01—Abstract
Summary
Summary of the 10-Q filed July 25, 2024. Cited figures are marked; the original filing is the authoritative source.
Keurig Dr Pepper Inc. reported second-quarter 2024 net sales of $3,922 milliona, up 3.5% from $3,789 million a year earlier, with income from operations rising 12.0% to $861 million and diluted EPS of $0.38 versus $0.36.
Gross margin expanded 150 bps to 55.4%, led by a net benefit from ingredients, materials, and productivity, while net price realization and volume/mix both contributed to growth. Net income rose 2.4% to $515 millionb, though interest expense climbed 18.6% to $204 million on higher weighted average borrowings, and the effective tax rate increased to 23.4% from 17.9%. For the first six months of 2024, net sales were $7,390 million (up 3.5%) and income from operations was $1,626 million (up 20.2%).
Operating cash flow rose to $742 millionc from $452 million, driven by working capital, while the company spent $1,105 million on share repurchases and paid $591 million in dividends. Long-term obligations increased to $12,406 million after the March 2024 issuance of $3 billion in senior notes, which funded buybacks, commercial paper repayment, and the repayment of the 2024 Notes. As of June 30, 2024, $1,810 million remained under the $4 billion repurchase authorization, and the company had no borrowings under its $4 billion Revolving Credit Agreement.
The filing also discloses a pending Multidistrict Antitrust Litigation in which plaintiffs claim more than $5 billiond in damages, for which no loss accrual has been recorded, and an agreement in principle with the SEC Staff to resolve an investigation of K-Cup recyclability statements with a $1.5 million penalty. Management also announced the planned acquisition of Kalil Bottling Company's assets, expected to close in the third quarter of 2024.
02—Key points
Key Highlights
- Net sales rose 3.5% to $3,922 million in Q2 2024; U.S. Refreshment Beverages grew 3.3% and International grew 15.5%, while U.S. Coffee declined 2.1%.
- Income from operations increased 12.0% to $861 million, and operating margin expanded 170 bps to 22.0%.
- Diluted EPS was $0.38 versus $0.36, though net income grew only 2.4% to $515 million as interest expense rose 18.6% to $204 million.
- Total long-term obligations and short-term borrowings rose with the $3 billion March 2024 note issuance; long-term obligations reached $12,406 million.
- Repurchased $1,105 million of common stock in the first six months, including a $1,012 million repurchase of 35 million shares from JAB's secondary offering; $1,810 million remains authorized.
- Operating cash flow for the first six months was $742 million, up from $452 million, with the cash conversion cycle at approximately 4 days versus (37) days a year earlier.
- Pending antitrust litigation seeks more than $5 billion in damages; no loss accrual has been recorded.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2024, Keurig Dr Pepper kept $0.13.
- Revenue$3.92B100.0%
- Cost of revenue−$1.75B44.6%
- Gross profit$2.17B55.4%
- Operating costs−$1.31B33.4%
- Operating income$861.0M22.0%
- Interest, other & tax−$346.0M8.8%
- Net income$515.0M13.1%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2024filed July 25, 2024Financial Statements
Q2 FY2024 against Q2 FY2023
| Line item | Q2 FY2024Q2 FY2023 | Change |
|---|---|---|
| Revenue | $3.92B$3.79B | +3.5% |
| Cost of Revenue | $1.75B$1.75B | +0.1% |
| Gross Profit | $2.17B$2.04B | +6.4% |
| SG&A Expenses | $1.29B$1.27B | +1.8% |
| Operating Income | $861.00M$769.00M | +12.0% |
| Net Income | $515.00M$503.00M | +2.4% |
| EPS (Basic) | $0.38$0.36 | +5.6% |
| EPS (Diluted) | $0.38$0.36 | +5.6% |
| Shares Outstanding (Basic) | 1.36B1.40B | −3.2% |
| Shares Outstanding (Diluted) | 1.36B1.41B | −3.4% |
05—Questions
Frequently Asked Questions
How did Keurig Dr Pepper perform in the second quarter of 2024?
Net sales grew 3.5% to $3,922 million, gross profit rose 6.4% to $2,172 million, and income from operations increased 12.0% to $861 million. Net income was $515 million, up 2.4%, and diluted EPS was $0.38 compared with $0.36 a year earlier.
What drove the change in interest expense and tax rate?
Interest expense rose $32 million to $204 million, reflecting increased weighted average borrowings, partially offset by favorable unrealized mark-to-market activity. The effective tax rate increased to 23.4% from 17.9%, primarily due to the unfavorable comparison to a prior-year non-cash tax benefit and a shift in income toward higher-tax jurisdictions.
How is the company returning capital to shareholders?
In the first six months of 2024 the company declared dividends of $0.43 per share and repurchased $1,105 million of common stock. As of June 30, 2024, $1,810 million remained available under the $4 billion repurchase program, which expires December 31, 2025. No shares were repurchased under the program in the second quarter.
What is the status of the antitrust litigation and SEC investigation?
The Multidistrict Antitrust Litigation involving Keurig products remains pending, with plaintiffs claiming more than $5 billion in damages; the company strongly disputes the claims and has not accrued a loss contingency. Separately, the company reached an agreement in principle with the SEC Staff regarding K-Cup pod recyclability statements, which includes a $1.5 million penalty and is subject to documentation and SEC approval.
What acquisition did the company announce during the quarter?
In May 2024 the company announced an agreement to acquire all production, sales, and distribution assets of Kalil Bottling Company, which would give its DSD operations new bottling and distribution rights in Arizona for brands including Canada Dry, 7UP, A&W, Snapple, and Core Hydration. The transaction is expected to close in the third quarter of 2024.
06—Continue