Keurig Dr Pepper Inc

Previous wording

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act, including, in particular, statements about the impact of future events, future financial performance, plans (including our executive succession plan), strategies, expectations, prospects, competitive environment, regulation, labor matters, supply chain issues, inflation, and availability of raw materials. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as “outlook,” “guidance,” “anticipate,” “expect,” “believe,” “could,” “estimate,” “feel,” “forecast,” “intend,” “may,” “plan,” “potential,” “project,” “should,” “target,” “will,” “would,” and similar words, phrases or expressions and variations or negatives of these words in this Quarterly Report on Form 10-Q. We have based these forward-looking statements on our current views with respect to future events and financial performance. Our actual financial performance could differ materially from those projected in the forward-looking statements due to the inherent uncertainty of estimates, forecasts and projections, and our financial performance may be better or worse than anticipated. Given these uncertainties, you should not put undue reliance on any forward-looking statements. All of the forward-looking statements are qualified in their entirety by reference to the factors discussed under "Risk Factors" in Part I, Item 1A of our Annual Report, as well as our subsequent filings with the SEC. Forward-looking statements represent our estimates and assumptions only as of the date that they were made. We do not undertake any duty to update the forward-looking statements, and the estimates and assumptions associated with them, after the date of this Quarterly Report on Form 10-Q, except to the extent required by applicable securities laws.

Current wording

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act, including, in particular, statements about the impact of future events, future financial performance, plans, strategies, business combinations, expectations, prospects, competitive environment, regulation, labor matters, supply chain issues, inflation, and availability of raw materials. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as “outlook,” “guidance,” “anticipate,” “expect,” “believe,” “could,” “estimate,” “feel,” “forecast,” “intend,” “may,” “plan,” “potential,” “project,” “should,” “target,” “will,” “would,” and similar words, phrases or expressions and variations or negatives of these words in this Quarterly Report on Form 10-Q. We have based these forward-looking statements on our current views with respect to future events and financial performance. Our actual financial performance could differ materially from those projected in the forward-looking statements due to the inherent uncertainty of estimates, forecasts and projections, and our financial performance may be better or worse than anticipated. Given these uncertainties, you should not put undue reliance on any forward-looking statements. All of the forward-looking statements are qualified in their entirety by reference to the factors discussed under "Risk Factors" in Part I, Item 1A of our Annual Report, as well as our subsequent filings with the SEC. Forward-looking statements represent our estimates and assumptions only as of the date that they were made. We do not undertake any duty to update the forward-looking statements, and the estimates and assumptions associated with them, after the date of this Quarterly Report on Form 10-Q, except to the extent required by applicable securities laws.

Previous wording

KDP is a leading beverage company in North America that manufactures, markets, distributes, and sells hot and cold beverages and single serve brewing systems. We have a broad portfolio of iconic beverage brands, including Dr Pepper, Canada Dry, Mott's, A&W, Snapple, Peñafiel, 7UP, Green Mountain Coffee Roasters, Core Hydration, and The Original Donut Shop, as well as the Keurig brewing system. KDP has some of the most recognized beverage brands in North America, with significant consumer awareness levels and long histories that evoke strong emotional connections with consumers. We offer more than 125 owned, licensed, and partner brands, available nearly everywhere people shop and consume beverages through our sales and distribution network.

Current wording

KDP is a leading beverage company in North America that manufactures, markets, distributes, and sells hot and cold beverages and single serve brewing systems. We have a broad portfolio of iconic beverage brands, including Keurig, Dr Pepper, Canada Dry, Mott's, A&W, Snapple, Peñafiel, 7UP, Green Mountain Coffee Roasters, Clamato, Core Hydration, and The Original Donut Shop. KDP has some of the most recognized beverage brands in North America, with significant consumer awareness levels and long histories that evoke strong emotional connections with consumers. We offer more than 125 owned, licensed, and partner brands, available nearly everywhere people shop and consume beverages through our sales and distribution network.

Previous wording

Key Events During the First Quarter of 2024

Current wording

Key Events During the Second Quarter of 2024

Previous wording

The following table sets forth our unaudited condensed consolidated results of operations for the first quarter of 2024 and 2023:

Current wording

The following table sets forth our unaudited condensed consolidated results of operations for the second quarter of 2024 and 2023:

Previous wording

Gross Profit. Gross profit increased $196 million, or 11.2%, to $1,940 million for the first quarter of 2024 compared to $1,744 million in the prior year period. This performance primarily reflected the impact to gross profit of the strong growth in net sales (6 percentage points), the benefit from the earned equity from the achievement of milestones associated with certain distribution agreements (3 percentage points), and a net benefit from changes in ingredients, materials, and productivity (2 percentage points). Gross margin increased 390 bps versus the prior year period to 55.9%.

Current wording

Gross Profit. Gross profit increased $131 million, or 6.4%, to $2,172 million for the second quarter of 2024 compared to $2,041 million in the prior year period. This performance primarily reflected a net benefit from changes in ingredients, materials, and productivity (3 percentage points) and the gross profit impact of net sales growth (3 percentage points). Gross margin increased 150 bps versus the prior year period to 55.4%.

Previous wording

Income from Operations. Income from operations increased $181 million, or 31.0%, to $765 million for the first quarter of 2024 compared to $584 million in the prior year period, primarily driven by increased gross profit. Operating margin increased 470 bps from the prior year period to 22.1%.

Current wording

Income from Operations. Income from operations increased $273 million, or 20.2%, to $1,626 million for the first six months of 2024 compared to $1,353 million in the prior year period, primarily driven by increased gross profit. Operating margin increased 310 bps from the prior year period to 22.0%.

Previous wording

Interest Expense. Interest expense increased $155 million to $178 million for the first quarter of 2024 compared to $23 million for the prior year period, primarily driven by the unfavorable change in unrealized mark-to-market activity on interest rate contracts, resulting from increasing interest rates.

Current wording

Interest Expense. Interest expense increased $187 million to $382 million for the first six months of 2024 compared to $195 million for the prior year period, primarily driven by the unfavorable year-over-year change in unrealized mark-to-market activity (54 percentage points), as well as increased weighted average borrowings (42 percentage points).

Previous wording

Effective Tax Rate. The effective tax rate increased 400 bps to 23.6% for the first quarter of 2024, compared to 19.6% in the prior year period, driven by a shift in the mix of income from lower tax jurisdictions to higher tax jurisdictions (210 bps) and the unfavorable comparison to the prior year tax benefit received from favorable adjustments upon foreign tax return filing (150 bps).

Current wording

Effective Tax Rate. The effective tax rate increased 470 bps to 23.5% for the first six months of 2024, compared to 18.8% in the prior year period, primarily driven by the unfavorable comparison to the prior year tax benefit received from a non-cash adjustment (290 bps) and a shift in the mix of income from lower tax jurisdictions to higher tax jurisdictions (130 bps).

Previous wording

Net Income. Net income decreased $13 million, or 2.8%, to $454 million for the first quarter of 2024 as compared to $467 million in the prior year period, as increased interest expense and unfavorable changes in our effective tax rate offset our increased income from operations.

Current wording

Net Income. Net income decreased $1 million, or 0.1%, to $969 million for the first six months of 2024 as compared to $970 million in the prior year period, as increased interest expense and unfavorable changes in our effective tax rate more than offset our increased income from operations.

Previous wording

The following tables provide net sales and income from operations for our reportable segments for the first quarter of 2024 and 2023, as well as the other amounts necessary to reconcile our total segment results to our consolidated results presented in accordance with U.S. GAAP.

Current wording

The following tables provide net sales and income from operations for our reportable segments for the first six months of 2024 and 2023, as well as the other amounts necessary to reconcile our total segment results to our consolidated results presented in accordance with U.S. GAAP.

Previous wording

Sales Volume. Sales volume for the first quarter of 2024 decreased approximately 1.7% compared to the prior year period, as growth in Canada Dry and C4 Energy, combined with the launch of Electrolit within our distribution network, was more than offset by softness in the remainder of our portfolio.

Current wording

Sales Volume. Sales volume for the first six months of 2024 decreased approximately 2.2% compared to the prior year period, as the contributions from partnerships, including Electrolit and C4, and growth in select carbonated soft drinks was more than offset by softness in other parts of our portfolio.

Previous wording

Net Sales. Net sales increased 4.3% to $2,093 million in the first quarter of 2024, compared to $2,007 million in the prior year period, driven by favorable net price realization (5.6%), which was partially offset by unfavorable volume/mix (1.3%).

Current wording

Net Sales. Net sales increased 3.8% to $4,500 million in the first six months of 2024, compared to $4,337 million in the prior year period, driven by favorable net price realization of 4.2%, which was partially offset by unfavorable volume/mix of 0.4%.

Previous wording

Income from Operations. Income from operations increased $125 million, or 25.5%, to $615 million for the first quarter of 2024 compared to $490 million for the prior year period. This performance was led by the benefits to gross profit from net sales growth (17 percentage points) and earned equity from the achievement of milestones associated with certain distribution agreements (9 percentage points), as well as a net benefit from changes in ingredients, materials, and productivity (2 percentage points). Operating margin improved 500 bps versus the year ago period to 29.4%.

Current wording

Income from Operations. Income from operations increased $213 million, or 19.0%, to $1,332 million for the first six months of 2024 compared to $1,119 million for the prior year period. This performance was led by the gross profit impact of net sales growth (11 percentage points) and a net benefit from changes in ingredients, materials, and productivity (4 percentage points), as well as earned equity from the achievement of milestones associated with certain distribution agreements (4 percentage points). Operating margin improved 380 bps versus the year ago period to 29.6%.

Previous wording

Sales Volume. K-Cup pod volume decreased 1.1% for the first quarter of 2024 compared to the prior year period, reflecting softer at-home coffee category trends. Appliance volume increased 26.1% in the first quarter of 2024, driven by Keurig market share momentum.

Current wording

Sales Volume. K-Cup pod volume decreased 0.4% for the first six months of 2024 compared to the prior year period. Appliance volume increased 11.0% in the first six months of 2024, driven by Keurig market share momentum.

Previous wording

Net Sales. Net sales decreased 2.1% to $911 million for the first quarter of 2024 compared to $931 million in the prior year period, driven by unfavorable volume/mix (1.8%) and net price realization (0.3%).

Current wording

Net Sales. Net sales decreased 2.1% to $1,861 million for the first six months of 2024 compared to $1,901 million in the prior year period, driven by unfavorable net price realization of 2.4%, partially offset by favorable volume/mix of 0.3%.

Previous wording

Net Sales. Net sales increased 11.8% to $464 million in the first quarter of 2024, compared to $415 million in the prior year period, reflecting volume/mix growth (4.8%), favorable FX translation (4.8%), and higher net price realization (2.2%).

Current wording

Net Sales. Net sales increased 13.8% to $1,029 million in the first six months of 2024, compared to $904 million in the prior year period, reflecting volume/mix growth of 7.9%, higher net price realization of 3.3%, and favorable FX translation of 2.6%.

Previous wording

The following summarizes our cash activity for the first quarter of 2024 and 2023:

Current wording

The following summarizes our cash activity for the first six months of 2024 and 2023:

Previous wording

Net cash provided by operating activities increased $14 million for the first quarter of 2024, as compared to the first quarter of 2023, driven by an increase in working capital.

Current wording

Net cash provided by operating activities increased $290 million for the first six months of 2024, as compared to the first six months of 2023, driven by the favorable comparison in working capital versus the prior year period.

Previous wording

Our cash conversion cycle increased 48 days to approximately 2 days as of March 31, 2024 as compared to (46) days as of March 31, 2023, which was primarily driven by the decrease in DPO, reflecting the reduction of payment terms for certain suppliers.

Current wording

Our cash conversion cycle increased 41 days to approximately 4 days as of June 30, 2024 as compared to (37) days as of June 30, 2023, which was primarily driven by the decrease in DPO, reflecting the reduction of payment terms for certain suppliers.

Previous wording

We have declared total dividends of $0.215 per share and $0.20 per share for the first quarter of 2024 and 2023, respectively.

Current wording

We have declared total dividends of $0.43 per share and $0.40 per share for the first six months of 2024 and 2023, respectively.

Previous wording

Our Board authorized a four-year share repurchase program, ending December 31, 2025, of up to $4 billion of our outstanding common stock. We repurchased and retired $1,105 million of common stock during the first quarter of 2024. As of March 31, 2024, $1,810 million remained available for repurchase under the authorized share repurchase program.

Current wording

Our Board authorized a four-year share repurchase program, ending December 31, 2025, of up to $4 billion of our outstanding common stock. We repurchased and retired $1,105 million of common stock during the first six months of 2024. As of June 30, 2024, $1,810 million remained available for repurchase under the authorized share repurchase program.

Previous wording

Purchases of property, plant and equipment were $158 million and $62 million for the first quarter of 2024 and 2023, respectively.

Current wording

Purchases of property, plant and equipment were $273 million and $149 million for the first six months of 2024 and 2023, respectively.

Previous wording

Capital expenditures, which includes both purchases of property, plant and equipment and amounts included in accounts payable and accrued expenses, for the first quarter of 2024 and 2023 primarily related to investments in manufacturing capabilities. Capital expenditures included in accounts payable and accrued expenses were $189 million and $222 million for the first quarter of 2024 and 2023, respectively, which primarily related to these investments.

Current wording

Capital expenditures, which includes both purchases of property, plant and equipment and amounts included in accounts payable and accrued expenses, for the first six months of 2024 and 2023 primarily related to investments in manufacturing capabilities, both in the U.S. and internationally. Capital expenditures included in accounts payable and accrued expenses were $173 million and $214 million for the first six months of 2024 and 2023, respectively, which primarily related to these investments.

Previous wording

We have invested in the expansion of our DSD network through transactions with strategic independent bottlers or third-party brand ownership companies to ensure competitive distribution scale. From time to time, we additionally acquire brand ownership companies to expand our portfolio. These transactions are generally accounted for as an asset acquisition, as the majority of the transaction price represents the acquisition of an intangible asset. Purchases of intangible assets were $31 million and $51 million for the first quarter of 2024 and 2023, respectively.

Current wording

We have invested in the expansion of our DSD network through transactions with strategic independent bottlers or third-party brand ownership companies to ensure competitive distribution scale. From time to time, we additionally acquire brand ownership companies to expand our portfolio. These transactions are generally accounted for as an asset acquisition, as the majority of the transaction price represents the acquisition of an intangible asset. Purchases of intangible assets were $49 million and $55 million for the first six months of 2024 and 2023, respectively.

Previous wording

(1)Includes $157 million and $56 million of intercompany receivables due to the Parent and Guarantors from the Non-Guarantors as of March 31, 2024 and December 31, 2023, respectively.

Current wording

(1)Includes $97 million and $56 million of intercompany receivables due to the Parent and Guarantors from the Non-Guarantors as of June 30, 2024 and December 31, 2023, respectively.

Previous wording

(2)Includes $1,388 million and $1,399 million of intercompany payables due to the Non-Guarantors from the Parent and Guarantors as of March 31, 2024 and December 31, 2023, respectively.

Current wording

(2)Includes $1,476 million and $1,399 million of intercompany payables due to the Non-Guarantors from the Parent and Guarantors as of June 30, 2024 and December 31, 2023, respectively.