What changed in this filing

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Item 1. Financial Statements

2021-10-28 compared with 2021-07-29 · 189 added, 145 removed, 765 unchanged (30% of the section changed)

3 unchanged sentences

( UNAUDITED )

Second Quarter First Six Months

Third Quarter First Nine Months

(in millions, except per share data) 2021 2020 2021 2020

3 unchanged sentences

Selling, general and administrative expenses 1,040 949 3,040 2,978

Other operating income, net ( 3 ) — ( 4 ) ( 42 )

Other operating expense (income), net — 2 ( 4 ) ( 40 )

Income from operations 795 753 2,169 1,780

2 unchanged sentences

Impairment of investments and note receivable — 16 — 102

Other (income) expense, net ( 4 ) ( 4 ) ( 7 ) 16

Other expense (income), net 1 5 ( 6 ) 21

Income before provision for income taxes 678 584 1,689 1,195

Provision for income taxes 149 141 387 298

Net income 448 298 773 454

Net income attributable to non-controlling interest — — — —

Net income including non-controlling interest 529 443 1,302 897

Net loss attributable to non-controlling interest ( 1 ) — ( 1 ) —

Net income attributable to KDP $ 530 $ 443 $ 1,303 $ 897

9 unchanged sentences

( UNAUDITED )

Second Quarter First Six Months

Third Quarter First Nine Months

(in millions) 2021 2020 2021 2020

Net income $ 448 $ 298 $ 773 $ 454

Net income including non-controlling interest $ 529 $ 443 $ 1,302 $ 897

Other comprehensive income

1 unchanged sentence

Net change in pension and post-retirement liability, net of tax of $ — , $ — , $ — and $ — , respectively

— ( 1 ) — ( 2 )

Net change in cash flow hedges, net of tax of $ 4 , $ — , $( 22 ) and $ — , respectively

1 unchanged sentence

Total other comprehensive income (loss) ( 122 ) 111 ( 71 ) ( 321 )

Comprehensive income 412 450 824 22

Comprehensive income including non-controlling interest 407 554 1,231 576

Comprehensive income attributable to non-controlling interest — — — —

4 unchanged sentences

( UNAUDITED )

June 30, December 31,

September 30, December 31,

(in millions, except share and per share data) 2021 2020

28 unchanged sentences

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

Common stock, $ 0.01 par value, 2,000,000,000 shares authorized, 1,417,441,055 and 1,407,260,676 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively

Common stock, $ 0.01 par value, 2,000,000,000 shares authorized, 1,417,914,437 and 1,407,260,676 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively

Additional paid-in capital 21,764 21,677

9 unchanged sentences

( UNAUDITED )

First Six Months

First Nine Months

(in millions) 2021 2020

Operating activities:

Net income $ 773 $ 454

Net income attributable to KDP $ 1,303 $ 897

Adjustments to reconcile net income to net cash provided by operating activities:

7 unchanged sentences

Gain on disposal of property, plant and equipment ( 5 ) ( 39 )

Unrealized (gain) loss on foreign currency ( 15 ) 12

Unrealized loss on foreign currency 1 14

Unrealized (gain) loss on derivatives ( 94 ) 47

16 unchanged sentences

Issuance of related party note receivable ( 17 ) ( 6 )

Investments in unconsolidated affiliates — ( 4 )

Other, net 5 7

Net cash used in investing activities $ ( 350 ) $ ( 182 )

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

KEURIG DR PEPPER INC.

1 unchanged sentence

( UNAUDITED, CONTINUED)

First Six Months

First Nine Months

(in millions) 2021 2020

26 unchanged sentences

Capital expenditures included in accounts payable and accrued expenses $ 180 $ 255

Non-cash acquisition of controlling interest — 3

Supplemental cash flow disclosures of non-cash financing activities:

29 unchanged sentences

1,417.4 14 21,743 2,357 128 24,242 1 24,243

Net income — — — 530 — 530 ( 1 ) 529

Other comprehensive income — — — — ( 122 ) ( 122 ) — ( 122 )

Dividends declared, $ 0.1875 per share

— — — ( 266 ) — ( 266 ) — ( 266 )

Shares issued under employee stock-based compensation plans and other 0.5 — — — — — — —

Stock-based compensation and stock options exercised — — 21 — — 21 — 21

Balance as of September 30, 2021

1,417.9 $ 14 $ 21,764 $ 2,621 $ 6 $ 24,405 $ — $ 24,405

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

19 unchanged sentences

— — — ( 212 ) — ( 212 ) — ( 212 )

Proceeds from controlling shareholder stock transactions — — 22 — — 22 — 22

Proceeds from sale of stock by JAB — — 22 — — 22 — 22

Shares issued under employee stock-based compensation plans and other 0.1 — — — — — — —

2 unchanged sentences

1,407.2 14 21,624 1,613 ( 328 ) 22,923 — 22,923

Net income — — — 443 — 443 — 443

Other comprehensive loss — — — — 111 111 — 111

Dividends declared, $ 0.15 per share

— — — ( 211 ) — ( 211 ) — ( 211 )

Proceeds from sale of stock by JAB — — 7 — — 7 — 7

Non-cash acquisition of controlling interest — — 3 — — 3 1 4

Shares issued under employee stock-based compensation plans and other 0.1 — — — — — — —

Stock-based compensation and stock options exercised — — 20 — — 20 — 20

Balance as of September 30, 2020

1,407.3 $ 14 $ 21,654 $ 1,845 $ ( 217 ) $ 23,296 $ 1 $ 23,297

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

13 unchanged sentences

These unaudited condensed consolidated financial statements should be read in conjunction with KDP's consolidated financial statements and accompanying notes, included in the Company's Annual Report.

Except as otherwise specified, references to the "second quarter" indicate the Company's quarterly periods ended June 30, 2021 and 2020.

Except as otherwise specified, references to the "third quarter" indicate the Company's quarterly periods ended September 30, 2021 and 2020.

PRINCIPLES OF CONSOLIDATION

2 unchanged sentences

In these cases, the third party equity interest is referred to as non-controlling interest.

Non-controlling interests are presented as a separate component within equity in the unaudited Condensed Consolidated Balance Sheets, and net income attributable to the non-controlling interests are presented separately in the unaudited Condensed Consolidated Statements of Income.

The Company uses the equity method to account for investments in companies if the investment provides the Company with the ability to exercise significant influence over operating and financial policies of the investee.

Non-controlling interest is presented as a separate component within equity in the unaudited Condensed Consolidated Balance Sheets, and net income attributable to the non-controlling interest is presented separately in the unaudited Condensed Consolidated Statements of Income.

The Company uses the equity method to account for investments in companies if the investment provides KDP with the ability to exercise significant influence over operating and financial policies of the investee.

Consolidated net income includes KDP's proportionate share of the net income or loss of these companies.

9 unchanged sentences

RECLASSIFICATIONS

The Company reclassified amounts in the Financing Activities section of the unaudited condensed consolidated Statement of Cash Flows for the first six months of 2020 in order to conform to current year presentation.

KDP reclassified amounts in the Financing Activities section of the unaudited condensed consolidated Statement of Cash Flows for the first nine months of 2020 in order to conform to current year presentation.

Refer to Note 2 for additional information about changes to the maturities of KDP’s commercial paper.

(in millions) Prior Presentation First Six Months of 2020

(in millions) Prior Presentation First Nine Months of 2020

Proceeds from commercial paper Net (repayment) issuance of commercial paper $ 6,843

10 unchanged sentences

The following table summarizes the Company 's long-term obligations:

(in millions) June 30, 2021 December 31, 2020

(in millions) September 30, 2021 December 31, 2020

$ 11,727 $ 13,065

4 unchanged sentences

The following table summarizes the Company's short-term borrowings and current portion of long-term obligations:

(in millions) June 30, 2021 December 31, 2020

(in millions) September 30, 2021 December 31, 2020

Commercial paper notes $ 998 $ —

9 unchanged sentences

(in millions, except %)

Issuance Maturity Date Rate June 30, 2021 December 31, 2020

Issuance Maturity Date Rate September 30, 2021 December 31, 2020

2021 Merger Notes May 25, 2021 3.551 % $ — $ 1,750

36 unchanged sentences

The KDP Credit Agreements consist of the following:

(in millions) June 30, 2021 December 31, 2020

(in millions) September 30, 2021 December 31, 2020

Issuance Maturity Date Available Balances Carrying Value Carrying Value

2019 KDP Term Loan $ — $ — $ 425

2019 KDP Term Loan February 8, 2023 $ — $ — $ 425

KDP Revolver (1)

February 28, 2023 2,400 — —

2020 364-Day Credit Agreement — — —

2020 364-Day Credit Agreement April 13, 2021 — —

2021 364-Day Credit Agreement March 23, 2022 1,500 — —

2 unchanged sentences

Carrying amount $ — $ 423

(1) The KDP Revolver has $ 200 million letters of credit availability and none utilized as of June 30, 2021.

As of June 30, 2021, KDP was in compliance with all financial covenant requirements relating to the KDP Credit Agreements .

(1) The KDP Revolver has $ 200 million letters of credit availability and none utilized as of September 30, 2021.

As of September 30, 2021, KDP was in compliance with all financial covenant requirements relating to the KDP Credit Agreements .

2019 KDP Term Loan

In March 2021, KDP voluntarily prepaid and terminated the 2019 KDP Term Loan using proceeds from the aforementioned issuance of senior subordinated notes, which resulted in $ 1 million of loss on early extinguishment of debt for the first six months of 2021.

In March 2021, KDP voluntarily prepaid and terminated the 2019 KDP Term Loan using proceeds from the aforementioned issuance of senior unsecured notes, which resulted in $ 1 million of loss on early extinguishment of debt for the first nine months of 2021.

364-Day Credit Agreements

6 unchanged sentences

Commercial Paper Program

T he following table provides information about the Company 's borrowings under its commercial paper program:

Second Quarter First Six Months

The following table provides information about the Company 's borrowings under its commercial paper program:

Third Quarter First Nine Months

(in millions, except %) 2021 2020 2021 2020

5 unchanged sentences

In addition to the portion of the KDP Revolver reserved for issuance of letters of credit, KDP has an incremental letter of credit facility.

Under this facility, $ 100 million is available for the issuance of letters of credit, $ 44 million of which was utilized as of June 30, 2021 and $ 56 million of which remains available for use.

Under this facility, $ 100 million is available for the issuance of letters of credit, $ 44 million of which was utilized as of September 30, 2021 and $ 56 million of which remains available for use.

FAIR VALUE DISCLOSURES

2 unchanged sentences

The difference between the fair value and the carrying value represents the theoretical net premium or discount that would be paid or received to retire all the Notes and related unamortized costs to be incurred at such date.

The fair value of KDP's Notes was $ 13,342 million and $ 15,274 million as of June 30, 2021 and December 31, 2020, respectively.

The fair value of KDP's Notes was $ 13,268 million and $ 15,274 million as of September 30, 2021 and December 31, 2020, respectively.

KEURIG DR PEPPER INC.

6 unchanged sentences

Foreign currency translation 19 3 2 ( 15 ) 9

Balance as of June 30, 2021 $ 9,849 $ 5,333 $ 4,548 $ 542 $ 20,272

Balance as of September 30, 2021 $ 9,814 $ 5,317 $ 4,538 $ 524 $ 20,193

INTANGIBLE ASSETS OTHER THAN GOODWILL

The net carrying amounts of intangible assets other than goodwill with indefinite lives are as follows:

(in millions) June 30, 2021 December 31, 2020

(in millions) September 30, 2021 December 31, 2020

$ 19,858 $ 19,874

3 unchanged sentences

Total $ 22,546 $ 22,534

(1) The increase of $ 67 million in brands with indefinite lives was due to foreign currency translation during the first six months of 2021.

(1) The decrease of $ 16 million in brands with indefinite lives was due to foreign currency translation during the first nine months of 2021.

(2) The Company executed nine agreements to acquire distribution rights during the first nine months of 2021, which resulted in an increase of $28 million.

The net carrying amounts of intangible assets other than goodwill with definite lives are as follows:

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

(in millions) Gross Amount Accumulated Amortization Net Amount Gross Amount Accumulated Amortization Net Amount

7 unchanged sentences

Amortization expense for intangible assets with definite lives was as follows:

Second Quarter First Six Months

Third Quarter First Nine Months

(in millions) 2021 2020 2021 2020

10 unchanged sentences

As a result of the changes to the Company’s operating segments effective January 1, 2021, as described in Note 7, which resulted in a change to the Company’s reporting units, management performed a step zero analysis as of the effective date of the goodwill for the impacted reporting units.

The Company also performed an analysis as of June 30, 2021 to ensure that there were no additional triggering events which occurred during the quarter.

The Company also performed an analysis as of September 30, 2021 to ensure that there were no additional triggering events which occurred during the quarter.

As a result of these analyses, management did not identify any indications that the carrying amount of any goodwill or any intangible asset may not be recoverable.

3 unchanged sentences

The Company also incurs expenses that are an integral component of, and directly attributable to, its restructuring activities, which do not qualify as exit and disposal costs, such as accelerated depreciation, asset impairments, implementation costs and other incremental costs.

These costs are recorded within SG&A expenses on the income statement and are held primarily within unallocated corporate costs.

These costs are primarily recorded within SG&A expenses on the income statement and are held primarily within unallocated corporate costs.

DPS INTEGRATION PROGRAM

1 unchanged sentence

The Company expects to incur total cash expenditures of $ 750 million, comprised of both capital expenditures and expense, and expects to complete the program in 2021.

The restructuring and integration program resulted in cumulative pre-tax charges of approximately $ 679 million, primarily consisting of professional fees related to the integration and transformation and costs associated with severance and employee terminations, through June 30, 2021.

The restructuring and integration program resulted in cumulative pre-tax charges of approximately $ 732 million, primarily consisting of professional fees related to the integration and transformation and costs associated with severance and employee terminations, through September 30, 2021.

Restructuring and integration charges on the DPS Integration Program were as follows:

Second Quarter First Six Months

Third Quarter First Nine Months

(in millions) 2021 2020 2021 2020

7 unchanged sentences

Cash payments

Balance as of June 30, 2021 $ 17

Balance as of September 30, 2021 $ 19

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, CONTINUED)

KDP is exposed to market risks arising from adverse changes in interest rates, commodity prices, and FX rates.

1 unchanged sentence

KDP does not hold or issue derivative financial instruments for trading or speculative purposes.

KDP formally designates and accounts for certain foreign exchange forward contracts that meet established accounting criteria under U.S.

KDP formally designates and accounts for certain foreign exchange forward contracts and interest rate contracts that meet established accounting criteria under U.S.

GAAP as cash flow hedges.

4 unchanged sentences

If the underlying hedged transaction ceases to exist, any associated amounts reported in AOCI would be reclassified to earnings at that time.

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, CONTINUED)

For derivatives that are not designated or for which the designated hedging relationship is discontinued, the gain or loss on the instrument is recognized in earnings in the period of change.

9 unchanged sentences

Changes in the fair value of these instruments are recorded in earnings throughout the term of the derivative instrument and are reported in interest expense in the unaudited Condensed Consolidated Statements of Income.

As of June 30, 2021, economic interest rate derivative instruments have maturities ranging from September 2021 to May 2028.

As of September 30, 2021, economic interest rate derivative instruments have maturities ranging from December 2021 to May 2028.

Cash Flow Hedges

1 unchanged sentence

The forward starting swaps are planned to be unwound at the issuance of long-term debt.

As of June 30, 2021, the forward starting swaps have mandatory termination dates ranging from June 2022 to May 2025.

As of September 30, 2021, the forward starting swaps have mandatory termination dates ranging from June 2022 to May 2025.

FOREIGN EXCHANGE

2 unchanged sentences

Economic Hedges

During the second quarter and first six months of 2021 and 2020, KDP held FX forward contracts to economically manage the balance sheet exposures resulting from changes in the FX exchange rates described above.

During the third quarter and first nine months of 2021 and 2020, KDP held FX forward contracts to economically manage the balance sheet exposures resulting from changes in the FX exchange rates described above.

The intent of these FX contracts is to minimize the impact of FX risk associated with balance sheet positions not in local currency.

1 unchanged sentence

Changes in the fair value of these instruments are recorded in earnings throughout the term of the derivative instrument and are reported in the same caption of the unaudited Condensed Consolidated Statements of Income as the associated risk.

These FX contracts have maturities ranging from July 2021 to September 2024 as of June 30, 2021.

As of September 30, 2021, these FX contracts have maturities ranging from October 2021 to September 2024.

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, CONTINUED)

Cash Flow Hedges

1 unchanged sentence

The intent of these FX contracts is to provide predictability in the Company's overall cost structure.

These FX contracts, carried at fair value, have maturities ranging from July 2021 to March 2023 as of June 30, 2021.

As of September 30, 2021, these FX contracts have maturities ranging from October 2021 to March 2023.

Economic Hedges

KDP centrally manages the exposure to volatility in the prices of certain commodities used in its production process and transportation through various derivative contracts.

During the second quarter and first six months of 2021 and 2020, the Company held forward, future, swap and option contracts that economically hedged certain of its risks.

During the third quarter and first nine months of 2021 and 2020, the Company held forward, future, swap and option contracts that economically hedged certain of its risks.

In these cases, a hedging relationship exists in which changes in the fair value of the instruments act as an economic offset to changes in the fair value of the underlying items.

1 unchanged sentence

Unrealized gains and losses are recognized as a component of unallocated corporate costs until the Company's operating segments are affected by the completion of the underlying transaction, at which time the gain or loss is reflected as a component of the respective segment's income from operations.

These commodity contracts have maturities ranging from July 2021 to January 2024 as of June 30, 2021.

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, CONTINUED)

As of September 30, 2021, these commodity contracts have maturities ranging from October 2021 to February 2023.

NOTIONAL AMOUNTS OF DERIVATIVE INSTRUMENTS

The following table presents the notional amounts of KDP's outstanding derivative instruments by type:

(in millions) June 30, 2021 December 31, 2020

(in millions) September 30, 2021 December 31, 2020

Interest rate contracts

5 unchanged sentences

Forward contracts, designated as cash flow hedges 380 333

Commodity contracts 518 450

Commodity contracts, not designated as hedging instruments 440 450

FAIR VALUE OF DERIVATIVE INSTRUMENTS

4 unchanged sentences

Therefore, the Company has categorized these contracts as Level 2.

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, CONTINUED)

Not Designated as Hedging Instruments

1 unchanged sentence

All such instruments are designated level 2 within the fair value hierarchy.

(in millions) Balance Sheet Location June 30, 2021 December 31, 2020

(in millions) Balance Sheet Location September 30, 2021 December 31, 2020

Interest rate contracts Prepaid expenses and other current assets $ 2 $ —

FX contracts Prepaid expenses and other current assets 2 —

Commodity contracts Prepaid expenses and other current assets 144 45

7 unchanged sentences

Commodity contracts Other non-current liabilities 1 2

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, CONTINUED)

Designated as Hedging Instruments

1 unchanged sentence

All such instruments are designated level 2 within the fair value hierarchy.

(in millions) Balance Sheet Location June 30, 2021 December 31, 2020

(in millions) Balance Sheet Location September 30, 2021 December 31, 2020

FX contracts Prepaid expenses and other current assets $ 4 $ —

FX contracts Other non-current assets 1 —

Interest rate contracts Prepaid expenses and other current assets 1 —

FX contracts Other current liabilities $ 3 $ 12

FX contracts Other non-current liabilities 3 —

Interest rate contracts Other non-current liabilities 99 —

IMPACT OF DERIVATIVE INSTRUMENTS NOT DESIGNATED AS HEDGING INSTRUMENTS

The following table presents the amount of (gains) losses recognized in the unaudited Condensed Consolidated Statements of Income related to derivative instruments not designated as hedging instruments under U.S.

The following table presents the amount of (gains) losses, net, recognized in the unaudited Condensed Consolidated Statements of Income related to derivative instruments not designated as hedging instruments under U.S.

GAAP during the periods presented.

Amounts include both realized and unrealized gains and losses.

Second Quarter First Six Months

Third Quarter First Nine Months

(in millions) Income Statement Location 2021 2020 2021 2020

1 unchanged sentence

FX contracts Cost of sales ( 4 ) 5 5 ( 15 )

FX contracts Other (income) expense, net 6 5 11 ( 12 )

FX contracts Other expense (income), net ( 7 ) 7 4 ( 5 )

Commodity contracts Cost of sales ( 71 ) ( 45 ) ( 127 ) 6

Commodity contracts SG&A expenses — 5 ( 56 ) 41

Total $ ( 60 ) $ 38 $ ( 105 ) $ 64

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, CONTINUED)

IMPACT OF CASH FLOW HEDGES

The following table presents the amount of (gain) loss reclassified from AOCI into the unaudited Condensed Consolidated Statements of Income related to derivative instruments designated as cash flow hedging instruments during the periods presented:

Second Quarter First Six Months

The following table presents the amount of (gains) losses, net, reclassified from AOCI into the unaudited Condensed Consolidated Statements of Income related to derivative instruments designated as cash flow hedging instruments during the periods presented:

Third Quarter First Nine Months

(in millions) Income Statement Location 2021 2020 2021 2020

2 unchanged sentences

KDP expects to reclassify approximately $ 3 million of pre-tax net losses from AOCI into net income during the next twelve months related to its FX contracts.

KDP does not expect to reclassify any amounts from AOCI into net income during the next twelve months related to its interest rate contracts.

The Company leases certain facilities and machinery and equipment, including fleet.

KDP expects to reclassify $1 million of pre-tax net losses from AOCI into net income during the next twelve months related to its interest rate contracts.

KDP leases certain facilities and machinery and equipment, including fleet.

These leases expire at various dates through 2044.

1 unchanged sentence

KDP has lease agreements with lease and non-lease components, which are generally accounted for as a single lease component.

The Company's lease agreements do not contain any material residual value guarantees or restrictive covenants, except for leases of certain manufacturing properti es and of our Frisco headquarters, which contain residual value guarantees at the end of the respective lease terms that approximate a percentage of the cost of the asset as of the inception of the lease.

KDP's lease agreements do not contain any material residual value guarantees or restrictive covenants, except for leases of certain manufacturing properti es and of our Frisco headquarters, which contain residual value guarantees at the end of the respective lease terms that approximate a percentage of the cost of the asset as of the inception of the lease.

The Company considers the possibility of incurring costs associated with the residual value guarantees to be remote.

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, CONTINUED)

The following table presents the components of lease cost:

Second Quarter First Six Months

Third Quarter First Nine Months

(in millions) 2021 2020 2021 2020

9 unchanged sentences

The following table presents supplemental cash flow information about the Company's leases:

First Six Months

First Nine Months

(in millions) 2021 2020

3 unchanged sentences

Financing cash flows from finance leases 40 35

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, CONTINUED)

The following table presents information about the Company's weighted average discount rate and remaining lease term:

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Weighted average discount rate

4 unchanged sentences

Finance leases 11 years 11 years

Future minimum lease payments for non-cancellable leases that have commenced and are reflected on the unaudited Condensed Consolidated Balance Sheets as of June 30, 2021 were as follows:

Future minimum lease payments for non-cancellable leases that have commenced and are reflected on the unaudited Condensed Consolidated Balance Sheets as of September 30, 2021 were as follows:

(in millions) Operating Leases Finance Leases

5 unchanged sentences

SIGNIFICANT LEASES THAT HAVE NOT YET COMMENCED

As of June 30, 2021, the Company has entered into leases that have not yet commenced with estimated aggregated future lease payments of approximately $ 301 million.

These leases are expected to commence between the third and fourth quarters of 2021, with initial lease terms ranging from 5 years to 10 years.

As of September 30, 2021, the Company has entered into leases that have not yet commenced with estimated aggregated future lease payments of approximately $ 296 million.

These leases are expected to commence between the fourth quarter of 2021 and the third quarter of 2022, with initial lease terms ranging from 5 years to 10 years .

KEURIG DR PEPPER INC.

18 unchanged sentences

Information about the Company's operations by reportable segment is as follows:

Second Quarter First Six Months

Third Quarter First Nine Months

(in millions) 2021 2020 2021 2020

5 unchanged sentences

Net sales $ 3,250 $ 3,020 $ 9,292 $ 8,497

Second Quarter First Six Months

Third Quarter First Nine Months

(in millions) 2021 2020 2021 2020

12 unchanged sentences

Anti-dilutive stock-based awards excluded from the calculations of diluted EPS were immaterial during the periods presented.

Second Quarter First Six Months

Third Quarter First Nine Months

(in millions, except per share data) 2021 2020 2021 2020

8 unchanged sentences

The components of stock-based compensation expense are presented below:

Second Quarter First Six Months

Third Quarter First Nine Months

(in millions) 2021 2020 2021 2020

10 unchanged sentences

Forfeited ( 1,910,582 ) 25.43

Outstanding as of June 30, 2021 20,189,534 $ 25.39 2.6 $ 711

As of June 30, 2021, there was $ 344 million of unrecognized compensation cost related to unvested RSUs that is expected to be recognized over a weighted average period of 3.7 years.

Total payments for the employees' tax obligations to the relevant taxing authorities were $ 125 million for the first six months of 2021, which were funded through the issuance of shares in at-the-market offerings, known as an ATM program.

There were no such payments made during the first six months of 2020.

Outstanding as of September 30, 2021 19,436,862 $ 25.64 2.4 $ 664

As of September 30, 2021, there was $ 318 million of unrecognized compensation cost related to unvested RSUs that is expected to be recognized over a weighted average period of 2.3 years.

Total payments for the employees' tax obligations to the relevant taxing authorities were $ 125 million for the first nine months of 2021, which were funded through the issuance of shares in at-the-market offerings, known as an ATM program.

There were no such payments made during the first nine months of 2020.

This payment is reflected as a financing activity within the unaudited Condensed Consolidated Statements of Cash Flows.

11 unchanged sentences

(in millions) Coffee Systems Packaged Beverages Beverage Concentrates Latin America Beverages Total

For the second quarter of 2021:

For the third quarter of 2021:

$ — $ 728 $ 386 $ 115 $ 1,229

5 unchanged sentences

Net sales $ 1,155 $ 1,547 $ 392 $ 156 $ 3,250

For the second quarter of 2020:

For the third quarter of 2020:

$ — $ 658 $ 345 $ 89 $ 1,092

5 unchanged sentences

Net sales $ 1,097 $ 1,447 $ 352 $ 124 $ 3,020

For the first six months of 2021:

For the first nine months of 2021:

$ — $ 2,063 $ 1,077 $ 324 $ 3,464

5 unchanged sentences

Net sales $ 3,398 $ 4,352 $ 1,095 $ 447 $ 9,292

For the first six months of 2020:

For the first nine months of 2020:

$ — $ 1,842 $ 951 $ 262 $ 3,055

12 unchanged sentences

The Company’s effective tax rates were as follows:

Second Quarter First Six Months

Third Quarter First Nine Months

(in millions) 2021 2020 2021 2020

Effective tax rate 22.0 % 24.1 % 22.9 % 24.9 %

For the second quarter of 2021, the provision for income taxes was higher than the second quarter of 2020, which was primarily driven by the increase on the revaluation of state deferred tax liabilities due to state legislative changes in 2021.

This increase was slightly offset by the decrease of U.S.

taxation of foreign earnings.

For the first six months of 2021, the provision for income taxes was lower than the first six months of 2020, which was primarily driven by the tax benefit received from excess tax deductions that were generated from the vesting of RSUs during the first six months of 2021.

For the third quarter of 2021, the provision for income taxes was lower than the third quarter of 2020, which was primarily driven by the decrease on the revaluation of state deferred tax liabilities due to state legislative and apportionment changes in 2021, as well as the benefit received from U.S.

provision-to-return adjustments.

For the first nine months of 2021, the provision for income taxes was lower than the first nine months of 2020, which was primarily driven by the tax benefit received from excess tax deductions that were generated from the vesting of RSUs during the first nine months of 2021, as well as the benefits received from the Company’s election of the high-tax exception to the GILTI calculation and U.S.

provision-to-return adjustments.

Investments in Unconsolidated Affiliates

The following table summarizes investments in unconsolidated affiliates as of June 30, 2021 and December 31, 2020:

(in millions) Ownership Interest June 30, 2021 December 31, 2020

The following table summarizes investments in unconsolidated affiliates as of September 30, 2021 and December 31, 2020:

(in millions) Ownership Interest September 30, 2021 December 31, 2020

BodyArmor 12.5 % $ 53 $ 51

11 unchanged sentences

The following table provides a reconciliation of cash, cash equivalents, restricted cash and restricted cash equivalents reported with the unaudited Condensed Consolidated Balance Sheets to the total of the same amounts shown in the unaudited Condensed Consolidated Statements of Cash Flows:

(in millions) June 30, 2021 December 31, 2020

(in millions) September 30, 2021 December 31, 2020

Cash and cash equivalents $ 200 $ 240

1 unchanged sentence

Total cash, cash equivalents, restricted cash and restricted cash equivalents shown in the unaudited Condensed Consolidated Statement of Cash Flows $ 203 $ 255

(1) Restricted cash and cash equivalents as of June 30, 2021 primarily represent amounts held in escrow in connection with the acquisitions of Core Nutrition LLC and Big Red Group Holdings, LLC, which have a corresponding holdback liability recorded in other current liabilities, as shown below.

The decrease during the first six months of 2021 was primarily driven by the release of $10 million from escrow in April 2021 related to the 2017 acquisition of Bai Brands LLC.

(1) Restricted cash and cash equivalents as of September 30, 2021 primarily represent amounts held in escrow in connection with the acquisitions of Core Nutrition LLC and Big Red Group Holdings, LLC, which have a corresponding holdback liability recorded in other current liabilities, as shown below.

The decrease during the first nine months of 2021 was primarily driven by the release of $10 million from escrow in April 2021 related to the 2017 acquisition of Bai Brands LLC.

ALLOWANCE FOR EXPECTED CREDIT LOSSES

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Write-offs and adjustments —

Balance as of June 30, 2021 $ 9

Balance as of September 30, 2021 $ 9

KEURIG DR PEPPER INC.

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ACCOUNTS PAYABLE

KDP has an agreement with a third party administrator which allows participating suppliers to track payments from KDP, and if voluntarily elected by the supplier, to sell payment obligations from KDP to financial institutions.

KDP has agreements with third party administrators which allow participating suppliers to track payments from KDP, and if voluntarily elected by the supplier, to sell payment obligations from KDP to financial institutions.

Suppliers can sell one or more of KDP's payment obligations at their sole discretion and the rights and obligations of KDP to its suppliers are not impacted.

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KDP's obligations to its suppliers, including amounts due and scheduled payment terms, are not impacted.

KDP has been informed by the third party administrator that as of June 30, 2021 and December 31, 2020, $ 2,901 million and $ 2,578 million, respectively, of KDP's outstanding payment obligations were voluntarily elected by the supplier and sold to financial institutions.

KDP has been informed by the third party administrators that as of September 30, 2021 and December 31, 2020, $ 3,027 million and $ 2,578 million, respectively, of KDP's outstanding payment obligations were voluntarily elected by the supplier and sold to financial institutions.

SELECTED BALANCE SHEET INFORMATION

The tables below provide selected financial information from the unaudited Condensed Consolidated Balance Sheets:

June 30, December 31,

September 30, December 31,

(in millions) 2021 2020

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Spare parts 66 55

Assets held for sale 2 2

Income tax receivable 14 11

Assets held for sale — 2

Total prepaid expenses and other current assets $ 490 $ 323

Other non-current assets:

Customer incentive programs $ 63 $ 70

Marketable securities - trading (1)

Operating lease right-of-use assets $ 627 $ 645

Customer incentive programs 68 70

Derivative instruments 18 12

Equity securities (1)

Equity securities without readily determinable fair values 1 1

Related party notes receivable (2)

Other 131 125

Total other non-current assets $ 901 $ 894

(1) Fair values of marketable securities are determined using quoted market prices from daily exchange traded markets, based on the closing price as of the balance sheet date, and are classified as Level 1.

The fair value of marketable securities was $ 44 million and $ 41 million as of June 30, 2021 and December 31, 2020, respectively.

(1) Fair values of these equity securities are determined using quoted market prices from daily exchange traded markets, based on the closing price as of the balance sheet date, and are classified as Level 1.

The fair value of marketable securities was $ 41 million and $ 41 million as of September 30, 2021 and December 31, 2020, respectively.

(2) Refer to Note 16 for additional information about the Company's related party note receivable from Bedford.

KEURIG DR PEPPER INC.

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(UNAUDITED, CONTINUED)

June 30, December 31,

September 30, December 31,

(in millions) 2021 2020

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(in millions) Foreign Currency Translation Adjustments Pension and Post-Retirement Benefit Liabilities Cash Flow Hedges Accumulated Other Comprehensive Income (Loss)

For the second quarter of 2021:

For the third quarter of 2021:

Beginning balance $ 223 $ ( 4 ) $ ( 91 ) $ 128

Other comprehensive income 112 — ( 152 ) ( 40 )

Other comprehensive income (loss) ( 137 ) — 10 ( 127 )

Amounts reclassified from AOCI — — 5 5

Other comprehensive income, net ( 137 ) — 15 ( 122 )

Balance as of June 30, 2021 $ 223 $ ( 4 ) $ ( 91 ) $ 128

For the second quarter of 2020:

Balance as of September 30, 2021 $ 86 $ ( 4 ) $ ( 76 ) $ 6

For the third quarter of 2020:

Beginning balance $ ( 328 ) $ ( 1 ) $ 1 $ ( 328 )

Other comprehensive income 151 — 1 152

Balance as of June 30, 2020 $ ( 328 ) $ ( 1 ) $ 1 $ ( 328 )

For the first six months of 2021:

Other comprehensive income (loss) 111 ( 1 ) 1 111

Balance as of September 30, 2020 $ ( 217 ) $ ( 2 ) $ 2 $ ( 217 )

For the first nine months of 2021:

Beginning balance $ 95 $ ( 4 ) $ ( 14 ) $ 77

Other comprehensive income 128 — ( 84 ) 44

Other comprehensive income (loss) ( 9 ) — ( 74 ) ( 83 )

Amounts reclassified from AOCI — — 12 12

Other comprehensive income, net ( 9 ) — ( 62 ) ( 71 )

Balance as of June 30, 2021 $ 223 $ ( 4 ) $ ( 91 ) $ 128

For the first six months of 2020:

Balance as of September 30, 2021 $ 86 $ ( 4 ) $ ( 76 ) $ 6

For the first nine months of 2020:

Beginning balance $ 104 $ — $ — $ 104

Other comprehensive loss ( 432 ) ( 1 ) 1 ( 432 )

Balance as of June 30, 2020 $ ( 328 ) $ ( 1 ) $ 1 $ ( 328 )

The following table presents the amount of (gains)/losses reclassified from AOCI into the unaudited Condensed Consolidated Statements of Income:

Second Quarter First Six Months

Other comprehensive income (loss) ( 321 ) ( 2 ) 2 ( 321 )

Balance as of September 30, 2020 $ ( 217 ) $ ( 2 ) $ 2 $ ( 217 )

The following table presents the amount of losses reclassified from AOCI into the unaudited Condensed Consolidated Statements of Income:

Third Quarter First Nine Months

(in millions) Income Statement Caption 2021 2020 2021 2020

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LEGAL MATTERS

The Company is involved from time to time in various claims, proceedings, and litigation.

KDP is involved from time to time in various claims, proceedings, and litigation.

KDP establishes reserves for specific legal proceedings when the Company determines that the likelihood of an unfavorable outcome is probable and the amount of loss can be reasonably estimated.

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In February 2014, TreeHouse Foods, Inc.

and certain affiliated entities filed suit against KDP’s wholly-owned subsidiary, KGM, in the U.S.

and certain affiliated entities filed suit against KDP’s wholly-owned subsidiary, Keurig, in the U.S.

District Court for the Southern District of New York (“SDNY”) (TreeHouse Foods, Inc.

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In March 2014, JBR, Inc.

filed suit against KGM in the U.S.

filed suit against Keurig in the U.S.

District Court for the Eastern District of California (JBR, Inc.

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complaint were substantially similar to the claims asserted and relief sought in the TreeHouse complaint.

Beginning in March 2014, twenty-seven putative class actions asserting similar claims and seeking similar relief were filed on behalf of purported direct and indirect purchasers of KGM’s products in various federal district courts.

Beginning in March 2014, twenty-seven putative class actions asserting similar claims and seeking similar relief were filed on behalf of purported direct and indirect purchasers of Keurig’s products in various federal district courts.

In June 2014, the Judicial Panel on Multidistrict Litigation granted a motion to transfer these various actions, including the TreeHouse and JBR actions, to a single judicial district for coordinated or consolidated pre-trial proceedings (the “Multidistrict Antitrust Litigation”).

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In January 2019, McLane Company, Inc.

filed suit against KGM (McLane Company, Inc.

filed suit against Keurig (McLane Company, Inc.

Keurig Green Mountain, Inc.) in the SDNY asserting similar claims and also was transferred into the Multidistrict Antitrust Litigation.

In July 2021, BJ’s Wholesale Club, Inc.

filed suit against Keurig (BJ’s Wholesale Club, Inc.

Keurig Green Mountain, Inc.) in the U.S.

District Court for the Eastern District of New York (“EDNY”) asserting similar claims and also was transferred into the Multidistrict Antitrust Litigation.

These actions are now pending in the SDNY (In re:

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Discovery in the Multidistrict Antitrust Litigation commenced in December 2017.

Separately, a statement of claim was filed in September 2014 against KGM and Keurig Canada Inc.

In August 2021, Winn-Dixie Stores, Inc.

and Bi-Lo Holding LLC filed suit against Keurig (Winn-Dixie Stores, Inc.

Keurig Green Mountain, Inc.

al.) in the EDNY asserting similar claims and was transferred into the Multidistrict Antitrust Litigation;

the complaint in this litigation has not been served.

Separately, a statement of claim was filed in September 2014 against Keurig and Keurig Canada Inc.

in Ontario, Canada by Club Coffee L.P., a Canadian manufacturer of single serve beverage pods, asserting a breach of competition law and false and misleading statements by Keurig.

In July 2020, KGM reached an agreement with the putative indirect purchaser class plaintiffs in the Multidistrict Antitrust Litigation to settle the claims asserted in their complaint for $ 31 million.

The settlement class consists of individuals and entities in the United States that purchased, from persons other than KGM and not for purposes of resale, KGM manufactured or licensed single serve beverage portion packs during the applicable class period (beginning in September 2010 for most states).

In July 2020, Keurig reached an agreement with the putative indirect purchaser class plaintiffs in the Multidistrict Antitrust Litigation to settle the claims asserted in their complaint for $ 31 million.

The settlement class consists of individuals and entities in the United States that purchased, from persons other than Keurig and not for purposes of resale, Keurig manufactured or licensed single serve beverage portion packs during the applicable class period (beginning in September 2010 for most states).

The court granted preliminary approval of the settlement in December 2020, and the Company paid the settlement amount in January 2021.

Final approval of the settlement was granted by the court in June 2021.

KDP intends to vigorously defend the remaining lawsuits brought by Treehouse, JBR, McLane, the putative direct purchaser class and Club Coffee.

KDP intends to vigorously defend the remaining lawsuits described above.

At this time, the Company is unable to predict the outcome of these lawsuits, the potential loss or range of loss, if any, associated with the resolution of these lawsuits or any potential effect they may have on the Company or its operations.

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Brad Barry LLC, et al., Case No.

BC461182), alleging that KGM, and certain other defendants who manufacture, package, distribute or sell coffee, failed to warn persons in California that KGM's coffee products expose persons to the chemical acrylamide in violation of Proposition 65.

KGM, as part of a joint defense group organized to defend against the lawsuit, disputed CERT's claims and asserted multiple affirmative defenses.

BC461182), alleging that Keurig, and certain other defendants who manufacture, package, distribute or sell coffee, failed to warn persons in California that Keurig's coffee products expose persons to the chemical acrylamide in violation of Proposition 65.

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, CONTINUED)

Keurig, as part of a joint defense group organized to defend against the lawsuit, disputed CERT's claims and asserted multiple affirmative defenses.

The case was scheduled to proceed to a third phase for trial on damages, remedies and attorneys' fees, but such trial did not occur in light of California’s Office of Environmental Health Hazard Assessment proposal of a new Proposition 65 regulation clarifying that cancer warnings are not required for chemicals, such as acrylamide, that are present in coffee as a result of roasting coffee beans.

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However, the Company believes that the likelihood that it will incur a material loss in connection with the CERT litigation is remote and accordingly, no loss contingency has been recorded.

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, CONTINUED)

Related Parties

IDENTIFICATION OF RELATED PARTIES

JAB AND ITS AFFILIATES

JAB holds a significant but non-controlling interest in KDP.

As of June 30, 2021, JAB beneficially owned approximately 33 % of KDP's outstanding common stock.

As of September 30, 2021, JAB beneficially owned approximately 33 % of KDP's outstanding common stock.

JAB and its affiliates also hold investments in a number of other companies that have commercial relationships with the Company, including Peet's, Caribou Coffee Company, Inc., Panera Bread Company, Einstein Bros Bagels, and Krispy Kreme Doughnuts Inc.

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for resale to retail customers.

INVESTMENTS IN BRAND OWNERSHIP COMPANIES

KDP holds investments in certain brand ownership companies, and in certain instances, the Company also has rights in specified territories to bottle and/or distribute the brands owned by such companies.

2 unchanged sentences

ABI purchases Clamato from KDP and pays the Company a royalty for use of the brand name.

On July 15, 2021, KDP issued a convertible promissory note for $ 15 million to Bedford at an interest rate of 0.12 % per year.

The outstanding principal and any unpaid accrued interest will automatically convert to equity interests in Bedford during the fourth quarter of 2021.

Refer to Note 12 for additional information about KDP's investments in brand ownership companies.

Subsequent Event

On October 25, 2021, the Company acquired an ownership interest in Vita Coco for $ 20 million.

The investment in equity securities will be recorded within the Other non-current assets caption of the unaudited Condensed Consolidated Balance Sheets, and unrealized gains and losses related to the investment will be recorded in Other non-operating expense (income, net).

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements