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Keurig Dr Pepper Reports Q4 2023 Results and Provides Outlook for 2024

Q4 Performance Led by Continued Momentum in U.S. Refreshment Beverages & International
After a Strong 2023, Company Expects to Deliver On-Algorithm Net Sales and Adjusted EPS Growth in 2024

BURLINGTON, Mass. and FRISCO, Texas, Feb. 22, 2024 /PRNewswire/ -- Keurig Dr Pepper Inc. (NASDAQ: KDP) today reported results for the fourth quarter and full year ended December 31, 2023. The Company also provided guidance for 2024.



Reported GAAP Basis


Adjusted Basis1



Q4


FY 2023


Q4


FY 2023

Net Sales


$3.87 bn


$14.81 bn


$3.87 bn


$14.81 bn

% vs prior year


1.7 %


5.4 %


1.1 %


4.9 %

Diluted EPS


$0.49


$1.55


$0.55


$1.79

% vs prior year


53.1 %


53.5 %


10.0 %


6.0 %

Full-year 2023 highlights:

  • Mid-single-digit net sales growth, led by U.S. Refreshment Beverages and International segments.
  • Adjusted diluted EPS growth of 6%, in line with guidance and reflecting a significantly enhanced composition of earnings. EPS growth accelerated in the second half of the year.
  • In U.S. Refreshment Beverages, market share gains in categories representing approximately 85% of the portfolio.
  • In U.S. Coffee, Keurig brewing system expanded to approximately 40 million U.S. households. Adjusted segment margins strongly inflected in the second half of the year.
  • In International, double-digit net sales growth, increasing to 13% of the total company sales mix.
  • Portfolio expansion into quickly growing ready-to-drink coffee and sports hydration categories through strategic partnerships with Chobani (La Colombe) and Grupo PiSA (Electrolit). Successful execution during year one of the strategic partnership with Nutrabolt (C4 Energy).
  • Over $1.8 billion returned to shareholders through dividends, including a 7.5% increase in KDP's quarterly dividend, and the opportunistic repurchase of 22 million shares.

Commenting on the results, Chairman and CEO Bob Gamgort stated, "2023 was a year of significant progress for KDP. Broad-based market share gains across our portfolio and entries into attractive white spaces supported our revenue momentum. Gross margin expansion resumed, as the relationship between inflation, pricing, and our redoubled productivity efforts improved throughout the year and helped fund investments in our brands and capabilities. We delivered on our financial commitments while simultaneously enhancing the composition of our earnings profile and strengthening our balance sheet.

Gamgort continued, "We now enter 2024 with a high-quality foundation from which to grow, as we target performance in line with our long-term financial algorithm. Moreover, we head into 2024 with confidence and strategic focus, bolstered by our bold challenger culture and a refreshed, energized executive leadership team."

2023 Full Year Consolidated Results

Net sales for the full year increased 5.4% to $14.8 billion. On a constant currency basis, net sales advanced 4.9%, driven by net price realization of 7.0%, partly offset by lower volume/mix of 2.1%. This performance reflected the strength of the Company's brand portfolio and in-market execution, as well as continued manageable elasticities across most categories.

GAAP operating income increased 22.5% to $3.2 billion. The comparison primarily reflected the favorable year-over-year impact of items affecting comparability, including lapping a $477 million impairment in the prior year period.

Adjusted operating income increased 2.8% to $3.7 billion and totaled 24.7% as a percent of net sales. Adjusted operating income growth was driven by 7.6% Adjusted gross profit growth, translating to 150 basis points of Adjusted gross margin expansion. Adjusted operating income growth reflected higher net price realization and productivity, partly offset by the impact of inflationary pressures, the volume/mix decline, and higher SG&A costs, including increased marketing investment.

GAAP net income for the year increased 51.9% to $2.2 billion, or $1.55 per diluted share. This performance primarily reflected the increase in GAAP operating income and the favorable year-over-year impact of non-operating items affecting comparability.

Adjusted net income for the year advanced 4.4% to $2.5 billion, and Adjusted diluted EPS increased 6.0% to $1.79. The Adjusted net income and EPS growth was driven by the Adjusted operating income growth and a benefit from Nutrabolt equity method earnings, partly offset by higher interest expense.

Operating cash flow for the full year was $1.3 billion and free cash flow totaled $913 million. Operating and free cash flow included a $1.6 billion use of cash from accounts payable and accrued expenses, primarily related to the Company's decision to strategically reduce its supplier financing program.

2023 Full Year Segment Results

U.S. Refreshment Beverages

Net sales for the full year increased 9.1% to $8.8 billion, driven by net price realization of 9.6%, partly offset by a modest decline in volume/mix of 0.5%. This performance reflected resilient category trends, continued market share gains, and the contribution from KDP's sales and distribution partnership with Nutrabolt for C4 Energy.

KDP in-market performance in the U.S. Liquid Refreshment Beverages (LRB) category was strong. Retail dollar consumption2 advanced 8.7% and market share grew in categories representing approximately 85% of the Company's cold beverage retail sales base. The dollar share gains were led by Dr Pepper, Polar, Evian, Vita Coco, C4 Energy, and Mott's apple juice.

GAAP operating income increased 26.6% to $2.5 billion. The growth included a favorable year-over-year impact of items affecting comparability, including lapping a $477 million impairment in the prior year period.

Adjusted operating income increased 13.9% to $2.6 billion and totaled 29.0% as a percent of net sales, driven by net sales growth and productivity, partly offset by cost inflation and increased marketing investment.

U.S. Coffee

Net sales for the full year decreased 5.4% to $4.1 billion, driven by net price realization of 2.5%, which was more than offset by a volume/mix decline of 7.9%.

Pod revenue decreased 3.6%, driven by a pod shipment decline of 5.1%. Across IRi tracked channels, U.S. retail dollar consumption2 of KDP-Manufactured K-Cup® Pods decreased 4.5%, with stronger performance registered in untracked channels. KDP Manufactured dollar share in the year was approximately 80%.

Brewer shipments totaled 9.7 million for the twelve months ending December 31, 2023, declining 10.3% year-over-year amid a softer discretionary demand environment and due to the impact of retailer inventory shifts during the first half of the year. Compared against pre-pandemic levels represented by the twelve months ending December 31, 2019, brewer shipments grew 13.0% and at a 3% CAGR. Over that same timeframe, Keurig brewing system households increased by 10 million to approximately 40 million.

GAAP operating income decreased 4.7% to $1.2 billion, including a favorable year-over-year impact from items affecting comparability.

Adjusted operating income decreased 4.3% to $1.3 billion and totaled 32.7% as a percent of net sales. Adjusted operating income margin expanded versus prior year, driven by higher net price realization and productivity, partly offset by inflationary pressures and the volume/mix decline.

International

Net sales for the full year increased 15.0% to $1.9 billion. On a constant currency basis, net sales advanced 10.5%, driven by net price realization of 5.5% and volume/mix growth of 5.0%. This strong performance reflected continued momentum across markets.

GAAP operating income increased 27.3% to $475 million, including a favorable year-over-year impact of items affecting comparability.

Adjusted operating income increased 19.5% to $497 million and totaled 25.9% as a percent of net sales, driven by net sales growth and productivity, partly offset by continued inflation.

Fourth Quarter Consolidated Results

Net sales for the fourth quarter increased 1.7% to $3.9 billion. On a constant currency basis, net sales advanced 1.1%, driven by net price realization of 4.8%, partly offset by lower volume/mix of 3.7%.

GAAP operating income increased 40.1% to $943 million. The comparison primarily reflected the favorable year-over-year impact of items affecting comparability, including lapping a $166 million impairment in the prior year period.

Adjusted operating income increased 6.5% to $1.1 billion and totaled 28.5% as a percent of net sales. Adjusted operating income growth was driven by 9.7% Adjusted gross profit growth, translating to 450 basis points of Adjusted gross margin expansion. Adjusted operating income growth reflected higher net price realization, productivity, and earned performance incentives related to C4 Energy, partly offset by the impact of the volume/mix decline and higher SG&A costs, including increased marketing investment.

GAAP net income for the quarter increased 53.0% to $693 million, or $0.49 per diluted share. This performance primarily reflected the increase in GAAP operating income and the favorable year-over-year impact of non-operating items affecting comparability, partly offset by a higher year-over-year GAAP tax rate.

Adjusted net income for the quarter advanced 7.1% to $770 million, and Adjusted diluted EPS increased 10.0% to $0.55.  The Adjusted net income growth was driven by the Adjusted operating income growth and a benefit from Nutrabolt equity method earnings, partly offset by a higher year-over-year tax rate. Adjusted diluted EPS growth also reflected lower diluted shares outstanding.

Operating cash flow for the fourth quarter was $297 million and free cash flow totaled $143 million. Operating and free cash flow included a $463 million use of cash from accounts payable and accrued expenses, primarily related to the Company's decision to strategically reduce its supplier financing program.

Fourth Quarter Segment Results

U.S. Refreshment Beverages

Net sales for the fourth quarter increased 6.8% to $2.2 billion, driven by net price realization of 7.5%, partly offset by a modest decline in volume/mix of 0.7%. This performance reflected manageable elasticities, continued market share gains, and the contribution from KDP's sales and distribution partnership with Nutrabolt for C4 Energy.

KDP in-market performance in the U.S. Liquid Refreshment Beverages (LRB) category remained healthy. Retail dollar consumption3 advanced 3.9% and market share grew in categories representing approximately 85% of the Company's cold beverage retail sales base. The dollar share gains were led by Dr Pepper, Polar, Evian, Vita Coco, C4 Energy, and Hawaiian Punch.

GAAP operating income increased 69.0% to $688 million. The growth primarily reflected the favorable year-over-year impact of items affecting comparability, including lapping the $166 million impairment in the prior year period.

Adjusted operating income increased 20.2% to $713 million and totaled 32.2% as a percent of net sales, driven by net sales growth, productivity, and earned performance incentives related to C4 Energy, partly offset by continued cost inflation and increased marketing investment.

U.S. Coffee

Net sales for the fourth quarter decreased 9.9% to $1.2 billion, driven by net price realization of 0.8%, which was more than offset by a volume/mix decline of 10.7%.

Pod revenue decreased 6.9%, driven by a shipment decline of 2.7% and unfavorable mix. Across IRi tracked channels, U.S. retail dollar consumption3 of KDP-Manufactured K-Cup® Pods decreased 8.6%, with stronger performance registered in untracked channels. KDP Manufactured dollar share in the quarter was approximately 80%.

GAAP operating income decreased 2.5% to $383 million, despite a favorable year-over-year impact of items affecting comparability.

Adjusted operating income decreased 2.8% to $423 million, primarily due to the decline in volume/mix, and totaled 36.5% as a percent of net sales. Adjusted operating income margin expanded 260 basis points versus the prior year, reflecting a favorable relationship between higher net price realization, productivity, and input costs.

International

Net sales for the fourth quarter increased 11.5% to $495 million. On a constant currency basis, net sales advanced 6.5%, driven by net price realization of 3.6% and volume/mix growth of 2.9%. This strong performance reflected continued momentum across markets.

GAAP operating income increased 26.3% to $144 million, despite an unfavorable year-over-year impact of items affecting comparability.

Adjusted operating income increased 19.8% to $152 million and totaled 30.7% as a percent of net sales, driven by the net sales growth and productivity, partly offset by continued inflation.

2024 Guidance

The 2024 guidance provided below is presented on a constant currency, non-GAAP basis. The Company does not provide reconciliations of such forward-looking non-GAAP measures to GAAP measures, due to the inability to predict the amount and timing of impacts outside of the Company's control on certain items, such as non-cash gains or losses resulting from mark-to-market adjustments of derivative instruments, among others, which could be material.

KDP expects constant currency net sales growth in a mid-single-digit range and Adjusted diluted EPS growth in a high-single-digit range in 2024. Foreign currency translation is expected to approximate a half of one percentage point headwind to both net sales and EPS growth.

________________________________________

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

2 Retail consumption data based on Keurig Dr Pepper's custom IRi (Circana) category definitions for the 52-week period ending 12/31/2023.

3 Retail consumption data based on Keurig Dr Pepper's custom IRi (Circana) category definitions for the 13-week period ending 12/31/2023.

Investor Contacts:

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

Chethan Mallela
T: 888-340-5287 / chethan.mallela@kdrp.com

Media Contact:

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

ABOUT KEURIG DR PEPPER

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

FORWARD LOOKING STATEMENTS

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

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

NON-GAAP FINANCIAL MEASURES

This release includes certain non-GAAP financial measures, which differ from results using U.S. Generally Accepted Accounting Principles (GAAP).  These non-GAAP financial measures should be considered as supplements to and should not be considered replacements for, or superior to, the GAAP measures.  These measures may differ from similarly titled non-GAAP financial measures presented by other companies, and other companies may not define the non-GAAP financial measure in the same way. Non-GAAP financial measures typically exclude certain charges, including one-time costs that are not expected to occur routinely in future periods, described by the Company as "items affecting comparability". Refer to page A-5 for the Company's description of items affecting comparability for each period presented. The Company uses non-GAAP financial measures to evaluate our operating and financial performance and to compare such performance to that of prior periods and to the performance of our competitors. Additionally, we use non-GAAP financial measures in making operational and financial decisions and in our budgeting and planning process. We believe that providing non-GAAP financial measures to investors helps investors evaluate our operating performance, profitability and business trends in a way that is consistent with how management evaluates such performance.

Adjusted gross profit. Adjusted gross profit is defined as Net sales less Cost of sales, as adjusted for items affecting comparability as described on page A-5. Management believes that Adjusted gross profit is useful for investors in evaluating the Company's operating results and understanding the Company's operating trends by adjusting certain items that can vary significantly depending on specific underlying transactions or events, thereby affecting comparability.

Adjusted operating income. Adjusted operating income is defined as Income from operations, as adjusted for items affecting comparability as described on page A-5. Management believes that Adjusted operating income is useful for investors in evaluating the Company's operating results and understanding the Company's operating trends by adjusting certain items that can vary significantly depending on specific underlying transactions or events, thereby affecting comparability.

Adjusted net income attributable to KDP. Adjusted net income attributable to KDP is defined as Net income attributable to KDP, as adjusted for items affecting comparability as described on page A-5. Management believes that Adjusted net income is useful for investors in evaluating the Company's operating results and understanding the Company's operating trends by adjusting certain items that can vary significantly depending on specific underlying transactions or events, thereby affecting comparability.

Adjusted diluted EPS. Adjusted diluted EPS is defined as Diluted EPS, as adjusted for items affecting comparability as described on page A-5. Management believes that Adjusted diluted EPS is useful for investors in providing period-to-period comparisons of the results of our operations since it adjusts for certain items affecting overall comparability.

Adjusted gross margin. Adjusted gross margin is defined as Adjusted gross profit divided by Net sales. Management believes that Adjusted gross margin is useful for investors as supplemental measures to evaluate our operating performance and ability to manage ongoing costs.

Adjusted operating margin. Adjusted operating margin is defined as Adjusted Income from operations divided by Net sales. Management believes that Adjusted operating margin is useful for investors as supplemental measures to evaluate our operating performance and ability to manage ongoing costs.

Adjusted interest expense. Adjusted interest expense is defined as Interest expense, net, as adjusted for items affecting comparability as described on page A-5. Management believes that Adjusted interest expense is useful for investors in evaluating our performance and establishing expectations for the impacts of interest expenses.

Adjusted EBITDA. Adjusted EBITDA is defined as EBITDA, as adjusted for items affecting comparability as described on page A-5. EBITDA is defined as Net income attributable to KDP as adjusted for interest expense, net; provision for income taxes; depreciation expense; amortization of intangibles; and other amortization. Management believes that Adjusted EBITDA is useful for investors in evaluating the Company's operating results and understanding the Company's operating trends by adjusting certain items that can vary significantly depending on specific underlying transactions or events, thereby affecting comparability.

Management leverage ratio. Management leverage ratio is defined as KDP's total principal amounts of debt less cash and cash equivalents, divided by Adjusted EBITDA. Management believes that the Management leverage ratio is useful for investors in evaluating the Company's liquidity and assessing the Company's ability to meet its financial obligations.

Free cash flow. 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. Management uses this measure to evaluate the company's performance and make resource allocation decisions.

Financial measures presented on a constant currency basis. 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. Because our reporting currency is the U.S. Dollar, the value of financial measures presented in U.S. Dollar will be affected by changes in currency exchange rates. Therefore, we present certain financial measures on a constant currency basis for greater comparability.

 

KEURIG DR PEPPER INC.

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)



Fourth Quarter


Year Ended December 31,

(in millions, except per share data)

2023


2022


2023


2022

Net sales

$         3,867


$         3,803


$       14,814


$       14,057

Cost of sales

1,683


1,807


6,734


6,734

Gross profit

2,184


1,996


8,080


7,323

Selling, general, and administrative expenses

1,258


1,227


4,912


4,645

Impairment of intangible assets


166


2


477

Gain on litigation settlement




(299)

Other operating income, net

(17)


(70)


(26)


(105)

Income from operations

943


673


3,192


2,605

Interest expense, net

64


123


496


693

Loss on early extinguishment of debt




217

Gain on sale of equity method investment




(50)

Impairment of investments and note receivable




12

Other income, net

(20)


(8)


(61)


14

Income before provision for income taxes

899


558


2,757


1,719

Provision for income taxes

206


105


576


284

Net income including non-controlling interest

693


453


2,181


1,435

Less: Net loss attributable to non-controlling interest




(1)

 Net income attributable to KDP

$            693


$            453


$         2,181


$         1,436









Earnings per common share:








Basic

$           0.50


$           0.32


$           1.56


$           1.01

Diluted

0.49


0.32


1.55


1.01

Weighted average common shares outstanding:








Basic

1,393.6


1,415.5


1,399.3


1,416.8

Diluted

1,401.3


1,427.5


1,408.4


1,428.5

 

KEURIG DR PEPPER INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)



December 31,


December 31,

(in millions, except share and per share data)

2023


2022

Assets

Current assets:




Cash and cash equivalents

$                267


$                535

Trade accounts receivable, net

1,368


1,484

Inventories

1,142


1,314

Prepaid expenses and other current assets

598


471

Total current assets

3,375


3,804

Property, plant and equipment, net

2,699


2,491

Investments in unconsolidated affiliates

1,387


1,000

Goodwill

20,202


20,072

Other intangible assets, net

23,287


23,183

Other non-current assets

1,149


1,252

Deferred tax assets

31


35

Total assets

$           52,130


$           51,837

Liabilities and Stockholders' Equity

Current liabilities:




Accounts payable

3,597


5,206

Accrued expenses

1,242


1,153

Structured payables

117


137

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

3,246


895

Other current liabilities

714


685

Total current liabilities

8,916


8,076

Long-term obligations

9,945


11,072

Deferred tax liabilities

5,760


5,739

Other non-current liabilities

1,833


1,825

Total liabilities

26,454


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, 1,390,446,043

and 1,408,394,293 shares issued and outstanding as of December 31, 2023 and

2022, respectively

14


14

Additional paid-in capital

20,788


21,444

Retained earnings

4,559


3,539

Accumulated other comprehensive income

315


129

Total stockholders' equity

25,676


25,126

Non-controlling interest


(1)

Total equity

25,676


25,125

Total liabilities and stockholders' equity

$           52,130


$           51,837

 

KEURIG DR PEPPER INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)



Year Ended December 31,

(in millions)

2023


2022

Operating activities:




Net income attributable to KDP

$               2,181


$               1,436

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




Depreciation expense

402


399

Amortization of intangibles

137


138

Other amortization expense

181


172

Provision for sales returns

61


61

Deferred income taxes

(4)


(289)

Employee stock-based compensation expense

116


52

Loss on early extinguishment of debt


217

Gain on sale of equity method investment


(50)

Gain on disposal of property, plant, and equipment

(1)


(80)

Unrealized (gain) loss on foreign currency

(13)


26

Unrealized loss on derivatives

31


383

Settlements of interest rate contracts

54


125

Equity in (earnings) loss of unconsolidated affiliates

(33)


5

Earned equity

(44)


Impairment of intangible assets

2


477

Impairment of investments and note receivable of unconsolidated affiliate


12

Other, net

6


28

Changes in assets and liabilities:




Trade accounts receivable

70


(398)

Inventories

182


(426)

Income taxes receivable and payables, net

(199)


(105)

Other current and non-current assets

(192)


(456)

Accounts payable and accrued expenses

(1,618)


903

Other current and non-current liabilities

10


207

Net change in operating assets and liabilities

(1,747)


(275)

Net cash provided by operating activities

1,329


2,837

Investing activities:




Proceeds from sale of investment in unconsolidated affiliates


50

Purchases of property, plant, and equipment

(425)


(353)

Proceeds from sales of property, plant, and equipment

9


168

Purchases of intangibles

(56)


(26)

Issuance of related party note receivable


(18)

Investments in unconsolidated affiliates

(316)


(962)

Other, net

4


6

Net cash used in investing activities

(784)


(1,135)

Financing activities:




Proceeds from issuance of Notes


3,000

Repayments of Notes

(500)


(3,365)

Net proceeds from issuance of commercial paper

1,697


250

Proceeds from structured payables

130


155

Repayments of structured payables

(148)


(158)

Cash dividends paid

(1,142)


(1,080)

Repurchases of common stock

(706)


(379)

Tax withholdings related to net share settlements

(62)


(15)

Payments on finance leases

(95)


(90)

Other, net

(6)


(46)

Net cash used in financing activities

(832)


(1,728)

Cash and cash equivalents:




Net change from operating, investing and financing activities

(287)


(26)

Effect of exchange rate changes

19


(7)

Beginning balance

535


568

Ending balance

$                  267


$                  535

 

KEURIG DR PEPPER INC.

RECONCILIATION OF SEGMENT INFORMATION

(UNAUDITED)



Fourth Quarter


Year Ended December 31,

(in millions)

2023


2022


2023


2022

Net Sales








U.S. Refreshment Beverages

$            2,214


$            2,074


$            8,821


$            8,083

U.S. Coffee

1,158


1,285


4,071


4,302

International

495


444


1,922


1,672

Total net sales

$            3,867


$            3,803


$          14,814


$          14,057









Income from Operations








U.S. Refreshment Beverages

$              688


$              407


$            2,483


$            1,961

U.S. Coffee

383


393


1,158


1,215

International

144


114


475


373

Unallocated corporate costs

(272)


(241)


(924)


(944)

Total income from operations

$              943


$              673


$            3,192


$            2,605

 

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

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

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

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

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

For the fourth quarter and full year ended December 31, 2023, the other certain items excluded for comparison purposes include (i) productivity expenses, (ii) restructuring expenses associated with the 2023 CEO Succession and Associated Realignment, and (iii) costs related to significant non-routine legal matters, specifically the antitrust litigation. Additionally, during the year ended December 31, 2023, the non-cash changes in deferred tax liabilities related to goodwill and other intangible assets included an immaterial non-cash true-up of the valuation of foreign deferred tax liabilities related to a prior period.

For the fourth quarter and full year ended December 31, 2022, the other certain items excluded for comparison purposes include (i) restructuring and integration expenses related to significant business combinations; (ii) productivity expenses; (iii) costs related to significant non-routine legal matters, specifically the antitrust litigation; (iv) the loss on early extinguishment of debt related to the redemption of debt; (v) incremental costs to our operations related to risks associated with the COVID-19 pandemic, which were incurred to either maintain the health and safety of our front-line employees or temporarily increase compensation to such employees to ensure essential operations continue during the pandemic; (vi) the gain on the sale of our investment in BodyArmor as a result of the settlement of the associated holdback liability; (vii) the gain on the settlement of our prior litigation with BodyArmor, excluding recoveries of previously incurred litigation expenses which were included in our adjusted results; (viii) losses recognized with respect to our equity method investment in Bedford as a result of funding our share of their wind-down costs; (ix) transaction costs for significant business combinations (completed or abandoned); (x) foundational projects, which are transformative and non-recurring in nature; and (xi) impairments recognized on certain intangible brand assets.

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 years ended December 31, 2023 and 2022, the supplemental financial data set forth below includes reconciliations of adjusted and constant currency adjusted financial measures to the applicable financial measure presented in the unaudited condensed consolidated financial statements for the same period.

 

KEURIG DR PEPPER INC.

RECONCILIATION OF CERTAIN NON-GAAP INFORMATION

(UNAUDITED)



Gross profit


Gross
margin


Income from
operations


Operating
margin

For the Fourth Quarter of 2023








Reported

$            2,184


56.5 %


$               943


24.4 %

Items Affecting Comparability:








Mark to market

13




40



Amortization of intangibles




34



Stock compensation




4



Restructuring - 2023 CEO Succession and Associated Realignment




8



Productivity

26




71



Transaction costs




1



Adjusted

$            2,223


57.5 %


$            1,101


28.5 %

Impact of foreign currency



— %




— %

Constant currency adjusted



57.5 %




28.5 %









For the Fourth Quarter of 2022








Reported

$            1,996


52.5 %


$               673


17.7 %

Items Affecting Comparability:








Mark to market

(10)




(9)



Amortization of intangibles




38



Stock compensation




2



Restructuring and integration costs - DPS Merger




81



Productivity

30




71



Impairment of intangible assets




166



Non-routine legal matters




4



COVID-19

(1)






Foundational projects




1



Adjusted

$            2,015


53.0 %


$            1,027


27.0 %


Refer to pages A-8 and A-9 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,
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 Fourth Quarter of 2023












Reported

$       64


$                  899


$             206


22.9 %


$           693


$         0.49

Items Affecting Comparability:












Mark to market

60


(20)


(4)




(16)


(0.01)

Amortization of intangibles


34


9




25


0.02

Amortization of fair value debt adjustment

(5)


5


2




3


Stock compensation


4





4


Restructuring - 2023 CEO Succession and Associated Realignment


8


3




5


Productivity


71


18




53


0.04

Transaction costs


1





1


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



(2)




2


Adjusted

$     119


$               1,002


$             232


23.2 %


$           770


$         0.55

Impact of foreign currency







(0.1) %





Constant currency adjusted







23.1 %

















For the Fourth Quarter of 2022












Reported

$     123


$                  558


$             105


18.8 %


$           453


$         0.32

Items Affecting Comparability:












Mark to market

(2)


(11)


(8)




(3)


Amortization of intangibles


38


10




28


0.02

Amortization of fair value of debt adjustment

(5)


5


1




4


Stock compensation


2





2


Restructuring and integration costs - DPS Merger


81


19




62


0.04

Productivity


71


24




47


0.03

Impairment of intangible assets


166


49




117


0.08

Impairment of investment



3




(3)


Loss on early extinguishment of debt



(3)




3


Non-routine legal matters


4


1




3


COVID-19



1




(1)


Foundational projects


1





1


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



(1)




1


Adjusted

$     116


$                  915


$             201


22.0 %


$           714


$         0.50













Change - adjusted

2.6 %








7.8 %


10.0 %

Impact of foreign currency

— %








(0.7) %


— %

Change - constant currency adjusted

2.6 %








7.1 %


10.0 %


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)



U.S.
Refreshment
Beverages


U.S. Coffee


International


Unallocated
corporate costs


Total

For the Fourth Quarter of 2023










Reported - Income from Operations

$                    688


$                   383


$                   144


$                  (272)


$                   943

Items Affecting Comparability:










Mark to market



6


34


40

Amortization of intangibles

6


26


2



34

Stock compensation




4


4

Restructuring - 2023 CEO Succession and Associated Realignment




8


8

Productivity

19


14



38


71

Transaction costs




1


1

Adjusted - Income from Operations

$                    713


$                   423


$                   152


$                  (187)


$                1,101











Change - adjusted

20.2 %


(2.8) %


25.6 %


53.3 %


7.2 %

Impact of foreign currency

— %


— %


(5.8) %


— %


(0.7) %

Change - constant currency adjusted

20.2 %


(2.8) %


19.8 %


53.3 %


6.5 %











For the Fourth Quarter of 2022










Reported - Income from Operations

$                    407


$                   393


$                   114


$                  (241)


$                   673

Items Affecting Comparability:










Mark to market



1


(10)


(9)

Amortization of intangibles

6


27


5



38

Stock compensation




2


2

Restructuring and integration costs - DPS Merger


(1)


1


81


81

Productivity

13


17



41


71

Impairment of intangible assets

166





166

Non-routine legal matters




4


4

COVID-19

1


(1)




Foundational projects




1


1

Adjusted - Income from Operations

$                    593


$                   435


$                   121


$                  (122)


$                1,027

 

KEURIG DR PEPPER INC.

RECONCILIATION OF CERTAIN FINANCIAL MEASURES BY SEGMENT TO CONSTANT CURRENCY

ADJUSTED FINANCIAL MEASURES BY SEGMENT

(UNAUDITED)




Reported


Impact of Foreign
Currency


Constant Currency

For the fourth quarter of 2023







Net sales







U.S. Refreshment Beverages


6.8 %


— %


6.8 %

U.S. Coffee


(9.9)



(9.9)

International


11.5


(5.0)


6.5

Total net sales


1.7


(0.6)


1.1

 



Reported


Items Affecting
Comparability


Adjusted


Impact of
Foreign
Currency


Constant
Currency
Adjusted

For the fourth quarter of 2023











Operating margin











U.S. Refreshment Beverages


31.1 %


1.1 %


32.2 %


— %


32.2 %

U.S. Coffee


33.1


3.4


36.5



36.5

International


29.1


1.6


30.7



30.7

Total operating margin


24.4


4.1


28.5



28.5

 

KEURIG DR PEPPER INC.

RECONCILIATION OF CERTAIN NON-GAAP INFORMATION

(UNAUDITED)



Gross profit


Gross
margin


Income from
operations


Operating
margin

For the Year Ended December 31, 2023








Reported

$            8,080


54.5 %


$        3,192


21.5 %

Items Affecting Comparability:








Mark to market

(5)




8



Amortization of intangibles




137



Stock compensation




17



Restructuring - 2023 CEO Succession and Associated Realignment




35



Productivity

115




259



Impairment of intangible assets




2



Non-routine legal matters




5



Transaction costs




2



Adjusted

$            8,190


55.3 %


$        3,657


24.7 %

Impact of foreign currency



— %




— %

Constant currency adjusted



55.3 %




24.7 %









For the Year Ended December 31, 2022








Reported

$            7,323


52.1 %


$        2,605


18.5 %

Items Affecting Comparability:








Mark to market

120




150



Amortization of intangibles




138



Stock compensation




5



Restructuring and integration costs - DPS Merger




172



Productivity

116




230



Impairment of intangible assets




477



Non-routine legal matters




13



COVID-19

9




14



Gain on litigation




(271)



Transaction costs




1



Foundational projects




4



Adjusted

$            7,568


53.8 %


$        3,538


25.2 %


Refer to pages A-13 and A-14 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,
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 Year Ended December 31, 2023












Reported

$     496


$               2,757


$            576


20.9 %


$      2,181


$      1.55

Items Affecting Comparability:












Mark to market

(14)


6


2




4


Amortization of intangibles


137


34




103


0.07

Amortization of deferred financing costs

(1)


1





1


Amortization of fair value debt adjustment

(19)


19


5




14


0.01

Stock compensation


17


6




11


0.01

Restructuring - 2023 CEO Succession and Associated Realignment


35


9




26


0.02

Productivity


259


63




196


0.14

Impairment of intangible assets


2





2


Non-routine legal matters


5


1




4


Transaction costs


2





2


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



26




(26)


(0.02)

Adjusted

$     462


$               3,240


$            722


22.3 %


$      2,518


$      1.79

Impact of foreign currency







(0.1) %





Constant currency adjusted







22.2 %






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

 

KEURIG DR PEPPER INC.

RECONCILIATION OF CERTAIN NON-GAAP INFORMATION

(UNAUDITED)



Interest
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 Year Ended December 31, 2022












Reported

$     693


$               1,719


$            284


16.5 %


$      1,436


$      1.01

Items Affecting Comparability:












Mark to market

(249)


395


93




302


0.21

Amortization of intangibles


138


35




103


0.07

Amortization of deferred financing costs

(2)


2





2


Amortization of fair value of debt adjustment

(19)


19


4




15


0.01

Stock compensation


5


(1)




6


Restructuring and integration costs - DPS Merger


172


41




131


0.09

Productivity


230


56




174


0.12

Impairment of intangible assets


477


126




351


0.25

Impairment of investment


12


3




9


0.01

Loss on early extinguishment of debt


217


51




166


0.12

Non-routine legal matters


13


3




10


0.01

COVID-19


14


4




10


0.01

Gain on litigation


(271)


(68)




(203)


(0.14)

Gain on sale of equity-method investment


(50)


(12)




(38)


(0.03)

Transaction costs


1





1


Foundational projects


4


1




3


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



80




(80)


(0.06)

Adjusted

$     423


$               3,097


$            700


22.6 %


$      2,398


$      1.68













Change - adjusted

9.2 %








5.0 %


6.5 %

Impact of foreign currency

— %








(0.6) %


(0.5) %

Change - Constant currency adjusted

9.2 %








4.4 %


6.0 %


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)



U.S.
Refreshment
Beverages


U.S. Coffee


International


Unallocated
corporate costs


Total

For the Year Ended December 31, 2023










Reported - Income from Operations

$                 2,483


$                1,158


$                   475


$                  (924)


$                3,192

Items Affecting Comparability:










Mark to market



6


2


8

Amortization of intangibles

20


101


16



137

Stock compensation




17


17

Restructuring - 2023 CEO Succession and Associated Realignment




35


35

Productivity

57


74



128


259

Impairment of intangible assets

2





2

Non-routine legal matters




5


5

Transaction costs




2


2

Adjusted - Income from Operations

$                 2,562


$                1,333


$                   497


$                  (735)


$                3,657











Change - adjusted

13.9 %


(4.3) %


24.3 %


45.5 %


3.4 %

Impact of foreign currency

— %


— %


(4.8) %


— %


(0.6) %

Change - constant currency adjusted

13.9 %


(4.3) %


19.5 %


45.5 %


2.8 %











For the Year Ended December 31, 2022










Reported - Income from Operations

$                 1,961


$                1,215


$                   373


$                  (944)


$                2,605

Items Affecting Comparability:










Mark to market



9


141


150

Amortization of intangibles

22


102


14



138

Stock compensation




5


5

Restructuring and integration costs - DPS Merger

2



2


168


172

Productivity

52


71



107


230

Impairment of intangible assets

477





477

Non-routine legal matters




13


13

COVID-19

7


5


2



14

Gain on litigation

(271)





(271)

Transaction costs




1


1

Foundational projects




4


4

Adjusted - Income from Operations

$                 2,250


$                1,393


$                   400


$                  (505)


$                3,538

 

KEURIG DR PEPPER INC.

RECONCILIATION OF CERTAIN FINANCIAL MEASURES BY SEGMENT TO CONSTANT CURRENCY
ADJUSTED FINANCIAL MEASURES BY SEGMENT

(UNAUDITED)




Reported


Impact of Foreign
Currency


Constant Currency

For the year ended December 31, 2023







Net sales







U.S. Refreshment Beverages


9.1 %


— %


9.1 %

U.S. Coffee


(5.4)



(5.4)

International


15.0


(4.5)


10.5

Total net sales


5.4


(0.5)


4.9

 



Reported


Items
Affecting
Comparability


Adjusted


Impact of
Foreign
Currency


Constant
Currency
Adjusted

For the year ended December 31, 2023











Operating margin











U.S. Refreshment Beverages


28.1 %


0.9 %


29.0 %


— %


29.0 %

U.S. Coffee


28.4


4.3


32.7



32.7

International


24.7


1.2


25.9



25.9

Total operating margin


21.5


3.2


24.7



24.7

 

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

$                  2,181

Interest expense, net

496

Provision for income taxes

576

Depreciation expense

402

Other amortization

181

Amortization of intangibles

137

EBITDA

$                  3,973

Items affecting comparability:


Impairment of intangible assets

$                        2

Restructuring - 2023 CEO Succession and Associated Realignment

35

Productivity

218

Non-routine legal matters

5

Stock compensation

17

Transaction costs

2

Mark to market

(8)

Adjusted EBITDA

$                  4,244




December 31,


2023

Principal amounts of:


Commercial paper notes

$                  2,096

Senior unsecured notes

11,243

Total principal amounts

13,339

Less: Cash and cash equivalents

267

Total principal amounts less cash and cash equivalents

$                13,072



December 31, 2023 Management Leverage Ratio

3.1

 

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



Year Ended December 31,

(in millions)


2023


2022

Net cash provided by operating activities


$            1,329


$            2,837

Purchases of property, plant and equipment


(425)


(353)

Proceeds from sales of property, plant and equipment


9


168

Free Cash Flow


$               913


$            2,652

 

(PRNewsfoto/Keurig Dr Pepper)

 

SOURCE Keurig Dr Pepper Inc.

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