Economic Value Added (EVA)
EVA is registered trademark of Stern Stewart.
Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.
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Economic Profit
Keurig Dr Pepper Inc., economic profit calculation
US$ in millions
| 12 months ended: | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | |
|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | |||||
| Cost of capital2 | |||||
| Invested capital3 | |||||
| Economic profit4 | |||||
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2021 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =
The period between 2018 and 2021 demonstrates a consistent pattern regarding economic profit. While net operating profit after taxes (NOPAT) increased over the four years, economic profit remained negative, though with a decreasing magnitude. This suggests that, despite growing operational profitability, the company’s returns are not exceeding its cost of capital.
- NOPAT Trend
- Net operating profit after taxes exhibited a substantial increase from US$903 million in 2018 to US$2,588 million in 2021. The most significant growth occurred between 2018 and 2019, followed by more moderate increases in subsequent years. This indicates improving operational performance and profitability.
- Cost of Capital Trend
- The cost of capital experienced a gradual increase from 9.92% in 2018 to 10.79% in 2021. This rise suggests potentially increasing risk or changing market conditions impacting the company’s funding costs. The increases were relatively small year-over-year, but cumulative.
- Invested Capital Trend
- Invested capital remained relatively stable throughout the period, fluctuating between US$43,835 million and US$44,635 million. The slight decrease in 2019 and 2020 was followed by a return to near the 2018 level in 2021. This stability suggests consistent capital allocation strategies.
- Economic Profit Trend
- Economic profit consistently registered as a negative value across all four years, starting at -US$3,524 million in 2018 and improving to -US$2,172 million in 2021. The decreasing negative value indicates that the gap between NOPAT and the cost of capital is narrowing, but the company is still destroying economic value. The largest improvement in economic profit occurred between 2020 and 2021, coinciding with the largest increase in NOPAT.
In summary, the company demonstrates increasing operational profitability, but its cost of capital remains higher than its returns on invested capital, resulting in continued economic losses. The trend suggests a positive trajectory in closing this gap, but further analysis is needed to determine if the company can achieve positive economic profit in the future.
Net Operating Profit after Taxes (NOPAT)
Keurig Dr Pepper Inc., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance for expected credit losses.
3 Addition of increase (decrease) in product warranties.
4 Addition of increase (decrease) in restructuring liabilities.
5 Addition of increase (decrease) in equity equivalents to net income attributable to KDP.
6 2021 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
7 2021 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
8 Addition of after taxes interest expense to net income attributable to KDP.
The financial performance over the four-year period demonstrates a notably positive trend in profitability measures.
- Net Income Attributable to KDP
- The net income attributable to the company increased substantially, starting at 586 million US dollars in 2018 and rising to 2,146 million US dollars by the end of 2021. This represents a more than threefold increase over the period, with a particularly strong jump between 2020 and 2021, where net income grew by approximately 62%. The steady increases in the prior years reflect consistent growth in profitability.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT also exhibited strong growth, increasing from 903 million US dollars in 2018 to 2,588 million US dollars in 2021. The year-over-year increases indicate robust operating profitability improvements, with the most significant rise observed in the last year, mirroring the trend seen in net income. The growth rate from 2020 to 2021 was approximately 45%, demonstrating enhanced operational efficiency and effective tax management contributing to increased net operating profits.
Overall, the data indicates significant and sustained financial improvement in key profitability metrics, with the largest gains occurring in the most recent year. This suggests successful management strategies and operational execution leading to stronger earnings and operational results over time.
Cash Operating Taxes
Keurig Dr Pepper Inc., cash operating taxes calculation
US$ in millions
| 12 months ended: | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | |
|---|---|---|---|---|---|
| Provision for income taxes | |||||
| Less: Deferred income tax expense (benefit) | |||||
| Add: Tax savings from interest expense | |||||
| Cash operating taxes |
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
The financial data reveals the trends in tax-related expenses over the four-year period ending December 31, 2021. There is an upward trajectory in both the provision for income taxes and cash operating taxes, though the growth rates and amounts vary between these two categories.
- Provision for Income Taxes
- This figure rose from 202 million US dollars in 2018 to 653 million US dollars in 2021. The largest year-over-year increase occurred between 2020 and 2021, with an increase of 225 million US dollars. The provision more than tripled over the four years, indicating a substantial increase in income tax expenses recognized during this period.
- Cash Operating Taxes
- Cash operating taxes demonstrated a consistent upward trend, increasing from 381 million US dollars in 2018 to 733 million US dollars in 2021. The increase across the period was approximately 92%, with the most significant jump occurring between 2018 and 2019 (224 million US dollars). The growth in cash taxes paid suggests rising tax obligations or improved tax payment alignments within the company.
Overall, the data reflects a significant increase in both accrued income tax provisions and actual cash tax payments over the examined period. The increases may be indicative of growing profitability, changes in tax regulation, or alterations in financial strategies related to tax expenses. The sharper rise in the provision for income taxes in the final year suggests a possible anticipation of higher tax liability.
Invested Capital
Keurig Dr Pepper Inc., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 Addition of capitalized operating leases.
2 Elimination of deferred taxes from assets and liabilities. See details »
3 Addition of allowance for doubtful accounts receivable.
4 Addition of product warranties.
5 Addition of restructuring liabilities.
6 Addition of equity equivalents to stockholders’ equity.
7 Removal of accumulated other comprehensive income.
8 Subtraction of construction-in-progress.
The financial data reveals a consistent trend in the company's capital structure over the analyzed period from 2018 to 2021. There is a clear decline in the total reported debt and leases, indicating a steady reduction in liabilities.
- Total reported debt & leases
- Starting at 16,236 million US dollars in 2018, this figure decreases each year, reaching 13,266 million US dollars by the end of 2021. This downward trend suggests a strategic effort to reduce financial leverage or improve the balance sheet strength.
- Stockholders’ equity
- Stockholders' equity shows a gradual increase across the same timeframe, moving from 22,533 million US dollars in 2018 to 24,972 million US dollars in 2021. This incremental rise indicates growth in the company’s net assets, which may reflect retained earnings accumulation or capital infusions.
- Invested capital
- Invested capital remains relatively stable, fluctuating slightly without a clear upward or downward trajectory. It begins at 44,635 million US dollars in 2018, decreases marginally to 43,835 million US dollars in 2020, and recovers slightly to 44,109 million US dollars in 2021. This stability may imply consistent investment levels despite changing debt and equity components.
Overall, the reduction in debt combined with the increase in equity suggests an improvement in the financial robustness and potentially a lower risk profile. The steadiness of invested capital implies that the company maintained its asset base, possibly reflecting controlled investment or capital expenditure activities balanced by depreciation or disposals.
Cost of Capital
Keurig Dr Pepper Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Short-term borrowings, long-term obligations (including current portion), and finance lease liability3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in millions
2 Equity. See details »
3 Short-term borrowings, long-term obligations (including current portion), and finance lease liability. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Short-term borrowings, long-term obligations (including current portion), and finance lease liability3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in millions
2 Equity. See details »
3 Short-term borrowings, long-term obligations (including current portion), and finance lease liability. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Short-term borrowings, long-term obligations (including current portion), and finance lease liability3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in millions
2 Equity. See details »
3 Short-term borrowings, long-term obligations (including current portion), and finance lease liability. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Short-term borrowings, long-term obligations (including current portion), and finance lease liability3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2018-12-31).
1 US$ in millions
2 Equity. See details »
3 Short-term borrowings, long-term obligations (including current portion), and finance lease liability. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Keurig Dr Pepper Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||
| Economic profit1 | |||||
| Invested capital2 | |||||
| Performance Ratio | |||||
| Economic spread ratio3 | |||||
| Benchmarks | |||||
| Economic Spread Ratio, Competitors4 | |||||
| Coca-Cola Co. | |||||
| Mondelēz International Inc. | |||||
| PepsiCo Inc. | |||||
| Philip Morris International Inc. | |||||
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2021 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
The period under review demonstrates a consistent pattern of negative economic profit, alongside a relatively stable invested capital base. This results in consistently negative economic spread ratios, though with a noticeable trend toward improvement over the four years examined.
- Economic Profit
- Economic profit exhibits a decreasing negative value from 2018 to 2021. Starting at a loss of US$3,524 million in 2018, the negative economic profit lessened to US$2,172 million by the end of 2021. This indicates a reduction in the magnitude of value destruction, although the company still failed to generate returns exceeding its cost of capital during this period.
- Invested Capital
- Invested capital remained remarkably stable throughout the observed timeframe. A slight decrease is noted from US$44,635 million in 2018 to US$43,835 million in 2020, followed by a modest increase to US$44,109 million in 2021. These fluctuations are minimal and do not appear to significantly influence the overall trends.
- Economic Spread Ratio
- The economic spread ratio, calculated as a percentage, consistently registered negative values. However, a clear upward trend is apparent. The ratio moved from -7.89% in 2018 to -4.92% in 2021. This improvement suggests that the company’s returns on invested capital are gradually approaching, but have not yet reached, the company’s cost of capital. The narrowing negative spread indicates a lessening gap between returns and the required rate of return.
In summary, while the company continues to experience negative economic profit, the trend suggests a positive trajectory in value creation. The stabilization of invested capital, coupled with the improving economic spread ratio, indicates a potential shift towards more efficient capital allocation and improved profitability.
Economic Profit Margin
Keurig Dr Pepper Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||
| Economic profit1 | |||||
| Net sales | |||||
| Performance Ratio | |||||
| Economic profit margin2 | |||||
| Benchmarks | |||||
| Economic Profit Margin, Competitors3 | |||||
| Coca-Cola Co. | |||||
| Mondelēz International Inc. | |||||
| PepsiCo Inc. | |||||
| Philip Morris International Inc. | |||||
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 Economic profit. See details »
2 2021 Calculation
Economic profit margin = 100 × Economic profit ÷ Net sales
= 100 × ÷ =
3 Click competitor name to see calculations.
The economic profit margin exhibited a consistent, though moderating, improvement over the observed period. While negative throughout, the magnitude of the loss decreased from 2018 to 2021. This trend is directly linked to the changes in economic profit and net sales.
- Economic Profit Margin
- The economic profit margin began at -47.35% in 2018. A substantial improvement was noted in 2019, reaching -24.40%. This positive shift continued, albeit at a slower pace, with the margin reaching -23.38% in 2020. The most recent year, 2021, saw a further, though smaller, improvement to -17.12%. This indicates a decreasing disparity between economic profit and net sales, suggesting improved capital efficiency or profitability relative to the cost of capital.
Net sales demonstrated a clear upward trend throughout the period. Starting at US$7,442 million in 2018, net sales increased to US$11,120 million in 2019, then to US$11,618 million in 2020, and finally reached US$12,683 million in 2021. This growth in sales likely contributed to the observed improvements in the economic profit margin.
- Economic Profit
- Economic profit remained negative across all four years. The initial value was -US$3,524 million in 2018. This decreased to -US$2,714 million in 2019 and remained relatively stable at -US$2,717 million in 2020. A further reduction was observed in 2021, with economic profit reported as -US$2,172 million. While still a loss, the decreasing magnitude suggests improved performance relative to the cost of capital employed.
The combined trends suggest that while the company continues to operate at an economic loss, its performance is improving. The growth in net sales, coupled with a lessening economic loss, indicates a positive trajectory in terms of value creation, though further improvement is needed to achieve positive economic profit.