What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-02-23 compared with 2022-02-24 · 549 added, 578 removed, 1304 unchanged (46% of the section changed)

9 unchanged sentences

Significant Accounting Policies

Long-Term Obligations and Borrowing Arrangements

Goodwill and Other Intangible Assets

Restructuring and Integration Costs

Employee Benefit Plans

Long-Term Obligations and Borrowing Arrangements

Revenue Recognition

Earnings per Share

Employee Benefit Plans

Stock-Based Compensation

Revenue Recognition

Acquisitions and Investments in Unconsolidated Subsidiaries

Investments and Acquisitions

Restructuring and Integration Costs

Accumulated Other Comprehensive Income (Loss)

4 unchanged sentences

Related Parties

Subsequent Events

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the stockholders and the Board of Directors of

Keurig Dr Pepper Inc.

Burlington, Massachusetts

To the stockholders and the Board of Directors of Keurig Dr Pepper Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Keurig Dr Pepper Inc.

and subsidiaries (the "Company") as of December 31, 2021 and 2020, the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for each of the three years ended December 31, 2021, 2020 and 2019, and the related notes (collectively referred to as the "financial statements").

and subsidiaries (the "Company") as of December 31, 2022 and 2021, the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows, for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

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Critical Audit Matter Description

As discussed in Notes 2 and 4, the Company has indefinite-lived brand intangible assets (“brand assets”).

The Company’s evaluation of the brand assets for impairment is performed annually as of October 1, and involves the comparison of the fair value of each brand asset to its carrying value.

As discussed in Notes 2 and 3, the Company has indefinite-lived brand intangible assets (“brand assets”) with a balance of $ 19,291 million as of December 31, 2022.

Management recognized non-cash impairment losses of $ 472 million for the year ended December 31, 2022.

The Company’s evaluation of the brand assets for impairment is performed annually as of October 1, or more frequently if events or circumstances indicate the carrying amount may not be recoverable and involves the comparison of the fair value of each brand asset to its carrying value.

Management estimates the fair value of the brand assets using a multi-period excess earnings method, which is a specific discounted cash flow method.

The fair value determination of these assets requires management to make significant estimates and assumptions related to revenue growth projections, discount rates, and operating margins.

The fair value determination of these assets requires management to make significant estimates and assumptions related to revenue growth projections, operating margins, and discount rates.

Each of these assumptions is sensitive to future market or industry conditions, as well as company-specific conditions.

Changes in these assumptions could have a significant impact on the fair value of certain indefinite-lived brand intangible assets (“certain brand assets”) that have a lower headroom percentage, the amount of any impairment, or both.

Given the significant judgments made by management to estimate the fair value of certain brand assets, a high degree of auditor judgment and an increased extent of effort were required to perform audit procedures that evaluated the reasonableness of management’s estimates and assumptions.

Given the significant judgments made by management to estimate the fair value of certain brand assets, a high degree of auditor judgment and an increased extent of effort were required to perform audit procedures that evaluated the timing and reasonableness of management’s estimates and assumptions.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the underlying business and valuation assumptions for certain brand assets included the following, among others:

• We tested the effectiveness of controls over the Company’s indefinite-lived brand intangible asset impairment review process.

This included controls over management’s review of the revenue growth rates, operating margins, and discount rates used in the valuation models.

• We performed risk assessment procedures and for certain brand assets with a higher risk of impairment, we evaluated the reasonableness of management’s ability to forecast revenue growth and operating margins by comparing the forecasts to:

Our audit procedures consisted of risk assessment and testing the timing of management’s impairment assessment and the underlying business and valuation assumptions for certain brand assets.

Those procedures included, but were not limited to, the following:

• We tested the effectiveness of controls over the Company’s indefinite-lived brand intangible asset impairment review process, including annual and interim controls when circumstances indicated that the carrying amount may not be recoverable.

• We evaluated the reasonableness of management’s ability to forecast revenue growth and operating margins by comparing the forecasts to:

– Historical revenue and operating margins.

6 unchanged sentences

/s/ Deloitte & Touche LLP

Boston, Massachusetts

Dallas, Texas

February 23, 2023

1 unchanged sentence

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the stockholders and the Board of Directors of

Keurig Dr Pepper Inc.

Burlington, Massachusetts

To the stockholders and the Board of Directors of Keurig Dr Pepper Inc.

Opinion on Internal Control over Financial Reporting

20 unchanged sentences

/s/ Deloitte & Touche LLP

Boston, Massachusetts

Dallas, Texas

February 23, 2023

8 unchanged sentences

Impairment of intangible assets 477 — 67

Other operating (income) expense, net ( 70 ) ( 39 ) 2

Gain on litigation settlement ( 299 ) — —

Other operating income, net ( 105 ) ( 70 ) ( 39 )

Income from operations 2,605 2,894 2,480

3 unchanged sentences

Impairment of investments and note receivable 12 17 102

Other (income) expense, net ( 2 ) 17 19

Other expense (income), net 14 ( 2 ) 17

Income before provision for income taxes 1,719 2,798 1,753

19 unchanged sentences

Net change in pension and post-retirement liability, net of tax of $ 3 , $ — , and $ 1 , respectively

( 6 ) — ( 4 )

Net change in cash flow hedges, net of tax of $( 87 ), $ 30 and $ 1 , respectively

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Retained earnings 3,539 3,199

Accumulated other comprehensive (loss) income ( 26 ) 77

Accumulated other comprehensive income (loss) 129 ( 26 )

Total stockholders' equity 25,126 24,972

20 unchanged sentences

Gain on disposal of property, plant and equipment ( 80 ) ( 75 ) ( 36 )

Unrealized (gain) loss on foreign currency 9 ( 1 ) ( 24 )

Unrealized (gain) loss on derivatives ( 70 ) 8 36

Unrealized loss (gain) on foreign currency 26 9 ( 1 )

Unrealized loss (gain) on derivatives 383 ( 70 ) 8

Settlements of interest rate contracts 125 — —

Equity in losses of unconsolidated affiliates 5 5 20

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Purchases of intangibles ( 26 ) ( 32 ) ( 56 )

Acquisitions of businesses — — ( 8 )

Issuance of related party note receivable ( 18 ) ( 19 ) ( 6 )

1 unchanged sentence

Other, net 6 ( 16 ) 9

Net cash provided by (used in) investing activities $ 210 $ ( 316 ) $ ( 150 )

Net cash (used in) provided by investing activities $ ( 1,135 ) $ 210 $ ( 316 )

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

10 unchanged sentences

Repayment of KDP Revolver — — ( 1,850 )

Proceeds from term loan — — 2,000

Repayments of term loan — ( 425 ) ( 955 )

Repurchases of common stock ( 379 ) — —

Proceeds from issuance of common stock — 140 —

14 unchanged sentences

Capital expenditures included in accounts payable and accrued expenses $ 213 $ 189 $ 280

Transaction costs included in accounts payable and accrued expenses 8 — —

Conversion of note receivable to equity method investment 6 15 —

Non-cash acquisition of controlling interest — — 3

Measurement period adjustment of Core purchase price — — ( 11 )

Non-cash purchases of intangibles 19 — —

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Common Stock Issued Additional

Paid-In Capital

Retained Earnings Accumulated Other Comprehensive Income (Loss) Total

Stockholders' Equity

Non-Controlling Interest Total Equity

Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Total

Stockholders' Equity Non-Controlling Interest Total Equity

(in millions) Shares Amount

Balance as of December 31, 2019 1,406.8 $ 14 $ 21,557 $ 1,582 $ 104 $ 23,257 $ — $ 23,257

Adoption of new accounting standards — — — ( 5 ) — ( 5 ) — ( 5 )

Net income — — — 1,325 — 1,325 — 1,325

Other comprehensive income — — — — 234 234 — 234

Measurement period adjustment for acquisition of Core — — 11 — — 11 — 11

Other comprehensive loss — — — — ( 27 ) ( 27 ) — ( 27 )

Dividends declared, $ 0.60 per share

— — — ( 846 ) — ( 846 ) — ( 846 )

Proceeds from sale of stock by JAB — — 29 — — 29 — 29

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

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

3 unchanged sentences

Other comprehensive loss — — — — ( 103 ) ( 103 ) — ( 103 )

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

Dividends declared, $ 0.7125 per share

— — — ( 1,008 ) — ( 1,008 ) — ( 1,008 )

Proceeds from sale of stock by JAB — — 29 — — 29 — 29

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

Shares issued under employee stock-based compensation plans and other 6.5 — — — — — — —

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

Stock-based compensation — — 93 — — 93 — 93

Balance as of December 31, 2021 1,418.1 $ 14 $ 21,785 $ 3,199 $ ( 26 ) $ 24,972 $ — $ 24,972

Net income (loss) — — — 2,146 — 2,146 ( 1 ) 2,145

Other comprehensive loss — — — — ( 103 ) ( 103 ) — ( 103 )

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

Net income — — — 1,436 — 1,436 ( 1 ) 1,435

Other comprehensive income — — — — 155 155 — 155

Dividends declared, $ 0.775 per share

— — — ( 1,096 ) — ( 1,096 ) — ( 1,096 )

Repurchases of common stock ( 10.6 ) — ( 379 ) — — ( 379 ) — ( 379 )

Shares issued under employee stock-based compensation plans and other 0.9 — — — — — — —

19 unchanged sentences

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.

The fiscal year for Maple Parent Holdings Corp.

includes 53 weeks for the year ended December 31, 2022 and 52 weeks for the years ended December 31, 2021 and 2020.

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

5 unchanged sentences

The Company would be required to consolidate VIEs for which KDP has been determined to be the primary beneficiary.

To determine if KDP is the primary beneficiary, the Company assesses whether it has the power to direct the significant activities of the VIE and the obligation to absorb losses or receive benefits from the VIE that may be significant to the VIE.

To determine if KDP is the primary beneficiary, the Company assesses specific criteria and uses judgment when determining if it has the power to direct the significant activities of the VIE and the obligation to absorb losses or receive benefits from the VIE that may be significant to the VIE.

Factors considered include risk and reward sharing, voting rights, involvement in day-to-day capital and operating decisions, representation on a VIE’s governance structure, existence of unilateral kick-out rights exclusive of protective rights or voting rights, and level of economic disproportionality between the Company and the VIE’s other partner(s).

The Company has determined that it is not the primary beneficiary of any VIEs.

4 unchanged sentences

KDP eliminates from its financial results all intercompany transactions between entities included in the consolidated financial statements.

RECLASSIFICATIONS

For the year ended December 31, 2021, the Company made certain reclassifications in the prior period presentations of the Consolidated Statements of Cash Flows to conform to the current year presentation.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statements of Cash Flows

The following table presents the reclassifications made to the Consolidated Statements of Cash Flows:

UNALLOCATED CORPORATE COST ALIGNMENT

Effective January 1, 2022, the Company updated its presentation of certain of KDP's unallocated corporate costs, primarily related to IT, to be aligned among the Company's segments and to more consistently reflect controllable costs at the segment level.

Refer to Note 7 for current year presentation.

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

Year Ended December 31,

(in millions) Prior Presentation 2020 2019

Net cash used in financing activities:

Proceeds from commercial paper Net (repayment) issuance of commercial paper $ 7,288 $ 16,197

Repayments of commercial paper Net (repayment) issuance of commercial paper ( 8,534 ) ( 16,030 )

(in millions) 2021 2020

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

Coffee Systems $ 1,446 $ 1,318 $ 1,398 $ 1,268

Packaged Beverages 1,023 1,010 835 822

Beverage Concentrates 1,047 1,044 935 932

Latin America Beverages 133 133 105 105

Unallocated corporate costs ( 755 ) ( 611 ) ( 793 ) ( 647 )

Income from operations $ 2,894 $ 2,894 $ 2,480 $ 2,480

Significant Accounting Policies

21 unchanged sentences

There were no transfers of financial instruments between the three levels of fair value hierarchy during the years ended December 31, 2022, 2021 and 2020.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company evaluates the facts and circumstances of each acquisition to determine whether the transaction should be accounted for as an asset acquisition or a business combination.

Asset Acquisitions

When substantially all of the fair value of the assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets, the transaction is accounted for as an asset acquisition.

Direct transaction costs associated with asset acquisitions are capitalized.

Business Combinations

6 unchanged sentences

These charges primarily include direct third-party professional fees for advisory and consulting services and other incremental costs related to the acquisition.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Cash and Cash Equivalents

22 unchanged sentences

As of December 31, 2022 and 2021, Walmart accounted for approximately $ 303 million and $ 157 million of trade receivables, respectively, which exceeded 10% of the Company's total trade accounts receivabl e.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Inventories consist of raw materials, work in process and finished goods.

1 unchanged sentence

The costs of finished goods inventories manufactured by the Company include raw materials, direct labor and indirect production and overhead costs.

Finished goods also include the purchases of brewing systems from third-party manufacturers and beverages from partner brands.

Finished goods also include the purchases of brewing systems and certain beverages from third-party manufacturers.

Inventories are stated at the lower of cost or net realizable value.

6 unchanged sentences

Adjustments for excess and obsolete inventories are based on an assessment of slow-moving and obsolete inventories, determined by historical usage and demand.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Property, Plant and Equipment, Net

2 unchanged sentences

The Company capitalizes certain computer software and software development costs incurred in connection with developing or obtaining computer software for internal use, which are included in property, plant and equipment.

When property, plant and equipment is sold, the costs and the related accumulated depreciation are removed from the accounts, and any net gain or loss is recorded in Other operating (income) expense, net in the Consolidated Statements of Income.

When property, plant and equipment is sold, the costs and the related accumulated depreciation are removed from the accounts, and any net gain or loss is recorded in Other operating income, net in the Consolidated Statements of Income.

For financial reporting purposes, depreciation is computed on the straight-line method over the estimated useful asset lives as follows:

9 unchanged sentences

Measurement of an impairment loss is based on the excess of the carrying amount of the group of assets over the long-lived asset's fair value.

For the year ended December 31, 2021, the Company recorded no impairment loss.

For the years ended December 31, 2020 and 2019, the Company recorded an impairment loss of $ 1 million and $ 24 million, respectively.

Impairment loss is recorded in Other operating (income) expense, net, in the Consolidated Statements of Income.

For the years ended December 31, 2022 and 2021, the Company recorded no impairment loss related to these assets.

For the year ended December 31, 2020, the Company recorded an impairment loss of $ 1 million.

Impairment loss is recorded in Other operating income, net, in the Consolidated Statements of Income.

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

7 unchanged sentences

Leases with an initial term of 12 months or less are not recognized on the Consolidated Balance Sheets.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Right of use assets and lease liabilities are recognized in the Consolidated Balance Sheets at the present value of future minimum lease payments over the lease term on the commencement date.

7 unchanged sentences

Rental payments under such transactions are recognized as a reduction of the financing obligation and as interest expense using an effective interest method.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Deferred Compensation Plan

1 unchanged sentence

non-qualified defined contribution plan.

Employee and employer matching contributions under the non-qualified defined contribution plan are maintained in a rabbi trust and are not readily available to the Company.

Contributions under the non-qualified defined contribution plan are maintained in a rabbi trust and are not readily available to the Company.

The rabbi trust consists of readily marketable equity securities, which are included in Other non-current assets in the Consolidated Balance Sheets.

Gains or losses from such investments are classified as trading and are charged to Other (income) expense, net in the Consolidated Statements of Income.

Gains or losses from such investments are classified as trading and are charged to Other expense (income), net in the Consolidated Statements of Income.

The corresponding deferred compensation liability is included in Other non-current liabilities in the Consolidated Balance Sheets, with changes in this obligation recognized as adjustments to compensation expense and recorded in SG&A expenses.

5 unchanged sentences

The companies over which we exert significant influence, but do not control the financial and operating decisions, are accounted for as equity method investments.

The Company's equity method investments are reported at cost and adjusted each period for the Company’s share of the investee’s net income (loss) and dividends paid, if any.

The Company's proportionate share of the net income (loss) resulting from these investments is recorded in Other (income) expense, net in the Consolidated Statements of Income.

The Company's equity method investments are reported at cost, which includes third-party transaction costs, and are adjusted each period for the Company’s share of the investee’s net income (loss) and dividends paid, if any.

The Company's proportionate share of the net income (loss) resulting from these investments is recorded in Other expense (income), net in the Consolidated Statements of Income.

Any gains and losses resulting from the sale of these investments are recorded in Gain on sale of equity method investment.

2 unchanged sentences

Investments with readily determinable fair values for which we do not have the ability to exercise significant influence are measured at fair value and reported in Other non-current assets in the Company's Consolidated Balance Sheets.

As of December 31, 2022 and 2021, all such investments were categorized as Level 1.

Unrealized gains and losses on these investments are recorded in Other (income) expense, net in the Consolidated Statements of Income.

Investments without readily determinable fair values for which we do not have the ability to exercise significant influence are accounted for at cost and reported in Other non-current assets in the Company's Consolidated Balance Sheets.

Any gains or losses resulting from the sales of these investments are recorded in Other operating (income) expense, net, in the Consolidated Statements of Income.

Any gains or losses resulting from the sales of these investments are recorded in Other operating income, net, in the Consolidated Statements of Income.

The Company's non-controlling investments in certain privately held entities do not have readily determinable fair values and are periodically evaluated for impairment.

An impairment loss would be recorded whenever a decline in value of an investment below its carrying amount is determined to be other than temporary.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Goodwill and Other Intangible Assets

7 unchanged sentences

If the criteria are not met to assign an indefinite life, the brand is amortized over its expected useful life.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Identifiable intangible assets deemed by the Company to have determinable finite useful lives are amortized on a straight-line basis over the period of which the expected economic benefit is derived.

24 unchanged sentences

Refer to Note 3 for additional information.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capitalized Customer Incentive Programs

4 unchanged sentences

The costs for these programs are amortized over the period to be directly benefited based upon a methodology consistent with the Company 's contractual rights under these arrangements.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Accounts Payable

KDP has agreements with third party administrators which allow participating suppliers to track payment obligations 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.

KDP has no economic interest in a supplier’s decision to enter into these agreements and no direct financial relationship with the financial institutions.

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 December 31, 2022 and 2021, $ 3,839 million and $ 3,194 million, respectively, of KDP's outstanding payment obligations were voluntarily elected by the supplier and sold to financial institutions.

Structured Payables

The Company has entered into an agreement with a supply chain payment processing intermediary, for the intermediary to act as a virtual credit card sponsor, whereby the card sponsor pays amounts on behalf of the Company and sells the amounts due from the Company to a participating financial institution.

The card sponsor then bills the Company the original payment amount.

The card sponsor then bills the Company the original payment amount, effectively financing the transaction.

The agreement permits the Company to utilize the third party and participating financial institutions to make a broad range of payments, including commercial payables to suppliers, business acquisitions, purchases of property, plant and equipment, and employee-related payments

Additionally, the Company has commercial arrangements with suppliers who use third party administrators to sell payment obligations from KDP to financial institutions.

The Company evaluates the commercial arrangements with suppliers to determine if they are more representative of debt or accounts payable classification.

If the Company determines these commercial arrangements are more representative of a financing transaction, then the Company records those payment obligations as structured payables.

Structured payables have equal priority with accounts payable and are treated as non-recourse obligations.

8 unchanged sentences

defined pension plans exceed the estimated annual interest and service costs.

The components of net periodic benefit cost other than the service cost component are included in Other (income) expense, net, in the Company's Consolidated Statements of Income.

The components of net periodic benefit cost other than the service cost component are included in Other expense (income), net, in the Company's Consolidated Statements of Income.

The service cost component is included in either Cost of sales or SG&A expenses, depending on the classification of the employee's other compensation costs.

2 unchanged sentences

The Company participates in three multi-employer pension plans and makes contributions to those plans, which are recorded in either Cost of sales or SG&A expenses, depending on the classification of the employee's other compensation costs.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Risk Management Programs

7 unchanged sentences

The Company bases its judgment of the recoverability of its deferred tax assets primarily on historical earnings, its estimate of current and expected future earnings and prudent and feasible tax planning strategies.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company establishes income tax liabilities to remove some or all of the income tax benefit of any of the Company's income tax positions at the time the Company determines that the positions become uncertain based upon one of the following:

13 unchanged sentences

When net income is affected by the variability of the underlying transaction, the applicable offsetting amount of the gain or loss from the derivative instrument deferred in AOCI is reclassified to net income.

Cash flows from derivative instruments designated in a qualifying hedging relationship are classified in the same category as the cash flows from the hedged items.

Cash flows from derivative instruments designated in a qualifying hedging relationship are classified in the same category as the cash flows from the underlying hedged items.

If a cash flow hedge were to cease to qualify for hedge accounting, or were terminated, the derivatives would continue to be carried on the balance sheet at fair value until settled and hedge accounting would be discontinued prospectively.

4 unchanged sentences

The Company selects and periodically reviews counterparties based on credit ratings, limits its exposure to a single counterparty under defined guidelines and monitors the market position of the programs upon execution of a hedging transaction and at least on a quarterly basis.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Loss Contingencies

7 unchanged sentences

The estimate for warranties requires assumptions relating to expected warranty claims which are based on the Company's historical claims and known current year factors.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Revenue Recognition

3 unchanged sentences

The amount of consideration the Company receives and revenue the Company recognizes varies with changes in customer incentives the Company offers to its customers and their customers.

These incentives and discounts include cash discounts, price allowances, volume-based rebates, product placement fees and other financial support for items such as trade promotions, displays, new products, consumer incentives and advertising assistance.

These incentives and discounts, which are recorded as a reduction of revenue, include cash discounts, price allowances, volume-based rebates, product placement fees and other financial support for items such as trade promotions, displays, new products, consumer incentives and advertising assistance.

Accruals are established for the expected payout based on contractual terms, volume-based metrics and/or historical trends and require management judgment with respect to estimating customer participation and performance levels.

15 unchanged sentences

Research and Development Costs

Research and development costs are expensed when incurred and amounted to $ 66 million, $ 69 million and $ 81 million for the years ended December 31, 2021, 2020 and 2019.

Research and development costs are expensed when incurred and amounted to $ 65 million, $ 66 million and $ 69 million for the years ended December 31, 2022, 2021 and 2020, respectively.

These expenses are recorded primarily in SG&A expenses in the Consolidated Statements of Income.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Stock-Based Compensation Expense

3 unchanged sentences

The fair value of PSUs is estimated at the date of grant using a Monte-Carlo simulation.

Forfeitures are recognized as incurred.

Prior to January 1, 2022, the Company recorded forfeitures as incurred.

Effective January 1, 2022, the Company changed its accounting policy election to record expense only for awards expected to vest.

Estimated forfeiture rates are based on historical data and are periodically reassessed.

The cumulative effect of this change in accounting policy was recorded effective January 1, 2022, as the impact of forfeitures on stock-based compensation has historically been insignificant to the Company.

Stock-based compensation expense is recognized ratably over the vesting period and is recorded SG&A expenses in the Consolidated Statements of Income.

3 unchanged sentences

When the Company implements these programs, the Company incurs expenses, such as employee separations, lease terminations and other direct exit costs, that qualify as exit and disposal costs under U.S.

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

The Company has recorded these costs within SG&A expenses on the Consolidated Statements of Income, and these costs are held within unallocated corporate costs.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Foreign Currency Translation and Transaction

10 unchanged sentences

Assets and liabilities resulting from these transactions are translated at the rate of exchange in effect at the balance sheet date.

Such differences are recorded in Cost of sales or Other (income) expense, net in the Consolidated Statements of Income, depending on the nature of the underlying transaction .

Such differences are recorded in Cost of sales or Other expense (income), net in the Consolidated Statements of Income, depending on the nature of the underlying transaction .

Earnings per Share

1 unchanged sentence

Diluted EPS reflects the assumed conversion of all dilutive securities.

Repurchases of Common Stock

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

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

RECENTLY ISSUED ACCOUNTING STANDARDS

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU 2020-04").

Facilitation of the Effects of Reference Rate Reform on Financial Reporting , later amended by ASU 2021-01, Reference Rate Reform (Topic 848) Scope and ASU 2022-06, Reference Rate Reform (Topic 848):

Deferral of the Sunset Date of Topic 848 .

The objective of ASU 2020-04 is to provide optional expedients and exceptions for applying U.S.

GAAP to contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform.

ASU 2020-04 is effective and can be elected for all entities from the issuance date of ASU 2020-04 through December 31, 2022.

This was further clarified by ASU 2021-01, which confirmed that certain optional expedients and exceptions in Topic 848 apply to derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform.

ASU 2020-04 is effective and can be elected for all entities from the issuance date of ASU 2020-04 through December 31, 2024, as amended by ASU 2022-06.

The Company is currently evaluating ASU 2020-04 but expects the impact to be immaterial to KDP’s consolidated financial statements.

In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832):

Disclosures by Business Entities about Government Assistance .

The objective of ASU 2021-10 is to require business entities to disclose information about certain government assistance they receive.

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 2021-10 but expects the impact of the disclosures to be immaterial to KDP’s consolidated financial statements.

RECENTLY ADOPTED PROVISIONS OF U.S.

As of January 1, 2021, the Company adopted ASU 2020-01, Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323),and Derivatives and Hedging (Topic 815):

Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 .

The objective of ASU 2020-01 is to clarify the interaction of the accounting for equity securities, investments accounted for under the equity method of accounting and the accounting for certain forward contracts and purchased options accounted for under different topics in U.S.

The adoption of the standard did not impact KDP’s consolidated financial statements.

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

Goodwill and Other Intangible Assets

Changes in the carrying amount of goodwill by reportable segment for the years ended December 31, 2022 and 2021 are as follows:

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

Balance as of December 31, 2020 $ 9,795 $ 5,314 $ 4,536 $ 539 $ 20,184

Foreign currency translation 5 5 3 ( 15 ) ( 2 )

Balance as of December 31, 2021 9,800 5,319 4,539 524 20,182

Foreign currency translation ( 64 ) ( 46 ) ( 31 ) 31 ( 110 )

Balance as of December 31, 2022 $ 9,736 $ 5,273 $ 4,508 $ 555 $ 20,072

INTANGIBLE ASSETS OTHER THAN GOODWILL

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

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

$ 19,291 $ 19,865

Trade names 2,480 2,480

Contractual arrangements (2)

Distribution rights (3)

Total $ 21,993 $ 22,553

(1) The decrease in brands with indefinite lives was driven by impairment charges of $ 472 million , led by Bai and Schweppes, and $ 102 million of FX translation during the year ended December 31, 2022.

Refer to Impairment Analysis below.

(2) The decrease in contractual arrangements is driven by FX translation during the year ended December 31, 2022.

(3) The Company executed seven agreements to acquire distribution rights during the year ended December 31, 2022, which resulted in an increase of $ 15 million.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

December 31, 2022 December 31, 2021

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

Acquired technology $ 1,146 $ ( 475 ) $ 671 $ 1,146 $ ( 401 ) $ 745

Customer relationships 638 ( 204 ) 434 638 ( 169 ) 469

Trade names (1)

127 ( 101 ) 26 128 ( 86 ) 42

51 ( 19 ) 32 21 ( 8 ) 13

Distribution rights 29 ( 16 ) 13 29 ( 11 ) 18

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

Total $ 2,015 $ ( 825 ) $ 1,190 $ 1,986 $ ( 683 ) $ 1,303

(1) The decrease in trade names is driven by FX translation during the year ended December 31, 2022.

(2) The increase in brands with definite lives during the year ended December 31, 2022 is driven by the acquisition of Atypique, which was recorded as a definite lived brand asset of $ 30 million with an estimated useful life of five years.

This increase was partially offset by impairment expense recognized through accumulated amortization of $ 5 million on a definite lived brand asset.

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

Year Ended December 31,

(in millions) 2022 2021 2020

Amortization expense for intangible assets with definite lives $ 138 $ 134 $ 133

Amortization expense of these intangible assets is expected to be as follows:

For the Years Ending December 31,

(in millions) 2023 2024 2025 2026 2027

Expected amortization expense for intangible assets with definite lives $ 138 $ 130 $ 117 $ 113 $ 95

IMPAIRMENT ANALYSIS

The following table summarizes impairment recognized on indefinite lived intangible assets as a result of the annual impairment analyses as of October 1 of each year and interim triggering analyses during the periods:

Year Ended December 31,

(in millions) 2022 2021 2020

Interim triggering analysis $ 311 $ — $ —

Annual analysis 161 — 67

Total impairment of indefinite lived intangible assets $ 472 $ — $ 67

Quarterly Triggering Event Analysis

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

Management identified specific performance and margin challenges for Bai 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.

Annual Analysis

For both goodwill and other indefinite lived intangible assets, KDP has the option to first assess qualitative factors to determine whether the fair value of either the reporting unit or indefinite lived intangible asset is "more likely than not" less than its carrying value, also known as a Step 0 analysis.

For the years ended December 31, 2022 and 2021, KDP performed a Step 0 analysis for certain indefinite lived intangible assets, including trade names, contractual arrangements and distribution rights and did not identify any indicators of impairment.

For goodwill and the primary indefinite-lived brands, KDP performed a quantitative analysis, using the income approach, or in some cases a combination of income and market based approaches, to determine the fair value of the Company's assets, as well as an overall consideration of market capitalization and enterprise value.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended December 31, 2020, KDP performed a quantitative analysis, using the income approach, or in some cases a combination of income and market based approaches, to determine the fair value of the Company's assets, as well as an overall consideration of market capitalization and enterprise value.

The following table provides the range of rates used in the analysis as of October 1, 2022, 2021, and 2020:

2022 2021 2020

Rate Minimum Maximum Minimum Maximum Minimum Maximum

Discount rates 7.3 % 10.3 % 6.5 % 10.0 % 6.0 % 10.0 %

Long-term growth rates — % 3.8 % — % 3.8 % — % 3.5 %

Royalty rates (1)

N/A N/A N/A N/A 1.0 % 10.0 %

(1) Royalty rates were not used for the impairment analysis for the years ended December 31, 2022 or 2021, as KDP performed a Step 0 qualitative analysis for the trade names which historically utilized the Relief From Royalty Method.

The primary factors that led to the brand impairment determination in the fourth quarter of 2022, driven primarily by Schweppes, was the change in the macroeconomic environment leading to increases in discount rates, as shown in the table above, as well as supply chain disruptions within third-party distribution networks.

The factors that led to the Bai brand impairment determination in the fourth quarter of 2020 were primarily performance of the brand during the COVID-19 pandemic, related shifts in consumer behaviors that were expected to be other-than-temporary, and updated forecasts of brand performance based on a refined strategic vision to market and sell the product.

The results of the impairment analysis of the Company's indefinite lived brands as of October 1, 2022, 2021, and 2020 are as follows:

2022 2021 2020

Headroom Percentage Carrying Value Fair Value Carrying Value Fair Value Carrying Value Fair Value

$ 2,136 $ 2,136 $ — $ — $ 415 $ 415

Less than 25% 2,186 2,547 3,311 3,663 5,052 5,775

26 - 50% — — 5,335 7,456 2,261 2,993

In excess of 50% 14,848 28,942 11,173 21,982 11,946 19,835

(1) Carrying value reflects the results of the annual impairment analysis recognized during the years ended December 31, 2022 and 2020.

Long-term Obligations and Borrowing Arrangements

1 unchanged sentence

(in millions) 2022 2021

Senior unsecured notes $ 11,733 $ 13,065

Term loans — 423

Subtotal 11,733 13,488

Less - current portion ( 155 ) ( 2,345 )

$ 11,568 $ 11,733

current portion of long-term obligations ( 496 ) ( 155 )

Long-term obligations $ 11,072 $ 11,578

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

2 unchanged sentences

Current portion of long-term obligations:

Senior unsecured notes 155 2,246

Term loans — 99

Short-term borrowings and current portion of long-term obligations $ 895 $ 304

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SENIOR UNSECURED NOTES

3 unchanged sentences

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

2021-A Notes November 15, 2021 3.200 % — 250

2021-B Notes November 15, 2021 2.530 % — 250

2022 Notes November 15, 2022 2.700 % — 250

2023 Merger Notes May 25, 2023 4.057 % 1,000 2,000

2023 Notes December 15, 2023 3.130 % 500 500

2024 Notes (1)

March 15, 2024 0.750 % 1,150 —

2024 Notes March 15, 2024 0.750 % 1,150 1,150

2025 Merger Notes May 25, 2025 4.417 % 529 1,000

3 unchanged sentences

2028 Merger Notes May 25, 2028 4.597 % 1,112 2,000

2029 Notes April 15, 2029 3.950 % 1,000 —

2030 Notes May 1, 2030 3.200 % 750 750

2031 Notes March 15, 2031 2.250 % 500 500

2038 Notes (3)

May 1, 2038 7.450 % 125 125

2032 Notes April 15, 2032 4.050 % 850 —

2038 Notes May 1, 2038 7.450 % — 125

2038 Merger Notes May 25, 2038 4.985 % 211 500

4 unchanged sentences

2051 Notes March 15, 2051 3.350 % 500 500

2052 Notes April 15, 2052 4.500 % 1,150 —

Principal amount $ 11,743 $ 11,875

2 unchanged sentences

Carrying amount $ 11,568 $ 11,733

(1) The 2024 Notes may be called anytime on or after March 15, 2022, in whole or in part, at the Company’s option, at a redemption price equal to 100% of the principal amount being redeemed, plus accrued and unpaid interest.

(1) The carrying amount includes unamortized discounts, debt issuance costs and fair value adjustments related to the DPS Merger.

(3) On January 24, 2022, the Company redeemed and retired the remainder of its 2038 Notes.

Notice was provided to external parties of the Company’s intention to redeem the 2038 Notes prior to December 31, 2021, therefore the Notes have been reclassified and are reported in Current portion of long-term obligations within the Consolidated Balance Sheets.

Refer to Note 21 for additional information.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On March 15, 2021, the Company completed the issuance of the 2024 Notes, the 2031 Notes, and the 2051 Notes.

On January 24, 2022, KDP redeemed and retired the remainder of its 2038 Notes.

The loss on early extinguishment of the 2038 Notes was approximately $ 45 million, comprised of the make-whole premium and the write-off of the associated unamortized fair value adjustment related to the DPS Merger.

On April 22, 2022, the Company undertook the 2022 Strategic Refinancing and completed the issuance of the 2029 Notes, the 2032 Notes, and the 2052 Notes.

The discount associated with these notes was approximately $ 16 million, and the Company incurred $ 23 million in debt issuance costs.

The net proceeds from the issuance were used to repay the Company’s 2021-A Notes, 2021-B Notes, 2022 Notes, and approximately $ 1 billion of the 2023 Merger Notes, as well as to repay and terminate the 2019 KDP Term Loan as described below.

As a result of the repayments of senior unsecured notes, the Company recorded losses on early extinguishment of debt of $ 104 million during the year ended December 31, 2021, comprised of a make-whole premium, fair market value adjustments and deferred financing fees written off.

The indentures governing the Notes, among other things, contain customary default provisions and limit the Company's ability to incur indebtedness secured by principal properties, to enter into certain sale and leaseback transactions and to enter into certain mergers or transfers of substantially all of the Company's assets.

The proceeds from the issuance were used to voluntarily prepay and retire the remaining 2023 Merger Notes and to tender portions of the 2025 Merger Notes, the 2028 Merger Notes, the 2038 Merger Notes, and the 2048 Merger Notes.

The Company recorded approximately $ 169 million of loss on early extinguishment of debt, comprised of the tender and make-whole premiums, the write-off of debt issuance costs, and the impact of terminating reverse treasury lock contracts.

Notes, among other things, contain customary default provisions and limit the Company's ability to incur indebtedness secured by principal properties, to enter into certain sale and leaseback transactions and to enter into certain mergers or transfers of substantially all of the Company's assets.

The Notes are fully and unconditionally guaranteed by certain direct and indirect subsidiaries of the Company.

As of December 31, 2022, the Company was in compliance with all financial covenant requirements of the Notes.

BORROWING ARRANGEMENTS

Financial Information Related to KDP Credit Agreements

The KDP Credit Agreements consisted of the following:

(in millions) 2021 2020

Issuance Maturity Date Available Balances Carrying Value Carrying Value

2019 KDP Term Loan February 8, 2023 — — 425

KDP Revolver (1)

February 28, 2023 2,400 — —

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

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

Principal amount $ — $ 425

Unamortized debt issuance costs

Carrying amount $ — $ 423

(1) The KDP Revolver has $ 200 million letters of credit available, none of which were utilized as of December 31, 2021.

The KDP Credit Agreements contain customary representations and warranties for investment grade financings.

The KDP Credit Agreements also contain (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 total net leverage ratio and (iv) customary events of default (including a change of control) for financings of this type.

As of December 31, 2021, the Company was in compliance with its financial covenant requirement relating to the KDP Credit Agreements.

2019 KDP Term Loan

In March 2021, the Company terminated its 2019 KDP Term Loan using proceeds from the aforementioned issuance of senior unsecured notes.

As a result of the extinguishment of the 2019 KDP Term Loan, the Company recorded approximately $ 1 million of loss on early extinguishment during the year ended December 31, 2021.

The 2019 KDP Term Loan had an original maturity date of February 8, 2023.

364-Day Credit Agreements

In March 2021, KDP terminated its 2020 364-Day Credit Agreement, which originally was available through April 13, 2021.

No amounts were drawn under the 2020 364-Day Credit Agreement prior to termination.

KDP then entered into the 2021 364-Day Credit Agreement on March 24, 2021 among KDP, the banks party thereto and Bank of America, N.A.

as administrative agent, pursuant to which KDP obtained a $ 1.5 billion commitment.

The interest rate applicable to borrowings under the 2021 364-Day Credit Agreement ranges from a rate equal to LIBOR plus a margin of 1.000 % to 1.625 % or a base rate plus a margin of 0.000 % to 0.625 %, depending on the rating of certain indexed debt of the Company.

The 2021 364-Day Credit Agreement matures on March 23, 2022, and includes a term-out option which allows KDP to extend any outstanding amounts borrowed under the agreement for one year for a fee of 0.750 % on the amounts borrowed.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

KDP Revolving Credit Facility

The interest rate applicable to any borrowings under the KDP Revolver ranges from a rate equal to LIBOR plus a margin of 0.875 % to 1.500 % or a base rate plus a margin of 0.00 % to 0.50 %, depending on the rating of certain indexed debt of KDP.

Under the KDP Revolver, KDP will pay the Revolving Lenders an unused commitment fee calculated at a rate per annum equal to an amount between 0.07 % and 0.20 %, depending on the rating of certain indexed debt of KDP.

The KDP Revolver will mature on February 28, 2023.

BORROWING ARRANGEMENTS

Revolving Credit Agreement

On February 23, 2022, KDP terminated the 2021 364-Day Credit Agreement and the KDP Revolver.

The loss on early extinguishment of these instruments was approximately $ 3 million, comprised of termination fees and the write-off of the associated deferred financing fees.

There were no amounts drawn upon the 2021 364-Day Credit Agreement or the KDP Revolver prior to termination.

Also on February 23, 2022, KDP entered into the 2022 Revolving Credit Agreement among KDP, as borrower, the lenders from time to time party thereto and JPMorgan Chase, Bank, N.A., as administrative agent.

The Company incurred approximately $ 4 million in deferred financing fees related to the issuance.

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

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

Issuance Maturity Date Capacity Carrying Value Carrying Value

2022 Revolving Credit Agreement (1)

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 December 31, 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.

Borrowings under the 2022 Revolving Credit Agreement will bear interest at a rate per annum equal to, at KDP's option, an adjusted SOFR rate plus a margin of 0.875 % to 1.500 % or a base rate plus a margin of 0.000 % to 0.500 %, in each case, depending on the rating of certain index debt of KDP.

The 2022 Revolving Credit Agreement contains customary representations and warranties for investment grade financings.

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 December 31, 2022, KDP was in compliance with its minimum interest coverage ratio relating to the 2022 Revolving Credit Agreement .

Commercial Paper Program

KDP has a commercial paper program, under which the Company may issue unsecured commercial paper notes on a private placement basis up to a maximum aggregate amount outstanding at any time of $ 2,400 million.

The maturities of the commercial paper notes will vary, but may not exceed 397 days from the date of issuance.

KDP classifies its commercial paper notes as short-term, as maturities do not exceed one year.

The maturities of the commercial paper notes vary, but commercial paper notes are classified as short-term, as maturities do not exceed one year.

The Company issues commercial paper notes as needed for general corporate purposes.

Outstanding commercial paper notes rank equally with all of the commercial paper notes' existing and future unsecured borrowings.

The Company had $ 149 million outstanding commercial paper notes as of December 31, 2021 and none as of December 31, 2020.

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

4 unchanged sentences

Letters of Credit Facility

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

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

Under this facility, $ 150 million is available for the issuance of letters of credit, $ 68 million of which was utilized as of December 31, 2022 and $ 82 million of which remains available for use.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FAIR VALUE DISCLOSURES

3 unchanged sentences

The fair value of the Company's Notes was $ 10,495 million and $ 13,078 million as of December 31, 2022 and December 31, 2021, respectively.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Goodwill and Other Intangible Assets

Changes in the carrying amount of goodwill by reportable segment for the years ended December 31, 2021 and 2020 are as follows:

Coffee Systems Packaged Beverages Beverage Concentrates Latin America Beverages Total

Balance as of December 31, 2019 $ 9,775 $ 5,301 $ 4,526 $ 570 $ 20,172

Foreign currency translation 20 13 10 ( 31 ) 12

Balance as of December 31, 2020 9,795 5,314 4,536 539 20,184

Foreign currency translation 5 5 3 ( 15 ) ( 2 )

Balance as of December 31, 2021 $ 9,800 $ 5,319 $ 4,539 $ 524 $ 20,182

INTANGIBLE ASSETS OTHER THAN GOODWILL

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

December 31, 2021 December 31, 2020

$ 19,865 $ 19,874

Trade names 2,480 2,480

Contractual arrangements 123 123

Distribution rights (2)

Total $ 22,553 $ 22,534

(1) The decrease was driven by $ 9 million of FX translation during the year ended December 31, 2021.

(2) The Company executed ten agreements to acquire distribution rights during the year ended December 31, 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:

December 31, 2021 December 31, 2020

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

Acquired technology $ 1,146 $ ( 401 ) $ 745 $ 1,146 $ ( 328 ) $ 818

Customer relationships 638 ( 169 ) 469 638 ( 135 ) 503

Trade names 128 ( 86 ) 42 127 ( 69 ) 58

Distribution rights 29 ( 11 ) 18 26 ( 6 ) 20

Contractual arrangements 24 ( 8 ) 16 24 ( 5 ) 19

Brands 21 ( 8 ) 13 21 ( 5 ) 16

Total $ 1,986 $ ( 683 ) $ 1,303 $ 1,982 $ ( 548 ) $ 1,434

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

Year Ended December 31,

(in millions) 2021 2020 2019

Amortization expense for intangible assets with definite lives $ 134 $ 133 $ 126

Amortization expense of these intangible assets is expected to be as follows:

For the Years Ending December 31,

(in millions) 2022 2023 2024 2025 2026

Expected amortization expense for intangible assets with definite lives $ 134 $ 132 $ 124 $ 109 $ 105

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

IMPAIRMENT ANALYSIS

For both goodwill and other indefinite lived intangible assets, KDP has the option to first assess qualitative factors to determine whether the fair value of either the reporting unit or indefinite lived intangible asset is not "more likely than not" less than its carrying value, also known as a Step 0 analysis.

For the year ended December 31, 2021, KDP performed a Step 0 analysis for certain indefinite lived intangible assets, including trade names, contractual arrangements and distribution rights and did not identify any indicators of impairment.

For the year ended December 31, 2019, KDP performed a quantitative analysis using an income based approach to determine fair value.

The following table provides the range of rates used in the analysis as of October 1, 2021, 2020, and 2019:

2021 2020 2019

Rate Minimum Maximum Minimum Maximum Minimum Maximum

Discount rates 6.5 % 10.0 % 6.0 % 10.0 % 7.3 % 13.0 %

Long-term growth rates — % 3.8 % — % 3.5 % — % 2.5 %

Royalty rates (1)

N/A N/A 1.0 % 10.0 % 1.0 % 10.0 %

(1) Royalty rates were not used for the impairment analysis for the year ended December 31, 2021 as KDP performed a Step 0 qualitative analysis for the trade names which historically utilized the Relief From Royalty Method.

No impairment was identified for the years ended December 31, 2021 or 2019.

KDP recorded impairment of $ 67 million for the year ended December 31, 2020 for Bai, an indefinite lived brand asset.

No other impairment of goodwill or indefinite lived intangible assets was identified for the year ended December 31, 2020.

The factors that led to the Bai brand impairment determination for the year ended December 31, 2020 were primarily performance of the brand during the COVID-19 pandemic, related shifts in consumer behaviors that are expected to be other-than-temporary, and updated forecasts of brand performance based on a refined strategic vision to market and sell the product.

The results of the impairment analysis of the Company's indefinite lived brands and trade names as of October 1, 2021, 2020, and 2019 are as follows:

2021 2020 2019

Headroom Percentage Carrying Value Fair Value Carrying Value Fair Value Carrying Value Fair Value

Impairment (1)

$ — $ — $ 482 $ 415 $ — $ —

0 - 25% 3,311 3,663 5,052 5,775 6,356 7,251

26 - 50% 5,335 7,456 2,261 2,993 12,319 17,303

In excess of 50% 11,173 21,982 11,946 19,835 1,188 1,988

$ 19,819 $ 33,101 $ 19,741 $ 29,018 $ 19,863 $ 26,542

Trade Names (2)

Impairment N/A N/A $ — $ — $ — $ —

0 - 25% N/A N/A 1 1 — —

26 - 50% N/A N/A — — — —

In excess of 50% N/A N/A 2,479 6,990 2,479 6,650

$ — $ — $ 2,480 $ 6,991 $ 2,479 $ 6,650

(1) The impairment line represents the carrying value and fair value of Bai as of the October 1, 2020 measurement date, prior to the $ 67 million impairment recorded during the fourth quarter of 2020.

(2) The Company performed a Step 0 qualitative impairment analysis on the trade names for the year ended December 31, 2021 .

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Restructuring and Integration Costs

Restructuring and integration charges incurred on the defined programs during the years ended December 31, 2021, 2020 and 2019 were as follows:

Year Ended December 31,

(in millions) 2021 2020 2019

DPS Integration program $ 202 $ 200 $ 232

Other restructuring charges — — 1

Total restructuring and integration charges

$ 202 $ 200 $ 233

Restructuring liabilities that qualify as exit and disposal costs under U.S.

GAAP are included in accounts payable and accrued expenses on the consolidated financial statements.

R estructuring liabilities for the DPS Integration Program, all of which were workforce reduction costs, as of December 31, 2021 and 2020 , along with charges to expense, cash payments, and non-cash charges during the years ended December 31, 2021 and 2020, were as follows:

(in millions) Workforce Reduction Costs

Balance as of December 31, 2019 $ 15

Charges to expense

Cash payments

Non-cash adjustment items

Balance as of December 31, 2020 14

Charges to expense

Cash payments

Non-cash adjustment items

Balance as of December 31, 2021 $ 19

RESTRUCTURING PROGRAMS

DPS Integration Program

As part of the DPS Merger, the Company developed a program to deliver $ 600 million in synergies over a three-year period through supply chain optimization, reduction of indirect spend through new economies of scale, elimination of duplicative support functions and advertising and promotion optimization.

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 will be completed in 2022.

The restructuring and integration program resulted in cumulative pre-tax charges of approximately $ 790 million, primarily consisting of professional fees related to the integration and transformation and costs associated with severance and employee terminations, through December 31, 2021.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

INTEREST RATES

1 unchanged sentence

KDP is exposed to interest rate risk related to its borrowing arrangements and obligations.

The Company enters into interest rate swaps to provide predictability in the Company 's overall cost structure and to manage the balance of fixed-rate and variable-rate debt.

The Company enters into interest rate contracts to provide predictability in the Company 's overall cost structure and to manage the balance of fixed-rate and variable-rate debt.

KDP primarily enters into receive-fixed, pay-variable and receive-variable, pay-fixed swaps and swaption contracts.

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 interest expense in the Consolidated Statements of Income.

As of December 31, 2021, economic interest rate derivative instruments have maturities ranging from January 2027 to May 2028.

As of December 31, 2022, economic interest rate derivative instruments have maturities ranging from January 2027 to April 2032.

Additionally, during the year ended December 31, 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.

These contracts terminated during the year ended December 31, 2022, and the realized losses associated with these contracts are reported in loss on early extinguishment of debt in the Consolidated Statements of Income.

Cash Flow Hedges

In order to hedge the variability in cash flows from interest rate changes associated with the Company’s planned future issuances of long-term debt, during the first quarter of 2021, the Company entered into forward starting swaps and designated them as cash flow hedges.

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

As of December 31, 2021, the forward starting swaps have mandatory termination dates ranging from June 2022 to May 2025.

In April 2022, concurrently with the 2022 Strategic Refinancing, KDP terminated $ 1.5 billion of notional amount of the forward starting swaps.

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.

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 Consolidated Statements of Income.

As of December 31, 2022, the remaining forward starting swaps designated as cash flow hedges have a mandatory termination date in May 2025.

FOREIGN EXCHANGE

7 unchanged sentences

As of December 31, 2022, these FX contracts have maturities ranging from January 2023 to September 2024.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Cash Flow Hedges

During 2020, KDP began to designate certain FX forward contracts related to 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 December 31, 2021, these FX contracts have maturities ranging from January 2022 to May 2023.

As of December 31, 2022, these FX contracts have maturities ranging from January 2023 to October 2024.

Economic Hedges

1 unchanged sentence

During the years ended December 31, 2022, 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.

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 or as an offset to certain costs of production.

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 line item of the Consolidated Statements of Income as the hedged transaction.

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 December 31, 2021, these commodity contracts have maturities ranging from January 2022 to November 2023.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2022, these commodity contracts have maturities ranging from January 2023 to April 2024.

NOTIONAL AMOUNTS OF DERIVATIVE INSTRUMENTS

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

Receive-variable, pay-fixed interest rate swaps, not designated as hedging instruments — 450

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

2 unchanged sentences

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

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The fair value of commodity contracts are valued using the market approach based on observable market transactions, primarily underlying commodities futures or physical index prices, at the reporting date.

Interest rate contracts are valued using models based primarily on readily observable market parameters, such as LIBOR forward rates, for all substantial terms of the Company's contracts and credit risk of the counterparties.

Interest rate contracts are valued using models based primarily on readily observable market parameters, such as LIBOR or SOFR forward rates, for all substantial terms of the Company's contracts and credit risk of the counterparties.

FX forward contracts are valued using quoted FX forward rates at the reporting date.

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

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Not Designated as Hedging Instruments

4 unchanged sentences

Commodity contracts 2 Prepaid expenses and other current assets 6 133

Interest rate contracts 2 Other non-current assets 49 —

FX forward contracts 2 Other non-current assets 1 —

Commodity contracts 2 Other non-current assets 1 2

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Commodity contracts 2 Other non-current liabilities 1 1

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Designated as Hedging Instruments

3 unchanged sentences

FX contracts Other non-current assets 1 1

Interest rate contracts Other non-current assets 88 —

FX contracts Other current liabilities $ 3 $ 1

1 unchanged sentence

Interest rate contracts Other non-current liabilities — 128

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

IMPACT OF DERIVATIVE INSTRUMENTS NOT DESIGNATED AS HEDGING INSTRUMENTS

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(in millions) Income Statement Location 2022 2021 2020

Commodity contracts Cost of sales $ ( 148 ) $ ( 35 ) $ ( 10 )

Commodity contracts SG&A expenses ( 60 ) 22 ( 15 )

Interest rate contracts Interest expense $ 231 $ ( 25 ) $ 7

Interest rate contracts Loss on early extinguishment of debt 31 — —

FX forward contracts Cost of sales ( 7 ) 4 ( 6 )

FX forward contracts Other (income) expense, net — 6 18

FX forward contracts Other expense (income), net ( 9 ) — 6

Commodity contracts Cost of sales 12 ( 148 ) ( 35 )

Commodity contracts SG&A expenses ( 46 ) ( 60 ) 22

IMPACT OF CASH FLOW HEDGES

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FX contracts Cost of sales 5 18 2

KDP expects to reclassify approximately $ 1 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 $ 2 million of pre-tax net losses from AOCI into net income during the next twelve months related to its interest rate contracts.

KDP expects to reclassify approximately $ 8 million and $ 15 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.

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Finance leases 9 years 10 years

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS

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Present value of minimum lease payments $ 903 $ 713

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SIGNIFICANT LEASES THAT HAVE NOT YET COMMENCED

As of December 31, 2022, the Company has entered into leases that have not yet commenced with estimated aggregated future lease payments of approximately $ 220 million.

These leases will commence in 2022 and 2023, with initial lease terms ranging from 2 years to 10 years.

These leases will commence between 2023 and 2025, with initial lease terms ranging from 4 to 10 years.

ASSET SALE-LEASEBACK TRANSACTIONS

Transactions with Special Purpose Entities with Same Sponsor

The Company has entered into a number of asset sale-leaseback transactions with the same sponsor.

The Company has entered into a number of asset sale-leaseback transactions with the same sponsor, the Veyron SPEs.

The following table presents details of the transactions.

Gains on the sale transactions are recorded in Other operating (income) expense, net, and the leasebacks are accounted for as operating leases.

Sale Proceeds Carrying Value Gain on Sale

December 29, 2021 (1)

$ 102 $ 32 $ 70

January 6, 2020 (2)

Gains on the sale-leasebacks are recorded in Other operating income, net, and the leasebacks are accounted for as operating leases.

(in millions) Sale Proceeds Carrying Value Gain on Sale

March 31, 2022 (1)

$ 77 $ 39 $ 38

November 30, 2022 (2)

December 14, 2022 (3)

$ 170 $ 140 $ 30

December 29, 2021 (4)

January 6, 2020 (5)

(1) The sale-leaseback transaction included one manufacturing property and one distribution property.

(2) The sale-leaseback transaction included one manufacturing property and one multipurpose property.

(3) The sale-leaseback transaction included one distribution property.

(4) The sale-leaseback transaction included two manufacturing properties and two distribution properties.

(5) The sale-leaseback transaction included two manufacturing properties.

(3) The sale-leaseback transaction included three manufacturing properties.

The initial term of each leaseback is 15 years, with two 10-year renewal options.

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Refer to Note 19 for additional information about RVGs associated with asset sale-leaseback transactions.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company has additionally entered into asset sale-leaseback transactions with other entities.

The following table presents details of the transactions.

Gains on the sale transactions are recorded in Other operating (income) expense, net, and the leasebacks are accounted for as operating leases.

The Company has additionally entered into an asset sale-leaseback transaction with another entity.

The following table presents details of the transaction.

The gain on the sale-leaseback is recorded in Other operating income, net, and the leaseback is accounted for as an operating lease.

Sale Proceeds Carrying Value Gain on Sale

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$ 50 $ 27 $ 23

December 20, 2019 (2)

December 13, 2019 (3)

(1) The sale-leaseback transaction included two distribution properties.

The initial term of the leaseback is five years and has two three-year renewal options.

(2) The sale-leaseback transaction included KDP’s former headquarters in Plano, Texas.

During the year ended December 31, 2019, KDP transferred the assets to assets held for sale and recognized an impairment of approximately $ 5 million.

The leaseback ended in 2021 upon the Company’s relocation to a new facility.

(3) The sale-leaseback transaction included certain properties in Waterbury, Vermont.

During the year ended December 31, 2019, KDP transferred the assets to assets held for sale and recognized an impairment of approximately $ 12 million.

The term of the leaseback ended in 2020 upon the Company’s relocation to a new facility.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Effective January 1, 2022, the Company updated its presentation of certain of KDP's corporate costs, primarily related to IT, to be aligned among the Company's segments and to more consistently reflect controllable costs at the segment level.

The prior period segment disclosures reflect the revised presentation.

Effective January 1, 2021, the Company modified its internal reporting and operating segments to reflect changes in the executive leadership team to further enhance speed-to-market and decision effectiveness.

These changes did not change the Company’s reportable segments.

As of December 31, 2022 and 2021 and for the years ended December 31, 2022, 2021 and 2020, the Company's reportable segments consist of the following:

• The Coffee Systems segment reflects sales in the U.S.

and Canada of the manufacture and distribution of finished goods relating to the Company's coffee system, K-Cup pods and brewers.

• The Packaged Beverages segment reflects sales in the U.S.

and Canada from the manufacture and distribution of finished beverages and other products, including sales of the Company's own brands and third-party brands, through both the DSD and WD systems.

DSD and WD have both been identified as operating segments that the Company aggregated into Packaged Beverages due to similar economic characteristics and similarities in the nature of finished goods sales and route-to-markets.

• The Beverage Concentrates segment reflects sales of the Company's branded concentrates and syrup to third-party bottlers primarily in the U.S.

Most of the brands in this segment are CSD brands.

Our FFS operating segment is aggregated with our Branded Concentrates operating segment into our Beverage Concentrates reportable segment due to similar economic characteristics and similarities in the nature of the product sold.

• The Latin America Beverages segment reflects sales in Mexico, the Caribbean, and other international markets from the manufacture and distribution of concentrates, syrup and finished beverages.

Segment results are based on management reports.

Net sales and income from operations are the significant financial measures used to assess the operating performance of the Company's operating segments.

Intersegment sales are recorded at cost and are eliminated in the Consolidated Statements of Income.

“Unallocated corporate costs” are excluded from the Company's measurement of segment performance and include unrealized commodity derivative gains and losses, and certain general corporate expenses.

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

For the Year Ended December 31,

(in millions) 2022 2021 2020

Coffee Systems $ 4,982 $ 4,716 $ 4,433

Packaged Beverages 6,607 5,882 5,363

Beverage Concentrates 1,725 1,486 1,325

Latin America Beverages 743 599 497

Total net sales $ 14,057 $ 12,683 $ 11,618

Income from operations

Coffee Systems $ 1,316 $ 1,446 $ 1,398

Packaged Beverages 1,014 1,023 835

Beverage Concentrates 1,061 1,047 935

Latin America Beverages 158 133 105

Unallocated corporate costs ( 944 ) ( 755 ) ( 793 )

Income from operations $ 2,605 $ 2,894 $ 2,480

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions) 2022 2021

Identifiable operating assets

Coffee Systems $ 15,830 $ 15,397

Packaged Beverages 11,870 11,819

Beverage Concentrates 20,495 20,674

Latin America Beverages 1,885 1,763

Segment total 50,080 49,653

Unallocated corporate assets 757 915

Total identifiable operating assets 50,837 50,568

Investments in unconsolidated affiliates 1,000 30

Total assets $ 51,837 $ 50,598

GEOGRAPHIC DATA

The following table presents information about the Company's operations by geographic region:

For the Year Ended December 31,

(in millions) 2022 2021 2020

$ 12,454 $ 11,267 $ 10,318

International 1,603 1,416 1,300

Net sales $ 14,057 $ 12,683 $ 11,618

(in millions) 2022 2021

Property, plant and equipment, net

$ 2,088 $ 2,084

International 403 410

Total property, plant and equipment, net $ 2,491 $ 2,494

MAJOR CUSTOMER

Walmart is considered a major customer, accounting for more than 10% of the Company's total net sales, and is represented in all four of the Company’s reportable segments.

The following table provides KDP’s net sales to Walmart:

For the Year Ended December 31,

(in millions) 2022 2021 2020

Walmart $ 2,184 $ 1,989 $ 1,782

Additionally, customers in the Company's Beverage Concentrates segment buy concentrate from the Company, which is used in finished goods sold by the Company's third party bottlers to Walmart.

These indirect sales further increase the concentration of risk associated with the Company's consolidated net sales as it relates to Walmart.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Revenue Recognition

The following table disaggregates the Company's revenue by portfolio:

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

For the Year Ended December 31, 2022

$ — $ 3,193 $ 1,700 $ 542 $ 5,435

— 2,993 14 201 3,208

K-cup pods (2)

3,772 — — — 3,772

Appliances 923 — — — 923

Other 287 421 11 — 719

Net sales $ 4,982 $ 6,607 $ 1,725 $ 743 $ 14,057

For the Year Ended December 31, 2021

$ — $ 2,825 $ 1,463 $ 435 $ 4,723

— 2,617 11 163 2,791

K-cup pods (2)

3,546 — — — 3,546

Appliances 907 — — — 907

Other 263 440 12 1 716

Net sales $ 4,716 $ 5,882 $ 1,486 $ 599 $ 12,683

For the Year Ended December 31, 2020

$ — $ 2,489 $ 1,304 $ 361 $ 4,154

— 2,477 10 135 2,622

K-cup pods (2)

3,369 — — — 3,369

Appliances 850 — — — 850

Other 214 397 11 1 623

Net sales $ 4,433 $ 5,363 $ 1,325 $ 497 $ 11,618

(1) Represents net sales of owned and partner brands within the Company's portfolio.

(2) Represents net sales from owned brands, partner brands and private label owners.

Net sales for partner brands and private label owners are contractual and long term in nature.

Earnings Per Share

The following table presents the Company's basic and diluted EPS and shares outstanding.

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

For the Year Ended December 31,

(in millions, except per share data) 2022 2021 2020

Net income attributable to KDP $ 1,436 $ 2,146 $ 1,325

Weighted average common shares outstanding 1,416.8 1,415.7 1,407.2

Dilutive effect of stock-based awards 11.7 12.2 14.9

Weighted average common shares outstanding and common stock equivalents 1,428.5 1,427.9 1,422.1

Basic EPS $ 1.01 $ 1.52 $ 0.94

Diluted EPS $ 1.01 $ 1.50 $ 0.93

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Employee Benefit Plans

20 unchanged sentences

Impact of changes in FX rates 1 —

Plan amendments 3 —

Settlements ( 14 ) ( 9 )

5 unchanged sentences

Benefits paid ( 4 ) ( 5 )

Impact of changes in FX rates — ( 1 )

Settlements ( 14 ) ( 9 )

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The amortization period for plans with active participants is the average future service of covered active employees, and the amortization period for plans with no active participants is the average future lifetime of plan participants.

There will be no estimated service cost or net actuarial loss for the defined benefit pension plans amortized from AOCI into periodic benefit cost in 2022.

The Company included $ 2 million of net actuarial losses in AOCI as of both December 31, 2021 and 2020.

The estimated service costs or net actuarial losses for the defined benefit pension plans amortized from AOCI into periodic benefit cost in 2023 are expected to be insignificant.

The following table summarizes amounts included in AOCI for the Company’s defined benefit plans:

As of December 31,

(in millions) 2022 2021

Net actuarial loss $ 6 $ 2

Prior service cost 3 —

Total $ 9 $ 2

Contributions and Expected Benefit Payments

1 unchanged sentence

The following table summarizes the estimated future benefit payments for the Company's defined benefit plans:

2022 2023 2024 2025 2026 2027-2031

(in millions) 2023 2024 2025 2026 2027 2028-2032

Estimated future benefit payments $ 11 $ 11 $ 12 $ 12 $ 12 $ 62

8 unchanged sentences

plans are then matched to spot rates along that yield curve in order to determine their present value and a single equivalent discount rate is calculated that produces the same present value as the spot rates.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Expected mortality is a key assumption in the measurement for pension benefit obligations.

1 unchanged sentence

plans, the Company used the Pri-2012 mortality tables and the Mortality Improvement Scale MP-2020 published by the Society of Actuaries’ Retirement Plans Experience Committee for each of the years ended December 31, 2022 and 2021.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes the weighted-average assumptions used to determine benefit obligations at the plan measurement dates for U.S.

34 unchanged sentences

equity securities, 5 - 15 % for international equity securities, and 70 - 90 % for fixed income securities.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company has several non-contributory defined benefit PRMB plans, each having a measurement date of December 31.

3 unchanged sentences

The Company's PRMB plans are not significant to the Company's consolidated financial statements as of December 31, 2022 and 2021.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FAIR VALUE OF THE PENSION AND PRMB ASSETS

27 unchanged sentences

Multi-employer plan expenses were $ 5 million, $ 5 million and $ 7 million for the years ended December 31, 2022, 2021 and 2020, respectively.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Individually Significant Multi-Employer Plan

4 unchanged sentences

Expiration dates of collective bargaining agreements (1)

March 20, 2022 through February 20, 2025

May 6, 2023 through March 20, 2025

Financial Improvement Plan/Rehabilitation Plan status pending/implemented Implemented

2 unchanged sentences

(1) Central States includes seven collective bargaining agreements.

The largest agreement, which is set to expire March 2, 2024, covers approximately 55 % of the employees included in Central States.

Two of the collective bargaining agreements are set to expire during 2022, covering approximately 14 % of the employees included in Central States.

The largest agreement, which is set to expire January 20, 2025, covers approximately 56 % of the employees included in Central States.

One of the collective bargaining agreements is set to expire during 2023, covering approximately 6 % of the employees included in Central States.

The most recent Pension Protection Act zone status available as of December 31, 2022 is for the plan's year-end as of December 31, 2021.

Central States has not utilized any extended amortization provisions that affect the calculation of the zone status.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company's contributions to Central States did not exceed 5% of the total contributions made to Central States for the years ended December 31, 2022, 2021 and 2020.

Future estimated contributions to Central States based on the number of covered employees and the terms of the collective bargaining agreements are as follows:

2022 2023 2024 2025 2026

(in millions) 2023 2024 2025 2026 2027

Future estimated contributions to Central States $ 2 $ 2 $ 2 $ 2 $ 2

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plans permit both pre-tax and after-tax contributions, which are subject to limitations imposed by IRS regulations.

The Company makes matching contributions and discretionary profit sharing contributions to these plans.

The Company incurred contribution expense of $ 61 million, $ 73 million and $ 77 million to the defined contribution plan for the years ended December 31, 2022, 2021 and 2020, respectively.

The Company also sponsors a non-qualified defined contribution plan for employees which is maintained in a rabbi trust and are not readily available to the Company.

5 unchanged sentences

The corresponding liability related to the deferred defined compensation plan is recorded in other non-current liabilities.

Gains and losses in connection with these trading securities are recorded in Other (income) expense, net with an offset for the same amount recorded in SG&A expenses.

There were $ 5 million in gains associated with these trading securities during the year ended December 31, 2021, and $ 8 million in gains during each of the years ended December 31, 2020 and 2019.

The Company makes matching contributions and discretionary profit sharing contributions to each of the respective plans.

The Company incurred contribution expense of $ 73 million, $ 77 million and $ 66 million to the defined contribution plans for the years ended December 31, 2021, 2020 and 2019, respectively.

These changes did not change the Company’s reportable segments.

As of December 31, 2021 and 2020 and for the years ended December 31, 2021, 2020 and 2019, the Company's reportable segments consist of the following:

• The Coffee Systems segment reflects sales in the U.S.

and Canada of the manufacture and distribution of finished goods relating to the Company's coffee system, K-Cup pods and brewers.

• The Packaged Beverages segment reflects sales in the U.S.

and Canada from the manufacture and distribution of finished beverages and other products, including sales of the Company's own brands and third-party brands, through both the DSD and WD systems.

• The Beverage Concentrates segment reflects sales of the Company's branded concentrates and syrup to third-party bottlers primarily in the U.S.

Most of the brands in this segment are CSD brands.

• The Latin America Beverages segment reflects sales in Mexico, the Caribbean, and other international markets from the manufacture and distribution of concentrates, syrup and finished beverages.

Segment results are based on management reports.

Net sales and income from operations are the significant financial measures used to assess the operating performance of the Company's operating segments.

Intersegment sales are recorded at cost and are eliminated in the Consolidated Statements of Income.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

For the Year Ended December 31,

(in millions) 2021 2020 2019

Coffee Systems $ 4,716 $ 4,433 $ 4,233

Packaged Beverages 5,882 5,363 4,945

Beverage Concentrates 1,486 1,325 1,414

Latin America Beverages 599 497 528

Total net sales $ 12,683 $ 11,618 $ 11,120

Income from operations

Coffee Systems $ 1,318 $ 1,268 $ 1,219

Packaged Beverages 1,010 822 757

Beverage Concentrates 1,044 932 955

Latin America Beverages 133 105 85

Unallocated corporate costs ( 611 ) ( 647 ) ( 638 )

Income from operations $ 2,894 $ 2,480 $ 2,378

(in millions) 2021 2020

Identifiable operating assets

Coffee Systems $ 15,397 $ 15,295

Packaged Beverages 11,819 11,540

Beverage Concentrates 20,674 20,575

Latin America Beverages 1,763 1,763

Segment total 49,653 49,173

Unallocated corporate assets 915 518

Total identifiable operating assets 50,568 49,691

Investments in unconsolidated affiliates 30 88

Total assets $ 50,598 $ 49,779

GEOGRAPHIC DATA

The following table presents information about the Company's operations by geographic region:

For the Year Ended December 31,

(in millions) 2021 2020 2019

$ 11,267 $ 10,318 $ 9,843

International 1,416 1,300 1,277

Net sales $ 12,683 $ 11,618 $ 11,120

Gains and losses in connection with these trading securities are recorded in Other expense (income), net with an offset for the same amount recorded in SG&A expenses.

There were $ 8 million in losses, as well as $ 5 million and $ 8 million in gains associated with these trading securities during the years ended December 31, 2022, 2021 and 2020, respectively.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions) 2021 2020

Property, plant and equipment, net

$ 2,084 $ 1,893

International 410 319

Total property, plant and equipment, net $ 2,494 $ 2,212

MAJOR CUSTOMER

Walmart is considered a major customer, accounting for more than 10% of the Company's total net sales.

The following table provides net sales for Walmart:

For the Year Ended December 31,

(in millions) 2021 2020 2019

Walmart $ 1,989 $ 1,782 $ 1,483

Additionally, customers in the Company's Beverage Concentrates segment buy concentrate from the Company, which is used in finished goods sold by the Company's third party bottlers to Walmart.

These indirect sales further increase the concentration of risk associated with the Company's consolidated net sales as it relates to Walmart.

Earnings Per Share

The following table presents the Company's basic and diluted EPS and shares outstanding.

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

For the Year Ended December 31,

(in millions, except per share data) 2021 2020 2019

Net income attributable to KDP $ 2,146 $ 1,325 $ 1,254

Weighted average common shares outstanding 1,415.7 1,407.2 1,406.7

Dilutive effect of stock-based awards 12.2 14.9 12.4

Weighted average common shares outstanding and common stock equivalents 1,427.9 1,422.1 1,419.1

Basic EPS $ 1.52 $ 0.94 $ 0.89

Diluted EPS $ 1.50 $ 0.93 $ 0.88

Stock-Based Compensation

4 unchanged sentences

Total stock-based compensation expense (1)

Income tax benefit recognized in the Statements of Income ( 14 ) ( 13 ) ( 11 )

$ 52 $ 88 $ 85

Income tax benefit recognized in the Consolidated Statements of Income

( 7 ) ( 14 ) ( 13 )

Stock-based compensation expense, net of tax $ 45 $ 74 $ 72

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) Effective January 1, 2022, the Company changed its accounting policy for stock-based compensation expense with respect to forfeitures.

The cumulative effect of this change resulted in a one-time reduction in stock-based compensation expense of $ 40 million recognized in the first quarter of 2022.

Refer to Note 2 for additional information.

DESCRIPTION OF STOCK-BASED COMPENSATION PLANS

Prior to the DPS Merger, Maple Parent Holdings Corp.

had share-based compensation programs under which certain designated employees were granted awards in the form of RSUs.

Upon consummation of the DPS Merger, RSUs granted under these programs were converted at the exchange ratio established in the DPS Merger into RSUs that will be settled into shares of the Company's common stock on their existing vesting schedule.

The Company previously adopted the 2009 Incentive Plan, under which employees and non-employee directors could be granted stock options, stock appreciation rights, stock awards, RSUs and PSUs, and grants subsequent to the DPS Merger were granted under the 2009 Incentive Plan.

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Period Granted Vesting Terms

RSUs granted prior to the DPS Merger 4 years, 6 months term with cliff-vesting at the end of the term

RSUs granted after the DPS Merger through 2019 5 -year term with cliff-vesting at the end of the term

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Balance as of December 31, 2022 18,038,745 27.46 1.6 643

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The weighted average grant date fair value for RSUs granted for the years ended December 31, 2022, 2021 and 2020 was $ 35.76 , $ 28.83 and $ 24.91 , respectively.

1 unchanged sentence

As of December 31, 2022, there was $ 192 million of unrecognized compensation cost related to unvested RSUs that is expected to be recognized over a weighted average period of 3.1 years.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

PERFORMANCE SHARE UNITS

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Balance as of December 31, 2022 436,198 28.80 0.5 16

As of December 31, 2021, there was $ 13 million of unrecognized compensation cost related to unvested PSUs that is expected to be recognized over a weighted average period of 2.0 years.

As of December 31, 2022, there was $ 6 million of unrecognized compensation cost related to unvested PSUs that is expected to be recognized over a weighted average period of 1.0 year.

STOCK OPTIONS

8 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Revenue Recognition

The following table disaggregates the Company's revenue by portfolio:

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

For the Year Ended December 31, 2021

$ — $ 2,825 $ 1,463 $ 435 $ 4,723

— 2,617 11 163 2,791

K-cup pods (2)

3,546 — — — 3,546

Appliances 907 — — — 907

Other 263 440 12 1 716

Net sales $ 4,716 $ 5,882 $ 1,486 $ 599 $ 12,683

For the Year Ended December 31, 2020

$ — $ 2,489 $ 1,304 $ 361 $ 4,154

— 2,477 10 135 2,622

K-cup pods (2)

3,369 — — — 3,369

Appliances 850 — — — 850

Other 214 397 11 1 623

Net sales $ 4,433 $ 5,363 $ 1,325 $ 497 $ 11,618

For the Year Ended December 31, 2019

$ — $ 2,219 $ 1,385 $ 380 $ 3,984

— 2,317 13 146 2,476

K-cup pods (2)

Investments and Acquisitions

INVESTMENTS IN UNCONSOLIDATED AFFILIATES

The following table summarizes the Company's investments in unconsolidated affiliates:

(in millions) Ownership Interest 2022 2021

29.8 % $ 874 $ —

Appliances 723 — — — 723

Other 217 409 16 2 644

Net sales $ 4,233 $ 4,945 $ 1,414 $ 528 $ 11,120

(1) Represents net sales of owned and partner brands within the Company's portfolio.

(2) Represents net sales from owned brands, partner brands and private label owners.

Net sales for partner brands and private label owners are contractual and long term in nature.

Tractor 19.2 % 49 —

Athletic Brewing (1)

Dyla LLC 12.4 % 12 12

Force Holdings LLC (2)

Beverage startup companies (3)

(various) 5 8

Other (various) 5 5

Investments in unconsolidated affiliates $ 1,000 $ 30

(1) In November 2022, the Company invested $ 51 million in exchange for a 13.1 % ownership interest in Athletic Brewing.

(2) Force Holdings LLC has a 14.1% ownership interest in Dyla LLC.

(3) Beverage startup companies represent equity method investments in development stage entities and may include entities which are pre-revenue, in test markets, or in early operations .

Nutrabolt Investment

In December 2022, the Company invested $ 871 million, which includes $ 8 million of incremental third-party costs, in exchange for preferred equity units in Nutrabolt that represent a 29.8 % ownership interest on an as-converted basis.

The Company will earn the greater of (i) a 5 % annual coupon on the preferred equity units plus any accretion for amounts not yet paid or (ii) our share of Nutrabolt’s earnings as if our preferred equity was converted into common units.

During the year ended December 31, 2022, the Company recorded preferred dividends of $ 3 million, which increased the investment balance for Nutrabolt.

Tractor Investment

In May 2022, the Company invested $ 44 million in exchange for equity interests in Tractor.

The Company also issued a $ 6 million convertible note to Tractor with an annual interest rate of LIBOR + 5 % and a term of six months.

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 %.

BodyArmor Investment

On November 1, 2021, Coca-Cola announced that it had acquired full ownership of BodyArmor for cash consideration of $ 5.6 billion for the remaining 85 % of equity interests that Coca-Cola did not previously own.

Prior to the transaction, KDP held an ownership interest in BodyArmor of 12.5 % on an undiluted basis, which had a carrying value of approximately $ 52 million.

As a result of BodyArmor’s change in control, KDP’s ownership interest was diluted to 10.6 % as a result of the vesting of incentive equity compensation previously granted by BodyArmor to employees, athletes, and endorsers.

KDP received cash consideration from the sale of its interests in BodyArmor, net of holdback liabilities, of $ 576 million on December 15, 2021, resulting in a gain on the sale of the investment of $ 524 million.

This gain was recorded to Gain on sale of investment in the Consolidated Statements of Income.

In January 2022, KDP agreed to a $ 350 million payment from BodyArmor for a full settlement of all of the claims under the litigation against BodyArmor and in complete satisfaction of the holdback amount owed to ABC in association with the sale of ABC’s equity interest in BodyArmor in 2021.

ABC received the settlement payment in January 2022 and the lawsuit was dismissed.

The Company allocated approximately $ 300 million of the settlement for resolution of the prior litigation, of which $ 299 million was recorded to Gain on litigation settlement and $ 1 million was applied against outstanding receivables from BodyArmor.

Approximately $ 28 million of the $ 299 million gain on litigation settlement was held in unallocated corporate costs as a recovery of legal fees incurred during the litigation process, with the remaining $ 271 million of the $ 299 million recorded to our Packaged Beverages segment.

Approximately $ 50 million of the $ 350 million payment was allocated to the settlement of the holdback liability, which was recorded to Gain on the sale of our equity method investment.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Bedford Investment

The Company has a 30 % ownership interest in Bedford, which has a carrying value of $ 0 as of December 31, 2022 and 2021.

In December 2021, the board of directors of Bedford communicated to KDP that it was unable to obtain additional investors, and that Bedford will begin procedures to wind down the company.

As part of the wind down procedures, KDP and ABI agreed to together fund a $ 68 million credit agreement to Bedford.

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 and impaired through December 31, 2022.

The Company recorded $ 12 million and $ 2 million in impairment losses related to this credit agreement during the years ended December 31, 2022 and 2021, respectively, which are included in the impairment charges described below.

The Company has also issued various promissory notes to Bedford since 2020, which have been fully impaired and placed in non-accrual status.

The Company has recorded impairment charges related to its investment and notes receivable in Bedford of $ 12 million, $ 17 million, and $ 86 million during the years ended December 31, 2022, 2021 and 2020, respectively.

The impairment charges were recorded on the Impairment of investments and note receivable line in the Consolidated Statements of Income.

LifeFuels Investment

In September 2020, the Company tested its investment in LifeFuels, which is included in the Beverage startup companies line in the table above, for an other-than-temporary impairment as a result of continued losses, ongoing liquidity concerns and a lack of a buyer for LifeFuels.

As a result of this analysis, the Company determined that the investment was fully impaired and recorded an impairment charge of approximately $ 16 million to the Impairment of investments and note receivable line in the Consolidated Statements of Income.

On July 31, 2020, the Company closed on a stock purchase agreement to obtain a 66.4 % ownership interest in Revive from Peet's for cash consideration of $ 1 , with Peet's retaining a minority ownership interest.

Revive is an organic, non-alcoholic kombucha brand, available in both traditional refrigerated and shelf-stable varieties.

The transaction was considered a common control transaction due to KDP's relationship with Peet's at the transaction date, through certain affiliates of JAB.

The investment was accounted for as an acquisition of a controlling interest, and in accordance with the requirements of U.S.

GAAP for common control transactions, KDP recognized all of Revive's assets and liabilities at their carrying values as of July 31, 2020, with the $ 3 million difference between the Company's ownership interest in the net assets and the purchase price recorded to additional paid-in capital.

Refer to Note 1 for the Company's accounting policies with respect to the consolidation of Revive and accounting for the non-controlling interest.

Income before provision for income taxes was as follows:

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Total $ 1,719 $ 2,798 $ 1,753

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The provision for income taxes has the following components:

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state income tax.

The Company recorded a valuation allowance release of approximately $ 51 million during the year ended December 31, 2021 against U.S.

foreign tax credit carryforwards, as realization is more likely than not.

Foreign tax credits will begin to expire in 2024.

UNDISTRIBUTED INTERNATIONAL EARNINGS

For the tax year ended December 31, 2021 and 2020, undistributed earnings in non-U.S.

subsidiaries for which no deferred taxes have been provided totaled approximately $ 295 million and $ 130 million, respectively.

For the tax year ended December 31, 2022, undistributed earnings in non-U.S.

subsidiaries for which no deferred taxes have been provided totaled approximately $ 604 million.

An actual repatriation from our non-U.S.

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federal purposes and in various state jurisdictions.

The Company also files income tax returns in various foreign jurisdictions, principally Canada and Mexico.

The Company also files income tax returns in various foreign jurisdictions, principally Canada, Ireland, and Mexico.

and most state income tax returns for years prior to 2017 are closed to examination by applicable tax authorities.

Mexican income tax returns are generally open for tax years 2016 and forward, and Canadian income tax returns are open for audit for tax years 2013 and forward.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Canadian and Mexican income tax returns are generally open for audit for tax years 2018 and forward.

The Company has a tax holiday in Singapore, whereby the local statutory rate is significantly reduced if certain conditions are met.

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The impact of the tax holiday increased net income by approximately $ 6 million for each of the years ended December 31, 2022 and 2021, respectively, resulting in no impact to basic and diluted EPS for each of the years ended December 31, 2022 and 2021.

On August 16, 2022, the “Inflation Reduction Act” (H.R.

5376) was signed into law in the United States.

The Company does not currently expect the Inflation Reduction Act to have a material impact on KDP’s consolidated financial statements.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

UNRECOGNIZED TAX BENEFITS

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Balance, end of the period $ 15 $ 12 $ 18

The total amount of unrecognized tax benefits that, if recognized, would reduce the effective tax rate, is $ 9 million after considering the federal impact of state income taxes.

During the next twelve months, KDP does not expect a significant change to its unrecognized tax benefits.

The total amount of unrecognized tax benefits that would reduce the effective tax rate if recognized is $ 12 million after considering the federal impact of state income taxes.

KDP does not expect a significant change to its unrecognized tax benefits, but it is reasonably possible that a change in the unrecognized tax benefits may occur within the next twelve months related to the settlement of audits or the lapse of applicable statutes of limitations.

KDP accrues interest and penalties on its uncertain tax positions as a component of its provision for income taxes.

The Company recognized a benefit of $ 1 million and $ 8 million, and expense of $ 3 million, related to interest and penalties for uncertain tax positions for the years ended December 31, 2021, 2020 and 2019, respectively.

The Company had a total of $ 2 million and $ 1 million accrued for interest and penalties for its uncertain tax positions reported as part of other non-current liabilities as of December 31, 2021 and 2020, respectively.

Acquisitions and Investments in Unconsolidated Affiliates

2021 ACQUISITIONS

The Company did not make any acquisitions during the year ended December 31, 2021.

2020 ACQUISITIONS

Revive is an organic, non-alcoholic kombucha brand, available in both traditional refrigerated and shelf-stable varieties.

The transaction is considered a common control transaction due to KDP's relationship with Peet's through certain affiliates of JAB.

The investment was accounted for as an acquisition of a controlling interest, and in accordance with the requirements of U.S.

Refer to Note 1 for the Company's accounting policies with respect to the consolidation of Revive and accounting for the non-controlling interest.

2019 ACQUISITIONS

The Company spent an aggregate of $ 8 million in connection with immaterial acquisitions during the year ended December 31, 2019, which resulted in the recognition of fixed assets, intangible assets and goodwill.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

INVESTMENTS IN UNCONSOLIDATED AFFILIATES

The following table summarizes the Company's investments in unconsolidated affiliates:

(in millions) Ownership Interest (1)

BodyArmor — % $ — $ 51

Bedford 30.0 % — —

Dyla LLC 12.4 % 12 12

Force Holdings LLC (2)

Beverage startup companies (3)

(various) 8 15

Other (various) 5 5

Investments in unconsolidated affiliates $ 30 $ 88

(1) Represents the Company’s ownership interest as of December 31, 2021 on an undiluted basis, which does not reflect the potential dilution resulting from equity arrangements of the entity, including vesting of such arrangements upon a change in control.

(2) Force Holdings LLC has a 14.1% ownership interest in Dyla LLC.

(3) Beverage startup companies represent equity method investments in development stage entities and may include entities which are pre-revenue, in test markets, or in early operations.

Sale of Investment

Prior to the transaction, KDP held an ownership interest in BodyArmor of 12.5 % on an undiluted basis, which had a carrying value of approximately $ 52 million.

This gain was recorded to Gain on sale of investment in the Consolidated Statements of Income.

The Company’s holdback liabilities represent a contingent gain due to a number of uncertainties, which includes unresolved items and any potential indemnification claims.

The end of the holdback period is 18 months after Coca-Cola’s full acquisition of BodyArmor.

The holdback liability, as of November 1, 2021, was $$ 105 million.

Refer to Note 21 for information about the resolution of the holdback liabilities subsequent to December 31, 2021.

Impairments of Investments

Bedford Investment and Related Party Note Receivable - 2020

The Company and ABI, in conjunction with the creation of Bedford, had executed a line of credit agreement with Bedford on March 3, 2017, which was amended on December 7, 2018 to increase the line of credit.

The Company committed and funded the $ 51 million capacity, which incurs a fixed interest rate of 8.1 % per annum.

The credit agreement with Bedford originally had a maturity of March 3, 2024.

In March 2020, the Company reduced its expectation of future operating performance for Bedford based on COVID-19 and a new revised five-year projection from the management of Bedford that projected the possibility of profitability two years later than previously anticipated.

As a result of these indicators of impairment, the Company tested the Bedford investment for an other-than-temporary impairment using a discounted cash flow framework with multiple scenarios, including the conversion of the note receivable into equity.

The results of its analysis indicated that the note receivable of $ 55 million and the investment in unconsolidated affiliates of $ 31 million were fully impaired, which was recorded on the Impairment of investments and note receivable line in the Consolidated Statements of Income.

As a result of the other-than-temporary impairment, the Company placed the note receivable in non-accrual status.

Bedford Investment and Related Party Notes Receivable - 2021

In July 2021, the board of directors of Bedford communicated to KDP that Bedford was seeking additional investors in order to continue its operations.

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 automatically converted to equity interests in Bedford during the fourth quarter of 2021.

KDP recognized no expense related to interest and penalties for uncertain tax positions for the year ended December 31, 2022, and recognized expense of $ 1 million and benefit of $ 8 million for the years ended December 31, 2021 and 2020, respectively.

The Company had a total of $ 2 million accrued for interest and penalties for its uncertain tax positions reported as part of other non-current liabilities as of both December 31, 2022 and 2021 .

Restructuring and Integration Costs

DPS Integration Program

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

The restructuring and integration program resulted in cumulative pre-tax charges of approximately $ 962 million, primarily consisting of professional fees related to the integration and transformation and costs associated with severance and employee terminations, through December 31, 2022.

Restructuring and integration charges incurred on the defined programs during the years ended December 31, 2022, 2021 and 2020 were as follows:

Year Ended December 31,

(in millions) 2022 2021 2020

DPS Integration program $ 172 $ 202 $ 200

Restructuring liabilities that qualify as exit and disposal costs under U.S.

GAAP are included in accounts payable and accrued expenses on the consolidated financial statements.

R estructuring liabilities for the DPS Integration Program, all of which were workforce reduction costs, as of December 31, 2022 and 2021 were as follows:

(in millions) Workforce Reduction Costs

Balance as of December 31, 2020 $ 14

Charges to expense

Cash payments

Balance as of December 31, 2021 19

Charges to expense

Cash payments

Balance as of December 31, 2022 $ 55

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On November 29, 2021, KDP issued a promissory note for $ 2 million to Bedford at an interest rate of 0.33 % per year.

The outstanding principal and any unpaid accrued interest are due November 29, 2022.

In December 2021, the board of directors of Bedford communicated to KDP that it was unable to obtain additional investors, and that Bedford will begin procedures to wind down the company.

As a result of this decision, KDP fully impaired the outstanding note receivable of $ 2 million and investment in unconsolidated affiliates of $ 15 million, and the note receivable was placed in non-accrual status.

As part of the wind down procedures, KDP and ABI agreed to together fund a $ 68 million credit agreement to Bedford.

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

The $ 2 million promissory note funded on November 29, 2021 is considered as part of this credit agreement.

Impairment of LifeFuels

Accumulated Other Comprehensive Income (Loss)

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Amounts reclassified from AOCI — 1 2 3

Net current period other comprehensive income 230 4 — 234

Net current period other comprehensive loss ( 9 ) ( 4 ) ( 14 ) ( 27 )

Balance as of December 31, 2020 95 ( 4 ) ( 14 ) 77

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

Net current period other comprehensive loss ( 14 ) — ( 89 ) ( 103 )

Net current period other comprehensive (loss) income ( 167 ) ( 6 ) 328 155

Balance as of December 31, 2022 $ ( 86 ) ( 10 ) $ 225 $ 129

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FX contracts Cost of sales 5 18 2

Total ( 1 ) 18 2

Income tax benefit — ( 5 ) —

Total, net of tax $ ( 1 ) $ 13 $ 2

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Property, Plant and Equipment

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Property, plant and equipment, net $ 2,491 $ 2,494

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes the location of depreciation expense within the Consolidated Statements of Income:

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Other Financial Information

CASH AND CASH EQUIVALENTS

The carrying value of cash, cash equivalents, restricted cash and restricted cash equivalents is valued as of the balance sheet date equating fair value and is classified as Level 1.

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

(in millions) 2021 2020

Cash and cash equivalents $ 567 $ 240

Restricted cash and restricted cash equivalents 1 15

Total cash, cash equivalents, restricted cash and restricted cash equivalents $ 568 $ 255

ACCOUNTS PAYABLE

KDP has agreements with third party administrators which allow participating suppliers to track payment obligations 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.

KDP has no economic interest in a supplier’s decision to enter into these agreements and no direct financial relationship with the financial institutions.

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 December 31, 2021 and 2020, $ 3,194 million and $ 2,578 million, respectively, of KDP's outstanding payment obligations were voluntarily elected by the supplier and sold to financial institutions.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SELECTED BALANCE SHEET INFORMATION

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Other receivables $ 167 $ 112

Prepaid income taxes 49 5

Customer incentive programs 25 21

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Spare parts 89 72

Assets held for sale — 2

Income tax receivable 17 14

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Other non-current assets:

Customer incentive programs $ 59 $ 70

Equity securities (1)

Operating lease right-of-use assets $ 881 $ 673

Customer incentive programs 46 59

Derivative instruments 140 3

Equity securities (1)

Equity securities without readily determinable fair values 1 1

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Refer to Note 10 for additional information about the rabbi trust.

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

Unrealized mark-to-market losses on the investment of $ 5 million for the year ended December 31, 2021 are recorded in Other (income) expense, net.

Unrealized mark-to-market losses on the Vita Coco investment of $ 4 million and $ 5 million for the years ended December 31, 2022 and 2021, respectively, are recorded in Other (income) expense, net.

KEURIG DR PEPPER INC.

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Derivative instruments 112 39

Holdback liability — 15

Total other current liabilities $ 685 $ 613

Other non-current liabilities:

Long-term pension and postretirement liability $ 40 $ 38

Insurance reserves 75 72

Operating lease liability $ 803 $ 608

Finance lease liability 618 621

Long-term pension and postretirement liability 37 40

Insurance reserves 69 75

Derivative instruments 195 143

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

These cases remain in the early stages of discovery.

Discovery in these cases is expected to continue into early 2023.

A number of putative class actions asserting similar claims and seeking similar relief were previously filed on behalf of purported indirect purchasers of Keurig’s products.

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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.

On February 15, 2023, the California Supreme Court denied CERT’s petition to review the Court of Appeals’ affirmance.

This action effectively concludes the litigation, and accordingly, no loss contingency will be recorded.

ENVIRONMENTAL, HEALTH AND SAFETY MATTERS

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Transactions with Variable Interest Entities

Transactions with Veyron SPEs

The Company has a number of leasing arrangements and one licensing arrangement with special purpose entities associated with the same sponsor, which are referred to as the Veyron SPEs.

The Veyron SPEs are VIEs for which KDP is not the primary beneficiary.

The Veyron SPEs are VIEs for which KDP is not the primary beneficiary, as KDP has limited power based on the contractual agreements to direct the activities that most significantly impact the VIEs’ performance.

Leasing Arrangements

As of December 31, 2021, the Company has entered into ten lease transactions with the Veyron SPEs, nine of which were associated with asset sale-leaseback transactions.

As of December 31, 2022, the Company has entered into fifteen lease transactions with the Veyron SPEs, fourteen of which were associated with asset sale-leaseback transactions.

Refer to Note 6 for additional information about the asset sale-leaseback transactions.

Each lease has a RVG based on a percentage of Veyron SPEs’s purchase price;

Each lease has a RVG based on a percentage of the Veyron SPEs’ purchase price;

however, the Company concluded it was not probable that the Company will owe an amount at the end of each individual lease term, as the fair values of the properties are not expected to fall below the RVGs at the end of each individual lease term.

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Non-current liabilities 419 323

(1) The leasing agreements included as of December 31, 2022 include nine manufacturing sites, four distribution centers, one multipurpose property 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.

(2) The leasing agreements included as of December 31, 2020 include five manufacturing sites.

Licensing Arrangement

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Transaction with Nutrabolt

The Company has a preferred equity investment in Nutrabolt, which will earn the greater of (i) a 5 % annual coupon on the preferred equity units plus any accretion for amounts not yet paid or (ii) KDP’s share of Nutrabolt’s earnings as if KDP’s preferred equity was converted into common units.

As the other investors of Nutrabolt have to share in Nutrabolt's earnings with KDP if in excess of the 5 % annual coupon, the other investors lack certain characteristics of a controlling financial interest, which qualifies Nutrabolt as a VIE.

KDP is not the primary beneficiary of the VIE and therefore is not required to consolidate Nutrabolt, as the primary shareholder of the VIE has control over the board and decision-making for the activities that most significantly impact the VIE’s economic performance, including sales, marketing, and operations.

KDP has no obligation to provide additional funding to Nutrabolt, and thus the Company’s maximum exposure and risk of loss related to Nutrabolt is limited to the carrying value of KDP’s investment.

Refer to Note 12 for additional information about the transaction with Nutrabolt and the carrying value of the investment.

Related Parties

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As of December 31, 2022, JAB beneficially owned approximately 31 % 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.

• KDP purchases certain raw materials from Peet's and manufactures coffee and tea portion packs under Peet's brands for sale by KDP and Peet's in the U.S.

• KDP exclusively manufactures, distributes and sells Peet's RTD beverage products in the U.S.

• KDP licenses the Caribou Coffee, Panera Bread and Krispy Kreme trademarks for use in the manufacturing of portion packs for the Keurig brewing system.

• KDP sells various syrups and packaged beverages to Caribou Coffee Company, Inc., Panera Bread Company, Einstein Bros Bagels, and Krispy Kreme Doughnuts Inc.

for resale to retail customers.

JAB and its affiliates also hold investments in a number of other companies that have commercial relationships with the Company.

These commercial relationships may take the form of KDP’s purchase of raw materials, KDP’s license of the companies’ trademarks for use in the manufacturing of K-cup pods, KDP’s sale of products for resale to retail customers, or KDP’s manufacture or distribution of products to, or on behalf of, these 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.

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Accounts payable to related parties were $ 8 million and $ 7 million as of December 31, 2022 and 2021, respectively, primarily related to purchases of finished goods inventory for distribution.

Receipts to and payments generated from these related parties were as follows:

Revenues from and payments to these related parties were as follows:

For the Year Ended December 31,

(in millions) 2022 2021 2020

Receipts from related parties $ 113 $ 112 $ 93

Revenues from related parties $ 127 $ 113 $ 112

Payments to related parties 64 67 73

NOTE RECEIVABLE FROM BEDFORD

KDP holds a note receivable executed in December 2021 from Bedford, a related party.

All fundings made under this note receivable in 2021 were fully impaired and placed in non-accrual status as of December 31, 2021.

KDP has issued various promissory notes to Bedford since 2020, all of which have been fully impaired and placed in non-accrual status.

Refer to Note 12 for additional information.

Subsequent Events

BODYARMOR LITIGATION

In January 2022, KDP agreed to a $ 350 million payment from BodyArmor for a full settlement of all of the claims under the existing litigation against BodyArmor and in complete satisfaction of the holdback amount owed to ABC in association with the sale of ABC’s equity interest in BodyArmor in 2021.

ABC received the settlement payment in January 2022 and the lawsuit has been dismissed.

In January 2022, the Company allocated approximately $ 300 million of the settlement for resolution of the prior litigation, which was recorded to other operating (income) expense, net.

The remaining $ 50 million was allocated to the settlement of the holdback liability, which was recorded to Gain on the sale of our equity method investment.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

REDEMPTION OF THE 2038 NOTES

On January 24, 2022, KDP redeemed and retired the remainder of its 2038 Notes.

TERMINATION OF EXISTING CREDIT FACILITIES AND CREATION OF NEW FIVE-YEAR CREDIT FACILITY

On February 23, 2022, KDP terminated the 2021 364-Day Credit Agreement and the KDP Revolver.

There were no amounts drawn upon the 2021 364-Day Credit Agreement or the KDP Revolver prior to termination.

The 2022 Revolving Credit Agreement provides for a $ 4 billion revolving credit facility, including a letter of credit sub-facility in an aggregate principal amount of up to $200 million.

The 2022 Revolving Credit Agreement will mature in February 2027.

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

Borrowings under the 2022 Revolving Credit Agreement will bear interest at a rate per annum equal to, at KDP's option, an adjusted SOFR rate plus a margin of 0.875 % to 1.500 % or a base rate plus a margin of zero to 0.500 %, in each case, depending on the rating of certain index debt of KDP.

The 2022 Revolving Credit Agreement contains customary representations and warranties for investment grade financings.

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 and (iv) customary events of default (including a change of control) for financings of this type.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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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-K

Item 8. Financial Statements and Supplementary Data