What changed in this filing

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Item 1. Financial Statements

2022-10-27 compared with 2022-07-28 · 173 added, 126 removed, 852 unchanged (26% of the section changed)

3 unchanged sentences

( UNAUDITED )

Second Quarter First Six Months

Third Quarter First Nine Months

(in millions, except per share data) 2022 2021 2022 2021

3 unchanged sentences

Selling, general and administrative expenses 1,196 1,040 3,418 3,040

Impairment of intangible assets 311 — 311 —

Gain on litigation settlement — — ( 299 ) —

7 unchanged sentences

Income before provision for income taxes 183 678 1,161 1,689

(Benefit) provision for income taxes ( 5 ) 165 175 238

Provision for income taxes 4 149 179 387

Net income including non-controlling interest 179 529 982 1,302

11 unchanged sentences

( UNAUDITED )

Second Quarter First Six Months

Third Quarter First Nine Months

(in millions) 2022 2021 2022 2021

Net income including non-controlling interest $ 179 $ 529 $ 982 $ 1,302

Other comprehensive income

Other comprehensive (loss) income

Foreign currency translation adjustments ( 249 ) ( 137 ) ( 283 ) ( 9 )

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

( 3 ) — ( 3 ) —

Net change in cash flow hedges, net of tax of $ 12 , $ 4 , $ 98 and $( 22 ), respectively

35 15 303 ( 62 )

Total other comprehensive income (loss) ( 10 ) ( 36 ) 231 51

Total other comprehensive (loss) income ( 214 ) ( 122 ) 17 ( 71 )

Comprehensive income including non-controlling interest ( 35 ) 407 999 1,231

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

Comprehensive income attributable to KDP $ 208 $ 412 $ 1,034 $ 824

Comprehensive (loss) income attributable to KDP $ ( 35 ) $ 407 $ 999 $ 1,231

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

2 unchanged sentences

( UNAUDITED )

June 30, December 31,

September 30, December 31,

(in millions, except share and per share data) 2022 2021

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, 1,416,072,925 and 1,418,119,197 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively

Common stock, $ 0.01 par value, 2,000,000,000 shares authorized, 1,416,251,307 and 1,418,119,197 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively

Additional paid-in capital 21,730 21,785

Retained earnings 3,367 3,199

Accumulated other comprehensive income (loss) 205 ( 26 )

Accumulated other comprehensive loss ( 9 ) ( 26 )

Total stockholders' equity 25,102 24,972

6 unchanged sentences

( UNAUDITED )

First Six Months

First Nine Months

(in millions) 2022 2021

11 unchanged sentences

Gain on disposal of property, plant and equipment ( 38 ) ( 5 )

Unrealized loss (gain) on foreign currency 2 ( 15 )

Unrealized loss on foreign currency 22 1

Unrealized loss (gain) on derivatives 387 ( 94 )

1 unchanged sentence

Equity in loss of unconsolidated affiliates 6 2

Impairment of intangible assets 311 —

Impairment on investments and note receivable of unconsolidated affiliate 12 —

22 unchanged sentences

( UNAUDITED, CONTINUED)

First Six Months

First Nine Months

(in millions) 2022 2021

24 unchanged sentences

Non-cash conversion of note receivable to investment in unconsolidated affiliate 6 —

Purchases of intangibles 22 —

Supplemental cash flow disclosures of non-cash financing activities:

21 unchanged sentences

Net income — — — 218 — 218 — 218

Other comprehensive income — — — — ( 10 ) ( 10 ) — ( 10 )

Other comprehensive loss — — — — ( 10 ) ( 10 ) — ( 10 )

Dividends declared, $ 0.1875 per share

6 unchanged sentences

1,416.1 14 21,701 3,471 205 25,391 — 25,391

Net income — — — 180 — 180 ( 1 ) 179

Other comprehensive loss — — — — ( 214 ) ( 214 ) — ( 214 )

Dividends declared, $ 0.20 per share

— — — ( 284 ) — ( 284 ) — ( 284 )

Shares issued under employee stock-based compensation plans and other 0.2 — — — — — — —

Tax withholdings related to net share settlements — — ( 2 ) — — ( 2 ) — ( 2 )

Stock-based compensation and stock options exercised — — 31 — — 31 — 31

Balance as of September 30, 2022

1,416.3 $ 14 $ 21,730 $ 3,367 $ ( 9 ) $ 25,102 $ ( 1 ) $ 25,101

KEURIG DR PEPPER INC.

11 unchanged sentences

Issuance of common stock 4.3 — 140 — — 140 — 140

Shares issued under stock-based compensation plans and other 5.7 — — — — — — —

Shares issued under employee stock-based compensation plans and other 5.7 — — — — — — —

Tax withholdings related to net share settlements — — ( 125 ) — — ( 125 ) — ( 125 )

10 unchanged sentences

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

Net income — — — 530 — 530 ( 1 ) 529

Other comprehensive loss — — — — ( 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.

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.

References to the "second quarter" indicate the Company's quarterly periods ended June 30, 2022 and 2021.

References to the "third quarter" indicate the Company's quarterly periods ended September 30, 2022 and 2021.

KDP's significant subsidiary, Maple Parent Holdings Corp., has a fiscal year end of the last Saturday in December, and its interim fiscal quarters end every thirteenth Saturday.

1 unchanged sentence

includes 53 weeks in 2022 and 52 weeks in 2021.

KDP does not adjust for the difference in fiscal year when applicable, as the difference is within the range permitted by the Exchange Act.

KDP does not adjust for the difference in fiscal year between KDP and Maple Parent Holdings Corp.

when applicable, as the difference is within the range permitted by the Exchange Act.

USE OF ESTIMATES

14 unchanged sentences

In 2021, our Board authorized a four-year share repurchase program of up to $4 billion of our outstanding common stock.

For shares repurchased and retired under the program, the excess purchase price over the par value is recorded to additional paid-in capital.

Shares repurchased under the program are retired, and the excess purchase price over the par value is recorded to additional paid-in capital.

KEURIG DR PEPPER INC.

5 unchanged sentences

The following table summarizes the revised and prior presentations of income from operations at the segment level:

(in millions) Second Quarter 2021

First Six Months 2021

(in millions) Third Quarter 2021

First Nine Months 2021

Segment Results – Income from operations Current Presentation Prior Presentation Current Presentation Prior Presentation

5 unchanged sentences

Income from operations $ 795 $ 795 $ 2,169 $ 2,169

RECENTLY ISSUED ACCOUNTING STANDARDS

In September 2022, the FASB issued ASU 2022-04, Liabilities — Supplier Finance Programs (Subtopic 405-50):

Disclosure of Supplier Finance Program Obligations .

The objective of ASU 2022-04 is to require entities to disclose information about the use of supplier finance programs in connection with the purchase of goods and services.

ASU 2022-04 is effective for all entities for annual periods beginning after December 15, 2022.

The Company is currently evaluating ASU 2022-04 but expects the impact to be immaterial to KDP’s current consolidated financial statement disclosures.

Long-term Obligations and Borrowing Arrangements

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

(in millions) June 30, 2022 December 31, 2021

(in millions) September 30, 2022 December 31, 2021

$ 11,561 $ 11,733

2 unchanged sentences

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

(in millions) June 30, 2022 December 31, 2021

(in millions) September 30, 2022 December 31, 2021

Commercial paper notes $ — $ 149

7 unchanged sentences

(in millions, except %)

Issuance Maturity Date Rate June 30, 2022 December 31, 2021

Issuance Maturity Date Rate September 30, 2022 December 31, 2021

2023 Merger Notes May 25, 2023 4.057 % $ — $ 1,000

40 unchanged sentences

The following table summarizes information about the 2022 Revolving Credit Agreement:

(in millions) June 30, 2022 December 31, 2021

(in millions) September 30, 2022 December 31, 2021

Issuance Maturity Date Capacity Carrying Value Carrying Value

1 unchanged sentence

February 23, 2027 $ 4,000 $ — $ —

(1) The 2022 Revolving Credit Agreement has $ 200 million letters of credit available, none of which were utilized as of June 30, 2022.

(1) The 2022 Revolving Credit Agreement has $ 200 million letters of credit available, none of which were utilized as of September 30, 2022.

The 2022 Revolving Credit Agreement replaced the KDP Revolver and the 2021 364-Day Credit Agreement and the proceeds of the credit facility are intended to be used for working capital and for other general corporate purposes of KDP.

2 unchanged sentences

The 2022 Revolving Credit Agreement also contains (i) certain customary affirmative covenants, including those that impose certain reporting and/or performance obligations on KDP and its subsidiaries, (ii) certain customary negative covenants that generally limit, subject to various exceptions, KDP and its subsidiaries from taking certain actions, including, without limitation, incurring liens, consummating certain fundamental changes and entering into transactions with affiliates, (iii) a financial covenant in the form of a minimum interest coverage ratio (as defined therein) of 3.25 to 1.00 and (iv) customary events of default (including a change of control) for financings of this type.

As of June 30, 2022, KDP was in compliance with its minimum interest coverage ratio relating to the 2022 Revolving Credit Agreement .

As of September 30, 2022, KDP was in compliance with its minimum interest coverage ratio relating to the 2022 Revolving Credit Agreement .

Commercial Paper Program

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

Second Quarter First Six Months

Third Quarter First Nine Months

(in millions, except %) 2022 2021 2022 2021

3 unchanged sentences

In addition to the portion of the 2022 Revolving Credit Agreement reserved for issuance of letters of credit, KDP has an incremental letter of credit facility.

Under this facility, $ 150 million is available for the issuance of letters of credit, $ 96 million of which was utilized as of June 30, 2022 and $ 54 million of which remains available for use.

Under this facility, $ 150 million is available for the issuance of letters of credit, $ 96 million of which was utilized as of September 30, 2022 and $ 54 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 $ 10,844 million and $ 13,078 million as of June 30, 2022 and December 31, 2021, respectively.

The fair value of KDP's Notes was $ 10,253 million and $ 13,078 million as of September 30, 2022 and December 31, 2021, respectively.

KEURIG DR PEPPER INC.

6 unchanged sentences

Foreign currency translation ( 68 ) ( 59 ) ( 39 ) 8 ( 158 )

Balance as of June 30, 2022 $ 9,792 $ 5,307 $ 4,531 $ 533 $ 20,163

Balance as of September 30, 2022 $ 9,732 $ 5,260 $ 4,500 $ 532 $ 20,024

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, 2022 December 31, 2021

(in millions) September 30, 2022 December 31, 2021

$ 19,370 $ 19,865

3 unchanged sentences

Total $ 22,068 $ 22,553

(1) The decrease in brands with indefinite lives was driven by foreign currency translation of $ 25 million during the first six months of 2022.

(2) The Company executed three agreements to acquire distribution rights during the first six months of 2022, which resulted in an increase of approximately $ 10 million.

(1) The decrease in brands with indefinite lives was driven by the impairment of the Bai brand asset of $ 311 million and foreign currency translation of $ 184 million during the first nine months of 2022.

Refer to Impairment Testing below for further information about the impairment charge.

(2) The Company executed five agreements to acquire distribution rights during the first nine months of 2022, which resulted in an increase of approximately $ 11 million.

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

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

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

3 unchanged sentences

Contractual arrangements 24 ( 10 ) 14 24 ( 8 ) 16

Brands 21 ( 11 ) 10 21 ( 8 ) 13

51 ( 11 ) 40 21 ( 8 ) 13

Distribution rights 29 ( 15 ) 14 29 ( 11 ) 18

Total $ 2,014 $ ( 783 ) $ 1,231 $ 1,986 $ ( 683 ) $ 1,303

(1) During the third quarter of 2022, the Company closed on the acquisition of Atypique, which was recorded as a definite-lived brand asset of $30 million with an estimated useful life of five years.

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

Second Quarter First Six Months

Third Quarter First Nine Months

(in millions) 2022 2021 2022 2021

8 unchanged sentences

IMPAIRMENT TESTING

KDP conducts impairment tests on goodwill and all indefinite lived intangible assets annually, or more frequently if circumstances indicate that the carrying amount of an asset may not be recoverable.

The Company performed an analysis as of June 30, 2022 to ensure that there were no triggering events which occurred during the quarter.

As a result of this analysis, management did not identify any indications that the carrying amount of any goodwill or any intangible assets may not be recoverable.

KDP conducts impairment tests on goodwill and all indefinite lived intangible assets annually on October 1, or more frequently if circumstances indicate that the carrying amount of an asset may not be recoverable.

The Company performed an analysis as of September 30, 2022 to evaluate whether any triggering events occurred during the quarter.

Management identified specific performance and margin challenges for Bai, an indefinite lived brand asset, and performed a Step 1 quantitative discounted cash flow analysis using the income approach.

As a result of this analysis, KDP recorded an impairment charge of $ 311 million in the Packaged Beverages segment for the Bai brand in the third quarter of 2022.

No other triggering events impacting goodwill or indefinite lived intangible assets were identified during the period.

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

19 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, 2022, economic interest rate derivative instruments have maturities ranging from January 2027 to April 2032.

As of September 30, 2022, economic interest rate derivative instruments have maturities ranging from January 2027 to April 2032.

Additionally, during the quarter ended June 30, 2022, KDP entered into reverse treasury lock contracts in order to manage the interest rate risk related to changes in value of the tender offers in the 2022 Strategic Refinancing prior to the pricing date.

4 unchanged sentences

Upon termination, KDP received $ 125 million to settle the contracts with the counterparties, which will be amortized to interest expense over the respective terms of the issued Notes.

As of June 30, 2022, the remaining forward starting swaps have a mandatory termination date in May 2025.

KEURIG DR PEPPER INC.

1 unchanged sentence

(UNAUDITED, CONTINUED)

On September 30, 2022, KDP de-designated $500 million of notional amount of the forward starting swaps.

As the forecasted debt transaction is still probable to occur, the fair value of the these instruments as of September 30, 2022 was recorded in AOCI.

Changes in fair value of the these instruments from the point of de-designation will be recorded as unrealized gains or losses in interest expense in the unaudited Condensed Consolidated Statements of Income.

As of September 30, 2022, the remaining forward starting swaps designated as cash flow hedges have a mandatory termination date in May 2025.

FOREIGN EXCHANGE

6 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 the same caption of the unaudited Condensed Consolidated Statements of Income as the associated risk.

As of June 30, 2022, these FX contracts have maturities ranging from July 2022 to September 2024.

As of September 30, 2022, these FX contracts have maturities ranging from October 2022 to September 2024.

Cash Flow Hedges

KDP designates certain FX forward contracts related to forecasted inventory purchases of the Canadian and Mexican businesses as cash flow hedges in order to manage the exposures resulting from changes in the FX rates described above.

KDP designates certain FX forward contracts as cash flow hedges in order to manage the exposures resulting from changes in the FX rates described above.

These designated FX forward contracts relate to either forecasted inventory purchases in U.S.

dollars of the Canadian and Mexican businesses or forecasted capital expenditures of certain equipment in euros for KDP’s U.S.

manufacturing facilities.

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

As of June 30, 2022, these FX contracts have maturities ranging from July 2022 to October 2023.

As of September 30, 2022, these FX contracts have maturities ranging from October 2022 to October 2024.

Economic Hedges

4 unchanged sentences

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.

As of June 30, 2022, these commodity contracts have maturities ranging from July 2022 to February 2024.

As of September 30, 2022, these commodity contracts have maturities ranging from October 2022 to February 2024.

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, CONTINUED)

NOTIONAL AMOUNTS OF DERIVATIVE INSTRUMENTS

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

(in millions) June 30, 2022 December 31, 2021

(in millions) September 30, 2022 December 31, 2021

Interest rate contracts

Forward starting swaps, designated as cash flow hedges $ 500 $ 2,500

Forward starting swaps, not designated as hedging instruments 1,000 —

Receive-fixed, pay-variable interest rate swaps, not designated as hedging instruments 1,900 400

Swaptions, not designated as hedging instruments 500 —

Forward contracts, not designated as hedging instruments 517 463

1 unchanged sentence

Commodity contracts, not designated as hedging instruments (1)

(1) Notional value for commodity contracts is calculated as the expected volume times strike price per unit on a gross basis.

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 considered level 2 within the fair value hierarchy.

(in millions) Balance Sheet Location June 30, 2022 December 31, 2021

(in millions) Balance Sheet Location September 30, 2022 December 31, 2021

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

1 unchanged sentence

Commodity contracts Prepaid expenses and other current assets 17 133

Interest rate contracts Other non-current assets 49 —

FX contracts Other non-current assets 1 —

Commodity contracts Other non-current assets 1 2

5 unchanged sentences

Commodity contracts Other non-current liabilities 1 1

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, 2022 December 31, 2021

(in millions) Balance Sheet Location September 30, 2022 December 31, 2021

FX contracts Prepaid expenses and other current assets $ 22 $ 6

3 unchanged sentences

Interest rate contracts Other current liabilities — 8

FX contracts Other non-current liabilities 2 —

Interest rate contracts Other non-current liabilities — 128

3 unchanged sentences

Amounts include both realized and unrealized gains and losses.

Second Quarter First Six Months

Third Quarter First Nine Months

(in millions) Income Statement Location 2022 2021 2022 2021

5 unchanged sentences

Commodity contracts SG&A expenses 24 — ( 39 ) ( 56 )

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, CONTINUED)

IMPACT OF CASH FLOW HEDGES

The following table presents the amount of 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:

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 2022 2021 2022 2021

1 unchanged sentence

FX contracts Cost of sales — 6 5 15

KDP expects to reclassify approximately $ 5 million of pre-tax net gains from AOCI into net income during the next twelve months related to its FX contracts.

KDP expects to reclassify $ 8 million of pre-tax net gains from AOCI into net income during the next twelve months related to its interest rate contracts.

KDP expects to reclassify approximately $ 8 million and $ 16 million of pre-tax net gains from AOCI into net income during the next twelve months related to interest rate contracts and FX contracts, respectively.

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) 2022 2021 2022 2021

4 unchanged sentences

Variable lease cost (1)

Short-term lease cost 1 — 1 —

Sublease income ( 1 ) — ( 1 ) ( 1 )

2 unchanged sentences

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

First Six Months

First Nine Months

(in millions) 2022 2021

7 unchanged sentences

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

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Weighted average discount rate

7 unchanged sentences

(UNAUDITED, CONTINUED)

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, 2022 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, 2022 were as follows:

(in millions) Operating Leases Finance Leases

5 unchanged sentences

SIGNIFICANT LEASES THAT HAVE NOT YET COMMENCED

As of June 30, 2022, the Company has entered into leases that have not yet commenced with estimated aggregated future lease payments of approximately $ 180 million.

These leases are expected to commence in 2022 and 2023, with initial lease terms ranging from 4 years to 7 years.

As of September 30, 2022, the Company has entered into leases that have not yet commenced with estimated aggregated future lease payments of approximately $ 205 million.

These leases are expected to commence between the fourth quarter of 2022 and 2025, with initial lease terms ranging from 4 years to 10 years.

ASSET SALE-LEASEBACK TRANSACTION

The Company entered into a sale-leaseback transaction with the Veyron SPEs during the first six months of 2022.

The Company entered into a sale-leaseback transaction with the Veyron SPEs during the first nine months of 2022.

The following table presents details of the transaction.

28 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) 2022 2021 2022 2021

18 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) 2022 2021 2022 2021

7 unchanged sentences

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

Second Quarter First Six Months

Third Quarter First Nine Months

(in millions) 2022 2021 2022 2021

1 unchanged sentence

$ 31 $ 20 $ 43 $ 68

Income tax expense (benefit) ( 5 ) ( 4 ) ( 1 ) ( 8 )

Income tax benefit ( 5 ) ( 4 ) ( 6 ) ( 12 )

Stock-based compensation expense, net of tax $ 26 $ 16 $ 37 $ 56

10 unchanged sentences

Forfeited ( 984,576 ) 27.12

Outstanding as of June 30, 2022 20,082,216 $ 27.24 2.0 $ 711

As of June 30, 2022, there was $ 232 million of unrecognized compensation cost related to unvested RSUs that is expected to be recognized over a weighted average period of 3.3 years.

Outstanding as of September 30, 2022 20,313,145 $ 27.48 1.8 $ 728

As of September 30, 2022, there was $ 230 million of unrecognized compensation cost related to unvested RSUs that is expected to be recognized over a weighted average period of 3.2 years.

KEURIG DR PEPPER INC.

9 unchanged sentences

Although the program was initially expected to be completed in 2021, as a result of delays due to COVID-19, KDP will continue to recognize expenditures for certain initiatives which began during the integration period and are expected to be completed in 2022.

The restructuring and integration program resulted in cumulative pre-tax charges of approximately $ 848 million, primarily consisting of professional fees related to the integration and transformation and costs associated with severance and employee terminations, through June 30, 2022.

The restructuring and integration program resulted in cumulative pre-tax charges of approximately $ 881 million, primarily consisting of professional fees related to the integration and transformation and costs associated with severance and employee terminations, through September 30, 2022.

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

Second Quarter First Six Months

Third Quarter First Nine Months

(in millions) 2022 2021 2022 2021

7 unchanged sentences

Cash payments

Balance as of June 30, 2022 $ 11

Balance as of September 30, 2022 $ 15

KEURIG DR PEPPER INC.

10 unchanged sentences

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

For the second quarter of 2022:

For the third quarter of 2022:

$ — $ 825 $ 452 $ 147 $ 1,424

5 unchanged sentences

Net sales $ 1,209 $ 1,756 $ 459 $ 198 $ 3,622

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 first six months of 2022:

For the first nine months of 2022:

$ — $ 2,319 $ 1,260 $ 400 $ 3,979

5 unchanged sentences

Net sales $ 3,497 $ 4,925 $ 1,278 $ 554 $ 10,254

For the first six months of 2021:

For the first nine months of 2021:

$ — $ 2,063 $ 1,077 $ 324 $ 3,464

12 unchanged sentences

The Company’s effective tax rates were as follows:

Second Quarter First Six Months

Third Quarter First Nine Months

(in millions) 2022 2021 2022 2021

2 unchanged sentences

federal statutory tax rate to the provision for income taxes reported in the unaudited Condensed Consolidated Statements of Income:

Second Quarter First Six Months

Third Quarter First Nine Months

(in millions) 2022 2021 2022 2021

5 unchanged sentences

Tax credits (1)

( 11.7 ) % ( 1.7 ) % ( 3.2 ) % ( 1.5 ) %

taxation of foreign earnings (1)

11.2 % 1.7 % 3.1 % 1.3 %

Deferred rate change (2)

5 unchanged sentences

Total provision for income taxes 2.2 % 22.0 % 15.4 % 22.9 %

(1) For the second quarter and first six months of 2022, primarily driven by the Company’s incremental income in low tax jurisdictions.

(2) For the second quarter and first six months of 2022, primarily driven by the revaluation of state deferred tax liabilities due to state legislative changes.

(3) For the first six months of 2022, primarily driven by the unfavorable comparison to the excess tax deductions that were generated from the vesting of RSUs during the first six months of 2021.

The following table summarizes investments in unconsolidated affiliates as of June 30, 2022 and December 31, 2021:

(in millions) Ownership Interest June 30, 2022 December 31, 2021

(1) For the third quarter and first nine months of 2022, primarily driven by the Company’s incremental income in low tax jurisdictions.

(2) For the third quarter and first nine months of 2022, primarily driven by the revaluation of state deferred tax liabilities due to state legislative changes.

(3) For the first nine months of 2022, primarily driven by the unfavorable comparison to the excess tax deductions that were generated from the vesting of RSUs during the first nine months of 2021.

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, CONTINUED)

The following table summarizes investments in unconsolidated affiliates as of September 30, 2022 and December 31, 2021:

(in millions) Ownership Interest September 30, 2022 December 31, 2021

Bedford 30.0 % $ — $ —

12 unchanged sentences

The convertible note was converted into equity interests during the second quarter of 2022, increasing the Company’s total ownership in Tractor to 19.2 %.

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, CONTINUED)

BEDFORD INVESTMENT

2 unchanged sentences

KDP will fund 30 % of this loan, in line with the Company’s ownership percentage in Bedford.

Approximately $ 14 million of the Company’s responsibility under this credit agreement has been funded through June 30, 2022.

The Company recorded impairment losses related to this credit agreement of $ 6 million and $ 12 million in the second quarter and first six months of 2022, respectively.

Approximately $ 14 million of the Company’s responsibility under this credit agreement has been funded through September 30, 2022.

The Company recorded no impairment losses related to this credit agreement in the third quarter of 2022 and $ 12 million in the first nine months of 2022.

BODYARMOR INVESTMENT

10 unchanged sentences

(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 2022:

For the third quarter of 2022:

Beginning balance $ 47 $ ( 7 ) $ 165 $ 205

Other comprehensive income (loss) ( 133 ) ( 3 ) 126 ( 10 )

Other comprehensive (loss) income ( 249 ) — 36 ( 213 )

Amounts reclassified from AOCI — — ( 1 ) ( 1 )

Total other comprehensive income (loss) ( 133 ) ( 3 ) 126 ( 10 )

Balance as of June 30, 2022 $ 47 $ ( 7 ) $ 165 $ 205

For the second quarter of 2021:

Total other comprehensive (loss) income ( 249 ) — 35 ( 214 )

Balance as of September 30, 2022 $ ( 202 ) $ ( 7 ) $ 200 $ ( 9 )

For the third quarter of 2021:

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

Other comprehensive income (loss) 112 — ( 152 ) ( 40 )

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

Amounts reclassified from AOCI — — 5 5

Total other comprehensive income (loss) 112 — ( 148 ) ( 36 )

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

For the first six months of 2022:

Total other comprehensive (loss) income ( 137 ) — 15 ( 122 )

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

For the first nine months of 2022:

Beginning balance $ 81 $ ( 4 ) $ ( 103 ) $ ( 26 )

Other comprehensive income (loss) ( 34 ) ( 3 ) 266 229

Other comprehensive (loss) income ( 283 ) ( 3 ) 302 16

Amounts reclassified from AOCI — — 1 1

Total other comprehensive income (loss) ( 34 ) ( 3 ) 268 231

Balance as of June 30, 2022 $ 47 $ ( 7 ) $ 165 $ 205

For the first six months of 2021:

Total other comprehensive (loss) income ( 283 ) ( 3 ) 303 17

Balance as of September 30, 2022 $ ( 202 ) $ ( 7 ) $ 200 $ ( 9 )

For the first nine months of 2021:

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

Other comprehensive income (loss) 128 — ( 84 ) 44

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

Amounts reclassified from AOCI — — 12 12

Total other comprehensive income (loss) 128 — ( 77 ) 51

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

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

Second Quarter First Six Months

Total other comprehensive (loss) income ( 9 ) — ( 62 ) ( 71 )

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

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

Third Quarter First Nine Months

(in millions) Income Statement Caption 2022 2021 2022 2021

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Total ( 2 ) 6 1 15

Income tax benefit — — ( 1 ) ( 2 )

Income tax (benefit) expense 1 ( 1 ) — ( 3 )

Total, net of tax $ ( 1 ) $ 5 $ 1 $ 12

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

June 30, December 31,

September 30, December 31,

(in millions) 2022 2021

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(UNAUDITED, CONTINUED)

June 30, December 31,

September 30, December 31,

(in millions) 2022 2021

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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 administrators that as of June 30, 2022 and December 31, 2021, $ 3,698 million and $ 3,194 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, 2022 and December 31, 2021, $ 3,923 million and $ 3,194 million, respectively, of KDP's outstanding payment obligations were voluntarily elected by the supplier and sold to financial institutions.

Commitments and Contingencies

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Reserves are recorded 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.

As of June 30, 2022 and December 31, 2021, the Company had litigation reserves of $ 12 million and $ 14 million, respectively.

As of September 30, 2022 and December 31, 2021, the Company had litigation reserves of $ 10 million and $ 14 million, respectively.

KDP has also identified certain other legal matters where we believe an unfavorable outcome is reasonably possible and/or for which no estimate of possible losses can be made.

The Company does not believe that the outcome of these, or any other, pending legal matters, individually or collectively, will have a material adverse effect on the results of operations, financial condition or liquidity of KDP.

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, CONTINUED)

ANTITRUST LITIGATION

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

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, CONTINUED)

Beginning in 2014, a number of putative class actions asserting similar claims and seeking similar relief to the matters described above were filed on behalf of purported direct purchasers of Keurig’s products in various federal district courts.

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In August 2020, the court granted the defendants' motion for summary judgment, effectively ending CERT's Proposition 65 litigation at the trial court level.

CERT has filed its appeal brief, and the Company intends to continue vigorously defending itself in this action.

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.

CERT appealed the trial court’s ruling, and the California Court of Appeals affirmed the trial court’s ruling in October 2022.

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.

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LEASING ARRANGEMENTS

As of June 30, 2022, the Company has entered into twelve lease transactions with the Veyron SPEs, eleven of which were associated with asset sale-leaseback transactions.

As of September 30, 2022, the Company has entered into twelve lease transactions with the Veyron SPEs, eleven of which were associated with asset sale-leaseback transactions.

Refer to Note 5 for additional information about the current period asset sale-leaseback transactions.

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As such, the Company recorded each lease obligation excluding the associated RVG.

The aggregate maximum undiscounted RVG associated with the leasing arrangements as of June 30, 2022 and December 31, 2021 were $ 602 million and $ 549 million, respectively.

The aggregate maximum undiscounted RVG associated with the leasing arrangements as of September 30, 2022 and December 31, 2021 were $ 602 million and $ 549 million, respectively.

This aggregate maximum value assumes that the fair value of each property at the end of either the original lease term or renewal term is equal to zero, which the Company has concluded is not probable.

The following table provides the carrying amounts of the right-to-use assets and lease obligations recorded on the Company’s Consolidated Balance Sheets associated with these leasing arrangements related to the VIEs as of June 30, 2022 and December 31, 2021.

(in millions) June 30, 2022 (1)

(in millions) September 30, 2022 (1)

December 31, 2021 (2)

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Non-current liabilities 359 323

(1) The leasing agreements included as of June 30, 2022 include eight manufacturing sites, three distribution centers and our Frisco, Texas headquarters.

(1) The leasing agreements included as of September 30, 2022 include eight manufacturing sites, three distribution centers and our Frisco, Texas headquarters.

(2) The leasing agreements included as of December 31, 2021 include seven manufacturing sites, two distribution centers and our Frisco, Texas headquarters.

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All obligations with respect to the guarantee will cease upon termination of the distribution agreement, which would occur upon notice by ABC not to renew the distribution agreement, KDP no longer being investment grade at the end of the term, or the sale of the distribution rights by the Veyron SPEs.

As of June 30, 2022, KDP has not recorded a liability as it is not probable that the Company will have to make any payments required under the residual value guarantee, as the fair value of the distribution rights is not expected to fall below $ 142 million over the term of the agreement.

As of June 30, 2022, KDP had $ 104 million in fixed service fee commitments related to the 15-year distribution agreement which was effective on December 28, 2020, with Veyron SPEs.

As of September 30, 2022, KDP has not recorded a liability as it is not probable that the Company will have to make any payments required under the residual value guarantee, as the fair value of the distribution rights is not expected to fall below $ 142 million over the term of the agreement.

As of September 30, 2022, KDP had $ 102 million in fixed service fee commitments related to the 15-year distribution agreement which was effective on December 28, 2020, with Veyron SPEs.

These commitments were used to assist the Veyron SPEs in obtaining financing.

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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