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Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.

Economic Profit
Net Operating Profit after Taxes (NOPAT)
Cash Operating Taxes
Invested Capital
Cost of Capital
Economic Spread Ratio
Economic Profit Margin

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	2,588)	1,786)	1,753)	903)
Cost of capital²	8.86%	8.48%	8.36%	8.21%
Invested capital³	44,109)	43,835)	44,138)	44,635)

Economic profit⁴	(1,318)	(1,932)	(1,938)	(2,763)

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
= 2,588 – 8.86% × 44,109 = -1,318

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Item	Description	The company
Economic profit	Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital.	Keurig Dr Pepper Inc. economic profit increased from 2019 to 2020 and from 2020 to 2021.

Keurig Dr Pepper Inc., NOPAT calculation

US$ in millions

12 months ended:	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Net income attributable to KDP	2,146)	1,325)	1,254)	586)
Deferred income tax expense (benefit)¹	31)	(51)	(23)	(81)
Increase (decrease) in allowance for expected credit losses²	(14)	12)	1)	6)
Increase (decrease) in product warranties³	3)	2)	—)	(5)
Increase (decrease) in restructuring liabilities⁴	5)	(1)	(14)	25)
Increase (decrease) in equity equivalents⁵	25)	(38)	(36)	(55)
Interest expense	500)	604)	654)	452)
Interest expense, operating lease liability⁶	29)	28)	23)	15)
Adjusted interest expense	529)	632)	677)	467)
Tax benefit of interest expense⁷	(111)	(133)	(142)	(98)
Adjusted interest expense, after taxes⁸	418)	499)	535)	369)
Net income (loss) attributable to noncontrolling interest	(1)	—)	—)	3)
Net operating profit after taxes (NOPAT)	2,588)	1,786)	1,753)	903)

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
= 684 × 4.30% = 29

⁷ 2021 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 529 × 21.00% = 111

⁸ Addition of after taxes interest expense to net income attributable to KDP.

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Item	Description	The company
NOPAT	Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income.	Keurig Dr Pepper Inc. NOPAT increased from 2019 to 2020 and from 2020 to 2021.

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	653)	428)	440)	202)
Less: Deferred income tax expense (benefit)	31)	(51)	(23)	(81)
Add: Tax savings from interest expense	111)	133)	142)	98)
Cash operating taxes	733)	612)	605)	381)

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).

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Item	Description	The company
Cash operating taxes	Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction.	Keurig Dr Pepper Inc. cash operating taxes increased from 2019 to 2020 and from 2020 to 2021.

Keurig Dr Pepper Inc., invested capital calculation (financing approach)

US$ in millions

	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Short-term borrowings and current portion of long-term obligations	304)	2,345)	1,593)	1,458)
Current finance lease liability	79)	44)	41)	26)
Long-term obligations, excluding current portion	11,578)	11,143)	12,827)	14,201)
Non-current finance lease liability	621)	298)	269)	305)
Operating lease liability¹	684)	652)	496)	246)
Total reported debt & leases	13,266)	14,482)	15,226)	16,236)
Stockholders’ equity	24,972)	23,829)	23,257)	22,533)
Net deferred tax (assets) liabilities²	5,944)	5,948)	6,001)	5,897)
Allowance for expected credit losses³	7)	21)	9)	8)
Product warranties⁴	13)	10)	8)	8)
Restructuring liabilities⁵	19)	14)	15)	29)
Equity equivalents⁶	5,983)	5,993)	6,033)	5,942)
Accumulated other comprehensive (income) loss, net of tax⁷	26)	(77)	(104)	130)
Non-controlling interest	—)	1)	—)	—)
Adjusted stockholders’ equity	30,981)	29,746)	29,186)	28,605)
Construction-in-progress⁸	(138)	(393)	(274)	(206)
Invested capital	44,109)	43,835)	44,138)	44,635)

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.

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Item	Description	The company
Invested capital	Capital is an approximation of the economic book value of all cash invested in going-concern business activities.	Keurig Dr Pepper Inc. invested capital decreased from 2019 to 2020 but then increased from 2020 to 2021 not reaching 2019 level.

Keurig Dr Pepper Inc., cost of capital calculations

Dec 31, 2021

	Capital (fair value)¹	Weights					Cost of capital
Equity²	51,976)	51,976)	÷	66,587)	=	0.78	0.78	×	10.52%	=	8.21%
Short-term borrowings, long-term obligations (including current portion), and finance lease liability³	13,927)	13,927)	÷	66,587)	=	0.21	0.21	×	3.67% × (1 – 21.00%)	=	0.61%
Operating lease liability⁴	684)	684)	÷	66,587)	=	0.01	0.01	×	4.30% × (1 – 21.00%)	=	0.03%
Total:	66,587)					1.00					8.86%

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 »

Dec 31, 2020

	Capital (fair value)¹	Weights					Cost of capital
Equity²	43,428)	43,428)	÷	60,119)	=	0.72	0.72	×	10.52%	=	7.60%
Short-term borrowings, long-term obligations (including current portion), and finance lease liability³	16,039)	16,039)	÷	60,119)	=	0.27	0.27	×	4.00% × (1 – 21.00%)	=	0.84%
Operating lease liability⁴	652)	652)	÷	60,119)	=	0.01	0.01	×	4.30% × (1 – 21.00%)	=	0.04%
Total:	60,119)					1.00					8.48%

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 »

Dec 31, 2019

	Capital (fair value)¹	Weights					Cost of capital
Equity²	39,733)	39,733)	÷	56,055)	=	0.71	0.71	×	10.52%	=	7.46%
Short-term borrowings, long-term obligations (including current portion), and finance lease liability³	15,826)	15,826)	÷	56,055)	=	0.28	0.28	×	3.90% × (1 – 21.00%)	=	0.87%
Operating lease liability⁴	496)	496)	÷	56,055)	=	0.01	0.01	×	4.60% × (1 – 21.00%)	=	0.03%
Total:	56,055)					1.00					8.36%

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 »

Dec 31, 2018

	Capital (fair value)¹	Weights					Cost of capital
Equity²	35,363)	35,363)	÷	51,421)	=	0.69	0.69	×	10.52%	=	7.24%
Short-term borrowings, long-term obligations (including current portion), and finance lease liability³	15,812)	15,812)	÷	51,421)	=	0.31	0.31	×	3.92% × (1 – 21.00%)	=	0.95%
Operating lease liability⁴	246)	246)	÷	51,421)	=	0.00	0.00	×	6.18% × (1 – 21.00%)	=	0.02%
Total:	51,421)					1.00					8.21%

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 »

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	(1,318)	(1,932)	(1,938)	(2,763)
Invested capital²	44,109)	43,835)	44,138)	44,635)
Performance Ratio
Economic spread ratio³	-2.99%	-4.41%	-4.39%	-6.19%
Benchmarks
Economic Spread Ratio, Competitors⁴
Altria Group Inc.	-2.08%	4.26%	-9.66%	—
Coca-Cola Co.	5.24%	3.03%	3.33%	—
PepsiCo Inc.	5.51%	4.14%	5.92%	—
Philip Morris International Inc.	25.71%	19.41%	17.87%	—

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 × -1,318 ÷ 44,109 = -2.99%

⁴ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic spread ratio	The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital.	Keurig Dr Pepper Inc. economic spread ratio deteriorated from 2019 to 2020 but then improved from 2020 to 2021 exceeding 2019 level.

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	(1,318)	(1,932)	(1,938)	(2,763)
Net sales	12,683)	11,618)	11,120)	7,442)
Performance Ratio
Economic profit margin²	-10.39%	-16.63%	-17.43%	-37.12%
Benchmarks
Economic Profit Margin, Competitors³
Altria Group Inc.	-2.68%	6.76%	-16.39%	—
Coca-Cola Co.	10.89%	6.95%	6.58%	—
PepsiCo Inc.	4.84%	4.12%	5.23%	—
Philip Morris International Inc.	23.96%	21.61%	18.75%	—

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 × -1,318 ÷ 12,683 = -10.39%

³ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic profit margin	The ratio of economic profit to sales. It is the company profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin.	Keurig Dr Pepper Inc. economic profit margin improved from 2019 to 2020 and from 2020 to 2021.

Keurig Dr Pepper Inc. (NASDAQ:KDP)

Economic Value Added (EVA)

Economic Profit

Net Operating Profit after Taxes (NOPAT)

Cash Operating Taxes

Invested Capital

Cost of Capital

Economic Spread Ratio

Economic Profit Margin