01—Abstract
Summary
Summary of the 10-K filed February 25, 2021. Cited figures are marked; the original filing is the authoritative source.
Keurig Dr Pepper Inc. (KDP) reported net sales of $11.62 billiona for 2020, up $498 million (4.5%) from $11.12 billion in 2019, driven by higher volume/mix of 5.6%, partially offset by lower net price realization of 0.6%.
Net income attributable to KDP rose $71 millionb, or 5.7%, to $1.33 billion, and diluted EPS was $0.93 versus $0.88. Excluding items affecting comparability, adjusted net income increased 15.1% to $1.99 billion and adjusted diluted EPS rose 14.8% to $1.40. The filing attributes performance to productivity and merger synergies, volume/mix growth and lower discretionary spending, primarily marketing, while noting $150 million of pre-tax COVID-19 expenses and a $67 million non-cash impairment of the Bai brand intangible asset.
COVID-19 had divergent effects: at-home demand for K-Cup pods and brewers grew strongly, while away-from-home channels, fountain foodservice and Mexico tourism declined. Coffee Systems and Packaged Beverages drove growth, while Beverage Concentrates net sales fell 6.3% to $1.33 billionc. Operating cash flow was $2.46 billion, and net repayments of debt totaled $951 million related to notes, the 2019 KDP Term Loan and commercial paper.
Total assets were $49.78 billiond, including $20.18 billion of goodwill and $23.97 billion of other intangible assets, and the company stated it was in compliance with all debt covenants. The filing also notes that JAB's ownership fell to approximately 34%, so KDP is no longer a controlled company, and that the Board approved a 25% increase in the quarterly dividend in February 2021. Management expects heightened net sales volatility during and after the pandemic and continues to target rapid deleveraging within two to three years of the DPS Merger.
02—Key points
Key Highlights
- Net sales rose 4.5% to $11.62 billion, with volume/mix up 5.6% and net price realization down 0.6%.
- Net income attributable to KDP increased 5.7% to $1.33 billion; diluted EPS was $0.93 versus $0.88.
- Adjusted diluted EPS rose 14.8% to $1.40, and adjusted operating margin expanded 150 bps to 27.5%.
- Coffee Systems net sales grew 4.7% to $4.43 billion on K-Cup pod volume up 6.3% and brewer volume up 21.2%.
- Packaged Beverages net sales increased 8.5% to $5.36 billion, while Beverage Concentrates declined 6.3% to $1.33 billion due to fountain foodservice weakness.
- COVID-19 added $150 million of pre-tax expenses, and a $67 million non-cash impairment was recorded on the Bai brand.
- Board approved a 25% increase in the quarterly dividend in February 2021; operating cash flow was $2.46 billion.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2020, Keurig Dr Pepper kept $0.11.
- Revenue$11.62B100.0%
- Cost of revenue−$5.13B44.2%
- Gross profit$6.49B55.8%
- Operating costs−$4.01B34.5%
- Operating income$2.48B21.3%
- Interest, other & tax−$1.16B9.9%
- Net income$1.32B11.4%
Where FY2020 revenue went
$11.62B- Cost of revenue: $5.13B, 44% of revenue
- SG&A: $3.98B, 34% of revenue
- Net income: $1.32B, 11% of revenue
- R&D: $69.0M, 0.6% of revenue
- Interest, other & tax: $1.16B, 9.9% of revenue
Kept 11% as net incomeNet income $1.32B · 11%R&D $69.0M · 0.6%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2020filed February 25, 2021Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $11.62B$11.12B | +4.5% |
| Cost of Revenue | $5.13B$4.78B | +7.4% |
| Gross Profit | $6.49B$6.34B | +2.3% |
| R&D Expenses | $69.00M$81.00M | −14.8% |
| SG&A Expenses | $3.98B$3.96B | +0.4% |
| Operating Income | $2.48B$2.38B | +4.3% |
| Interest Expense | $604.00M$654.00M | −7.6% |
| Net Income | $1.32B$1.25B | +5.7% |
| EPS (Basic) | $0.94$0.89 | +5.6% |
| EPS (Diluted) | $0.93$0.88 | +5.7% |
| Shares Outstanding (Basic) | 1.41B1.41B | 0.0% |
| Shares Outstanding (Diluted) | 1.42B1.42B | +0.2% |
05—Questions
Frequently Asked Questions
How did Keurig Dr Pepper perform financially in 2020?
Net sales increased 4.5% to $11.62 billion and net income attributable to KDP rose 5.7% to $1.33 billion. Diluted EPS was $0.93, compared with $0.88 in 2019. Adjusted diluted EPS, which excludes items affecting comparability, rose 14.8% to $1.40.
What drove growth in 2020, and where did the company see weakness?
Growth was driven by higher volume/mix, productivity and merger synergies, and lower discretionary spending, primarily marketing. At-home demand for K-Cup pods and brewers was strong, while away-from-home channels, fountain foodservice and Mexico tourism were weaker, leading to a 6.3% decline in Beverage Concentrates net sales.
What were the main COVID-19 and impairment charges?
The filing reports $150 million of pre-tax COVID-19 expenses in 2020. It also records a $67 million non-cash impairment of the Bai brand intangible asset and a $102 million impairment on investments and a note receivable tied to Bedford and LifeFuels.
How is the company's debt and liquidity position?
Operating cash flow was $2.46 billion. The company made net debt repayments of $951 million and had $3.9 billion of borrowing capacity under its KDP Revolver and 2020 364-Day Credit Agreement. Debt ratings were Baa2 (Moody's, negative outlook) and BBB (S&P, stable), and the company stated it was in compliance with all debt covenants.
What changed in the company's ownership and shareholder returns?
JAB and its affiliates now own approximately 34% of common stock following 2020 secondary sales, so KDP is no longer a controlled company under Nasdaq rules. The Board approved a 25% increase in the quarterly dividend in February 2021, beginning with the second-quarter dividend announcement.
06—Continue