Operator: Good morning and welcome to Dr Pepper Snapple Group's First Quarter 2013 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 replay and download after the call has ended.
It is now my pleasure to introduce Carolyn Ross, Vice President, Investor Relations. Carolyn, you may begin.
Carolyn Ross - VP, IR: 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 statements, 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 - President and CEO: Thanks, Carolyn, and good morning, everyone. We're pleased with our performance in the quarter. As our teams remained focused in executing our strategy, despite macroeconomic challenges and seasonably cold weather across the country and continued criticism of sugar sweetened beverages.
For the quarter, bottler case sales declined 2% on 3 percentage points of price and mix. Dr Pepper declined 3% with declines across the base business and Dr Pepper TEN, as we continue to cycle inventory bills from the national launch. It should come as no surprise that our Dr Pepper performance was negatively impacted by calendar shifts from our larger bottling partners and while we continue to gain new availabilities in fountain, softening trends in the restaurant industry more than offset those gains.
Our Core 4 brands were flat for the quarter from the launch of our TEN products and I'll speak more about TEN in a moment. Hawaiian Punch decreased 14%, primarily due to its performance at one national retailer and Mott's posted strong growth of 11%, as we continue to gain distribution across key packages in both the juice and sauce categories.
Snapple declined 2%, cycling 5% growth from a year ago, on price increases and lower promotional activity associated with the national launch of Diet Half 'n Half last year. While I don't like talking about the weather, the severe cold this winter in the Northeast; Snapple's heartland, definitely had an impact on this brand.
All other brands decreased 2% for the quarter, led by a mid-single decline in Crush and double-digit decline in Sun Drop. On a currency neutral basis, net sales increased 1% for the quarter, reflecting 3 percentage points of price mix, partially offset by lower volumes.
Segment operating profit increased 7% for the quarter as revenue growth, ongoing productivity improvements from RCI and a favorable adjustment to our LIFO inventory provision of $7 million were partially offset by planned increases in commodities, primarily from apples and our labor and benefit costs.
Core EPS was $0.53 for the quarter, versus $0.46 in the prior year, a 15% increase. As consumers are becoming increasingly more aware of calorie intake and are looking to make healthier choices for themselves and their families, there's no question, they're drinking fewer CSDs. That's why we created TEN platform, giving consumers the opportunity to enjoy the same great taste and full mouth feel of a regular CSD with a lot less calories. In fact, they can drink an entire 12 pack of TEN and consume less calories than in one regular 12 ounce can. Now that's something to get excited about.
The national rollout of our Core 4 and RC TEN is well underway. With ACV currently at 65% in grocery, we've secured incremental space in the majority of our accounts and we'll continue to gain distribution over the next several months, based on each retailers' planogram resets, and while it's still very early, I'm pleased to say, it's performing in line with our expectations, where we currently have distribution, these products are approximately 10% of the core trademarks total sales, and they've been highly incremental to the CSD category, meaning that we are achieving our goal of bringing (large) consumers back to the category. Our marketing support behind this launch is heating up too. The national TV spot, which plays to both male and female consumers began airing mid-March and will continue through the summer letting consumers know that they can get both with TEN. We have also had lots of buzz through social media with consumer created videos available on Facebook, Twitter and YouTube. My personal favorite shows a guy who spends about 20 seconds, prepping for a workout then runs for only 3 seconds to work off the 10 calories.
I hope you all saw Olympics gold medal winning gymnast McKayla Maroney in February at Penn Station renamed TEN Station for the day. She handed out hundreds of samples of TEN to consumers and said that she finally found something that impressed her with our TEN products. She also did a media blitz around TEN with coverage on Fox & Friends, CNN's Starting Point and many others garnering over 300 million impressions. Like I said last quarter it's critical that we get this product in the consumers' hands. Our lifestyle sampling program has already hit more than 10 markets with more to come, giving out thousands of free cans and the consumer feedback has all been extremely positive.
We will continue to be patient with this launch because we know consumption habits take time to change and we have proven that TEN can bring consumers back to the category. Of course TEN isn't all we have to be excited about. We are teaming up with Redbox to give consumers free movie rentals when they purchase take home packages or single-serve bottles of Dr Pepper and we will be firing up the grills this summer with one-of-a-kind point-of-sale and merchandizing kits to drive additional points of (introduction) in key retailers. Speaking of grilling our Core 5 brands are partnering with Coleman to bring a full package of summer time solutions to consumers and retailers. The Core 5 summer fun program will tie in with retailer (schematics) driving additional displays and points of interruption in the store.
For the fourth year in a row, we're sponsoring the PJ Awards, the number one rated Hispanic youth award program. Pitbull will once again be our partner, headlining both a new TV campaign and a Dr Pepper private concert. We'll also sponsor a new (Me-mix) promotion where participants can compete for the opportunity to perform at the private concert.
Soccer is a major passion for Hispanic consumers, so 7UP is sponsoring the 2013 Gold Cup, a premier international tournament where 12 national teams from the Caribbean, North and Central America compete. In 2011, this tournament drew more than 600,000 fans with 10.8 million total viewers on Univision. This year, FOX Channel and FOX Sports are joining in and we'll broadcast all 25 matches in English for the first time in Gold Cup industry. 7UP will have branding on all official Gold Cup material and has an exclusive media buy on Univision during the tournament.
Crush is giving away a money can't buy, VIP experience with teen sensation, Cody Simpson and our new advertising on Sun Drop goes head-to-head with the competition, letting consumers know that while Mountain Dew is good, Sun Drop is surprisingly good. Wake up and say Aloha, with Hawaiian Punch Aloha Morning, a delicious new breakfast offering that contains 40% less sugar than other leading juice drinks. Snapple is bringing back a nostalgic under the cap promotion, win nothing instantly. Where consumers can win nothing, such as no grocery bills or no rent, and we'll provide value to your consumers and retailers with the launch of Cold-Fill SnapTea and a gallon take home package and 16 ounce single serve cans, and that's not all. We know the value of collaborating with strong partners. So, we've teamed up with 7-Eleven to develop an exclusive limited Snapple line directly targeting millennial consumers. Our Snapple lemonades will include three thirst quenching flavors, regular, pink, and mango lemonade and features never seen before graphics. These products will have store front presence and merchandising throughout the summer. I'm sure you'll agree that we have some great activity lined up for the summer.
Now, let me turn the call over to Marty, to walk you through some of our global line items and our thoughts on the balance of the year.
Martin M. Ellen - CFO: Thanks Larry, and good morning, everyone. Reported net sales for the quarter, were up 1% with price and mix of just over 1 point each and 0.5 point from favorable discount in both our beverage concentrates and packaged beverages segments. This was partially offset by a 2 point decline in sales volume. Reported gross margins were up slightly, increasing from 57.1% last year to 57.2% this year. There are a of moving parts here, so, let me review them for you.
First, the net pricing factors I just mentioned increased gross margins by approximately 80 basis points. Second, higher input costs primarily related to apples and corn reduced year-over-year gross margins by 50 basis points, but this increase was offset by ongoing RCI productivity benefits. We also recorded a LIFO inventory benefit of $7 million in the quarter based on our current view of inflation and year-end inventory balances, this drove a 50 basis point improvement in the gross margin comparison as there was no LIFO reserve movement last year. Furthermore product mix reduced gross margins by approximately 40 basis points.
Finally changes in certain commodity prices at the end of the quarter caused us to record a $7 million unrealized mark to market loss with $6 million in cost of goods and $1 million in SG&A. This compares to $6 million unrealized mark to market gain last year with approximately $5 million in cost of goods and $1 million in SG&A. This unfavorable comparison reduced gross margins by approximately 80 basis points. SG&A excluding depreciation and amortization increased by $10 million for the quarter on planned increases and field labor costs, higher marketing investments of $2 million and the unfavorable mark-to-market comparison I just mentioned.
Moving below the operating line, depreciation and amortization expense for the quarter declined by $3 million and reported operating income increased by 3% from $192 million, representing 14.1% of net sales to $197 million or 14.3% of net sales this year. We are moving the impact of mark to market gains and losses in both years. Core operating income increased by 10% or $18 million and represented 14.8% of net sales, up 110 basis points from 13.7% last year. Net interest expense was $34 million for $2 million above last year. Our effective tax rate for the quarter was 36.1% versus 37.4% in the prior year, as we benefitted from various tax credits.
Moving on to cash flow; cash from operating activities were $60 million, and capital spending was $29 million. Free cash flow was $31 million compared to $132 million in the prior year, after adjusting for the taxes paid on the Coke and Pepsi licensing agreements. Receivables grew as a result of fewer collection days in March of this year and on a FIFO inventory basis, apples and resin increased raw materials by $18 million compared to the same period last year. For the quarter, total distributions to shareholders were $171 million, with $101 million in share repurchases and $70 million in dividend.
Before I update you on our 2013 guidance, let me provide you with a quick update on RCI. We've now just begun the third year of our continuous improvement journey and I couldn't be more pleased with the level of engagement and enthusiasm from our people. To-date, we've had over 3,000 people participate in 255 Kaizen events. Through these events, we've learned that break through change is possible and that can be done rapidly and sustainably.
As I mentioned in February, the next phase of our journey includes two approaches; goal deployment and lean leadership track management. Essentially we're focused on driving break-through business results, while also developing our business leaders to become lean champions. We've identified track leaders from across the business to focus on the core activities within DSV; warehousing, delivery, merchandising cold drink, and certain field marketing activities. These track leaders will leverage lean tools to discover and replicate wins across the business where they can be adapted to local operations. We've already kicked off the initial DSD track Kaizens and they will continue to run through the second quarter with replication events starting mid-June, and with $127million of cash productivity already achieved, I remain confident that we'll achieve at least $150 million of cash productivity by the end of this third year of our journey.
Moving onto 2013 full year guidance, as you saw in this morning's press release, we continue to believe we can achieve net sales growth of approximately 3% for the year with full-year core earnings per share in $3.04 to $3.12 range. Consistent with our first quarter performance, we expect combined price and mix to be up about 2% to 2.5% for the full year, with a larger portion resulting from mix. Remember, the majority of Core 4 and RC TEN volume will be finished product sales through our packaged beverages segment, contributing to higher reported net selling price per case.
Sales volume is expected to be about 0.5 points led by Core 4 TEN and growth in our non-carb portfolio for Mott's, Snapple and our allied brands. As we communicated previously, considering our hedged positions and current market prices for our unhedged positions, we expect packaging and ingredients to increase total cost of good by approximately 2% on a constant volume mix basis. Our core earnings guidance does not include an assumption for LIFO reserve adjustments positive or negative. We continue to expect higher field labor costs including health and welfare to increase our costs by $25 million and higher lane rates from our common carriers, as well as certain regulatory changes in Mexico to increase our transportation base by $6 million for the year.
As Larry said, our national rollout of Core 4 and RC TEN is well underway and we remain committed to investing in excess of $30 million incrementally to support this critical launch. Net interest expense will be around 4.4% on our $2.7 billion of debt and we now expect our full year tax rate to be slightly below 37%, including the credits we recognized in the first quarter.
In terms of cash flow, capital spending is expected to be approximately 3.5% of net sales and we remain on track to repurchase approximately $375 million to $400 million of our common stock this year, subject to market conditions. For modeling purposes, let me highlight a couple of items that will impact quarterly phasing. First, marketing investments will be heavily weighted to the second quarter. Second, as a reminder, revenue benefited from a point of discount favorability in the second quarter of 2012 that we do not expect to recur this year. Finally as I said last quarter the transportation and field sales cost inflation will be evenly spread throughout the year.
With that let me turn the call back over to Larry.
Larry D. Young - President and CEO: Thanks, Marty. Before we open the lines for questions, let me leave you with these slides. You have heard me say it many times now that it's absolutely critical we reinvigorate the CSD category and bring consumers back to the products that they know and love and we are doing that with our TEN platform, giving then the great taste and full mouth fill of a regular CSD, but with only 10 calories. We continue to execute against our focused strategy, ensuring that we close distribution on availability gaps making our products top of mind and close at hand for our consumers.
We remain focused on driving profitable growth delivering value to our consumers, while continuing to invest wisely behind our roll-up brands for the long-term. RCI continues to gain traction throughout the organization, building a long-term sustainable operating platform that will continue to deliver tangible financial results. Finally, we remain committed to returning excess free cash to our shareholders over time.
Operator, we're ready for our first question.
Operator: John Faucher, JPMorgan.
John Faucher - JPMorgan: I think at the beginning when you were talking about TEN, you talked about 65% ACV and can you talk about what it is sort of on a brand-by-brand basis, how much success you're getting in terms of getting all the brands in there. You talked about incremental shelf space, how you're doing that. Is this something you expect to continue to build over the next couple of quarters, or what's the level where you think this can max out and what percentage of those accounts do you think you'll get all four plus potential RC in as well?
Larry D. Young - President and CEO: Where they are at right now, John, they are taking all of the brands. That's part of the performance we're looking for, the incremental space, plus taking all of them. So it's been working very successfully. As I mentioned, it's going to build more, especially to the second quarter, as stores are doing their planogram resets. We've got a lot of accounts right now that are giving us an incremental end-cap until they can reset the shelf. So, as I mentioned, where we have it, the accounts that we've been able to get it in, we're showing that the TEN is 10% of the trademark. So, we're very, very pleased with that. I think one of the surprises that I look at and kind of have had a pleasant surprise is how well RC 10's been doing. We don't ever do much with it, but it's just been very, very successful working on the TEN platform. When you go across them, they're all performing, basically equally out there.
John Faucher - JPMorgan: In terms of looking at getting all four of those on an end-cap together, I mean – in some markets you're going to have Dr Pepper TEN going through a Coke or Pepsi bottle, or with maybe the other products going through your system. What are the executional hurdles as you try to put all the brands in place together when you're going through different systems?
Larry D. Young - President and CEO: We've got a lot of accounts right now, we've been able to – we go ahead and let, whether it's Coke or Pepsi, put the Dr Pepper TEN on with our TEN platform and it's worked very well. We have one regional chain that's even, we've put them all together, the Dr Pepper TEN and even Pepsi NEXT. They were the two kind of, coming up for the better for you platform, so, our retailers are working with us, we're working with them and we're working with our partners and that's why I said, it's going to be a long – it's a journey. It's not just something we go out there and turn the lights on overnight getting those consumption habits to change, but so far, we're very, very bullish on what we've seen be able to happen and how excited the retailer is about it.
Operator: Wendy Nicholson, Citi Research.
Wendy Nicholson - Citigroup: Could you talk about the still part of the portfolio because it just seems that Hawaiian Punch has been so weak for so long and I just wonder, if there is any hope and recovery there and even Mott's looks better this quarter. Again that's been more of a problem maybe than a strength and then on Snapple as well I know you are repositioning the value end there. Can you talk about when we ought to see that turn positive in terms of year-over-year growth as well?
Larry D. Young - President and CEO: I think we will see – again as I mentioned Snapple really got hit the hardest by the weather. The Northeaster is our (indiscernible) we have our heavy sales. So we look at the Snapple coming back with the stuff I showed you for the summer. The activity that we have placed for Snapple is very, very heavy focused on Q2. So we'll get that activity out there. We will get the media, the promotions that we have going with (indiscernible) very well into the summer and third quarter. On Hawaiian Punch we're still sticking to our guns on the pricing. We put it out there. It has suffered on volume. I think that we will see that probably start lapping towards the end of the second part of the third quarter. Its hurt us on volume Wendy but I will tell you on the margins and the profitability you have always heard us say we pursue profitable volume and we had to take some pricing and we have stuck to our guns. It's hurting for a little bit but it's going to pay off.
Wendy Nicholson - Citigroup: Following up I guess on the price mix guidance you gave for the year, Marty going back, trying to sort of drill down on what the top line growth is going to like for the overall Company in the second quarter so we can manage expectations. Price mix specifically for the second quarter given all of the marketing spending, I know you said advertising was going to be weighted there. What about promotional spending? Is that still going to be up strongly in the second quarter?
Martin M. Ellen - CFO: Yes, Wendy it will be.
Operator: Bryan Spillane, Bank of America Merrill Lynch.
Bryan Spillane - Bank of America Merrill Lynch: Two questions, I guess related to just to the revenue build; one, can you explain a little bit more or give a little more color just on what the discount favorability was? Then I guess connected to that, I guess we should look at that as something that reverses later in the year. Just trying to understand what that was and kind of how to think about that over the next couple of quarters.
Martin M. Ellen - CFO: Yes. So Bryan, the item relates to how we record trade or what others might call funding to bottlers. We don't record that when we ship the cases to them or the concentrate to them. We record it when they sell it through and report it back as bottler case sales. So, depending upon the comparison of shipments to bottler case sales in any period, you could have more or less trade. This year in the quarter, for example, if you think about the calendar for a moment we had Easter, right at that, it was like beginning of April, it may have been April 1st as I recall, so we were shipping a lot of holiday concentrates to our bottling partners in the back half of March. But obviously that product didn't sell-through, so we would not have accrued that trade that helped Q1, but that's timing, it will come back and in essence we will accrue that in the second quarter. Just think about it as timing throughout the year.
Bryan Spillane - Bank of America Merrill Lynch: So you've got a full year plan for kind of what you think volume will be and what the spending is related to that and it just was a mismatch in the first quarter, but it should even out as we go through the balance of the year.
Martin M. Ellen - CFO: That's correct.
Bryan Spillane - Bank of America Merrill Lynch: Then just a second question, just in terms of the slotting fees or the costs that you're spending to attain the distribution on TEN, is that being accrued evenly across the year, is it sort of tied to when you get the activity – I'm just trying to understand how much of a factor that was in terms of driving cost in the first quarter and I guess, it sounds like maybe there would be even more in the second quarter just given how much more extra distribution we're expecting.
Martin M. Ellen - CFO: From the accounting point, to the extent we're paying slotting, we would do it as we incur it. We don't spread it throughout the year.
Bryan Spillane - Bank of America Merrill Lynch: So, that should be more an expense again in the second quarter, to the extent that you're paying it?
Larry D. Young - President and CEO: It'll be just like our marketing. The marketing load is all heavy towards the second quarter, more availability – it will go second quarter and a little bit into the third.
Operator: Steve Powers, Bernstein.
Steve Powers - Sanford C. Bernstein: On TEN, just going back to distribution, and I think you've alluded to this, but the list of partners, on your TENGetBoth website at this point is still pretty selective, specifically missing Kroger, Walmart, Target. I believe there's at least partial distribution at those outlets at this point, and the gains are ramping up as we've talked about. But what inning would you say you were exiting Q1 on distribution and what inning do you expect to be in exiting Q2, just to get a sense of the magnitude of the Q2 ramp?
Larry D. Young - President and CEO: I think we're right now in the third inning and it'll probably be in the third quarter before we achieve our goal.
Steve Powers - Sanford C. Bernstein: So, in Q3 essentially full distribution in terms of…?
Larry D. Young - President and CEO: Q3 will be some of – what we are seeing Steve is a lot of them that would not give incremental space and that we wouldn’t put the product in or coming back now and saying if we give you a permanent end-cap. So we have agreed to do a permanent end-cap in some of those and that's – we know the timing of when those sets will be in. So that's why I say it will be up into the third quarter before some of those are in.
Steve Powers - Sanford C. Bernstein: I know that you are now beginning to rebuild in Q1 but just to confirm do you expect DP TEN volume to finish up for the year and if so roughly by how much?
Larry D. Young - President and CEO: I think we can get it basically flat to a little bit up. We had just a huge build out there with the displays and everything and I think we are getting a nice halo effect from the Core TEN.
Steve Powers - Sanford C. Bernstein: Then lastly, early in the quarter you re-acquired distribution rights on Snapple and some other noncarbonated beverages in Asia and also acquired distribution rights across California, Idaho, Nevada, et cetera. Those are obviously small deals but in the context of past comments, past discussions they didn’t need to expand outside of your current geographies and you didn’t need to add distribution – geographic footprint to the distribution to kind of drive growth. Can you just help frame those transactions? What made them attractive now and whether or not you foresee more actions in that direction as you look ahead?
Larry D. Young - President and CEO: I will tell you, I will cover the California piece and let Marty cover the Asia Pacific. You guys have heard me say before we have a – the only time we really bolt any of these franchises on is when it gets down to a situation of either succession planning or state planning. We had a great bottler out there that decided that he wanted to get out the business and it just made sense. We surrounded it. We were able to shut down the production facility .We will be able to service our customers I think a lot faster with having one voice and so we do a lot of those little bolt-ons to your point are very, very small. So that's why we picked that one up and, I'll let Marty kind of go into Asia-Pacific.
Martin M. Ellen - CFO: Yeah, Steve Kraft, or really now Mondelez, had the distribution rights from Cadbury for Snapple and actually a number of other brands including CSD brands. They didn't want to keep it. They had done nothing with it. I think that five total distributors throughout the region and really only two of them were selling much of anything and maybe just slightly in excess of 100,000 cases of Snapple, one distributor being in Singapore, one being at Hong Kong. Actually the Snapple brand, years and years and years ago was actually represented in the region and sold reasonably well in a few places and it was pulled out of the market years and years and years ago. So our attitude was look, they really don't want it. If you study our financial statements carefully and open the cash flow statement carefully enough, you can probably tell what we paid for, which was very, very small. For the opportunities to build out, well, it don't look like a third party distribution system. There's no plans here to spend capital, to build plants or warehouses, to invest in our own footprint, but rather to put together a network of distributors. The product will continue to be made initially, and I'm referring to Snapple, in the U.S. So it's quite expensive to transport it to Asia, but we'll decide if we need co-packing there. So we're in the early stages. We've got a handful of people here that I have taken on the management of it, and they're building and developing plans, and I said when we put out the announcement that not to expect anything material in terms of financial outcome this year, but as we develop it and have a sense for what that could mean to us, we will communicate it.
Operator: Mark Swatzberg, Stifel Nicolaus.
Mark Swatzberg - Stifel Nicolaus: A few questions, firstly, Larry, here in the U.S., could you speak specifically to the fountain channel and what you think you're seeing unfold there from a larger category perspective and the performance of your brands in that channel and how you're looking at that channel looking out?
Larry D. Young - President and CEO: Yeah, if we look at the latest month and like you've heard me say before Mark, we really watch it closely, because it's a good indicator for us, but our March flash was showing that the QSR traffic was down about 1%. You can kind of see that with how our fountain performance was for the quarter. A lot of, some of the big ones that reported that are publicly traded gave the numbers down, 1%, 1%, 2%, so it shows very much what we're seeing in March, and it affected us, but we outperformed the category as a whole if you look in QSR. I'm thinking it's going to possibly get a little stronger. We're cautiously optimistic about it. You've heard some of the plans from some of the major chains on how they're kind of changing some of their strategies and we hope we'll be a significant part of health and inventory in that ramp.
Mark Swatzberg - Stifel Nicolaus: And when you look at that channel and maybe see stores – when you look at the trends from across different channels, what do you think they're telling you about the consumer generally or the consumer vis a vis the products, the fizzy and the non-carbonated products that you and others are selling?
Larry D. Young - President and CEO: I think the tough part for Q1, Mark that makes it a little harder to look at from the trends we've been watching was the weather that we had in the first quarter. I would probably – if you look at the softness, I would probably give two-thirds of that softness to weather and the other third to the consumer and the economy. Our convenience store trends are still looking pretty good. We are still showing some favorability. Then we are pretty bullish about the gas prices coming down. I don't know about up in the Northeast but they are dropping pretty quick here and so I think that's going to give us an uplift there.
Mark Swatzberg - Stifel Nicolaus: Marty, I guess two questions. One is really a follow-on to Steve. Can you speak a little bit more about your attitude towards the Snapple brand, other brands in Europe where I think there might be an opportunity eventually to change distribution there? Press a little bit or kind of flesh out a little bit further really to Steve's question about what this might signal from a larger kind of attitude to growth outside of the U.S. not only for Snapple in your non-carbonated brands but for those brands where it's still acquirable on the carbonated side. Then just on the productivity might we – can you give us some sense when we will get a view of productivity opportunities beyond the 150, you target by the end of this year?
Martin M. Ellen - CFO: Yes. Mark let me finish my thoughts. I think you are right as Steve started to ask. I mean first of all as I said in the Mandalay's transaction we actually did not – we are not interested in the carbonated brands. I think we had be foolish to actually believe that we were going to start building a carbonated soft drink business in some of these places. But the non-carbs, Snapple for example, ready to drink tea; Ready to drink tea across the countries of Asia that we now have the rights to is something like 2.6 billion case market, defined market and I think everybody knows ready to drink tea in most parts of the world is a good LRB category and Snapple fits right in there well. So it's an opportunity. Mott's Hawaiian Punch for the most part, all of our non-carbs, we do have the rights to. So we could do something with them and it's very possible that with a couple of brands, we will add them along with Snapple and take them to distributors as a portfolio, because we think those brands might be able to gain some traction there too. We would love to have this opportunity, we want to have the opportunity to grow internationally if we can, of course and on the carbonated side, as everybody knows we're pretty much land locked between the U.S., Canada and Mexico, because of the actions Cadbury took back in the 90s. So, yes, to the extent that we can take Snapple to markets internationally, whether it's in Asia or maybe down the road in other markets, yes there could be an opportunity there, but I think it's too early for us to certainly try to size that, but at some point it might be meaningful for us and be a good add-on to our business, but not in carbonated. I wouldn't expect you to do anything in carbonated. Productivity improvements are – it's a little early. You could tell I'm encouraged. We had some pretty good results this quarter, seeing some of the P&L productivity flowing through from many of the supply chain related projects that we worked on throughout last year, some of those benefits now we're starting to see on the P&L side. Larry and I and others have been present through a number of these early Kaizen events in DSD and we are quite thrilled actually by some of the early returns. Larry and I'll be speaking to some employees later this morning and I'm going to share an update on RCI with them and I'm going to talk about a few data points that for us are really important, but I can't size them completely for you in terms of guidance, but just some of the things we've done in the merchandising function in Houston and Irving that in the case of Houston for example in the first quarter, the actual merchandising spend is down 9% and when you look at their volume, it's an improvement of $0.18 a case and Irving's got some similar benefits and the teams think maybe this could be worth $1.5 million to $2 million for them, just in these two branches. So, there's just lots of opportunity, but it's too early for me to put the next level target out there. So, I'm going to at least for this quarter defer on that.
Operator: Kaumil Gajrawala, UBS.
Kaumil Gajrawala - UBS: Another question on TEN and on the platform, and I think trying to square your commentary with the results. It looks like you got quite a bit of distribution getting up to 65% distribution and, you talked about it being incremental, but I'm looking at the overall volumes of Core 4 still being flat. So, can you help me understand a little bit the dynamic between the two?
Martin M. Ellen - CFO: Well flat on the Core 4 is pretty good for what the category it's in. You can tell we outperformed there, on it and like I said, if you take our total trademark, it's about 10% is what we're running. The TEN products are 10% of the trademark and we're seeing that build, and so we're excited about that. The teams have done an excellent job on getting the execution out there, you have to get out and execute and what I like is that we stood behind that we are not putting it in if we don’t get incremental space. We probably could have been above 65 if we had not stuck to that. But we are seeing people come back in and like right now we are safely at 100% distribution. We have got display rates sitting out there at 70% and the TEN sales are incremental to the entire LRB category not just CSDs. So it's hard to talk about the success and really show success when you got a category that's down. But we think we are going to see most of the category in my opinion for the quarters I mentioned a moment ago was weather related and I think we are going to see that kind of come back.
Kaumil Gajrawala - UBS: It seems like the idea of launching new products and committing to only distributing them if you have incremental shelf spaces is something that's becoming maybe not more of a norm, but something that is a big focus. I know Red Bull is doing that with their flavors. Do you think we are going into a period of time where we can have SKU proliferation even in CSDs as everybody scrambles for shelf space and can really just do it based on their sales as a percentage of what their sales would be in the category, there needs to be something different or something new?
Larry D. Young - President and CEO: Well I think we have – our customers and our partners out there always asking us for innovation and we bring the innovation that it would be kind of silly for us to just take our own space with innovation. Then we are cannibalizing our own products and this way we can really tell. We can give you exactly what we are losing on Core, whether it's Regular, Diet to TEN. So I think on SKU proliferation, I mean everybody is getting pretty good at category management and you have got to have X number of days of terms or you're not going to be in that space and it's not what we sell them on. It's what they tell us.
Operator: Kevin Grundy, Morgan Stanley.
Kevin Grundy - Morgan Stanley: So two questions for you. First on your top line growth guidance for the year; is it fair to say, maybe you're feeling modestly less optimistic on the 3% growth? I say that within the context that the first quarter on the CSD side was obviously rough for the industry for a number of reasons, whether in higher gas prices, et cetera. Then on the non-carb side, Marty, I think last quarter you said you're hoping for low to mid-single digit growth of that portion in your portfolio and given the rough first quarter where bottler case sales were down 4%, that would probably suggest you have to do mid-single digit sort of growth for the balance of the year, which would seem like a challenge. So I was just curious to get your thoughts if you think that seems like a fair assessment?
Martin M. Ellen - CFO: Kevin, here's what our (bad sectors) were that deals with the non-carbs. Larry commented on Hawaiian Punch and yes I would tell you we thought maybe we had seen better performance, as of this point, we haven't. He said we're standing in there with our position on the brand and it's affected the volume as you've all seen. As you also said, we're looking for profitable growth and that's not one of our highest margin brands. So doesn't do as much damage on the bottom line. So we don't get as concerned about what it's doing on the top line, although it's a key factor. It's the largest volume in case, but it's the largest volume brand in the non-carbs, and that's why it gets this attention. Not worried about Snapple. Our Northeast distributors, when we took a pretty big hit in the first quarter, the brand performed pretty well in most of the other parts of the country. Clearly they told us, they simply couldn't get the product and consumers weren't – we're not going to worry about Snapple. It's well positioned. We got a lot of activity for that. So the non-carb piece, we're pretty confident we can get that back and of course Mott's performed well. We expect that that to continue. Actually, that's part of our optimism in terms of why we think we could still get to the 3% and then on the carb side of course, as Larry said, this is the critical period through the end of the reset period. We're pretty pleased with the self through that we're seeing in the Nielsen data and many of you can see that date. I saw the March data. It was clipping along at actually a pace that we were very happy with. Yes, a lot of that could be trial. Too early to talk about repeat, but we're very encouraged.
Kevin Grundy - Morgan Stanley: One other question I had was on shelf space and distribution. So, first on DP TEN, the syndicated data that I'm looking at suggests that guys have lost several points, since you've launched nationally. I was curious if that's the same sort of data that you're looking at and if so if you could elaborate that and then second, on an unrelated topic, kind of more broadly, Larry I'd like to get your thoughts, there's been more discussion of late about CSD's losing shelf space to high growth categories like craft beer and energy drinks. Are you seeing that? Are you hearing more of that from your bottlers and retailers et cetera?
Larry D. Young - President and CEO: On the TEN, you're correct, we've lost some points on that, but we also have programs in place to pick that back up. We've just through having meetings with both our large partners and we've got great plans in place, and as I mentioned a moment ago, I think we're getting a halo effect from the Core TEN out there and especially where we can merchandise them together and kind of build strength there together, which we have no problem at all, doing that. As far as shelf space losing to energy or craft beers, they're in a different part of the store. They're in a different aisle. We haven't seen really, any issues with that. You might see some of it in smaller convenience stores that don't have much space, but I think if we all kind of look at – I know the numbers I look at show that even energy is slowing down a little bit. So, I don't know if that's really a problem that we've run into out here.
Operator: Bill Schmitz, Deutsche Bank.
William Schmitz - Deutsche Bank: Couple of things, first on sort of TEN looking forward five years, have you any sort of targets for what you think it could be as a percentage of the total carbonated soft drink portfolio and then maybe what you think about some of the rumblings about a new sweetener and how flexible the sweetener components are in TEN to sort of changing when something new and different comes out?
Larry D. Young - President and CEO: Well, I'll start with the sweetener. We're always looking at the different sweeteners, but I don't think it will have any impact on our TEN. I'm not saying that we wouldn't come out with something else down the road, but TEN is a platform that we designed to makes sure that we have the mouth fill of a regular CSD. It's full bodied, so we have no intention of changing the TEN, but we never stopped looking at different sweeteners. The sweetener technology and the chase for that Holy Grail is ongoing. This keeps going and all of us are out there working on it and trying to see what we come up with. But I think with all the research that we did, we found that what we came up with TEN is probably going to affect more people out there that are looking for that great taste with less caloric intake. Do you want to take the first part of the question Marty?
Martin M. Ellen - CFO: The first part of the question, I believe that we have sort of a five year goal for what TEN could be. We think it could be big, but no, we haven't stated any specific numbers.
William Schmitz - Deutsche Bank: Then I was just sort of playing like with all the puts and takes. I know you don't like to give quarterly guidance, but (indiscernible) is going to be down in the second quarter based on everything you've sort of said in your prepared comments and then maybe how April is looking so far?
Martin M. Ellen - CFO: Bill, like you said, we don't give quarterly guidance.
William Schmitz - Deutsche Bank: How about April? How are April trends so far?
Larry D. Young - President and CEO: Yes. We have no comment on April.
Operator: Brett Cooper, Consumer Edge Research.
Brett Cooper - Consumer Edge Research: Just a question, I guess a clarification. When you're talking about price mix, you said that it benefitted 50 basis points and that you're lapping 100 basis point benefit from a year ago. Does that mean that that sort of reported price mix will trail underlying by 50 or 100 basis points, all else equal in the second quarter?
Martin M. Ellen - CFO: So, I think (indiscernible) I would think about your pricing as you lay it out. The peer pricing that we talked about this year which includes the concentrate price increase January 1st, which spread over the entire revenue base, not just the (contrary) revenue base is more than about 0.5 point. Some other pricing we took a year ago in Mott's and actually sauce. I should say sauce was a real success story for us because we went ahead and hit the board on the higher price for the apples and raised price and in so doing, we couldn't cover the full cost last year, but we got good customer commitments through space and that's helped us out. That's going to be a full year – that's going to be sort of an even flow there. So the pricing itself is sort of even, the mix will start to pick up because of the shift to the Core TEN, which our DSD cases – you'll have to figure out how to model that in your own models. Yes, the lapping of the trade adjustment is really, mostly a Q2 factor. So, that will hurt the comparison, really on in Q2.
Brett Cooper - Consumer Edge Research: Then as a follow-up, what was marketing in the quarter then how do we think about it for the second quarter, because I recall correctly when you guys initially talked about sort of the incremental $30 million and if memory serves, I thought you talked about that being more weighted to the first half.
Martin M. Ellen - CFO: That's correct. So, let me go through that. We actually talked about spending $30 million incrementally on TEN, and I'll tell you, we actually spent a little more than $10 million in the first quarter. Total marketing was only up $2 million, and that's because we were lapping from a year ago, the launch of Snapple Diet Half 'n Half, so actually marketing spend last year in the first quarter was a little heavy. So, the comparison was up only $2 million, but we did spend the $10 million and we're still committed to expecting the full $30 million. For your purpose, I assume that the better part of that remainder all falls in the second quarter. The second quarter was a little lighter – wasn't lighter than the first quarter, but it's going to be Q2 marketing's going to be up quite substantially.
Brett Cooper - Consumer Edge Research: Just to be clear, is the non-marketing or $30 million piece should be flat to up for the year. Is that correct?
Martin M. Ellen - CFO: I'm sorry. The non-marketing…
Brett Cooper - Consumer Edge Research: So, you're saying $30 million incremental in the TEN platform right, then obviously you're saying that' sort of the non-TEN was down $8 million year-over-year in the first quarter. How should we think about the bucket that is the non-TEN incremental?
Martin M. Ellen - CFO: When you think about the phasing of our marketing programs, you've got a big piece of TEN in the second quarter. we just said earlier, We've got Snapple regular Half 'n Half rolling in the second quarter, we've got marketing spend. All of that's going to contribute to pretty heavy spend in Q2, but the rest would be I would guess (going) flat. We will update you next quarter and we are not changing our full year marketing numbers. All we are talking about here is timing.
Operator: Thank you. That was out final question. I will now turn the floor back over to Larry for any closing remarks.
Larry D. Young - President and CEO: Well I want to thank everybody for joining the call today and especially for your continued interest and investment in Dr Pepper Snapple. Thank you.
Operator: This concludes today's conference call. You may now disconnect.