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Keurig Dr Pepper Reports Full Year 2021 Results and Successful Delivery of Three-Year Merger Commitments
Company Delivers High Single-Digit Revenue Growth and Double-Digit EPS Growth in 2021 and Affirms Guidance for 2022

BURLINGTON, Mass. and FRISCO, Texas, Feb. 24, 2022 /PRNewswire/ -- Keurig Dr Pepper Inc. (NASDAQ: KDP) today reported strong financial results for the fourth quarter and full year ended December 31, 2021 and affirms guidance for 2022.   

 

Reported GAAP Basis

Adjusted Basis1

   
 

Q4

FY 2021

Q4

FY 2021

Net Sales

  % vs Prior Year

  % vs Prior Year – Constant Currency

  % vs FY 2019 – Constant Currency

$3.39 bn

8.7%

 

 

$12.68 bn

9.2%

 

$3.39 bn

8.7%

8.5%

15.7%

$12.68 bn

9.2%

8.4%

13.9%

Diluted EPS

  % vs Prior Year

  % vs FY 2019

$0.59

96.7%

103.4%

$1.50

61.3%

70.5%

$0.45

15.4%

28.6%

$1.60

14.3%

31.2%

Full-year 2021 highlights
Strong performance in 2021 marked the successful completion of the Company's three-year merger period, with results that met or exceeded all key commitments. Highlights of 2021 performance include:

  • Posted high single-digit net sales growth and double-digit Adjusted diluted EPS growth.
  • Grew market share2 in nearly 75% of the Company's cold beverage retail base.
  • Added nearly three million new U.S. households to the Keurig system, bringing total Keurig households to almost 36 million, reflecting successful brewer innovation including the Keurig Supreme Plus Smart – KDP's first connected brewer launch.
  • Improved KDP's management leverage ratio to 2.9x at year-end 2021.
  • Continued to navigate the evolving macro challenges presented by COVID-19 and prioritize and invest in the health and safety of employees.
  • Advanced KDP's corporate responsibility agenda, including adding new goals for Diversity & Inclusion, Positive Hydration, and Regenerative Agriculture.

Commenting on the announcement, Chairman and CEO Bob Gamgort stated, "We finished 2021 with exceptional top-line momentum, driven by robust consumer demand across our portfolio, and our third consecutive year of double-digit Adjusted EPS growth. Despite ongoing macro and COVID-related challenges, we successfully delivered our merger commitments on or ahead of the targets we set four years ago. We head into 2022 with confidence in the stronger, faster-growing business we have built, poised to continue to drive outsized long-term value creation in an environment that we expect to remain challenging for some time."

2021 Full Year Consolidated Results
Net sales for the full year of 2021 increased 9.2% to $12.68 billion, compared to $11.62 billion in the year-ago period, driven by strong growth in each business segment. On a constant currency basis, net sales increased 8.4%, driven by higher volume/mix of 5.7% and favorable net price realization of 2.7%. On a two-year basis, constant currency net sales advanced 13.9% versus 2019. 

KDP in-market performance in the Liquid Refreshment Beverages (LRB) category remained strong for the year, with retail dollar consumption2 advancing 8.4% versus prior year across the Company's cold beverage retail base, largely reflecting strength in CSDs3, premium unflavored water, coconut water, apple juice, and apple sauce. This performance reflected the strength of Dr Pepper, Canada Dry, A&W, Sunkist and Squirt CSDs, CORE Hydration and Evian premium water, Vita Coco coconut water, Polar seltzers, and Mott's apple juice and apple sauce. On a two-year basis, KDP gained market share in 77% of its cold beverage retail base and grew consumption of its cold beverage portfolio by 22%. KDP's performance in CSDs has been particularly strong, with the Company now holding a CSD share position of nearly 25%.

In coffee, retail dollar consumption of single-serve pods manufactured by KDP in IRi tracked channels grew 2.7% versus prior year and KDP manufactured share remained strong, advancing to 83.2% for the year. Performance in the away-from-home business improved versus year-ago, although the increase in overall consumer mobility has not yet fully translated into a broad return to offices. On a two-year basis, retail consumption of single-serve pods manufactured by KDP increased 12.7% in IRi tracked channels.

GAAP operating income for the full year of 2021 increased 16.7% to $2.89 billion, compared to $2.48 billion in the year-ago period, driven by the strong net sales growth, productivity, merger synergies and the net year-over-year benefit of $28 million from the Company's strategic asset investment program initiated in 2019. This program creates value from certain assets to enable reinvestment in strategic assets. Also contributing to growth was the favorable year-over-year impact of items affecting comparability, including lower COVID-related costs and comparison to a non-cash impairment charge in the year-ago period. Partially offsetting these positive drivers were the impacts of broad-based inflation and significant supply chain disruption across manufacturing, logistics, material inputs and labor availability, all exacerbated by Omicron late in the year. Also impacting the comparison was a double-digit increase in marketing investment, which more than offset the aforementioned $28 million strategic asset investment program benefit.

Adjusted operating income for the full year of 2021 increased 7.2% to $3.42 billion, compared to $3.19 billion in the year-ago period and, on a constant currency basis, Adjusted operating income grew 6.5%. Adjusted operating margin was 27.0% in 2021, compared to 27.5% in the prior year. On a two-year basis, Adjusted operating income advanced 18.3% versus 2019.

GAAP net income for the full year of 2021 advanced 62% to $2.15 billion, or $1.50 per diluted share, compared to $1.33 billion, or $0.93 per diluted share, in the year-ago period. This performance was driven by the growth in operating income, lower interest expense and a lower effective tax rate, as well as the favorable year-over-year impact of items affecting comparability, including an after-tax gain of $400 million on the sale of the Company's equity interest in BodyArmor.

Adjusted net income for the full year of 2021 increased 14.7% to $2.28 billion, compared to $1.99 billion in the prior year. Adjusted diluted EPS for the year increased 14.3% to $1.60, compared to $1.40 in the prior year. On a two-year basis, Adjusted diluted EPS advanced 31.2% versus 2019.

KDP generated exceptionally strong free cash flow totaling $2.57 billion in 2021, primarily reflecting growth in earnings and ongoing effective working capital management. The free cash flow performance, combined with pre-tax cash proceeds of $576 million from the sale of the Company's equity interest in BodyArmor, enabled KDP to reduce total financial obligations by $1.73 billion in 2021 and end the year with $567 million of unrestricted cash on hand. In addition, the Company's management leverage ratio declined to 2.9x at the end of 2021, compared to 3.6x at the end of 2020. Since the close of the merger in July 2018, KDP's management leverage ratio declined by 3.1x.

1 Adjusted financial metrics used in this release are non-GAAP. See reconciliations of GAAP results to Adjusted results in the accompanying tables.   

2 Market share and retail consumption data based on Keurig Dr Pepper's custom IRi category definitions for the 13-week and 52-week periods ending 12/26/2021.

3 CSDs refer to "Carbonated Soft Drinks".

2021 Full Year Segment Results

Coffee Systems
Net sales for the full year of 2021 increased 6.4% to $4.72 billion, compared to $4.43 billion in the year-ago period. On a constant currency basis, net sales advanced 5.6%, driven by higher volume/mix of 6.5% and lower net price realization of 0.9%. The net price realization reflected continued moderation in strategic pod pricing and customer fines stemming from challenged service levels in the fourth quarter of 2021, only partially offset by the benefit of list price increases on owned and licensed pods and brewers which were implemented late in the year. 

The volume/mix growth of 6.5% reflected pod volume growth of 5.6% and exceptionally strong brewer volume growth of 10% that successfully lapped the 21% growth in brewer volume in the prior year. The pod volume performance reflected continued strong growth in the at-home business, largely reflecting the benefit of significant growth in households in the Keurig system, and improving trends in the away-from-home business. The strong brewer growth was driven by continued, successful innovation, marketing investment to grow household penetration and a strong holiday season. For the full year, U.S. households regularly using a Keurig brewer increased approximately 9% on top of similar growth in 2020. 

GAAP operating income increased 3.9% to $1.32 billion in 2021, compared to $1.27 billion in the year-ago period. This performance reflected the growth in net sales, productivity and merger synergies, as well as the favorable year-over-year impact of items affecting comparability. Partially offsetting these drivers were the impacts of broad-based inflation, significant supply chain disruption, including higher operating costs to meet strong consumer demand, and the unfavorable comparison to a $16 million strategic asset investment program benefit recorded in the segment in the first quarter of 2020.

Adjusted operating income totaled $1.52 billion, compared to $1.51 billion in the year-ago period and, on a constant currency basis, Adjusted operating income decreased 0.4%. On a percent of net sales basis, Adjusted operating income in 2021 was 32.1%, compared to 34.2% in the prior year, largely due to the timing of pricing in the market lagging inflation, as well as the costs of supply chain disruption in the fourth quarter not being fully offset by productivity.

Packaged Beverages
Net sales for the full year of 2021 increased 9.7% to $5.88 billion, compared to $5.36 billion in the year-ago period. On a constant currency basis, net sales increased 9.5%, reflecting favorable volume/mix of 6.0% and higher net price realization of 3.5%. This strong performance reflected continued market share growth across the portfolio, with particular strength in CSDs, coconut water, apple juice, and apple sauce.

Driving the strong net sales performance were Canada Dry, Sunkist, Dr Pepper, A&W, 7UP and Squirt CSDs, as well as growth in Mott's, Polar seltzers, Vita Coco, and Snapple, partially offset by a decline in Hawaiian Punch.

GAAP operating income increased 22.9% to $1.01 billion in 2021, compared to $0.82 billion in the prior year, reflecting the strong growth in net sales, continued productivity and merger synergies and the net year-over-year benefit of $44 million recorded in the segment from the Company's strategic asset investment program. Also benefitting the comparison was the favorable year-over-year impact of items affecting comparability, including lower costs related to COVID-19 and comparison to a non-cash impairment charge in the prior year. Partially offsetting these drivers were the impacts of broad-based inflation, significant supply chain disruption, including higher operating costs to meet strong consumer demand, and increased marketing investment.

Adjusted operating income increased 8.6% to $1.11 billion, compared to $1.02 billion in the prior year and, on a constant currency basis, Adjusted operating income increased 8.3%. On a percent of net sales basis, Adjusted operating income was 18.9% in 2021, compared to 19.0% in the prior year, reflecting the strong growth in net sales offset by the combined impacts of inflation, increased marketing investment and higher costs to meet consumer demand, which were not fully offset by productivity.   

Beverage Concentrates
Net sales for the full year of 2021 increased 12.2% to $1.49 billion, compared to $1.33 billion in the prior year. On a constant currency basis, net sales increased 11.7%, reflecting favorable volume/mix of 2.0% and higher net price realization of 9.7%. The volume/mix performance was fueled by the benefit of significantly increased marketing investment and improving trends versus the prior year in the fountain foodservice business, as consumer mobility in the restaurant and hospitality channels increased. 

Total shipment volume increased 1.1% in 2021 versus the prior year, driven by growth in Dr Pepper, A&W and Crush, partially offset by lower shipment volume in Canada Dry. Bottler cases sales volume in 2021 increased 2.0% versus the prior year.

GAAP operating income for the full year increased 12.0% to $1.04 billion, compared to $0.93 billion in the year-ago period, reflecting the higher net sales, partially offset by significantly higher marketing investment and a slightly unfavorable year-over-year impact of items affecting comparability.

Adjusted operating income increased 12.5% to $1.06 billion for the full year of 2021, compared to $0.94 billion in the prior year and, on a constant currency basis, Adjusted operating income increased 11.9%. On a percent of net sales basis, Adjusted operating income increased 20 basis points to 71.0% in 2021, compared to 70.8% in the prior year, largely reflecting the strong growth in net sales, partially offset by the significantly higher marketing investment. 

Latin America Beverages
Net sales for the full year of 2021 increased 20.5% to $599 million, compared to $497 million in the prior year and, on a constant currency basis, net sales increased 14.1%. This performance was driven by higher volume/mix of 7.3%, fueled by significantly higher marketing investment, and higher net price realization of 6.8%. Leading the strong growth in net sales were Peñafiel and Clamato.

GAAP operating income for the full year increased 26.7% to $133 million, compared to $105 million in the year-ago period, reflecting the growth in constant currency net sales, continued productivity and the favorable year-over-year impact of items affecting comparability. These positive drivers were partially offset by inflation and the significant increase in marketing investment.

Adjusted operating income increased 25.0% in 2021 to $135 million, compared to $108 million in the prior year and, on a constant currency basis, Adjusted operating income increased 19.4%. On a percent of net sales basis, Adjusted operating income increased 80 basis points in 2021 to 22.5%, compared to 21.7% in the prior year, primarily driven by the strong growth in net sales.

Fourth Quarter Consolidated Results

Net sales for the fourth quarter of 2021 increased 8.7% to $3.39 billion, compared to $3.12 billion in the year-ago period, primarily reflecting exceptionally strong growth in Packaged Beverages, along with strong growth in Beverage Concentrates and Latin America Beverages. On a constant currency basis, net sales advanced 8.5%, reflecting higher volume/mix of 4.4% and favorable net price realization of 4.1%. On a two-year basis, constant currency net sales advanced 15.7% versus 2019.

KDP in-market performance in the LRB category remained strong in the quarter, with retail dollar consumption advancing 12.6% across the Company's cold beverage retail base, largely reflecting strength in CSDs, premium unflavored water, coconut water, apple juice, and apple sauce. This performance was driven by Dr Pepper, Sunkist, Canada Dry, A&W and Squirt CSDs, CORE Hydration and Evian premium water, Vita Coco, Polar seltzers, and Mott's. On a two-year basis, KDP gained market share in 83% of its cold beverage retail base and grew consumption of its cold beverage portfolio by 27%.

In coffee, retail dollar consumption of single-serve pods manufactured by KDP in IRi tracked channels increased 3.4%, driven by growth in partner brands and KDP owned and licensed brands, partially offset by a decline in private label pods manufactured by KDP. KDP manufactured share remained strong, advancing 60 basis points to 83.5% in the quarter. Performance in the away-from-home business improved versus the year-ago shelter-in-place environment, although the increase in overall consumer mobility has not yet fully translated into a broad return to offices. On a two-year basis, retail consumption of single-serve pods manufactured by KDP increased 11.2% in IRi tracked channels. 

GAAP operating income increased 3.6% to $725 million in the fourth quarter of 2021, compared to $700 million in the year-ago period, reflecting the benefits of the strong growth in net sales, productivity, merger synergies and a strategic asset investment program benefit of $70 million in the quarter. Partially offsetting these positive drivers were the impacts of broad-based inflation and significant supply chain disruption across manufacturing, logistics, material inputs and labor availability. Also impacting the comparison was increased marketing investment and the unfavorable year-over-year impact of items affecting comparability.

Adjusted operating income in the quarter grew 6.1% to $910 million, compared to $858 million in the year-ago period. Adjusted operating margin was 26.8% in the quarter, compared to 27.5% in the year-ago period. On a two-year basis, fourth quarter Adjusted Operating income advanced 11.9% versus 2019. On a constant currency basis, Adjusted operating income grew 5.9% in the fourth quarter versus year-ago.

GAAP net income in the fourth quarter of 2021 increased 97% to $843 million, or $0.59 per diluted share, compared to GAAP net income of $428 million, or $0.30 per diluted share, in the year-ago period. This performance was driven by the growth in operating income, lower interest expense and a lower effective tax rate. Also benefitting the performance was the favorable year-over-year impact of items affecting comparability, including the aforementioned $400 million after-tax gain on the sale of the Company's equity interest in BodyArmor and comparison to a non-cash impairment charge in the prior year. 

Adjusted net income advanced 15.5% to $640 million in the fourth quarter of 2021, compared to $554 million in the year-ago period. Adjusted diluted EPS increased 15.4% to $0.45, compared to $0.39 in the year-ago period. On a two-year basis, Adjusted diluted EPS in the quarter grew 28.6% versus 2019.

Fourth Quarter Segment Results

Coffee Systems
Net sales for the fourth quarter of 2021 totaled $1.32 billion, essentially even with the year-ago period. On a constant currency basis, net sales declined 0.5%, reflecting higher volume/mix of 0.1%, and lower net price realization of 0.6%. The net price realization reflected the benefit of pricing actions taken in the quarter, primarily on owned and licensed pods, more than offset by continued moderation in strategic pod pricing and customer fines incurred due to challenged service levels, as strong consumer demand for pods exceeded capacity due to supply chain challenges and labor shortages exacerbated by Omicron. 

The volume/mix increase of 0.1% in the quarter reflected pod volume growth of 2.7%, which was capacity constrained, and a 10.8% decline in brewer shipments due to comparison to the very strong brewer shipment growth of 28% in the year-ago period. Pod growth reflected strong demand in the at-home business, fueled by the significant growth in households using Keurig brewers, and improving trends in the away-from-home business.

GAAP operating income declined 15.5% to $326 million in the fourth quarter of 2021, compared to $386 million in the year-ago period, largely reflecting the broad-based inflationary environment and the impact of supply chain challenges, including capacity constraints and labor shortages. Also impacting the comparison was the unfavorable year-over-year impact of items affecting comparability. Partially offsetting these drivers were continued productivity and merger synergies, as well as lower marketing expense.   

Adjusted operating income declined 12.3% to $378 million, compared to $431 million in the year-ago period and, on a percent of net sales basis, Adjusted operating income in the fourth quarter of 2021 was 28.7%, compared to 32.7% in the year-ago period.

Packaged Beverages
Net sales for the fourth quarter of 2021 increased 17.1% to $1.53 billion, compared to $1.31 billion in the year-ago period. On a constant currency basis, net sales increased 17.0%, reflecting favorable volume/mix of 10.3%, due to continued strong in-market execution and market share expansion across the portfolio and higher net price realization of 6.7%. 

Leading the net sales performance were Canada Dry, Dr Pepper, Sunkist, A&W, 7UP and Squirt CSDs, Mott's, and Snapple, as well as growth in Polar seltzers, CORE Hydration, Vita Coco, Clamato, Yoo-Hoo, and Bai.

GAAP operating income increased 75% in the fourth quarter of 2021 to $289 million, compared to $165 million in the year-ago period, reflecting the strong net sales growth, the aforementioned $70 million strategic asset investment program benefit realized in the segment, continued productivity, merger synergies and the favorable year-over-year impact of items affecting comparability. Partially offsetting these drivers were the broad-based inflationary environment and the impact of supply chain challenges and Omicron-related labor shortages that drove higher operating costs to meet the continued strong consumer demand, as well as increased marketing investment in the quarter.

Adjusted operating income increased 28.2% to $314 million, compared to $245 million in the year-ago period and, on a constant currency basis, Adjusted operating income increased 27.8%. On a percent of net sales basis, Adjusted operating income in the fourth quarter of 2021 increased 180 basis points to 20.5%, compared to 18.7% in the year-ago period.

Beverage Concentrates
Net sales for the fourth quarter of 2021 increased 9.2% to $391 million, compared to $358 million in the year-ago period. On a constant currency basis, net sales advanced 8.9%, reflecting higher net price realization of 9.8% and unfavorable volume/mix of 0.9%. The volume/mix performance reflected lower bottle/can concentrate shipments, largely offset by an increase in the fountain foodservice business, driven by increased consumer mobility in the restaurant and hospitality channels.

Total shipment volume versus year-ago decreased 2.3% in the quarter, as declines in Canada Dry were partially offset by increases in Dr Pepper. Bottler case sales volume increased 1.4% in the quarter compared to the year-ago period.

GAAP operating income in the fourth quarter of 2021 increased 5.1% to $266 million, compared to $253 million in the year-ago period, reflecting the impact of the higher net sales, partially offset by a significant increase marketing investment and the unfavorable year-over-year impact of items affecting comparability.

Adjusted operating income increased 6.7% to $271 million, compared to $254 million in the year-ago period and, on a constant currency basis, Adjusted operating income increased 6.3%. On a percent of net sales basis, Adjusted operating income was 69.3% in the quarter, compared to 70.9% in the year-ago period, reflecting the increase in marketing investment. 

Latin America Beverages
Net sales for the fourth quarter of 2021 increased 11.8% to $152 million, compared to net sales of $136 million in the year-ago period and, on a constant currency basis, net sales increased 12.5%. This performance was driven by higher net price realization of 8.8% and increased volume/mix of 3.7%. Leading the strong net sales growth in the quarter were Clamato, Peñafiel and Squirt.

GAAP operating income in the fourth quarter of 2021 increased 18.8% to $38 million, compared to $32 million in the year-ago period, reflecting the strong growth in constant currency net sales, continued productivity and the favorable year-over-year impact of items affecting comparability. These drivers were partially offset by the broad-based inflationary environment and higher marketing investment.

Adjusted operating income increased 15.2% to $38 million, compared to $33 million in the year-ago period and, on a constant currency basis, Adjusted operating income increased 18.2%. On a percent of net sales basis, Adjusted operating income increased 70 basis points to 25.0% in the quarter, compared to 24.3% in the year-ago period.

KDP 2022 Guidance

KDP affirmed guidance for both net sales and Adjusted diluted EPS growth in 2022 in the mid-single-digit range. The Company expects EPS performance versus 2021 to strengthen throughout the year, with Adjusted diluted EPS growth reaching the high-single-digit range in the second half of 2022, in line with the Company's long-term algorithm.

Investor Contacts:
Steve Alexander
T: 972-673-6769 / steve.alexander@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 in excess of $12 billion and approximately 27,000 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. 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 impact of the global COVID-19 pandemic and 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 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.

 

KEURIG DR PEPPER INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED, IN MILLIONS, EXCEPT PER SHARE DATA)

 
 

Fourth Quarter

 

Year Ended December 31,

(in millions, except per share data)

2021

 

2020

 

2021

 

2020

Net sales

$              3,391

 

$              3,121

 

$            12,683

 

$            11,618

Cost of sales

1,619

 

1,353

 

5,706

 

5,132

Gross profit

1,772

 

1,768

 

6,977

 

6,486

Selling, general and administrative expenses

1,113

 

1,000

 

4,153

 

3,978

Impairment of intangible assets

 

67

 

 

67

Other operating expense (income), net

(66)

 

1

 

(70)

 

(39)

Income from operations

725

 

700

 

2,894

 

2,480

Interest expense

119

 

146

 

500

 

604

Loss on early extinguishment of debt

 

 

105

 

4

Gain on sale of equity method investment

(524)

 

 

(524)

 

Impairment of investments and note receivable

17

 

 

17

 

102

Other expense (income), net

4

 

(4)

 

(2)

 

17

Income before provision for income taxes

1,109

 

558

 

2,798

 

1,753

Provision for income taxes

266

 

130

 

653

 

428

Net income including non-controlling interest

843

 

428

 

2,145

 

1,325

Less: Net loss attributable to non-controlling interest

 

 

(1)

 

Net income attributable to KDP

$                 843

 

$                 428

 

$              2,146

 

$              1,325

               

Earnings per common share:

             

Basic

$                0.59

 

$                0.30

 

$                1.52

 

$                0.94

Diluted

0.59

 

0.30

 

1.50

 

0.93

Weighted average common shares outstanding:

             

Basic

1,418.0

 

1,407.3

 

1,415.7

 

1,407.2

Diluted

1,429.0

 

1,423.8

 

1,427.9

 

1,422.1

 

KEURIG DR PEPPER INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED, IN MILLIONS, EXCEPT PER SHARE DATA)

 
 

December 31,

(in millions, except share and per share data)

2021

 

2020

Assets

Current assets:

     

Cash and cash equivalents

$                      567

 

$                      240

Restricted cash and restricted cash equivalents

1

 

15

Trade accounts receivable, net

1,148

 

1,048

Inventories

894

 

762

Prepaid expenses and other current assets

447

 

323

Total current assets

3,057

 

2,388

Property, plant and equipment, net

2,494

 

2,212

Investments in unconsolidated affiliates

30

 

88

Goodwill

20,182

 

20,184

Other intangible assets, net

23,856

 

23,968

Other non-current assets

937

 

894

Deferred tax assets

42

 

45

Total assets

$                50,598

 

$                49,779

Liabilities and Stockholders' Equity

Current liabilities:

     

Accounts payable

$                  4,316

 

$                  3,740

Accrued expenses

1,110

 

1,040

Structured payables

142

 

153

Short-term borrowings and current portion of long-term obligations

304

 

2,345

Other current liabilities

613

 

416

Total current liabilities

6,485

 

7,694

Long-term obligations

11,578

 

11,143

Deferred tax liabilities

5,986

 

5,993

Other non-current liabilities

1,577

 

1,119

Total liabilities

25,626

 

25,949

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, 1,418,119,197 and
1,407,260,676 shares issued and outstanding as of December 31, 2021 and 2020,
respectively

14

 

14

Additional paid-in capital

21,785

 

21,677

Retained earnings

3,199

 

2,061

Accumulated other comprehensive (income) loss

(26)

 

77

Total stockholders' equity

24,972

 

23,829

Non-controlling interest

 

1

Total equity

24,972

 

23,830

Total liabilities and stockholders' equity

$                50,598

 

$                49,779

 

KEURIG DR PEPPER INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED, IN MILLIONS)

 
 

Year Ended December 31,

(in millions)

2021

 

2020

Operating activities:

     

Net income attributable to KDP

$               2,146

 

$               1,325

Adjustments to reconcile net income to net cash provided by operating activities:

     

Depreciation expense

410

 

362

Amortization of intangibles

134

 

133

Other amortization expense

164

 

158

Provision for sales returns

63

 

54

Deferred income taxes

31

 

(51)

Employee stock-based compensation expense

88

 

85

Loss on early extinguishment of debt

105

 

4

Gain on sale of equity method investment

(524)

 

Gain on disposal of property, plant and equipment

(75)

 

(36)

Unrealized (gain) loss on foreign currency

9

 

(1)

Unrealized (gain) loss on derivatives

(70)

 

8

Equity in losses of unconsolidated affiliates

5

 

20

Impairment of intangible assets

 

67

Impairment on investments and note receivable of unconsolidated affiliates

17

 

102

Other, net

20

 

60

Changes in assets and liabilities:

     

Trade accounts receivable

(152)

 

(5)

Inventories

(133)

 

(107)

Income taxes receivable and payables, net

114

 

(91)

Other current and non-current assets

(243)

 

(435)

Accounts payable and accrued expenses

762

 

624

Other current and non-current liabilities

3

 

180

Net change in operating assets and liabilities

351

 

166

Net cash provided by operating activities

2,874

 

2,456

Investing activities:

     

Proceeds from sale of investment in unconsolidated affiliates

578

 

Purchases of property, plant and equipment

(423)

 

(461)

Proceeds from sales of property, plant and equipment

122

 

203

Purchases of intangibles

(32)

 

(56)

Issuance of related party note receivable

(19)

 

(6)

Investments in unconsolidated affiliates

 

(5)

Other, net

(16)

 

9

Net cash provided by (used in) investing activities

210

 

(316)

Financing activities:

     

Proceeds from issuance of Notes

2,150

 

1,500

Repayments of Notes

(3,595)

 

(250)

Proceeds from issuance of commercial paper

5,406

 

7,288

Repayments of commercial paper

(5,257)

 

(8,534)

Proceeds from KDP Revolver

 

1,850

Repayments of KDP Revolver

 

(1,850)

Repayments of 2019 KDP Term Loan

(425)

 

(955)

Proceeds from structured payables

156

 

171

Repayments of structured payables

(167)

 

(341)

Cash dividends paid

(955)

 

(846)

Proceeds from issuance of common stock

140

 

Tax withholdings related to net share settlements

(125)

 

Payments on finance leases

(54)

 

(52)

Proceeds from controlling shareholder stock transactions

 

29

Other, net

(36)

 

Net cash used in financing activities

(2,762)

 

(1,990)

Cash, cash equivalents, restricted cash, and restricted cash equivalents:

     

Net change from operating, investing and financing activities

322

 

150

Effect of exchange rate changes

(9)

 

(6)

Beginning balance

255

 

111

Ending balance

$                  568

 

$                  255

 

 

KEURIG DR PEPPER INC.
RECONCILIATION OF SEGMENT INFORMATION
(UNAUDITED)

 

 

 

 
 

Fourth Quarter

 

Year Ended December 31,

(in millions)

2021

 

2020

 

2021

 

2020

Net Sales

             

Coffee Systems

$                 1,318

 

$                 1,320

 

$                 4,716

 

$                 4,433

Packaged Beverages

1,530

 

1,307

 

5,882

 

5,363

Beverage Concentrates

391

 

358

 

1,486

 

1,325

Latin America Beverages

152

 

136

 

599

 

497

Total net sales

$                 3,391

 

$                 3,121

 

$              12,683

 

$              11,618

               

Income from Operations

             

Coffee Systems

$                    326

 

$                    386

 

$                 1,318

 

$                 1,268

Packaged Beverages

289

 

165

 

1,010

 

822

Beverage Concentrates

266

 

253

 

1,044

 

932

Latin America Beverages

38

 

32

 

133

 

105

Unallocated corporate costs

(194)

 

(136)

 

(611)

 

(647)

Total income from operations

$                    725

 

$                    700

 

$                 2,894

 

$                 2,480

 

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 fourth quarter and full year ended December 31, 2021 and 2020, 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, 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) non-cash changes in deferred tax liabilities related to goodwill and other intangible assets as a result of tax rate or apportionment changes; and (vii) other certain items that are excluded for comparison purposes to prior year periods.

For the fourth quarter and full year ended December 31, 2021, 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; (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; (vi) gains from insurance recoveries related to the February 2019 organized malware attack on our business operation networks in the Coffee Systems segment; (vii) the gain on the sale of our investment in BodyArmor; (viii) impairment recognized on our equity method investment with Bedford as a result of funding our share of their wind-down costs; and (ix) transaction costs for significant business combinations (completed or abandoned).

For the fourth quarter and full year ended December 31, 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 non-routine legal matters; (v) the loss on early extinguishment of debt related to the redemption of debt, (vi) incremental costs to our operations related to risks associated with the COVID-19 pandemic and (vii) impairment recognized on our equity method investments with Bedford and LifeFuels.

Costs related to significant non-routine legal matters relate to the antitrust litigation. 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 the fourth quarter and full year ended December 31, 2021 and 2020, the supplemental financial data set forth below includes reconciliations of Adjusted gross margin, Adjusted income from operations, Adjusted operating margin, 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 fourth quarter of 2021
(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

 

$                    1,619

 

$                    1,772

 

52.3 %

 

$                               1,113

 

$                       725

 

21.4 %

Items Affecting Comparability:

                       

Mark to market

 

(21)

 

21

     

(7)

 

28

   

Amortization of intangibles

 

 

     

(33)

 

33

   

Stock compensation

 

 

     

(4)

 

4

   

Restructuring and integration costs

 

 

     

(57)

 

57

   

Productivity

 

(29)

 

29

     

(19)

 

48

   

Non-routine legal matters

 

 

     

(7)

 

7

   

COVID-19

 

(4)

 

4

     

(2)

 

6

   

Transaction costs

 

 

     

(1)

 

1

   

Malware incident

 

 

     

(1)

 

1

   

Adjusted

 

$                    1,565

 

$                    1,826

 

53.8 %

 

$                                  982

 

$                       910

 

26.8 %

 

 

Interest
expense

 

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

 

Reported

$       119

 

$                  (524)

 

$                    17

 

$             4

 

$               1,109

 

$            266

 

24.0 %

 

$                843

 

$             0.59

 

Items Affecting Comparability:

                                   

Mark to market

(1)

 

 

 

(6)

 

35

 

10

     

25

 

0.02

 

Amortization of intangibles

 

 

 

 

33

 

5

     

28

 

0.02

 

Amortization of deferred financing costs

(1)

 

 

 

 

1

 

     

1

 

 

Amortization of fair value debt adjustment

(5)

 

 

 

 

5

 

2

     

3

 

 

Stock compensation

 

 

 

 

4

 

1

     

3

 

 

Restructuring and integration costs

 

 

 

 

57

 

12

     

45

 

0.03

 

Productivity

 

 

 

 

48

 

11

     

37

 

0.03

 

Impairment of investment

 

 

(17)

 

 

17

 

(45)

     

62

 

0.04

 

Loss on early extinguishment of debt

 

 

 

 

 

     

 

 

Non-routine legal matters

 

 

 

 

7

 

2

     

5

 

 

COVID-19

 

 

 

 

6

 

1

     

5

 

 

Gain on sale of equity-method investment

 

524

 

 

 

(524)

 

(124)

     

(400)

 

(0.28)

 

Transaction costs

 

 

 

 

1

 

     

1

 

 

Malware incident

 

 

 

 

1

 

1

     

 

 

Change in deferred tax liabilities related to
goodwill and other intangible assets

 

 

 

 

 

18

     

(18)

 

(0.01)

 

Adjusted

$       112

 

$                     —

 

$                     —

 

$            (2)

 

$                  800

 

$            160

 

20.0 %

 

$                640

 

$             0.45

 
 

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 fourth quarter of 2020
(Unaudited, in millions, except per share data)

 
 

Cost of sales

 

Gross profit

 

Gross
margin

 

Selling, general and
administrative expenses

 

Impairment of
intangible assets

 

Income from
operations

 

Operating
margin

Reported

$                1,353

 

$              1,768

 

56.6 %

 

$                              1,000

 

$                         67

 

$                700

 

22.4 %

Items Affecting Comparability:

                         

Mark to market

31

 

(31)

     

23

 

 

(54)

   

Amortization of intangibles

 

     

(33)

 

 

33

   

Stock compensation

 

     

(6)

 

 

6

   

Restructuring and integration costs

 

     

(56)

 

 

56

   

Productivity

(1)

 

1

     

(24)

 

 

25

   

Impairment on intangible asset

 

     

 

(67)

 

67

   

Non-routine legal matters

 

     

(14)

 

 

14

   

COVID-19

(6)

 

6

     

(5)

 

 

11

   

Adjusted

$                1,377

 

$              1,744

 

55.9 %

 

$                                 885

 

$                          —

 

$                858

 

27.5 %

 

 

Interest
expense

 

Income before provision for
income taxes

 

Provision for
income taxes

 

Effective tax
rate

 

Net income
attributable to KDP

 

Diluted earnings per
share

Reported

$             146

 

$                                            558

 

$              130

 

23.3 %

 

$                         428

 

$                              0.30

Items Affecting Comparability:

                     

Mark to market

1

 

(55)

 

(14)

     

(41)

 

(0.03)

Amortization of intangibles

 

33

 

8

     

25

 

0.02

Amortization of deferred financing costs

(3)

 

3

 

1

     

2

 

Amortization of fair value debt adjustment

(6)

 

6

 

2

     

4

 

Stock compensation

 

6

 

1

     

5

 

Restructuring and integration costs

 

56

 

15

     

41

 

0.03

Productivity

 

25

 

6

     

19

 

0.01

Impairment on intangible asset

 

67

 

15

     

52

 

0.04

Non-routine legal matters

 

14

 

4

     

10

 

0.01

COVID-19

 

11

 

2

     

9

 

0.01

Adjusted

$             138

 

$                                            724

 

$              170

 

23.5 %

 

$                         554

 

$                              0.39

 

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 Year Ended December 31, 2021
(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

$             5,706

 

$           6,977

 

55.0 %

 

$                                       4,153

 

$                    2,894

 

22.8 %

Items Affecting Comparability:

                     

Mark to market

32

 

(32)

     

25

 

(57)

   

Amortization of intangibles

 

     

(134)

 

134

   

Stock compensation

 

     

(18)

 

18

   

Restructuring and integration costs

 

     

(202)

 

202

   

Productivity

(72)

 

72

     

(91)

 

163

   

Non-routine legal matters

 

     

(30)

 

30

   

COVID-19

(26)

 

26

     

(11)

 

37

   

Transaction costs

 

     

(2)

 

2

   

Malware incident

 

     

2

 

(2)

   

Adjusted

$             5,640

 

$           7,043

 

55.5 %

 

$                                       3,692

 

$                    3,421

 

27.0 %

 

 

Interest
expense

 

Loss on early
extinguishment
of debt

 

Impairment of
investments and
note receivable

 

Gain on sale
of equity-
method
investment

 

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

Reported

$       500

 

$                  105

 

$                  17

 

$            (524)

 

$            (2)

 

$             2,798

 

$        653

 

23.3 %

 

$          2,146

 

$       1.50

Items Affecting Comparability:

                                     

Mark to market

6

 

 

 

 

(6)

 

(57)

 

(13)

     

(44)

 

(0.03)

Amortization of intangibles

 

 

 

 

 

134

 

31

     

103

 

0.07

Amortization of deferred financing costs

(7)

 

 

 

 

 

7

 

2

     

5

 

Amortization of fair value debt adjustment

(19)

 

 

 

 

 

19

 

5

     

14

 

0.01

Stock compensation

 

 

 

 

 

18

 

15

     

3

 

Restructuring and integration costs

 

 

 

 

 

202

 

47

     

155

 

0.11

Productivity

 

 

 

 

 

163

 

40

     

123

 

0.09

Impairment of investment

 

 

(17)

 

 

 

17

 

(45)

     

62

 

0.04

Loss on early extinguishment of debt

 

(105)

 

 

 

 

105

 

24

     

81

 

0.06

Non-routine legal matters

 

 

 

 

 

30

 

7

     

23

 

0.02

COVID-19

 

 

 

 

 

37

 

9

     

28

 

0.02

Gain on sale of equity-method investment

 

 

 

524

 

 

(524)

 

(124)

     

(400)

 

(0.28)

Transaction costs

 

 

 

 

 

2

 

     

2

 

Malware incident

 

 

 

 

 

(2)

 

     

(2)

 

Change in deferred tax liabilities related to
goodwill and other intangible assets

 

 

 

 

 

 

19

     

(19)

 

(0.01)

Adjusted

$       480

 

$                     —

 

$                  —

 

$               —

 

$            (8)

 

$             2,949

 

$        670

 

22.7 %

 

$          2,280

 

$       1.60

 
 

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 Year Ended December 31, 2020
(Unaudited, in millions, except per share data)

 
 

Cost of sales

 

Gross profit

 

Gross
margin

 

Selling, general and
administrative
expenses

 

Impairment of
intangible assets

 

Income from
operations

 

Operating
margin

Reported

$                5,132

 

$                6,486

 

55.8 %

 

$                                3,978

 

$                          67

 

$                2,480

 

21.3 %

Items Affecting Comparability:

                         

Mark to market

33

 

(33)

     

(5)

 

 

(28)

   

Amortization of intangibles

 

     

(133)

 

 

133

   

Stock compensation

 

     

(27)

 

 

27

   

Restructuring and integration costs

 

     

(199)

 

 

199

   

Productivity

(29)

 

29

     

(99)

 

 

128

   

Impairment on intangible asset

 

     

 

(67)

 

67

   

Non-routine legal matters

 

     

(57)

 

 

57

   

COVID-19

(44)

 

44

     

(84)

 

 

128

   

Adjusted

$                5,092

 

$                6,526

 

56.2 %

 

$                                3,374

 

$                          —

 

$                3,191

 

27.5 %

 

 

Interest
expense

 

Loss on early
extinguishment
of debt

 

Impairment of
investments and
note receivable

 

Income before
provision for
income taxes

 

Provision
for income
taxes

 

Effective
tax rate

 

Net income
attributable to
KDP

 

Diluted
earnings
per
share

Reported

$           604

 

$                         4

 

$                        102

 

$                     1,753

 

$               428

 

24.4 %

 

$                1,325

 

$        0.93

Items Affecting Comparability:

                             

Mark to market

(27)

 

 

 

(1)

 

(1)

     

 

Amortization of intangibles

 

 

 

133

 

35

     

98

 

0.07

Amortization of deferred financing costs

(11)

 

 

 

11

 

3

     

8

 

0.01

Amortization of fair value debt adjustment

(24)

 

 

 

24

 

6

     

18

 

0.01

Stock compensation

 

 

 

27

 

5

     

22

 

0.02

Restructuring and integration costs

 

 

 

199

 

49

     

150

 

0.11

Productivity

 

 

 

128

 

33

     

95

 

0.07

Impairment on intangible asset

 

 

 

67

 

15

     

52

 

0.04

Loss on early extinguishment of debt

 

(4)

 

 

4

 

1

     

3

 

Impairment of investment

 

 

(102)

 

102

 

25

     

77

 

0.05

Non-routine legal matters

 

 

 

57

 

14

     

43

 

0.03

COVID-19

 

 

 

128

 

31

     

97

 

0.07

Adjusted

$           542

 

$                       —

 

$                          —

 

$                     2,632

 

$               644

 

24.5 %

 

$                1,988

 

$        1.40

 

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 fourth quarter of 2021

         

Income from Operations

         

Coffee Systems

$                 326

 

$                        52

 

$                 378

Packaged Beverages

289

 

25

 

314

Beverage Concentrates

266

 

5

 

271

Latin America Beverages

38

 

 

38

Unallocated corporate costs

(194)

 

103

 

(91)

Total income from operations

$                 725

 

$                      185

 

$                 910

           

For the fourth quarter of 2020

         

Income from Operations

         

Coffee Systems

$                 386

 

$                        45

 

$                 431

Packaged Beverages

165

 

80

 

245

Beverage Concentrates

253

 

1

 

254

Latin America Beverages

32

 

1

 

33

Unallocated corporate costs

(136)

 

31

 

(105)

Total income from operations

$                 700

 

$                      158

 

$                 858

 

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 year ended December 31, 2021

         

Income from Operations

         

Coffee Systems

$         1,318

 

$                197

 

$         1,515

Packaged Beverages

1,010

 

99

 

1,109

Beverage Concentrates

1,044

 

11

 

1,055

Latin America Beverages

133

 

2

 

135

Unallocated corporate costs

(611)

 

218

 

(393)

Total income from operations

$         2,894

 

$                527

 

$         3,421

           

For the year ended December 31, 2020

         

Income from Operations

         

Coffee Systems

$         1,268

 

$                246

 

$         1,514

Packaged Beverages

822

 

199

 

1,021

Beverage Concentrates

932

 

6

 

938

Latin America Beverages

105

 

3

 

108

Unallocated corporate costs

(647)

 

257

 

(390)

Total income from operations

$         2,480

 

$                711

 

$         3,191

 

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

$                  2,146

Interest expense

500

Provision for income taxes

653

Other (income) expense, net

(2)

Depreciation expense

410

Other amortization

164

Amortization of intangibles

134

EBITDA

$                  4,005

Items affecting comparability:

 

Gain on sale of equity-method investment

$                   (524)

Loss on early extinguishment of debt

105

Impairment of investments and note receivable

17

Restructuring and integration expenses

202

Productivity

138

Non-routine legal matters

30

Stock compensation

18

COVID-19

37

Transaction costs

2

Malware incident

(2)

Mark to market

(57)

Adjusted EBITDA

$                  3,971

   
 

December 31,

 

2021

Principal amounts of:

 

Commercial paper notes

$                     149

Senior unsecured notes

11,875

Total principal amounts

12,024

Less: Cash and cash equivalents

567

Total principal amounts less cash and cash equivalents

$                11,457

   

December 31, 2021 Management Leverage Ratio

2.9

 

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 years ended December 31, 2020 and 2019, there were no certain items excluded for comparison to prior year periods.

   

Year Ended December 31,

(in millions)

 

2021

 

2020

Net cash provided by operating activities

 

$                 2,874

 

$                 2,456

Purchases of property, plant and equipment

 

(423)

 

(461)

Proceeds from sales of property, plant and equipment

 

122

 

203

Free Cash Flow

 

$                 2,573

 

$                 2,198

 

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.

   

Coffee
Systems

 

Packaged
Beverages

 

Beverage
Concentrates

 

Latin
America
Beverages

 

Total

For the fourth quarter of 2021

                   

Net sales

 

(0.2)%

 

17.1%

 

9.2%

 

11.8%

 

8.7%

Impact of foreign currency

 

(0.3)%

 

(0.1)%

 

(0.3)%

 

0.7%

 

(0.2)%

Net sales, as adjusted to currency neutral

 

(0.5)%

 

17.0%

 

8.9%

 

12.5%

 

8.5%

                     

For the year ended December 31, 2021

                   

Net sales

 

6.4%

 

9.7%

 

12.2%

 

20.5%

 

9.2%

Impact of foreign currency

 

(0.8)%

 

(0.2)%

 

(0.5)%

 

(6.4)%

 

(0.8)%

Net sales, as adjusted to currency neutral

 

5.6%

 

9.5%

 

11.7%

 

14.1%

 

8.4%

 

   

Coffee
Systems

 

Packaged
Beverages

 

Beverage
Concentrates

 

Latin
America
Beverages

 

Total

For the fourth quarter of 2021

                   

Adjusted income from operations

 

(12.3)%

 

28.2%

 

6.7%

 

15.2%

 

6.1%

Impact of foreign currency

 

—%

 

(0.4)%

 

(0.4)%

 

3.0%

 

(0.2)%

Adjusted income from operations, as adjusted
to currency neutral

 

(12.3)%

 

27.8%

 

6.3%

 

18.2%

 

5.9%

                     

For the year ended December 31, 2021

                   

Adjusted income from operations

 

0.1%

 

8.6%

 

12.5%

 

25.0%

 

7.2%

Impact of foreign currency

 

(0.5)%

 

(0.3)%

 

(0.6)%

 

(5.6)%

 

(0.7)%

Adjusted income from operations, as adjusted
to currency neutral

 

(0.4)%

 

8.3%

 

11.9%

 

19.4%

 

6.5%

 

   

Fourth Quarter of
2021

 

Year Ended December 31,
2021

Adjusted diluted earnings per share

 

$                           0.45

 

$                                        1.60

Impact of foreign currency

 

 

(0.01)

Adjusted diluted earnings per share, as adjusted to currency neutral

 

$                           0.45

 

$                                        1.59

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 are 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 Affecting 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 fourth quarter of 2021

                 

Coffee Systems

$                            1

 

$                            2

 

$                  —

 

$                  —

 

$                    3

Packaged Beverages

1

 

1

 

 

 

2

Beverage Concentrates

 

 

 

 

Latin America Beverages

 

1

 

 

 

1

Total

$                            2

 

$                            4

 

$                  —

 

$                  —

 

$                    6

                   

For the fourth quarter of 2020

                 

Coffee Systems

$                            1

 

$                            3

 

$                  —

 

$                  —

 

$                    4

Packaged Beverages

3

 

3

 

 

 

6

Beverage Concentrates

 

 

 

 

Latin America Beverages

 

1

 

 

 

1

Total

$                            4

 

$                            7

 

$                  —

 

$                  —

 

$                 11

                   

For the year ended December 31,
2021

                 

Coffee Systems

$                            4

 

$                          16

 

$                  (2)

 

$                  —

 

$                 18

Packaged Beverages

8

 

7

 

(8)

 

 

7

Beverage Concentrates

 

 

(3)

 

 

(3)

Latin America Beverages

 

2

 

 

 

2

Total

$                          12

 

$                          25

 

$                (13)

 

$                  —

 

$                 24

                   

For the year ended December 31,
2020

                 

Coffee Systems

$                          15

 

$                          10

 

$                    2

 

$                    8

 

$                 35

Packaged Beverages

76

 

25

 

8

 

 

109

Beverage Concentrates

 

 

4

 

 

4

Latin America Beverages

 

2

 

 

 

2

Total

$                          91

 

$                          37

 

$                 14

 

$                    8

 

$               150

                   

 

(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)

In 2021, primarily included incremental benefits provided to frontline workers such as extended sick leave, in order to maintain essential operations during the COVID-19 pandemic. In 2020, primarily reflected temporary incremental frontline incentive pay and benefits, as well as pay for temporary employees, including the associated taxes. Impacts both cost of sales and SG&A expenses.

(3)

Included costs associated with personal protective equipment, temperature scans, cleaning and other sanitization services. Impacts both cost of sales and SG&A expenses.

(4)

In 2020, allowances reflected 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. In 2021, reversals of those allowances reflect improving economic conditions. Impacts SG&A expenses.

(5)

Impacts cost of sales.

 

 

RECONCILIATION OF CERTAIN ADJUSTED FINANCIAL RESULTS
FOR THE YEAR ENDED DECEMBER 31, 2019
(Unaudited, in millions, except per share data)

For the purposes of additional analysis, we have also included certain non-GAAP financial measures for the year ended December 31, 2019.

For the year ended December 31, 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.

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; (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; and (vi) other certain items that are excluded for comparison purposes to prior year periods.

For the year ended December 31, 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) not associated with the DPS Merger; (iv) costs related to significant non-routine 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.

   

Net Sales

 

Income from operations

 

Diluted earnings per share

Reported

 

$                 11,120

 

$                                    2,378

 

$                                         0.88

Items Affecting Comparability:

           

Mark to market

 

 

(45)

 

Amortization of intangibles

 

 

126

 

0.06

Amortization of deferred financing costs

 

 

 

0.01

Amortization of fair value debt adjustment

 

 

 

0.01

Stock compensation

 

 

24

 

0.01

Restructuring and integration costs

 

 

242

 

0.13

Productivity

 

 

97

 

0.05

Transaction costs

 

 

9

 

0.01

Inventory step-up

 

 

3

 

Loss on early extinguishment of debt

 

 

 

0.01

Nonroutine legal matters

 

 

48

 

0.02

Malware incident

 

 

8

 

Adjusted

 

$                 11,120

 

$                                    2,890

 

$                                         1.22

 

Diluted earnings per common share may not foot due to rounding.

RECONCILIATION OF CURRENCY NEUTRAL FINANCIAL RESULTS
FOR THE YEAR ENDED DECEMBER 31, 2021 COMPARED TO THE YEAR ENDED DECEMBER 31, 2019
(Unaudited)

Net sales as adjusted to currency neutral: This adjusted financial result is calculated on a currency neutral basis by converting our local currency net sales for the year ended December 31, 2021 using the foreign currency exchange rates from the year ended December 31, 2019.

   

Growth (%)

Net sales growth compared to the year ended December 31, 2019

 

14.1%

Impact of foreign currency

 

(0.2)%

Net sales growth compared to the year ended December 31, 2019, as adjusted to currency neutral

 

13.9%

 

(PRNewsfoto/Keurig Dr Pepper)

 

 

SOURCE Keurig Dr Pepper Inc.

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