Snapple 2008 Annual Report Download - page 51

Year Ended December 31, 2008 Compared to Year Ended December 31, 2007
Consolidated Operations
The following table sets forth our consolidated results of operation for the years ended December 31, 2008 and
2007 (dollars in millions).
Dollars Percent Dollars Percent
Percentage
Change
2008 2007
For the Year Ended December 31,
Net sales ........................................ $5,710 100.0% $5,695 100.0% 0.3%
Cost of sales ..................................... 2,590 45.4 2,564 45.0 1.0
Gross profit ...................................... 3,120 54.6 3,131 55.0 (0.4)
Selling, general and administrative expenses.............. 2,075 36.3 2,018 35.5 2.8
Depreciation and amortization ........................ 113 2.0 98 1.7 15.3
Restructuring costs . ............................... 57 1.0 76 1.3 (25.0)
Impairment of goodwill and intangible assets ............. 1,039 18.2 6 0.1 NM
Other operating expense (income) ..................... 4 0.1 (71) (1.2) NM
(Loss) income from operations ........................ (168) (3.0) 1,004 17.6 NM
Interest expense................................... 257 4.5 253 4.4 1.6
Interest income ................................... (32) (0.6) (64) (1.1) (50.0)
Other (income) expense ............................. (18) (0.3) (2) — NM
(Loss) income before provision for income taxes and equity
in earnings of unconsolidated subsidiaries.............. (375) (6.6) 817 14.3 NM
Provision for income taxes........................... (61) (1.1) 322 5.6 NM
(Loss) income before equity in earnings of unconsolidated
subsidiaries .................................... (314) (5.5) 495 8.7 NM
Equity in earnings of unconsolidated subsidiaries, net of tax . . 2 — 2 — —
Net (loss) income . . ............................... $(312) (5.5)% $ 497 8.7% NM
Volume
Volume (BCS) declined 2%. CSDs declined 1% and NCBs declined 7%. The absence of glaceau brand (“glaceau”)
sales following the termination of the distribution agreement in 2007 negatively impacted total volumes and NCB
volumes by 1 percentage point and 7 percentage points, respectively. In CSDs, Dr Pepper declined 1% primarily due to
continued declines in the “Soda Fountain Classics” line. Our “Core 4” brands, which include 7UP, Sunkist, A&W and
Canada Dry, declined 2%, primarily related to a 7% decline in 7UP as the brand cycled the final stages of launch support
for 7UP with 100% Natural Flavors and the re-launch of Diet 7UP, partially offset by a 3% increase in Canada Dry due to
the launch of Canada Dry Green Tea Ginger Ale. In NCBs, 9% growth in Hawaiian Punch, 6% growth in Clamato and
2% growth in Mott’s were more than offset by declines of 17% in Aguafiel, 7% in Snapple and the loss of glaceau
distribution rights. Aguafiel declined 17% reflecting price increases and a more competitive environment. Our Snapple
volumes were down 7% as the brand overlapped 5% growth in the prior year driven by aggressive promotional activity
that we chose not to repeat in 2008, as well as the impact of a weakened retail environment on our premium products. In
North America volume declined 2% and in Mexico and the Caribbean volume declined 4%.
Net Sales
Net sales increased $15 million for 2008 compared with 2007, primarily due to price increases and an increase
in concentrate sales as bottlers purchased more concentrate in advance of planned concentrate price increases.
Concentrate price increases will be effective in January 2009 compared with concentrate price increases which were
made in February 2008. These increases were partially offset by a decline in sales volumes and an increase in
discounts paid to customers. The termination of the glaceau distribution agreement on November 2, 2007, and the
Hansen distribution agreement in the United States on November 10, 2008, reduced 2008 net sales by $227 million
and $23 million, respectively. Net sales resulting from the acquisition of SeaBev in July 2007 added an incremental
$61 million to 2008 consolidated net sales.
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