higher growth categories and packages and brands and still put a tremendous focus on our CSDs and grow them. I don't think you'll see near the impact of the gross profit per case is going to be a lot higher on the non-carbs, but as you can tell by some of the programs we put together, our major focus in our CSD business.

I guess, as you - you say you have a lot of room for growth on the 20%, and that seems to be true, but as you think about - I mean, how do you think about the impact that has maybe two or three years down the road?

I mean if you look at 1% growth in your core four as something that is very leverageable, I'm not sure that over three or four year time horizon with the nature of these new brands, [SKU] complex, non-carbs that tend to change - consumer tastes tend to change a little bit, has the same kind of profit drop. Do you think that's true? Do you think that has more profit? I mean how do you think that relates?

Well as I - its - what it does is it also helps us to complement our CSDs as we go out into our cold drink strategy, placing more coolers, one of the biggest things we have to do is be competitive with our - with everybody that's out there, we have to have a full line up to go in those coolers so that we can, not only satisfy the CSD consumer and customer, but have the new age beverages there with them.

So its - it kind of gives us a halo effect on our CSDs with our cold drink strategy.

Okay. Thank you very much.

Thank you. (OPERATOR INSTRUCTIONS). Your next question is coming from Judy Hong with Goldman Sachs. Please go ahead.

Good morning, everyone.

Hi, Judy.

If I look at your sales growth guidance for this year, 3 to 5% growth and if we adjust for the loss of Glasso and addition of SeaBev, I guess it comes out to 6 to 8% kind of underlying growth and with flattish or a slight decline in volume, it sounds like you're embedding pretty strong pricing.

So, first of all, I'm just wondering if I'm doing my sort of calculation correction, or looking at it correctly. And secondly, in that context, if you talk a little bit more about your pricing plan, I know you talked about the pressure on the fuel costs, given that you've had also [CD] talking about trying to take more prices up post labor day. Does that give you more comfort around taking further pricing up for the - at the remaining of the year.

Judy, its John here. Your math sounds about right on the contribution, excluding what you identified. So your math is right. Larry, on pricing.

Yes, I -- let me see this here. On our pricing, based on the guidance we gave you this morning, as the commodities continue to go up and as John said, about 6%, we have specific cases where we have plans in place to take price overall. But we feel very good with the level of pricing we've taken so far and at current cost projections, our guidance does not require us to take additional pricing.

Okay. And then, Larry, just in terms of your effort to expand into the immediate consumption channel, just given how challenging that channel is at this point, are you sort of rethinking about how aggressive you go about doing that? Are you still trying to roll out as much cold drink equipment as you've laid out before at the meeting?

Yes, our plan is still the same, Judy. As I said in the presentation, our cold drink is up 3%. Even though we 're adding an additional 35,000 a year, that has still - I mean it doesn't even hardly move the needle on the total cold drink placements out there in the industry.

With our flavors being - being a leading flavor company, we've found it's been very easy to get our coolers in place, especially as we go in with those flavors. When you look at the flavor categories, the top 10 flavors, six of them are ours. And when we add the Snapple line up and all of our non-carbs, it's made it very - we've not had a lot of challenges.

The beauty of it is, as we go through the different regions, I mean, if we se somewhere that its not working, this is something that we can turn on and off, we can focus more over to a - like an acquisition like SeaBev where - I mean a lot of the strength of SeaBev has been able to get the cold drink placements, our feet on the street and really turning that operation around quickly.

Okay. And then, John, I know you said we shouldn't focus too much on the segment numbers, but if you think about the beverage concentrate segment and sales were down 4% and volume was down sort of 3 to 4% and you said you got positive pricing, so how do we get to that 4% decline in the beverage concentrate business?

Well, we took concentrate pricing, as you know, in February so that gave us a benefit. But we are seeing that load in - a year ago when we traditionally took the price increase on April the 1st, what you would see is some degree of load in immediately prior to the price increase. Clearly, our current quarter did not benefit from that. And as we've mentioned, things have normalized through April and we would expect that one off distortion, if you will, to have gone away by next year.

Okay. Thanks.

Thank you. Your next question is coming with [Todd Duvec] with Banc of America Securities.

Hi, this is actually [Tom Truxillio] standing in for Todd Duvec. I appreciate your reiteration of your cash flow priorities and that you're first going to invest in the business and then pay down debt. Just based on your guidance that you've given today, do you still expect to generate enough free cash flow after CapEx to pay down debt by about $300 million to 400 million?

What I'll tell you is we've got credit metrics that we have to be compliant with. We've run the numbers and I can tell you that we're comfortably in compliance with the credit metrics and our credit agreements. We will clearly be able to make the minimum payments with comfort and we expect to make some additional payments above and beyond the minimum required payments of $165 million.

Okay, thank you.

Thank you. Your final question is coming from John Faucher with JPMorgan. Please go ahead.

Much. Along with all the concerns on cold drink over the past six months or so, we've gotten a view into just the difference in profitability per case in cold drink versus take home. So, first question, if you could give us an idea in terms of our relative profitability on the cold drink business on a per case basis versus take home.

And then the second question would be on sort of trying to find a right - the right earnings base for 2007, we had been looking, I think, at roughly a 196 number is where we sort of netted out, but we weren't sure whether that included charges or not. So can you give us sort of an ongoing EPS base for 2007 as well? Thanks.

Yes, I'll take the first piece of it there and then let John take the second. John, we don't have it broken out between the take home and cold drink, we don't give that, but of course, it is considerably more. Especially whenever you look at the 12 packs are out there. I think Memorial Day, probably an average you'd see out there were four 12 packs for $11.

We've got the cold drink going out there - getting up closer to $20 a case, so I mean it's a considerable increase in margin, a lot lower volume but, I mean, it really brings up the efficiency of the routes and helps the total margin and the top net sales line. I'll let John take the EPS question and walk you though that one.

Yes. I would - refer you to the form 10, if you have a look at page 34 on the final edition of the form 10, where you see our earnings for 2007, I think that is a broadly indicative indicator for earnings going forward or normalized earnings. You can see the -- there's a couple big one off items, but they, broadly speaking, offset one another. So that 2007 indication, I think is a good starting point for normalized earnings.

Okay, and then - thank you. And then, Larry, to follow up on your comment there, we've been hearing numbers sort of five to one in terms of relative profit per case. So I mean, would you be dramatically different than what we're hearing from other players in the industry?

We should be - we should be very similar to the industry.

Okay, thank you very much.

All right.

Well, I'd like to thank you for your interest in Dr. Pepper Snapple and spending a few minutes with us today. Thank you very much.

Thank you. And this concludes today's Dr. Pepper Snapple Group's First Quarter 2008 Earnings Conference Call. You may now disconnect your lines and have a pleasant day.