Keurig Dr Pepper Reports 2022 Results and Provides Outlook for 2023

Sample article from our Food & Beverage

February 23, 2023 (press release) –

Company Achieves Guidance for 2022

KDP Guides to 5% Constant Currency Net Sales Growth and 6-7% Adjusted Diluted EPS Growth in 2023 

BURLINGTON, Mass. and FRISCO, Texas, Feb. 23, 2023 /PRNewswire/ -- Keurig Dr Pepper Inc. (NASDAQ: KDP) today reported results for the fourth quarter and full year ended December 31, 2022.  The Company also provided guidance for constant currency net sales growth of 5% and Adjusted diluted EPS growth of 6% to 7% in 2023.

 

Reported GAAP Basis

Adjusted Basis1

       
 

Q4

FY 2022

Q4

FY 2022

Net Sales

 % vs Prior Year

$3.80 bn

+12.1%

$14.06 bn

+10.8%

$3.80 bn

+12.4%

$14.06 bn

+11.1%

Diluted EPS

   % vs Prior Year

$0.32

(45.8)%

$1.01

(32.7)%

$0.50

+11.1%

$1.68

+5.0%

             

Full-year 2022 highlights:

  • Drove double-digit net sales growth of 11%, significantly ahead of the Company's initial guidance of mid-single-digit growth and in line with its guidance update in the second quarter.
  • Delivered Adjusted diluted EPS growth of 5%, in line with the Company's mid-single-digit guidance.
  • Grew market share in Cold Beverages in categories representing 92% of the Company's U.S. retail sales base.
  • Expanded the Keurig brewing system to 38 million U.S. households, a 10 million household increase since 2018.
  • Expanded the Company's presence in the strategically compelling energy and non-alcohol beer and cocktail categories through unique partnerships and disciplined investments, such as the strategic partnership with Nutrabolt announced in the fourth quarter, which included a long-term sales and distribution agreement for C4 Energy drinks. 
  • Returned $1.5 billion to shareholders through dividends, including a 6.7% increase in KDP's quarterly dividend, and the opportunistic repurchase of 10.6 million shares.
  • Ended the year with a strong balance sheet and reduced management leverage ratio of 2.8x.

Commenting on the announcement, Chairman and CEO Bob Gamgort stated, "We accelerated our revenue growth for the fifth consecutive year, delivering 12% growth in the fourth quarter and 11% growth for the full year.  Continued brand strength across our portfolio enabled modest elasticities in an environment marked by significant pricing.  As we look to 2023, we expect mid-single-digit revenue growth, as the rate of pricing moderates, and enhanced gross margins, as the relationship between inflation and pricing improves."

Gamgort continued, "In 2022 we made multiple strategic investments in new platforms and categories through innovation, partnerships and equity investments that support our vision of a "Modern Beverage Company" and provide fuel for future growth.  Further, we continued to enhance our positive impact on all stakeholders through continued achievement of our ambitious 'Drink Well. Do Good.' corporate responsibility commitments."

_________________________

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.

 

2022 Full Year Consolidated Results
Net sales for the full year of 2022 increased 10.8% to $14.06 billion, compared to $12.68 billion in the year-ago period and, on a constant currency basis, net sales advanced 11.1%.  Driving the constant currency net sales growth was favorable net price realization of 10.6% and higher volume/mix of 0.5%, which reflected the strength of the Company's brand portfolio, continued strong in-market execution and modest elasticities.  

KDP in-market performance in the Liquid Refreshment Beverages (LRB) category remained strong for the year, with retail dollar consumption2 advancing 11.0% and KDP growing market share of the category, largely reflecting strength in premium unflavored waters, seltzers, coconut waters, apple juice, tea and fruit drinks, and solid performance in CSDs3.  This performance was driven by CORE Hydration, Polar seltzers, Vita Coco, Mott's, Snapple, Hawaiian Punch and Dr Pepper, Canada Dry, A&W, Sunkist and Squirt CSDs.   

In coffee, retail dollar consumption of single-serve pods manufactured by KDP increased 4.9% in IRi tracked channels, led by higher pricing.  KDP Manufactured share remained strong at 82.4% for the year.

GAAP operating income for the year decreased 10.0% to $2.61 billion, compared to $2.89 billion in the year-ago period, primarily reflecting an unfavorable year-over-year impact of items affecting comparability totaling $406 million.  Also impacting the performance were the benefits of higher gross profit, a change in accounting for non-cash stock compensation expense, recovery of litigation expenses associated with our successful Body Armor settlement, a business interruption insurance recovery and a modest year-over-year gain from the Company's strategic asset investment program.  These benefits were partially offset by significantly higher inflationary pressures in transportation, warehousing and labor.  Excluding items affecting comparability, Adjusted operating income increased 3.7% to $3.54 billion and, on a percent of net sales basis, Adjusted operating income was 25.2%.  

GAAP net income for the year decreased 33.1% to $1.44 billion, or $1.01 per diluted share, compared to $2.15 billion, or $1.50 per diluted share, in the year-ago period.  This performance primarily reflected the decrease in GAAP operating income and an unfavorable year-over-year impact of non-operating items affecting comparability.  This performance was partially offset by the growth in Adjusted operating income and lower Adjusted interest expense.  Excluding items affecting comparability, Adjusted net income for the year advanced 5.4% to $2.40 billion, and Adjusted diluted EPS increased 5.0% to $1.68, compared to $1.60 in the year-ago period.

Free cash flow for the year was strong at $2.65 billion, reflecting a slight decrease in operating cash flow more than offset by lower capital spending.

During the year, the Company repurchased approximately 10.6 million KDP shares at an average price per share of $35.88, totaling approximately $379 million. The Company has approximately $3.6 billion remaining under its share repurchase authorization expiring on December 31, 2025.

_________________________

2 Retail consumption data based on Keurig Dr Pepper's custom IRi category definitions for the 52-week period ending 12/25/2022.

3 CSDs refer to "Carbonated Soft Drinks".

 

2022 Full Year Segment Results

Coffee Systems
Net sales for the year increased 5.6% to $4.98 billion, compared to $4.72 billion in the year-ago period and, on a constant currency basis, net sales advanced 6.2%.  The constant currency net sales growth was driven by a 7.0% increase in net price realization, partially offset by a 0.8% decrease in volume/mix driven by brewers.

The higher net price realization of 7.0% for the year primarily reflected pricing actions taken in late 2021 and the second quarter of 2022, while the volume/mix decrease of 0.8% was due to pod shipment growth of 1.4%, more than offset by an expected brewer shipment decline of 5.2%, due to lapping a COVID-related brewer sales acceleration in the prior year.  The Company added approximately two million net new U.S. households to the Keurig system in 2022, in line with its long-term annual target, reflecting successful innovation including new connected brewer models.

GAAP operating income for the year decreased 9.0% to $1.32 billion, compared to $1.45 billion in the year-ago period.  The performance largely reflected broad-based inflationary pressure that was only partially offset by the growth in net sales, productivity, a $44 million benefit from the Company's strategic asset investment program and a $23 million benefit related to the aforementioned insurance recovery.  Adjusted operating income decreased 7.5% to $1.51 billion and, on a percent of net sales basis, totaled 30.4%.

Packaged Beverages
Net sales for the year increased 12.3% to $6.61 billion, compared to $5.88 billion in the year-ago period and, on a constant currency basis, net sales advanced 12.4%.  This continued strong performance was driven by higher net price realization of 12.1% and increased volume/mix of 0.3%, the latter reflecting continued strength of the portfolio and strong in-market execution.  Broad-based strength was led by CSDs, Mott's, Snapple, CORE Hydration, Hawaiian Punch, Polar seltzers and Evian.  KDP's highly successful Zero Sugar launch across much of the CSD portfolio, the Snapple refresh, as well as the Snapple Elements and Mott's Mighty launches, proved incremental. 

GAAP operating income for the year decreased 0.9% to $1.01 billion, compared to $1.02 billion in the year-ago period, reflecting a modest unfavorable impact of items affecting comparability and a significant increase in transportation, warehousing and labor costs, as well as a year-over-year headwind of $32 million from the Company's strategic asset investment program.  More than offsetting these factors were the benefits of the strong net sales growth and productivity.  Excluding items affecting comparability, Adjusted operating income increased 1.2% to $1.13 billion and, on a percent of net sales basis, totaled 17.1%.

Beverage Concentrates
Net sales for the year increased 16.1% to $1.73 billion, compared to $1.49 billion in the year-ago period and, on a constant currency basis, net sales advanced 16.4%.  This strong performance was driven by higher net price realization of 14.7% and favorable volume/mix of 1.7%, as elasticities remained modest.   

Total shipment volume for the year increased 1.6% versus the year-ago period, reflecting increases in Dr Pepper and Canada Dry, partly offset by declines in Schweppes and Crush.  Bottler case sales volume for the year was essentially even with the year-ago period.

GAAP operating income for the year increased 1.3% to $1.06 billion, compared to $1.05 billion in the year-ago period, primarily reflecting the strong net sales performance, which more than offset inflation and an unfavorable impact of items affecting comparability.  Excluding items affecting comparability, Adjusted operating income increased 16.9% to $1.23 billion and, on a percent of net sales basis, totaled 71.5%.

Latin America Beverages
Net sales for the year increased 24.0% to $743 million, compared to net sales of $599 million in the year-ago period and, on a constant currency basis, net sales advanced 23.0%.  This strong and balanced performance was driven by higher net price realization of 13.9% and increased volume/mix of 9.1%, reflecting the strength of the portfolio and continued strong in-market execution.  Leading the net sales growth were Peñafiel, Clamato, Mott's and Squirt.  

GAAP operating income for the year increased 18.8% to $158 million, compared to $133 million in the year-ago period, reflecting the strong net sales growth, productivity and a favorable impact from foreign currency translation, partially offset by broad-based inflationary pressure, significantly higher marketing investment and a slightly unfavorable year-over-year impact of items affecting comparability.  Excluding items affecting comparability and the favorable impact of foreign currency translation, Adjusted operating income increased 18.5% to $162 million and, on a percent of net sales basis, totaled 21.8%.

Fourth Quarter Consolidated Results
Net sales for the fourth quarter increased 12.1% to $3.80 billion, compared to $3.39 billion in the year-ago period.  On a constant currency basis, net sales advanced 12.4% with all four segments growing at a double-digit rate.  Driving the consolidated net sales growth was favorable net price realization of 13.1%, only slightly offset by lower volume/mix of 0.7%, reflecting continued modest elasticities and exceptional in-market execution.  

KDP in-market performance in the LRB category remained strong in the quarter, with retail dollar consumption4 advancing 12.2% and total LRB dollar share posting another quarter of growth, largely reflecting strength in premium unflavored waters, seltzers, apple juice and fruit drinks, combined with continued solid performance in CSDs.  This performance was driven by CORE Hydration, Evian, Polar seltzers, Mott's, Hawaiian Punch and Dr Pepper, Crush, Canada Dry, A&W, Schweppes and Squirt CSDs.

In coffee, retail dollar consumption of single-serve pods manufactured by KDP increased 7.1% in IRi tracked channels, led by higher pricing.  KDP Manufactured share remained strong at approximately 83% in the quarter, driven by strength of owned and licensed pods.

GAAP operating income in the fourth quarter decreased 7.2% to $673 million, compared to $725 million in the year-ago period, primarily reflecting an unfavorable year-over-year impact of items affecting comparability, as well as continued broad-based inflationary pressure and a net $26 million year-over year headwind from the Company's strategic asset investment program.  Partially offsetting these factors were the higher net sales growth, increased gross profit and the benefit of the aforementioned business interruption insurance recovery that totaled $23 million.  Excluding items affecting comparability, Adjusted operating income increased 13.2% to $1.03 billion and, on a percent of net sales basis, Adjusted operating income was 27.0%.

GAAP net income in the fourth quarter decreased 46.3% to $453 million, or $0.32 per diluted share, compared to $843 million, or $0.59 per diluted share, in the year-ago period, primarily reflecting the unfavorable year-over-year impact of items affecting comparability, partially offset by the double-digit growth in Adjusted operating income.  Excluding items affecting comparability, Adjusted net income in the quarter advanced 11.6% to $714 million, while Adjusted diluted EPS increased 11.1% to $0.50, compared to $0.45 in the year-ago period.

_________________________

4 Retail consumption data based on Keurig Dr Pepper's custom IRi category definitions for the 13-week period ending 12/25/2022.

 

Fourth Quarter Segment Results

Coffee Systems
Net sales for the fourth quarter increased 12.7% to $1.49 billion, compared to $1.32 billion in the year-ago period and, on a constant currency basis, net sales advanced 13.8%.  The constant currency net sales growth was driven by a 10.6% increase in net price realization and a 3.2% increase in volume/mix, including a modest benefit of the 53rd week in 2022.

The higher net price realization of 10.6% in the quarter was primarily driven by pricing actions taken in late 2021 and the second quarter of 2022, while the volume/mix increase of 3.2% was due to pod shipment growth of 2.9% and brewer shipment growth of 3.3%.

GAAP operating income increased 22.3% to $438 million, compared to $358 million in the year-ago period, largely reflecting the strong net sales growth and productivity, as well as the $44 million benefit from the Company's strategic asset investment program and the $23 million benefit related to the aforementioned insurance recovery.  Also modestly benefiting the performance was the impact of the 53rd week.  These benefits more than offset broad-based inflationary pressure in the quarter.  Excluding items affecting comparability, Adjusted operating income increased 18.8% to $483 million and, on a percent of net sales basis, totaled 32.5%.

Packaged Beverages
Net sales for the fourth quarter increased 9.9% to $1.68 billion, compared to $1.53 billion in the year-ago period and, on a constant currency basis, net sales advanced 10.1%.  This performance was driven by higher net price realization of 14.9%, partially offset by a 4.8% decrease in volume/mix, as the segment lapped volume/mix growth of 10.3% in the year-ago period.  Broad-based net sales growth across the portfolio was led by CSDs, Mott's, Snapple, Hawaiian Punch, Evian and Polar seltzers.

GAAP operating income decreased 2.1% to $286 million, compared to $292 million in the year-ago period, primarily reflecting the strong net sales growth and productivity, more than offset by a $70 million year-over-year headwind from the Company's strategic asset investment program and continued broad-based inflation.  Excluding items affecting comparability, Adjusted operating income decreased 1.3% to $311 million and, on a percent of net sales basis, totaled 18.5%.

Beverage Concentrates
Net sales for the fourth quarter increased 14.3% to $447 million, compared to $391 million in the year-ago period and, on a constant currency basis, advanced 14.8%.  This strong net sales performance was driven by higher net price realization of 14.3% and favorable volume/mix of 0.5%.

Total shipment volume increased 1.2% versus the year-ago period, reflecting increases in Dr Pepper and Schweppes.  Bottler case sales volume was essentially even with the year-ago period.

GAAP operating income in the fourth quarter decreased 45.3% to $146 million, compared to $267 million in the year-ago period, reflecting the strong net sales growth more than offset by the unfavorable year-over-year impact of items affecting comparability.  Excluding items affecting comparability, Adjusted operating income increased 14.3% to $310 million and, on a percent of net sales basis, totaled 69.4%.

Latin America Beverages
Net sales for the fourth quarter increased 24.3% to $189 million, compared to net sales of $152 million in the year-ago period and, on a constant currency basis, advanced 17.8%.  This strong and balanced performance was driven by higher net price realization of 13.2% and increased volume/mix of 4.6%, reflecting the continued strength of the portfolio and continued strong in-market execution.  Leading the net sales growth were Peñafiel and Clamato.  

GAAP operating income in the fourth quarter increased 15.8% to $44 million, compared to $38 million in the year-ago period, reflecting the strong net sales growth, productivity and a favorable impact from foreign currency translation, partially offset by broad-based inflationary pressure, significantly higher marketing investment and a slightly unfavorable year-over-year impact of items affecting comparability.  Excluding items affecting comparability and the favorable impact of foreign currency translation, Adjusted operating income increased 10.5% to $45 million and, on a percent of net sales basis, totaled 23.8%.

KDP 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 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.

KDP expects net sales growth of 5% and Adjusted diluted EPS growth of 6% to 7% in 2023, primarily reflecting an improved relationship between pricing and inflation.  Foreign currency translation is expected to approximate a half of one percentage point headwind to both net sales and Adjusted EPS growth.

Investor Contacts:
Steve Alexander
T: 972-673-6769 / steve.alexander@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 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 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)

 
 

Fourth Quarter

 

Year Ended December 31,

(in millions, except per share data)

2022

 

2021

 

2022

 

2021

Net sales

$          3,803

 

$          3,391

 

$        14,057

 

$        12,683

Cost of sales

1,807

 

1,619

 

6,734

 

5,706

Gross profit

1,996

 

1,772

 

7,323

 

6,977

Selling, general and administrative expenses

1,227

 

1,113

 

4,645

 

4,153

Impairment of intangible assets

166

 

 

477

 

Gain on litigation settlement

 

 

(299)

 

Other operating income, net

(70)

 

(66)

 

(105)

 

(70)

Income from operations

673

 

725

 

2,605

 

2,894

Interest expense

123

 

119

 

693

 

500

Loss on early extinguishment of debt

 

 

217

 

105

Gain on sale of equity method investment

 

(524)

 

(50)

 

(524)

Impairment of investments and note receivable

 

17

 

12

 

17

Other expense (income), net

(8)

 

4

 

14

 

(2)

Income before provision for income taxes

558

 

1,109

 

1,719

 

2,798

Provision for income taxes

105

 

266

 

284

 

653

Net income including non-controlling interest

453

 

843

 

1,435

 

2,145

Less: Net loss attributable to non-controlling interest

 

 

(1)

 

(1)

Net income attributable to KDP

$            453

 

$            843

 

$          1,436

 

$          2,146

               

Earnings per common share:

             

Basic

$           0.32

 

$           0.59

 

$           1.01

 

$           1.52

Diluted

0.32

 

0.59

 

1.01

 

1.50

Weighted average common shares outstanding:

             

Basic

1,415.5

 

1,418.0

 

1,416.8

 

1,415.7

Diluted

1,427.5

 

1,429.0

 

1,428.5

 

1,427.9

 

KEURIG DR PEPPER INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 
 

December 31,

 

December 31,

(in millions, except share and per share data)

2022

 

2021

Assets

Current assets:

     

Cash and cash equivalents

$                535

 

$                567

Restricted cash and cash equivalents

 

1

Trade accounts receivable, net

1,484

 

1,148

Inventories

1,314

 

894

Prepaid expenses and other current assets

471

 

447

Total current assets

3,804

 

3,057

Property, plant and equipment, net

2,491

 

2,494

Investments in unconsolidated affiliates

1,000

 

30

Goodwill

20,072

 

20,182

Other intangible assets, net

23,183

 

23,856

Other non-current assets

1,252

 

937

Deferred tax assets

35

 

42

Total assets

$           51,837

 

$           50,598

Liabilities and Stockholders' Equity

Current liabilities:

     

Accounts payable

$             5,206

 

$             4,316

Accrued expenses

1,153

 

1,110

Structured payables

137

 

142

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

895

 

304

Other current liabilities

685

 

613

Total current liabilities

8,076

 

6,485

Long-term obligations

11,072

 

11,578

Deferred tax liabilities

5,739

 

5,986

Other non-current liabilities

1,825

 

1,577

Total liabilities

26,712

 

25,626

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, 1,408,394,293 and 1,418,119,197 shares issued and outstanding as of December 31, 2022 and 2021, respectively

14

 

14

Additional paid-in capital

21,444

 

21,785

Retained earnings

3,539

 

3,199

Accumulated other comprehensive income (loss)

129

 

(26)

Total stockholders' equity

25,126

 

24,972

Non-controlling interest

(1)

 

Total equity

25,125

 

24,972

Total liabilities and stockholders' equity

$           51,837

 

$           50,598

 

KEURIG DR PEPPER INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 
 

Year Ended December 31,

(in millions)

2022

 

2021

Operating activities:

     

Net income attributable to KDP

$               1,436

 

$               2,146

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

     

Depreciation expense

399

 

410

Amortization of intangibles

138

 

134

Other amortization expense

172

 

164

Provision for sales returns

61

 

63

Deferred income taxes

(289)

 

31

Employee stock-based compensation expense

52

 

88

Loss on early extinguishment of debt

217

 

105

Gain on sale of equity method investment

(50)

 

(524)

Gain on disposal of property, plant and equipment

(80)

 

(75)

Unrealized loss on foreign currency

26

 

9

Unrealized loss (gain) on derivatives

383

 

(70)

Settlements of interest rate contracts

125

 

Equity in losses of unconsolidated affiliates

5

 

5

Impairment of intangible assets

477

 

Impairment on investments and note receivable of unconsolidated affiliates

12

 

17

Other, net

28

 

20

Changes in assets and liabilities:

     

Trade accounts receivable

(398)

 

(152)

Inventories

(426)

 

(133)

Income taxes receivable and payables, net

(105)

 

114

Other current and non-current assets

(456)

 

(243)

Accounts payable and accrued expenses

903

 

762

Other current and non-current liabilities

207

 

3

Net change in operating assets and liabilities

(275)

 

351

Net cash provided by operating activities

2,837

 

2,874

Investing activities:

     

Proceeds from sale of investment in unconsolidated affiliates

50

 

578

Purchases of property, plant and equipment

(353)

 

(423)

Proceeds from sales of property, plant and equipment

168

 

122

Purchases of intangibles

(26)

 

(32)

Issuance of related party note receivable

(18)

 

(19)

Investments in unconsolidated affiliates

(962)

 

Other, net

6

 

(16)

Net cash (used in) provided by investing activities

(1,135)

 

210

Financing activities:

     

Proceeds from issuance of Notes

3,000

 

2,150

Repayments of Notes

(3,365)

 

(3,595)

Proceeds from issuance of commercial paper

1,198

 

5,406

Repayments of commercial paper

(948)

 

(5,257)

Repayments of 2019 KDP Term Loan

 

(425)

Proceeds from structured payables

155

 

156

Repayments of structured payables

(158)

 

(167)

Cash dividends paid

(1,080)

 

(955)

Repurchases of common stock

(379)

 

Proceeds from issuance of common stock

 

140

Tax withholdings related to net share settlements

(15)

 

(125)

Payments on finance leases

(90)

 

(54)

Other, net

(46)

 

(36)

Net cash used in financing activities

(1,728)

 

(2,762)

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

     

Net change from operating, investing and financing activities

(26)

 

322

Effect of exchange rate changes

(7)

 

(9)

Beginning balance

568

 

255

Ending balance

$                  535

 

$                  568

 

KEURIG DR PEPPER INC.

RECONCILIATION OF SEGMENT INFORMATION

(UNAUDITED)

 
 

Fourth Quarter

 

Year Ended December 31,

(in millions)

2022

 

2021

 

2022

 

2021

Net Sales

             

Coffee Systems

$            1,485

 

$            1,318

 

$            4,982

 

$            4,716

Packaged Beverages

1,682

 

1,530

 

6,607

 

5,882

Beverage Concentrates

447

 

391

 

1,725

 

1,486

Latin America Beverages

189

 

152

 

743

 

599

Total net sales

$            3,803

 

$            3,391

 

$          14,057

 

$          12,683

               

Income from Operations

             

Coffee Systems

$              438

 

$              358

 

$            1,316

 

$            1,446

Packaged Beverages

286

 

292

 

1,014

 

1,023

Beverage Concentrates

146

 

267

 

1,061

 

1,047

Latin America Beverages

44

 

38

 

158

 

133

Unallocated corporate costs

(241)

 

(230)

 

(944)

 

(755)

Total income from operations

$              673

 

$              725

 

$            2,605

 

$            2,894

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 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.

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).

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 fourth quarter and full year ended December 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

 

Impairment
of intangible
assets

 

Income
from
operations

 

Operating
margin

For the Fourth Quarter of 2022

                         

Reported

$         1,807

 

$         1,996

 

52.5 %

 

$                      1,227

 

$            166

 

$            673

 

17.7 %

Items Affecting Comparability:

                         

Mark to market

10

 

(10)

     

(1)

 

 

(9)

   

Amortization of intangibles

 

     

(38)

 

 

38

   

Stock compensation

 

     

(2)

 

 

2

   

Restructuring and integration costs

 

     

(81)

 

 

81

   

Productivity

(30)

 

30

     

(41)

 

 

71

   

Impairment of intangible assets

 

     

 

(166)

 

166

   

Non-routine legal matters

 

     

(4)

 

 

4

   

COVID-19

1

 

(1)

     

(1)

 

 

   

Foundational projects

 

     

(1)

 

 

1

   

Adjusted

$         1,788

 

$         2,015

 

53.0 %

 

$                      1,058

 

$              —

 

$         1,027

 

27.0 %

Impact of foreign currency

       

— %

             

— %

Constant currency adjusted

       

53.0 %

             

27.0 %

                           

For the Fourth Quarter of 2021

                         

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 %

 

Refer to page A-12 for reconciliations of reported net sales to constant currency net sales and adjusted income from operations to constant currency adjusted income from operations.

 

KEURIG DR PEPPER INC.

RECONCILIATION OF CERTAIN NON-GAAP INFORMATION

(UNAUDITED)

 
 

Interest
expense

 

Gain on sale
of equity
method
investment

 

Impairment of
investments
and note
receivable

 

Other
expense
(income), 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 2022

                                 

Reported

$       123

 

$                   —

 

$                     —

 

$                (8)

 

$                    558

 

$               105

 

18.8 %

 

$             453

 

$           0.32

Items Affecting Comparability:

                                 

Mark to market

(2)

 

 

 

4

 

(11)

 

(8)

     

(3)

 

Amortization of intangibles

 

 

 

 

38

 

10

     

28

 

0.02

Amortization of fair value debt adjustment

(5)

 

 

 

 

5

 

1

     

4

 

Stock compensation

 

 

 

 

2

 

     

2

 

Restructuring and integration costs

 

 

 

 

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

 

$                   —

 

$                     —

 

$                (4)

 

$                    915

 

$               201

 

22.0 %

 

$             714

 

$           0.50

Impact of foreign currency

                       

0.1 %

       

Constant currency adjusted

                       

22.1 %

       
                                   

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

 

KEURIG DR PEPPER INC.

RECONCILIATION OF CERTAIN NON-GAAP INFORMATION

(UNAUDITED)

 
 

Interest
expense

 

Gain on sale
of equity
method
investment

 

Impairment of
investments
and note
receivable

 

Other
expense
(income), 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 2021

                                 

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 of 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

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

                                   

Change - adjusted

3.6 %

                         

11.6 %

 

11.1 %

Impact of foreign currency

— %

                         

— %

 

— %

Change - constant currency adjusted

3.6 %

                         

11.6 %

 

11.1 %

 

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

 

KEURIG DR PEPPER INC.

RECONCILIATION OF CERTAIN NON-GAAP INFORMATION

(UNAUDITED)

 
 

Cost of sales

 

Gross profit

 

Gross
margin

 

Selling, general
and administrative
expenses

 

Impairment
of intangible
assets

 

Gain on
litigation
settlement

 

Other operating
income, net

 

Income from
operations

 

Operating
margin

For the Year Ended December 31, 2022

                                 

Reported

$            6,734

 

$            7,323

 

52.1 %

 

$                    4,645

 

$              477

 

$             (299)

 

$                 (105)

 

$         2,605

 

18.5 %

Items Affecting Comparability:

                                 

Mark to market

(120)

 

120

     

(30)

 

 

 

 

150

   

Amortization of intangibles

 

     

(138)

 

 

 

 

138

   

Stock compensation

 

     

(5)

 

 

 

 

5

   

Restructuring and integration costs

 

     

(170)

 

 

 

(2)

 

172

   

Productivity

(116)

 

116

     

(114)

 

 

 

 

230

   

Impairment of intangible assets

 

     

 

(477)

 

 

 

477

   

Non-routine legal matters

 

     

(13)

 

 

 

 

13

   

COVID-19

(9)

 

9

     

(5)

 

 

 

 

14

   

Gain on litigation

 

     

 

 

271

 

 

(271)

   

Transaction costs

 

     

(1)

 

 

 

 

1

   

Foundational projects

 

     

(4)

 

 

 

 

4

   

Adjusted

$            6,489

 

$            7,568

 

53.8 %

 

$                    4,165

 

$                —

 

$              (28)

 

$                 (107)

 

$         3,538

 

25.2 %

Impact of foreign currency

       

— %

                     

— %

Constant currency adjusted

       

53.8 %

                     

25.2 %

                                   

For the Year Ended December 31, 2021

                                 

Reported

$            5,706

 

$            6,977

 

55.0 %

 

$                    4,153

 

$                —

 

$                —

 

$                   (70)

 

$         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

 

$                —

 

$                —

 

$                   (70)

 

$         3,421

 

27.0 %

 

Refer to page A-13 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
expense
(income),
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

 

$                 217

 

$                 (50)

 

$                     12

 

$              14

 

$            1,719

 

$              284

 

16.5 %

 

$     1,436

 

$    1.01

Items Affecting Comparability:

                                     

Mark to market

(249)

 

 

 

 

4

 

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 debt adjustment

(19)

 

 

 

 

 

19

 

4

     

15

 

0.01

Stock compensation

 

 

 

 

 

5

 

(1)

     

6

 

Restructuring and integration costs

 

 

 

 

 

172

 

41

     

131

 

0.09

Productivity

 

 

 

 

 

230

 

56

     

174

 

0.12

Impairment of intangible assets

 

 

 

 

 

477

 

126

     

351

 

0.25

Impairment of investment

 

 

 

(12)

 

 

12

 

3

     

9

 

0.01

Loss on early extinguishment of debt

 

(217)

 

 

 

 

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

 

 

 

(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

 

$                   —

 

$                   —

 

$                     —

 

$              18

 

$            3,097

 

$              700

 

22.6 %

 

$     2,398

 

$    1.68

Impact of foreign currency

                           

— %

       

Constant currency adjusted

                           

22.6 %

       
                                       

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

 

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
expense
(income),
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, 2021

                                     

Reported

$     500

 

$                 105

 

$               (524)

 

$                     17

 

$               (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 of 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

 

0.01

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

                                       

Change - adjusted

(11.9) %

                             

5.2 %

 

5.0 %

Impact of foreign currency

— %

                             

0.2 %

 

— %

Change - Constant currency adjusted

(11.9) %

                             

5.4 %

 

5.0 %

 

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

 

KEURIG DR PEPPER INC.

RECONCILIATION OF CERTAIN NON-GAAP INFORMATION

(UNAUDITED)

 
 

(in millions)

Reported

 

Items Affecting
Comparability

 

Adjusted

For the fourth quarter of 2022

         

Income from operations

         

Coffee Systems

$                            438

 

$                              45

 

$                            483

Packaged Beverages

286

 

25

 

311

Beverage Concentrates

146

 

164

 

310

Latin America Beverages

44

 

1

 

45

Unallocated corporate costs

(241)

 

119

 

(122)

Total income from operations

$                            673

 

$                            354

 

$                         1,027

           

For the fourth quarter of 2021

         

Income from operations

         

Coffee Systems

$                            358

 

$                              52

 

$                            410

Packaged Beverages

292

 

25

 

317

Beverage Concentrates

267

 

5

 

272

Latin America Beverages

38

 

 

38

Unallocated corporate costs

(230)

 

103

 

(127)

Total income from operations

$                            725

 

$                            185

 

$                            910

           
 

Reported

 

Impact of Foreign
Currency

 

Constant Currency

For the fourth quarter of 2022

         

Net sales

         

Coffee Systems

12.7 %

 

1.1 %

 

13.8 %

Packaged Beverages

9.9

 

0.2

 

10.1

Beverage Concentrates

14.3

 

0.5

 

14.8

Latin America Beverages

24.3

 

(6.5)

 

17.8

Total net sales

12.1

 

0.3

 

12.4

           
 

Adjusted

 

Impact of Foreign
Currency

 

Constant Currency
Adjusted

For the fourth quarter of 2022

         

Income from operations

         

Coffee Systems

17.8 %

 

1.0 %

 

18.8 %

Packaged Beverages

(1.9)

 

0.6

 

(1.3)

Beverage Concentrates

14.0

 

0.3

 

14.3

Latin America Beverages

18.4

 

(7.9)

 

10.5

Total income from operations

12.9

 

0.3

 

13.2

 

   

Reported

 

Items Affecting
Comparability

 

Adjusted

 

Impact of
Foreign
Currency

 

Constant
Currency
Adjusted

For the fourth quarter of 2022

                   

Operating margin

                   

Coffee Systems

 

29.5 %

 

3.0 %

 

32.5 %

 

— %

 

32.5 %

Packaged Beverages

 

17.0

 

1.5

 

18.5

 

0.1

 

18.6

Beverage Concentrates

 

32.7

 

36.7

 

69.4

 

(0.1)

 

69.3

Latin America Beverages

 

23.3

 

0.5

 

23.8

 

(0.3)

 

23.5

Total operating margin

 

17.7

 

9.3

 

27.0

 

 

27.0

 

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 year ended December 31, 2022

         

Income from operations

         

Coffee Systems

$                         1,316

 

$                            198

 

$                         1,514

Packaged Beverages

1,014

 

119

 

1,133

Beverage Concentrates

1,061

 

173

 

1,234

Latin America Beverages

158

 

4

 

162

Unallocated corporate costs

(944)

 

439

 

(505)

Total income from operations

$                         2,605

 

$                            933

 

$                         3,538

           

For the year ended December 31, 2021

         

Income from operations

         

Coffee Systems

$                         1,446

 

$                            197

 

$                         1,643

Packaged Beverages

1,023

 

99

 

1,122

Beverage Concentrates

1,047

 

11

 

1,058

Latin America Beverages

133

 

2

 

135

Unallocated corporate costs

(755)

 

218

 

(537)

Total income from operations

$                         2,894

 

$                            527

 

$                         3,421

           
 

Reported

 

Impact of Foreign
Currency

 

Constant Currency

For the year ended December 31, 2022

         

Net sales

         

Coffee Systems

5.6 %

 

0.6 %

 

6.2 %

Packaged Beverages

12.3

 

0.1

 

12.4

Beverage Concentrates

16.1

 

0.3

 

16.4

Latin America Beverages

24.0

 

(1.0)

 

23.0

Total net sales

10.8

 

0.3

 

11.1

           
 

Adjusted

 

Impact of Foreign
Currency

 

Constant Currency
Adjusted

For the year ended December 31, 2022

         

Income from operations

         

Coffee Systems

(7.9) %

 

0.4 %

 

(7.5) %

Packaged Beverages

1.0

 

0.2

 

1.2

Beverage Concentrates

16.6

 

0.3

 

16.9

Latin America Beverages

20.0

 

(1.5)

 

18.5

Total income from operations

3.4

 

0.3

 

3.7

 

   

Reported

 

Items
Affecting
Comparability

 

Adjusted

 

Impact of
Foreign
Currency

 

Constant
Currency
Adjusted

For the year ended December 31, 2022

                   

Operating margin

                   

Coffee Systems

 

26.4 %

 

4.0 %

 

30.4 %

 

(0.1) %

 

30.3 %

Packaged Beverages

 

15.3

 

1.8

 

17.1

 

0.1

 

17.2

Beverage Concentrates

 

61.5

 

10.0

 

71.5

 

 

71.5

Latin America Beverages

 

21.3

 

0.5

 

21.8

 

(0.1)

 

21.7

Total operating margin

 

18.5

 

6.7

 

25.2

 

 

25.2

 

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

$                  1,436

Interest expense

693

Provision for income taxes

284

Other expense (income), net

14

Depreciation expense

399

Other amortization

172

Amortization of intangibles

138

EBITDA

$                  3,136

Items affecting comparability:

 

Gain on sale of equity-method investment

$                     (50)

Gain on litigation settlement

(271)

Loss on early extinguishment of debt

217

Impairment of intangible assets

477

Impairment of investments and note receivable

12

Restructuring and integration expenses

169

Productivity

201

Non-routine legal matters

13

Stock compensation

5

COVID-19

14

Transaction costs

1

Foundational projects

4

Mark to market

150

Adjusted EBITDA

$                  4,078

   
 

December 31,

 

2022

Principal amounts of:

 

Commercial paper notes

$                     399

Senior unsecured notes

11,743

Total principal amounts

12,142

Less: Cash and cash equivalents

535

Total principal amounts less cash and cash equivalents

$                11,607

   

December 31, 2022 Management Leverage Ratio

2.8

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, 2021 and 2020, there were no certain items excluded for comparison to prior year periods.

   

Year Ended December 31,

(in millions)

 

2022

 

2021

Net cash provided by operating activities

 

$                 2,837

 

$                 2,874

Purchases of property, plant and equipment

 

(353)

 

(423)

Proceeds from sales of property, plant and equipment

 

168

 

122

Free Cash Flow

 

$                 2,652

 

$                 2,573

KEURIG DR PEPPER INC.
RECONCILIATION OF SIGNIFICANT COVID-19 RELATED EXPENSES
(UNAUDITED)

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)

 

Total

For the fourth quarter of 2022

             

Coffee Systems

$                          —

 

$                           (1)

 

$                  —

 

$                  (1)

Packaged Beverages

1

 

 

 

1

Beverage Concentrates

 

 

 

Latin America Beverages

 

 

 

Total

$                            1

 

$                           (1)

 

$                  —

 

$                  —

               

For the fourth quarter of 2021

             

Coffee Systems

$                            1

 

$                            1

 

$                  —

 

$                    2

Packaged Beverages

1

 

1

 

 

2

Beverage Concentrates

 

 

 

Latin America Beverages

 

 

 

Total

$                            2

 

$                            2

 

$                  —

 

$                    4

               

For the year ended December 31, 2022

             

Coffee Systems

$                            1

 

$                            5

 

$                  —

 

$                    6

Packaged Beverages

4

 

3

 

 

7

Beverage Concentrates

 

 

 

Latin America Beverages

 

1

 

 

1

Total

$                            5

 

$                            9

 

$                  —

 

$                 14

               

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

               
   

(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)

Primarily included incremental benefits provided to frontline workers such as extended sick leave, in order to maintain essential operations during the COVID-19 pandemic.

(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)

Reflects reversal of allowances initially recorded in 2020 specifically related to the COVID-19 pandemic, driven by improving economic conditions during 2021.

 

 

 

 

SOURCE Keurig Dr Pepper Inc.

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