Keurig Dr Pepper Inc. Reports Second Quarter 2018 Results for Keurig Green Mountain, Inc. and Dr Pepper Snapple Group, Inc.
Keurig Dr Pepper Inc. Affirms Guidance for Full Year 2018
Aug 8, 2018

BURLINGTON, Mass. and PLANO, Texas, Aug. 8, 2018 /PRNewswire/ -- Keurig Dr Pepper Inc. (NYSE: KDP) today reported second quarter 2018 results for Keurig Green Mountain ("KGM") and Dr Pepper Snapple Group ("DPS") for the period ending June 30, 2018.  Keurig Dr Pepper filed a Form 8-K/A with the U.S. Securities and Exchange Commission containing a presentation of KGM's results for the second quarter ended June 30, 20181 and a Form 10-Q containing a presentation of DPS's second quarter results.  Subsequent to the end of the second quarter, the merger of KGM and DPS was successfully completed.

(PRNewsfoto/Keurig Dr Pepper)

Keurig Green Mountain Q2 2018 Results

  • KGM net sales were even with year-ago, as strong volume/mix of 3.2% and favorable foreign currency translation of 0.5% were essentially offset by the moderating impact of strategic pricing actions initiated in 2016.
  • Operating income in the second quarter of 2018 totaled $170 million, after giving effect to merger-related expenses totaling $74 million and expenses related to the amortization of intangibles. Adjusted operating income2 advanced 10.8% versus year-ago to $288 million, an improvement of 290 basis points as a percentage of net sales.

 

 

Three Months Ended

($ in millions)

6/30/2018

 

6/24/2017

 

Change

Net Sales

$

949

   

$

948

   

+0.1%

Adj. Operating Income2

$

288

   

$

260

   

+10.8%

      % of Net Sales

30.3%

   

27.4%

   

+290 bps

KGM's net sales performance in the second quarter of 2018 reflected high single-digit pod volume growth, driven primarily by growth in U.S. household penetration of the Keurig single-serve system, offset by lower net price realization due to strategic pricing actions and lower brewer sales due to timing related to brewer innovation.

Household penetration responded positively to increased marketing investment behind new brewer innovations, such as the K-Elite, introduced in March, and the K-Café, which debuted during the quarter. KGM Adjusted operating income advanced 10.8% versus year-ago, primarily driven by the benefits of significant productivity savings and SG&A overhead cost management, partially offset by significantly higher planned advertising investment.

KGM has continued to significantly reduce net debt3, with a reduction of $481 million at the end of the second quarter of 2018, compared to net debt at December 31, 2017, reflecting strong cash flow management and improved operating results. Since the end of the second quarter of 2017, KGM's strategy of rapid deleveraging has reduced term loans and the revolving credit facility by a total of approximately $1.1 billion.

Dr Pepper Snapple Group Q2 2018 Results

  • DPS net sales increased 5.0% versus year-ago, primarily reflecting favorable mix and higher volume, despite the shift of Easter into the first quarter of 2018.
  • Operating income declined 3.5% versus year-ago, as expected, as inflationary cost increases have not yet been fully offset by pricing actions and productivity benefits, particularly in the Packaged Beverage segment.
  • Diluted EPS of $1.30 advanced 27.5%, including the significant benefit in the second quarter of 2018 from the Tax Cuts and Jobs Act enacted in December 2017 and the favorable year-over-year impact from the 2017 loss on the early extinguishment of debt.

 

 

Three Months Ended

($ in millions)

6/30/2018

 

6/30/2017

 

Change

Net Sales

$

1,886

   

$

1,797

   

+5.0%

Operating Income

$

362

   

$

375

   

-3.5%

Diluted EPS

$

1.30

   

$

1.02

   

+27.5%

DPS's net sales growth of 5% versus year-ago reflected the benefits of favorable mix of 3% and higher volume of 2%, including growth in contract manufacturing.  Also benefitting the net sales comparison was modestly higher net pricing, offset by unfavorable foreign currency translation.

The strong net sales performance in the second quarter of 2018 was driven by successful innovation behind Canada Dry, continued growth of Bai and gains in Mott's juices and several Allied Brands.

DPS operating income declined 3.5% to $362 million, reflecting commodity inflation, particularly in plastics, aluminum and apples, higher logistics costs, increased planned marketing investments and higher administrative expenses, primarily behind the Packaged Beverage DSD organization.  Partially offsetting these factors were the benefits of the strong growth in net sales and the favorable year-over-year impact of mark-to-market adjustments.  Excluding mark-to-market adjustments and other items affecting comparability, Adjusted operating income4 declined 6.4% versus year-ago to $363 million.

Adjusted diluted EPS5 increased 4.0% to $1.30 in the second quarter of 2018, compared to $1.25 in the second quarter of 2017, primarily due to a 720 basis point reduction in the effective tax rate to 26.1%, compared to a 33.3% effective tax rate in the year-ago quarter.

Commenting on the announcement, Keurig Dr Pepper CEO Bob Gamgort stated, "With the merger of these two great companies now behind us, our focus is on integration, optimization and ensuring delivery of the financial expectations we established.  We are very pleased with the progress to date.  The integration, in particular, is well on track, as evidenced by the establishment of the new KDP leadership team, and we remain very confident in our promised synergies and the future of our new Company.  On financials, the second quarter results reported today are fully consistent with our full year outlook for 2018, and we are equally confident in the longer-term value creation framework we shared at our March 20, 2018 Investor Day."

KDP Outlook
KDP will report combined results of both KGM and DPS beginning with the third quarter ending September 30, 2018.  The Company's outlook for the business remains unchanged, including the following:

  • 2018 Adjusted diluted EPS5 of $1.02 to $1.07, on a pro-forma basis, after the impact of preliminary Purchase Price Accounting adjustments
  • Merger-related synergies totaling $600 million over the 2019-2021 period, with $200 million in savings expected per year
  • Significant cash flow generation and rapid deleveraging, with leverage ratio targeted to be less than 3.0x in two to three years

1 Presentation of KGM results reflects the results of Maple Parent Holdings Corp, KGM's parent company. Maple Parent Holdings Corp. is a holding company that does not have any operations or material assets other than its interest in KGM through which Maple conducted all of its operations.
2 KGM Adjusted operating income is a non-GAAP financial measure.  Please see the discussion of non-GAAP measures and the reconciliation to GAAP at the end of this press release.
3 KGM Net debt is a non-GAAP financial measure. Please see the discussion of non-GAAP measures and the reconciliation to GAAP at the end of this press release.
4 DPS Adjusted operating income (or "Core" operating income) is a non-GAAP measure.  Please see the discussion of non-GAAP measures and the reconciliation to GAAP at the end of this press release.
5 Adjusted diluted EPS (or "Core" diluted EPS) is a non-GAAP financial measure.  Please see the discussion of non-GAAP measures and the reconciliation to GAAP at the end of this press release.

ABOUT KEURIG DR PEPPER
Keurig Dr Pepper (KDP) is a leading coffee and beverage company in North America, with annual revenue in excess of $11 billion. KDP holds leadership positions in soft drinks, specialty coffee and tea, water, juice and juice drinks and mixers, and markets the #1 single serve coffee brewing system in the U.S. The Company maintains an unrivaled distribution system that enables its portfolio of more than 125 owned, licensed and partner brands to be available nearly everywhere people shop and consume beverages. With a wide range of hot and cold beverages that meet virtually any consumer need, KDP key brands include Keurig®, Dr Pepper®, Green Mountain Coffee Roasters®, Canada Dry®, Snapple®, Bai®, Mott's® and The Original Donut Shop®. The Company employs more than 25,000 employees and operates more than 120 offices, manufacturing plants, warehouses and distribution centers across North America.   For more information, visit www.keurigdrpepper.com.

FORWARD LOOKING STATEMENTS
Certain statements contained herein are "forward-looking statements" within the meaning of applicable securities laws and regulations. These forward-looking statements can generally be identified by the use of words such as "anticipate," "expect," "believe," "could," "estimate," "feel," "forecast," "intend," "may," "plan," "potential," "project," "should," "will," "would," and similar words, phrases or expressions and variations or negatives of these words, although not all forward-looking statements contain these identifying words. Forward-looking statements by their nature address matters that are, to different degrees, uncertain, such as statements regarding the estimated or anticipated future results of the combined company following the combination of Keurig Green Mountain, Inc. ("KGM") and Dr Pepper Snapple Group, Inc. ("DPSG" and such combination, the "merger"), the anticipated benefits of the transaction, including estimated synergies and cost savings, and other statements that are not historical facts. These statements are based on the current expectations of our management and are not predictions of actual performance.

These forward-looking statements are subject to a number of risks and uncertainties regarding the combined company's business and the combination and actual results may differ materially. These risks and uncertainties include, but are not limited to: (i) the impact the significant additional debt incurred in connection with the transaction may have on our ability to operate our combined business, (ii) risks relating to the integration of the KGM and DPS operations, products and employees into the combined company and assumption of certain potential liabilities of KGM and the possibility that the anticipated synergies and other benefits of the combination, including cost savings, will not be realized or will not be realized within the expected timeframe, (iii) our status as a "controlled company" within the meanings of the New York Stock Exchange, including our reliance on exemptions from certain corporate governance standards and the significantly less influence that our pre- transaction holders now have on our company, and (iv) risks relating to the combined businesses and the industries in which our combined company operates. These risks and uncertainties, as well as other risks and uncertainties, are more fully discussed in our definitive proxy statement filed with the SEC on May 29, 2018, our Current Report on Form 8-K filed with the SEC on July 9, 2018, and our subsequent filings with the SEC. While the lists of risk factors presented here and in our public filings are considered representative, no such list should be considered to be a complete statement of all potential risks and uncertainties. Any forward-looking statement made herein speaks only as of the date of this document. We are under no obligation to, and expressly disclaim any obligation to, update or alter any forward-looking statements, whether as a result of new information, subsequent events or otherwise, except as required by applicable laws or regulations.

NON-GAAP FINANCIAL MEASURES
This release includes certain non-GAAP financial measures, which differ from results using U.S. Generally Accepted Accounting Principles (GAAP). These non-GAAP financial measures should be considered as supplements to the GAAP reported measures, should not be considered replacements for, or superior to, the GAAP measures and may not be comparable to similarly named measures used by other companies. Non-GAAP financial measures typically exclude certain charges, which are not expected to occur routinely in future periods. The Company uses non-GAAP financial measures internally to focus management on performance excluding these special charges to gauge our business operating performance. Management believes this information is helpful to investors because it increases transparency and assists investors in understanding the underlying performance of the Company and in the analysis of ongoing operating trends. Additionally, management believes that non-GAAP financial measures are frequently used by analysts and investors in their evaluation of companies, and its continued inclusion provides consistency in financial reporting and enables analysts and investors to perform meaningful comparisons of past, present and future operating results. The most directly comparable GAAP financial measures and reconciliations to non-GAAP financial measures are set forth in the appendix to this presentation and included in the Company's filings with the SEC.

See the attached schedules for the supplemental financial data and corresponding reconciliations of DPS Adjusted operating income, DPS Adjusted diluted EPS, KGM Adjusted operating income and KGM net debt.

Contacts:

Investors:
Maria Sceppaguercio
781-418-8136
maria.sceppaguercio@keurig.com

Steve Alexander
972-673-6769
steve.alexander@dpsg.com

Media:
Katie Gilroy
781-418-3345
katie.gilroy@keurig.com

 

DR PEPPER SNAPPLE GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

For The Three and Six Months Ended June 30, 2018 and 2017

(Unaudited, in millions, except per share data)

 
 

For the

 

For the

 

Three Months Ended

 

Six Months Ended

 

June 30,

 

June 30,

(in millions, except per share data)

2018

 

2017

 

2018

 

2017

Net sales

$

1,886

   

$

1,797

   

$

3,480

   

$

3,307

 

Cost of sales

790

   

718

   

1,471

   

1,325

 

Gross profit

1,096

   

1,079

   

2,009

   

1,982

 

Selling, general and administrative expenses

721

   

681

   

1,347

   

1,301

 

Depreciation and amortization

28

   

25

   

55

   

50

 

Other operating income, net

(15)

   

(2)

   

(14)

   

(30)

 

Income from operations

362

   

375

   

621

   

661

 

Interest expense

43

   

44

   

84

   

84

 

Interest income

   

(1)

   

(1)

   

(2)

 

Loss on early extinguishment of debt

   

49

   

   

49

 

Other income, net

(2)

   

   

(2)

   

(1)

 

Income before provision for income taxes and equity in loss of unconsolidated subsidiaries

321

   

283

   

540

   

531

 

Provision for income taxes

83

   

94

   

137

   

165

 

Income before equity in loss of unconsolidated subsidiaries

238

   

189

   

403

   

366

 

Equity in loss of unconsolidated subsidiaries, net of tax

(3)

   

(1)

   

(9)

   

(1)

 

Net income

$

235

   

$

188

   

$

394

   

$

365

 

Earnings per common share:

             

Basic

$

1.30

   

$

1.02

   

$

2.19

   

$

1.99

 

Diluted

1.30

   

1.02

   

2.17

   

1.98

 

Weighted average common shares outstanding:

             

Basic

180.2

   

183.2

   

180.1

   

183.3

 

Diluted

181.1

   

183.7

   

181.0

   

184.1

 

Cash dividends declared per common share

$

   

$

0.58

   

$

0.58

   

$

1.16

 

 

DR PEPPER SNAPPLE GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

As of June 30, 2018 and December 31, 2017

(Unaudited, in millions, except share and per share data)

 
 

June 30,

 

December 31,

(in millions, except share and per share data)

2018

 

2017

Assets

Current assets:

     

Cash and cash equivalents

$

64

   

$

61

 

Restricted cash and restricted cash equivalents

25

   

18

 

Accounts receivable:

     

Trade, net

814

   

668

 

Other

52

   

42

 

Inventories

265

   

229

 

Prepaid expenses and other current assets

196

   

99

 

Total current assets

1,416

   

1,117

 

Property, plant and equipment, net

1,183

   

1,198

 

Investments in unconsolidated subsidiaries

34

   

24

 

Goodwill

3,562

   

3,561

 

Other intangible assets, net

3,777

   

3,781

 

Other non-current assets

214

   

279

 

Deferred tax assets

60

   

62

 

Total assets

$

10,246

   

$

10,022

 

Liabilities and Stockholders' Equity

Current liabilities:

     

Accounts payable

$

484

   

$

365

 

Deferred revenue

64

   

64

 

Short-term borrowings and current portion of long-term obligations

264

   

79

 

Income taxes payable

39

   

11

 

Other current liabilities

675

   

719

 

Total current liabilities

1,526

   

1,238

 

Long-term obligations

4,126

   

4,400

 

Deferred tax liabilities

645

   

614

 

Non-current deferred revenue

1,021

   

1,055

 

Other non-current liabilities

206

   

264

 

Total liabilities

7,524

   

7,571

 

Commitments and contingencies

     

Stockholders' equity:

     

Preferred stock, $0.01 par value, 15,000,000 shares authorized, no shares issued

   

 

Common stock, $0.01 par value, 800,000,000 shares authorized, 180,288,812 and 179,743,028 shares issued and outstanding as of June 30, 2018 and December 31, 2017, respectively

2

   

2

 

Additional paid-in capital

   

 

Retained earnings

2,920

   

2,651

 

Accumulated other comprehensive loss

(200)

   

(202)

 

Total stockholders' equity

2,722

   

2,451

 

Total liabilities and stockholders' equity

$

10,246

   

$

10,022

 

 

 

DR PEPPER SNAPPLE GROUP, INC.
RECONCILIATION OF GAAP AND NON-GAAP INFORMATION
(Unaudited)

 

The company reports its financial results in accordance with U.S. GAAP. However, management believes that certain non-GAAP financial measures that reflect the way management evaluates the business may provide investors with additional information regarding the company's results, trends and ongoing performance on a comparable basis. Specifically, investors should consider the following with respect to our quarterly results:

Core earnings: Defined as net income adjusted for the unrealized mark-to-market impact of commodity derivatives and interest rate derivatives not designated as hedges in accordance with U.S. GAAP and for certain Items Affecting Comparability.

Items affecting comparability: Defined as certain items that are excluded for comparison to prior year periods, adjusted for the tax impact as applicable. Tax impact is determined based upon an approximate rate for each item. For the three and six months ended June 30, 2018, we excluded (i) the impact of transaction and integration expenses associated with the Maple Merger and the Bai Brands Merger, (ii) restructuring charges and (iii) the impact of the recent federal tax law change. For the three and six months ended June 30, 2017, we excluded (i) the impact of transaction and integration expenses associated with the Bai Brands Merger and (ii) the loss on early extinguishment of debt related to the completion of a tender offer for our 2018 Notes and 2038 Notes.

The tables on the following pages provide these reconciliations.

DR PEPPER SNAPPLE GROUP, INC.

RECONCILIATION OF CERTAIN REPORTED ITEMS TO NON-GAAP CORE MEASURES

(Unaudited, in millions, except per share data)

 
 

For the Three Months Ended June 30, 2018

 

Reported

 

Mark to
Market

 

Transaction
& Integration
Expenses

 

Restructuring

 

Tax
Reform

 

Total
Adjustments

 

Core

Cost of sales

$

790

   

$

1

   

$

   

$

   

$

   

$

1

   

$

791

 

Gross profit

1,096

   

(1)

   

   

   

   

(1)

   

1,095

 

Gross margin

58.1

%

 

%

 

%

 

%

 

%

 

%

 

58.1

%

Selling, general and administrative expenses

$

721

   

$

8

   

$

(11)

   

$

1

   

$

   

$

(2)

   

$

719

 

Income from operations

362

   

(9)

   

11

   

(1)

   

   

1

   

363

 

Operating margin

19.2

%

 

(0.5)

%

 

0.6

%

 

(0.1)

%

 

   

0.1

%

 

19.2

%

Income before provision for income taxes and equity in loss of unconsolidated subsidiaries

321

   

(9)

   

11

   

(1)

   

   

1

   

322

 

Provision for income taxes

83

   

(2)

   

2

   

   

1

   

1

   

84

 

Effective tax rate

25.9

%

 

0.1

%

 

(0.3)

%

 

0.1

%

 

0.3

%

 

0.2

%

 

26.1

%

Income before equity in loss of unconsolidated subsidiaries

238

   

(7)

   

9

   

(1)

   

(1)

   

   

238

 

Net income

$

235

   

$

(7)

   

$

9

   

$

(1)

   

$

(1)

   

   

$

235

 
                           
 

Reported
EPS

                     

Core
EPS

Diluted earnings per common share

$

1.30

   

$

(0.04)

   

$

0.04

   

$

   

$

   

$

   

$

1.30

 

FX Translation

 

$

 

Currency Neutral Core EPS

 

$

1.30

 

 

DR PEPPER SNAPPLE GROUP, INC.

RECONCILIATION OF CERTAIN REPORTED ITEMS TO NON-GAAP CORE MEASURES - (Continued)

(Unaudited, in millions, except per share data)

 
 

For the Three Months Ended June 30, 2017

 

Reported

 

Mark to
Market

 

Transaction &
Integration
Expenses

 

Loss on Early
Extinguishment
of Debt

 

Total
Adjustments

 

Core

Cost of sales

$

718

   

$

(6)

   

$

   

$

   

$

(6)

   

$

712

 

Gross profit

1,079

   

6

   

   

   

6

   

1,085

 

Gross margin

60.0

%

 

0.4

%

 

   

   

0.4

%

 

60.4

%

Selling, general and administrative expenses

$

681

   

$

(6)

   

$

(1)

   

$

   

$

(7)

   

$

674

 

Income from operations

375

   

12

   

1

   

   

13

   

388

 

Operating margin

20.9

%

 

0.7

%

 

   

   

0.7

%

 

21.6

%

Loss on early extinguishment of debt

49

   

   

   

(49)

   

(49)

   

 

Income before provision for income taxes and equity in loss of unconsolidated subsidiaries

283

   

12

   

1

   

49

   

62

   

345

 

Provision for income taxes

94

   

4

   

   

17

   

21

   

115

 

Effective tax rate

33.2

%

 

%

 

(0.1)

%

 

0.2

%

 

0.1

%

 

33.3

%

Net income

$

188

   

$

8

   

$

1

   

$

32

   

$

41

   

$

229

 
                       
 

Reported
EPS

                 

Core
EPS

Diluted earnings per common share

$

1.02

   

$

0.04

   

$

0.01

   

$

0.18

   

$

0.23

   

$

1.25

 

 

DR PEPPER SNAPPLE GROUP, INC.

RECONCILIATION OF CERTAIN REPORTED ITEMS TO NON-GAAP CORE MEASURES - (Continued)

(Unaudited, in millions, except per share data)

 
 

For the Six Months Ended June 30, 2018

 

Reported

 

Mark to
Market

 

Transaction &
Integration
Expenses

 

Restructuring

 

Tax Reform

 

Total
Adjustments

 

Core

Cost of sales

$

1,471

   

$

(11)

   

$

   

$

   

$

   

$

(11)

   

$

1,460

 

Gross profit

2,009

   

11

   

   

   

   

11

   

2,020

 

Gross margin

57.7

%

 

0.3

%

 

   

   

   

0.3

%

 

58.0

%

Selling, general and administrative expenses

$

1,347

   

$

9

   

$

(24)

   

$

1

   

$

   

$

(14)

   

$

1,333

 

Income from operations

621

   

2

   

24

   

(1)

   

   

25

   

646

 

Operating margin

17.8

%

 

0.1

%

 

0.7

%

 

%

 

   

0.8

%

 

18.6

%

Income before provision for income taxes and equity in earnings of unconsolidated subsidiaries

$

540

   

$

2

   

$

24

   

$

(1)

   

$

   

$

25

   

$

565

 

Provision for income taxes

137

   

1

   

5

   

   

1

   

7

   

144

 

Effective tax rate

25.4

%

 

0.1

%

 

(0.2)

%

 

%

 

0.2

%

 

0.1

%

 

25.5

%

Income before equity in earnings of unconsolidated subsidiaries

403

   

1

   

19

   

(1)

   

(1)

   

18

   

421

 

Net income

$

394

   

$

1

   

$

19

   

$

(1)

   

$

(1)

   

$

18

   

$

412

 
                           
 

Reported
EPS

                     

Core
EPS

Diluted earnings per common share

$

2.17

   

$

0.01

   

$

0.10

   

$

   

$

   

$

0.11

   

$

2.28

 

FX Translation

 

$

 

Currency Neutral Core EPS

 

$

2.28

 

 

DR PEPPER SNAPPLE GROUP, INC.

RECONCILIATION OF CERTAIN REPORTED ITEMS TO NON-GAAP CORE MEASURES - (Continued)

(Unaudited, in millions, except per share data)

 
 

For the Six Months Ended June 30, 2017

 

Reported

 

Mark to
Market

 

Transaction &
Integration
Expenses

 

Loss on Early
Extinguishment
of Debt

 

Total
Adjustments

 

Core

Cost of sales

$

1,325

   

$

12

   

$

   

$

   

$

12

   

$

1,337

 

Gross profit

1,982

   

(12)

   

   

   

(12)

   

1,970

 

Gross margin

59.9

%

 

(0.3)

%

 

   

   

(0.3)

%

 

59.6

%

Selling, general and administrative expenses

$

1,301

   

$

(20)

   

$

(20)

   

$

   

$

(40)

   

$

1,261

 

Income from operations

661

   

8

   

20

   

   

28

   

689

 

Operating margin

20.0

%

 

0.2

%

 

   

   

0.8

%

 

20.8

%

Interest expense

84

   

1

   

   

   

1

   

85

 

Loss on early extinguishment of debt

$

49

   

$

   

$

   

$

(49)

   

$

(49)

   

$

 

Income before provision for income taxes and equity in loss of unconsolidated subsidiaries

531

   

7

   

20

   

49

   

76

   

607

 

Provision for income taxes

165

   

2

   

7

   

17

   

26

   

191

 

Effective tax rate

31.1

%

 

(0.1)

%

 

0.1

%

 

0.3

%

 

0.4

%

 

31.5

%

Net income

$

365

   

$

5

   

$

13

   

$

32

   

$

50

   

$

415

 
                       
 

Reported
EPS

                 

Core EPS

Diluted earnings per common share

$

1.98

   

$

0.02

   

$

0.07

   

$

0.18

   

$

0.27

   

$

2.25

 

 

MAPLE PARENT HOLDINGS CORP.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

For The Three and Six Months Ended June 30, 2018 and June 24, 2017

(Unaudited, in millions)

 
   

For the Three Months Ended

 

For the Six Months Ended

(in millions, except per share data)

 

June 30, 2018

 

June 24, 2017

 

June 30, 2018

 

June 24, 2017

Net sales

 

$

949

   

$

948

   

$

1,897

   

$

1,916

 

Cost of sales

 

467

   

493

   

943

   

976

 

Gross profit

 

482

   

455

   

954

   

940

 

Selling, general and administrative expenses

 

212

   

188

   

402

   

389

 

Transportation and warehouse costs

 

48

   

55

   

104

   

116

 

Transaction costs

 

44

   

   

80

   

 

Restructuring expenses

 

8

   

28

   

14

   

30

 

Operating income

 

170

   

184

   

354

   

405

 

Other income (loss), net

 

12

   

1

   

4

   

3

 

Gain (loss) on financial instruments, net

 

10

   

(34)

   

38

   

(27)

 

Gain (loss) on foreign currency, net

 

(6)

   

(1)

   

(19)

   

(11)

 

Loss on extinguishment of debt

 

   

   

(1)

   

(52)

 

Interest expense - related party

 

(26)

   

(25)

   

(51)

   

(50)

 

Interest expense

 

(61)

   

(36)

   

(86)

   

(91)

 

Income before income taxes

 

99

   

89

   

239

   

177

 

Income tax benefit (expense)

 

(13)

   

(28)

   

(65)

   

(56)

 

Net income

 

86

   

61

   

174

   

121

 

Net income attributable to noncontrolling interests

 

(2)

   

(1)

   

(3)

   

(2)

 

Net income attributable to Maple Parent Holdings Corp.

 

$

84

   

$

60

   

$

171

   

$

119

 

 

MAPLE PARENT HOLDINGS CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

As of June 30, 2018 and December 31, 2017

(Unaudited, in millions, except share and per share data)

 

(in millions, except for shares)

 

June 30,
 2018

 

December 31,
 2017

 

Current assets:

       

Cash, cash equivalents, and restricted cash

 

$

8,284

   

$

95

 

Receivables, less uncollectible accounts and return allowances of $23 and $31, respectively

 

338

   

483

 

Inventories

 

412

   

384

 

Income taxes receivable

 

23

   

45

 

Other current assets

 

103

   

49

 

Total current assets

 

9,160

   

1,056

 

Fixed assets, net

 

782

   

790

 

Intangibles, net

 

3,783

   

3,834

 

Goodwill

 

9,767

   

9,819

 

Deferred income taxes, net

 

28

   

27

 

Long-term restricted cash

 

   

 

Investments in unconsolidated Subsidiaries

 

110

   

97

 

Other long-term assets

 

170

   

121

 

Total assets

 

$

23,800

   

$

15,744

 
 

Current liabilities:

       

Current portion of long-term debt

 

$

219

   

$

219

 

Current portion of capital lease and financing obligations

 

8

   

6

 

Accounts payable

 

1,711

   

1,580

 

Accrued expenses

 

302

   

201

 

Income tax payable

 

3

   

3

 

Deferred revenue

 

4

   

3

 

Other current liabilities

 

6

   

6

 

Total current liabilities

 

2,253

   

2,018

 

Long-term debt, less current portion

 

10,772

   

3,064

 

Long-term debt, related party

 

1,815

   

1,815

 

Capital lease and financing obligations, less current portion

 

107

   

97

 

Deferred income taxes, net

 

993

   

1,031

 

Other long-term liabilities

 

54

   

56

 

Total liabilities

 

15,994

   

8,081

 

Commitment and contingencies

       

Employee redeemable non-controlling interest and mezzanine equity awards

 

318

   

265

 

Stockholders' equity:

       

Class A Common Stock

 

   

 

Class B Common Stock

 

   

 

Additional paid-in capital

 

6,385

   

6,385

 

Retained earnings

 

1,044

   

914

 

Accumulated other comprehensive income

 

59

   

99

 

Total stockholders' equity

 

$

7,488

   

$

7,398

 

Total liabilities and stockholders' equity

 

$

23,800

   

$

15,744

 

 

 

MAPLE PARENT HOLDINGS CORP.
RECONCILIATION OF GAAP AND NON-GAAP INFORMATION
(Unaudited)

 

The company reports its financial results in accordance with U.S. GAAP. However, management believes that certain non-GAAP financial measures that reflect the way management evaluates the business may provide investors with additional information regarding the company's results, trends and ongoing performance on a comparable basis. Specifically, investors should consider the following with respect to our quarterly results:

Adjusted operating income: Defined as operating income adjusted for certain items affecting comparability.

Items affecting comparability: Defined as certain items that are excluded for comparison to prior year periods, adjusted for the tax impact as applicable. Tax impact is determined based upon an approximate rate for each item. For the three and six months ended June 30, 2018, we excluded (i) expenses related to antitrust litigation, (ii) amortization of identifiable intangibles, (iii) restructuring expenses, (iv) acquisition, integration and productivity expenses and (v) stock compensation. For the three and six months ended June 24, 2017, we excluded (i)  amortization of identifiable intangibles, (ii) restructuring expenses, (iii) acquisition, integration and productivity expenses and (iv) stock compensation.

Net Debt: Defined as long term debt (including the current portion), less cash, cash equivalents and restricted cash.

Reconciliations for these items are provided in the tables below.

(in millions)

 

June 30,
 2018

 

December 31,
 2017

 

Change

Current portion of long-term debt

 

$

219

   

$

219

   

$

 

Long-term debt, less current portion

 

10,772

   

3,064

   

7,708

 

Long-term debt, related party

 

1,815

   

1,815

   

 

Less: Cash, cash equivalents, and restricted cash

 

(8,284)

   

(95)

   

(8,189)

 

Net Debt

 

$

4,522

   

$

5,003

   

$

(481)

 

 

 

Three Months Ended

 

Six Months Ended

(in millions)

June 30, 2018

 

June 24, 2017

 

June 30, 2018

 

June 24, 2017

Operating income

$

170

   

$

184

   

$

354

   

$

405

 

Expenses related to antitrust litigation

1

   

   

4

   

 

Amortization of identifiable intangibles

29

   

24

   

59

   

48

 

Restructuring expenses

8

   

28

   

14

   

30

 

Acquisition, integration, and productivity expenses

74

   

17

   

117

   

48

 

Stock compensation

6

   

7

   

12

   

12

 

Non-GAAP adjusted operating income

$

288

   

$

260

   

$

560

   

$

543

 

 

 

SOURCE Keurig Dr Pepper Inc.

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