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Keurig Dr Pepper Reports Q1 2023 Results and Reaffirms Guidance for 2023

Company Delivers Continued Strong Net Sales Momentum, led by U.S. Refreshment Beverages

BURLINGTON, Mass. and FRISCO, Texas, April 27, 2023 /PRNewswire/ -- Keurig Dr Pepper Inc. (NASDAQ: KDP) today reported results for the first quarter ended March 31, 2023 and reaffirmed its guidance for full year constant currency net sales growth of 5% and Adjusted diluted EPS growth of 6% to 7%.

 

Reported GAAP

Basis

Adjusted

Basis1

   
 

Q1

Q1

Net Sales

 % vs Prior Year

$3.35 bn

8.9%

$3.35 bn

8.9%

Diluted EPS

   % vs Prior Year

$0.33

(19.5)%

$0.34

3.0%

       

Commenting on the announcement, Chairman and CEO Bob Gamgort stated, "Our overall performance in the quarter demonstrated the resilience of KDP as we delivered on our commitments in a dynamic macro environment. Our results were led by strong revenue growth, supported by successful innovation, increased marketing and modest brand elasticities. The U.S. Refreshment Beverages and International segments exhibited standout performance and, as expected, U.S. Coffee had a slower start to the year. Though the at-home coffee category is still cycling through mobility-related changes relative to last year, single serve continues to gain volume share of the U.S. category. On a consolidated basis and against the backdrop of persistent inflation, we are driving healthy bottom-line growth while reinvesting in our business, and we remain confident in our 2023 outlook."

First Quarter Consolidated Results
Net sales for the first quarter of 2023 increased 8.9% to $3.35 billion, compared to $3.08 billion in the year-ago period and, on a constant currency basis, net sales also advanced 8.9%.  Driving the consolidated net sales growth was favorable net price realization of 9.9%, only slightly offset by lower volume/mix of 1.0%, reflecting the strength of the Company's brand portfolio and continued modest elasticities across most categories. 

KDP in-market performance in the U.S. Liquid Refreshment Beverages (LRB) category remained strong, with retail dollar consumption2 advancing 13.6% and KDP growing market share in categories representing approximately 88% of its cold beverage retail sales base.  The performance reflected strength in CSDs3, seltzers, coconut waters, energy, apple juice and fruit drinks and was driven by Dr Pepper, Canada Dry, A&W, Sunkist, Squirt and Crush CSDs, as well as Polar seltzers, Vita Coco, C4 Energy, Mott's and Hawaiian Punch.

Total at-home coffee category trends continued to be impacted in the quarter by greater consumer mobility versus the prior year, with the single serve pod segment gaining volume share of the category. U.S. retail dollar consumption2 of KDP Manufactured pods decreased 0.5% in IRi tracked channels in the quarter, while KDP Manufactured share remained healthy at approximately 81%.

GAAP operating income for the quarter decreased 39.5% to $584 million, compared to $966 million in the year-ago period, primarily reflecting the unfavorable year-over-year impact of items affecting comparability, including the gain on the Body Armor litigation settlement in 2022, as well as the comparison to year-ago benefits related to the Company's strategic asset investment program, a change in accounting for non-cash stock compensation expense and a recovery of legal fees, which collectively represented an $88 million unfavorable impact in the quarter.  Also impacting the comparison was growth in GAAP gross profit, as continued broad-based inflation was more than offset by the strong net sales performance and higher productivity. 

Excluding items affecting comparability, Adjusted operating income decreased 4.5% to $699 million, despite the strong growth in net sales and Adjusted gross profit, primarily due to the comparison to year-ago benefits, broad-based inflationary pressure, as well as increased marketing investment.  On a percent of net sales basis, Adjusted operating income was 20.8%.  

GAAP net income for the quarter decreased 20.2% to $467 million, or $0.33 per diluted share, compared to $585 million, or $0.41 per diluted share, in the year-ago period.  This performance reflected the unfavorable year-over-year impact of items affecting comparability and the decline in Adjusted operating income, partially offset by the benefits of Nutrabolt equity method earnings, a lower effective tax rate and lower diluted shares outstanding.   Excluding items affecting comparability, Adjusted net income for the quarter advanced 0.6% to $479 million, and Adjusted diluted EPS increased 3.0% to $0.34.

Free cash flow for the first quarter was $16 million, reflecting lower operating cash flow and higher capital expenditures.

During the quarter, the Company repurchased approximately 6.6 million KDP shares at a weighted average price per share of $34.96, totaling approximately $231 million. The Company has approximately $3.4 billion remaining under its share repurchase authorization expiring on December 31, 2025.

___________________

1

Adjusted financial metrics presented in this release are non-GAAP and with growth rates presented on a constant currency basis. See reconciliations of GAAP results to Adjusted results on a constant currency basis in the accompanying tables.

2

Retail consumption data based on Keurig Dr Pepper's custom IRi category definitions for the 13-week period ending 4/2/2023.

3

CSDs refer to "Carbonated Soft Drinks"

First Quarter Segment Results

U.S. Refreshment Beverages
Net sales for the first quarter increased 12.7% to $2.01 billion, compared to $1.78 billion in the year-ago period, reflecting favorable net price realization of 12.5% and a 0.2% increase in volume/mix.  Driving this exceptional performance was strong traction from recent innovation, most notably Dr Pepper Strawberries & Cream, and effective in-market execution, as well as the contribution from our recently announced sales and distribution partnership for C4 Energy.   

GAAP operating income decreased 30.4% to $490 million, compared to $704 million in the year-ago period, largely reflecting the unfavorable year-over-year impact of items affecting comparability, including the gain on the Body Armor litigation settlement in 2022. Also impacting the performance was continued broad-based inflationary pressure and a net $32 million year-over-year headwind from the Company's strategic asset investment program, partially offset by the strong net sales growth and productivity.  Excluding items affecting comparability, Adjusted operating income increased 11.6% to $508 million and, on a percent of net sales basis, totaled 25.3%.

U.S. Coffee
Net sales for the first quarter decreased 1.3% to $931 million, compared to $943 million in the year-ago period.  This performance reflected higher net price realization of 5.3%, more than offset by a 6.6% decline in volume/mix.  

At-home coffee consumption in the quarter continued to normalize post the pandemic.  Pod revenue grew 2.9%, including a shipment decline of 1.9% due primarily to greater mobility versus the prior year.  On a trailing twelve-month basis versus the pre-pandemic Q1 2019 period, at-home pod shipments grew 22.8%, representing a mid-single digit compound annual growth rate (CAGR).

Brewer shipments totaled 10.2 million for the twelve months ending March 31, 2023, representing a 9.8% decline year-over-year.  Compared against pre-pandemic levels represented by the twelve months ending March 31, 2019, brewer shipments grew 25.6%, representing a mid-single digit CAGR.

GAAP operating income decreased 9.0% to $232 million, compared to $255 million in the year-ago period, largely reflecting the decline in volume/mix, broad-based inflationary pressure and an unfavorable year-over-year impact of items affecting comparability, partially offset by higher net price realization and productivity. Excluding items affecting comparability, Adjusted operating income decreased 5.3% to $285 million and, on a percent of net sales basis, totaled 30.6%.

International
Net sales for the first quarter increased 17.2% to $415 million, compared to $354 million in the year-ago period and, on a constant currency basis, net sales advanced 16.7%.  This strong and balanced performance was driven by higher net price realization of 9.0% and volume/mix growth of 7.7%, and reflected strength in Peñafiel and growth in K-Cup® Pods in Canada.

GAAP operating income increased a strong 25.0% to $80 million, compared to $64 million in the year-ago period, largely reflecting the benefits of the double-digit increase in net sales and productivity, as well as items affecting comparability, partially offset by broad-based inflationary pressure.  Excluding items affecting comparability, Adjusted operating income increased 18.3% to $84 million and, on a percent of net sales basis, totaled 20.2%.

2023 Guidance
The 2023 guidance provided below is presented on a constant currency, non-GAAP basis.  The Company does not provide reconciliations of such forward-looking non-GAAP measures to GAAP measures, due to the inability to predict the amount and timing of impacts outside of the Company's control on certain items, such as non-cash gains or losses resulting from mark-to-market adjustments of derivative instruments, among others.

On a constant currency basis, KDP continues to expect net sales growth of 5% and Adjusted diluted EPS growth of 6% to 7% in 2023, with foreign currency translation expected to be an approximate one half of one percentage point headwind to both metrics.

Investor Contacts:
Jane Gelfand
T: 888-340-5287 / jane.gelfand@kdrp.com

Chethan Mallela
T: 646-620-8761 / chethan.mallela@kdrp.com

Media Contact:
Katie Gilroy
T: 781-418-3345 / katie.gilroy@kdrp.com

About Keurig Dr Pepper
Keurig Dr Pepper (KDP) is a leading beverage company in North America, with annual revenue of more than $14 billion and approximately 28,000 employees. KDP holds leadership positions in liquid refreshment beverages, including soft drinks, specialty coffee and tea, water, juice and juice drinks and mixers, and markets the #1 single serve coffee brewing system in the U.S. and Canada. The Company's portfolio of more than 125 owned, licensed and partner brands is designed to satisfy virtually any consumer need, any time, and includes Keurig®, Dr Pepper®, Canada Dry®, Clamato®, CORE®, Green Mountain Coffee Roasters®, Mott's®, Snapple®, and The Original Donut Shop®. Through its powerful sales and distribution network, KDP can deliver its portfolio of hot and cold beverages to nearly every point of purchase for consumers. The Company's Drink Well. Do Good. corporate responsibility platform is focused on the greatest opportunities for impact in the environment, its supply chain, the health and well-being of consumers and with its people and communities. For more information, visit www.keurigdrpepper.com

FORWARD LOOKING STATEMENTS
Certain statements contained herein are "forward-looking statements" within the meaning of applicable securities laws and regulations. These forward-looking statements can generally be identified by the use of words such as "outlook," "guidance," "anticipate," "expect," "believe," "could," "estimate," "feel," "forecast," "intend," "may," "plan," "potential," "project," "should," "target," "will," "would," and similar words. Forward-looking statements by their nature address matters that are, to different degrees, uncertain. These statements are based on the current expectations of our management, are not predictions of actual performance, and actual results may differ materially.

Forward-looking statements are subject to a number of risks and uncertainties, including the factors disclosed in our Annual Report on Form 10-K and subsequent filings with the SEC. We are under no obligation to update, modify or withdraw any forward-looking statements, except as required by applicable law.

NON-GAAP FINANCIAL MEASURES
This release includes certain non-GAAP financial measures including Adjusted gross profit, Adjusted operating income, Adjusted net income, Adjusted diluted EPS, free cash flow and financial measures presented on a constant currency basis, which differ from results using U.S. Generally Accepted Accounting Principles (GAAP). These non-GAAP financial measures should be considered as supplements to the GAAP reported measures, should not be considered replacements for, or superior to, the GAAP measures and may not be comparable to similarly named measures used by other companies. Non-GAAP financial measures typically exclude certain charges, including one-time costs that are not expected to occur routinely in future periods. The Company uses non-GAAP financial measures internally to focus management on performance excluding these special charges to gauge our business operating performance. Management believes this information is helpful to investors because it increases transparency and assists investors in understanding the underlying performance of the Company and in the analysis of ongoing operating trends. Additionally, management believes that non-GAAP financial measures are frequently used by analysts and investors in their evaluation of companies, and their continued inclusion provides consistency in financial reporting and enables analysts and investors to perform meaningful comparisons of past, present and future operating results. The most directly comparable GAAP financial measures and reconciliations to non-GAAP financial measures are set forth in the appendix to this release and included in the Company's filings with the SEC.

To the extent that the Company provides guidance, it does so only on a non-GAAP basis and does not provide reconciliations of such forward-looking non-GAAP measures to GAAP due to the inability to predict the amount and timing of impacts outside of the Company's control on certain items, such as non-cash gains or losses resulting from mark-to-market adjustments of derivative instruments, among others.

 

KEURIG DR PEPPER INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

 
 

First Quarter

(in millions, except per share data)

2023

 

2022

Net sales

$          3,353

 

$          3,078

Cost of sales

1,609

 

1,428

Gross profit

1,744

 

1,650

Selling, general and administrative expenses

1,165

 

1,018

Gain on litigation settlement

 

(299)

Other operating income, net

(5)

 

(35)

Income from operations

584

 

966

Interest expense

23

 

188

Loss on early extinguishment of debt

 

48

Gain on sale of equity method investment

 

(50)

Impairment of investments and note receivable

 

6

Other (income) expense, net

(20)

 

9

Income before provision for income taxes

581

 

765

Provision for income taxes

114

 

180

Net income including non-controlling interest

467

 

585

Less: Net loss attributable to non-controlling interest

 

Net income attributable to KDP

$            467

 

$            585

       

Earnings per common share:

     

Basic

$           0.33

 

$           0.41

Diluted

0.33

 

0.41

Weighted average common shares outstanding:

     

Basic

1,406.2

 

1,418.2

Diluted

1,417.0

 

1,429.7

 

KEURIG DR PEPPER INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 
 

March 31,

 

December 31,

(in millions, except share and per share data)

2023

 

2022

Assets

Current assets:

     

Cash and cash equivalents

$                204

 

$                535

Trade accounts receivable, net

1,451

 

1,484

Inventories

1,391

 

1,314

Prepaid expenses and other current assets

540

 

471

Total current assets

3,586

 

3,804

Property, plant and equipment, net

2,480

 

2,491

Investments in unconsolidated affiliates

1,009

 

1,000

Goodwill

20,117

 

20,072

Other intangible assets, net

23,273

 

23,183

Other non-current assets

1,160

 

1,252

Deferred tax assets

35

 

35

Total assets

$           51,660

 

$           51,837

Liabilities and Stockholders' Equity

Current liabilities:

     

Accounts payable

4,947

 

5,206

Accrued expenses

1,046

 

1,153

Structured payables

137

 

137

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

2,310

 

895

Other current liabilities

687

 

685

Total current liabilities

9,127

 

8,076

Long-term obligations

9,929

 

11,072

Deferred tax liabilities

5,739

 

5,739

Other non-current liabilities

1,763

 

1,825

Total liabilities

26,558

 

26,712

Commitments and contingencies

     

Stockholders' equity:

     

Preferred stock, $0.01 par value, 15,000,000 shares authorized, no shares
issued

 

Common stock, $0.01 par value, 2,000,000,000 shares authorized,
1,403,720,858 and 1,408,394,293 shares issued and outstanding as of March
31, 2023 and December 31, 2022, respectively

14

 

14

Additional paid-in capital

21,210

 

21,444

Retained earnings

3,724

 

3,539

Accumulated other comprehensive income

155

 

129

Total stockholders' equity

25,103

 

25,126

Non-controlling interest

(1)

 

(1)

Total equity

25,102

 

25,125

Total liabilities and stockholders' equity

$           51,660

 

$           51,837

 

KEURIG DR PEPPER INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 
 

First Quarter

(in millions)

2023

 

2022

Operating activities:

     

Net income attributable to KDP

$                  467

 

$                  585

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

     

Depreciation expense

107

 

106

Amortization of intangibles

34

 

34

Other amortization expense

45

 

42

Provision for sales returns

10

 

12

Deferred income taxes

 

8

Employee stock-based compensation expense

29

 

(15)

Loss on early extinguishment of debt

 

48

Gain on sale of equity method investment

 

(50)

Gain on disposal of property, plant and equipment

(5)

 

(38)

Unrealized gain on foreign currency

(2)

 

(11)

Unrealized gain on derivatives

(95)

 

Equity in (earnings) loss of unconsolidated affiliates

(9)

 

3

Impairment on investments and note receivable of unconsolidated affiliates

 

6

Other, net

(4)

 

13

Changes in assets and liabilities:

     

Trade accounts receivable

28

 

(73)

Inventories

(74)

 

(147)

Income taxes receivable and payables, net

60

 

135

Other current and non-current assets

(151)

 

(284)

Accounts payable and accrued expenses

(391)

 

151

Other current and non-current liabilities

22

 

138

Net change in operating assets and liabilities

(506)

 

(80)

Net cash provided by operating activities

71

 

663

Investing activities:

     

Proceeds from sale of investment in unconsolidated affiliates

 

50

Purchases of property, plant and equipment

(62)

 

(109)

Proceeds from sales of property, plant and equipment

7

 

78

Purchases of intangibles

(51)

 

(10)

Issuance of related party note receivable

 

(6)

Investments in unconsolidated affiliates

 

(3)

Other, net

1

 

3

Net cash (used in) provided by investing activities

(105)

 

3

Financing activities:

     

Repayments of Notes

 

(201)

Proceeds from issuance of commercial paper

3,523

 

Repayments of commercial paper

(3,258)

 

(149)

Proceeds from structured payables

34

 

38

Repayments of structured payables

(32)

 

(37)

Cash dividends paid

(281)

 

(265)

Repurchases of common stock

(231)

 

Tax withholdings related to net share settlements

(31)

 

(5)

Payments on finance leases

(24)

 

(20)

Other, net

(3)

 

(5)

Net cash used in financing activities

(303)

 

(644)

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

     

Net change from operating, investing and financing activities

(337)

 

22

Effect of exchange rate changes

6

 

4

Beginning balance

535

 

568

Ending balance

$                  204

 

$                  594

 

KEURIG DR PEPPER INC.

RECONCILIATION OF SEGMENT INFORMATION

(UNAUDITED)

 
 

First Quarter

(in millions)

2023

 

2022

Net Sales

     

U.S. Refreshment Beverages

$            2,007

 

$            1,781

U.S. Coffee

931

 

943

International

415

 

354

Total net sales

$            3,353

 

$            3,078

       

Income from Operations

     

U.S. Refreshment Beverages

$              490

 

$              704

U.S. Coffee

232

 

255

International

80

 

64

Unallocated corporate costs

(218)

 

(57)

Total income from operations

$              584

 

$              966

 

KEURIG DR PEPPER INC.
RECONCILIATION OF CERTAIN NON-GAAP INFORMATION
(UNAUDITED)

The company reports its financial results in accordance with U.S. GAAP. However, management believes that certain non-GAAP financial measures that reflect the way management evaluates the business may provide investors with additional information regarding the company's results, trends and ongoing performance on a comparable basis.

Specifically, investors should consider the following with respect to our financial results:

Adjusted: Defined as certain financial statement captions and metrics adjusted for certain items affecting comparability.

Items affecting comparability: Defined as certain items that are excluded for comparison to prior year periods, adjusted for the tax impact as applicable. Tax impact is determined based upon an approximate rate for each item. For each period, management adjusts for (i) the unrealized mark-to-market impact of derivative instruments not designated as hedges in accordance with U.S. GAAP that do not have an offsetting risk reflected within the financial results, as well as the unrealized mark-to-market impact of our Vita Coco investment; (ii) the amortization associated with definite-lived intangible assets; (iii) the amortization of the deferred financing costs associated with the DPS Merger; (iv) the amortization of the fair value adjustment of the senior unsecured notes obtained as a result of the DPS Merger; (v) stock compensation expense and the associated windfall tax benefit attributable to the matching awards made to employees who made an initial investment in KDP; (vi) 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 first quarter of 2023, the other certain items excluded for comparison purposes include productivity expenses.

For the first quarter of 2022, the other certain items excluded for comparison purposes include (i) restructuring and integration expenses related to significant business combinations; (ii) productivity expenses; (iii) costs related to significant non-routine legal matters, specifically the antitrust litigation; (iv) the loss on early extinguishment of debt related to the redemption of debt; (v) incremental costs to our operations related to risks associated with the COVID-19 pandemic, which were incurred to either maintain the health and safety of our front-line employees or temporarily increase compensation to such employees to ensure essential operations continue during the pandemic; (vi) the gain on the sale of our investment in BodyArmor as a result of the settlement of the associated holdback liability; (vii) the gain on the settlement of our prior litigation with BodyArmor, excluding recoveries of previously incurred litigation expenses which were included in our adjusted results; and (viii) losses recognized with respect to our equity method investment in Bedford as a result of funding our share of their wind-down costs.

Constant currency adjusted: Defined as certain financial statement captions and metrics adjusted for certain items affecting comparability, calculated on a constant currency basis by converting our current period local currency financial results using the prior period foreign currency exchange rates.

For the first quarter ended March 31, 2022 and 2021, the supplemental financial data set forth below includes reconciliations of adjusted and constant currency adjusted financial measures to the applicable financial measure presented in the unaudited condensed consolidated financial statements for the same period.

KEURIG DR PEPPER INC.

RECONCILIATION OF CERTAIN NON-GAAP INFORMATION

(UNAUDITED)

 
 

Cost of sales

 

Gross profit

 

Gross
margin

 

Selling, general
and administrative
expenses

 

Gain on
litigation
settlement

 

Other operating
income, net

 

Income from
operations

 

Operating
margin

For the First Quarter of 2023

                             

Reported

$            1,609

 

$            1,744

 

52.0 %

 

$                    1,165

 

$                —

 

$                     (5)

 

$            584

 

17.4 %

Items Affecting Comparability:

                             

Mark to market

14

 

(14)

     

(12)

 

 

 

(2)

   

Amortization of intangibles

 

     

(34)

 

 

 

34

   

Stock compensation

 

     

(5)

 

 

 

5

   

Productivity

(38)

 

38

     

(40)

 

 

 

78

   

Adjusted

$            1,585

 

$            1,768

 

52.7 %

 

$                    1,074

 

$                —

 

$                     (5)

 

$            699

 

20.8 %

Impact of foreign currency

       

— %

                 

0.1 %

Constant currency adjusted

       

52.7 %

                 

20.9 %

                               

For the First Quarter of 2022

                             

Reported

$            1,428

 

$            1,650

 

53.6 %

 

$                    1,018

 

$             (299)

 

$                   (35)

 

$            966

 

31.4 %

Items Affecting Comparability:

                             

Mark to market

59

 

(59)

     

26

 

 

 

(85)

   

Amortization of intangibles

 

     

(34)

 

 

 

34

   

Stock compensation

 

     

7

 

 

 

(7)

   

Restructuring and integration costs

 

     

(33)

 

 

(3)

 

36

   

Productivity

(28)

 

28

     

(22)

 

 

 

50

   

Non-routine legal matters

 

     

(4)

 

 

 

4

   

COVID-19

(4)

 

4

     

(1)

 

 

 

5

   

Gain on litigation

 

     

 

271

 

 

(271)

   

Adjusted

$            1,455

 

$            1,623

 

52.7 %

 

$                       957

 

$              (28)

 

$                   (38)

 

$            732

 

23.8 %

 

Refer to page A-8 for reconciliations of reported net sales to constant currency net sales and adjusted income from operations to constant currency adjusted income from operations.

 

KEURIG DR PEPPER INC.

RECONCILIATION OF CERTAIN NON-GAAP INFORMATION

(UNAUDITED)

 
 

Interest
expense

 

Loss on early
extinguishment
of debt

 

Gain on sale of
equity method
investment

 

Impairment of
investments and
note receivable

 

Other
(income)
expense, net

 

Income before
provision for
income taxes

 

Provision for
income taxes

 

Effective
tax rate

 

Net income
attributable
to KDP

 

Diluted
earnings
per share

For the First Quarter of 2023

                                     

Reported

$      23

 

$                   —

 

$                   —

 

$                     —

 

$             (20)

 

$               581

 

$              114

 

19.6 %

 

$        467

 

$    0.33

Items Affecting Comparability:

                                     

Mark to market

93

 

 

 

 

9

 

(104)

 

(29)

     

(75)

 

(0.05)

Amortization of intangibles

 

 

 

 

 

34

 

10

     

24

 

0.02

Amortization of fair value debt adjustment

(4)

 

 

 

 

 

4

 

1

     

3

 

Stock compensation

 

 

 

 

 

5

 

2

     

3

 

Productivity

 

 

 

 

 

78

 

21

     

57

 

0.04

Adjusted

$     112

 

$                   —

 

$                   —

 

$                     —

 

$             (11)

 

$               598

 

$              119

 

19.9 %

 

$        479

 

$    0.34

Impact of foreign currency

                           

0.3 %

       

Constant currency adjusted

                           

20.2 %

       
                                       

For the First Quarter of 2022

                                     

Reported

$     188

 

$                   48

 

$                 (50)

 

$                       6

 

$                9

 

$               765

 

$              180

 

23.5 %

 

$        585

 

$    0.41

Items Affecting Comparability:

                                     

Mark to market

(71)

 

 

 

 

(3)

 

(11)

 

(2)

     

(9)

 

(0.01)

Amortization of intangibles

 

 

 

 

 

34

 

9

     

25

 

0.02

Amortization of deferred financing costs

(1)

 

 

 

 

 

1

 

     

1

 

Amortization of fair value of debt
adjustment

(5)

 

 

 

 

 

5

 

1

     

4

 

Stock compensation

 

 

 

 

 

(7)

 

(1)

     

(6)

 

Restructuring and integration costs

 

 

 

 

 

36

 

9

     

27

 

0.02

Productivity

 

 

 

 

 

50

 

12

     

38

 

0.03

Impairment of investment

 

 

 

(6)

 

 

6

 

     

6

 

Loss on early extinguishment of debt

 

(48)

 

 

 

 

48

 

11

     

37

 

0.03

Non-routine legal matters

 

 

 

 

 

4

 

1

     

3

 

COVID-19

 

 

 

 

 

5

 

1

     

4

 

Gain on litigation

 

 

 

 

 

(271)

 

(68)

     

(203)

 

(0.14)

Gain on sale of equity-method investment

 

 

50

 

 

 

(50)

 

(12)

     

(38)

 

(0.03)

Adjusted

$     111

 

$                   —

 

$                   —

 

$                     —

 

$                6

 

$               615

 

$              141

 

22.9 %

 

$        474

 

$    0.33

                                       

Change - adjusted

0.9 %

                             

1.1 %

 

3.0 %

Impact of foreign currency

— %

                             

(0.5) %

 

— %

Change - Constant currency adjusted

0.9 %

                             

0.6 %

 

3.0 %

 

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

 

KEURIG DR PEPPER INC.

RECONCILIATION OF CERTAIN FINANCIAL MEASURES BY SEGMENT TO CONSTANT CURRENCY

ADJUSTED FINANCIAL MEASURES BY SEGMENT

(UNAUDITED)

 

(in millions)

Reported

 

Items Affecting
Comparability

 

Adjusted

For the first quarter of 2023:

         

Income from operations

         

U.S. Refreshment Beverages

$                            490

 

$                              18

 

$                            508

U.S. Coffee

232

 

53

 

285

International

80

 

4

 

84

Unallocated corporate costs

(218)

 

40

 

(178)

Total income from operations

$                            584

 

$                            115

 

$                            699

           

For the first quarter of 2022:

         

Income from operations

         

U.S. Refreshment Beverages

$                            704

 

$                          (249)

 

$                            455

U.S. Coffee

255

 

46

 

301

International

64

 

7

 

71

Unallocated corporate costs

(57)

 

(38)

 

(95)

Total income from operations

$                            966

 

$                          (234)

 

$                            732

 
 

Reported

 

Impact of Foreign
Currency

 

Constant Currency

For the first quarter of 2023:

         

Net sales

         

U.S. Refreshment Beverages

12.7 %

 

— %

 

12.7 %

U.S. Coffee

(1.3)

 

 

(1.3)

International

17.2

 

(0.5)

 

16.7

Total net sales

8.9

 

 

8.9

 
 

Adjusted

 

Impact of Foreign
Currency

 

Constant Currency
Adjusted

For the first quarter of 2023:

         

Income from operations

         

U.S. Refreshment Beverages

11.6 %

 

— %

 

11.6 %

U.S. Coffee

(5.3)

 

 

(5.3)

International

18.3

 

 

18.3

Total income from operations

(4.5)

 

 

(4.5)

 

   

Reported

 

Items
Affecting
Comparability

 

Adjusted

 

Impact of
Foreign
Currency

 

Constant
Currency
Adjusted

For the first quarter of 2023:

                   

Operating margin

                   

U.S. Refreshment Beverages

 

24.4 %

 

0.9 %

 

25.3 %

 

— %

 

25.3 %

U.S. Coffee

 

24.9

 

5.7

 

30.6

 

 

30.6

International

 

19.3

 

0.9

 

20.2

 

0.1

 

20.3

Total operating margin

 

17.4

 

3.4

 

20.8

 

0.1

 

20.9

 

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

 

KEURIG DR PEPPER INC.

RECONCILIATION OF ADJUSTED EBITDA AND MANAGEMENT LEVERAGE RATIO

(UNAUDITED)

 

(in millions, except for ratio)

 

ADJUSTED EBITDA RECONCILIATION - LAST TWELVE MONTHS

 

Net income attributable to KDP

$                  1,318

Interest expense

528

Provision for income taxes

218

Other (income) expense, net

(15)

Depreciation expense

400

Other amortization

175

Amortization of intangibles

138

EBITDA

$                  2,762

Items affecting comparability:

 

Loss on early extinguishment of debt

$                     169

Impairment of intangible assets

477

Impairment of investments and note receivable

6

Restructuring and integration expenses

136

Productivity

218

Non-routine legal matters

9

Stock compensation

17

COVID-19

9

Transaction costs

1

Foundational projects

4

Mark to market

233

Adjusted EBITDA

$                  4,041

   
 

March 31,

 

2023

Principal amounts of:

 

Commercial paper notes

$                     664

Senior unsecured notes

11,743

Total principal amounts

12,407

Less: Cash and cash equivalents

204

Total principal amounts less cash and cash equivalents

$                12,203

   

March 31, 2023 Management Leverage Ratio

3.0

 

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

 

KEURIG DR PEPPER INC.

RECONCILIATION OF ADJUSTED EBITDA - LAST TWELVE MONTHS

(UNAUDITED)

 

(in millions)

SECOND
QUARTER OF
2022

 

THIRD
QUARTER OF
2022

 

FOURTH
QUARTER OF
2022

 

FIRST
QUARTER OF
2023

 

LAST TWELVE
MONTHS

Net income attributable to KDP

$                 218

 

$                 180

 

$                 453

 

$                 467

 

$             1,318

Interest expense

175

 

207

 

123

 

23

 

528

Provision for income taxes

(5)

 

4

 

105

 

114

 

218

Other (income) expense, net

9

 

4

 

(8)

 

(20)

 

(15)

Depreciation expense

99

 

96

 

98

 

107

 

400

Other amortization

44

 

43

 

43

 

45

 

175

Amortization of intangibles

33

 

33

 

38

 

34

 

138

EBITDA

$                 573

 

$                 567

 

$                 852

 

$                 770

 

$             2,762

Items affecting comparability:

                 

Loss on early extinguishment of debt

$                 169

 

$                   —

 

$                   —

 

$                   —

 

$                 169

Impairment of intangible assets

 

311

 

166

 

 

477

Impairment on investments and note receivable

6

 

 

 

 

6

Restructuring and integration expenses

22

 

33

 

81

 

 

136

Productivity

44

 

50

 

64

 

60

 

218

Nonroutine legal matters

3

 

2

 

4

 

 

9

Stock compensation

5

 

5

 

2

 

5

 

17

COVID-19

4

 

5

 

 

 

9

Transaction costs

1

 

 

 

 

1

Foundational projects

2

 

1

 

1

 

 

4

Mark to market

138

 

106

 

(9)

 

(2)

 

233

Adjusted EBITDA

$                 967

 

$             1,080

 

$             1,161

 

$                 833

 

$             4,041

 

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

 

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 quarter of 2023 and 2022, there were no certain items excluded for comparison to prior year periods.

   

First Quarter

(in millions)

 

2023

 

2022

Net cash provided by operating activities

 

$                       71

 

$                     663

Purchases of property, plant and equipment

 

(62)

 

(109)

Proceeds from sales of property, plant and equipment

 

7

 

78

Free Cash Flow

 

$                       16

 

$                     632

 

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

 

(PRNewsfoto/Keurig Dr Pepper)

 

 

SOURCE Keurig Dr Pepper Inc.

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