KDP filing — read by section

Item 2. Management’s Discussion and Analysis

ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 
 The following discussion should be read in conjunction with our audited consolidated financial statements and notes thereto in our Annual Report , as filed on February 27, 2020. 
 This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act , including, in particular, statements about anticipated benefits and expenses of the DPS Merger and other transactions, including estimated synergies, deleveraging and associated cash management, and cost savings, the impact of COVID-19, future events, future financial performance, plans, strategies, expectations, prospects, competitive environment, regulation, labor matters and availability of raw materials. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as “outlook,” “guidance,” “anticipate,” “expect,” “believe,” “could,” “estimate,” “feel,” “forecast,” “intend,” “may,” “plan,” “potential,” “project,” “should,” “target,” “will,” “would,” and similar words, phrases or expressions and variations or negatives of these words in this Quarterly Report on Form 10-Q. We have based these forward-looking statements on our current views with respect to future events and financial performance. Our actual financial performance could differ materially from those projected in the forward-looking statements due to the inherent uncertainty of estimates, forecasts and projections, and our financial performance may be better or worse than anticipated. Given these uncertainties, you should not put undue reliance on any forward-looking statements. All of the forward-looking statements are qualified in their entirety by reference to the factors discussed under "Risk Factors" in Part I, Item 1A of our Annual Report and in Part II, Item 1A of this Quarterly Report on Form 10-Q, as well as our subsequent filings with the SEC . Forward-looking statements represent our estimates and assumptions only as of the date that they were made. We do not undertake any duty to update the forward-looking statements, and the estimates and assumptions associated with them, after the date of this Quarterly Report on Form 10-Q, except to the extent required by applicable securities laws. 
 This Quarterly Report on Form 10-Q contains the names of some of our owned or licensed trademarks, trade names and service marks, which we refer to as our brands. All of the product names included in this Quarterly Report on Form 10-Q are either our registered trademarks or those of our licensors. 
 
 OVERVIEW 
 KDP is a leading beverage company in North America, with a diverse portfolio of flavored (non-cola) CSD s, NCB s, including water (enhanced and flavored), ready-to-drink tea and coffee, juice, juice drinks, mixers and specialty coffee, and is a leading producer of innovative single serve brewing systems. With a wide range of hot and cold beverages that meet virtually any consumer need, KDP key brands include Keurig, Dr Pepper, Canada Dry, Snapple, Bai, Mott's, Core, Green Mountain and The Original Donut Shop. KDP has some of the most recognized beverage brands in North America, with significant consumer awareness levels and long histories that evoke strong emotional connections with consumers. KDP offers more than 125 owned, licensed, and partner brands, including the top ten best-selling coffee brands and Dr Pepper as a leading flavored CSD in the U.S. , according to IRi , available nearly everywhere people shop and consume beverages. 
 KDP operates as an integrated brand owner, manufacturer and distributor. We believe our integrated business model strengthens our route-to-market and provides opportunities for net sales and profit growth through the alignment of the economic interests of our brand ownership and our manufacturing and distribution businesses through both our DSD system and our WD delivery system. KDP markets and sells its products to retailers, including supermarkets, mass merchandisers, club stores, pure-play e-commerce retailers, and office superstores; to restaurants, hotel chains, office product and coffee distributors, and partner brand owners; and directly to consumers through its websites. Our integrated business model enables us to be more flexible and responsive to the changing needs of our large retail customers and allows us to more fully leverage our scale and reduce costs by creating greater geographic manufacturing and distribution coverage. 
 The beverage market is subject to some seasonal variations. Our cold beverage sales are generally higher during the warmer months, while hot beverage sales are generally higher during the cooler months. Overall beverage sales can be influenced by the timing of holidays and weather fluctuations. Sales of brewing systems and related accessories are generally higher during the second half of the year due to the holiday shopping season. 
 COFFEE SYSTEMS 
 Our Coffee Systems segment is primarily a producer of innovative single serve brewing systems and specialty coffee in the U.S. and Canada. Our brewing systems are aimed at changing the way consumers prepare and enjoy coffee and other beverages, both at home and away from home in places such as offices, restaurants, cafeterias, convenience stores and hotels. We develop and sell a variety of Keurig brewers, brewer accessories and other coffee-related equipment. In addition to coffee, we produce and sell a variety of other specialty beverages in K-Cup pod s (including hot and iced teas, hot cocoa and other beverages) for use with Keurig brewing systems. We also offer traditional whole bean and ground coffee in other package types, including bags, fractional packages and cans. 
 
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 Our Coffee Systems segment manufactures over 75% of the pods in the single serve K-Cup pod format in the U.S. We manufacture and sell 100% of the K-Cup pod s of our own brands, such as Green Mountain Coffee Roasters, The Original Donut Shop, Laughing Man, REVV, and Van Houtte. We have licensing and manufacturing agreements with our partner brands, including brands such as Starbucks, Dunkin' Donuts, Folgers, Newman’s Own Organics, McCafé, Peet's Coffee, Caribou Coffee, Eight O’Clock, Maxwell House, and Tim Hortons, and private label arrangements. Our Coffee Systems segment also has agreements for manufacturing, distributing, and selling K-Cup pod s for tea under brands such as Celestial Seasonings, Lipton and Tazo in addition to K-Cup pod s of our own brand, Snapple. We also produce and sell K-Cup pod s for cocoa, including through a licensing agreement for the Swiss Miss brand, and hot apple cider. 
 Our Coffee Systems segment manufactures its K-Cup pod s in facilities in North America that include specialty designed proprietary high-speed packaging lines using freshly roasted and ground coffee as well as tea, cocoa and other products. We offer high-quality coffee including certified single-origin, organic, flavored, limited edition and proprietary blends. We carefully select our coffee beans and appropriately roast the coffees to optimize their taste and flavor differences. We engineer and design most of our single serve brewing systems, where we then utilize third-party contract manufacturers located in various countries in Asia for brewer appliance manufacturing. We distribute our Coffee Systems products using third-party distributors, retail partners and through e-commerce, including our website at www.keurig.com. 
 PACKAGED BEVERAGES 
 Our Packaged Beverages segment is principally a brand ownership, manufacturing and distribution business. In this segment, we primarily manufacture and distribute packaged beverages of our brands. Additionally, in order to maximize the size and scale of our manufacturing and distribution operations, we also distribute packaged beverages for our partner brands and manufacture packaged beverages for other third parties in the U.S. and Canada. 
 Our larger NCB brands in this segment include Snapple, Mott's, Bai, Clamato, Hawaiian Punch, Core, Yoo-Hoo, ReaLemon, Vita Coco coconut water, evian water, Mr and Mrs T mixers, and Forto Coffee. Our larger CSD brands in this segment include Dr Pepper, Canada Dry, 7UP, A&W, Sunkist soda, Squirt, Big Red, RC Cola, Vernors and A Shoc . 
 Approximately 95% of our 2019 Packaged Beverages net sales came from the manufacturing and distribution of our own brands and the contract manufacturing of certain private label and emerging brand beverages. The remaining portion of our 2019 Packaged Beverages net sales came from the distribution of our partner brands such as Vita Coco coconut water, evian water, Neuro drinks, High Brew RTD Coffee, Forto Coffee shots, A Shoc energy drinks, Peet's RTD Coffee and Runa energy drinks. We provide a route-to-market for third party brand owners seeking effective distribution for their new and emerging brands. These brands give us exposure in certain markets to fast growing segments of the beverage industry with minimal capital investment. 
 Our Packaged Beverages products are manufactured in multiple facilities across the U.S. and are sold or distributed to retailers and their warehouses by our own distribution network or by third party distributors. 
 We sell our Packaged Beverages products through our DSD and our WD systems, both of which include sales to all major retail channels, including supermarkets, fountains, mass merchandisers, club stores, e-commerce, vending machines, convenience stores, gas stations, small groceries, drug chains and dollar stores. 
 BEVERAGE CONCENTRATES 
 Our Beverage Concentrates segment is principally a brand ownership business where we manufacture and sell beverage concentrates in the U.S. and Canada. Most of the brands in this segment are CSD brands. Key brands include Dr Pepper, Canada Dry, Crush, Schweppes, Sun Drop, Sunkist soda, A&W, 7UP, Squirt, Big Red, RC Cola and Hawaiian Punch. Almost all of our beverage concentrates are manufactured at our plant in St. Louis, Missouri. 
 Beverage concentrates are shipped to third party bottlers, as well as to our own manufacturing systems, who combine them with carbonation, water, sweeteners and other ingredients, package the combined product in aluminum cans, PET containers and glass bottles, and sell them as a finished beverage to retailers. Beverage concentrates are also manufactured into syrup, which is shipped to fountain customers, such as fast food restaurants, who mix the syrup with water and carbonation to create a finished beverage at the point of sale to consumers. Dr Pepper represents most of our fountain channel volume. 
 Our Beverage Concentrates brands are sold by our bottlers through all major retail channels including supermarkets, fountains, mass merchandisers, club stores, vending machines, convenience stores, gas stations, small groceries, drug chains and dollar stores. 
 LATIN AMERICA BEVERAGES 
 Our Latin America Beverages segment is a brand ownership, manufacturing and distribution business, with operations in Mexico representing approximately 90% of the segment's 2019 net sales. This segment participates mainly in carbonated mineral water, flavored CSD , bottled water and vegetable juice, with particular strength in carbonated mineral water, vegetable juice categories and grapefruit flavored CSD s. The largest brands include Peñafiel, Squirt, Clamato, Aguafiel and Crush. 
 
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 In Mexico, we manufacture and distribute our products through our bottling operations and third party bottlers and distributors. We sell our finished beverages through all major Mexican retail channels, including small outlets, supermarkets, hypermarkets, convenience stores and on-premise channels. In the Caribbean, we distribute our products through third party bottlers and distributors. We have also begun to distribute certain products in other international jurisdictions through various third party bottlers and distributors. 
 VOLUME 
 In evaluating our performance, we consider different volume measures depending on whether we sell beverage concentrates, finished beverages, K-Cup pod s or brewers. 
 Beverage Concentrates Sales Volume 
 In our Beverage Concentrates segment, we measure our sales volume as concentrate case sales. The unit of measurement for concentrate case sales equals 288 fluid ounces of finished beverage, the equivalent of 24 twelve ounce servings. 
 Concentrate case sales represent units of measurement for concentrates sold by us to our bottlers and distributors. A concentrate case is the amount of concentrate needed to make one case of 288 fluid ounces of finished beverage. It does not include any other component of the finished beverage other than concentrate. Our net sales in our concentrate businesses are based on our sales of concentrate cases. 
 Packaged Beverages and Latin America Beverages Sales Volume 
 In our Packaged Beverages and Latin America Beverages segments, we measure volume as case sales to customers. A case sale represents a unit of measurement equal to 288 fluid ounces of packaged beverage sold by us. Case sales include both our owned brands and certain brands licensed to and/or distributed by us. 
 Coffee Systems K-Cup Pod and Appliance Sales Volume 
 In our Coffee Systems segments, we measure our sales volume as the number of appliances and the number of individual K-Cup pod s sold to our customers. 
 COMPARABLE RESULTS OF OPERATIONS 
 Management believes that there are certain non-GAAP financial measures that allow management to evaluate our results, trends and ongoing performance on a comparable basis. In order to derive the adjusted financial information, we adjust certain financial statement captions and metrics prepared under U.S. GAAP for certain items affecting comparability. See Non-GAAP Financial Measures for further information on the certain items affecting comparability used in the preparation of the financial information. These items are referred to within this Management's Discussion and Analysis discussion as Adjusted income from operations, Adjusted interest expense, Adjusted provision for income taxes, Adjusted net income and Adjusted diluted EPS. 
 
 EXECUTIVE SUMMARY 
 
 Impact of COVID-19 on our Financial Statements 
 The impact of COVID-19 on our third quarter net sales performance presented both headwinds and tailwinds across the business and within the segments, requiring strong portfolio, package and channel mix management to optimize overall performance. The diversity of the Company’s broad portfolio and extensive route to market network enabled it to successfully navigate these mix impacts posed by the pandemic to drive overall performance and deliver a strong third quarter compared to the prior year period. 
 
 • 
 Coffee Systems experienced growth in K-Cup coffee pods for at-home consumption and strong double-digit growth in brewers, which more than offset the continued significant decline in away-from-home consumption due to weaknesses in the office coffee channel, as elevated work-from-home trends persisted throughout the quarter. Sales in the e-commerce channel were again very strong, as consumers continue to shift purchases to the on-line channel, including at the Keurig.com retail site. 
 
 • 
 Packaged Beverages experienced a net benefit from strong in-market execution, driven by net sales and market share growth in the majority of the segment's beverage portfolio. Performance in large-format channels continued to be strong across multi-pack and take-home packages, and performance in the convenience and gas channels improved during the quarter, as consumer mobility increased. 
 
 • 
 Beverage Concentrates experienced a decline due to the fountain foodservice component of the business, which services restaurants and hospitality, as a result of the impact of shutdowns and reductions in occupant capacity, which improved throughout the quarter, reflecting a modest reopening of quick-serve and other fast-casual restaurants. 
 
 • 
 Latin America Beverages experienced a modest decline in sales volumes driven by limited consumer mobility in Mexico. 
 
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 The current environment has increased operating costs, requiring us to take deliberate action. In addition to strong portfolio, package and channel mix management to optimize overall net sales performance, we maintained our strong cost discipline, which included the following: 
 
 • 
 Reduced marketing expense, given the current COVID-19 landscape which has reduced the effectiveness and return on these marketing investments; and 
 
 • 
 Significantly reduced all other discretionary costs, such as travel and entertainment expenses, within the business. 
 
 As a result of these items, COVID-19 is impacting our results, both positively and negatively, and should be taken into account when reviewing this Management's Discussion and Analysis. Refer to the section Uncertainties and Trends Affecting our Business - COVID-19 Pandemic Disclosures below for further information. 
 
 The following table sets forth our reconciliation of significant COVID-19-related expenses. Employee compensation expense and employee protection costs, which impact our SG&A expenses and cost of sales, are included as the COVID-19 item affecting comparability and is excluded in our Adjusted financial measures. In addition, reported amounts under U.S. GAAP also include additional costs, not included as the COVID-19 item affecting comparability, as presented in tables below. 
 
 Items Affecting Comparability (1) 
 
 (in millions) 
 Employee Compensation Expense (2) 
 
 Employee Protection Costs (3) 
 
 Allowances for Expected Credit Losses (4) 
 
 Inventory Write-Downs (5) 
 
 Total 
 
 For the third quarter of 2020: 
 
 Coffee Systems 
 $ 
 7 
 
 $ 
 5 
 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 12 
 
 Packaged Beverages 
 32 
 
 4 
 
 — 
 
 — 
 
 36 
 
 Beverage Concentrates 
 — 
 
 — 
 
 — 
 
 — 
 
 — 
 
 Latin America Beverages 
 — 
 
 1 
 
 — 
 
 — 
 
 1 
 
 Total 
 $ 
 39 
 
 $ 
 10 
 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 49 
 
 For the first nine months of 2020: 
 
 Coffee Systems 
 $ 
 14 
 
 $ 
 7 
 
 $ 
 2 
 
 $ 
 8 
 
 $ 
 31 
 
 Packaged Beverages 
 73 
 
 22 
 
 8 
 
 — 
 
 103 
 
 Beverage Concentrates 
 — 
 
 — 
 
 4 
 
 — 
 
 4 
 
 Latin America Beverages 
 — 
 
 1 
 
 — 
 
 — 
 
 1 
 
 Total 
 $ 
 87 
 
 $ 
 30 
 
 $ 
 14 
 
 $ 
 8 
 
 $ 
 139 
 
 (1) 
 Employee compensation expense and employee protection costs are both included as the COVID-19 items affecting comparability in the reconciliation of our Adjusted Non-GAAP financial measures. 
 
 (2) 
 Reflects temporary incremental frontline incentive pay and the associated taxes in order to maintain essential operations during the COVID-19 pandemic. Impacts both cost of sales and SG&A expenses. Beginning in mid-September 2020, we have discontinued the incremental frontline incentive pay program. 
 
 (3) 
 Includes costs associated with personal protective equipment, temperature scans, cleaning and other sanitization services. Impacts both cost of sales and SG&A expenses. 
 
 (4) 
 Allowances reflect the expected impact of the economic uncertainty caused by COVID-19, leveraging estimates of credit worthiness, default and recovery rates for certain of our customers. Impacts SG&A expenses. 
 
 (5) 
 Inventory write-downs include obsolescence charges of $8 million for the first nine months of 2020 . Impacts cost of sales. 
 
 Financial Overview 
 
 • 
 Net sales increased $150 million , or 5.2% , to $3,020 million for the third quarter of 2020 compared with $2,870 million in the prior year period. This performance reflected higher volume/mix of 6.6% , partially offset by lower net price realization of 0.8% and unfavorable FX translation of 0.6% , primarily in our Latin America Beverages segment. 
 
 • 
 Net income increased $139 million to $443 million for the third quarter of 2020 as compared to $304 million in the prior year period, reflecting strong growth in income from operations, driven primarily by the continued benefit of productivity and merger synergies, lower marketing expense and higher volume/mix, partially offset by $49 million of additional pre-tax expenses associated with COVID-19. Other favorable drivers included lower interest expense due to continued deleveraging and the impact of a lower effective tax rate, partially offset by a non-cash impairment on an equity investment. 
 
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 • 
 Adjusted net income increased $106 million to $557 million for the third quarter of 2020 as compared to Adjusted net income of $451 million in the prior year period, reflecting the continued benefit of productivity and merger synergies, lower marketing expense and volume/mix growth, which were partially offset by lower net price realization and higher manufacturing and operating costs associated with increased consumer retail demand for our products. Other drivers included lower interest expense due to continued deleveraging and the impact of a lower effective tax rate. 
 
 • 
 Diluted EPS increased 47.6% to $0.31 per diluted share as compared to $0.21 in the prior year period. 
 
 • 
 Adjusted diluted EPS increased 21.9% to $0.39 per diluted share as compared to Adjusted diluted EPS of $0.32 per diluted share in the prior year period. 
 
 • 
 During the first nine months of 2020 , we made net repayments of $541 million related to our commercial paper notes, KDP Revolver , 2019 KDP Term Loan and our Notes. Additionally, we repaid $290 million and added $128 million of structured payables during the first nine months of 2020 . 
 
 • 
 In July 2020, we entered into a long-term franchise agreement with Polar Beverages to manufacture and distribute Polar Seltzer sparkling seltzer waters. The manufacture and distribution of Polar Beverages products will launch in early markets in the fourth quarter of 2020 and is anticipated to reach nationwide distribution throughout our DSD network in the first half of 2021. 
 
 • 
 Effective September 18, 2020, at market close, our common stock ceased to be listed on the New York Stock Exchange and on September 21, 2020, the following business day, our common stock began trading on Nasdaq 's Global Select Market at market open. Our stock ticker remains "KDP". 
 
 • 
 Effective October 19, 2020, we were added to the Nasdaq-100 Index. 
 
 • 
 On October 28, 2020, we announced an agreement that will allow us to sell and distribute certain KDP brands in 18 counties in New York and New Jersey. Honickman is selling these rights to a third party and we will enter into a simultaneous transaction with the third-party to gain long-term access to these rights in exchange for the payment of an annual fee. 
 
 RESULTS OF OPERATIONS 
 We eliminate from our financial results all intercompany transactions between entities included in our consolidated financial statements and the intercompany transactions with our equity method investees. 
 References in the financial tables to percentage changes that are not meaningful are denoted by "NM". See Uncertainties and Trends Affecting our Business - COVID-19 Pandemic Disclosures for more information about the specific costs related to COVID-19. 
 Non-GAAP financial measures are provided in addition to U.S. GAAP measures. Such non-GAAP financial measures are excluded from the Results of Operations by Segment when there is no difference between the non-GAAP and the corresponding U.S. GAAP measure. See Non-GAAP Financial Measures for more information, including reconciliations to the corresponding U.S. GAAP measures. 
 
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 Third Quarter of 2020 Compared to Third Quarter of 2019 
 Consolidated Operations 
 The following table sets forth our unaudited condensed consolidated results of operations for the third quarter of 2020 and 2019 : 
 
 Third Quarter 
 
 Dollar 
 
 Percentage 
 
 ($ in millions, except per share amounts) 
 2020 
 
 2019 
 
 Change 
 
 Change 
 
 Net sales 
 $ 
 3,020 
 
 $ 
 2,870 
 
 $ 
 150 
 
 5.2 
 % 
 
 Cost of sales 
 1,316 
 
 1,245 
 
 71 
 
 5.7 
 
 Gross profit 
 1,704 
 
 1,625 
 
 79 
 
 4.9 
 
 Selling, general and administrative expenses 
 949 
 
 1,012 
 
 (63 
 ) 
 
 (6.2 
 ) 
 
 Other operating expense (income), net 
 2 
 
 33 
 
 (31 
 ) 
 
 NM 
 
 Income from operations 
 753 
 
 580 
 
 173 
 
 29.8 
 
 Interest expense 
 148 
 
 158 
 
 (10 
 ) 
 
 (6.3 
 ) 
 
 Loss on early extinguishment of debt 
 — 
 
 — 
 
 — 
 
 NM 
 
 Impairment on investments and note receivable 
 16 
 
 — 
 
 16 
 
 NM 
 
 Other expense, net 
 5 
 
 9 
 
 (4 
 ) 
 
 NM 
 
 Income before provision for income taxes 
 584 
 
 413 
 
 171 
 
 41.4 
 
 Provision for income taxes 
 141 
 
 109 
 
 32 
 
 29.4 
 
 Net income 
 $ 
 443 
 
 $ 
 304 
 
 139 
 
 45.7 
 
 Earnings per common share: 
 
 Basic 
 $ 
 0.31 
 
 $ 
 0.22 
 
 $ 
 0.09 
 
 40.9 
 % 
 
 Diluted 
 0.31 
 
 0.21 
 
 0.10 
 
 47.6 
 
 Gross margin 
 56.4 
 % 
 
 56.6 
 % 
 
 (20 bps) 
 
 Operating margin 
 24.9 
 % 
 
 20.2 
 % 
 
 470 bps 
 
 Effective tax rate 
 24.1 
 % 
 
 26.4 
 % 
 
 (230 bps) 
 
 Sales Volume. The following table sets forth changes in sales volume for the third quarter of 2020 compared to the prior year period: 
 
 Increase 
 
 K-Cup pod volume 
 
 2.4 
 % 
 
 Brewer volume 
 
 33.7 
 
 CSD sales volume 
 
 1.4 
 
 NCB sales volume 
 
 0.1 
 
 Net Sales. Net sales increased $150 million , or 5.2% , to $3,020 million for the third quarter of 2020 compared with $2,870 million in the prior year period. This performance reflected higher volume/mix of 6.6% , partially offset by lower net price realization of 0.8% and unfavorable FX translation of 0.6% , primarily in our Latin America Beverages segment. 
 Gross Profit. Gross profit increased $79 million for the third quarter of 2020 compared with the prior year period. This performance primarily reflected the impact of higher volume/mix, the favorable change in commodity mark-to-market impacts and the benefit of productivity and merger synergies. These benefits were partially offset by lower net price realization, $19 million in COVID-19 charges, increases in other manufacturing costs and unfavorable FX translation. Gross margin decreased 20 bps versus the year ago period to 56.4% 
 Selling, General and Administrative Expenses. SG&A expenses decreased $63 million , or 6.2% , to $949 million for the third quarter of 2020 compared with $1,012 million in the prior year period. The decrease was driven by lower marketing expense, the benefit of productivity and merger synergies and reduced travel and entertainment expenses, which were partially offset by $30 million in COVID-19 charges and higher operating costs, such as logistics and labor, associated with the strong consumer demand for our products. 
 
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 Other Operating Expense (Income), Net. Other operating expense (income), net had a favorable change of $31 million for the third quarter of 2020 compared with the prior year period, primarily due to integration expenses in the third quarter of 2019 related to unfavorable fair value adjustments on real estate assets. 
 Income from Operations. Income from operations increased $173 million to $753 million for the third quarter of 2020 compared to $580 million in the prior year period due to the increase in gross profit, lower SG&A expenses and the favorable change in other operating (income) expense, net. Operating margin increased 470 bps versus the year ago period to 24.9% . 
 Interest Expense. Interest expense decreased $10 million , or 6.3% , to $148 million for the third quarter of 2020 compared with $158 million in the prior year period. This change was primarily the result of the benefit of lower indebtedness due to continued deleveraging. 
 Impairment on Investments and Note Receivable. Impairment on investments and note receivable reflected a non-cash impairment charge of $16 million for the third quarter of 2020 associated with our LifeFuels investment. Refer to Note 4 for additional information regarding the impairment charge. 
 Effective Tax Rate. The effective tax rate decreased 230 bps to 24.1% for the third quarter of 2020 , compared to 26.4% in the prior year period. This decrease was primarily due to a decrease in our uncertain tax positions as a result of examination settlements, slightly offset by an increase of U.S. taxation of foreign earnings in the current period. 
 Adjusted Results of Operations 
 The following table sets forth certain unaudited condensed consolidated adjusted results of operations for the third quarter of 2020 and 2019 : 
 
 Third Quarter 
 
 Dollar 
 
 Percent 
 
 (in millions, except per share amounts) 
 2020 
 
 2019 
 
 Change 
 
 Change 
 
 Adjusted income from operations 
 $ 
 874 
 
 $ 
 754 
 
 $ 
 120 
 
 15.9 
 % 
 
 Adjusted interest expense 
 139 
 
 145 
 
 (6 
 ) 
 
 (4.1 
 ) 
 
 Adjusted provision for income taxes 
 173 
 
 149 
 
 24 
 
 16.1 
 
 Adjusted net income 
 557 
 
 451 
 
 106 
 
 23.5 
 
 Adjusted diluted EPS 
 0.39 
 
 0.32 
 
 0.07 
 
 21.9 
 
 Adjusted operating margin 
 28.9 
 % 
 
 26.3 
 % 
 
 260 bps 
 
 Adjusted effective tax rate 
 23.7 
 % 
 
 24.8 
 % 
 
 (110 bps) 
 
 Adjusted Income from Operations. Adjusted income from operations increased $120 million , or 15.9% , to $874 million for the third quarter of 2020 as compared to Adjusted income from operations of $754 million in the prior year period. Driving this performance in the quarter were the benefit of productivity and merger synergies, lower marketing expense and volume/mix growth. These increases were partially offset by lower net price realization and higher manufacturing and operating costs associated with increased consumer demand for our products. Adjusted operating margin grew 260 bps versus the year ago period to 28.9% . 
 Adjusted Interest Expense. Adjusted interest expense decreased $6 million , or 4.1% , to $139 million for the third quarter of 2020 compared to Adjusted interest expense of $145 million in the prior year period. This benefit was primarily the result of lower indebtedness due to continued deleveraging. 
 Adjusted Effective Tax Rate. The Adjusted effective tax rate decreased 110 bps to 23.7% for the third quarter of 2020 , compared to the Adjusted effective tax rate of 24.8% in the prior year period. This decrease was primarily due to a decrease in our uncertain tax positions as a result of examination settlements, slightly offset by an increase of U.S. taxation of foreign earnings in the current period. 
 Adjusted Net Income. Adjusted net income increased 23.5% to $557 million for the third quarter of 2020 as compared to Adjusted net income of $451 million in the prior year period. This performance was driven by the strong growth in Adjusted income from operations, a lower Adjusted effective tax rate and lower Adjusted interest expense. 
 Adjusted Diluted EPS. Adjusted diluted EPS increased 21.9% to $0.39 per diluted share for the third quarter of 2020 as compared to Adjusted diluted EPS of $0.32 per diluted share in the prior year period. 
 
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 Results of Operations by Segment 
 The following tables set forth net sales and income from operations for our segments for the third quarter of 2020 and 2019 , as well as the other amounts necessary to reconcile our total segment results to our consolidated results presented in accordance with U.S. GAAP : 
 
 Third Quarter 
 
 (in millions) 
 2020 
 
 2019 
 
 Segment Results — Net sales 
 
 Coffee Systems 
 $ 
 1,097 
 
 $ 
 1,065 
 
 Packaged Beverages 
 1,447 
 
 1,307 
 
 Beverage Concentrates 
 352 
 
 360 
 
 Latin America Beverages 
 124 
 
 138 
 
 Net sales 
 $ 
 3,020 
 
 $ 
 2,870 
 
 Third Quarter 
 
 (in millions) 
 2020 
 
 2019 
 
 Segment Results — Income from Operations 
 
 Coffee Systems 
 $ 
 320 
 
 $ 
 310 
 
 Packaged Beverages 
 260 
 
 196 
 
 Beverage Concentrates 
 262 
 
 245 
 
 Latin America Beverages 
 25 
 
 25 
 
 Unallocated corporate costs 
 (114 
 ) 
 
 (196 
 ) 
 
 Income from operations 
 $ 
 753 
 
 $ 
 580 
 
 COFFEE SYSTEMS 
 The following table provides selected information about our Coffee Systems segment's results: 
 
 Third Quarter 
 
 Dollar 
 
 Percent 
 
 (in millions) 
 2020 
 
 2019 
 
 Change 
 
 Change 
 
 Net sales 
 $ 
 1,097 
 
 $ 
 1,065 
 
 $ 
 32 
 
 3.0 
 % 
 
 Income from operations 
 320 
 
 310 
 
 10 
 
 3.2 
 
 Operating margin 
 29.2 
 % 
 
 29.1 
 % 
 
 10 bps 
 
 Adjusted income from operations 
 $ 
 373 
 
 $ 
 367 
 
 $ 
 6 
 
 1.6 
 % 
 
 Adjusted operating margin 
 34.0 
 % 
 
 34.5 
 % 
 
 (50 bps) 
 
 Sales Volume. Volume growth for the Coffee Systems segment included K-Cup pod volume growth of 2.4% , reflecting continued strength in at-home consumption, which was significantly offset by ongoing softness in the away-from-home business as return to offices and hospitality remained depressed, despite increased consumer mobility. Brewer volume increased 33.7% in the quarter, as compared to 8.0% in the year ago period, reflecting successful innovation introduced over the past two years and investments to drive household penetration, as well as retailer inventory stocking ahead of the holiday season. 
 Net Sales. Net sales increased 3.0% to $1,097 million for the third quarter of 2020 compared to net sales of $1,065 million in the prior year period, driven by strong volume/mix growth of 6.0% , which was partially offset by lower net price realization of 2.8% , resulting from strategic price investments. Unfavorable FX translation also impacted the period by 0.2% . 
 Income from Operations. Income from operations increased $10 million , or 3.2% , to $320 million for the third quarter of 2020 , compared to $310 million for the prior year period, driven by the continued benefit of productivity and merger synergies, which impacted both cost of sales and SG&A, an increase in sales volume, a reduction in expenses associated with productivity projects and a decrease in people costs. These impacts were partially offset by unfavorable product mix related to the strong brewer growth, strategic price investments and $12 million in COVID-19 charges. Operating margin increased 10 bps versus the year ago period to 29.2% . 
 
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 Adjusted Income from Operations. Adjusted income from operations increased $6 million , or 1.6% , to $373 million for the third quarter of 2020 , compared with Adjusted income from operations of $367 million for the prior year period, driven by the continued benefit of productivity and merger synergies, which impacted both SG&A and cost of sales, an increase in sales volume and decreases in people costs and marketing expense. These impacts were partially offset by unfavorable product mix related to the strong brewer growth, strategic price investments and higher manufacturing costs. Adjusted operating margin decreased 50 bps versus the year ago period to 34.0% . 
 
 PACKAGED BEVERAGES 
 The following table provides selected information about our Packaged Beverages segment's results: 
 
 Third Quarter 
 
 Dollar 
 
 Percent 
 
 (in millions) 
 2020 
 
 2019 
 
 Change 
 
 Change 
 
 Net sales 
 $ 
 1,447 
 
 $ 
 1,307 
 
 $ 
 140 
 
 10.7 
 % 
 
 Income from operations 
 260 
 
 196 
 
 64 
 
 32.7 
 
 Operating margin 
 18.0 
 % 
 
 15.0 
 % 
 
 300 bps 
 
 Adjusted income from operations 
 $ 
 304 
 
 $ 
 201 
 
 $ 
 103 
 
 51.2 
 % 
 
 Adjusted operating margin 
 21.0 
 % 
 
 15.4 
 % 
 
 560 bps 
 
 Sales Volume. Sales volume for the third quarter of 2020 increased 8.7% due primarily to strength in CSDs, driven by the broad flavor portfolio and the strength of our DSD system, juice and juice drinks, and apple sauce, which were partially offset by lower volume in enhanced flavored water, driven by Bai, due to continued softness in convenience and gas channels, and reductions in contract manufacturing. 
 Net Sales. Net sales increased 10.7% to $1,447 million for the third quarter of 2020 , compared with net sales of $1,307 million in the prior year period, driven by strong volume/mix growth of 11.4% , partially offset by lower net price realization of 0.7% . 
 Income from Operations. Income from operations increased $64 million , or 32.7% , to $260 million for the third quarter of 2020 , compared with $196 million for the prior year period, reflecting higher volume/mix, the continued benefit of productivity and merger synergies and lower marketing expense. These growth drivers were partially offset by $36 million in COVID-19 charges, higher manufacturing and operating costs associated with the strong consumer demand, lower net price realization, inflation in logistics, and reserves for inventory obsolescence. Operating margin grew 300 bps versus the year ago period to 18.0% . 
 Adjusted Income from Operations. Adjusted income from operations increased $103 million , or 51.2% , to $304 million for the third quarter of 2020 , compared with Adjusted income from operations of $201 million for the prior year period, largely driven by strong volume/mix, the continued benefit of productivity and merger synergies and lower marketing expense. These growth drivers were partially offset by higher manufacturing and operating costs associated with the strong consumer demand, lower net price realization, inflation in logistics, and reserves for inventory obsolescence. Adjusted operating margin grew 560 bps versus the year ago period to 21.0% . 
 
 BEVERAGE CONCENTRATES 
 The following table provides selected information about our Beverage Concentrates segment's results: 
 
 Third Quarter 
 
 Dollar 
 
 Percent 
 
 (in millions) 
 2020 
 
 2019 
 
 Change 
 
 Change 
 
 Net sales 
 $ 
 352 
 
 $ 
 360 
 
 $ 
 (8 
 ) 
 
 (2.2 
 )% 
 
 Income from operations 
 262 
 
 245 
 
 17 
 
 6.9 
 
 Operating margin 
 74.4 
 % 
 
 68.1 
 % 
 
 630 bps 
 
 Adjusted income from operations 
 $ 
 265 
 
 $ 
 244 
 
 $ 
 21 
 
 8.6 
 % 
 
 Adjusted operating margin 
 75.3 
 % 
 
 67.8 
 % 
 
 750 bps 
 
 Sales volume. Sales volume for the third quarter of 2020 decreased 3.9% , primarily reflecting the decline in our fountain foodservice component of the business, which services restaurants and hospitality, reflecting the impact of shutdowns and reductions in occupant capacity, which improved throughout the quarter. 
 Net Sales. Net sales decreased 2.2% to $352 million for the third quarter of 2020 compared to $360 million for the prior year period, driven by unfavorable volume/mix of 4.8% partially offset by higher net price realization of 2.6% . 
 
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 Income from Operations. Income from operations increased $17 million , or 6.9% , to $262 million for the third quarter of 2020 compared to $245 million for the prior year period, driven by lower marketing expense, partially offset by the net sales decline. Operating margin grew 630 bps from versus the year ago period to 74.4% . 
 Adjusted Income from Operations. Adjusted income from operations increased $21 million , or 8.6% , to $265 million for the third quarter of 2020 compared with Adjusted income from operations of $244 million for the prior year period, driven by lower marketing expense, partially offset by the net sales decline. Adjusted operating margin grew 750 bps versus the year ago period to 75.3% . 
 
 LATIN AMERICA BEVERAGES 
 The following table provides selected information about our Latin America Beverages segment's results: 
 
 Third Quarter 
 
 Dollar 
 
 Percent 
 
 (in millions) 
 2020 
 
 2019 
 
 Change 
 
 Change 
 
 Net sales 
 $ 
 124 
 
 $ 
 138 
 
 $ 
 (14 
 ) 
 
 (10.1 
 )% 
 
 Income from operations 
 25 
 
 25 
 
 — 
 
 — 
 % 
 
 Operating margin 
 20.2 
 % 
 
 18.1 
 % 
 
 210 bps 
 
 Sales Volume. Sales volume for the third quarter of 2020 decreased 3.9% compared to the prior year period, driven by Penafiel and Aguafiel due to limited consumer mobility in Mexico, partially offset by an increase in Clamato. 
 Net Sales. Net sales decreased 10.1% to $124 million for the third quarter of 2020 compared to $138 million for the prior year period, driven primarily by unfavorable FX translation of 10.8% . Excluding the unfavorable impact of FX translation, net sales increased as a result of higher net price realization of 5.2% partially offset by unfavorable volume/mix of 4.5% . 
 Income from Operations . Income from operations remained flat at $25 million for the third quarter of 2020 compared to the prior year period, driven by higher net price realization, continued productivity, lower marketing expense and lower operating costs, completely offset by unfavorable FX effects (FX transaction and translation) and unfavorable volume/mix. Operating margin increased 210 bps versus the year ago period to 20.2% . 
 
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 First Nine Months of 2020 Compared to First Nine Months of 2019 
 Consolidated Operations 
 The following table sets forth our unaudited condensed consolidated results of operations for the first nine months of 2020 and 2019 : 
 
 First Nine Months 
 
 Dollar 
 
 Percentage 
 
 ($ in millions, except per share amounts) 
 2020 
 
 2019 
 
 Change 
 
 Change 
 
 Net sales 
 $ 
 8,497 
 
 $ 
 8,186 
 
 $ 
 311 
 
 3.8 
 % 
 
 Cost of sales 
 3,779 
 
 3,537 
 
 242 
 
 6.8 
 
 Gross profit 
 4,718 
 
 4,649 
 
 69 
 
 1.5 
 
 Selling, general and administrative expenses 
 2,978 
 
 2,951 
 
 27 
 
 0.9 
 
 Other operating expense (income), net 
 (40 
 ) 
 
 33 
 
 (73 
 ) 
 
 NM 
 
 Income from operations 
 1,780 
 
 1,665 
 
 115 
 
 6.9 
 
 Interest expense 
 458 
 
 497 
 
 (39 
 ) 
 
 (7.8 
 ) 
 
 Loss on early extinguishment of debt 
 4 
 
 9 
 
 (5 
 ) 
 
 (55.6 
 ) 
 
 Impairment on investments and note receivable 
 102 
 
 — 
 
 102 
 
 NM 
 
 Other expense, net 
 21 
 
 15 
 
 6 
 
 NM 
 
 Income before provision for income taxes 
 1,195 
 
 1,144 
 
 51 
 
 4.5 
 
 Provision for income taxes 
 298 
 
 296 
 
 2 
 
 0.7 
 
 Net income 
 $ 
 897 
 
 $ 
 848 
 
 49 
 
 5.8 
 
 Earnings per common share: 
 
 Basic 
 $ 
 0.64 
 
 $ 
 0.60 
 
 $ 
 0.04 
 
 6.7 
 % 
 
 Diluted 
 0.63 
 
 0.60 
 
 0.03 
 
 5.0 
 
 Gross margin 
 55.5 
 % 
 
 56.8 
 % 
 
 (130 bps) 
 
 Operating margin 
 20.9 
 % 
 
 20.3 
 % 
 
 60 bps 
 
 Effective tax rate 
 24.9 
 % 
 
 25.9 
 % 
 
 (100 bps) 
 
 Sales volume. The following table sets forth changes in sales volume for the first nine months of 2020 compared to the prior year period: 
 
 Increase 
 
 K-Cup pod volume 
 
 5.8 
 % 
 
 Brewer volume 
 
 17.7 
 
 CSD sales volume 
 
 — 
 
 NCB sales volume 
 
 2.1 
 
 Net Sales. Net sales increased $311 million , or 3.8% , to $8,497 million for the first nine months of 2020 compared to $8,186 million in the prior year period. This performance reflected higher volume/mix of 5.3% , partially offset by lower net price realization of 0.9% and unfavorable foreign currency translation of 0.6% , primarily in our Latin America Beverages segment. 
 Gross Profit. Gross profit increased $69 million , or 1.5% , to $4,718 million for the first nine months of 2020 compared to $4,649 million in the prior year period. This performance primarily reflected the impact of higher volume/mix and the benefit of productivity and merger synergies. These benefits were partially offset by unfavorable net price realization, unfavorable FX translation, $46 million in COVID-19 charges and an increase in other manufacturing costs. Gross margin decreased 130 bps versus the year ago period to 55.5% . 
 Selling, General and Administrative Expenses. SG&A expenses increased $27 million , or 0.9% , to $2,978 million for the first nine months of 2020 compared to $2,951 million in the prior year period. The increase was driven by $93 million in COVID-19 charges, the unfavorable change in commodity mark-to-market impacts, expenses associated with productivity and integration projects, and higher operating costs, such as logistics and labor, associated with the strong consumer demand. These increases were partially offset by lower marketing expenses, the benefit of strong productivity and merger synergies, lower travel and entertainment expense and favorable FX translation. 
 
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 Other Operating (Income) Expense, net. Other operating income, net had a favorable change of $73 million for the first nine months of 2020 compared to the prior year period, largely driven by the network optimization program gain of $42 million on the asset sale-leaseback of four facilities in the current year and the favorable comparison to integration expenses in the third quarter of 2019 related to unfavorable fair value adjustments on real estate assets. 
 Income from Operations. Income from operations increased $115 million , or 6.9% , to $1,780 million for the first nine months of 2020 compared to $1,665 million in the prior year period, driven by the favorable change in other operating (income) expense, net and the increase in gross profit, partially offset by the increase in SG&A expenses. Operating margin increased 60 bps versus the year ago period to 20.9% . 
 Interest Expense. Interest expense decreased $39 million , or 7.8% , to $458 million for the first nine months of 2020 compared to $497 million for the prior year period. This change was primarily the result of the benefit of lower indebtedness due to continued deleveraging. 
 Impairment on Investments and Note Receivable. Impairment on investments and note receivable reflected a non-cash impairment charge of $102 million for the first nine months of 2020 associated with our Bedford and LifeFuels investments. Refer to Note 4 for additional information regarding the impairment charges. 
 Effective Tax Rate. The effective tax rate decreased 100 bps to 24.9% for the first nine months of 2020 , compared to 25.9% in the prior year period. This decrease primarily related to the tax benefit received in the current period due to a decrease in our uncertain tax positions as a result of examination settlements. 
 Net Income. Net income increased $49 million , or 5.8% , to $897 million for the first nine months of 2020 as compared to $848 million in the prior year period, driven by improved income from operations and reduced interest expense, which were partially offset by the impairment on investments and note receivable in the first nine months of 2020 . 
 Diluted EPS. Diluted EPS increased 5.0% to $0.63 per diluted share as compared to $0.60 in the prior year period. 
 Adjusted Results of Operations 
 The following table sets forth certain unaudited condensed consolidated adjusted results of operations for the first nine months of 2020 and 2019 : 
 
 First Nine Months 
 
 Dollar 
 
 Percent 
 
 (in millions, except per share amounts) 
 2020 
 
 2019 
 
 Change 
 
 Change 
 
 Adjusted income from operations 
 $ 
 2,333 
 
 $ 
 2,077 
 
 $ 
 256 
 
 12.3 
 
 Adjusted interest expense 
 404 
 
 407 
 
 (3 
 ) 
 
 (0.7 
 ) 
 
 Adjusted provision for income taxes 
 474 
 
 419 
 
 55 
 
 13.1 
 
 Adjusted net income 
 1,434 
 
 1,236 
 
 198 
 
 16.0 
 
 Adjusted diluted EPS 
 1.01 
 
 0.87 
 
 0.14 
 
 16.1 
 
 Adjusted operating margin 
 27.5 
 % 
 
 25.4 
 % 
 
 210 bps 
 
 Adjusted effective tax rate 
 24.8 
 % 
 
 25.3 
 % 
 
 (50 bps) 
 
 Adjusted Income from Operations. Adjusted income from operations increased $256 million , or 12.3% , to $2,333 million for the first nine months of 2020 compared to Adjusted income from operations of $2,077 million in the prior year period. Driving this performance in the current period were the benefit of productivity and merger synergies, which impacted both SG&A and cost of sales, higher volume/mix, lower marketing expense, a network optimization program gain of $42 million on the asset-sale leaseback of four facilities and lower travel and entertainment expenses. Partially offsetting these positive drivers were $22 million of additional COVID-19 charges, tariffs and higher manufacturing and operating costs, such as logistics and labor, associated with the strong consumer demand. Adjusted operating margin grew 210 bps versus the year ago period to 27.5% . 
 Adjusted Interest Expense. Adjusted interest expense decreased $3 million , or 0.7% , to $404 million for the first nine months of 2020 compared to Adjusted interest expense of $407 million in the prior year period. This benefit was primarily driven by lower indebtedness resulting from continued deleveraging, which was partially offset by the unfavorable comparison to realized gains in the first nine months of 2019 resulting from the termination of interest rate swaps and amortization of deferred financing costs incurred since the DPS Merger. 
 Adjusted Effective Tax Rate. The Adjusted effective tax rate decreased by 50 bps to 24.8% for the first nine months of 2020 , compared to 25.3% in the prior year period. This decrease primarily related to the tax benefit received in the current period due to a decrease in our uncertain tax positions as a result of examination settlements. 
 
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 Adjusted Net Income. Adjusted net income increased 16.0% to $1,434 million for the first nine months of 2020 as compared to Adjusted net income of $1,236 million in the prior year period. This performance was driven primarily by strong growth in Adjusted income from operations. 
 Adjusted Diluted EPS. Adjusted diluted EPS increased 16.1% to $1.01 per diluted share as compared to Adjusted diluted EPS of $0.87 per diluted share in the prior year period. 
 
 Results of Operations by Segment 
 The following tables set forth net sales and income from operations for our segments for the first nine months of 2020 and 2019 , as well as the other amounts necessary to reconcile our total segment results to our consolidated results presented in accordance with U.S. GAAP : 
 
 (in millions) 
 First Nine Months 
 
 Segment Results — Net sales 
 2020 
 
 2019 
 
 Coffee Systems 
 $ 
 3,113 
 
 $ 
 3,023 
 
 Packaged Beverages 
 4,056 
 
 3,734 
 
 Beverage Concentrates 
 967 
 
 1,034 
 
 Latin America Beverages 
 361 
 
 395 
 
 Net sales 
 $ 
 8,497 
 
 $ 
 8,186 
 
 First Nine Months 
 
 (in millions) 
 2020 
 
 2019 
 
 Segment Results — Income from Operations 
 
 Coffee Systems 
 $ 
 882 
 
 $ 
 890 
 
 Packaged Beverages 
 657 
 
 531 
 
 Beverage Concentrates 
 679 
 
 690 
 
 Latin America Beverages 
 73 
 
 62 
 
 Unallocated corporate costs 
 (511 
 ) 
 
 (508 
 ) 
 
 Income from operations 
 $ 
 1,780 
 
 $ 
 1,665 
 
 COFFEE SYSTEMS 
 The following table provides selected information about our Coffee Systems segment's results: 
 
 First Nine Months 
 
 Dollar 
 
 Percent 
 
 (in millions) 
 2020 
 
 2019 
 
 Change 
 
 Change 
 
 Net sales 
 $ 
 3,113 
 
 $ 
 3,023 
 
 $ 
 90 
 
 3.0 
 % 
 
 Income from operations 
 882 
 
 890 
 
 (8 
 ) 
 
 (0.9 
 ) 
 
 Operating margin 
 28.3 
 % 
 
 29.4 
 % 
 
 (110 bps) 
 
 Adjusted income from operations 
 1,083 
 
 1,033 
 
 50 
 
 4.8 
 
 Adjusted operating margin 
 34.8 
 % 
 
 34.2 
 % 
 
 60 bps 
 
 Sales Volume. Sales volume growth in the first nine months of 2020 compared to the prior year period for the Coffee Systems segment included strong K-Cup pod volume growth of 5.8% , reflecting strength in at-home consumption which was significantly offset by softness in the away-from-home business due to the pandemic. Brewer volume increased 17.7% in the first nine months of 2020 , as compared to 12.7% growth in the year-ago period, reflecting successful innovation introduced over the past two years and investments to drive household penetration. 
 Net Sales. Net sales increased $90 million , or 3.0% , to $3,113 million for the first nine months of 2020 compared to $3,023 million for the prior year period due to volume/mix growth of 5.9% , which was partially offset by lower net price realization of 2.8% . Unfavorable FX translation also impacted the period by 0.1% . 
 Income from Operations. Income from operations decreased $8 million , or 0.9% , to $882 million for the first nine months of 2020 , compared to $890 million in the prior year period, driven by strategic pricing, expenses associated with productivity projects, $31 million in COVID-19 charges, an increase in our litigation reserve and tariffs. These impacts were partially offset by the benefit of strong productivity and merger synergies, which impacted both cost of sales and SG&A, strong volume/mix growth, reductions in people costs, a network optimization program gain of $16 million on an asset sale-leaseback of a manufacturing facility and lower travel and entertainment expenses. Operating margin declined 110 bps versus the year ago period to 28.3% . 
 
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 Table of Contents 
 
 Adjusted Income from Operations. Adjusted income from operations increased $50 million , or 4.8% , to $1,083 million for the first nine months of 2020 , compared to $1,033 million in the prior year period, driven by the continued benefit of productivity and merger synergies, which impacted both cost of sales and SG&A, strong volume/mix, reductions in people costs, a network optimization program gain of $16 million on an asset sale-leaseback of a manufacturing facility and lower travel and entertainment expenses. Partially offsetting these factors was strategic pricing, tariffs and $10 million in COVID-19 charges. Adjusted operating margin grew 60 bps versus the year ago period to 34.8% . 
 
 PACKAGED BEVERAGES 
 The following table provides selected information about our Packaged Beverages segment's results: 
 
 First Nine Months 
 
 Dollar 
 
 Percent 
 
 (in millions) 
 2020 
 
 2019 
 
 Change 
 
 Change 
 
 Net sales 
 $ 
 4,056 
 
 $ 
 3,734 
 
 $ 
 322 
 
 8.6 
 % 
 
 Income from operations 
 657 
 
 531 
 
 126 
 
 23.7 
 
 Operating margin 
 16.2 
 % 
 
 14.2 
 % 
 
 200 bps 
 
 Adjusted income from operations 
 776 
 
 551 
 
 225 
 
 40.8 
 
 Adjusted operating margin 
 19.1 
 % 
 
 14.8 
 % 
 
 430 bps 
 
 Sales Volume. Sales volume for the first nine months of 2020 increased 8.0% compared to the prior year period, reflecting the impact of COVID-19 which displayed strength in CSDs, juice and juice drinks, premium water and apple sauce, driven by heightened consumer demand the first nine months of 2020 . These increases were partially offset by lower volume in enhanced flavored water, driven by Bai, due to continued softness in convenience and gas channels during the current period. 
 Net Sales. Net sales increased $322 million , or 8.6% , to $4,056 million for the first nine months of 2020 compared to $3,734 million for the prior year period, driven by higher volume/mix of 8.9% , partially offset by unfavorable net price realization of 0.2% and foreign currency translation of 0.1% . 
 Income from Operations. Income from operations increased $126 million , or 23.7% , to $657 million for the first nine months of 2020 compared to $531 million for the prior year period, driven primarily by strong volume/mix, reflecting the impact of COVID-19. Other favorable drivers included the benefit of continued productivity and merger synergies and lower marketing expense. These growth drivers were partially offset by $103 million in COVID-19 charges, higher manufacturing and operating costs, such as logistics and labor, associated with the strong consumer demand and the unfavorable comparison to a $10 million net gain on a renegotiation of a manufacturing contract in the prior year period. Operating margin grew 200 bps versus the year ago period to 16.2% . 
 Adjusted Income from Operations. Adjusted income from operations increased $225 million , or 40.8% , to $776 million for the first nine months of 2020 compared to $551 million for the prior year period, largely driven by strong volume/mix, reflecting the impact of COVID-19. Other favorable drivers included the benefit of continued productivity and merger synergies and lower marketing expense. These drivers were partially offset by higher manufacturing and operating costs, such as logistics and labor, associated with the strong consumer demand and the unfavorable comparison to a $10 million net gain on a renegotiation of a manufacturing contract in the prior year period. Adjusted operating margin grew 430 bps versus the year ago period to 19.1% . 
 
 BEVERAGE CONCENTRATES 
 The following table provides selected information about our Beverage Concentrates segment's results: 
 
 First Nine Months 
 
 Dollar 
 
 Percent 
 
 (in millions) 
 2020 
 
 2019 
 
 Change 
 
 Change 
 
 Net sales 
 $ 
 967 
 
 $ 
 1,034 
 
 $ 
 (67 
 ) 
 
 (6.5 
 )% 
 
 Income from operations 
 679 
 
 690 
 
 (11 
 ) 
 
 (1.6 
 ) 
 
 Operating margin 
 70.2 
 % 
 
 66.7 
 % 
 
 350 bps 
 
 Adjusted income from operations 
 684 
 
 691 
 
 (7 
 ) 
 
 (1.0 
 ) 
 
 Adjusted operating margin 
 70.7 
 % 
 
 66.8 
 % 
 
 390 bps 
 
 Sales Volume. Sales volume for the first nine months of 2020 as compared to the prior year period declined 5.8% , primarily reflecting the decline in our fountain foodservice component of the business, which services restaurants and hospitality, reflecting the impact of shutdowns and reductions in occupant capacity. 
 Net Sales. Net sales decreased $67 million , or 6.5% , to $967 million for the first nine months of 2020 compared to $1,034 million in the prior year period, driven by unfavorable volume/mix of 6.3% partially offset by lower net price realization of 0.1% and unfavorable foreign currency translation of 0.1% . 
 
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 Table of Contents 
 
 Income from Operations. Income from operations decreased $11 million , or 1.6% , to $679 million for the first nine months of 2020 compared to $690 million in the prior year period. This performance reflected the net sales decline, partially offset by lower marketing expense and lower operating costs. Operating margin increased 350 bps versus the year ago period to 70.2% . 
 Adjusted Income from Operations. Adjusted income from operations decreased $7 million , or 1.0% , to $684 million for the first nine months of 2020 compared to $691 million in the prior year period. This performance reflected the net sales decline, partially offset by lower marketing expense and lower operating costs. Adjusted operating margin increased 390 bps versus the year ago period to 70.7% . 
 
 LATIN AMERICA BEVERAGES 
 The following table provides selected information about our Latin America Beverages segment's results: 
 
 First Nine Months 
 
 Dollar 
 
 Percent 
 
 (in millions) 
 2020 
 
 2019 
 
 Change 
 
 Change 
 
 Net sales 
 $ 
 361 
 
 $ 
 395 
 
 $ 
 (34 
 ) 
 
 (8.6 
 )% 
 
 Income from operations 
 73 
 
 62 
 
 11 
 
 17.7 
 
 Operating margin 
 20.2 
 % 
 
 15.7 
 % 
 
 450 bps 
 
 Adjusted income from operations 
 75 
 
 57 
 
 18 
 
 31.6 
 
 Adjusted operating margin 
 20.8 
 % 
 
 14.4 
 % 
 
 640 bps 
 
 Sales Volume. Sales volume for the first nine months of 2020 as compared to the prior year period increased 1.1% , driven by Squirt. 
 Net Sales. Net sales decreased $34 million , or 8.6% , to $361 million for the first nine months of 2020 compared to $395 million in the prior year period, driven primarily by unfavorable FX translation of 10.9% . Excluding the unfavorable impact of FX translation, net sales increased as a result of higher net price realization of 5.7% , partially offset by unfavorable volume/mix of 3.4% . 
 Income from Operations . Income from operations increased $11 million , or 17.7% , to $73 million for the first nine months of 2020 compared to $62 million in the prior year period, driven by higher net price realization, continued productivity and lower marketing expense, partially offset by unfavorable FX effects (FX translation and transaction), unfavorable volume/mix, and the comparison to a real estate gain in the prior year. Operating margin increased 450 bps versus the year ago period to 20.2% . 
 Adjusted Income from Operations. Adjusted income from operations increased $18 million , or 31.6% , to $75 million in the first nine months of 2020 compared to $57 million in the prior year period. This performance reflected higher net price realization, continued productivity and lower marketing expense, partially offset by unfavorable FX effects (FX translation and transaction) and unfavorable volume/mix. Adjusted operating margin grew 640 bps versus the year ago period to 20.8% . 
 
 UNCERTAINTIES AND TRENDS AFFECTING OUR BUSINESS 
 We believe the North American beverage market is influenced by certain key trends and uncertainties. Some of these items, such as the ongoing outbreak of COVID-19, increased health consciousness and changes in consumer preferences and economic factors, have previously created and may continue in the future to create category headwinds for a number of our products. Refer to Item 1A, "Risk Factors", of our Annual Report and this Quarterly Report on Form 10-Q, combined with the Uncertainties and Trends Affecting Liquidity section below, for more information about risks and uncertainties facing us. 
 
 COVID-19 Pandemic Disclosures 
 Our first priority, always, is to keep our employees safe and healthy. We’ve taken extraordinary precautions to do this and to provide the support our employees and their families may need during this unprecedented time. 
 We continue to deliver for our customers and consumers, working hard around the clock to fulfill strong demand. We are finding innovative ways to quickly adapt to changes in shopping behaviors, with more than half of North America impacted by stay-at-home, shelter-in-place and closure of non-essential business orders. 
 We are also focused on providing for our communities by supporting frontline healthcare workers who are fighting this crisis day in and day out head on. We don’t make masks or medical equipment at our Company, but we do make beverages and, through our Fueling The Frontline program, we are donating Keurig brewers, coffee and other beverages to hospitals in need, as our way to say thank you for the unwavering commitment and courage of the entire medical community. 
 As discussed in the Impact of COVID-19 on our Financial Statements , the pandemic is having offsetting impacts within our business. For example, we experienced a significant increase in demand and consumption of our products in our at-home business caused in part by changing consumer habits in response to COVID-19, contributing to increases in net sales. At the same time, we experienced declines in our away-from-home business due to office closures and the slowdown of hospitality and fountain foodservice as a result of shelter-in-place guidelines and restaurant capacity limits. In the future, the economic effects of the pandemic, including 
 
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 Table of Contents 
 
 higher levels of unemployment, lower wages or a recessionary environment, may result in reduced demand for our products. It could also lead to volatility in demand due to government actions, such as shelter-in-place notices, which impact consumers’ movements and access to our products. 
 While we believe that there will continue to be strong long-term demand for our products, the timing and extent of economic recovery, and the uncertainties in short-term demand trends, make it difficult to predict the overall effects of the pandemic on our business. We expect that there will be heightened volatility in net sales during and subsequent to the duration of the pandemic that may impact interim periods. 
 Our ability to continue to operate without any significant negative impacts will in part depend on our ability to protect our critical frontline employees and our supply chain. As food and agriculture is deemed part of the critical infrastructure by the Department of Homeland Security, our frontline employees have been identified as critical workers in maintaining the U.S. food and beverage supply. As a result, we have strived to follow recommended actions of government and health authorities to protect our employees, with particular measures in place for those working in our manufacturing and distribution facilities, which also includes additional incentive pay programs and benefits. We intend to continue to work with government authorities and implement our employee safety measures; however, disruptions to our supply chain, measures taken to protect employees, increased absenteeism or other local effects of the pandemic have impacted and could continue to impact our operations. For our corporate employees, participating in a remote work environment is familiar to us as we work in a multi-location environment. As such, we do not believe that the remote work environment has had any significant impact on our internal controls over financial reporting. With the health and safety of our employees remaining our top priority, we are diligently working on plans to safely bring our employees back to office locations with enhanced safety and health protocols. We do not believe these plans will impact our near-term liquidity needs. 
 The pandemic has not materially impacted our liquidity position. We continue to generate operating cash flows to meet our short-term liquidity needs, and we expect to maintain access to the capital markets enabled by our debt ratings. Refer to Uncertainties and Trends Affecting Liquidity and Capital Resources for more information. 
 We do not believe our operating and intangible assets are impaired as a result of COVID-19. 
 For additional information on risk factors that could impact our results, please refer to Risk Factors in Part II, Item 1A of this Form 10-Q. 
 
 CRITICAL ACCOUNTING ESTIMATES 
 The process of preparing our consolidated financial statements in conformity with U.S. GAAP requires the use of estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses. Critical accounting estimates are both fundamental to the portrayal of a company’s financial condition and results and require difficult, subjective or complex estimates and assessments. These estimates and judgments are based on historical experience, future expectations and other factors and assumptions we believe to be reasonable under the circumstances. The most significant estimates and judgments are reviewed on an ongoing basis and revised when necessary. These critical accounting estimates are discussed in greater detail in our Annual Report . 
 
 LIQUIDITY AND CAPITAL RESOURCES 
 Overview and Our Financing Arrangements 
 Our financial condition and liquidity remain strong. Net cash provided by operations was $1,666 million for the first nine months of 2020 compared to $1,803 million for the prior year period. Although there is uncertainty related to the anticipated impact of the ongoing COVID-19 pandemic on our future results, we believe we are uniquely positioned, with our broad portfolio and unmatched distribution network, to successfully navigate through this pandemic, and the recent steps we have taken to strengthen our balance sheet leave us well positioned to manage our business as the crisis continues to unfold. We continue to manage all aspects of our business, including, but not limited to, monitoring the financial health of our customers, suppliers and other third-party relationships, implementing gross margin enhancement strategies and developing new opportunities for growth. 
 Our principal sources of liquidity are our existing cash and cash equivalents, as well as cash generated from operations and borrowing capacity currently available under our existing KDP Revolver and 2020 364-Day Credit Agreement . Additionally, we have an uncommitted commercial paper program where we can issue unsecured commercial paper notes on a private placement basis. Refer to Note 2 of the Notes to our Unaudited Condensed Consolidated Financial Statements for management's discussion of these financing arrangements. 
 
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 During March 2020, as a result of market stress and a dislocation in the commercial paper market driven by the COVID-19 pandemic, we chose to repay $1,000 million of commercial paper notes with an equivalent amount of borrowings under our KDP Revolver as the costs and ability to issue commercial paper became inefficient versus borrowings under our KDP Revolver . In April 2020, we took steps to further strengthen our balance sheet by increasing excess liquidity in order to better position us to navigate the uncertainty of the COVID-19 pandemic. On April 13, 2020, we issued $1,500 million of senior unsecured notes and used the net proceeds from these senior unsecured notes to repay our KDP Revolver , effectively refinancing short-term borrowings with efficient long-term bonds to free up excess short-term liquidity. On April 14, 2020, we terminated the 2019 364-Day Credit Agreement and replaced it with the new 2020 364-Day Credit Agreement and increased total commitments under the facility from $750 million to $1,500 million. As a result of these two actions, we have increased our liquidity to a level that we believe enables us to more than meet our commitments, even in a prolonged economic downturn, as we continue to exercise financial discipline to ensure our long-term financial health. Refer to Note 2 of the Notes to our Unaudited Condensed Consolidated Financial Statements for management's discussion of these new financing arrangements. 
 As of September 30, 2020 , we were in compliance with all debt covenants and we have no reason to believe that we will be unable to satisfy these covenants. 
 
 Cash Flows 
 Based on our current and anticipated level of operations, we believe that our operating cash flows will be sufficient to meet our anticipated obligations for the next twelve months. To the extent that our operating cash flows are not sufficient to meet our liquidity needs, we may utilize cash on hand or amounts available under our financing arrangements, if necessary. 
 The following table summarizes our cash activity for the first nine months of 2020 and 2019 : 
 
 First Nine Months 
 
 (in millions) 
 2020 
 
 2019 
 
 Net cash provided by operating activities 
 $ 
 1,666 
 
 $ 
 1,803 
 
 Net cash used in investing activities 
 (182 
 ) 
 
 (216 
 ) 
 
 Net cash used in financing activities 
 (1,366 
 ) 
 
 (1,626 
 ) 
 
 NET CASH PROVIDED BY OPERATING ACTIVITIES 
 Net cash provided by operating activities decreased $137 million for the first nine months of 2020 , as compared to the first nine months of 2019 , driven by the decline in working capital and an increase in income tax payments partially offset by the increase in net income adjusted for non-cash items. 
 As of September 30, 2020, we had no deferred tax payments as compared to $85 million of deferred tax payments as of September 30, 2019. 
 Additionally, beginning in the second quarter of 2020 and continuing through the rest of the year, we have deferred payments of employer-related payroll taxes as allowed under the U.S. Coronavirus Aid, Relief and Economic Security Act, commonly known as the CARES Act. Payment of at least 50% of the deferred amount is due on December 31, 2021 with the remainder due by December 31, 2022. As of September 30, 2020, we have deferred a total of $41 million in such payments. 
 
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 Cash Conversion Cycle 
 Our cash conversion cycle is defined as DIO and DSO less DPO . The calculation of each component of the cash conversion cycle is provided below: 
 
 Component 
 
 Calculation (on a trailing twelve month basis) 
 
 DIO 
 
 (Average inventory divided by cost of sales) * Number of days in the period 
 
 DSO 
 
 (Accounts receivable divided by net sales) * Number of days in the period 
 
 DPO 
 
 (Accounts payable * Number of days in the period) divided by cost of sales and SG&A expenses 
 
 Our cash conversion cycle declined 20 days to approximately (56) days as of September 30, 2020 as compared to (36) days in the prior year period. The change was primarily driven by an increase of 19 days in our DPO as the DPS operations had significantly shorter terms than the legacy KGM business, which have been steadily increasing as we continue to focus on our accounts payable program. DIO and DSO were relatively consistent as compared to the prior year period. 
 
 September 30, 
 
 2020 
 
 2019 
 
 DIO 
 
 53 
 
 52 
 
 DSO 
 
 34 
 
 36 
 
 DPO 
 
 143 
 
 124 
 
 Cash conversion cycle 
 
 (56 
 ) 
 
 (36 
 ) 
 
 In future periods, DPO is expected to continue to have a positive impact on our cash conversion cycle as a result of our supplier terms initiative, which has set our customary terms as we integrate our legacy businesses. 
 Accounts Payable Program 
 As part of our ongoing efforts to improve our cash flow and related liquidity, we work with our suppliers to optimize our terms and conditions, which include the extension of payment terms. Excluding our suppliers who require cash at date of purchase or sale, our current payment terms with our suppliers generally range from 10 to 360 days. We also entered into an agreement with a third party administrator to allow participating suppliers to track payment obligations from us, and if voluntarily elected by the supplier, sell payment obligations from us to financial institutions. Suppliers can sell one or more of our payment obligations at their sole discretion and our rights and obligations to our suppliers are not impacted. We have no economic interest in a supplier’s decision to enter into these agreements and no direct financial relationship with the financial institutions. Our obligations to our suppliers, including amounts due and scheduled payment terms, are not impacted. We have been informed by the third party administrator that as of September 30, 2020 and December 31, 2019 , $2,442 million and $2,097 million , respectively, of our outstanding payment obligations were voluntarily elected by the supplier and sold to financial institutions. The amounts settled through the program and paid to the financial institutions were $2,022 million and $1,208 million for the first nine months of 2020 and 2019 , respectively. 
 
 NET CASH USED IN INVESTING ACTIVITIES 
 Cash used in investing activities for the first nine months of 2020 consisted primarily of purchases of property, plant and equipment of $356 million , mostly offset by proceeds of $203 million from sales of property, plant and equipment, primarily driven by our asset sale-leaseback transactions. 
 Cash used in investing activities for the first nine months of 2019 consisted primarily of purchases of property, plant and equipment of $208 million . 
 
 NET CASH USED IN FINANCING ACTIVITIES 
 Cash used in financing activities for the first nine months of 2020 consisted primarily of the net repayment of $911 million for commercial paper notes, which was primarily a result of the decision to repay commercial paper notes with an equivalent amount of borrowings under our KDP Revolver as the costs and ability to issue commercial paper became inefficient versus borrowings under our KDP Revolver . The KDP Revolver was subsequently repaid through the issuance of our 2030 Notes and 2050 Notes. Additionally, we made voluntary and mandatory repayments on the term loan facility of $880 million , repayment of the 2020 Notes of $250 million , dividend payments of $635 million and net payments on structured payables of $162 million . We also received $29 million from controlling shareholder stock transactions, which related to the disgorgement of short-swing profits pursuant to Section 16(b) of the Exchange Act . 
 Net cash used in financing activities for the first nine months of 2019 consisted primarily of the voluntary and mandatory repayments on the term loan facility of $873 million , repayment of the 2019 Notes of $250 million , repayments of structured payables of $432 million and dividend payments of $633 million . These cash outflows from financing activities were partially offset by net issuance of commercial paper notes of $335 million and proceeds from structured payables of $246 million . 
 
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 Uncertainties and Trends Affecting Liquidity 
 Disruptions in financial and credit markets, including those caused by the ongoing COVID-19 pandemic, may impact our ability to manage normal commercial relationships with our customers, suppliers and creditors. These disruptions could have a negative impact on the ability of our customers to timely pay their obligations to us, thus reducing our cash flow, or the ability of our vendors to timely supply materials. 
 Customer and consumer demand for our products may also be impacted by all risk factors discussed under "Risk Factors" in Part 1, Item 1A of our Annual Report and in Part II, Item 1A of this Quarterly Report on Form 10-Q, as well as subsequent filings with the SEC , that could have a material effect on production, delivery and consumption of our products in the U.S., Mexico and the Caribbean or Canada, which could result in a reduction in our sales volume. 
 We believe that the following events, trends and uncertainties may also impact liquidity: 
 
 • 
 Our ability to access our committed financing arrangements, including our KDP Revolver and our 2020 364-Day Credit Agreement , which have availability of $3,900 million as of October 29, 2020; 
 
 • 
 Our ability to issue unsecured uncommitted commercial paper notes on a private placement basis up to a maximum aggregate amount outstanding at any time of $2,400 million ; 
 
 • 
 Our intention to drive significant cash flow generation to enable rapid deleveraging within three years from the DPS Merger; 
 
 • 
 A significant downgrade in our credit ratings could limit a financial institution's willingness to participate in our accounts payable program and reduce the attractiveness of the accounts payable program to participating suppliers who may sell payment obligations from us to financial institutions, which could impact our accounts payable program; 
 
 • 
 Our continued integration of DPS; 
 
 • 
 Our continued capital expenditures; 
 
 • 
 Our continued payment of dividends; 
 
 • 
 Future mergers or acquisitions of brand ownership companies, regional bottling companies, distributors and/or distribution rights to further extend our geographic coverage; 
 
 • 
 Future equity investments; 
 
 • 
 Seasonality of our operating cash flows, which could impact short-term liquidity; and 
 
 • 
 Fluctuations in our tax obligations. 
 
 Debt Ratings 
 As of September 30, 2020 , our credit ratings were as follows: 
 
 Rating Agency 
 Long-Term Debt Rating 
 Commercial Paper Rating 
 Outlook 
 Date of Last Change 
 
 Moody's 
 Baa2 
 P-2 
 Negative 
 May 11, 2018 
 
 S&P 
 BBB 
 A-2 
 Stable 
 May 14, 2018 
 
 These debt and commercial paper ratings impact the interest we pay on our financing arrangements. A downgrade of one or both of our debt and commercial paper ratings could increase our interest expense and decrease the cash available to fund anticipated obligations. 
 
 Capital Expenditures 
 Capital expenditures were $356 million and $208 million for the first nine months of 2020 and 2019 , respectively. 
 Capital expenditures for the first nine months of 2020 primarily related to our continued investment in the build-out of our Spartanburg manufacturing facility, the purchase of real estate in Ireland and build out of the facility and build-out of our Allentown manufacturing facility. Capital expenditures included in accounts payable and accrued expenses were $255 million for the first nine months of 2020 , which primarily related to these investments. 
 Capital expenditures for the first nine months of 2019 primarily related to machinery and equipment, our continued investment in the build-out of our Spartanburg facility and information technology infrastructure. Capital expenditures included in accounts payable and accrued expenses was $236 million for the first nine months of 2019 , which primarily related to our continued investment in the build-out of our Spartanburg facility. 
 
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 Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents 
 Cash, cash equivalents, restricted cash and restricted cash equivalents increased $107 million from December 31, 2019 to September 30, 2020 as cash generated from our operations outpaced our voluntary repayments on our term loan facility and other financing transactions. 
 Our cash balances are used to fund working capital requirements, scheduled debt and interest payments, capital expenditures, income tax obligations, dividend payments and business combinations. Cash generated by our foreign operations is generally repatriated to the U.S. periodically as working capital funding requirements in those jurisdictions allow. Foreign cash balances were $89 million and $70 million as of September 30, 2020 and December 31, 2019 , respectively. We accrue tax costs for repatriation, as applicable, as cash is generated in those foreign jurisdictions. 
 
 Contractual Commitments and Obligations 
 We enter into various contractual obligations that impact, or could impact, our liquidity. Based on our current and anticipated level of operations, we believe that our proceeds from operating cash flows combined with cash on hand and amounts available under our financing arrangements will be sufficient to meet our anticipated obligations. Refer to Note 2 of the Notes to our Unaudited Condensed Consolidated Financial Statements for payments related to our senior unsecured notes and our KDP Credit Agreements . Refer to Note 8 of the Notes to our Unaudited Condensed Consolidated Financial Statements for future minimum rental commitments. 
 The following table summarizes our contractual obligations and contingencies, as of September 30, 2020 , that have significantly changed from the amounts disclosed in our Annual Report: 
 
 Payments Due in Year 
 
 (in millions) 
 Total 
 
 2020 
 
 2021 
 
 2022 
 
 2023 
 
 2024 
 
 Thereafter 
 
 Interest payments 
 $ 
 5,531 
 
 $ 
 264 
 
 $ 
 504 
 
 $ 
 458 
 
 $ 
 406 
 
 $ 
 349 
 
 $ 
 3,550 
 
 Purchase obligations (1) 
 1,035 
 
 372 
 
 255 
 
 122 
 
 103 
 
 97 
 
 86 
 
 (1) 
 Amounts represent payments under agreements to purchase goods or services that are legally binding and that specify all significant terms, including capital obligations and long-term contractual obligations. 
 
 Through September 30, 2020 , there have been no other material changes to the amounts disclosed in our Annual Report on Form 10-K for the year ended December 31, 2019 . 
 
 OFF-BALANCE SHEET ARRANGEMENTS 
 There are no material changes in off-balance sheet arrangements from those disclosed in our Annual Report. 
 
 EFFECT OF RECENT ACCOUNTING PRONOUNCEMENTS 
 Refer to Note 1 of the Notes to our Unaudited Condensed Consolidated Financial Statements for a discussion of recently issued accounting standards and recently adopted provisions of U.S. GAAP . 
 
 SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION 
 The Notes are fully and unconditionally guaranteed by certain of our direct and indirect subsidiaries (the "Guarantors"), as defined in the indentures governing the Notes. The Guarantors are 100% owned either directly or indirectly by us and jointly and severally guarantee, subject to the release provisions described below, our obligations under the Notes. None of our subsidiaries organized outside of the U.S., immaterial subsidiaries used for charitable purposes, any of the subsidiaries held by Maple prior to the DPS Merger or any of the subsidiaries acquired after the DPS Merger (collectively, the "Non-Guarantors") guarantee the Notes. The subsidiary guarantees with respect to the Notes are subject to release upon the occurrence of certain events, including the sale of all or substantially all of a subsidiary's assets, the release of the subsidiary's guarantee of our other indebtedness, our exercise of the legal defeasance option with respect to the Notes and the discharge of our obligations under the applicable indenture. 
 The following schedules present the summarized financial information for the Parent and the Guarantors on a combined basis after intercompany eliminations; the Parent and the Guarantors' amounts due from; amounts due to, and transactions with Non-Guarantors are disclosed separately. The consolidating schedules are provided in accordance with the reporting requirements of Rule 13-01 under SEC Regulation S-X for the issuer and guarantor subsidiaries. 
 
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 Table of Contents 
 
 The summarized financial information for the Parent and Guarantors were as follows: 
 
 (in millions) 
 For the First Nine Months of 2020 
 
 Net sales 
 $ 
 4,996 
 
 Income from operations 
 498 
 
 Equity in earnings of subsidiaries, net of tax 
 356 
 
 Net income 
 897 
 
 (in millions) 
 September 30, 2020 
 
 December 31, 2019 
 
 Current assets (1) 
 $ 
 1,752 
 
 $ 
 1,404 
 
 Non-current assets 
 43,227 
 
 43,501 
 
 Current liabilities (2) 
 $ 
 4,949 
 
 $ 
 3,942 
 
 Non-current liabilities 
 16,733 
 
 17,707 
 
 (1) 
 Includes $306 million and $241 million of current intercompany receivables due to the Parent and Guarantors from the Non-Guarantors as of September 30, 2020 and December 31, 2019 , respectively. 
 
 (2) 
 Includes $28 million and $20 million of current intercompany payables due to the Non-Guarantors from the Parent and Guarantors as of September 30, 2020 and December 31, 2019 , respectively. 
 
 NON-GAAP FINANCIAL MEASURES 
 To supplement the consolidated financial statements presented in accordance with U.S. GAAP , we have presented for the third quarter and first nine months of 2020 and 2019 (i) Adjusted income from operations, (ii) Adjusted net income and (iii) Adjusted diluted EPS, which are considered non-GAAP financial measures. The non-GAAP financial measures provided should be viewed in addition to, and not as an alternative for, results prepared in accordance with U.S. GAAP . The non-GAAP financial measures presented may differ from similarly titled non-GAAP financial measures presented by other companies, and other companies may not define these non-GAAP financial measures in the same way. The adjusted measures are not substitutes for their comparable U.S. GAAP financial measures, such as income from operations, net income, diluted EPS, or other measures prescribed by U.S. GAAP , and there are limitations to using non-GAAP financial measures. 
 For the third quarter and first nine months of 2020 and 2019 , we define our Adjusted non-GAAP financial measures as certain financial statement captions and metrics adjusted for certain items affecting comparability. The items affecting comparability are defined below. 
 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 each period, management adjusts for (i) the unrealized mark-to-market impact of derivative instruments not designated as hedges in accordance with U.S. GAAP and do not have an offsetting risk reflected within the financial results; (ii) the amortization associated with definite-lived intangible assets; (iii) the amortization of the deferred financing costs associated with the DPS Merger and the Keurig Acquisition ; (iv) the amortization of the fair value adjustment of the senior unsecured notes obtained as a result of the DPS Merger ; (v) stock compensation expense attributable to the matching awards made to employees who made an initial investment in the EOP , the 2009 Incentive Plan or the 2019 Incentive Plan ; and (vi) other certain items that are excluded for comparison purposes to prior year periods. 
 
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 Table of Contents 
 
 For third quarter and first nine months of 2020 , the other certain items excluded for comparison purposes include (i) restructuring and integration expenses related to significant business combinations; (ii) productivity expenses; (iii) costs related to significant nonroutine legal matters; (iv) the loss on early extinguishment of debt related to the redemption of debt; (v) incremental temporary costs to our operations related to risks associated with the COVID-19 pandemic; and (vi) impairment recognized on equity method investments with Bedford and LifeFuels. 
 Incremental costs to our operations related to risks associated with the COVID-19 pandemic include incremental expenses incurred to either maintain the health and safety of our front-line employees or temporarily increase compensation to such employees to ensure essential operations continue during the pandemic. We believe removing these costs reflects how management views our business results on a consistent basis. See Impact of COVID-19 on our Financial Statements for further information. 
 For the third quarter and first nine months of 2019 , the other certain items excluded for comparison purposes include (i) restructuring and integration expenses related to significant business combinations; (ii) productivity expenses; (iii) transaction costs for significant business combinations (completed or abandoned) excluding the DPS Merger ; (iv) costs related to significant nonroutine legal matters; (v) the impact of the step-up of acquired inventory not associated with the DPS Merger ; (vi) the loss on early extinguishment of debt related to the redemption of debt and (vii) the loss related to the February 2019 organized malware attack on our business operation networks in the Coffee Systems segment. 
 For the third quarter and first nine months of 2020 and 2019 , the supplemental financial data set forth below includes reconciliations of Adjusted income from operations, Adjusted net income and Adjusted diluted EPS to the applicable financial measure presented in the unaudited condensed consolidated financial statement for the same period. 
 
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 KEURIG DR PEPPER INC. 
 RECONCILIATION OF CERTAIN REPORTED ITEMS TO CERTAIN NON-GAAP ADJUSTED ITEMS 
 For the Third Quarter of 2020 
 (Unaudited, in millions, except per share data) 
 
 Cost of sales 
 
 Gross profit 
 
 Gross margin 
 
 Selling, general and administrative expenses 
 
 Income from operations 
 
 Operating margin 
 
 Reported 
 $ 
 1,316 
 
 $ 
 1,704 
 
 56.4 
 % 
 
 $ 
 949 
 
 $ 
 753 
 
 24.9 
 % 
 
 Items Affecting Comparability: 
 
 Mark to market 
 46 
 
 (46 
 ) 
 
 (1 
 ) 
 
 (45 
 ) 
 
 Amortization of intangibles 
 — 
 
 — 
 
 (34 
 ) 
 
 34 
 
 Stock compensation 
 — 
 
 — 
 
 (6 
 ) 
 
 6 
 
 Restructuring and integration costs 
 — 
 
 — 
 
 (39 
 ) 
 
 39 
 
 Productivity 
 (10 
 ) 
 
 10 
 
 (20 
 ) 
 
 30 
 
 Nonroutine legal matters 
 — 
 
 — 
 
 (8 
 ) 
 
 8 
 
 COVID-19 
 (19 
 ) 
 
 19 
 
 (30 
 ) 
 
 49 
 
 Adjusted GAAP 
 $ 
 1,333 
 
 $ 
 1,687 
 
 55.9 
 % 
 
 $ 
 811 
 
 $ 
 874 
 
 28.9 
 % 
 
 Interest expense 
 
 Impairment on investments and note receivable 
 
 Income before provision for income taxes 
 
 Provision for income taxes 
 
 Effective tax rate 
 
 Net income 
 
 Weighted Average Diluted shares 
 
 Diluted earnings per share 
 
 Reported 
 $ 
 148 
 
 $ 
 16 
 
 $ 
 584 
 
 $ 
 141 
 
 24.1 
 % 
 
 $ 
 443 
 
 1,422.9 
 
 $ 
 0.31 
 
 Items Affecting Comparability: 
 
 Mark to market 
 (1 
 ) 
 
 — 
 
 (44 
 ) 
 
 (13 
 ) 
 
 (31 
 ) 
 
 (0.02 
 ) 
 
 Amortization of intangibles 
 — 
 
 34 
 
 9 
 
 25 
 
 0.02 
 
 Amortization of deferred financing costs 
 (2 
 ) 
 
 — 
 
 2 
 
 1 
 
 1 
 
 — 
 
 Amortization of fair value debt adjustment 
 (6 
 ) 
 
 — 
 
 6 
 
 1 
 
 5 
 
 — 
 
 Stock compensation 
 — 
 
 — 
 
 6 
 
 1 
 
 5 
 
 — 
 
 Restructuring and integration costs 
 — 
 
 — 
 
 39 
 
 8 
 
 31 
 
 0.02 
 
 Productivity 
 — 
 
 — 
 
 30 
 
 8 
 
 22 
 
 0.02 
 
 Investment Impairment 
 — 
 
 (16 
 ) 
 
 16 
 
 4 
 
 12 
 
 0.01 
 
 Nonroutine legal matters 
 — 
 
 — 
 
 8 
 
 1 
 
 7 
 
 — 
 
 COVID-19 
 — 
 
 — 
 
 49 
 
 12 
 
 37 
 
 0.03 
 
 Adjusted GAAP 
 $ 
 139 
 
 $ 
 — 
 
 $ 
 730 
 
 $ 
 173 
 
 23.7 
 % 
 
 $ 
 557 
 
 1,422.9 
 
 $ 
 0.39 
 
 Diluted earnings per common share may not foot due to rounding. 
 
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 Table of Contents 
 
 KEURIG DR PEPPER INC. 
 RECONCILIATION OF CERTAIN REPORTED ITEMS TO CERTAIN NON-GAAP ADJUSTED ITEMS 
 For the Third Quarter of 2019 
 (Unaudited, in millions, except per share data) 
 
 Cost of sales 
 
 Gross profit 
 
 Gross margin 
 
 Selling, general and administrative expenses 
 
 Other operating expense (income), net 
 
 Income from operations 
 
 Operating margin 
 
 Reported 
 $ 
 1,245 
 
 $ 
 1,625 
 
 56.6 
 % 
 
 $ 
 1,012 
 
 $ 
 33 
 
 $ 
 580 
 
 20.2 
 % 
 
 Items Affecting Comparability: 
 
 Mark to market 
 (5 
 ) 
 
 5 
 
 (4 
 ) 
 
 — 
 
 9 
 
 Amortization of intangibles 
 — 
 
 — 
 
 (31 
 ) 
 
 — 
 
 31 
 
 Stock compensation 
 — 
 
 — 
 
 (3 
 ) 
 
 — 
 
 3 
 
 Restructuring and integration costs 
 1 
 
 (1 
 ) 
 
 (54 
 ) 
 
 (24 
 ) 
 
 77 
 
 Productivity 
 (10 
 ) 
 
 10 
 
 (12 
 ) 
 
 (13 
 ) 
 
 35 
 
 Transaction costs 
 — 
 
 — 
 
 (7 
 ) 
 
 — 
 
 7 
 
 Nonroutine legal matters 
 — 
 
 — 
 
 (12 
 ) 
 
 — 
 
 12 
 
 Adjusted GAAP 
 $ 
 1,231 
 
 $ 
 1,639 
 
 57.1 
 % 
 
 $ 
 889 
 
 $ 
 (4 
 ) 
 
 $ 
 754 
 
 26.3 
 % 
 
 Interest expense 
 
 Income before provision for income taxes 
 
 Provision for income taxes 
 
 Effective tax rate 
 
 Net income 
 
 Weighted Average Diluted shares 
 
 Diluted earnings per share 
 
 Reported 
 $ 
 158 
 
 $ 
 413 
 
 $ 
 109 
 
 26.4 
 % 
 
 $ 
 304 
 
 1,419.4 
 
 $ 
 0.21 
 
 Items Affecting Comparability: 
 
 Mark to market 
 1 
 
 8 
 
 — 
 
 8 
 
 0.01 
 
 Amortization of intangibles 
 — 
 
 31 
 
 9 
 
 22 
 
 0.02 
 
 Amortization of deferred financing costs 
 (3 
 ) 
 
 3 
 
 1 
 
 2 
 
 — 
 
 Amortization of fair value debt adjustment 
 (7 
 ) 
 
 7 
 
 3 
 
 4 
 
 — 
 
 Stock compensation 
 — 
 
 3 
 
 — 
 
 3 
 
 — 
 
 Restructuring and integration costs 
 — 
 
 77 
 
 13 
 
 64 
 
 0.04 
 
 Productivity 
 — 
 
 35 
 
 8 
 
 27 
 
 0.02 
 
 Transaction costs 
 (4 
 ) 
 
 11 
 
 3 
 
 8 
 
 0.01 
 
 Nonroutine legal matters 
 — 
 
 12 
 
 3 
 
 9 
 
 0.01 
 
 Adjusted GAAP 
 $ 
 145 
 
 $ 
 600 
 
 $ 
 149 
 
 24.8 
 % 
 
 $ 
 451 
 
 1,419.4 
 
 $ 
 0.32 
 
 Diluted earnings per common share may not foot due to rounding. 
 
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 KEURIG DR PEPPER INC. 
 RECONCILIATION OF CERTAIN REPORTED ITEMS TO CERTAIN NON-GAAP ADJUSTED ITEMS 
 For the First Nine Months of 2020 
 (Unaudited, in millions, except per share data) 
 
 Cost of sales 
 
 Gross profit 
 
 Gross margin 
 
 Selling, general and administrative expenses 
 
 Income from operations 
 
 Operating margin 
 
 Reported 
 $ 
 3,779 
 
 $ 
 4,718 
 
 55.5 
 % 
 
 $ 
 2,978 
 
 $ 
 1,780 
 
 20.9 
 % 
 
 Items Affecting Comparability: 
 
 Mark to market 
 2 
 
 (2 
 ) 
 
 (28 
 ) 
 
 26 
 
 Amortization of intangibles 
 — 
 
 — 
 
 (100 
 ) 
 
 100 
 
 Stock compensation 
 — 
 
 — 
 
 (21 
 ) 
 
 21 
 
 Restructuring and integration costs 
 — 
 
 — 
 
 (143 
 ) 
 
 143 
 
 Productivity 
 (28 
 ) 
 
 28 
 
 (75 
 ) 
 
 103 
 
 Nonroutine legal matters 
 — 
 
 — 
 
 (43 
 ) 
 
 43 
 
 COVID-19 
 (38 
 ) 
 
 38 
 
 (79 
 ) 
 
 117 
 
 Adjusted GAAP 
 $ 
 3,715 
 
 $ 
 4,782 
 
 56.3 
 % 
 
 $ 
 2,489 
 
 $ 
 2,333 
 
 27.5 
 % 
 
 Interest expense 
 
 Loss on early extinguishment of debt 
 
 Impairment on investments and note receivable 
 
 Income before provision for income taxes 
 
 Provision for income taxes 
 
 Effective tax rate 
 
 Net income 
 
 Weighted Average Diluted shares 
 
 Diluted earnings per share 
 
 Reported 
 $ 
 458 
 
 $ 
 4 
 
 $ 
 102 
 
 $ 
 1,195 
 
 $ 
 298 
 
 24.9 
 % 
 
 $ 
 897 
 
 1,421.5 
 
 $ 
 0.63 
 
 Items Affecting Comparability: 
 
 Mark to market 
 (28 
 ) 
 
 — 
 
 — 
 
 54 
 
 13 
 
 41 
 
 0.03 
 
 Amortization of intangibles 
 — 
 
 — 
 
 — 
 
 100 
 
 27 
 
 73 
 
 0.05 
 
 Amortization of deferred financing costs 
 (8 
 ) 
 
 — 
 
 — 
 
 8 
 
 2 
 
 6 
 
 — 
 
 Amortization of fair value debt adjustment 
 (18 
 ) 
 
 — 
 
 — 
 
 18 
 
 4 
 
 14 
 
 0.01 
 
 Stock compensation 
 — 
 
 — 
 
 — 
 
 21 
 
 4 
 
 17 
 
 0.01 
 
 Restructuring and integration costs 
 — 
 
 — 
 
 — 
 
 143 
 
 34 
 
 109 
 
 0.08 
 
 Productivity 
 — 
 
 — 
 
 — 
 
 103 
 
 27 
 
 76 
 
 0.05 
 
 Loss on early extinguishment of debt 
 — 
 
 (4 
 ) 
 
 — 
 
 4 
 
 1 
 
 3 
 
 — 
 
 Investment impairment 
 — 
 
 — 
 
 (102 
 ) 
 
 102 
 
 25 
 
 77 
 
 0.05 
 
 Nonroutine legal matters 
 — 
 
 — 
 
 — 
 
 43 
 
 10 
 
 33 
 
 0.02 
 
 COVID-19 
 — 
 
 — 
 
 — 
 
 117 
 
 29 
 
 88 
 
 0.06 
 
 Adjusted GAAP 
 $ 
 404 
 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 1,908 
 
 $ 
 474 
 
 24.8 
 % 
 
 $ 
 1,434 
 
 1,421.5 
 
 $ 
 1.01 
 
 Diluted earnings per common share may not foot due to rounding. 
 
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 Table of Contents 
 
 KEURIG DR PEPPER INC. 
 RECONCILIATION OF CERTAIN REPORTED ITEMS TO CERTAIN NON-GAAP ADJUSTED ITEMS 
 For the First Nine Months of 2019 
 (Unaudited, in millions, except per share data) 
 
 Cost of sales 
 
 Gross profit 
 
 Gross margin 
 
 Selling, general and administrative expenses 
 
 Other operating expense (income), net 
 
 Income from operations 
 
 Operating margin 
 
 Reported 
 $ 
 3,537 
 
 $ 
 4,649 
 
 56.8 
 % 
 
 $ 
 2,951 
 
 $ 
 33 
 
 $ 
 1,665 
 
 20.3 
 % 
 
 Items Affecting Comparability: 
 
 Mark to market 
 (6 
 ) 
 
 6 
 
 5 
 
 — 
 
 1 
 
 Amortization of intangibles 
 — 
 
 — 
 
 (94 
 ) 
 
 — 
 
 94 
 
 Stock compensation 
 — 
 
 — 
 
 (18 
 ) 
 
 — 
 
 18 
 
 Restructuring and integration costs 
 (1 
 ) 
 
 1 
 
 (151 
 ) 
 
 (24 
 ) 
 
 176 
 
 Productivity 
 (14 
 ) 
 
 14 
 
 (41 
 ) 
 
 (22 
 ) 
 
 77 
 
 Transaction costs 
 — 
 
 — 
 
 (8 
 ) 
 
 — 
 
 8 
 
 Nonroutine legal matters 
 — 
 
 — 
 
 (27 
 ) 
 
 — 
 
 27 
 
 Inventory step-up 
 (3 
 ) 
 
 3 
 
 — 
 
 — 
 
 3 
 
 Malware incident 
 (2 
 ) 
 
 2 
 
 (6 
 ) 
 
 — 
 
 8 
 
 Adjusted GAAP 
 $ 
 3,511 
 
 $ 
 4,675 
 
 57.1 
 % 
 
 $ 
 2,611 
 
 $ 
 (13 
 ) 
 
 $ 
 2,077 
 
 25.4 
 % 
 
 Interest expense 
 
 Loss on early extinguishment of debt 
 
 Income before provision for income taxes 
 
 Provision for income taxes 
 
 Effective tax rate 
 
 Net income 
 
 Weighted Average Diluted shares 
 
 Diluted earnings per share 
 
 Reported 
 $ 
 497 
 
 $ 
 9 
 
 $ 
 1,144 
 
 $ 
 296 
 
 25.9 
 % 
 
 $ 
 848 
 
 1,418.8 
 
 $ 
 0.60 
 
 Items Affecting Comparability: 
 
 Mark to market 
 (44 
 ) 
 
 — 
 
 45 
 
 11 
 
 34 
 
 0.02 
 
 Amortization of intangibles 
 — 
 
 — 
 
 94 
 
 26 
 
 68 
 
 0.05 
 
 Amortization of deferred financing costs 
 (10 
 ) 
 
 — 
 
 10 
 
 3 
 
 7 
 
 0.01 
 
 Amortization of fair value debt adjustment 
 (20 
 ) 
 
 — 
 
 20 
 
 5 
 
 15 
 
 0.01 
 
 Stock compensation 
 — 
 
 — 
 
 18 
 
 4 
 
 14 
 
 0.01 
 
 Restructuring and integration costs 
 — 
 
 — 
 
 176 
 
 39 
 
 137 
 
 0.10 
 
 Productivity 
 — 
 
 — 
 
 77 
 
 17 
 
 60 
 
 0.04 
 
 Transaction costs 
 (16 
 ) 
 
 — 
 
 24 
 
 6 
 
 18 
 
 0.01 
 
 Loss on early extinguishment of debt 
 — 
 
 (9 
 ) 
 
 9 
 
 2 
 
 7 
 
 — 
 
 Nonroutine legal matters 
 — 
 
 — 
 
 27 
 
 7 
 
 20 
 
 0.01 
 
 Inventory step-up 
 — 
 
 — 
 
 3 
 
 1 
 
 2 
 
 — 
 
 Malware incident 
 — 
 
 — 
 
 8 
 
 2 
 
 6 
 
 — 
 
 Adjusted GAAP 
 $ 
 407 
 
 $ 
 — 
 
 $ 
 1,655 
 
 $ 
 419 
 
 25.3 
 % 
 
 $ 
 1,236 
 
 1,418.8 
 
 $ 
 0.87 
 
 Diluted earnings per common share may not foot due to rounding. 
 
 54 

 Table of Contents 
 
 KEURIG DR PEPPER INC. 
 RECONCILIATION OF SEGMENT ITEMS TO CERTAIN NON-GAAP ADJUSTED SEGMENT ITEMS 
 (Unaudited) 
 
 (in millions) 
 Reported 
 
 Items Affecting Comparability 
 
 Adjusted GAAP 
 
 For the third quarter of 2020: 
 
 Income from Operations 
 
 Coffee Systems 
 $ 
 320 
 
 $ 
 53 
 
 $ 
 373 
 
 Packaged Beverages 
 260 
 
 44 
 
 304 
 
 Beverage Concentrates 
 262 
 
 3 
 
 265 
 
 Latin America Beverages 
 25 
 
 — 
 
 25 
 
 Unallocated corporate costs 
 (114 
 ) 
 
 21 
 
 (93 
 ) 
 
 Total income from operations 
 $ 
 753 
 
 $ 
 121 
 
 $ 
 874 
 
 For the third quarter of 2019: 
 
 Income from Operations 
 
 Coffee Systems 
 $ 
 310 
 
 $ 
 57 
 
 $ 
 367 
 
 Packaged Beverages 
 196 
 
 5 
 
 201 
 
 Beverage Concentrates 
 245 
 
 (1 
 ) 
 
 244 
 
 Latin America Beverages 
 25 
 
 — 
 
 25 
 
 Unallocated corporate costs 
 (196 
 ) 
 
 113 
 
 (83 
 ) 
 
 Total income from operations 
 $ 
 580 
 
 $ 
 174 
 
 $ 
 754 
 
 KEURIG DR PEPPER INC. 
 RECONCILIATION OF SEGMENT ITEMS TO CERTAIN NON-GAAP ADJUSTED SEGMENT ITEMS 
 (Unaudited) 
 
 (in millions) 
 Reported 
 
 Items Affecting Comparability 
 
 Adjusted GAAP 
 
 For the first nine months of 2020: 
 
 Income from Operations 
 
 Coffee Systems 
 $ 
 882 
 
 $ 
 201 
 
 $ 
 1,083 
 
 Packaged Beverages 
 657 
 
 119 
 
 776 
 
 Beverage Concentrates 
 679 
 
 5 
 
 684 
 
 Latin America Beverages 
 73 
 
 2 
 
 75 
 
 Unallocated corporate costs 
 (511 
 ) 
 
 226 
 
 (285 
 ) 
 
 Total income from operations 
 $ 
 1,780 
 
 $ 
 553 
 
 $ 
 2,333 
 
 For the first nine months of 2019: 
 
 Income from Operations 
 
 Coffee Systems 
 $ 
 890 
 
 $ 
 143 
 
 $ 
 1,033 
 
 Packaged Beverages 
 531 
 
 20 
 
 551 
 
 Beverage Concentrates 
 690 
 
 1 
 
 691 
 
 Latin America Beverages 
 62 
 
 (5 
 ) 
 
 57 
 
 Unallocated corporate costs 
 (508 
 ) 
 
 253 
 
 (255 
 ) 
 
 Total income from operations 
 $ 
 1,665 
 
 $ 
 412 
 
 $ 
 2,077 
 
 55 

 Table of Contents
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.
Keurig Dr Pepper Inc. 10-Q

Item 2. Management’s Discussion and Analysis
