0001418135FALSE00014181352023-10-262023-10-26
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 26, 2023
Keurig Dr Pepper Inc.
(Exact name of registrant as specified in its charter)
| | | | | | | | | | | | | | |
| | | | |
| Delaware | | 001-33829 | | 98-0517725 |
| (State or other jurisdiction of incorporation) | | (Commission File Number) | | (IRS Employer Identification No.) |
53 South Avenue, Burlington, Massachusetts 01803
(Address of principal executive offices, including zip code)
781-418-7000
(Registrant’s telephone number including area code)
Not Applicable
(Former name or former address if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-14(c) under the Exchange Act (17 CFR 240.13e-14(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | | | | | | | |
| Title of each class | | Trading Symbol | | Name of each exchange on which registered |
| Common stock | | KDP | | The Nasdaq Stock Market LLC |
Item 2.02. Results of Operations and Financial Condition.
The information contained in this Item 2.02, including Exhibit 99.1, shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or incorporated by reference in any filing under the Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act, except as expressly set forth by specific reference in such a filing.
On October 26, 2023, Keurig Dr Pepper Inc. (the "Company") issued a press release announcing the Company's financial results for the third quarter and first nine months ended September 30, 2023. A copy of such press release is attached as Exhibit 99.1 and is also available on the Company’s web site at http://www.keurigdrpepper.com.
Item 9.01. Financial Statements and Exhibits.
| | | | | | | | |
| Exhibit No. | | Description |
| | | |
| | Keurig Dr Pepper Inc. Press Release dated October 26, 2023 - "Keurig Dr Pepper Reports Q3 2023 Results and Reaffirms Full Year Guidance" |
| 104 | | Cover Page Interactive Data File, formatted in Inline XBRL and included as Exhibit 101 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
| | | | | | | | | | | | | | |
| | | | | |
| | KEURIG DR PEPPER INC. | |
Dated: October 26, 2023 | | |
| | By: | /s/ Anthony Shoemaker |
| | | Name: | Anthony Shoemaker |
| | | Title: | Chief Legal Officer, General Counsel and Secretary |
Keurig Dr Pepper Reports Q3 2023 Results and Reaffirms Full Year Guidance
Q3 Performance Led by Continued Net Sales Momentum and Strong Gross Margin Expansion
BURLINGTON, MA and FRISCO, TX (October 26, 2023) – Keurig Dr Pepper Inc. (NASDAQ: KDP) today reported results for the third quarter ended September 30, 2023 and reaffirmed its guidance for full year constant currency net sales growth of 5% to 6% and Adjusted diluted EPS growth of 6% to 7%.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Reported GAAP Basis | | Adjusted Basis1 |
| | Q3 | | YTD | | Q3 | | YTD |
| Net Sales | | $3.81 bn | | $10.95 bn | | $3.81 bn | | $10.95 bn |
| % vs prior year | | 5.1% | | 6.8% | | 4.1% | | 6.2% |
| | | | | | | | |
| Diluted EPS | | $0.37 | | $1.05 | | $0.48 | | $1.24 |
| % vs prior year | | 184.6% | | 52.2% | | 4.3% | | 5.1% |
| | | | | | | | |
“In the third quarter, we maintained healthy revenue momentum and delivered a significant gross margin inflection, helping to fund reinvestment in our brands and capabilities,” said Chairman and CEO Bob Gamgort. “In addition to continued strong results across our U.S. Refreshment Beverages and International segments, we also began to rebuild our margins in U.S. Coffee. We are reaffirming our full year outlook and remain committed to delivering a strong Q4 with an improved composition of earnings.”
Gamgort continued, “KDP continues to pair strong execution and financial delivery with building the foundation for the Company’s next phase of growth. Today we announced our expansion into sports hydration through a new and exciting partnership with Grupo PiSA for Electrolit. Over the past 12 months, we have established new growth platforms in sports hydration, energy and RTD coffee by partnering with compelling brands and leveraging our unique distribution assets across both cold and hot beverages to attract strong partnerships.”
Third Quarter Consolidated Results
Net sales for the third quarter of 2023 increased 5.1% to $3.81 billion, compared to $3.62 billion in the year-ago period. On a constant currency basis, net sales advanced 4.1%, driven by net price realization of 5.5% that was only partially offset by lower volume/mix of 1.4%. Revenue momentum reflected the continued strength of the Company’s brand portfolio and in-market execution, as well as manageable elasticity across most categories.
GAAP operating income increased 127.4% to $896 million, compared to $394 million in the year-ago period. The comparison primarily reflected the favorable year-over-year impact of items affecting comparability, including a $311 million impairment in the prior year period, as well as strong gross profit growth.
Adjusted1 operating income increased 3.1% to $984 million and totaled 25.9% as a percent of net sales. Adjusted operating income growth was driven by 6.0% Adjusted gross profit growth, translating to 100 basis points of Adjusted gross margin expansion, with gains from pricing and productivity more than offsetting both the modest volume/mix decline and continued input cost pressure. The growth in Adjusted gross profit funded a double-digit increase in marketing investment and more than offset inflation in transportation, warehousing and other corporate costs.
_________________________________________
1 Adjusted financial metrics presented in this release are non-GAAP, excluding items affecting comparability and with growth rates presented on a constant currency basis. See reconciliations of GAAP results to Adjusted results on a constant currency basis in the accompanying tables.
GAAP net income for the quarter increased 187.8% to $518 million, or $0.37 per diluted share, compared to $180 million, or $0.13 per diluted share, in the year-ago period. This performance primarily reflected a favorable year-over-year impact of items affecting comparability, partially offset by a higher GAAP tax rate.
Adjusted net income for the quarter advanced 1.8% to $673 million, and Adjusted diluted EPS increased 4.3% to $0.48. The Adjusted net income and EPS growth was driven by the Adjusted operating income growth, partly offset by higher interest expense.
Operating cash flow for the third quarter was $580 million and free cash flow totaled $459 million. As expected, free cash flow strengthened from the first half of the year, reflecting the combination of profit growth and moderating working capital usage.
Third Quarter Segment Results
U.S. Refreshment Beverages
Net sales for the third quarter increased 5.9% to $2.27 billion, compared to $2.14 billion in the year-ago period, driven by net price realization of 7.1% and a modest decline in volume/mix of 1.2%. This strong performance reflected resilient category trends, continued market share gains and the contribution from KDP’s sales and distribution partnership with Nutrabolt for C4 Energy.
KDP in-market performance in the U.S. Liquid Refreshment Beverages (LRB) category remained healthy. Retail dollar consumption2 advanced 7.0% and market share grew in categories representing approximately 82% of the Company’s cold beverage retail sales base. The dollar share gains were led by Dr Pepper and Squirt in CSDs3, Polar in unsweetened sparkling water, Vita Coco, C4 Energy and Mott’s apple juice.
GAAP operating income increased 109.9% to $676 million, compared to $322 million in the year-ago period. The growth primarily reflected the favorable year-over-year impact of items affecting comparability, including the aforementioned $311 million impairment in the prior year period.
Adjusted operating income increased 6.1% to $695 million and totaled 30.6% as a percent of net sales, driven by net sales gains and productivity, which more than offset continued broad-based input cost inflation and a significant increase in marketing investment.
U.S. Coffee
Net sales for the third quarter decreased 3.2% to $1.01 billion, compared to $1.05 billion in the year-ago period, driven by net price realization of 3.1% and a volume/mix decline of 6.3%.
Pod revenue decreased 4.8%, driven by a shipment decline of 8.1%. As expected, pod volume growth lagged gradually improving single serve category consumption, due to an unfavorable comparison to trade inventory builds in the year-ago period and the continued impact of exiting certain low-margin private label contracts.
Across IRi tracked channels, U.S. retail dollar consumption of KDP-Manufactured K-Cup® Pods decreased 7.0%, with significantly stronger performance registered in untracked channels. KDP Manufactured dollar share in the quarter was approximately 79%.
Brewer shipments totaled 10.2 million for the twelve months ending September 30, 2023, declining 4.5% year-over-year. In the quarter, brewer shipments grew year-over-year as KDP prepared for the upcoming holiday season, which is a key period for brewer demand.
GAAP operating income increased 7.7% to $293 million, compared to $272 million in the year-ago period, including a modest year-over-year benefit of items affecting comparability.
Adjusted operating income increased 5.7% to $333 million and totaled 32.9% as a percent of net sales. Adjusted operating income margin inflected strongly versus prior year, driven by higher net price realization and productivity, which more than offset the impacts of the volume/mix decline and inflation.
_________________________________________
2 Retail consumption data based on Keurig Dr Pepper’s custom IRi category definitions for the 13-week period ending 10/1/2023.
3 CSDs refer to “Carbonated Soft Drinks”.
International
Net sales for the third quarter increased 20.8% to $523 million, compared to $433 million in the year-ago period. On a constant currency basis, net sales advanced 12.9%, driven by volume/mix growth of 9.0% and net price realization of 3.9%. This very strong performance reflected continued momentum in both Mexico and Canada.
GAAP operating income increased 43.3% to $139 million, compared to $97 million in the year-ago period, including a modest year-over-year benefit of items affecting comparability.
Adjusted operating income increased 31.7% to $145 million and totaled 28.0% as a percent of net sales, driven by the net sales momentum and productivity gains, which more than offset continued inflation.
2023 Guidance
The 2023 guidance provided below is presented on a constant currency, non-GAAP basis. The Company does not provide reconciliations of such forward-looking non-GAAP measures to GAAP measures, due to the inability to predict the amount and timing of impacts outside of the Company's control on certain items, such as non-cash gains or losses resulting from mark-to-market adjustments of derivative instruments, among others, which could be material.
KDP reaffirmed its 2023 guidance for constant currency net sales growth of 5% to 6% and Adjusted diluted EPS growth of 6% to 7%.
Investor Contacts:
Jane Gelfand
T: 888-340-5287 / jane.gelfand@kdrp.com
Chethan Mallela
T: 888-340-5287 / chethan.mallela@kdrp.com
Media Contact:
Katie Gilroy
T: 781-418-3345 / katie.gilroy@kdrp.com
ABOUT KEURIG DR PEPPER
Keurig Dr Pepper (KDP) is a leading beverage company in North America, with annual revenue of more than $14 billion and approximately 28,000 employees. KDP holds leadership positions in liquid refreshment beverages, including soft drinks, specialty coffee and tea, water, juice and juice drinks and mixers, and markets the #1 single serve coffee brewing system in the U.S. and Canada. The Company’s portfolio of more than 125 owned, licensed and partner brands is designed to satisfy virtually any consumer need, any time, and includes Keurig®, Dr Pepper®, Canada Dry®, Clamato®, CORE®, Green Mountain Coffee Roasters®, Mott's®, Snapple®, and The Original Donut Shop®. Through its powerful sales and distribution network, KDP can deliver its portfolio of hot and cold beverages to nearly every point of purchase for consumers. The Company’s Drink Well. Do Good. corporate responsibility platform is focused on the greatest opportunities for impact in the environment, its supply chain, the health and well-being of consumers and with its people and communities. For more information, visit www.keurigdrpepper.com.
FORWARD LOOKING STATEMENTS
Certain statements contained herein are “forward-looking statements” within the meaning of applicable securities laws and regulations. These forward-looking statements can generally be identified by the use of words such as “outlook,” “guidance,” “anticipate,” “expect,” “believe,” “could,” “estimate,” “feel,” “forecast,” “intend,” “may,” “plan,” “potential,” “project,” “should,” “target,” “will,” “would,” and similar words. Forward-looking statements by their nature address matters that are, to different degrees, uncertain. These statements are based on the current expectations of our management, are not predictions of actual performance, and actual results may differ materially.
Forward-looking statements are subject to a number of risks and uncertainties, including the factors disclosed in our Annual Report on Form 10-K and subsequent filings with the SEC. We are under no obligation to update, modify or withdraw any forward-looking statements, except as required by applicable law.
NON-GAAP FINANCIAL MEASURES
This release includes certain non-GAAP financial measures including Adjusted gross profit, Adjusted operating income, Adjusted net income, Adjusted diluted EPS, free cash flow and financial measures presented on a constant currency basis, which differ from results using U.S. Generally Accepted Accounting Principles (GAAP). These non-GAAP financial measures should be considered as supplements to the GAAP reported measures, should not be considered replacements for, or superior to, the GAAP measures and may not be comparable to similarly named measures used by other companies. Non-GAAP financial measures typically exclude certain charges, including one-time costs that are not expected to occur routinely in future periods. The Company uses non-GAAP financial measures internally to focus management on performance excluding these special charges to gauge our business operating performance. Management believes this information is helpful to investors because it increases transparency and assists investors in understanding the underlying performance of the Company and in the analysis of ongoing operating trends. Additionally, management believes that non-GAAP financial measures are frequently used by analysts and investors in their evaluation of companies, and their continued inclusion provides consistency in financial reporting and enables analysts and investors to perform meaningful comparisons of past, present and future operating results. The most directly comparable GAAP financial measures and reconciliations to non-GAAP financial measures are set forth in the appendix to this release and included in the Company’s filings with the SEC.
To the extent that the Company provides guidance, it does so only on a non-GAAP basis and does not provide reconciliations of such forward-looking non-GAAP measures to GAAP due to the inability to predict the amount and timing of impacts outside of the Company’s control on certain items, such as non-cash gains or losses resulting from mark-to-market adjustments of derivative instruments, among others, which could be material.
KEURIG DR PEPPER INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
| | | | | | | | | | | | | | | | | | | | | | | |
| | Third Quarter | | First Nine Months |
| (in millions, except per share data) | 2023 | | 2022 | | 2023 | | 2022 |
Net sales | $ | 3,805 | | | $ | 3,622 | | | $ | 10,947 | | | $ | 10,254 | |
| Cost of sales | 1,694 | | | 1,721 | | | 5,051 | | | 4,927 | |
| Gross profit | 2,111 | | | 1,901 | | | 5,896 | | | 5,327 | |
| Selling, general and administrative expenses | 1,217 | | | 1,196 | | | 3,654 | | | 3,418 | |
| Impairment of intangible assets | 2 | | | 311 | | | 2 | | | 311 | |
| Gain on litigation settlement | — | | | — | | | — | | | (299) | |
| Other operating income, net | (4) | | | — | | | (9) | | | (35) | |
| Income from operations | 896 | | | 394 | | | 2,249 | | | 1,932 | |
| Interest expense | 237 | | | 207 | | | 432 | | | 570 | |
| Loss on early extinguishment of debt | — | | | — | | | — | | | 217 | |
| Gain on sale of equity method investment | — | | | — | | | — | | | (50) | |
| Impairment of investments and note receivable | — | | | — | | | — | | | 12 | |
| Other (income) expense, net | (5) | | | 4 | | | (41) | | | 22 | |
| Income before provision for income taxes | 664 | | | 183 | | | 1,858 | | | 1,161 | |
| Provision for income taxes | 146 | | | 4 | | | 370 | | | 179 | |
| Net income including non-controlling interest | 518 | | | 179 | | | 1,488 | | | 982 | |
| Less: Net loss attributable to non-controlling interest | — | | | (1) | | | — | | | (1) | |
Net income attributable to KDP | $ | 518 | | | $ | 180 | | | $ | 1,488 | | | $ | 983 | |
| | | | | | | |
| Earnings per common share: | | | | | | | |
| Basic | $ | 0.37 | | | $ | 0.13 | | | $ | 1.06 | | | $ | 0.69 | |
| Diluted | 0.37 | | | 0.13 | | | 1.05 | | | 0.69 | |
| Weighted average common shares outstanding: | | | | | | | |
| Basic | 1,397.4 | | | 1,416.1 | | | 1,401.3 | | | 1,417.3 | |
| Diluted | 1,406.2 | | | 1,427.2 | | | 1,410.8 | | | 1,428.8 | |
KEURIG DR PEPPER INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
| | | | | | | | | | | |
| | September 30, | | December 31, |
| (in millions, except share and per share data) | 2023 | | 2022 |
| Assets |
| Current assets: | | | |
| Cash and cash equivalents | $ | 260 | | | $ | 535 | |
| | | |
| Trade accounts receivable, net | 1,279 | | | 1,484 | |
| Inventories | 1,348 | | | 1,314 | |
| Prepaid expenses and other current assets | 519 | | | 471 | |
| Total current assets | 3,406 | | | 3,804 | |
| Property, plant and equipment, net | 2,527 | | | 2,491 | |
| Investments in unconsolidated affiliates | 1,336 | | | 1,000 | |
| Goodwill | 20,122 | | | 20,072 | |
| Other intangible assets, net | 23,223 | | | 23,183 | |
| Other non-current assets | 1,117 | | | 1,252 | |
| Deferred tax assets | 32 | | | 35 | |
| Total assets | $ | 51,763 | | | $ | 51,837 | |
| Liabilities and Stockholders' Equity |
| Current liabilities: | | | |
| Accounts payable | 4,090 | | | 5,206 | |
| Accrued expenses | 1,123 | | | 1,153 | |
| Structured payables | 122 | | | 137 | |
| Short-term borrowings and current portion of long-term obligations | 2,798 | | | 895 | |
| Other current liabilities | 681 | | | 685 | |
| Total current liabilities | 8,814 | | | 8,076 | |
| Long-term obligations | 9,940 | | | 11,072 | |
| Deferred tax liabilities | 5,714 | | | 5,739 | |
| Other non-current liabilities | 1,931 | | | 1,825 | |
| Total liabilities | 26,399 | | | 26,712 | |
| Commitments and contingencies | | | |
| Stockholders' equity: | | | |
Preferred stock, $0.01 par value, 15,000,000 shares authorized, no shares issued | — | | | — | |
Common stock, $0.01 par value, 2,000,000,000 shares authorized, 1,398,322,033 and 1,408,394,293 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively | 14 | | | 14 | |
| Additional paid-in capital | 21,014 | | | 21,444 | |
| Retained earnings | 4,165 | | | 3,539 | |
| Accumulated other comprehensive income | 171 | | | 129 | |
| Total stockholders' equity | 25,364 | | | 25,126 | |
| Non-controlling interest | — | | | (1) | |
| Total equity | 25,364 | | | 25,125 | |
| Total liabilities and stockholders' equity | $ | 51,763 | | | $ | 51,837 | |
KEURIG DR PEPPER INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| | | | | | | | | | | |
| | First Nine Months |
| (in millions) | 2023 | | 2022 |
| Operating activities: | | | |
| Net income attributable to KDP | $ | 1,488 | | | $ | 983 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | |
| Depreciation expense | 299 | | | 301 | |
| Amortization of intangibles | 103 | | | 100 | |
| Other amortization expense | 136 | | | 129 | |
| Provision for sales returns | 42 | | | 38 | |
| Deferred income taxes | (22) | | | (281) | |
| Employee stock-based compensation expense | 86 | | | 43 | |
| Loss on early extinguishment of debt | — | | | 217 | |
| Gain on sale of equity method investment | — | | | (50) | |
| Gain on disposal of property, plant and equipment | (3) | | | (38) | |
| Unrealized (gain) loss on foreign currency | (4) | | | 22 | |
| Unrealized loss on derivatives | 44 | | | 387 | |
| Settlements of interest rate contracts | 54 | | | 125 | |
| Equity in (earnings) loss of unconsolidated affiliates | (24) | | | 6 | |
| Impairment of intangible assets | 2 | | | 311 | |
| Impairment on investments and note receivable of unconsolidated affiliates | — | | | 12 | |
| Other, net | (5) | | | 22 | |
| Changes in assets and liabilities: | | | |
| Trade accounts receivable | 170 | | | (372) | |
| Inventories | (31) | | | (552) | |
| Income taxes receivable and payables, net | (39) | | | (106) | |
| Other current and non-current assets | (159) | | | (380) | |
| Accounts payable and accrued expenses | (1,155) | | | 1,014 | |
| Other current and non-current liabilities | 50 | | | 167 | |
| Net change in operating assets and liabilities | (1,164) | | | (229) | |
| Net cash provided by operating activities | 1,032 | | | 2,098 | |
| Investing activities: | | | |
| | | |
| | | |
| Proceeds from sale of investment in unconsolidated affiliates | — | | | 50 | |
| Purchases of property, plant and equipment | (271) | | | (260) | |
| Proceeds from sales of property, plant and equipment | 9 | | | 79 | |
| Purchases of intangibles | (55) | | | (19) | |
| Issuance of related party note receivable | — | | | (18) | |
| Investments in unconsolidated affiliates | (308) | | | (48) | |
| Other, net | 2 | | | 3 | |
| Net cash (used in) provided by investing activities | (623) | | | (213) | |
| Financing activities: | | | |
Proceeds from issuance of Notes | — | | | 3,000 | |
Repayments of Notes | — | | | (3,365) | |
| Net issuance (repayment) of commercial paper | 750 | | | (149) | |
| | | |
| | | |
| | | |
| | | |
| | | |
| Proceeds from structured payables | 91 | | | 114 | |
| Repayments of structured payables | (105) | | | (111) | |
| Cash dividends paid | (842) | | | (796) | |
| Repurchases of common stock | (457) | | | (88) | |
| | | |
| Tax withholdings related to net share settlements | (57) | | | (10) | |
| Payments on finance leases | (74) | | | (65) | |
| | | |
| Other, net | (3) | | | (45) | |
| Net cash used in financing activities | (697) | | | (1,515) | |
| Cash, cash equivalents, and restricted cash and cash equivalents: | | | |
| Net change from operating, investing and financing activities | (288) | | | 370 | |
| Effect of exchange rate changes | 13 | | | (10) | |
| Beginning balance | 535 | | | 568 | |
| Ending balance | $ | 260 | | | $ | 928 | |
KEURIG DR PEPPER INC.
RECONCILIATION OF SEGMENT INFORMATION
(UNAUDITED)
| | | | | | | | | | | | | | | | | | | | | | | |
| Third Quarter | | First Nine Months |
| (in millions) | 2023 | | 2022 | | 2023 | | 2022 |
| Net Sales | | | | | | | |
| U.S. Refreshment Beverages | $ | 2,270 | | | $ | 2,144 | | | $ | 6,607 | | | $ | 6,009 | |
| U.S. Coffee | 1,012 | | | 1,045 | | | 2,913 | | | 3,017 | |
| International | 523 | | | 433 | | | 1,427 | | | 1,228 | |
| Total net sales | $ | 3,805 | | | $ | 3,622 | | | $ | 10,947 | | | $ | 10,254 | |
| | | | | | | |
| Income from Operations | | | | | | | |
| U.S. Refreshment Beverages | $ | 676 | | | $ | 322 | | | $ | 1,795 | | | $ | 1,554 | |
| U.S. Coffee | 293 | | | 272 | | | 775 | | | 822 | |
| International | 139 | | | 97 | | | 331 | | | 259 | |
| Unallocated corporate costs | (212) | | | (297) | | | (652) | | | (703) | |
| Total income from operations | $ | 896 | | | $ | 394 | | | $ | 2,249 | | | $ | 1,932 | |
KEURIG DR PEPPER INC.
RECONCILIATION OF CERTAIN NON-GAAP INFORMATION
(UNAUDITED)
The company reports its financial results in accordance with U.S. GAAP. However, management believes that certain non-GAAP financial measures that reflect the way management evaluates the business may provide investors with additional information regarding the company's results, trends and ongoing performance on a comparable basis.
Specifically, investors should consider the following with respect to our financial results:
Adjusted: Defined as certain financial statement captions and metrics adjusted for certain items affecting comparability.
Items affecting comparability: Defined as certain items that are excluded for comparison to prior year periods, adjusted for the tax impact as applicable. Tax impact is determined based upon an approximate rate for each item. For each period, management adjusts for (i) the unrealized mark-to-market impact of derivative instruments not designated as hedges in accordance with U.S. GAAP that do not have an offsetting risk reflected within the financial results, as well as the unrealized mark-to-market impact of our Vita Coco investment; (ii) the amortization associated with definite-lived intangible assets; (iii) the amortization of the deferred financing costs associated with the DPS Merger; (iv) the amortization of the fair value adjustment of the senior unsecured notes obtained as a result of the DPS Merger; (v) stock compensation expense and the associated windfall tax benefit attributable to the matching awards made to employees who made an initial investment in KDP; (vi) transaction costs for significant business combinations (completed or abandoned); (vii) non-cash changes in deferred tax liabilities related to goodwill and other intangible assets as a result of tax rate or apportionment changes; (viii) impairments recognized on certain intangible assets; and (ix) other certain items that are excluded for comparison purposes to prior year periods.
For the third quarter and first nine months of 2023, the other certain items excluded for comparison purposes include (i) productivity expenses, (ii) restructuring expenses associated with the 2023 CEO Succession and Associated Realignment, and (iii) costs related to significant non-routine legal matters, specifically the antitrust litigation. Additionally, during the first nine months of 2023, the non-cash changes in deferred tax liabilities related to goodwill and other intangible assets included an immaterial non-cash true-up of the valuation of foreign deferred tax liabilities related to a prior period.
For the third quarter and first nine months of 2022, the other certain items excluded for comparison purposes include (i) restructuring and integration expenses related to significant business combinations; (ii) productivity expenses; (iii) costs related to significant non-routine legal matters, specifically the antitrust litigation; (iv) the loss on early extinguishment of debt related to the redemption of debt; (v) incremental costs to our operations related to risks associated with the COVID-19 pandemic, which were incurred to either maintain the health and safety of our front-line employees or temporarily increase compensation to such employees to ensure essential operations continue during the pandemic; (vi) the gain on the sale of our investment in BodyArmor as a result of the settlement of the associated holdback liability; (vii) the gain on the settlement of our prior litigation with BodyArmor, excluding recoveries of previously incurred litigation expenses which were included in our adjusted results; (viii) losses recognized with respect to our equity method investment in Bedford as a result of funding our share of their wind-down costs; and (ix) foundational projects, which are transformative and non-recurring in nature.
Constant currency adjusted: Defined as certain financial statement captions and metrics adjusted for certain items affecting comparability, calculated on a constant currency basis by converting our current period local currency financial results using the prior period foreign currency exchange rates.
For the third quarter and first nine months of 2023 and 2022, the supplemental financial data set forth below includes reconciliations of adjusted and constant currency adjusted financial measures to the applicable financial measure presented in the unaudited condensed consolidated financial statements for the same period.
KEURIG DR PEPPER INC.
RECONCILIATION OF CERTAIN NON-GAAP INFORMATION
(UNAUDITED)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Cost of sales | | Gross profit | | Gross margin | | Selling, general and administrative expenses | | Impairment of intangible assets | | | | | | Income from operations | | Operating margin |
| For the Third Quarter of 2023 | | | | | | | | | | | | | | | | | | | |
| Reported | | | $ | 1,694 | | | $ | 2,111 | | | 55.5 | % | | $ | 1,217 | | | $ | 2 | | | | | | | $ | 896 | | | 23.5 | % |
| Items Affecting Comparability: | | | | | | | | | | | | | | | | | | | |
| Mark to market | | | 13 | | | (13) | | | | | 21 | | | — | | | | | | | (34) | | | |
| Amortization of intangibles | | | — | | | — | | | | | (34) | | | — | | | | | | | 34 | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| Stock compensation | | | — | | | — | | | | | (4) | | | — | | | | | | | 4 | | | |
| Restructuring - 2023 CEO Succession and Associated Realignment | | | — | | | — | | | | | (27) | | | — | | | | | | | 27 | | | |
| Productivity | | | (25) | | | 25 | | | | | (27) | | | — | | | | | | | 52 | | | |
| Impairment of intangible assets | | | — | | | — | | | | | — | | | (2) | | | | | | | 2 | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| Non-routine legal matters | | | — | | | — | | | | | (2) | | | — | | | | | | | 2 | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| Transaction costs | | | — | | | — | | | | | (1) | | | — | | | | | | | 1 | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| Adjusted | | | $ | 1,682 | | | $ | 2,123 | | | 55.8 | % | | $ | 1,143 | | | $ | — | | | | | | | $ | 984 | | | 25.9 | % |
| Impact of foreign currency | | | | | | | — | % | | | | | | | | | | | | — | % |
| Constant currency adjusted | | | | | | | 55.8 | % | | | | | | | | | | | | 25.9 | % |
| | | | | | | | | | | | | | | | | | | |
| For the Third Quarter of 2022 | | | | | | | | | | | | | | | | | | | |
| Reported | | | $ | 1,721 | | | $ | 1,901 | | | 52.5 | % | | $ | 1,196 | | | $ | 311 | | | | | | | $ | 394 | | | 10.9 | % |
| Items Affecting Comparability: | | | | | | | | | | | | | | | | | | | |
| Mark to market | | | (51) | | | 51 | | | | | (55) | | | — | | | | | | | 106 | | | |
| Amortization of intangibles | | | — | | | — | | | | | (33) | | | — | | | | | | | 33 | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| Stock compensation | | | — | | | — | | | | | (5) | | | — | | | | | | | 5 | | | |
| Restructuring and integration costs - DPS Merger | | | — | | | — | | | | | (33) | | | — | | | | | | | 33 | | | |
| Productivity | | | (30) | | | 30 | | | | | (27) | | | — | | | | | | | 57 | | | |
| Impairment of intangible assets | | | — | | | — | | | | | — | | | (311) | | | | | | | 311 | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| Non-routine legal matters | | | — | | | — | | | | | (2) | | | — | | | | | | | 2 | | | |
| COVID-19 | | | (3) | | | 3 | | | | | (2) | | | — | | | | | | | 5 | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| Foundational projects | | | — | | | — | | | | | (1) | | | — | | | | | | | 1 | | | |
| | | | | | | | | | | | | | | | | | | |
| Adjusted | | | $ | 1,637 | | | $ | 1,985 | | | 54.8 | % | | $ | 1,038 | | | $ | — | | | | | | | $ | 947 | | | 26.1 | % |
| | | | | | | | | | | | | | | | | | | |
Refer to page A-8 for reconciliations of reported net sales to constant currency net sales and adjusted income from operations to constant currency adjusted income from operations. A-6
KEURIG DR PEPPER INC.
RECONCILIATION OF CERTAIN NON-GAAP INFORMATION
(UNAUDITED)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest expense | | | | | | | | Other (income) expense, net | | Income before provision for income taxes | | Provision for income taxes | | Effective tax rate | | Net income attributable to KDP | | Diluted earnings per share |
| For the Third Quarter of 2023 | | | | | | | | | | | | | | | | | | | |
| Reported | $ | 237 | | | | | | | | | $ | (5) | | | $ | 664 | | | $ | 146 | | | 22.0 | % | | $ | 518 | | | $ | 0.37 | |
| Items Affecting Comparability: | | | | | | | | | | | | | | | | | | | |
| Mark to market | (114) | | | | | | | | | (2) | | | 82 | | | 20 | | | | | 62 | | | 0.04 | |
| Amortization of intangibles | — | | | | | | | | | — | | | 34 | | | 9 | | | | | 25 | | | 0.02 | |
| | | | | | | | | | | | | | | | | | | |
| Amortization of fair value debt adjustment | (5) | | | | | | | | | — | | | 5 | | | 1 | | | | | 4 | | | — | |
| Stock compensation | — | | | | | | | | | — | | | 4 | | | 3 | | | | | 1 | | | — | |
| Restructuring - 2023 CEO Succession and Associated Realignment | — | | | | | | | | | — | | | 27 | | | 6 | | | | | 21 | | | 0.01 | |
| Productivity | — | | | | | | | | | — | | | 52 | | | 12 | | | | | 40 | | | 0.03 | |
| Impairment of intangible assets | — | | | | | | | | | — | | | 2 | | | — | | | | | 2 | | | — | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| Non-routine legal matters | — | | | | | | | | | — | | | 2 | | | — | | | | | 2 | | | — | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| Transaction costs | — | | | | | | | | | — | | | 1 | | | — | | | | | 1 | | | — | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| Change in deferred tax liabilities related to goodwill and other intangible assets | — | | | | | | | | | — | | | — | | | 3 | | | | | (3) | | | — | |
| Adjusted | $ | 118 | | | | | | | | | $ | (7) | | | $ | 873 | | | $ | 200 | | | 22.9 | % | | $ | 673 | | | $ | 0.48 | |
| Impact of foreign currency | | | | | | | | | | | | | | | (0.2) | % | | | | |
| Constant currency adjusted | | | | | | | | | | | | | | | 22.7 | % | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| For the Third Quarter of 2022 | | | | | | | | | | | | | | | | | | | |
| Reported | $ | 207 | | | | | | | | | $ | 4 | | | $ | 183 | | | $ | 4 | | | 2.2 | % | | $ | 180 | | | $ | 0.13 | |
| Items Affecting Comparability: | | | | | | | | | | | | | | | | | | | |
| Mark to market | (113) | | | | | | | | | 2 | | | 217 | | | 54 | | | | | 163 | | | 0.11 | |
| Amortization of intangibles | — | | | | | | | | | — | | | 33 | | | 8 | | | | | 25 | | | 0.02 | |
| | | | | | | | | | | | | | | | | | | |
| Amortization of fair value of debt adjustment | (5) | | | | | | | | | — | | | 5 | | | 1 | | | | | 4 | | | — | |
| Stock compensation | — | | | | | | | | | — | | | 5 | | | 2 | | | | | 3 | | | — | |
| Restructuring and integration costs - DPS Merger | — | | | | | | | | | — | | | 33 | | | 8 | | | | | 25 | | | 0.02 | |
| Productivity | — | | | | | | | | | — | | | 57 | | | 10 | | | | | 47 | | | 0.03 | |
| Impairment of intangible assets | — | | | | | | | | | — | | | 311 | | | 77 | | | | | 234 | | | 0.16 | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| Non-routine legal matters | — | | | | | | | | | — | | | 2 | | | — | | | | | 2 | | | — | |
| COVID-19 | — | | | | | | | | | — | | | 5 | | | 1 | | | | | 4 | | | — | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| Foundational projects | — | | | | | | | | | — | | | 1 | | | 1 | | | | | — | | | — | |
| Change in deferred tax liabilities related to goodwill and other intangible assets | — | | | | | | | | | — | | | — | | | 31 | | | | | (31) | | | (0.02) | |
| Adjusted | $ | 89 | | | | | | | | | $ | 6 | | | $ | 852 | | | $ | 197 | | | 23.1 | % | | $ | 656 | | | $ | 0.46 | |
| | | | | | | | | | | | | | | | | | | |
| Change - adjusted | 32.6 | % | | | | | | | | | | | | | | | | 2.6 | % | | 4.3 | % |
| Impact of foreign currency | — | % | | | | | | | | | | | | | | | | (0.8) | % | | — | % |
| Change - constant currency adjusted | 32.6 | % | | | | | | | | | | | | | | | | 1.8 | % | | 4.3 | % |
Diluted earnings per common share may not foot due to rounding.
A-7
KEURIG DR PEPPER INC.
RECONCILIATION OF CERTAIN NON-GAAP INFORMATION
(UNAUDITED)
| | | | | | | | | | | | | | | | | |
| (in millions) | Reported | | Items Affecting Comparability | | Adjusted |
| For the third quarter of 2023 | | | | | |
| Income from operations | | | | | |
| U.S. Refreshment Beverages | $ | 676 | | | $ | 19 | | | $ | 695 | |
| U.S. Coffee | 293 | | | 40 | | | 333 | |
| International | 139 | | | 6 | | | 145 | |
| Unallocated corporate costs | (212) | | | 23 | | | (189) | |
| Total income from operations | $ | 896 | | | $ | 88 | | | $ | 984 | |
| | | | | |
| For the third quarter of 2022 | | | | | |
| Income from operations | | | | | |
| U.S. Refreshment Beverages | $ | 322 | | | $ | 333 | | | $ | 655 | |
| U.S. Coffee | 272 | | | 43 | | | 315 | |
| International | 97 | | | 7 | | | 104 | |
| Unallocated corporate costs | (297) | | | 170 | | | (127) | |
| Total income from operations | $ | 394 | | | $ | 553 | | | $ | 947 | |
| | | | | | | | | | | | | | | | | | | | |
| | Reported | | Impact of Foreign Currency | | Constant Currency |
| For the third quarter of 2023 | | | | | | |
| Net sales | | | | | | |
| U.S. Refreshment Beverages | | 5.9 | % | | — | % | | 5.9 | % |
| U.S. Coffee | | (3.2) | | | — | | | (3.2) | |
| International | | 20.8 | | | (7.9) | | | 12.9 | |
| Total net sales | | 5.1 | | | (1.0) | | | 4.1 | |
| | | | | | | | | | | | | | | | | | | | |
| | Adjusted | | Impact of Foreign Currency | | Constant Currency Adjusted |
| For the third quarter of 2023 | | | | | | |
| Income from operations | | | | | | |
| U.S. Refreshment Beverages | | 6.1 | % | | — | % | | 6.1 | % |
| U.S. Coffee | | 5.7 | | | — | | | 5.7 | |
| International | | 39.4 | | | (7.7) | | | 31.7 | |
| Total income from operations | | 3.9 | | | (0.8) | | | 3.1 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Reported | | Items Affecting Comparability | | Adjusted | | Impact of Foreign Currency | | Constant Currency Adjusted |
| For the third quarter of 2023 | | | | | | | | | | |
| Operating margin | | | | | | | | | | |
| U.S. Refreshment Beverages | | 29.8 | % | | 0.8 | % | | 30.6 | % | | — | % | | 30.6 | % |
| U.S. Coffee | | 29.0 | | | 3.9 | | | 32.9 | | | — | | | 32.9 | |
| International | | 26.6 | | | 1.1 | | | 27.7 | | | 0.3 | | | 28.0 | |
| Total operating margin | | 23.5 | | | 2.4 | | | 25.9 | | | — | | | 25.9 | |
KEURIG DR PEPPER INC.
RECONCILIATION OF CERTAIN NON-GAAP INFORMATION
(UNAUDITED)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Cost of sales | | Gross profit | | Gross margin | | Selling, general and administrative expenses | | Impairment of intangible assets | | Gain on litigation settlement | | Other operating income, net | | Income from operations | | Operating margin |
| For the First Nine Months of 2023 | | | | | | | | | | | | | | | | | | | |
| Reported | | | $ | 5,051 | | | $ | 5,896 | | | 53.9 | % | | $ | 3,654 | | | $ | 2 | | | $ | — | | | $ | (9) | | | $ | 2,249 | | | 20.5 | % |
| Items Affecting Comparability: | | | | | | | | | | | | | | | | | | | |
| Mark to market | | | 18 | | | (18) | | | | | 14 | | | — | | | — | | | — | | | (32) | | | |
| Amortization of intangibles | | | — | | | — | | | | | (103) | | | — | | | — | | | — | | | 103 | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| Stock compensation | | | — | | | — | | | | | (13) | | | — | | | — | | | — | | | 13 | | | |
| Restructuring - 2023 CEO Succession and Associated Realignment | | | — | | | — | | | | | (27) | | | — | | | — | | | — | | | 27 | | | |
| Productivity | | | (89) | | | 89 | | | | | (99) | | | — | | | — | | | — | | | 188 | | | |
| Impairment of intangible assets | | | — | | | — | | | | | — | | | (2) | | | — | | | — | | | 2 | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| Non-routine legal matters | | | — | | | — | | | | | (5) | | | — | | | — | | | — | | | 5 | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| Transaction costs | | | — | | | — | | | | | (1) | | | — | | | — | | | — | | | 1 | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| Adjusted | | | $ | 4,980 | | | $ | 5,967 | | | 54.5 | % | | $ | 3,420 | | | $ | — | | | $ | — | | | $ | (9) | | | $ | 2,556 | | | 23.3 | % |
| Impact of foreign currency | | | | | | | — | % | | | | | | | | | | | | 0.1 | % |
| Constant currency adjusted | | | | | | | 54.5 | % | | | | | | | | | | | | 23.4 | % |
| | | | | | | | | | | | | | | | | | | |
| For the First Nine Months of 2022 | | | | | | | | | | | | | | | | | | | |
| Reported | | | $ | 4,927 | | | $ | 5,327 | | | 52.0 | % | | $ | 3,418 | | | $ | 311 | | | $ | (299) | | | $ | (35) | | | $ | 1,932 | | | 18.8 | % |
| Items Affecting Comparability: | | | | | | | | | | | | | | | | | | | |
| Mark to market | | | (130) | | | 130 | | | | | (29) | | | — | | | — | | | — | | | 159 | | | |
| Amortization of intangibles | | | — | | | — | | | | | (100) | | | — | | | — | | | — | | | 100 | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| Stock compensation | | | — | | | — | | | | | (3) | | | — | | | — | | | — | | | 3 | | | |
| Restructuring and integration costs - DPS Merger | | | — | | | — | | | | | (89) | | | — | | | — | | | (2) | | | 91 | | | |
| Productivity | | | (86) | | | 86 | | | | | (73) | | | — | | | — | | | — | | | 159 | | | |
| Impairment of intangible assets | | | — | | | — | | | | | — | | | (311) | | | — | | | — | | | 311 | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| Non-routine legal matters | | | — | | | — | | | | | (9) | | | — | | | — | | | — | | | 9 | | | |
| COVID-19 | | | (10) | | | 10 | | | | | (4) | | | — | | | — | | | — | | | 14 | | | |
| Gain on litigation | | | — | | | — | | | | | — | | | — | | | 271 | | | — | | | (271) | | | |
| | | | | | | | | | | | | | | | | | | |
| Transaction costs | | | — | | | — | | | | | (1) | | | — | | | — | | | — | | | 1 | | | |
| | | | | | | | | | | | | | | | | | | |
| Foundational projects | | | — | | | — | | | | | (3) | | | — | | | — | | | — | | | 3 | | | |
| | | | | | | | | | | | | | | | | | | |
| Adjusted | | | $ | 4,701 | | | $ | 5,553 | | | 54.2 | % | | $ | 3,107 | | | $ | — | | | $ | (28) | | | $ | (37) | | | $ | 2,511 | | | 24.5 | % |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Refer to page A-12 for reconciliations of reported net sales to constant currency net sales and adjusted income from operations to constant currency adjusted income from operations. A-9
KEURIG DR PEPPER INC.
RECONCILIATION OF CERTAIN NON-GAAP INFORMATION
(UNAUDITED)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest expense | | Loss on early extinguishment of debt | | Gain on sale of equity method investment | | Impairment of investments and note receivable | | Other (income) expense, net | | Income before provision for income taxes | | Provision for income taxes | | Effective tax rate | | Net income attributable to KDP | | Diluted earnings per share |
| For the First Nine Months of 2023 | | | | | | | | | | | | | | | | | | | |
| Reported | $ | 432 | | | $ | — | | | $ | — | | | $ | — | | | $ | (41) | | | $ | 1,858 | | | $ | 370 | | | 19.9 | % | | $ | 1,488 | | | $ | 1.05 | |
| Items Affecting Comparability: | | | | | | | | | | | | | | | | | | | |
| Mark to market | (74) | | | — | | | — | | | — | | | 16 | | | 26 | | | 6 | | | | | 20 | | | 0.01 | |
| Amortization of intangibles | — | | | — | | | — | | | — | | | — | | | 103 | | | 25 | | | | | 78 | | | 0.06 | |
| Amortization of deferred financing costs | (1) | | | — | | | — | | | — | | | — | | | 1 | | | — | | | | | 1 | | | — | |
| Amortization of fair value debt adjustment | (14) | | | — | | | — | | | — | | | — | | | 14 | | | 3 | | | | | 11 | | | 0.01 | |
| Stock compensation | — | | | — | | | — | | | — | | | — | | | 13 | | | 6 | | | | | 7 | | | — | |
| Restructuring - 2023 CEO Succession and Associated Realignment | — | | | — | | | — | | | — | | | — | | | 27 | | | 6 | | | | | 21 | | | 0.01 | |
| Productivity | — | | | — | | | — | | | — | | | — | | | 188 | | | 45 | | | | | 143 | | | 0.10 | |
| Impairment of intangible assets | — | | | — | | | — | | | — | | | — | | | 2 | | | — | | | | | 2 | | | — | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| Non-routine legal matters | — | | | — | | | — | | | — | | | — | | | 5 | | | 1 | | | | | 4 | | | — | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| Transaction costs | — | | | — | | | — | | | — | | | — | | | 1 | | | — | | | | | 1 | | | — | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| Change in deferred tax liabilities related to goodwill and other intangible assets | — | | | — | | | — | | | — | | | — | | | — | | | 28 | | | | | (28) | | | (0.02) | |
| Adjusted | $ | 343 | | | $ | — | | | $ | — | | | $ | — | | | $ | (25) | | | $ | 2,238 | | | $ | 490 | | | 21.9 | % | | $ | 1,748 | | | $ | 1.24 | |
| Impact of foreign currency | | | | | | | | | | | | | | | (0.1) | % | | | | |
| Constant currency adjusted | | | | | | | | | | | | | | | 21.8 | % | | | | |
| | | | | | | | | | | | | | | | | | | |
Diluted earnings per common share may not foot due to rounding.
A-10
KEURIG DR PEPPER INC.
RECONCILIATION OF CERTAIN NON-GAAP INFORMATION
(UNAUDITED)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest expense | | Loss on early extinguishment of debt | | Gain on sale of equity method investment | | Impairment of investments and note receivable | | Other (income) expense, net | | Income before provision for income taxes | | Provision for income taxes | | Effective tax rate | | Net income attributable to KDP | | Diluted earnings per share |
| For the First Nine Months of 2022 | | | | | | | | | | | | | | | | | | | |
| Reported | $ | 570 | | | $ | 217 | | | $ | (50) | | | $ | 12 | | | $ | 22 | | | $ | 1,161 | | | $ | 179 | | | 15.4 | % | | $ | 983 | | | $ | 0.69 | |
| Items Affecting Comparability: | | | | | | | | | | | | | | | | | | | |
| Mark to market | (247) | | | — | | | — | | | — | | | — | | | 406 | | | 101 | | | | | 305 | | | 0.21 | |
| Amortization of intangibles | — | | | — | | | — | | | — | | | — | | | 100 | | | 25 | | | | | 75 | | | 0.05 | |
| Amortization of deferred financing costs | (2) | | | — | | | — | | | — | | | — | | | 2 | | | — | | | | | 2 | | | — | |
| Amortization of fair value of debt adjustment | (14) | | | — | | | — | | | — | | | — | | | 14 | | | 3 | | | | | 11 | | | 0.01 | |
| Stock compensation | — | | | — | | | — | | | — | | | — | | | 3 | | | (1) | | | | | 4 | | | — | |
| Restructuring and integration costs - DPS Merger | — | | | — | | | — | | | — | | | — | | | 91 | | | 22 | | | | | 69 | | | 0.05 | |
| Productivity | — | | | — | | | — | | | — | | | — | | | 159 | | | 32 | | | | | 127 | | | 0.09 | |
| Impairment of intangible assets | — | | | — | | | — | | | — | | | — | | | 311 | | | 77 | | | | | 234 | | | 0.16 | |
| Impairment of investment | — | | | — | | | — | | | (12) | | | — | | | 12 | | | — | | | | | 12 | | | 0.01 | |
| Loss on early extinguishment of debt | — | | | (217) | | | — | | | — | | | — | | | 217 | | | 54 | | | | | 163 | | | 0.11 | |
| Non-routine legal matters | — | | | — | | | — | | | — | | | — | | | 9 | | | 2 | | | | | 7 | | | — | |
| COVID-19 | — | | | — | | | — | | | — | | | — | | | 14 | | | 3 | | | | | 11 | | | 0.01 | |
| Gain on litigation | — | | | — | | | — | | | — | | | — | | | (271) | | | (68) | | | | | (203) | | | (0.14) | |
| Gain on sale of equity-method investment | — | | | — | | | 50 | | | — | | | — | | | (50) | | | (12) | | | | | (38) | | | (0.03) | |
| Transaction costs | — | | | — | | | — | | | — | | | — | | | 1 | | | — | | | | | 1 | | | — | |
| | | | | | | | | | | | | | | | | | | |
| Foundational projects | — | | | — | | | — | | | — | | | — | | | 3 | | | 1 | | | | | 2 | | | — | |
| Change in deferred tax liabilities related to goodwill and other intangible assets | — | | | — | | | — | | | — | | | — | | | — | | | 81 | | | | | (81) | | | (0.06) | |
| Adjusted | $ | 307 | | | $ | — | | | $ | — | | | $ | — | | | $ | 22 | | | $ | 2,182 | | | $ | 499 | | | 22.9 | % | | $ | 1,684 | | | $ | 1.18 | |
| | | | | | | | | | | | | | | | | | | |
| Change - adjusted | 11.7 | % | | | | | | | | | | | | | | | | 3.8 | % | | 5.1 | % |
| Impact of foreign currency | — | % | | | | | | | | | | | | | | | | (0.6) | % | | (0.9) | % |
| Change - Constant currency adjusted | 11.7 | % | | | | | | | | | | | | | | | | 3.2 | % | | 4.2 | % |
Diluted earnings per common share may not foot due to rounding.
A-11
KEURIG DR PEPPER INC.
RECONCILIATION OF CERTAIN FINANCIAL MEASURES BY SEGMENT TO CONSTANT CURRENCY ADJUSTED FINANCIAL MEASURES BY SEGMENT
(UNAUDITED)
| | | | | | | | | | | | | | | | | |
| (in millions) | Reported | | Items Affecting Comparability | | Adjusted |
| For the first nine months of 2023: | | | | | |
| Income from operations | | | | | |
| U.S. Refreshment Beverages | $ | 1,795 | | | $ | 54 | | | $ | 1,849 | |
| U.S. Coffee | 775 | | | 135 | | | 910 | |
| International | 331 | | | 14 | | | 345 | |
| Unallocated corporate costs | (652) | | | 104 | | | (548) | |
| Total income from operations | $ | 2,249 | | | $ | 307 | | | $ | 2,556 | |
| | | | | |
| For the first nine months of 2022: | | | | | |
| Income from operations | | | | | |
| U.S. Refreshment Beverages | $ | 1,554 | | | $ | 103 | | | $ | 1,657 | |
| U.S. Coffee | 822 | | | 136 | | | 958 | |
| International | 259 | | | 20 | | | 279 | |
| Unallocated corporate costs | (703) | | | 320 | | | (383) | |
| Total income from operations | $ | 1,932 | | | $ | 579 | | | $ | 2,511 | |
| | | | | | | | | | | | | | | | | | | | |
| | Reported | | Impact of Foreign Currency | | Constant Currency |
| For the first nine months of 2023: | | | | | | |
| Net sales | | | | | | |
| U.S. Refreshment Beverages | | 10.0 | % | | — | % | | 10.0 | % |
| U.S. Coffee | | (3.4) | | | — | | | (3.4) | |
| International | | 16.2 | | | (4.3) | | | 11.9 | |
| Total net sales | | 6.8 | | | (0.6) | | | 6.2 | |
| | | | | | | | | | | | | | | | | | | | |
| | Adjusted | | Impact of Foreign Currency | | Constant Currency Adjusted |
| For the first nine months of 2023: | | | | | | |
| Income from operations | | | | | | |
| U.S. Refreshment Beverages | | 11.6 | % | | — | % | | 11.6 | % |
| U.S. Coffee | | (5.0) | | | — | | | (5.0) | |
| International | | 23.7 | | | (4.3) | | | 19.4 | |
| Total income from operations | | 1.8 | | | (0.5) | | | 1.3 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Reported | | Items Affecting Comparability | | Adjusted | | Impact of Foreign Currency | | Constant Currency Adjusted |
| For the first nine months of 2023: | | | | | | | | | | |
| Operating margin | | | | | | | | | | |
| U.S. Refreshment Beverages | | 27.2 | % | | 0.8 | % | | 28.0 | % | | — | % | | 28.0 | % |
| U.S. Coffee | | 26.6 | | | 4.6 | | | 31.2 | | | — | | | 31.2 | |
| International | | 23.2 | | | 1.0 | | | 24.2 | | | — | | | 24.2 | |
| Total operating margin | | 20.5 | | | 2.8 | | | 23.3 | | | 0.1 | | | 23.4 | |
Diluted earnings per common share may not foot due to rounding.
A-12
KEURIG DR PEPPER INC.
RECONCILIATION OF ADJUSTED EBITDA AND MANAGEMENT LEVERAGE RATIO
(UNAUDITED)
| | | | | |
| (in millions, except for ratio) | |
| ADJUSTED EBITDA RECONCILIATION - LAST TWELVE MONTHS | |
| Net income attributable to KDP | $ | 1,941 | |
| Interest expense | 555 | |
| Provision for income taxes | 475 | |
| Other (income) expense, net | (49) | |
| Depreciation expense | 397 | |
| Other amortization | 179 | |
| Amortization of intangibles | 141 | |
| EBITDA | $ | 3,639 | |
| Items affecting comparability: | |
| |
| |
| |
| Impairment of intangible assets | $ | 168 | |
| |
| Restructuring and integration expenses - DPS Merger | 81 | |
| Restructuring - 2023 CEO Succession and Associated Realignment | 27 | |
| Productivity | 216 | |
| |
| Non-routine legal matters | 9 | |
| Stock compensation | 15 | |
| |
| Transaction costs | 1 | |
| |
| Foundational projects | 1 | |
| Mark to market | (41) | |
| Adjusted EBITDA | $ | 4,116 | |
| |
| September 30, |
| 2023 |
| Principal amounts of: | |
| Commercial paper notes | $ | 1,149 | |
| Senior unsecured notes | 11,743 | |
| Total principal amounts | 12,892 | |
| Less: Cash and cash equivalents | 260 | |
| Total principal amounts less cash and cash equivalents | $ | 12,632 | |
| |
| September 30, 2023 Management Leverage Ratio | 3.1 | |
Diluted earnings per common share may not foot due to rounding.
A-13
KEURIG DR PEPPER INC.
RECONCILIATION OF ADJUSTED EBITDA - LAST TWELVE MONTHS
(UNAUDITED)
| | | | | | | | | | | | | | | | | | | | | |
| (in millions) | | | | | FOURTH QUARTER OF 2022 | | FIRST NINE MONTHS OF 2023 | | LAST TWELVE MONTHS |
| Net income attributable to KDP | | | | | $ | 453 | | | $ | 1,488 | | | $ | 1,941 | |
| Interest expense | | | | | 123 | | | 432 | | | 555 | |
| Provision for income taxes | | | | | 105 | | | 370 | | | 475 | |
| Other (income) expense, net | | | | | (8) | | | (41) | | | (49) | |
| Depreciation expense | | | | | 98 | | | 299 | | | 397 | |
| Other amortization | | | | | 43 | | | 136 | | | 179 | |
| Amortization of intangibles | | | | | 38 | | | 103 | | | 141 | |
| EBITDA | | | | | $ | 852 | | | $ | 2,787 | | | $ | 3,639 | |
| Items affecting comparability: | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Impairment of intangible assets | | | | | $ | 166 | | | $ | 2 | | | $ | 168 | |
| | | | | | | | | |
| Restructuring and integration expenses - DPS Merger | | | | | 81 | | | — | | | 81 | |
| Restructuring - 2023 CEO Succession and Associated Realignment | | | | | — | | | 27 | | | 27 | |
| Productivity | | | | | 64 | | | 152 | | | 216 | |
| | | | | | | | | |
| Nonroutine legal matters | | | | | 4 | | | 5 | | | 9 | |
| Stock compensation | | | | | 2 | | | 13 | | | 15 | |
| | | | | | | | | |
| Transaction costs | | | | | — | | | 1 | | | 1 | |
| Foundational projects | | | | | 1 | | | — | | | 1 | |
| | | | | | | | | |
| Mark to market | | | | | (9) | | | (32) | | | (41) | |
| Adjusted EBITDA | | | | | $ | 1,161 | | | $ | 2,955 | | | $ | 4,116 | |
Diluted earnings per common share may not foot due to rounding.
A-14
KEURIG DR PEPPER INC.
RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW
(UNAUDITED)
Free cash flow is defined as net cash provided by operating activities adjusted for purchases of property, plant and equipment, proceeds from sales of property, plant and equipment, and certain items excluded for comparison to prior year periods. For the first nine months of 2023 and 2022, there were no certain items excluded for comparison to prior year periods.
| | | | | | | | | | | | | | |
| | First Nine Months |
| (in millions) | | 2023 | | 2022 |
| Net cash provided by operating activities | | $ | 1,032 | | | $ | 2,098 | |
| Purchases of property, plant and equipment | | (271) | | | (260) | |
| Proceeds from sales of property, plant and equipment | | 9 | | | 79 | |
| Free Cash Flow | | $ | 770 | | | $ | 1,917 | |
Diluted earnings per common share may not foot due to rounding.
A-15
| X |
- DefinitionBoolean flag that is true when the XBRL content amends previously-filed or accepted submission.
| Name: |
dei_AmendmentFlag |
| Namespace Prefix: |
dei_ |
| Data Type: |
xbrli:booleanItemType |
| Balance Type: |
na |
| Period Type: |
duration |
|
| X |
- DefinitionFor the EDGAR submission types of Form 8-K: the date of the report, the date of the earliest event reported; for the EDGAR submission types of Form N-1A: the filing date; for all other submission types: the end of the reporting or transition period. The format of the date is YYYY-MM-DD.
| Name: |
dei_DocumentPeriodEndDate |
| Namespace Prefix: |
dei_ |
| Data Type: |
xbrli:dateItemType |
| Balance Type: |
na |
| Period Type: |
duration |
|
| X |
- DefinitionThe type of document being provided (such as 10-K, 10-Q, 485BPOS, etc). The document type is limited to the same value as the supporting SEC submission type, or the word 'Other'.
| Name: |
dei_DocumentType |
| Namespace Prefix: |
dei_ |
| Data Type: |
dei:submissionTypeItemType |
| Balance Type: |
na |
| Period Type: |
duration |
|
| X |
- DefinitionAddress Line 1 such as Attn, Building Name, Street Name
| Name: |
dei_EntityAddressAddressLine1 |
| Namespace Prefix: |
dei_ |
| Data Type: |
xbrli:normalizedStringItemType |
| Balance Type: |
na |
| Period Type: |
duration |
|
| X |
- Definition
+ References
+ Details
| Name: |
dei_EntityAddressCityOrTown |
| Namespace Prefix: |
dei_ |
| Data Type: |
xbrli:normalizedStringItemType |
| Balance Type: |
na |
| Period Type: |
duration |
|
| X |
- DefinitionCode for the postal or zip code
| Name: |
dei_EntityAddressPostalZipCode |
| Namespace Prefix: |
dei_ |
| Data Type: |
xbrli:normalizedStringItemType |
| Balance Type: |
na |
| Period Type: |
duration |
|
| X |
- DefinitionName of the state or province.
| Name: |
dei_EntityAddressStateOrProvince |
| Namespace Prefix: |
dei_ |
| Data Type: |
dei:stateOrProvinceItemType |
| Balance Type: |
na |
| Period Type: |
duration |
|
| X |
- DefinitionA unique 10-digit SEC-issued value to identify entities that have filed disclosures with the SEC. It is commonly abbreviated as CIK. Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Exchange Act
-Number 240
-Section 12
-Subsection b-2
| Name: |
dei_EntityCentralIndexKey |
| Namespace Prefix: |
dei_ |
| Data Type: |
dei:centralIndexKeyItemType |
| Balance Type: |
na |
| Period Type: |
duration |
|
| X |
- DefinitionIndicate if registrant meets the emerging growth company criteria. Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Exchange Act
-Number 240
-Section 12
-Subsection b-2
| Name: |
dei_EntityEmergingGrowthCompany |
| Namespace Prefix: |
dei_ |
| Data Type: |
xbrli:booleanItemType |
| Balance Type: |
na |
| Period Type: |
duration |
|
| X |
- DefinitionCommission file number. The field allows up to 17 characters. The prefix may contain 1-3 digits, the sequence number may contain 1-8 digits, the optional suffix may contain 1-4 characters, and the fields are separated with a hyphen.
| Name: |
dei_EntityFileNumber |
| Namespace Prefix: |
dei_ |
| Data Type: |
dei:fileNumberItemType |
| Balance Type: |
na |
| Period Type: |
duration |
|
| X |
- DefinitionTwo-character EDGAR code representing the state or country of incorporation.
| Name: |
dei_EntityIncorporationStateCountryCode |
| Namespace Prefix: |
dei_ |
| Data Type: |
dei:edgarStateCountryItemType |
| Balance Type: |
na |
| Period Type: |
duration |
|
| X |
- DefinitionThe exact name of the entity filing the report as specified in its charter, which is required by forms filed with the SEC. Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Exchange Act
-Number 240
-Section 12
-Subsection b-2
| Name: |
dei_EntityRegistrantName |
| Namespace Prefix: |
dei_ |
| Data Type: |
xbrli:normalizedStringItemType |
| Balance Type: |
na |
| Period Type: |
duration |
|
| X |
- DefinitionThe Tax Identification Number (TIN), also known as an Employer Identification Number (EIN), is a unique 9-digit value assigned by the IRS. Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Exchange Act
-Number 240
-Section 12
-Subsection b-2
| Name: |
dei_EntityTaxIdentificationNumber |
| Namespace Prefix: |
dei_ |
| Data Type: |
dei:employerIdItemType |
| Balance Type: |
na |
| Period Type: |
duration |
|
| X |
- DefinitionLocal phone number for entity.
| Name: |
dei_LocalPhoneNumber |
| Namespace Prefix: |
dei_ |
| Data Type: |
xbrli:normalizedStringItemType |
| Balance Type: |
na |
| Period Type: |
duration |
|
| X |
- DefinitionBoolean flag that is true when the Form 8-K filing is intended to satisfy the filing obligation of the registrant as pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act. Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Exchange Act
-Number 240
-Section 13e
-Subsection 4c
| Name: |
dei_PreCommencementIssuerTenderOffer |
| Namespace Prefix: |
dei_ |
| Data Type: |
xbrli:booleanItemType |
| Balance Type: |
na |
| Period Type: |
duration |
|
| X |
- DefinitionBoolean flag that is true when the Form 8-K filing is intended to satisfy the filing obligation of the registrant as pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act. Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Exchange Act
-Number 240
-Section 14d
-Subsection 2b
| Name: |
dei_PreCommencementTenderOffer |
| Namespace Prefix: |
dei_ |
| Data Type: |
xbrli:booleanItemType |
| Balance Type: |
na |
| Period Type: |
duration |
|
| X |
- DefinitionTitle of a 12(b) registered security. Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Exchange Act
-Number 240
-Section 12
-Subsection b
| Name: |
dei_Security12bTitle |
| Namespace Prefix: |
dei_ |
| Data Type: |
dei:securityTitleItemType |
| Balance Type: |
na |
| Period Type: |
duration |
|
| X |
- DefinitionName of the Exchange on which a security is registered. Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Exchange Act
-Number 240
-Section 12
-Subsection d1-1
| Name: |
dei_SecurityExchangeName |
| Namespace Prefix: |
dei_ |
| Data Type: |
dei:edgarExchangeCodeItemType |
| Balance Type: |
na |
| Period Type: |
duration |
|
| X |
- DefinitionBoolean flag that is true when the Form 8-K filing is intended to satisfy the filing obligation of the registrant as soliciting material pursuant to Rule 14a-12 under the Exchange Act. Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Exchange Act
-Section 14a
-Number 240
-Subsection 12
| Name: |
dei_SolicitingMaterial |
| Namespace Prefix: |
dei_ |
| Data Type: |
xbrli:booleanItemType |
| Balance Type: |
na |
| Period Type: |
duration |
|
| X |
- DefinitionTrading symbol of an instrument as listed on an exchange.
| Name: |
dei_TradingSymbol |
| Namespace Prefix: |
dei_ |
| Data Type: |
dei:tradingSymbolItemType |
| Balance Type: |
na |
| Period Type: |
duration |
|
| X |
- DefinitionBoolean flag that is true when the Form 8-K filing is intended to satisfy the filing obligation of the registrant as written communications pursuant to Rule 425 under the Securities Act. Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Securities Act
-Number 230
-Section 425
| Name: |
dei_WrittenCommunications |
| Namespace Prefix: |
dei_ |
| Data Type: |
xbrli:booleanItemType |
| Balance Type: |
na |
| Period Type: |
duration |
|
Keurig Dr Pepper (NASDAQ:KDP)
Historical Stock Chart
From May 2024 to Jun 2024
Keurig Dr Pepper (NASDAQ:KDP)
Historical Stock Chart
From Jun 2023 to Jun 2024
