BURLINGTON, Mass. and
PLANO, Texas, July 30, 2020 /PRNewswire/ -- Keurig Dr Pepper
Inc. (NYSE: KDP) today reported strong financial results for the
second quarter ended June 30, 2020
and reaffirmed guidance for the year.
On a GAAP basis, net sales in the second quarter of 2020
increased 1.8% and diluted earnings per share totaled $0.21, compared to $0.22 in the year-ago period. Constant currency
net sales in the second quarter advanced 2.9% versus year ago and
Adjusted1 diluted EPS grew 10% to $0.33.
Commenting on the announcement, Chairman and CEO Bob Gamgort stated, "Since its formation in
2018, KDP has delivered strong and balanced financial performance.
Our second quarter results demonstrated the ability of our broad
beverage portfolio, unique routes to market and culture of
execution to deliver growth in the most challenging of
environments. I am proud of and grateful for our 26,000 employees
who have stepped up in the face of adversity to deliver for our
customers, consumers and communities, while supporting each other
during this uncertain time. Despite the expectation for significant
volatility ahead, we remain confident in both our business model
and organization to continue to execute well to deliver on the
guidance we reaffirmed today."
Second Quarter Consolidated Results
Net sales for the
second quarter of 2020 increased 1.8% to $2.86 billion, compared to $2.81 billion in the year-ago period. On a
constant currency basis, net sales advanced 2.9%, reflecting strong
volume/mix growth of 4.3%, partially offset by lower net price
realization of 1.4%. COVID-19 had a significant impact on the
beverage industry during the quarter, requiring KDP to navigate the
challenging environment to deliver balanced growth in the quarter.
Highlights of net sales performance by segment include:
- Coffee Systems: Significant growth in brewers and K-Cup
coffee pods for at-home consumption more than offset a significant
drop-off in the office coffee and hospitality businesses.
E-commerce demonstrated particular strength during the quarter,
reflecting an acceleration of consumers shifting some of their
purchases to the on-line channel, including at the Keurig.com
retail site.
- Packaged Beverages: Strong in-market execution, leading
to share growth in the majority of KDP's cold beverage segments,
more than offset the decline in convenience and gas channels due to
reduced consumer mobility. Recent successful innovation also
contributed to the strong performance in the quarter.
- Beverage Concentrates: Declined due to the fountain
foodservice component of the business, which services restaurants
and hospitality, reflecting changes in consumer behavior.
- Latin America Beverages experienced a modest negative
impact due to limited consumer mobility in Mexico.
KDP in-market performance2 in tracked channels in the
second quarter of 2020 continued to be very strong, with market
share advancing in the majority of the Company's key categories,
including CSDs3, premium unflavored water, shelf stable
fruit drinks, shelf stable vegetable juice and shelf stable apple
juice and apple sauce. This performance reflected the strength of
Dr Pepper and Canada Dry CSDs, CORE hydration and evian premium
water, Snapple juice drinks, Clamato vegetable juice and Motts
apple juice and apple sauce. In coffee, retail consumption of
single-serve pods manufactured by KDP grew nearly 15% in IRi
tracked channels, with dollar market share of KDP manufactured pods
remaining strong at 82% and improving share trends in KDP's owned
and licensed brand portfolio.
New product introductions, most notably Dr Pepper & Cream
Soda and Canada Dry Bold and, to a lesser extent, Snapple Lemonades
supported the strength of the Packaged Beverages segment, while the
new The Original Donut Shop One Step Lattes and ongoing successful
brewer innovation, including the most recent K-Duo and K-Slim
introductions, supported the strength of the Coffee Systems
segment.
GAAP operating income decreased 4.4% to $561 million in the second quarter of 2020,
compared to $587 million in the
year-ago period, including the unfavorable year-over-year impact of
items affecting comparability, which include certain COVID-19
related expenses, as well as lower pricing, inflation in input
costs and logistics and higher operating costs associated with
increased consumer demand. Partially offsetting these factors were
lower marketing and other discretionary expenses, productivity and
merger synergies and the strong growth in net sales. Excluding
items affecting comparability, Adjusted operating income increased
10.4% to $775 million, compared to
$702 million in the year-ago period,
and Adjusted operating margin advanced 210 basis points to 27.1%.
On a constant currency basis, Adjusted operating income grew
11.1%.
The COVID-19 related operating costs incurred in the second
quarter of 2020 totaled $75 million,
of which $63 million were recognized
as items affecting comparability and consisted of temporary
compensation increases and incentives for front-line employees, as
well as incremental safety and sanitation expenses. The balance of
the COVID-19 related costs in the quarter, which consisted of
inventory write-downs and bad debt expense, are included in the
Company's Adjusted results.
GAAP net income in the second quarter of 2020 decreased 5.1% to
$298 million, or $0.21 per diluted share, compared to GAAP net
income of $314 million, or
$0.22 per diluted share, in the
year-ago period, reflecting the decline in GAAP operating income, a
higher effective tax rate resulting from the comparison to
favorable discrete tax items and valuation adjustments in the prior
year period and higher interest expense, as well as the unfavorable
year-over-year impact of items affecting comparability, partially
offset by an increase in non-operating income. Adjusted net income
advanced 10.9% in the second quarter of 2020 to $469 million, compared to $423 million in the year-ago period and Adjusted
diluted EPS advanced 10% to $0.33,
compared to $0.30 in the year-ago
period.
The Company generated strong free cash flow totaling
$524 million in the second quarter of
2020, enabling KDP to reduce bank debt by approximately
$274 million. The Company's
management leverage ratio declined from 4.9x at the end of the
second quarter of 2019 to 4.0x at the end of the second quarter of
2020, primarily driven by ongoing debt reduction and earnings
growth. Since the close of the merger in July 2018, KDP's management leverage ratio has
declined 2.0x.
1 Adjusted financial metrics used in this
release are non-GAAP. See reconciliations of GAAP results to
Adjusted results in the accompanying tables.
2 In-market performance (retail consumption; market
share) based on Keurig Dr Pepper's custom IRi category
definitions.
3 CSD refers to "Carbonated Soft Drink".
Second Quarter Segment Results
Coffee Systems
Net sales for the second quarter
of 2020 increased 5.4% to $1.04
billion, compared to $0.99
billion in the year-ago period, reflecting higher volume/mix
of 8.3%, partially offset by lower net price realization of 2.5%
and unfavorable foreign currency translation of 0.4%. On a constant
currency basis, net sales increased 5.8% in the quarter.
The volume/mix increase of 8.3% versus year-ago was driven by
strong pod volume growth of 9.5%, with a large increase in the
at-home business, partially offset by a significant decline in the
away-from-home office and hospitality businesses. Brewer volume
increased 11.6%, on 19% growth in the year-ago period, reflecting
successful innovation introduced over the past 12 months and
investments to drive household penetration.
Operating income increased 1.0% to $290
million in the second quarter of 2020, compared to
$287 million in the year-ago period,
reflecting the benefits of the strong net sales growth and
continued productivity and merger synergies, partially offset by
the unfavorable year-over-year impact of items affecting
comparability, including costs related to COVID-19 and an increase
in a litigation reserve. In the second quarter of 2020, the segment
incurred $17 million of costs related
to COVID-19, of which $9 million were
treated as items affecting comparability. Excluding these and other
items affecting comparability, Adjusted operating income in the
quarter increased 9.7% to $363
million, compared to $331
million in the year-ago period, and Adjusted operating
margin advanced 140 basis points to 34.8%. On a constant currency
basis, Adjusted operating income increased 10.0%.
Packaged Beverages
Net sales for the second
quarter of 2020 advanced 6.2% to $1.39
billion, compared to $1.31
billion in the year-ago period, reflecting strong volume/mix
growth of 6.6%, partially offset by lower net price realization of
0.3% and unfavorable foreign currency translation of 0.1%. The net
sales performance reflected strength in CSDs, juice and juice
drinks, apple sauce and mixers, partially offset by lower net sales
of premium water, driven by softness in convenience and gas
channels as consumer mobility was limited. Driving the net sales
performance in the quarter were Canada Dry, including the recently
launched Canada Dry Bold, and Dr Pepper, including the recently
launched Dr Pepper & Cream Soda. Also supporting the net sales
growth were A&W, 7UP, Squirt, A Shoc, Real Lemon, Sunkist,
Motts and Clamato, as well as increased contract manufacturing,
partially offset by the Snapple tea business and Bai.
Operating income increased approximately 12% to $208 million in the second quarter of 2020,
compared to $186 million in the
year-ago period, reflecting the strong net sales growth, lower
discretionary expenses, including marketing, and continued
productivity and merger synergies. These growth drivers were
partially offset by higher manufacturing and logistics costs to
meet the strong consumer demand in the quarter, as well as the
unfavorable year-over-year impact of items affecting comparability,
including costs related to COVID-19. In the second quarter of
2020, the segment incurred $54
million of costs related to COVID-19, all of which were
treated as items affecting comparability. Excluding these and other
items affecting comparability, Adjusted operating income increased
42% to $269 million, compared to
$190 million in the year-ago period,
and Adjusted operating margin advanced 480 basis points to
19.3%.
Beverage Concentrates
Net sales for the second
quarter of 2020 decreased 16.5% to $309
million, compared to $370
million in the year-ago period, reflecting unfavorable
volume/mix of 11.4%, lower net price realization of 4.8% and
unfavorable foreign currency translation of 0.3%. The volume/mix
performance reflected a significant decline to the fountain
foodservice business, which services the restaurant and hospitality
sectors, due to the shelter-in-place consumer behavior during the
quarter.
Total shipment volume versus year-ago declined 10.5% in the
second quarter of 2020, primarily reflecting the impact of COVID-19
on the fountain foodservice business. Dr Pepper and Crush net sales
were the most impacted in the quarter. Bottler case sales decreased
approximately 7% in the second quarter of 2020.
Operating income decreased 9.8% to $220
million in the second quarter of 2020, compared to
$244 million in the year-ago period,
reflecting the decline in net sales and modest COVID-19 costs,
partially offset by lower discretionary expenses, including
marketing. Excluding items affecting comparability, Adjusted
operating income decreased 9.8% to $222
million, compared to $246
million in the year-ago period, resulting in Adjusted
operating margin increasing 530 basis points versus year-ago to
71.8%. On a constant currency basis, Adjusted operating
income declined 9.3%.
Latin America Beverages
Net sales for the
second quarter of 2020 decreased 14.9% to $120 million, compared to net sales of
$141 million in the year-ago period,
largely reflecting the unfavorable impact of foreign currency
translation. On a constant currency basis, net sales increased 1.4%
in the quarter, reflecting net price realization of 6.1%, partially
offset by a 4.7% decline in volume/mix, largely related to COVID-19
impacts in Mexico.
Operating income decreased to $21
million in the second quarter of 2020, compared to
$26 million in the year-ago period,
reflecting the unfavorable impacts of the lower net sales, foreign
currency transaction expense and the unfavorable year-over-year
impact of items affecting comparability. Partially offsetting these
factors were continued productivity and lower marketing
expense. Excluding items affecting comparability, Adjusted
operating income increased 15% to $23
million in the second quarter of 2020, compared to
$20 million in the year-ago period,
resulting in Adjusted operating margin advancing 500 basis points
versus year-ago to 19.2%. On a constant currency basis, Adjusted
operating income increased 30%.
KDP Outlook for 2020
Given the Company's diverse
brand portfolio and extensive distribution network, which combined,
have enabled the Company to successfully navigate the volatility
caused by COVID-19 to date, the Company has confidence in its
ability to deliver continued growth in the second half of the
year.
Specifically, for the full-year 2020, KDP continues to expect
constant currency net sales growth in the range of 3% to 4%. The
Company also continues to expect full-year 2020 Adjusted diluted
EPS growth in the range of 13% to 15%, or $1.38 to $1.40 per
diluted share, given the significant visibility and control the
Company maintains over its cost structure, including strong cost
management, productivity programs and merger synergies. Finally,
the Company continues to expect its management leverage ratio in
the range of 3.5x to 3.8x at year end 2020 and its management
leverage ratio to be below 3.0x within two to three years of the
July 2018 merger closing.
Investor Contacts:
Tyson
Seely
Keurig Dr Pepper
T: 781-418-3352 / tyson.seely@kdrp.com
Steve Alexander
Keurig Dr Pepper
T: 972-673-6769 / steve.alexander@kdrp.com
Media Contact:
Katie
Gilroy
Keurig Dr Pepper
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 in excess of $11 billion and nearly 26,000 employees. KDP
holds leadership positions in 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®, Green Mountain Coffee Roasters®, Canada Dry®, Snapple®,
Bai®, Mott's®, CORE® 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 is committed to sourcing,
producing and distributing its beverages responsibly through its
Drink Well. Do Good. corporate responsibility platform, including
efforts around circular packaging, efficient natural resource use
and supply chain sustainability. 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, phrases or expressions and variations
or negatives of these words, although not all forward-looking
statements contain these identifying words. Forward-looking
statements by their nature address matters that are, to different
degrees, uncertain, such as statements regarding the estimated or
anticipated future results of the combined company following the
combination of Keurig Green Mountain, Inc. ("KGM") and Dr Pepper
Snapple Group, Inc. ("DPSG" and such combination, the
"transaction"), the anticipated benefits of the transaction,
including estimated synergies and cost savings, the long-term
merger targets, and other statements that are not historical facts.
These statements are based on the current expectations of our
management and are not predictions of actual performance.
These forward-looking statements are subject to a number of
risks and uncertainties regarding the company's business and the
transaction and actual results may differ materially. These risks
and uncertainties include, but are not limited to: (i) the impact
the significant additional debt incurred in connection with the
transaction may have on our ability to operate our business, (ii)
risks relating to the integration of the KGM and DPS operations,
products and employees into the combined company and assumption of
certain potential liabilities of KGM and the possibility that the
anticipated synergies and other benefits of the transaction,
including cost savings, will not be realized or will not be
realized within the expected timeframe, (iii) the impact of the
global COVID-19 pandemic, and (iv) risks relating to the businesses
and the industries in which our combined company operates. These
risks and uncertainties, as well as other risks and uncertainties,
are more fully discussed in the Company's filings with the SEC,
including our Annual Report on Form 10-K, and our subsequent
filings with the SEC. While the lists of risk factors presented
here and in our public filings are considered representative, no
such list should be considered to be a complete statement of all
potential risks and uncertainties. Any forward-looking statement
made herein speaks only as of the date of this document. We are
under no obligation to, and expressly disclaim any obligation to,
update or alter any forward-looking statements, whether as a result
of new information, subsequent events or otherwise, except as
required by applicable laws or regulations.
NON-GAAP FINANCIAL MEASURES
This release includes
certain non-GAAP financial measures including Adjusted operating
income, Adjusted net income, Adjusted diluted EPS and Free Cash
Flow, 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 related to the
transaction and integration activities, which 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
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.
KEURIG DR PEPPER
INC.
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
For the Second
Quarter and First Six Months of 2020 and 2019
(Unaudited, in
millions, except per share data)
|
|
|
Second
Quarter
|
|
First Six
Months
|
(in millions,
except per share data)
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Net
sales
|
$
|
2,864
|
|
|
$
|
2,812
|
|
|
$
|
5,477
|
|
|
$
|
5,316
|
|
Cost of
sales
|
1,302
|
|
|
1,186
|
|
|
2,463
|
|
|
2,292
|
|
Gross
profit
|
1,562
|
|
|
1,626
|
|
|
3,014
|
|
|
3,024
|
|
Selling, general and
administrative expenses
|
1,001
|
|
|
1,028
|
|
|
2,029
|
|
|
1,939
|
|
Other operating
(income) expense, net
|
—
|
|
|
11
|
|
|
(42)
|
|
|
—
|
|
Income from
operations
|
561
|
|
|
587
|
|
|
1,027
|
|
|
1,085
|
|
Interest
expense
|
157
|
|
|
170
|
|
|
310
|
|
|
339
|
|
Loss on early
extinguishment of debt
|
2
|
|
|
—
|
|
|
4
|
|
|
9
|
|
Impairment on
investment and note receivable
|
—
|
|
|
—
|
|
|
86
|
|
|
—
|
|
Other (income)
expense, net
|
(4)
|
|
|
1
|
|
|
16
|
|
|
6
|
|
Income before
provision for income taxes
|
406
|
|
|
416
|
|
|
611
|
|
|
731
|
|
Provision for income
taxes
|
108
|
|
|
102
|
|
|
157
|
|
|
187
|
|
Net
income
|
$
|
298
|
|
|
$
|
314
|
|
|
$
|
454
|
|
|
$
|
544
|
|
|
|
|
|
|
|
|
|
Earnings per
common share:
|
|
|
|
|
|
|
|
Basic
|
$
|
0.21
|
|
|
$
|
0.22
|
|
|
$
|
0.32
|
|
|
$
|
0.39
|
|
Diluted
|
0.21
|
|
|
0.22
|
|
|
0.32
|
|
|
0.38
|
|
Weighted average
common shares outstanding:
|
|
|
|
|
|
|
|
Basic
|
1,407.2
|
|
|
1,406.7
|
|
|
1,407.1
|
|
|
1,406.5
|
|
Diluted
|
1,421.5
|
|
|
1,419.2
|
|
|
1,420.8
|
|
|
1,418.5
|
|
KEURIG DR PEPPER
INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
As of June 30,
2020 and December 31, 2019
(Unaudited, in
millions, except shares and per share data)
|
|
|
June
30,
|
|
December
31,
|
(in millions,
except share and per share data)
|
2020
|
|
2019
|
Assets
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
149
|
|
|
$
|
75
|
|
Restricted cash and
restricted cash equivalents
|
28
|
|
|
26
|
|
Trade accounts
receivable, net
|
1,010
|
|
|
1,115
|
|
Inventories
|
747
|
|
|
654
|
|
Prepaid expenses and
other current assets
|
306
|
|
|
403
|
|
Total current
assets
|
2,240
|
|
|
2,273
|
|
Property, plant and
equipment, net
|
2,071
|
|
|
2,028
|
|
Investments in
unconsolidated affiliates
|
102
|
|
|
151
|
|
Goodwill
|
19,968
|
|
|
20,172
|
|
Other intangible
assets, net
|
23,785
|
|
|
24,117
|
|
Other non-current
assets
|
831
|
|
|
748
|
|
Deferred tax
assets
|
29
|
|
|
29
|
|
Total
assets
|
$
|
49,026
|
|
|
$
|
49,518
|
|
Liabilities and
Stockholders' Equity
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$
|
3,377
|
|
|
$
|
3,176
|
|
Accrued
expenses
|
940
|
|
|
939
|
|
Structured
payables
|
182
|
|
|
321
|
|
Short-term borrowings
and current portion of long-term obligations
|
2,256
|
|
|
1,593
|
|
Other current
liabilities
|
543
|
|
|
445
|
|
Total current
liabilities
|
7,298
|
|
|
6,474
|
|
Long-term
obligations
|
11,849
|
|
|
12,827
|
|
Deferred tax
liabilities
|
5,922
|
|
|
6,030
|
|
Other non-current
liabilities
|
1,034
|
|
|
930
|
|
Total
liabilities
|
26,103
|
|
|
26,261
|
|
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, 1,407,193,674 and
1,406,852,305 shares issued and outstanding as of June 30, 2020 and
December 31, 2019, respectively
|
14
|
|
|
14
|
|
Additional paid-in
capital
|
21,624
|
|
|
21,557
|
|
Retained
earnings
|
1,613
|
|
|
1,582
|
|
Accumulated other
comprehensive (income) loss
|
(328)
|
|
|
104
|
|
Total stockholders'
equity
|
22,923
|
|
|
23,257
|
|
Total liabilities
and stockholders' equity
|
$
|
49,026
|
|
|
$
|
49,518
|
|
KEURIG DR PEPPER
INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
For
The Second Quarter of 2020 and
2019
(Unaudited, in
millions)
|
|
|
First Six
Months
|
(in
millions)
|
2020
|
|
2019
|
Operating
activities:
|
|
|
|
Net income
|
$
|
454
|
|
|
$
|
544
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
Depreciation
expense
|
183
|
|
|
172
|
|
Amortization of
intangibles
|
66
|
|
|
63
|
|
Other amortization
expense
|
76
|
|
|
90
|
|
Provision for sales
returns
|
20
|
|
|
16
|
|
Deferred income
taxes
|
(29)
|
|
|
(5)
|
|
Employee stock based
compensation expense
|
42
|
|
|
34
|
|
Loss on early
extinguishment of debt
|
4
|
|
|
9
|
|
Gain on disposal of
property, plant and equipment
|
(40)
|
|
|
(8)
|
|
Unrealized loss
(gain) on foreign currency
|
12
|
|
|
(25)
|
|
Unrealized loss on
derivatives
|
76
|
|
|
43
|
|
Equity in losses of
unconsolidated affiliates
|
18
|
|
|
27
|
|
Impairment on
investment and note receivable of unconsolidated
affiliate
|
86
|
|
|
—
|
|
Other, net
|
36
|
|
|
8
|
|
Changes in assets and
liabilities, net of effects of acquisition:
|
|
|
|
Trade accounts
receivable
|
58
|
|
|
68
|
|
Inventories
|
(101)
|
|
|
(56)
|
|
Income taxes
receivable, prepaid and payables, net
|
69
|
|
|
64
|
|
Other current and non
current assets
|
(234)
|
|
|
(149)
|
|
Accounts payable and
accrued expenses
|
260
|
|
|
339
|
|
Other current and non
current liabilities
|
6
|
|
|
(31)
|
|
Net change in
operating assets and liabilities
|
58
|
|
|
235
|
|
Net cash provided by
operating activities
|
1,062
|
|
|
1,203
|
|
Investing
activities:
|
|
|
|
Acquisitions of
businesses
|
—
|
|
|
(8)
|
|
Issuance of related
party note receivable
|
(6)
|
|
|
(14)
|
|
Investments in
unconsolidated affiliates
|
—
|
|
|
(11)
|
|
Purchases of
property, plant and equipment
|
(276)
|
|
|
(118)
|
|
Proceeds from sales
of property, plant and equipment
|
202
|
|
|
19
|
|
Purchases of
intangibles
|
(15)
|
|
|
(4)
|
|
Other, net
|
3
|
|
|
22
|
|
Net cash used in
investing activities
|
(92)
|
|
|
(114)
|
|
Financing
activities:
|
|
|
|
Proceeds from
controlling shareholder stock transactions
|
22
|
|
|
—
|
|
Proceeds from
unsecured credit facility
|
1,850
|
|
|
—
|
|
Proceeds from senior
unsecured notes
|
1,500
|
|
|
—
|
|
Proceeds from term
loan
|
—
|
|
|
2,000
|
|
Net (payment)
issuance of commercial paper
|
(836)
|
|
|
381
|
|
Proceeds from
structured payables
|
86
|
|
|
78
|
|
Payments on
structured payables
|
(227)
|
|
|
(9)
|
|
Payments on senior
unsecured notes
|
(250)
|
|
|
(250)
|
|
Payment on unsecured
credit facility
|
(1,850)
|
|
|
—
|
|
Payments on term
loan
|
(730)
|
|
|
(2,848)
|
|
Payments on finance
leases
|
(24)
|
|
|
(19)
|
|
Cash dividends
paid
|
(423)
|
|
|
(423)
|
|
Other, net
|
(19)
|
|
|
10
|
|
Net cash used in
financing activities
|
(901)
|
|
|
(1,080)
|
|
Cash, cash
equivalents, restricted cash and restricted cash equivalents — net
change from:
|
|
|
|
Operating, investing
and financing activities
|
69
|
|
|
9
|
|
Effect of exchange
rate changes on cash, cash equivalents, restricted cash and
restricted cash
equivalents
|
(3)
|
|
|
12
|
|
Cash, cash
equivalents, restricted cash and restricted cash equivalents at
beginning of period
|
111
|
|
|
139
|
|
Cash, cash
equivalents, restricted cash and restricted cash equivalents at end
of period
|
$
|
177
|
|
|
$
|
160
|
|
KEURIG DR PEPPER
INC.
RECONCILIATION OF
SEGMENT INFORMATION
(Unaudited)
|
|
|
Second
Quarter
|
|
First Six
Months
|
(in
millions)
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Net
Sales
|
|
|
|
|
|
|
|
Coffee
Systems
|
$
|
1,043
|
|
|
$
|
990
|
|
|
$
|
2,016
|
|
|
$
|
1,958
|
|
Packaged
Beverages
|
1,392
|
|
|
1,311
|
|
|
2,609
|
|
|
2,427
|
|
Beverage
Concentrates
|
309
|
|
|
370
|
|
|
615
|
|
|
674
|
|
Latin America
Beverages
|
120
|
|
|
141
|
|
|
237
|
|
|
257
|
|
Total net
sales
|
$
|
2,864
|
|
|
$
|
2,812
|
|
|
$
|
5,477
|
|
|
$
|
5,316
|
|
|
|
|
|
|
|
|
|
Income from
Operations
|
|
|
|
|
|
|
|
Coffee
Systems
|
$
|
290
|
|
|
$
|
287
|
|
|
$
|
562
|
|
|
$
|
580
|
|
Packaged
Beverages
|
208
|
|
|
186
|
|
|
397
|
|
|
335
|
|
Beverage
Concentrates
|
220
|
|
|
244
|
|
|
417
|
|
|
445
|
|
Latin America
Beverages
|
21
|
|
|
26
|
|
|
48
|
|
|
37
|
|
Unallocated corporate
costs
|
(178)
|
|
|
(156)
|
|
|
(397)
|
|
|
(312)
|
|
Total income from
operations
|
$
|
561
|
|
|
$
|
587
|
|
|
$
|
1,027
|
|
|
$
|
1,085
|
|
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.
For the second quarter and first six months of 2020 and 2019, we
define our Adjusted non-GAAP financial measures as certain
financial statement captions and metrics adjusted for certain items
affecting comparability. The items affecting comparability are
defined below.
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
and do not have an offsetting risk reflected within the financial
results; (ii) the amortization associated with definite-lived
intangible assets; (iii) the amortization of the deferred financing
costs associated with the DPS Merger and Keurig Acquisition; (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 attributable to the matching awards made to
employees who made an initial investment in the Keurig Green
Mountain, Inc. Executive Ownership Plan, the Keurig Dr Pepper
Omnibus Incentive Plan of 2009 or the Keurig Dr Pepper Inc. Omnibus
Incentive Plan of 2019; and (vi) other certain items that are
excluded for comparison purposes to prior year periods.
For second quarter and first six months of 2020, the other
certain items excluded for comparison purposes include (i)
restructuring and integration expenses related to significant
business combinations; (ii) productivity expenses; (iii)
transaction costs for significant business combinations (completed
or abandoned) excluding the DPS Merger; (iv) costs related to
significant nonroutine legal matters; (v) the loss on early
extinguishment of debt related to the redemption of debt; (vi)
incremental temporary costs to our operations related to risks
associated with the COVID-19 pandemic and (vii) impairment
recognized on equity method investment with Bedford.
Incremental costs to our operations related to risks associated
with the COVID-19 pandemic include incremental expenses 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. We believe
removing these costs reflects how management views our business
results on a consistent basis.
For second quarter and first six months of 2019, the other
certain items excluded for comparison purposes include (i)
restructuring and integration expenses related to significant
business combinations; (ii) productivity expenses; (iii)
transaction costs for significant business combinations (completed
or abandoned) excluding the DPS Merger; (iv) costs related to
significant nonroutine legal matters; (v) the impact of the step-up
of acquired inventory not associated with the DPS Merger (vi) the
loss on early extinguishment of debt related to the redemption of
debt and (vii) the loss related to the February 2019 organized malware attack on our
business operation networks in the Coffee Systems segment.
For the second quarter and first six months of 2020 and 2019,
the supplemental financial data set forth below includes
reconciliations of Adjusted income from operations, Adjusted net
income and Adjusted diluted EPS to the applicable financial measure
presented in the unaudited condensed consolidated financial
statement for the same period.
Reconciliations for these items are provided in the tables
below.
KEURIG DR PEPPER
INC.
RECONCILIATION OF
CERTAIN REPORTED ITEMS TO CERTAIN NON-GAAP ADJUSTED
ITEMS
For the Second
Quarter of 2020
(Unaudited, in
millions, except per share data)
|
|
|
Cost of
sales
|
|
Gross
profit
|
|
Gross
margin
|
|
Selling,
general
and administrative
expenses
|
|
Income from
operations
|
|
Operating
margin
|
Reported
|
$
|
1,302
|
|
|
$
|
1,562
|
|
|
54.5
|
%
|
|
$
|
1,001
|
|
|
$
|
561
|
|
|
19.6
|
%
|
Items Affecting
Comparability:
|
|
|
|
|
|
|
|
|
|
|
|
Mark to
market
|
(29)
|
|
|
29
|
|
|
|
|
16
|
|
|
13
|
|
|
|
Amortization of
intangibles
|
—
|
|
|
—
|
|
|
|
|
(33)
|
|
|
33
|
|
|
|
Stock
compensation
|
—
|
|
|
—
|
|
|
|
|
(8)
|
|
|
8
|
|
|
|
Restructuring and
integration costs
|
—
|
|
|
—
|
|
|
|
|
(52)
|
|
|
52
|
|
|
|
Productivity
|
(2)
|
|
|
2
|
|
|
|
|
(17)
|
|
|
19
|
|
|
|
Nonroutine legal
matters
|
—
|
|
|
—
|
|
|
|
|
(26)
|
|
|
26
|
|
|
|
COVID-19
|
(18)
|
|
|
18
|
|
|
|
|
(45)
|
|
|
63
|
|
|
|
Adjusted
GAAP
|
$
|
1,253
|
|
|
$
|
1,611
|
|
|
56.3
|
%
|
|
$
|
836
|
|
|
$
|
775
|
|
|
27.1
|
%
|
|
|
Interest
expense
|
|
Loss on early
extinguishment
of debt
|
|
Income before
provision for
income taxes
|
|
Provision
for income
taxes
|
|
Effective
tax rate
|
|
Net
income
|
|
Weighted
Average
Diluted shares
|
|
Diluted
earnings per
share
|
Reported
|
$
|
157
|
|
|
$
|
2
|
|
|
$
|
406
|
|
|
$
|
108
|
|
|
26.6
|
%
|
|
$
|
298
|
|
|
1,421.5
|
|
$
|
0.21
|
|
Items Affecting
Comparability:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark to
market
|
(3)
|
|
|
—
|
|
|
16
|
|
|
5
|
|
|
|
|
11
|
|
|
|
|
0.01
|
|
Amortization of
intangibles
|
—
|
|
|
—
|
|
|
33
|
|
|
9
|
|
|
|
|
24
|
|
|
|
|
0.02
|
|
Amortization of
deferred financing costs
|
(3)
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
|
|
3
|
|
|
|
|
—
|
|
Amortization of fair
value debt adjustment
|
(6)
|
|
|
—
|
|
|
6
|
|
|
1
|
|
|
|
|
5
|
|
|
|
|
—
|
|
Stock
compensation
|
—
|
|
|
—
|
|
|
8
|
|
|
2
|
|
|
|
|
6
|
|
|
|
|
—
|
|
Restructuring and
integration costs
|
—
|
|
|
—
|
|
|
52
|
|
|
12
|
|
|
|
|
40
|
|
|
|
|
0.03
|
|
Productivity
|
—
|
|
|
—
|
|
|
19
|
|
|
4
|
|
|
|
|
15
|
|
|
|
|
0.01
|
|
Loss on early
extinguishment of debt
|
—
|
|
|
(2)
|
|
|
2
|
|
|
1
|
|
|
|
|
1
|
|
|
|
|
—
|
|
Nonroutine legal
matters
|
—
|
|
|
—
|
|
|
26
|
|
|
7
|
|
|
|
|
19
|
|
|
|
|
0.01
|
|
COVID-19
|
—
|
|
|
—
|
|
|
63
|
|
|
16
|
|
|
|
|
47
|
|
|
|
|
0.03
|
|
Adjusted
GAAP
|
$
|
145
|
|
|
$
|
—
|
|
|
$
|
634
|
|
|
$
|
165
|
|
|
26.0
|
%
|
|
$
|
469
|
|
|
1,421.5
|
|
$
|
0.33
|
|
|
Diluted
earnings per common share may not foot due to
rounding.
|
KEURIG DR PEPPER
INC.
RECONCILIATION OF
CERTAIN REPORTED ITEMS TO CERTAIN NON-GAAP ADJUSTED
ITEMS
For the Second
Quarter of 2019
(Unaudited, in
millions, except per share data)
|
|
|
Cost of
sales
|
|
Gross
profit
|
|
Gross
margin
|
|
Selling, general
and
administrative expenses
|
|
Other
operating
(income)
expense, net
|
|
Income
from
operations
|
|
Operating
margin
|
Reported
|
$
|
1,186
|
|
|
$
|
1,626
|
|
|
57.8
|
%
|
|
$
|
1,028
|
|
|
$
|
11
|
|
|
$
|
587
|
|
|
20.9
|
%
|
Items Affecting
Comparability:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark to
market
|
11
|
|
|
(11)
|
|
|
|
|
(3)
|
|
|
—
|
|
|
(8)
|
|
|
|
Amortization of
intangibles
|
—
|
|
|
—
|
|
|
|
|
(32)
|
|
|
—
|
|
|
32
|
|
|
|
Stock
compensation
|
—
|
|
|
—
|
|
|
|
|
(8)
|
|
|
—
|
|
|
8
|
|
|
|
Restructuring and
integration costs
|
(1)
|
|
|
1
|
|
|
|
|
(37)
|
|
|
—
|
|
|
38
|
|
|
|
Productivity
|
(1)
|
|
|
1
|
|
|
|
|
(23)
|
|
|
(9)
|
|
|
33
|
|
|
|
Transaction
costs
|
—
|
|
|
—
|
|
|
|
|
(1)
|
|
|
—
|
|
|
1
|
|
|
|
Nonroutine legal
matters
|
—
|
|
|
—
|
|
|
|
|
(8)
|
|
|
—
|
|
|
8
|
|
|
|
Malware
Incident
|
—
|
|
|
—
|
|
|
|
|
(3)
|
|
|
—
|
|
|
3
|
|
|
|
Adjusted
GAAP
|
$
|
1,195
|
|
|
$
|
1,617
|
|
|
57.5
|
%
|
|
$
|
913
|
|
|
$
|
2
|
|
|
$
|
702
|
|
|
25.0
|
%
|
|
|
Interest
expense
|
|
Other
(income)
expense, net
|
|
Income before
provision for
income taxes
|
|
Provision
for income
taxes
|
|
Effective
tax rate
|
|
Net
income
|
|
Weighted
Average
Diluted shares
|
|
Diluted
earnings
per share
|
Reported
|
$
|
170
|
|
|
$
|
1
|
|
|
$
|
416
|
|
|
$
|
102
|
|
|
24.5
|
%
|
|
$
|
314
|
|
|
1,419.2
|
|
$
|
0.22
|
|
Items Affecting
Comparability:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark to
market
|
(16)
|
|
|
(2)
|
|
|
10
|
|
|
4
|
|
|
|
|
6
|
|
|
|
|
—
|
|
Amortization of
intangibles
|
—
|
|
|
—
|
|
|
32
|
|
|
9
|
|
|
|
|
23
|
|
|
|
|
0.02
|
|
Amortization of
deferred financing costs
|
(3)
|
|
|
—
|
|
|
3
|
|
|
1
|
|
|
|
|
2
|
|
|
|
|
—
|
|
Amortization of fair
value debt adjustment
|
(6)
|
|
|
—
|
|
|
6
|
|
|
1
|
|
|
|
|
5
|
|
|
|
|
—
|
|
Stock
compensation
|
—
|
|
|
—
|
|
|
8
|
|
|
2
|
|
|
|
|
6
|
|
|
|
|
—
|
|
Restructuring and
integration costs
|
—
|
|
|
—
|
|
|
38
|
|
|
11
|
|
|
|
|
27
|
|
|
|
|
0.02
|
|
Productivity
|
—
|
|
|
—
|
|
|
33
|
|
|
7
|
|
|
|
|
26
|
|
|
|
|
0.02
|
|
Transaction
costs
|
(7)
|
|
|
—
|
|
|
8
|
|
|
2
|
|
|
|
|
6
|
|
|
|
|
—
|
|
Nonroutine legal
matters
|
—
|
|
|
—
|
|
|
8
|
|
|
2
|
|
|
|
|
6
|
|
|
|
|
—
|
|
Malware
Incident
|
—
|
|
|
—
|
|
|
3
|
|
|
1
|
|
|
|
|
2
|
|
|
|
|
—
|
|
Adjusted
GAAP
|
$
|
138
|
|
|
$
|
(1)
|
|
|
$
|
565
|
|
|
$
|
142
|
|
|
25.1
|
%
|
|
$
|
423
|
|
|
1,419.2
|
|
$
|
0.30
|
|
|
Numbers may not
foot due to rounding.
|
KEURIG DR PEPPER
INC.
RECONCILIATION OF
CERTAIN REPORTED ITEMS TO CERTAIN NON-GAAP ADJUSTED
ITEMS
For the First Six
Months Ended June 30, 2020
(Unaudited, in
millions, except per share data)
|
|
|
Cost of
sales
|
|
Gross
profit
|
|
Gross
margin
|
|
Selling,
general
and
administrative
expenses
|
|
Income from
operations
|
|
Operating
margin
|
Reported
|
$
|
2,463
|
|
|
$
|
3,014
|
|
|
55.0
|
%
|
|
$
|
2,029
|
|
|
$
|
1,027
|
|
|
18.8
|
%
|
Items Affecting
Comparability:
|
|
|
|
|
|
|
|
|
|
|
|
Mark to
market
|
(44)
|
|
|
44
|
|
|
|
|
(27)
|
|
|
71
|
|
|
|
Amortization of
intangibles
|
—
|
|
|
—
|
|
|
|
|
(66)
|
|
|
66
|
|
|
|
Stock
compensation
|
—
|
|
|
—
|
|
|
|
|
(15)
|
|
|
15
|
|
|
|
Restructuring and
integration costs
|
—
|
|
|
—
|
|
|
|
|
(104)
|
|
|
104
|
|
|
|
Productivity
|
(18)
|
|
|
18
|
|
|
|
|
(55)
|
|
|
73
|
|
|
|
Nonroutine legal
matters
|
—
|
|
|
—
|
|
|
|
|
(35)
|
|
|
35
|
|
|
|
COVID-19
|
(19)
|
|
|
19
|
|
|
|
|
(49)
|
|
|
68
|
|
|
|
Adjusted
GAAP
|
$
|
2,382
|
|
|
$
|
3,095
|
|
|
56.5
|
%
|
|
$
|
1,678
|
|
|
$
|
1,459
|
|
|
26.6
|
%
|
|
|
Interest
expense
|
|
Loss on early
extinguishment
of debt
|
|
Impairment
on investment
and note
receivable
|
|
Income
before
provision for
income taxes
|
|
Provision for
income
taxes
|
|
Effective
tax rate
|
|
Net
income
|
|
Weighted
Average
Diluted
shares
|
|
Diluted
earnings
per share
|
Reported
|
$
|
310
|
|
|
$
|
4
|
|
|
$
|
86
|
|
|
$
|
611
|
|
|
$
|
157
|
|
|
25.7
|
%
|
|
$
|
454
|
|
|
1,420.8
|
|
$
|
0.32
|
|
Items Affecting
Comparability:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark to
market
|
(27)
|
|
|
—
|
|
|
—
|
|
|
98
|
|
|
26
|
|
|
|
|
72
|
|
|
|
|
0.05
|
|
Amortization of
intangibles
|
—
|
|
|
—
|
|
|
—
|
|
|
66
|
|
|
18
|
|
|
|
|
48
|
|
|
|
|
0.03
|
|
Amortization of
deferred financing costs
|
(6)
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|
1
|
|
|
|
|
5
|
|
|
|
|
—
|
|
Amortization of fair
value debt adjustment
|
(12)
|
|
|
—
|
|
|
—
|
|
|
12
|
|
|
3
|
|
|
|
|
9
|
|
|
|
|
0.01
|
|
Stock
compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
15
|
|
|
3
|
|
|
|
|
12
|
|
|
|
|
0.01
|
|
Restructuring and
integration costs
|
—
|
|
|
—
|
|
|
—
|
|
|
104
|
|
|
26
|
|
|
|
|
78
|
|
|
|
|
0.05
|
|
Productivity
|
—
|
|
|
—
|
|
|
—
|
|
|
73
|
|
|
19
|
|
|
|
|
54
|
|
|
|
|
0.04
|
|
Loss on early
extinguishment of debt
|
—
|
|
|
(4)
|
|
|
—
|
|
|
4
|
|
|
1
|
|
|
|
|
3
|
|
|
|
|
—
|
|
Impairment on
investment
|
—
|
|
|
—
|
|
|
(86)
|
|
|
86
|
|
|
21
|
|
|
|
|
65
|
|
|
|
|
0.05
|
|
Nonroutine legal
matters
|
—
|
|
|
—
|
|
|
—
|
|
|
35
|
|
|
9
|
|
|
|
|
26
|
|
|
|
|
0.02
|
|
COVID-19
|
—
|
|
|
—
|
|
|
—
|
|
|
68
|
|
|
17
|
|
|
|
|
51
|
|
|
|
|
0.04
|
|
Adjusted
GAAP
|
$
|
265
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,178
|
|
|
$
|
301
|
|
|
25.6
|
%
|
|
$
|
877
|
|
|
1,420.8
|
|
$
|
0.62
|
|
|
Diluted
earnings per common share may not foot due to
rounding.
|
KEURIG DR PEPPER
INC.
RECONCILIATION OF
CERTAIN REPORTED ITEMS TO CERTAIN NON-GAAP ADJUSTED
ITEMS
For the First Six
Months Ended June 30, 2019
(Unaudited, in
millions, except per share data)
|
|
|
Cost of
sales
|
|
Gross
profit
|
|
Gross
margin
|
|
Selling, general
and
administrative
expenses
|
|
Income from
operations
|
|
Operating
margin
|
Reported
|
$
|
2,292
|
|
|
$
|
3,024
|
|
|
56.9
|
%
|
|
$
|
1,939
|
|
|
$
|
1,085
|
|
|
20.4
|
%
|
Items Affecting
Comparability:
|
|
|
|
|
|
|
|
|
|
|
|
Mark to
market
|
(1)
|
|
|
1
|
|
|
|
|
9
|
|
|
(8)
|
|
|
|
Amortization of
intangibles
|
—
|
|
|
—
|
|
|
|
|
(63)
|
|
|
63
|
|
|
|
Stock
compensation
|
—
|
|
|
—
|
|
|
|
|
(15)
|
|
|
15
|
|
|
|
Restructuring and
integration costs
|
(2)
|
|
|
2
|
|
|
|
|
(97)
|
|
|
99
|
|
|
|
Productivity
|
(4)
|
|
|
4
|
|
|
|
|
(29)
|
|
|
42
|
|
|
|
Transaction
costs
|
—
|
|
|
—
|
|
|
|
|
(1)
|
|
|
1
|
|
|
|
Nonroutine legal
matters
|
—
|
|
|
—
|
|
|
|
|
(15)
|
|
|
15
|
|
|
|
Inventory
step-up
|
(3)
|
|
|
3
|
|
|
|
|
—
|
|
|
3
|
|
|
|
Malware
incident
|
(2)
|
|
|
2
|
|
|
|
|
(6)
|
|
|
8
|
|
|
|
Adjusted
GAAP
|
$
|
2,280
|
|
|
$
|
3,036
|
|
|
57.1
|
%
|
|
$
|
1,722
|
|
|
$
|
1,323
|
|
|
24.9
|
%
|
|
|
Interest
expense
|
|
Loss on early
extinguishment
of debt
|
|
Income before
provision for
income taxes
|
|
Provision
for
income
taxes
|
|
Effective
tax rate
|
|
Net
income
|
|
Weighted
Average
Diluted
shares
|
|
Diluted
earnings
per share
|
Reported
|
$
|
339
|
|
|
$
|
9
|
|
|
$
|
731
|
|
|
$
|
187
|
|
|
25.6
|
%
|
|
$
|
544
|
|
|
1,418.5
|
|
$
|
0.38
|
|
Items Affecting
Comparability:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark to
market
|
(45)
|
|
|
—
|
|
|
37
|
|
|
11
|
|
|
|
|
26
|
|
|
|
|
0.02
|
|
Amortization of
intangibles
|
—
|
|
|
—
|
|
|
63
|
|
|
17
|
|
|
|
|
46
|
|
|
|
|
0.03
|
|
Amortization of
deferred financing costs
|
(7)
|
|
|
—
|
|
|
7
|
|
|
2
|
|
|
|
|
5
|
|
|
|
|
—
|
|
Amortization of fair
value debt adjustment
|
(13)
|
|
|
—
|
|
|
13
|
|
|
2
|
|
|
|
|
11
|
|
|
|
|
0.01
|
|
Stock
compensation
|
—
|
|
|
—
|
|
|
15
|
|
|
4
|
|
|
|
|
11
|
|
|
|
|
0.01
|
|
Restructuring and
integration costs
|
—
|
|
|
—
|
|
|
99
|
|
|
26
|
|
|
|
|
73
|
|
|
|
|
0.05
|
|
Productivity
|
—
|
|
|
—
|
|
|
42
|
|
|
9
|
|
|
|
|
33
|
|
|
|
|
0.02
|
|
Transaction
costs
|
(12)
|
|
|
—
|
|
|
13
|
|
|
3
|
|
|
|
|
10
|
|
|
|
|
0.01
|
|
Loss on early
extinguishment of debt
|
—
|
|
|
(9)
|
|
|
9
|
|
|
2
|
|
|
|
|
7
|
|
|
|
|
—
|
|
Nonroutine legal
matters
|
—
|
|
|
—
|
|
|
15
|
|
|
4
|
|
|
|
|
11
|
|
|
|
|
0.01
|
|
Inventory
step-up
|
—
|
|
|
—
|
|
|
3
|
|
|
1
|
|
|
|
|
2
|
|
|
|
|
—
|
|
Malware
incident
|
—
|
|
|
—
|
|
|
8
|
|
|
2
|
|
|
|
|
6
|
|
|
|
|
—
|
|
Adjusted
GAAP
|
$
|
262
|
|
|
$
|
—
|
|
|
$
|
1,055
|
|
|
$
|
270
|
|
|
25.6
|
%
|
|
$
|
785
|
|
|
1,418.5
|
|
$
|
0.55
|
|
|
Diluted
earnings per common share may not foot due to
rounding.
|
KEURIG DR PEPPER
INC.
RECONCILIATION OF
SEGMENT ITEMS TO CERTAIN NON-GAAP ADJUSTED SEGMENT
ITEMS
(Unaudited)
|
|
(in
millions)
|
Reported
|
|
Items
Affecting
Comparability
|
|
Adjusted
GAAP
|
For the second
quarter of 2020:
|
|
|
|
|
|
Income from
Operations
|
|
|
|
|
|
Coffee
Systems
|
$
|
290
|
|
|
$
|
73
|
|
|
$
|
363
|
|
Packaged
Beverages
|
208
|
|
|
61
|
|
|
269
|
|
Beverage
Concentrates
|
220
|
|
|
2
|
|
|
222
|
|
Latin America
Beverages
|
21
|
|
|
2
|
|
|
23
|
|
Unallocated corporate
costs
|
(178)
|
|
|
76
|
|
|
(102)
|
|
Total income from
operations
|
$
|
561
|
|
|
$
|
214
|
|
|
$
|
775
|
|
|
|
|
|
|
|
For the second
quarter of 2019:
|
|
|
|
|
|
Income from
Operations
|
|
|
|
|
|
Coffee
Systems
|
$
|
287
|
|
|
$
|
44
|
|
|
$
|
331
|
|
Packaged
Beverages
|
186
|
|
|
4
|
|
|
190
|
|
Beverage
Concentrates
|
244
|
|
|
2
|
|
|
246
|
|
Latin America
Beverages
|
26
|
|
|
(6)
|
|
|
20
|
|
Unallocated corporate
costs
|
(156)
|
|
|
71
|
|
|
(85)
|
|
Total income from
operations
|
$
|
587
|
|
|
$
|
115
|
|
|
$
|
702
|
|
|
Numbers may not
foot due to rounding.
|
KEURIG DR PEPPER
INC.
RECONCILIATION OF
SEGMENT ITEMS TO CERTAIN NON-GAAP ADJUSTED SEGMENT
ITEMS
(Unaudited)
|
|
(in
millions)
|
Reported
|
|
Items
Affecting
Comparability
|
|
Adjusted
GAAP
|
For the first six
months of 2020:
|
|
|
|
|
|
Income from
Operations
|
|
|
|
|
|
Coffee
Systems
|
$
|
562
|
|
|
$
|
148
|
|
|
$
|
710
|
|
Packaged
Beverages
|
397
|
|
|
75
|
|
|
472
|
|
Beverage
Concentrates
|
417
|
|
|
2
|
|
|
419
|
|
Latin America
Beverages
|
48
|
|
|
2
|
|
|
50
|
|
Unallocated corporate
costs
|
(397)
|
|
|
205
|
|
|
(192)
|
|
Total income from
operations
|
$
|
1,027
|
|
|
$
|
432
|
|
|
$
|
1,459
|
|
|
|
|
|
|
|
For the first six
months of 2019:
|
|
|
|
|
|
Income from
Operations
|
|
|
|
|
|
Coffee
Systems
|
$
|
580
|
|
|
$
|
86
|
|
|
$
|
666
|
|
Packaged
Beverages
|
335
|
|
|
15
|
|
|
350
|
|
Beverage
Concentrates
|
445
|
|
|
2
|
|
|
447
|
|
Latin America
Beverages
|
37
|
|
|
(5)
|
|
|
32
|
|
Unallocated corporate
costs
|
(312)
|
|
|
140
|
|
|
(172)
|
|
Total income from
operations
|
$
|
1,085
|
|
|
$
|
238
|
|
|
$
|
1,323
|
|
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
|
$
|
1,164
|
|
Interest
expense
|
625
|
|
Provision for income
taxes
|
410
|
|
Loss on early
extinguishment of debt
|
6
|
|
Impairment on
investment
|
86
|
|
Other (income)
expense, net
|
29
|
|
Depreciation
expense
|
369
|
|
Other
amortization
|
160
|
|
Amortization of
intangibles
|
129
|
|
EBITDA
|
$
|
2,978
|
|
Items affecting
comparability:
|
|
Restructuring and
integration expenses
|
$
|
240
|
|
Transaction
costs
|
8
|
|
Productivity
|
114
|
|
Nonroutine legal
matters
|
68
|
|
Stock
compensation
|
24
|
|
Mark to
market
|
34
|
|
COVID-19
|
68
|
|
Adjusted
EBITDA
|
$
|
3,534
|
|
|
|
|
June
30,
|
|
2020
|
Principal amounts
of:
|
|
Commercial paper
notes
|
$
|
410
|
|
Term loan
|
650
|
|
Senior unsecured
notes
|
13,225
|
|
Total principal
amounts
|
14,285
|
|
Less: Cash and cash
equivalents
|
149
|
|
Total principal
amounts less cash and cash equivalents
|
$
|
14,136
|
|
|
|
June 30, 2020
Management Leverage Ratio
|
4.0
|
|
KEURIG DR PEPPER
INC.
RECONCILIATION OF
ADJUSTED EBITDA - LAST TWELVE MONTHS
(Unaudited)
|
|
(in
millions)
|
THIRD
QUARTER
OF 2019
|
|
FOURTH
QUARTER
OF 2019
|
|
FIRST SIX
MONTHS
OF 2020
|
|
LAST
TWELVE
MONTHS
|
Net
income
|
$
|
304
|
|
|
$
|
406
|
|
|
$
|
454
|
|
|
$
|
1,164
|
|
Interest
expense
|
158
|
|
|
157
|
|
|
310
|
|
|
625
|
|
Provision for income
taxes
|
109
|
|
|
144
|
|
|
157
|
|
|
410
|
|
Loss on early
extinguishment of debt
|
—
|
|
|
2
|
|
|
4
|
|
|
6
|
|
Impairment on
investment
|
—
|
|
|
—
|
|
|
86
|
|
|
86
|
|
Other (income)
expense, net
|
9
|
|
|
4
|
|
|
16
|
|
|
29
|
|
Depreciation
expense
|
99
|
|
|
87
|
|
|
183
|
|
|
369
|
|
Other
amortization(1)
|
46
|
|
|
38
|
|
|
76
|
|
|
160
|
|
Amortization of
intangibles
|
31
|
|
|
32
|
|
|
66
|
|
|
129
|
|
EBITDA
|
$
|
756
|
|
|
$
|
870
|
|
|
$
|
1,352
|
|
|
$
|
2,978
|
|
Items affecting
comparability:
|
|
|
|
|
|
|
|
Restructuring and
integration expenses
|
$
|
74
|
|
|
$
|
62
|
|
|
$
|
104
|
|
|
$
|
240
|
|
Transaction
costs
|
7
|
|
|
1
|
|
|
—
|
|
|
8
|
|
Productivity
|
34
|
|
|
20
|
|
|
60
|
|
|
114
|
|
Nonroutine legal
matters
|
12
|
|
|
21
|
|
|
35
|
|
|
68
|
|
Stock
compensation
|
3
|
|
|
6
|
|
|
15
|
|
|
24
|
|
COVID-19
|
—
|
|
|
—
|
|
|
68
|
|
|
68
|
|
Mark to
market
|
9
|
|
|
(46)
|
|
|
71
|
|
|
34
|
|
Adjusted
EBITDA
|
$
|
895
|
|
|
$
|
934
|
|
|
$
|
1,705
|
|
|
$
|
3,534
|
|
|
(1) Other
amortization was added to the EBITDA calculation in the first
quarter of 2020.
|
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 six months of 2020
and 2019, there were no certain items excluded for comparison to
prior year periods.
|
|
|
|
First Six
Months
|
(in
millions)
|
|
2020
|
|
2019
|
Net cash provided
by operating activities
|
|
$
|
1,062
|
|
|
$
|
1,203
|
|
Purchases of
property, plant and equipment
|
|
(276)
|
|
|
(118)
|
|
Proceeds from sales
of property, plant and equipment
|
|
202
|
|
|
19
|
|
Free Cash
Flow
|
|
$
|
988
|
|
|
$
|
1,104
|
|
RECONCILIATION OF
CERTAIN CURRENCY NEUTRAL ADJUSTED FINANCIAL RESULTS
(Unaudited)
|
|
Net sales, adjusted
income from operations and adjusted earnings per share, as adjusted
to currency neutral: These adjusted financial results are
calculated on a currency neutral basis by converting our
current-period local currency financial results using the
prior-period foreign currency exchange rates.
|
|
|
|
For the Second
Quarter of 2020
|
|
|
Coffee
|
|
Packaged
|
|
Beverage
|
|
Latin
America
|
|
|
Percent
change
|
|
Systems
|
|
Beverages
|
|
Concentrates
|
|
Beverages
|
|
Total
|
Net
sales
|
|
5.4
|
%
|
|
6.2
|
%
|
|
(16.5)
|
%
|
|
(14.9)
|
%
|
|
1.8
|
%
|
Impact of foreign
currency
|
|
0.4
|
%
|
|
0.1
|
%
|
|
0.3
|
%
|
|
16.3
|
%
|
|
1.1
|
%
|
Net sales, as
adjusted to currency neutral
|
|
5.8
|
%
|
|
6.3
|
%
|
|
(16.2)
|
%
|
|
1.4
|
%
|
|
2.9
|
%
|
|
|
|
For the Second
Quarter of 2020
|
|
|
Coffee
|
|
Packaged
|
|
Beverage
|
|
Latin
America
|
|
|
Percent
change
|
|
Systems
|
|
Beverages
|
|
Concentrates
|
|
Beverages
|
|
Total
|
Adjusted income
from operations
|
|
9.7
|
%
|
|
41.6
|
%
|
|
(9.8)
|
%
|
|
15.0
|
%
|
|
10.4
|
%
|
Impact of foreign
currency
|
|
0.3
|
%
|
|
—
|
%
|
|
0.5
|
%
|
|
15.0
|
%
|
|
0.7
|
%
|
Adjusted income
from operations, as adjusted to currency
neutral
|
|
10.0
|
%
|
|
41.6
|
%
|
|
(9.3)
|
%
|
|
30.0
|
%
|
|
11.1
|
%
|
|
|
|
For the First Six
Months of 2020
|
|
|
Coffee
|
|
Packaged
|
|
Beverage
|
|
Latin
America
|
|
|
Percent
change
|
|
Systems
|
|
Beverages
|
|
Concentrates
|
|
Beverages
|
|
Total
|
Net
sales
|
|
3.0
|
%
|
|
7.5
|
%
|
|
(8.8)
|
%
|
|
(7.8)
|
%
|
|
3.0
|
%
|
Impact of foreign
currency
|
|
0.1
|
%
|
|
0.1
|
%
|
|
0.2
|
%
|
|
10.9
|
%
|
|
0.7
|
%
|
Net sales, as
adjusted to currency neutral
|
|
3.1
|
%
|
|
7.6
|
%
|
|
(8.6)
|
%
|
|
3.1
|
%
|
|
3.7
|
%
|
|
|
|
For the First Six
Months of 2020
|
|
|
Coffee
|
|
Packaged
|
|
Beverage
|
|
Latin
America
|
|
|
Percent
change
|
|
Systems
|
|
Beverages
|
|
Concentrates
|
|
Beverages
|
|
Total
|
Adjusted income
from operations
|
|
6.6
|
%
|
|
34.9
|
%
|
|
(6.3)
|
%
|
|
56.3
|
%
|
|
10.3
|
%
|
Impact of foreign
currency
|
|
0.2
|
%
|
|
—
|
%
|
|
0.3
|
%
|
|
15.6
|
%
|
|
0.5
|
%
|
Adjusted income
from operations, as adjusted to currency
neutral
|
|
6.8
|
%
|
|
34.9
|
%
|
|
(6.0)
|
%
|
|
71.9
|
%
|
|
10.8
|
%
|
|
|
|
For the Second
Quarter
of 2020
|
|
For the First Six
Months
of 2020
|
Adjusted diluted
earnings per share
|
|
$
|
0.33
|
|
|
$
|
0.62
|
|
Impact of foreign
currency
|
|
—
|
|
|
—
|
|
Adjusted diluted
earnings per share, as adjusted to currency neutral
|
|
$
|
0.33
|
|
|
$
|
0.62
|
|
The following table sets forth our reconciliation of significant
COVID-19-related expenses. However, employee compensation expense
and employee protection costs, which impact our SG&A expenses
and cost of sales, are included as the COVID-19 item affecting
comparability and is excluded in our Adjusted financial measures.
In addition, reported amounts under U.S. GAAP also include
additional costs, not included as the COVID-19 item affecting
comparability, as presented in tables below.
|
|
|
|
|
|
|
|
|
|
|
Items Effecting
Comparability(1)
|
|
|
|
|
|
|
(in
millions)
|
Employee
Compensation
Expense(2)
|
|
Employee
Protection
Costs(3)
|
|
Allowances for
Expected
Credit Losses(4)
|
|
Inventory
Write-Downs(5)
|
|
Total
|
For the second
quarter of 2020:
|
|
|
|
|
|
|
|
|
|
Coffee
Systems
|
$
|
7
|
|
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
8
|
|
|
$
|
17
|
|
Packaged
Beverages
|
38
|
|
|
16
|
|
|
—
|
|
|
—
|
|
|
54
|
|
Beverage
Concentrates
|
—
|
|
|
—
|
|
|
4
|
|
|
—
|
|
|
4
|
|
Latin America
Beverages
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Unallocated corporate
costs
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
$
|
45
|
|
|
$
|
18
|
|
|
$
|
4
|
|
|
$
|
8
|
|
|
$
|
75
|
|
|
|
|
|
|
|
|
|
|
|
For the first six
months of 2020:
|
|
|
|
|
|
|
|
|
|
Coffee
Systems
|
$
|
7
|
|
|
$
|
2
|
|
|
$
|
2
|
|
|
$
|
8
|
|
|
$
|
19
|
|
Packaged
Beverages
|
41
|
|
|
18
|
|
|
8
|
|
|
—
|
|
|
67
|
|
Beverage
Concentrates
|
—
|
|
|
—
|
|
|
4
|
|
|
—
|
|
|
4
|
|
Latin America
Beverages
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Unallocated corporate
costs
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
$
|
48
|
|
|
$
|
20
|
|
|
$
|
14
|
|
|
$
|
8
|
|
|
$
|
90
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Employee compensation
expense and employee protection costs are both included as the
COVID-19 items affecting comparability in the reconciliation of our
Adjusted Non-GAAP financial measures.
|
(2)
|
Reflects temporary
incremental frontline incentive pay and the associated taxes in
order to maintain essential operations during the COVID-19
pandemic. Impacts both cost of sales and SG&A
expenses.
|
(3)
|
Includes costs
associated with personal protective equipment, temperature scans,
cleaning and other sanitization services. Impacts both cost of
sales and SG&A expenses.
|
(4)
|
Allowances reflect
the expected impact of the economic uncertainty caused by COVID-19,
leveraging estimates of credit worthiness, default and recovery
rates for certain of our customers. Impacts SG&A
expenses.
|
(5)
|
Inventory write-downs
include obsolescence charges of $8 million for both the second
quarter and first six months of 2020. Impacts cost of
sales.
|
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SOURCE Keurig Dr Pepper