01—Abstract
Summary
Summary of the 10-K/A filed March 20, 2018. Cited figures are marked; the original filing is the authoritative source.
Dr Pepper Snapple Group, Inc. (now Keurig Dr Pepper Inc.) filed this Form 10-K/A, Amendment No. 1, to its annual report for the fiscal year ended December 31, 2017.
The original report was filed on February 14, 2018. This amendment adds the Part III information (directors, executive compensation, security ownership, related transactions and accountant fees) that was previously incorporated by reference from a proxy statement, and it adds new certifications. It does not amend financial statements.
The filing also describes the January 29, 2018 Merger Agreement with Maple Parent Holdings Corp. and Salt Merger Sub, Inc. to combine with Keurig Green Mountain, Inc. Under the agreement, Maple Parent's shareholders would receive newly issued DPSG common stock equal to approximately 87% of outstanding common stock on a fully diluted basis after closing, and DPSG would pay a special cash dividend of $103.75a per share. Completion requires stockholder approval of a charter amendment that increases authorized shares and changes the company's name to Keurig Dr Pepper Inc. A preliminary proxy statement was filed on March 8, 2018. The compensation disclosure reports that 2017 net sales, cash flow from operations and net income reached their highest levels in the last five years, and income from operations remained near record levels.
Against targets, 2017 net sales were $6,690 millionb versus a $6,731 million target, and income from operations (core basis) was $1,363 million versus a $1,417 million target. Annual MIP payouts ranged from 50% to 94% of target, and the 2015-2017 PSU cycle paid out at 81.25% of target. The say-on-pay vote in May 2017 passed with over 90% support.
CEO Larry D. Young's 2017 total compensation was $8,921,147,c and the reported CEO-to-median-employee pay ratio was 209 to 1. For investors, the amendment's most material items are the merger terms, the pending name change and the governance and compensation details that accompany a transaction of this scale.
Ownership disclosures show BlackRock, Inc. at 11.4% and The Vanguard Group at 10.22% of common stock. Deloitte's fees for 2017 audit services were $3,650 thousandd, up from $3,472 thousand in 2016, with no audit-related, tax or other fees reported.
02—Key points
Key Highlights
- Merger with Keurig Green Mountain: Under the January 29, 2018 Merger Agreement, Maple Parent shareholders would receive DPSG shares equal to approximately 87% of outstanding common stock on a fully diluted basis after closing.
- Special cash dividend: DPSG would declare a special cash dividend of $103.75 per share, payable to stockholders of record on the business day before the merger closing date.
- Stockholder approvals required: Completion requires approval of a charter amendment increasing authorized common shares and changing the company name to Keurig Dr Pepper Inc., plus approval of the share issuance.
- 2017 performance versus targets: Net sales were $6,690 million against a $6,731 million target, and income from operations was $1,363 million against a $1,417 million target.
- Incentive payouts: MIP payouts ranged from 50% to 94% of target, and the 2015-2017 PSU cycle paid 81.25% of target.
- Shareholder returns: Over the past five years, the company paid over $1.7B in dividends and repurchased $2.2B of stock, according to the filing.
- CEO pay and governance: CEO total 2017 compensation was $8,921,147, the CEO pay ratio was 209 to 1, and the 2017 say-on-pay vote received over 90% support.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2017, Keurig Dr Pepper kept $0.06.
- Revenue$6.69B100.0%
- Cost of revenue−$4.65B69.4%
- Gross profit$2.04B30.6%
- Operating costs−$1.15B17.1%
- Operating income$897.0M13.4%
- Interest, other & tax−$519.0M7.8%
- Net income$378.0M5.7%
Where FY2017 revenue went
$6.69B- Cost of revenue: $2.69B, 40% of revenue
- Other operating costs: $1.90B, 28% of revenue
- SG&A: $1.15B, 17% of revenue
- Net income: $378.0M, 5.7% of revenue
- R&D: $56.0M, 0.8% of revenue
- Interest, other & tax: $519.0M, 7.8% of revenue
Kept 5.7% as net incomeR&D $56.0M · 0.8%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-K/AFY2017filed March 20, 2018Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $6.69B$6.44B | +3.9% |
| Cost of Revenue | $2.69B$2.58B | +4.4% |
| Gross Profit | $2.04B$3.86B | −47.0% |
| R&D Expenses | $56.00M$20.00M | +180.0% |
| SG&A Expenses | $1.15B$2.33B | −50.8% |
| Operating Income | $897.00M$1.43B | −37.4% |
| Interest Expense | $101.00M$147.00M | −31.3% |
| Net Income | $378.00M$847.00M | −55.4% |
| EPS (Basic) | $0.48$4.57 | −89.5% |
| EPS (Diluted) | $0.47$4.54 | −89.6% |
| Shares Outstanding (Basic) | 790.50M185.40M | +326.4% |
| Shares Outstanding (Diluted) | 790.50M186.60M | +323.6% |
05—Questions
Frequently Asked Questions
What is this filing and why was it filed?
This is Amendment No. 1 on Form 10-K/A to the fiscal 2017 annual report, filed to include Part III information that was previously incorporated by reference from a proxy statement under General Instruction G(3), and to add new Rule 12b-15 and Rule 13a-14(a) certifications. The Original Filing, dated February 14, 2018, is otherwise unchanged.
What are the key terms of the proposed merger?
On January 29, 2018, DPSG agreed to merge Salt Merger Sub, Inc. into Maple Parent Holdings Corp., the indirect owner of Keurig Green Mountain, Inc. Maple Parent shareholders would receive newly issued DPSG common stock equal to approximately 87% of outstanding common stock on a fully diluted basis, and DPSG would pay a special cash dividend of $103.75 per share. A preliminary proxy statement was filed with the SEC on March 8, 2018.
How did the company perform against its 2017 incentive targets?
Net sales were $6,690 million against a $6,731 million target, paying out at 85.0% of target. Income from operations, on a core basis, was $1,363 million against a $1,417 million target, paying out at 52.2%. Segment operating profit for Beverage Concentrates and Latin America Beverages was $970 million against a $944 million target (146.4%), and for Packaged Beverages it was $693 million against a $739 million target (0.0%). Overall MIP payouts ranged from 50% to 94% of target.
What was CEO compensation for 2017 and how does it compare to employees?
CEO Larry D. Young's total 2017 compensation was $8,921,147, including $1,150,000 in salary, $4,922,265 in stock awards and $1,126,598 in non-equity incentive plan compensation. The annual total compensation for the median employee was $42,689, and the resulting CEO-to-median pay ratio was 209 to 1.
Who are the largest stockholders and what did the company pay its auditor?
As of March 15, 2018, BlackRock, Inc. beneficially owned 20,528,958 shares (11.4%), The Vanguard Group owned 18,453,448 shares (10.22%), and JPMorgan Chase & Co. owned 10,509,246 shares (5.8%). Deloitte's audit fees were $3,650 thousand for 2017 and $3,472 thousand for 2016, with no audit-related, tax or other fees reported in either year.
06—Continue