Keurig Dr Pepper Inc., Burlington, Mass., and Plano, Texas, reported financial results for the fourth quarter and full year ending Dec. 31, 2018, and provided guidance for adjusted diluted EPS growth for 2019 in line with the company's merger targets.   

The company's reported results were significantly impacted by the merger between Keurig Green Mountain and Dr Pepper Snapple Group Inc., which was completed on July 9, 2018.

Commenting on the announcement, Keurig Dr Pepper Chairman and Chief Executive Officer Bob Gamgort stated: "We finished 2018 on a strong note, successfully managing through the merger integration and achieving full year results in line with our 2018 targets. We also delivered strong in-market performance, growing market share in carbonated soft drinks, single-serve coffee and other key categories. Looking ahead, we are confident in our outlook for 2019 Adjusted diluted EPS growth of 15 percent to 17 percent, which is in line with our long-term merger target, despite the operating environment becoming more challenging."

Net sales for the full year of 2018 increased 76 percent to $7.44 billion, compared with $4.23 billion in the year-ago period, primarily reflecting the impact of the merger. Adjusted pro forma net sales of $11.02 billion in 2018 grew 2.3 percent, driven by higher underlying volume/mix of 3.7 percent, with strong performances registered across most categories, partially offset by the net unfavorable impact of 0.5 percent related to changes in the company's allied brands portfolio during the year, which was expected, the company says. Also partially offsetting the growth was unfavorable net price realization of 0.8 percent, driven by continued moderation in strategic pod pricing investments in the Coffee Systems segment, which offset higher net pricing in the balance of the portfolio. Unfavorable foreign currency translation also impacted the year by 0.1 percent.

Retail market performance, as measured by IRI, remained strong for the year, it says. The company's CSD and enhanced flavored and premium unflavored water portfolios registered market share growth in units and dollars, driven by strong performances of Dr Pepper, Canada Dry, Core and Bai.  Likewise, the coffee portfolio also performed well for the year, driven by single-serve pod category unit growth, combined with an increase in market share of pods manufactured by KDP, it says.

Since the merger close, KDP repaid approximately $940 million of bank debt, due to the strong operating profit results and ongoing effective working capital management, resulting in the pace of deleveraging in line with the Company's long-term merger target.

Net sales of the Beverage Concentrates division for the year totaled $669 million, reflecting results of the segment since the merger close. Adjusted pro forma net sales increased 3.8 percent to $1.33 billion in 2018, compared with $1.28 billion in the year-ago period, driven by higher net price realization of 3.2 percent and favorable volume/mix of 0.6 percent.

Dr Pepper fueled the growth in adjusted pro forma net sales for the segment, along with broad-based strength across the portfolio, particularly for A&W and, to a lesser extent, Squirt, Schweppes, Big Red and Canada Dry, partially offset by Crush and Sunkist. Shipment volume growth for the segment was led by Canada Dry, Big Red and Hawaiian Punch, partially offset by Crush and, to a lesser extent, 7UP.

Bottler case sales volume increased 0.6 percent and fountain foodservice volume increased 1.7 percent in 2018. 

Operating income totaled $430 million for the year, reflecting results of the segment since the merger close. Adjusted pro forma operating income increased 5.1 percent to $858 million in 2018, compared with $816 million in 2017, primarily reflecting the benefits of the adjusted pro forma net sales growth and lower marketing spending. 

Net sales for the Packaged Beverages division for the year totaled $2.42 billion, reflecting results of the segment since the merger close. Adjusted pro forma net sales advanced 4.1 percent to $5.07 billion in 2018 compared to $4.87 billion in 2017, reflecting strong underlying volume/mix of 5.4 percent, partially offset by the unfavorable impact of 1.2 percent resulting from changes in the Allied Brands portfolio during the year, as expected. Slightly lower net price realization of 0.1 percent also impacted the comparison. Driving the adjusted pro forma net sales performance were Canada Dry, Core, Bai and BODYARMOR, as well as contract manufacturing, partially offset by declines in Fiji, Vita Coco and Hawaiian Punch.

Net sales for the Coffee Systems division for the year totaled $2.42 billion, reflecting results of the segment since the merger close. Adjusted pro forma net sales advanced 4.1 percent to $5.07 billion in 2018 compared with $4.87 billion in 2017, reflecting strong underlying volume/mix of 5.4 percent, partially offset by the unfavorable impact of 1.2 percent resulting from changes in the Allied Brands portfolio during the year, as expected. Slightly lower net price realization of 0.1 percent also impacted the comparison. Driving the adjusted pro forma net sales performance were Canada Dry, Core, Bai and BODYARMOR, as well as contract manufacturing, partially offset by declines in Fiji, Vita Coco and Hawaiian Punch.