BURLINGTON, Mass. and
PLANO, Texas, May 9, 2019 /PRNewswire/ -- Keurig Dr Pepper Inc.
(NYSE: KDP) today reported financial results for the first quarter
ended March 31, 2019 and affirmed
guidance for Adjusted diluted EPS1 growth of 15% to 17%
for the full year.
GAAP performance in the first quarter of 2019 was significantly
impacted by the merger between Keurig Green Mountain and Dr Pepper
Snapple Group, Inc., which was completed in July 2018. As a
result, compared to the prior year period, net sales advanced 164%
to $2.5 billion, operating income
increased 180% to $498 million and
earnings per diluted share ("diluted EPS") grew 45% to $0.16.
The net sales of $2.50 billion in
the first quarter of 2019 declined 1.1%, compared to Adjusted pro
forma net sales of $2.53 billion in
the prior year period, reflecting strong underlying net sales
growth of 2.5% that was more than offset by the expected
unfavorable impacts of changes in the Company's Allied Brands
portfolio, as well as calendar timing that affected year-over-year
comparisons—namely, the shift of Easter into the second quarter of
2019 and one less shipping day this year in the first quarter.
Adjusted diluted EPS increased 32% to $0.25 in the first quarter, compared to Adjusted
pro forma diluted EPS of $0.19 in the
year-ago period.
Commenting on the quarter, Keurig Dr Pepper Chairman and CEO
Bob Gamgort stated, "Our first
quarter results represent a good start to the year, with strong EPS
delivery and all four segments registering underlying net sales
growth. In addition, our in-market performance was also
solid, as we grew retail dollar consumption across the majority of
our portfolio and held or grew market share in nearly all
categories. Our cash flow generation remains strong and we
continue to reduce debt in line with our deleveraging
targets. We remain confident in our targets for 2019 and our
long-term value creation framework."
First Quarter Consolidated Results
Net sales more than
doubled to $2.50 billion in the first
quarter of 2019, compared to $0.95
billion in the year-ago quarter, primarily reflecting the
impact of the merger. Compared to Adjusted pro forma net
sales of $2.53 billion in the first
quarter of 2018, net sales decreased 1.1%. This performance
reflected strong underlying net sales growth of 2.5%, driven by
higher volume/mix of 1.4% and net price realization of 1.1%, more
than offset by the expected unfavorable impacts related to changes
in the Company's Allied Brands portfolio of 2.5% and calendar
timing of 0.6%. Also impacting the comparison was unfavorable
foreign currency translation of 0.5%.
Retail market performance2 remained strong in the
first quarter, with dollar consumption growth registered across the
majority of the Company's portfolio and KDP holding or growing
market share in the vast majority of its categories. The
Company's CSD3, premium unflavored still water,
RTD3 coffee and shelf stable apple juice portfolios
registered market share growth in the quarter, driven by strong
performances of Dr Pepper and Canada Dry CSD's, CORE waters, Peet's
and Forto RTD coffees and Mott's apple juice. In coffee,
retail consumption of single-serve pods manufactured by KDP
increased essentially in line with category unit growth of 5%.
Operating income of $498 million
also more than doubled in the first quarter of 2019, compared to
$178 million in the year-ago quarter,
primarily reflecting the impact of the merger, partially offset by
the unfavorable year-over-year impact of items affecting
comparability.
Adjusted operating income advanced 10.5% to $621 million in the first quarter of 2019,
compared to Adjusted pro forma operating income of $562 million in the year-ago period. This
performance primarily reflected strong productivity and merger
synergies, both of which benefitted cost of goods sold and
SG&A. Partially offsetting these growth drivers was
inflation, particularly in packaging and logistics. On a
percentage of net sales basis, Adjusted operating income grew 260
basis points to 24.8% in the first quarter.
Net income increased to $230
million in the first quarter of 2019, compared to
$88 million in the year-ago quarter,
primarily reflecting the impact of the merger, partially offset by
the unfavorable year-over-year impact of items affecting
comparability. Diluted EPS grew 45% to $0.16 in the first quarter of 2019, compared to
diluted EPS of $0.11 in the year-ago
period.
Adjusted net income advanced 35% to $356
million in the first quarter of 2019, compared to Adjusted
pro forma net income of $263 million
in the year-ago period, primarily reflecting the growth in Adjusted
operating income and significantly lower interest expense, due to
the benefits of unwinding several interest rate swap contracts and
reduced outstanding indebtedness. Also benefitting the
comparison was a lower effective tax rate, due to U.S. tax reform
enacted in December 2017. Adjusted diluted EPS increased 32%
to $0.25, compared to Adjusted pro
forma diluted EPS of $0.19 in the
year-ago period.
During the quarter, due to the Company's strong operating profit
results and ongoing effective working capital management, KDP
reduced debt by $414 million.
|
|
|
|
1 Adjusted
financial metrics used in this release are non-GAAP measures and
refer to results in 2019. In 2018, Adjusted pro forma
financial metrics are also non-GAAP measures and assume the merger
occurred on December 31, 2016 and adjust for other items affecting
comparability. See reconciliations of GAAP results to
Adjusted results, in the case of 2019 metrics, and to Adjusted pro
forma results, in the case of 2018 metrics, in the accompanying
tables.
|
|
2 Retail
market performance (retail consumption; market share) based on
Keurig Dr Pepper's custom IRi category definitions.
|
|
3 CSD
refers to "Carbonated Soft Drink" and RTD refers to "Ready to
Drink".
|
|
First Quarter Segment Results
Coffee Systems
Net sales for the first quarter
of 2019 increased 2.1% to $968
million, compared to $948
million in the year-ago period. Compared to Adjusted
pro forma net sales of $952 million,
net sales increased 1.7%, reflecting higher volume/mix of 5.0%,
partially offset by lower net price realization of 2.5% and
unfavorable foreign currency translation of 0.8%.
The volume/mix growth of 5.0% for Coffee Systems was driven by a
7.0% increase in K-Cup pod volume and a 12.4% increase in brewer
volume, partially offset by lower pod sales mix, primarily
reflecting the impact of significant volume growth of branded
partners in the first quarter of 2019.
Operating income for Coffee Systems advanced 15.4% to
$293 million in the first quarter of
2019, compared to $254 million in the
year-ago period. Adjusted operating income advanced 7.4% to
$335 million, compared to Adjusted
pro forma operating income of $312
million in the year-ago period, primarily reflecting the net
sales growth and productivity. On a percentage of net sales
basis, Adjusted operating income grew 180 basis points versus
year-ago to 34.6%.
Packaged Beverages
Net sales for the first
quarter of 2019 decreased 5.3% to $1.12
billion, compared to Adjusted pro forma net sales of
$1.18 billion in the year-ago period,
reflecting underlying net sales growth of 1.4%, driven by higher
net price realization of 2.3%, partially offset by lower volume/mix
of 0.9%. More than offsetting the underlying net sales
growth in the quarter were the expected unfavorable impacts of 5.4%
from changes in the Allied Brands portfolio and 1.2% from calendar
timing. Unfavorable foreign currency translation also
impacted the comparison by 0.1%.
Strong net sales growth in the quarter was registered by CORE,
Evian, Dr Pepper, Canada Dry and Xyience, while Motts and 7UP
declined. Contract manufacturing also registered growth in
the quarter.
Operating income for Packaged Beverages totaled $149 million in the first quarter of 2019.
Adjusted operating income of $160
million for the first quarter of 2019 was even with
year-ago, largely reflecting strong productivity, including an
earlier than expected $10 million net
gain in the quarter related to the renegotiation of a manufacturing
contract, as well as merger synergies. These positive drivers were
offset by inflation, particularly in packaging and logistics.
On a percentage of net sales basis, Adjusted operating income grew
70 basis points versus year-ago to 14.3%.
Beverage Concentrates
Net sales for the first
quarter of 2019 increased 4.8% to $304
million, compared to Adjusted pro forma net sales of
$290 million in the year-ago period,
reflecting higher net price realization of 7.1%, partially offset
by lower volume/mix of 2.0% and unfavorable foreign currency
translation of 0.3%.
Dr Pepper continued to fuel the growth in net sales for the
segment, along with increases for Crush and Big Red, partially
offset by Canada Dry. Shipment volume was unfavorable 2.5%, largely
due to declines in Canada Dry, Dr
Pepper and Schweppes, partially offset by higher volume for Big Red
and Crush.
Bottler case sales volume decreased 1.9%, including fountain
foodservice which was 2.0% lower compared to the year-ago
period.
Operating income for Beverage Concentrates totaled $201 million in the first quarter of 2019.
Adjusted operating income in the quarter increased 11.7% to
$201 million, compared to Adjusted
pro forma operating income of $180
million in the year-ago period, primarily reflecting the
growth in net sales and timing of marketing investments. On a
percentage of net sales basis, Adjusted operating income grew 400
basis points versus year-ago to 66.1%.
Latin America Beverages
Net sales in the first
quarter of 2019 increased 2.7% to $116
million, compared to Adjusted pro forma net sales of
$113 million in the year-ago period,
reflecting higher net price realization of 4.1% and favorable
volume/mix of 1.0%, partially offset by unfavorable foreign
currency translation of 2.4%.
Operating income for Latin America Beverages totaled
$11 million in the first quarter of
2019. Adjusted operating income of $12
million in the quarter was even with Adjusted pro forma
operating income in the year-ago period, reflecting the benefit of
the net sales growth, entirely offset by an unfavorable foreign
currency transaction impact and inflation in input costs and
logistics.
KDP Adjusted Pro forma Outlook for 2019
The Company
affirmed Adjusted diluted EPS growth in 2019 in the range of 15% to
17%, or $1.20 to $1.22 per diluted share, in line with its
long-term merger target. Supporting this guidance are the
following unchanged expectations:
- Net sales growth of approximately 2%, consistent with the
Company's long-term merger target of 2-3%, which incorporates an
approximate 100 bps unfavorable impact from the changes in the
Allied Brands portfolio.
- Merger synergies of $200 million
in 2019, consistent with the Company's long-term merger target for
$200 million per year over the
2019-2021 period.
- Other expense, net is expected to approximate $30 million of expense in 2019 and assumes no
gains related to changes in the Allied Brands portfolio.
- Adjusted interest expense is expected to be in the range of
$570 million to $590 million, reflecting ongoing deleveraging and
the continued benefit of unwinding interest rate swap
contracts.
- The Adjusted effective tax rate is expected to be in the range
of 25.0% to 25.5%.
- Diluted weighted average shares outstanding are estimated to be
approximately 1,420 million.
- The Company continues to expect significant cash flow
generation and rapid deleveraging, with a targeted leverage ratio
below 3.0x in two to three years from the July 2018 closing of the merger.
Investor Contacts:
Tyson
Seely
Keurig Dr Pepper
T: 781-418-3352 / tyson.seely@kdrp.com
Steve Alexander
Keurig Dr Pepper
T: 972-673-6769 / steve.alexander@kdrp.com
Media Contact:
Katie
Gilroy
Keurig Dr Pepper
T: 781-418-3345 / katie.gilroy@kdrp.com
ABOUT KEURIG DR PEPPER
Keurig Dr Pepper (KDP) is a
leading beverage company in North
America, with annual revenue in excess of $11 billion. 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. The Company maintains a highly competitive
distribution system that enables its portfolio of more than 125
owned, licensed and partner brands to be available nearly
everywhere people shop and consume beverages. With a wide range of
hot and cold beverages that meet virtually any consumer need, KDP
key brands include Keurig®, Dr Pepper®, Green Mountain Coffee
Roasters®, Canada Dry®, Snapple®, Bai®, Mott's® and The Original
Donut Shop®. The Company employs more than 25,000 employees and
operates more than 120 offices, manufacturing plants, warehouses
and distribution centers across North
America. 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 "anticipate," "expect," "believe," "could,"
"estimate," "feel," "forecast," "intend," "may," "plan,"
"potential," "project," "should," "will," "would," and similar
words, phrases or expressions and variations or negatives of these
words, although not all forward-looking statements contain these
identifying words. Forward-looking statements by their nature
address matters that are, to different degrees, uncertain, such as
statements regarding the estimated or anticipated future results of
the combined company following the combination of Keurig Green
Mountain, Inc. ("KGM") and Dr Pepper Snapple Group, Inc. ("DPSG"
and such combination, the "transaction"), the anticipated benefits
of the transaction, including estimated synergies and cost savings,
and other statements that are not historical facts. These
statements are based on the current expectations of our management
and are not predictions of actual performance.
These forward-looking statements are subject to a number of
risks and uncertainties regarding the combined company's business
and the combination and actual results may differ materially. These
risks and uncertainties include, but are not limited to: (i) the
impact the significant additional debt incurred in connection with
the transaction may have on our ability to operate our combined
business, (ii) risks relating to the integration of the KGM and DPS
operations, products and employees into the combined company and
assumption of certain potential liabilities of KGM and the
possibility that the anticipated synergies and other benefits of
the combination, including cost savings, will not be realized or
will not be realized within the expected timeframe, and (iii) risks
relating to the combined businesses and the industries in which our
combined company operates. These risks and uncertainties, as well
as other risks and uncertainties, are more fully discussed in the
Company's filings with the SEC, including our Current Report on
Form 10-K filed with the SEC on February 28,
2019, and our subsequent filings with the SEC. While the
lists of risk factors presented here and in our public filings are
considered representative, no such list should be considered to be
a complete statement of all potential risks and uncertainties. Any
forward-looking statement made herein speaks only as of the date of
this document. We are under no obligation to, and expressly
disclaim any obligation to, update or alter any forward-looking
statements, whether as a result of new information, subsequent
events or otherwise, except as required by applicable laws or
regulations.
NON-GAAP FINANCIAL MEASURES
This release includes
certain non-GAAP financial measures including Adjusted pro forma
net sales, Adjusted pro forma operating income, and Adjusted
diluted EPS, which differ from results using U.S. Generally
Accepted Accounting Principles (GAAP). These non-GAAP financial
measures should be considered as supplements to the GAAP reported
measures, should not be considered replacements for, or superior
to, the GAAP measures and may not be comparable to similarly named
measures used by other companies. Non-GAAP financial measures
typically exclude certain charges, including one-time costs related
to the Transaction and integration activities, which are not
expected to occur routinely in future periods. The Company uses
non-GAAP financial measures internally to focus management on
performance excluding these special charges to gauge our business
operating performance, and to provide a meaningful comparison of
the Company's performance to periods prior to the Transaction.
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 its
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
presentation and included in the Company's filings with the
SEC.
See the attached schedules for the supplemental financial data
and corresponding reconciliations of KDP Adjusted pro forma net
sales, Adjusted pro forma operating income, and Adjusted diluted
EPS.
KEURIG DR PEPPER
INC.
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
For the First
Quarter of 2019 and 2018
(Unaudited)
|
|
|
First
Quarter
|
(in millions,
except per share data)
|
2019
|
|
2018
|
Net
sales
|
$
|
2,504
|
|
|
$
|
948
|
|
Cost of
sales
|
1,106
|
|
|
467
|
|
Gross
profit
|
1,398
|
|
|
481
|
|
Selling, general and
administrative expenses
|
911
|
|
|
300
|
|
Other operating
(income) expense, net
|
(11)
|
|
|
3
|
|
Income from
operations
|
498
|
|
|
178
|
|
Interest
expense
|
169
|
|
|
(2)
|
|
Interest expense -
related party
|
—
|
|
|
25
|
|
Loss on early
extinguishment of debt
|
9
|
|
|
2
|
|
Other expense,
net
|
5
|
|
|
13
|
|
Income before
provision (benefit) for income taxes
|
315
|
|
|
140
|
|
Provision (benefit)
for income taxes
|
85
|
|
|
51
|
|
Net
income
|
230
|
|
|
89
|
|
Less: Net income
attributable to employee redeemable non-controlling interest and
mezzanine equity awards
|
—
|
|
|
1
|
|
Net income
attributable to KDP
|
$
|
230
|
|
|
$
|
88
|
|
|
|
|
|
Earnings per
common share:
|
|
|
|
Basic
|
$
|
0.16
|
|
|
$
|
0.11
|
|
Diluted
|
0.16
|
|
|
0.11
|
|
Weighted average
common shares outstanding:
|
|
|
|
Basic
|
1,406.3
|
|
|
790.5
|
|
Diluted
|
1,417.7
|
|
|
790.5
|
|
KEURIG DR PEPPER
INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
As of March 31,
2019 and December 31, 2018
(Unaudited)
|
|
|
March
31,
|
|
December
31,
|
(in millions,
except share and per share data)
|
2019
|
|
2018
|
Assets
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
85
|
|
|
$
|
83
|
|
Restricted cash and
restricted cash equivalents
|
44
|
|
|
46
|
|
Trade accounts
receivable, net
|
1,016
|
|
|
1,150
|
|
Inventories
|
663
|
|
|
626
|
|
Prepaid expenses and
other current assets
|
354
|
|
|
254
|
|
Total current
assets
|
2,162
|
|
|
2,159
|
|
Property, plant and
equipment, net
|
2,282
|
|
|
2,310
|
|
Investments in
unconsolidated affiliates
|
172
|
|
|
186
|
|
Goodwill
|
20,077
|
|
|
20,011
|
|
Other intangible
assets, net
|
23,988
|
|
|
23,967
|
|
Other non-current
assets
|
584
|
|
|
259
|
|
Deferred tax
assets
|
26
|
|
|
26
|
|
Total
assets
|
$
|
49,291
|
|
|
$
|
48,918
|
|
|
Liabilities and
Stockholders' Equity
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$
|
2,558
|
|
|
$
|
2,300
|
|
Accrued
expenses
|
962
|
|
|
1,012
|
|
Structured
payables
|
595
|
|
|
526
|
|
Short-term borrowings
and current portion of long-term obligations
|
2,018
|
|
|
1,458
|
|
Other current
liabilities
|
523
|
|
|
406
|
|
Total current
liabilities
|
6,656
|
|
|
5,702
|
|
Long-term
obligations
|
13,246
|
|
|
14,201
|
|
Deferred tax
liabilities
|
5,940
|
|
|
5,923
|
|
Other non-current
liabilities
|
775
|
|
|
559
|
|
Total
liabilities
|
26,617
|
|
|
26,385
|
|
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, 1,406,689,275 and
1,405,944,922 shares issued and outstanding as of March 31, 2019
and December 31, 2018, respectively
|
14
|
|
|
14
|
|
Additional paid-in
capital
|
21,505
|
|
|
21,471
|
|
Retained
earnings
|
1,192
|
|
|
1,178
|
|
Accumulated other
comprehensive loss
|
(37)
|
|
|
(130)
|
|
Total stockholders'
equity
|
22,674
|
|
|
22,533
|
|
Total liabilities
and stockholders' equity
|
$
|
49,291
|
|
|
$
|
48,918
|
|
KEURIG DR PEPPER
INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
For The First
Quarter of 2019 and 2018
(Unaudited)
|
|
|
First
Quarter
|
(in
millions)
|
2019
|
|
2018
|
Operating
activities:
|
|
|
|
Net income
|
$
|
230
|
|
|
$
|
89
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
Depreciation
expense
|
85
|
|
|
32
|
|
Amortization
expense
|
78
|
|
|
33
|
|
Provision for sales
returns
|
9
|
|
|
11
|
|
Deferred income
taxes
|
1
|
|
|
(14)
|
|
Employee stock based
compensation expense
|
14
|
|
|
11
|
|
Loss on early
extinguishment of debt
|
9
|
|
|
2
|
|
Unrealized (gain) or
loss on foreign currency
|
(17)
|
|
|
8
|
|
Unrealized loss or
(gain) on derivatives
|
7
|
|
|
(29)
|
|
Other, net
|
—
|
|
|
18
|
|
Changes in assets and
liabilities, net of effects of acquisition:
|
|
|
|
Trade accounts
receivable
|
126
|
|
|
97
|
|
Inventories
|
(36)
|
|
|
(7)
|
|
Income taxes
receivable, prepaid and payables, net
|
68
|
|
|
(4)
|
|
Other current and non
current assets
|
(102)
|
|
|
(7)
|
|
Accounts payable and
accrued expenses
|
125
|
|
|
28
|
|
Other current and non
current liabilities
|
(6)
|
|
|
(1)
|
|
Net change in
operating assets and liabilities
|
175
|
|
|
106
|
|
Net cash provided by
operating activities
|
591
|
|
|
267
|
|
Investing
activities:
|
|
|
|
Issuance of related
party note receivable
|
(7)
|
|
|
—
|
|
Purchases of
property, plant and equipment
|
(62)
|
|
|
(20)
|
|
Other, net
|
24
|
|
|
(6)
|
|
Net cash used in
investing activities
|
(45)
|
|
|
(26)
|
|
Financing
activities:
|
|
|
|
Proceeds from term
loan
|
2,000
|
|
|
—
|
|
Net Issuance of
Commercial Paper
|
594
|
|
|
—
|
|
Proceeds from
structured payables
|
78
|
|
|
—
|
|
Payments on structure
payables
|
(9)
|
|
|
—
|
|
Payments on senior
unsecured notes
|
(250)
|
|
|
—
|
|
Repayment of term
loan
|
(2,758)
|
|
|
(200)
|
|
Payments on finance
leases
|
(10)
|
|
|
(3)
|
|
Proceeds from
issuance of common stock under compensation plans
|
8
|
|
|
—
|
|
Cash Dividends
paid
|
(211)
|
|
|
(11)
|
|
Other, net
|
2
|
|
|
(1)
|
|
Net cash used in
financing activities
|
(556)
|
|
|
(215)
|
|
Cash, cash
equivalents, restricted cash and restricted cash equivalents — net
change from:
|
|
|
|
Operating, investing
and financing activities
|
(10)
|
|
|
26
|
|
Effect of exchange
rate changes on cash, cash equivalents, restricted cash and
restricted cash equivalents
|
10
|
|
|
1
|
|
Cash, cash
equivalents, restricted cash and restricted cash equivalents at
beginning of period
|
139
|
|
|
95
|
|
Cash, cash
equivalents, restricted cash and restricted cash equivalents at end
of period
|
$
|
139
|
|
|
$
|
122
|
|
KEURIG DR PEPPER
INC.
RECONCILIATION OF
SEGMENT INFORMATION
(Unaudited)
|
|
|
First
Quarter
|
(in
millions)
|
2019
|
|
2018
|
Net
Sales
|
|
|
|
Coffee
Systems
|
$
|
968
|
|
|
$
|
948
|
|
Packaged
Beverages
|
1,116
|
|
|
—
|
|
Beverage
Concentrates
|
304
|
|
|
—
|
|
Latin America
Beverages
|
116
|
|
|
—
|
|
Total net
sales
|
$
|
2,504
|
|
|
$
|
948
|
|
|
|
|
|
Income from
Operations
|
|
|
|
Coffee
Systems
|
$
|
293
|
|
|
$
|
254
|
|
Packaged
Beverages
|
149
|
|
|
—
|
|
Beverage
Concentrates
|
201
|
|
|
—
|
|
Latin America
Beverages
|
11
|
|
|
—
|
|
Unallocated corporate
costs
|
(156)
|
|
|
(76)
|
|
Total income from
operations
|
$
|
498
|
|
|
$
|
178
|
|
Unaudited Pro Forma Financial Information
On January 29, 2018, DPS entered into an Agreement and Plan
of Merger (the "Merger Agreement") by and among DPS, Maple and Salt
Merger Sub, Inc. ("Merger Sub"), whereby Merger Sub will be merged
with and into Maple, with Maple surviving the merger as a
wholly-owned subsidiary of DPS (the "Transaction"). The Transaction
was consummated on July 9, 2018 (the "Merger Date"), at which
time DPS changed its name to "Keurig Dr Pepper Inc.".
Immediately prior to the consummation of the Transaction (the
"Effective Time"), each share of common stock of Maple issued
and outstanding was converted into the right to receive a number of
fully paid and nonassessable shares of common stock of Merger Sub
determined pursuant to an exchange ratio set forth in the Merger
Agreement (the "Acquisition Shares"). As a result of the
Transaction, the stockholders of Maple as of immediately prior to
the Effective Time own approximately 87% of DPS common stock
following the closing and the stockholders of DPS as of immediately
prior to the Effective Time own approximately 13% on a fully
diluted basis. Upon consummation of the Transaction, DPS declared a
special cash dividend equal to $103.75 per share, subject to any withholding of
taxes required by law, payable to holders of its common stock as of
the record date for the special dividend.
The following unaudited pro forma combined financial information
(the "financial information") is presented to illustrate the
estimated effects of the Transaction. The financial information for
the first quarter of 2018 is based on the actual first quarter
financial statements of KDP after giving effect to the Transaction
and the assumptions, reclassifications and adjustments described in
the accompanying notes to this financial information. The financial
information is presented as if the Transaction had been consummated
on December 31, 2016, and combines
the historical results of DPS and Maple. Refer to the Summary of
Pro Forma Adjustments and Summary of Reclassifications below for
details of the reclassifications and adjustments applied to the
historical financial statements of DPS and of Maple, which is now
reflected under the KDP column.
The financial information was prepared using the acquisition
method of accounting, which requires, among other things, that
assets acquired and liabilities assumed in a business combination
be recognized at their fair values as of the completion of the
acquisition. We utilized estimated fair values at the Merger Date
for the preliminary allocation of consideration to the net tangible
and intangible assets acquired and liabilities assumed. During the
measurement period, we will continue to obtain information to
assist in determining the fair value of the net tangible and
intangible assets acquired and liabilities assumed, which may
differ materially from these preliminary estimates. The historical
consolidated financial statements have been adjusted in the
accompanying financial information to give effect to unaudited pro
forma events that are (1) directly attributable to the transaction,
(2) factually supportable, and (3) are expected to have a
continuing impact on the results of operations of KDP.
The financial information has been prepared based upon currently
available information and assumptions deemed appropriate by the
Company's management. This financial information is not necessarily
indicative of what our results of operations actually would have
been had the Transaction been completed as of December 31, 2016. In addition, the financial
information is not indicative of future results or current
financial conditions and does not reflect any anticipated
synergies, operating efficiencies, cost savings or any integration
costs that may result from the Transaction. The financial
information should be read in conjunction with historical financial
statements and accompanying notes filed with the SEC.
Summary of Pro Forma Adjustments
Pro forma adjustments included in the Pro Forma Combined
Statements of Income are as follows:
- A decrease in Net sales to remove the historical deferred
revenue associated with DPS' arrangements with PepsiCo, Inc. and
The Coca-Cola Company, which were eliminated in the fair value
adjustments for DPS as part of purchase price accounting.
- An increase in Net sales to remove the historical amortization
of certain capitalized upfront customer incentive program payments.
These were eliminated in the fair value adjustments for DPS as
these upfront payments were revalued within the customer
relationship intangible assets recorded in purchase price
accounting.
- Adjustments to Selling, general and administrative ("SG&A")
expenses due to changes in amortization as a result of the fair
value adjustments for DPS' intangible assets with definite lives as
part of purchase price accounting.
- Adjustments to SG&A expenses due to changes in depreciation
as a result of the fair value adjustments for DPS' property, plant
and equipment as part of purchase price accounting.
- A decrease to SG&A expenses for both DPS and KDP (Maple) to
remove non-recurring transaction costs as a result of the
Transaction.
- Removal of the Interest expense - related party caption for KDP
(Maple), as the related party debt was capitalized into Additional
paid-in capital immediately prior to the Transaction.
- Adjustments to Interest expense to remove the historical
amortization of deferred debt issuance costs, discounts and
premiums and to record incremental amortization as a result of the
fair value adjustments for DPS' senior unsecured notes as part of
purchase price accounting.
- Adjustments to Interest expense to record incremental interest
expense and amortization of deferred debt issuance costs for
borrowings related to the Transaction.
- Removal of the Net income attributable to employee redeemable
non-controlling interest and mezzanine equity awards caption as the
Maple non-controlling interest was eliminated to reflect the
capital structure of the combined company.
Summary of Reclassifications
Reclassifications included in the Pro Forma Combined Statements
of Income for the three months ended March
31, 2018 are as follows:
- Foreign currency transaction gains and losses were reclassified
from Cost of sales and SG&A expenses in the historical DPS
Statements of Income to Other (income) expense, net.
- Depreciation and amortization expenses were reclassified from
Depreciation and amortization in the historical DPS Statements of
Income to SG&A expenses.
- Interest income was reclassified from Interest income in the
historical DPS Statements of Income to Other (income) expense,
net.
KEURIG DR PEPPER
INC.
PRO FORMA
CONDENSED COMBINED STATEMENT OF INCOME
For the Three
Months Ended March 31, 2018
(Unaudited)
|
|
(in millions,
except per share data)
|
Reported
KDP(1)
|
|
Historical
DPS(2)
|
|
Reclassifications(3)
|
|
Pro
Forma
Adjustments(3)
|
|
Pro
Forma
Combined
|
Net
sales
|
$
|
948
|
|
|
$
|
1,594
|
|
|
$
|
—
|
|
|
$
|
(13)
|
|
|
$
|
2,529
|
|
Cost of
sales
|
467
|
|
|
681
|
|
|
—
|
|
|
(13)
|
|
|
1,135
|
|
Gross
profit
|
481
|
|
|
913
|
|
|
—
|
|
|
—
|
|
|
1,394
|
|
Selling, general and
administrative expenses
|
300
|
|
|
626
|
|
|
27
|
|
|
(49)
|
|
|
904
|
|
Depreciation and
amortization
|
—
|
|
|
27
|
|
|
(27)
|
|
|
—
|
|
|
—
|
|
Other operating
income, net
|
3
|
|
|
1
|
|
|
—
|
|
|
2
|
|
|
6
|
|
Income from
operations
|
178
|
|
|
259
|
|
|
—
|
|
|
47
|
|
|
484
|
|
Interest
expense
|
(2)
|
|
|
41
|
|
|
—
|
|
|
106
|
|
|
145
|
|
Interest expense -
related party
|
25
|
|
|
—
|
|
|
—
|
|
|
(25)
|
|
|
—
|
|
Interest
income
|
—
|
|
|
(1)
|
|
|
1
|
|
|
—
|
|
|
—
|
|
Loss on early
extinguishment of debt
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
Other expense,
net
|
13
|
|
|
—
|
|
|
5
|
|
|
(1)
|
|
|
17
|
|
Income before
provision for income taxes
|
140
|
|
|
219
|
|
|
(6)
|
|
|
(33)
|
|
|
320
|
|
Provision (benefit)
for income taxes
|
51
|
|
|
54
|
|
|
—
|
|
|
(7)
|
|
|
98
|
|
Income before
equity in loss of unconsolidated affiliates
|
89
|
|
|
159
|
|
|
(6)
|
|
|
(26)
|
|
|
222
|
|
Equity in loss of
unconsolidated affiliates, net of tax
|
—
|
|
|
(6)
|
|
|
6
|
|
|
—
|
|
|
—
|
|
Net income
|
89
|
|
|
153
|
|
|
—
|
|
|
(26)
|
|
|
222
|
|
Net income
attributable to employee redeemable non-controlling interest and
mezzanine equity awards
|
1
|
|
|
—
|
|
|
—
|
|
|
(1)
|
|
|
—
|
|
Net income
attributable to KDP
|
$
|
88
|
|
|
$
|
159
|
|
|
$
|
—
|
|
|
$
|
(25)
|
|
|
$
|
222
|
|
Earnings per
common share:
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.11
|
|
|
$
|
0.88
|
|
|
|
|
|
|
$
|
0.16
|
|
Diluted
|
0.11
|
|
|
0.88
|
|
|
|
|
|
|
0.16
|
|
Weighted average
common shares outstanding:
|
|
|
|
|
|
|
|
|
|
Basic
|
790.5
|
|
|
179.9
|
|
|
|
|
416.1
|
|
|
1,386.5
|
|
Diluted
|
790.5
|
|
|
180.8
|
|
|
|
|
415.2
|
|
|
1,386.5
|
|
|
|
(1)
|
Refer to the
Statements of Income.
|
(2)
|
Refers to DPS's
activity during the first quarter of 2018. Refer to the Quarterly
Report on Form 10-Q as filed on April 25, 2018.
|
(3)
|
Refer to Summary
of Pro Forma Adjustments.
|
KEURIG DR PEPPER
INC.
RECONCILIATION OF
PRO FORMA SEGMENT INFORMATION
(Unaudited)
|
|
(in
millions)
|
Reported
KDP(1)
|
|
Reported
DPS(2)
|
|
Pro
Forma
Adjustments(3)
|
|
Pro
Forma
Combined
|
For the First
Quarter 2018
|
|
|
|
|
|
|
|
Net
Sales
|
|
|
|
|
|
|
|
Coffee
Systems
|
$
|
948
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
948
|
|
Packaged
Beverages
|
—
|
|
|
1,178
|
|
|
—
|
|
|
1,178
|
|
Beverage
Concentrates
|
—
|
|
|
303
|
|
|
(13)
|
|
|
290
|
|
Latin America
Beverages
|
—
|
|
|
113
|
|
|
—
|
|
|
113
|
|
Total net
sales
|
$
|
948
|
|
|
$
|
1,594
|
|
|
$
|
(13)
|
|
|
$
|
2,529
|
|
|
|
|
|
|
|
|
|
Income from
Operations
|
|
|
|
|
|
|
|
Coffee
Systems
|
$
|
254
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
254
|
|
Packaged
Beverages
|
—
|
|
|
149
|
|
|
9
|
|
|
158
|
|
Beverage
Concentrates
|
—
|
|
|
194
|
|
|
(14)
|
|
|
180
|
|
Latin America
Beverages
|
—
|
|
|
12
|
|
|
—
|
|
|
12
|
|
Unallocated
Corporate
|
(76)
|
|
|
(96)
|
|
|
52
|
|
|
(120)
|
|
Total income from
operations
|
$
|
178
|
|
|
$
|
259
|
|
|
$
|
47
|
|
|
$
|
484
|
|
|
|
(1)
|
Refer to the
Statements of Income.
|
(2)
|
Refers to DPS's
activity during the the first quarter of 2018. Refer to the
Quarterly Report on Form 10-Q as filed on April 25,
2018.
|
(3)
|
Refer to Summary
of Pro Forma Adjustments.
|
KEURIG DR PEPPER INC.
RECONCILIATION
OF CERTAIN NON-GAAP INFORMATION
(Unaudited)
The company reports its financial results in accordance with
U.S. GAAP. However, management believes that certain non-GAAP
financial measures that reflect the way management evaluates the
business may provide investors with additional information
regarding the company's results, trends and ongoing performance on
a comparable basis.
For periods that occur in 2019, management compares the Adjusted
GAAP, which is defined as U.S. GAAP results adjusted for certain
items affecting comparability, for the first quarter of 2019 to
Adjusted Pro Forma, which is defined as Pro Forma results adjusted
for certain items affecting comparability, for the first quarter of
2018. Pro Forma information is no longer prepared as the first
quarter of 2019 reflects DPS and Maple as a combined company for
the entire period.
Specifically, investors should consider the following with
respect to our financial results:
Adjusted: Defined as certain financial statement captions
and metrics adjusted for certain items affecting comparability.
Items affecting comparability: Defined as certain items
that are excluded for comparison to prior year periods, adjusted
for the tax impact as applicable. Tax impact is determined based
upon an approximate rate for each item. For each period, management
adjusts for (i) the unrealized mark-to-market impact of derivative
instruments not designated as hedges in accordance with U.S. GAAP
and do not have an offsetting risk reflected within the financial
results; (ii) the amortization associated with definite-lived
intangible assets; (iii) the amortization of the deferred financing
costs associated with the DPS Merger and Keurig Acquisition; (iv)
stock compensation expense attributable to the matching awards made
to employees who made an initial investment in the Keurig Green
Mountain, Inc. Executive Ownership Plan or the Keurig Dr Pepper
Omnibus Incentive Plan of 2009; and (v) other certain items that
are excluded for comparison purposes to prior year periods.
For the first quarter of 2019, the other certain items excluded
for comparison purposes include (i) restructuring and integration
expenses related to the DPS Merger and the Keurig Acquisition; (ii)
productivity expenses; (iii) transaction costs not associated with
the DPS Merger; (iv) provision for legal settlements; (v) the
impact of the step-up of acquired inventory not associated with the
DPS Merger (vi) the loss on early extinguishment of debt related to
the redemption of debt and (vii) the loss related to the malware
incident.
For the first quarter of 2018, the other certain items excluded
for comparison purposes include (i) restructuring and integration
expenses related to the DPS Merger and the Keurig Acquisition; (ii)
productivity expenses; (iii) provisions for legal settlements; and
(iv) the loss on early extinguishment of debt related to the
redemption of debt; and (v) tax reform associated with the
TCJA.
Reconciliations for these items are provided in the tables
below.
KEURIG DR PEPPER
INC.
RECONCILIATION OF
CERTAIN REPORTED ITEMS TO CERTAIN NON-GAAP ADJUSTED
ITEMS
(Unaudited, in
millions, except per share data)
|
|
|
For the Three
Months Ended March 31, 2019
|
|
|
|
|
|
|
|
|
|
Amortization
of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported
|
|
Mark
to
Market
|
|
Intangibles
|
|
Deferred
Financing
Costs
|
|
Stock
Compensation
|
|
Restructuring
and
Integration
Expenses
|
|
Productivity
|
|
Transaction
Costs
|
|
Loss
on
Early
Payment
of
Debt
|
|
Inventory
Step-Up
|
|
Provision
for
Settlements
|
|
Malware
Incident
|
|
Adjusted
GAAP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
sales
|
$
|
1,106
|
|
|
$
|
(12)
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(1)
|
|
|
$
|
(3)
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(3)
|
|
|
$
|
—
|
|
|
$
|
(2)
|
|
|
$
|
1,085
|
|
Gross
profit
|
1,398
|
|
|
12
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
2
|
|
|
1,419
|
|
Gross
margin
|
55.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
56.7
|
%
|
Selling, general and
administrative expenses
|
$
|
911
|
|
|
$
|
12
|
|
|
$
|
(31)
|
|
|
$
|
—
|
|
|
$
|
(7)
|
|
|
$
|
(60)
|
|
|
$
|
(6)
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(7)
|
|
|
$
|
(3)
|
|
|
809
|
|
Income from
operations
|
498
|
|
|
—
|
|
|
31
|
|
|
—
|
|
|
7
|
|
|
61
|
|
|
9
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
7
|
|
|
5
|
|
|
621
|
|
Operating
margin
|
19.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24.8
|
%
|
Interest
expense
|
$
|
169
|
|
|
$
|
(29)
|
|
|
$
|
—
|
|
|
$
|
(4)
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(5)
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
131
|
|
Loss on early
extinguishment of debt
|
9
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(9)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Other income,
net
|
5
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7
|
|
Income before
provision for income taxes
|
315
|
|
|
27
|
|
|
31
|
|
|
4
|
|
|
7
|
|
|
61
|
|
|
9
|
|
|
5
|
|
|
9
|
|
|
3
|
|
|
7
|
|
|
5
|
|
|
483
|
|
Provision for income
taxes
|
85
|
|
|
7
|
|
|
8
|
|
|
1
|
|
|
2
|
|
|
15
|
|
|
2
|
|
|
1
|
|
|
2
|
|
|
1
|
|
|
2
|
|
|
1
|
|
|
127
|
|
Effective tax
rate
|
27.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26.3
|
%
|
Net income
|
$
|
230
|
|
|
$
|
20
|
|
|
$
|
23
|
|
|
$
|
3
|
|
|
$
|
5
|
|
|
$
|
46
|
|
|
$
|
7
|
|
|
$
|
4
|
|
|
$
|
7
|
|
|
$
|
2
|
|
|
$
|
5
|
|
|
$
|
4
|
|
|
356
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported
EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EPS
|
Diluted earnings per
common share
|
$
|
0.16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.25
|
|
Shares
|
1,417.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,417.7
|
|
KEURIG DR PEPPER
INC.
RECONCILIATION OF
CERTAIN PRO FORMA ITEMS TO CERTAIN NON-GAAP ADJUSTED PRO FORMA
ITEMS
(Unaudited, in
millions, except per share data)
|
|
|
For the Three
Months Ended March 31, 2018
|
|
|
|
|
|
Amortization
of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro
Forma
|
|
Mark
to
Market
|
|
Intangibles
|
|
Deferred
Financing
Costs
|
|
Stock
Compensation
|
|
Restructuring
and
Integration
Expenses
|
|
Productivity
|
|
Provision
for
Settlements
|
|
Loss
on
Early
Payment
of
Debt
|
|
Tax
Reform
|
|
Adjusted
Pro
Forma
|
Net sales
|
$
|
2,529
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,533
|
|
Cost of
sales
|
1,135
|
|
|
(14)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,117
|
|
Gross
profit
|
1,394
|
|
|
14
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
1,416
|
|
Gross
margin
|
55.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
55.9
|
%
|
Selling, general and
administrative expenses
|
$
|
904
|
|
|
$
|
—
|
|
|
$
|
(28)
|
|
|
$
|
—
|
|
|
$
|
(6)
|
|
|
$
|
(6)
|
|
|
$
|
(14)
|
|
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
852
|
|
Other operating
income, net
|
6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
Income from
operations
|
484
|
|
|
14
|
|
|
28
|
|
|
—
|
|
|
6
|
|
|
6
|
|
|
22
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
562
|
|
Operating
margin
|
19.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22.2
|
%
|
Interest
expense
|
$
|
145
|
|
|
$
|
27
|
|
|
$
|
—
|
|
|
$
|
(1)
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
171
|
|
Loss on early
extinguishment of debt
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2)
|
|
|
—
|
|
|
—
|
|
Other income,
net
|
17
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
21
|
|
Income before
provision for income taxes
|
320
|
|
|
(17)
|
|
|
28
|
|
|
1
|
|
|
6
|
|
|
6
|
|
|
22
|
|
|
2
|
|
|
2
|
|
|
—
|
|
|
370
|
|
Provision for income
taxes
|
98
|
|
|
(4)
|
|
|
7
|
|
|
1
|
|
|
2
|
|
|
—
|
|
|
6
|
|
|
—
|
|
|
—
|
|
|
(3)
|
|
|
107
|
|
Effective tax
rate
|
30.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28.9
|
%
|
Net income
|
$
|
222
|
|
|
$
|
(13)
|
|
|
$
|
21
|
|
|
$
|
—
|
|
|
$
|
4
|
|
|
$
|
6
|
|
|
$
|
16
|
|
|
$
|
2
|
|
|
$
|
2
|
|
|
$
|
3
|
|
|
$
|
263
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro
Forma
EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro
Forma
Adjusted
EPS
|
Diluted earnings per
common share
|
$
|
0.16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.19
|
|
Shares
|
1,386.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,386.5
|
|
KEURIG DR PEPPER
INC.
RECONCILIATION OF
SEGMENT ITEMS TO CERTAIN NON-GAAP ADJUSTED SEGMENT
ITEMS
(Unaudited)
|
|
(in
millions)
|
Reported
|
|
Items
Affecting
Comparability
|
|
Adjusted
GAAP
|
For the First
Quarter of 2019
|
|
|
|
|
|
Net
Sales
|
|
|
|
|
|
Coffee
Systems
|
$
|
968
|
|
|
$
|
—
|
|
|
$
|
968
|
|
Packaged
Beverages
|
1,116
|
|
|
—
|
|
|
1,116
|
|
Beverage
Concentrates
|
304
|
|
|
—
|
|
|
304
|
|
Latin America
Beverages
|
116
|
|
|
—
|
|
|
116
|
|
Total net
sales
|
$
|
2,504
|
|
|
$
|
—
|
|
|
$
|
2,504
|
|
|
|
|
|
|
|
Income from
Operations
|
|
|
|
|
|
Coffee
Systems
|
$
|
293
|
|
|
$
|
42
|
|
|
$
|
335
|
|
Packaged
Beverages
|
149
|
|
|
11
|
|
|
160
|
|
Beverage
Concentrates
|
201
|
|
|
—
|
|
|
201
|
|
Latin America
Beverages
|
11
|
|
|
1
|
|
|
12
|
|
Unallocated corporate
costs
|
(156)
|
|
|
69
|
|
|
(87)
|
|
Total income from
operations
|
$
|
498
|
|
|
$
|
123
|
|
|
$
|
621
|
|
|
(in
millions)
|
Pro
Forma
|
|
Items
Affecting
Comparability
|
|
Adjusted
Pro
Forma
|
For the First
Quarter of 2018
|
|
|
|
|
|
Net
Sales
|
|
|
|
|
|
Coffee
Systems
|
$
|
948
|
|
|
$
|
4
|
|
|
$
|
952
|
|
Packaged
Beverages
|
1,178
|
|
|
—
|
|
|
1,178
|
|
Beverage
Concentrates
|
290
|
|
|
—
|
|
|
290
|
|
Latin America
Beverages
|
113
|
|
|
—
|
|
|
113
|
|
Total net
sales
|
$
|
2,529
|
|
|
$
|
4
|
|
|
$
|
2,533
|
|
|
|
|
|
|
|
Income from
Operations
|
|
|
|
|
|
Coffee
Systems
|
$
|
254
|
|
|
$
|
58
|
|
|
$
|
312
|
|
Packaged
Beverages
|
158
|
|
|
2
|
|
|
160
|
|
Beverage
Concentrates
|
180
|
|
|
—
|
|
|
180
|
|
Latin America
Beverages
|
12
|
|
|
—
|
|
|
12
|
|
Unallocated corporate
costs
|
(120)
|
|
|
18
|
|
|
(102)
|
|
Total income from
operations
|
$
|
484
|
|
|
$
|
78
|
|
|
$
|
562
|
|
KEURIG DR PEPPER
INC.
RECONCILIATION OF
ADJUSTED EBITDA AND MANAGEMENT LEVERAGE RATIO
(Unaudited)
|
|
(in millions,
except for ratio)
|
|
ADJUSTED EBITDA
RECONCILIATION - LAST TWELVE MONTHS
|
|
Net
income
|
$
|
1,126
|
|
Interest
expense
|
695
|
|
Provision for income
taxes
|
399
|
|
Loss on early
extinguishment of debt
|
20
|
|
Other (income)
expense, net
|
(44)
|
|
Depreciation
expense
|
333
|
|
Amortization of
intangibles
|
125
|
|
EBITDA
|
$
|
2,654
|
|
Items affecting
comparability:
|
|
Restructuring and
integration expenses
|
$
|
225
|
|
Transaction
costs
|
4
|
|
Productivity
|
19
|
|
Provision for
settlements
|
27
|
|
Stock
compensation
|
22
|
|
Malware
incident
|
5
|
|
Mark to
market
|
86
|
|
Step-up of acquired
inventory
|
5
|
|
Adjusted
EBITDA
|
$
|
3,047
|
|
|
|
|
March
31,
|
|
2019
|
Principal amounts
of:
|
|
Commercial
paper
|
$
|
1,674
|
|
Term loan
|
1,825
|
|
Senior unsecured
notes
|
11,975
|
|
Total principal
amounts
|
15,474
|
|
Less: Cash and cash
equivalents
|
85
|
|
Total principal
amounts less cash and cash equivalents
|
$
|
15,389
|
|
|
|
March 31, 2019
Management Leverage Ratio
|
5.1
|
|
KEURIG DR PEPPER
INC.
RECONCILIATION OF
ADJUSTED EBITDA - LAST TWELVE MONTHS
(Unaudited)
|
|
|
|
ADJUSTED
PROFORMA
|
|
ADJUSTED
|
|
|
(in
millions)
|
|
SECOND
QUARTER
OF
2018
|
|
THIRD
QUARTER
OF
2018
|
|
FOURTH
QUARTER
OF
2018
|
|
FIRST
QUARTER
OF
2019
|
|
LAST
TWELVE
MONTHS
|
Net
income
|
|
$
|
332
|
|
|
$
|
301
|
|
|
$
|
263
|
|
|
$
|
230
|
|
|
$
|
1,126
|
|
Interest
expense
|
|
170
|
|
|
178
|
|
|
178
|
|
|
169
|
|
|
695
|
|
Provision for income
taxes
|
|
99
|
|
|
121
|
|
|
94
|
|
|
85
|
|
|
399
|
|
Loss on early
extinguishment of debt
|
|
—
|
|
|
11
|
|
|
—
|
|
|
9
|
|
|
20
|
|
Other (income)
expense, net
|
|
(21)
|
|
|
(37)
|
|
|
9
|
|
|
5
|
|
|
(44)
|
|
Depreciation
expense
|
|
80
|
|
|
88
|
|
|
80
|
|
|
85
|
|
|
333
|
|
Amortization of
intangibles
|
|
31
|
|
|
30
|
|
|
33
|
|
|
31
|
|
|
125
|
|
EBITDA
|
|
$
|
691
|
|
|
$
|
692
|
|
|
$
|
657
|
|
|
$
|
614
|
|
|
$
|
2,654
|
|
Items affecting
comparability:
|
|
|
|
|
|
|
|
|
|
|
Restructuring and
integration expenses
|
|
$
|
33
|
|
|
$
|
47
|
|
|
$
|
84
|
|
|
$
|
61
|
|
|
$
|
225
|
|
Transaction
costs
|
|
—
|
|
|
2
|
|
|
2
|
|
|
—
|
|
|
4
|
|
Productivity
|
|
(5)
|
|
|
12
|
|
|
3
|
|
|
9
|
|
|
19
|
|
Provision for
settlements
|
|
2
|
|
|
11
|
|
|
7
|
|
|
7
|
|
|
27
|
|
Stock
compensation
|
|
6
|
|
|
4
|
|
|
5
|
|
|
7
|
|
|
22
|
|
Malware
incident
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
5
|
|
Mark to
market
|
|
(7)
|
|
|
26
|
|
|
40
|
|
|
27
|
|
|
86
|
|
Step-up of acquired
inventory
|
|
—
|
|
|
—
|
|
|
2
|
|
|
3
|
|
|
5
|
|
Adjusted
EBITDA
|
|
$
|
720
|
|
|
$
|
794
|
|
|
$
|
800
|
|
|
$
|
733
|
|
|
$
|
3,047
|
|
|
|
|
|
|
|
|
|
|
|
|
RECONCILIATION OF
CERTAIN ADJUSTED FINANCIAL RESULTS TO CERTAIN
CURRENCY NEUTRAL
ADJUSTED FINANCIAL RESULTS
(Unaudited)
|
|
Adjusted net sales,
adjusted income from operations and adjusted earnings per share, as
adjusted to currency neutral: These adjusted financial results
are calculated on a currency neutral basis by converting our
current-period local currency financial results using the
prior-period foreign currency exchange rates.
|
|
|
|
For the Three
Months Ended March 31, 2019
|
|
|
Coffee
|
|
Packaged
|
|
Beverage
|
|
Latin
America
|
|
|
Percent
change
|
|
Systems
|
|
Beverages
|
|
Concentrates
|
|
Beverages
|
|
Total
|
Adjusted net
sales
|
|
1.7
|
%
|
|
(5.3)
|
%
|
|
4.8
|
%
|
|
2.7
|
%
|
|
(1.1)
|
%
|
Impact of foreign
currency
|
|
0.8
|
%
|
|
0.1
|
%
|
|
0.3
|
%
|
|
2.4
|
%
|
|
0.5
|
%
|
Adjusted net
sales, as adjusted to currency neutral
|
|
2.5
|
%
|
|
(5.2)
|
%
|
|
5.1
|
%
|
|
5.1
|
%
|
|
(0.6)
|
%
|
|
|
|
For the Three
Months Ended March 31, 2019
|
|
|
Coffee
|
|
Packaged
|
|
Beverage
|
|
Latin
America
|
|
|
Percent
change
|
|
Systems
|
|
Beverages
|
|
Concentrates
|
|
Beverages
|
|
Total
|
Adjusted income
from operations
|
|
7.4
|
%
|
|
—
|
%
|
|
11.7
|
%
|
|
—
|
%
|
|
10.5
|
%
|
Impact of foreign
currency
|
|
1.6
|
%
|
|
—
|
%
|
|
0.5
|
%
|
|
1.3
|
%
|
|
1.1
|
%
|
Adjusted income
from operations, as adjusted to currency neutral
|
|
9.0
|
%
|
|
—
|
%
|
|
12.2
|
%
|
|
1.3
|
%
|
|
11.6
|
%
|
|
|
|
For the
Three
Months
Ended
|
|
|
March 31,
2019
|
Adjusted diluted
earnings per share
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.25
|
|
Impact of foreign
currency
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
Adjusted diluted
earnings per share, as adjusted to currency neutral
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.25
|
|
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SOURCE Keurig Dr Pepper