01—Abstract
Summary
Summary of the 10-Q filed April 25, 2024. Cited figures are marked; the original filing is the authoritative source.
Keurig Dr Pepper Inc. reported first-quarter 2024 net sales of $3,468 milliona, up from $3,353 million in the prior-year period, with income from operations rising to $765 million from $584 million.
Net income was $454 millionb, compared with $467 million a year earlier, and diluted EPS was $0.33, flat year over year. Management attributed the sales increase mainly to favorable net price realization (3.1%) and FX translation (0.6%), partly offset by unfavorable volume/mix (0.3%). Gross margin expanded to 55.9% from 52.0%, helped by earned equity from distribution agreement milestones, while interest expense rose to $178 million from $23 million, driven by unfavorable mark-to-market activity on interest rate contracts.
The balance sheet shifted meaningfully during the quarter. KDP issued $3 billionc of senior unsecured notes in March 2024, used to repay the $1.15 billion 2024 Notes at maturity, repurchase shares, and repay commercial paper. Long-term obligations rose to $12,929 million from $9,945 million, while short-term borrowings fell to $1,908 million from $3,246 million.
In March 2024, KDP repurchased 35 million shares for $1,012 milliond in connection with a JAB BevCo B.V. secondary offering, and total repurchases for the quarter were $1,105 million, leaving $1,810 million available under the authorized program. Cash flow from operations was $85 million, compared with $71 million in the prior year, and capital expenditures paid were $158 million. The filing also discloses a pending antitrust matter in which plaintiffs in the Multidistrict Antitrust Litigation collectively claim more than $5 billion in damages.
Keurig disputes the merits and has not accrued a loss contingency. Separately, the filing describes a CEO succession plan under which Tim Cofer is expected to succeed Robert Gamgort as CEO during the second quarter of 2024, and a 2024 network optimization involving closure of the Williston, Vermont manufacturing facility with pre-tax charges estimated at $30 million to $40 million.
02—Key points
Key Highlights
- Net sales rose 3.4% to $3,468 million, driven mainly by net price realization of 3.1%, with U.S. Refreshment Beverages sales up 4.3% to $2,093 million.
- Income from operations increased 31.0% to $765 million, and operating margin expanded 470 bps to 22.1%.
- Net income declined 2.8% to $454 million as interest expense rose to $178 million from $23 million; diluted EPS was flat at $0.33.
- KDP issued $3 billion of senior unsecured notes in March 2024 and repaid the $1,150 million 2024 Notes at maturity; short-term borrowings fell to $1,908 million from $3,246 million.
- Share repurchases totaled $1,105 million in the quarter, including 35 million shares bought from JAB's secondary offering for $1,012 million; $1,810 million remained under the $4 billion program.
- Cash provided by operating activities was $85 million, up from $71 million, with a cash conversion cycle of approximately 2 days versus (46) days a year earlier.
- A pending SEC resolution regarding K-Cup pod recyclability statements includes a $1.5 million penalty, and the Multidistrict Antitrust Litigation claims exceed $5 billion with no loss accrued.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2024, Keurig Dr Pepper kept $0.13.
- Revenue$3.47B100.0%
- Cost of revenue−$1.53B44.1%
- Gross profit$1.94B55.9%
- Operating costs−$1.18B33.9%
- Operating income$765.0M22.1%
- Interest, other & tax−$311.0M9.0%
- Net income$454.0M13.1%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2024filed April 25, 2024Financial Statements
Q1 FY2024 against Q1 FY2023
| Line item | Q1 FY2024Q1 FY2023 | Change |
|---|---|---|
| Revenue | $3.47B$3.35B | +3.4% |
| Cost of Revenue | $1.53B$1.61B | −5.0% |
| Gross Profit | $1.94B$1.74B | +11.2% |
| SG&A Expenses | $1.18B$1.17B | +0.9% |
| Operating Income | $765.00M$584.00M | +31.0% |
| Net Income | $454.00M$467.00M | −2.8% |
| EPS (Basic) | $0.33$0.33 | 0.0% |
| EPS (Diluted) | $0.33$0.33 | 0.0% |
| Shares Outstanding (Basic) | 1.38B1.41B | −1.8% |
| Shares Outstanding (Diluted) | 1.39B1.42B | −2.1% |
05—Questions
Frequently Asked Questions
How did Keurig Dr Pepper's profitability change in the first quarter of 2024?
Income from operations rose to $765 million from $584 million, and gross margin increased to 55.9% from 52.0%. Net income, however, fell to $454 million from $467 million because interest expense increased to $178 million from $23 million, mainly due to unfavorable mark-to-market activity on interest rate contracts. Diluted EPS was $0.33 in both periods.
What drove the increase in KDP's debt and how is it being used?
In March 2024 KDP issued $3 billion of senior unsecured notes. The proceeds were used to repay the $1,150 million 2024 Notes at maturity, repurchase KDP shares, repay outstanding commercial paper, and for general corporate purposes. Long-term obligations increased to $12,929 million from $9,945 million, while commercial paper and current debt declined.
How much did KDP return to shareholders this quarter?
KDP repurchased and retired $1,105 million of common stock and declared dividends of $0.215 per share, totaling $292 million declared in the quarter. The company repurchased 35 million shares in March 2024 for $1,012 million in connection with a JAB BevCo B.V. secondary offering. As of March 31, 2024, $1,810 million remained available under the share repurchase program, which expires December 31, 2025.
What legal and regulatory risks does the filing disclose?
Keurig is defending Multidistrict Antitrust Litigation in which plaintiffs collectively claim more than $5 billion in damages; Keurig strongly disputes the merits and has not accrued a loss contingency. The Staff of the SEC has also reached an agreement in principle to resolve its investigation into prior statements about K-Cup pod recyclability, which includes a $1.5 million penalty and is subject to documentation and SEC approval.
What leadership and restructuring changes were announced?
Tim Cofer was appointed Chief Operating Officer effective November 6, 2023, and is expected to succeed Robert Gamgort as CEO during the second quarter of 2024. The 2023 CEO succession and realignment program is expected to incur about $52 million in charges. The 2024 Network Optimization involves closing the Williston, Vermont manufacturing facility, with estimated pre-tax restructuring charges of $30 million to $40 million.
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