What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-04-27 compared with 2022-10-27 · 165 added, 587 removed, 289 unchanged (72% of the section changed)

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All of the product names included in this Quarterly Report on Form 10-Q are either our registered trademarks or those of our licensors.

KDP is a leading beverage company in North America, with a diverse portfolio of flavored (non-cola) CSDs, NCBs, including water (enhanced and flavored), ready-to-drink tea and coffee, juice, juice drinks, mixers and specialty coffee, and is a leading producer of innovative single serve brewing systems.

With a wide range of hot and cold beverages that meet virtually any consumer need, our key brands include Keurig, Dr Pepper, Canada Dry, Snapple, Bai, Mott's, Core, Green Mountain and The Original Donut Shop.

KDP is a leading beverage company in North America, with a diverse portfolio of LRBs, including flavored (non-cola) CSDs, water (enhanced and flavored), ready-to-drink tea and coffee, juice, juice drinks, mixers and specialty coffee, and is a leading producer of innovative single serve brewing systems.

With a wide range of hot and cold beverages that meet virtually any consumer need, our key brands include Keurig, Dr Pepper, Canada Dry, Snapple, Mott's, Clamato, Core, Green Mountain Coffee Roasters and The Original Donut Shop.

We have some of the most recognized beverage brands in North America, with significant consumer awareness levels and long histories that evoke strong emotional connections with consumers.

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Our integrated business model enables us to be more flexible and responsive to the changing needs of our large retail customers and allows us to more fully leverage our scale and reduce costs by creating greater geographic manufacturing and distribution coverage.

Our 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 our single-serve brewers, K-Cup pods and other coffee products.

• 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 our own brands and third-party brands, through both the DSD and WD systems.

• The Beverage Concentrates segment reflects sales primarily in the U.S.

and Canada of our branded concentrates to third-party bottlers and our syrup to fountain foodservice customers.

Most of the brands in this segment are carbonated soft drink brands.

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

Effective January 1, 2023, the Company revised its segment structure to align with how the Company’s Chief Operating Decision Maker manages the business, assesses performance and allocates resources.

The Company's reportable segments consist of the following:

Refreshment Beverages segment reflects sales in the U.S.

from the manufacture and distribution of branded concentrates, syrup and finished beverages, including the sales of the Company's own brands and third-party brands, to third-party bottlers, distributors and retailers.

Coffee segment reflects sales in the U.S.

from the manufacture and distribution of finished goods relating to the Company's K-Cup pods, single-serve brewers and other coffee products to partners, retailers and directly to consumers through our Keurig.com website.

• The International segment reflects sales in international markets, including the following:

◦ Sales in Canada, Mexico, the Caribbean and other international markets from the manufacture and distribution of branded concentrates, syrup and finished beverages, including sales of the Company's own brands and third-party brands, to third-party bottlers, distributors and retailers.

◦ Sales in Canada from the manufacture and distribution of finished goods relating to the Company’s single-serve brewers, K-Cup pods and other coffee products.

COMPARABLE RESULTS OF OPERATIONS

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EXECUTIVE SUMMARY

Financial Overview - Third Quarter of 2022 as compared to Third Quarter of 2021

Financial Overview - First Quarter of 2023 as compared to First Quarter of 2022

As Reported, in millions (except EPS)

As Adjusted, in millions (except EPS)

Key Events During and Subsequent to the Third Quarter of 2022

We filed a shelf registration statement with the SEC on August 19, 2022, which allows us to issue an indeterminate number or amount of common stock, preferred stock, debt securities and warrants from time to time in one or more offerings at the direction of our Board.

On September 1, 2022, we closed our acquisition of the global rights to the non-alcoholic, ready-to-drink cocktail brand Atypique for $30 million.

On September 14, 2022, we announced that our Board approved a 6.7% increase in our annualized dividend rate to $0.80 per share, from the current annualized rate of $0.75 per share, effective with the regularly quarterly cash dividend announced on the same day.

As a result of our quarterly triggering events assessment, we recorded a non-cash impairment charge of $311 million in the Packaged Beverages segment for the Bai brand in the third quarter of 2022.

Refer to Note 3 of the Notes to our Unaudited Condensed Consolidated Financial Statements for further information.

On October 6, 2022, we announced a strategic partnership with Red Bull, the iconic global energy brand, to sell and distribute Red Bull Energy Drink products in Mexico, which is expected to begin during the fourth quarter of 2022.

Uncertainties and Trends Affecting Our Business

We believe the North American beverage market is influenced by certain key trends and uncertainties.

Refer to Item 1A, "Risk Factors", of our Annual Report, for more information about risks and uncertainties facing us.

Some of these items, such as the ongoing COVID-19 pandemic and the invasion of Ukraine by Russia, and the resulting impacts on the global economy, including supply chain constraints and labor shortages, have led to inflation in input costs, logistics, manufacturing and labor costs.

During the first nine months of 2022, we have experienced supply chain disruptions and a significant inflationary impact compared to the prior year period.

These impacts have created headwinds for our products that we expect to continue through the remainder of the year.

As a result of these inflationary pressures, we have increased the pricing on a number of our products across our portfolio.

Consequently, we may incur a reduction of volume or net sales, which, combined with the inflationary pressures, could impact our margins and operating results.

Refer to Note 4 of the Notes to our Unaudited Condensed Consolidated Financial Statements for our discussion of how we manage our exposure to commodity risk.

Impact of COVID-19 on our Financial Statements

The following table sets forth our reconciliation of significant COVID-19-related expenses.

Employee compensation expense and employee protection costs, which impact our SG&A expenses and cost of sales, are included as the COVID-19 item affecting comparability and are excluded in our Adjusted financial measures.

In addition, reported amounts under U.S.

GAAP also include additional costs, not included as the COVID-19 item affecting comparability, as presented in tables below.

Items Affecting Comparability (1)

(in millions) Employee Compensation Expense (2)

Employee Protection Costs (3)

Allowances for Expected Credit Losses (4)

For the third quarter of 2022:

Coffee Systems $ — $ 3 $ — $ 3

Packaged Beverages 1 1 — 2

Beverage Concentrates — — — —

Latin America Beverages — — — —

Total $ 1 $ 4 $ — $ 5

For the third quarter of 2021:

Coffee Systems $ 1 $ 1 $ — $ 2

Packaged Beverages 1 1 — 2

Beverage Concentrates — — — —

Latin America Beverages — — — —

Total $ 2 $ 2 $ — $ 4

For the first nine months of 2022:

Coffee Systems $ 1 $ 6 $ — $ 7

Packaged Beverages 3 3 — 6

Beverage Concentrates — — — —

Latin America Beverages — 1 — 1

Total $ 4 $ 10 $ — $ 14

For the first nine months of 2021:

Coffee Systems $ 3 $ 14 $ (2) $ 15

Packaged Beverages 7 6 (8) 5

Beverage Concentrates — — (3) (3)

Latin America Beverages — 1 — 1

Total $ 10 $ 21 $ (13) $ 18

(1) Employee compensation expense and employee protection costs are both included as the COVID-19 items affecting comparability in the reconciliation of our Adjusted Non-GAAP financial measures.

(2) Amounts include pay for temporary employees, including the associated taxes, as well as incremental benefits provided to frontline workers such as extended sick leave, in order to maintain essential operations during the COVID-19 pandemic.

(3) Includes costs associated with personal protective equipment, temperature scans, cleaning and other sanitization services.

Impacts both cost of sales and SG&A expenses.

(4) Reflects reversal of allowances initially recorded in 2020 specifically related to the COVID-19 pandemic, driven by improving economic conditions during 2021.

RESULTS OF OPERATIONS

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References in the financial tables to percentage changes that are not meaningful are denoted by "NM".

Third Quarter of 2022 Compared to Third Quarter of 2021

Consolidated Operations

The following table sets forth our unaudited condensed consolidated results of operations for the third quarter of 2022 and 2021:

Third Quarter Dollar Percentage

($ in millions, except per share amounts) 2022 2021 Change Change

Net sales $ 3,622 $ 3,250 $ 372 11.4 %

Cost of sales 1,721 1,415 306 21.6

Gross profit 1,901 1,835 66 3.6

Selling, general and administrative expenses 1,196 1,040 156 15.0

Impairment of intangible assets 311 — 311 NM

Other operating income, net — — — NM

Income from operations 394 795 (401) (50.4)

Interest expense 207 116 91 78.4

Loss on early extinguishment of debt — — — NM

Other expense (income), net 4 1 3 NM

Income before provision for income taxes 183 678 (495) (73.0)

Provision for income taxes 4 149 (145) NM

Net income including non-controlling interest 179 529 (350) (66.2)

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

Net income attributable to KDP $ 180 $ 530 (350) (66.0)

Earnings per common share:

Basic $ 0.13 $ 0.37 $ (0.24) (64.9) %

Diluted 0.13 0.37 (0.24) (64.9)

Gross margin 52.5 % 56.5 % (400) bps

Operating margin 10.9 % 24.5 % NM

Effective tax rate 2.2 % 22.0 % NM

Sales Volume.

The following table provides the percentage change in sales volumes for the third quarter of 2022 compared to the prior year period:

Percentage Change

K-Cup pod volume 3.5 %

Brewer volume

CSD sales volume (0.3)

NCB sales volume 4.7

Net sales increased $372 million, or 11.4%, to $3,622 million for the third quarter of 2022 compared to $3,250 million in the prior year period.

This performance reflected favorable net price realization across all segments totaling 12.1%, primarily driven by price increases, slightly offset by unfavorable FX translation of 0.4% and unfavorable volume/mix of 0.3%.

Gross Profit.

Gross profit increased $66 million, or 3.6%, to $1,901 million for the third quarter of 2022 compared to $1,835 million in the prior year period.

This performance primarily reflected the strong growth in net sales, partially offset by the impacts of broad-based inflation and an unfavorable change in unrealized commodity mark-to-market expense.

Gross margin decreased 400 bps versus the year ago period to 52.5%.

Selling, General and Administrative Expenses.

SG&A expenses increased $156 million, or 15.0%, to $1,196 million for the third quarter of 2022 compared to $1,040 million in the prior year period.

The increase was driven by the impact of broad-based inflation, an unfavorable change in unrealized commodity mark-to-market impacts, increased marketing and other operating costs.

Impairment of Intangible Assets.

Impairment of intangible assets reflected a non-cash impairment charge of $311 million in the third quarter of 2022 associated with Bai, an indefinite lived brand asset.

Refer to Note 3 of the Notes to our Unaudited Condensed Consolidated Financial Statements for further information.

Income from Operations.

Income from operations decreased $401 million, or 50.4%, to $394 million for the third quarter of 2022 compared to $795 million in the prior year period, primarily driven by the impairment of Bai of $311 million and increased SG&A expenses.

Interest Expense.

Interest expense increased $91 million, or 78.4%, to $207 million for the third quarter of 2022 compared with $116 million in the prior year period.

This change was primarily driven by unfavorable unrealized mark-to-market losses of $113 million on interest rate contracts, which were partially offset by the favorable comparison to realized gains on certain interest rate contracts and our strategic refinancing initiatives.

Effective Tax Rate.

The effective tax rate was 2.2% for the third quarter of 2022, compared to 22.0% in the prior year period, primarily driven by the revaluation of state deferred tax liabilities due to state legislative changes.

Net Income Attributable to KDP.

Net income decreased $350 million, or 66.0%, to $180 million for the third quarter of 2022 as compared to $530 million in the prior year period, driven by lower income from operations and increased interest expense, partially offset by the decrease in our effective tax rate.

Diluted EPS decreased 64.9% to $0.13 per diluted share for the third quarter of 2022 as compared to $0.37 in the prior year period.

Results of Operations by Segment

The following tables set forth net sales and income from operations for our segments for the third quarter of 2022 and 2021, as well as other amounts necessary to reconcile our segment results to our consolidated results presented in accordance with U.S.

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.

Third Quarter

(in millions) 2022 2021

Segment Results — Net sales

Coffee Systems $ 1,209 $ 1,155

Packaged Beverages 1,756 1,547

Beverage Concentrates 459 392

Latin America Beverages 198 156

Net sales $ 3,622 $ 3,250

Third Quarter

(in millions) 2022 2021

Segment Results — Income from operations

Coffee Systems $ 295 $ 365

Packaged Beverages 10 291

Beverage Concentrates 347 287

Latin America Beverages 39 37

Unallocated corporate costs (297) (185)

Income from operations $ 394 $ 795

COFFEE SYSTEMS

The following table provides selected information about our Coffee Systems segment's results:

Third Quarter Dollar Percent

(in millions) 2022 2021 Change Change

Net sales $ 1,209 $ 1,155 $ 54 4.7 %

Income from operations 295 365 (70) (19.2)

Operating margin 24.4 % 31.6 % (720) bps

Sales Volume.

K-Cup pod volume grew 3.5% in the third quarter of 2022 compared to the prior year period, reflecting continued improvement following the completion of our coffee recovery program in the second quarter of 2022.

Brewer volume decreased 15.3% compared to the prior year period, as continuing improvements in consumer mobility resulted in brewer shipments returning to more normalized levels.

Net sales increased 4.7% to $1,209 million for the third quarter of 2022 compared to net sales of $1,155 million in the prior year period, reflecting favorable net price realization of 7.8%, partially offset by volume/mix declines of 2.6% and unfavorable FX translation of 0.5%.

Income from Operations.

Income from operations decreased $70 million, or 19.2%, to $295 million for the third quarter of 2022, compared to $365 million for the prior year period, reflecting the impacts of broad-based inflation, particularly in green coffee, unfavorable volume/mix, and increases in other operating costs, partially offset by the benefits of pricing actions taken and productivity.

Operating margin declined 720 bps versus the year ago period to 24.4%.

PACKAGED BEVERAGES

The following table provides selected information about our Packaged Beverages segment's results:

Third Quarter Dollar Percent

(in millions) 2022 2021 Change Change

Net sales $ 1,756 $ 1,547 $ 209 13.5 %

Income from operations 10 291 (281) (96.6)

Operating margin 0.6 % 18.8 % NM

Sales Volume.

Sales volume for the third quarter of 2022 decreased 0.8% compared to the prior year period, as the benefits of volume growth in Snapple, Hawaiian Punch and Core were more than offset by reductions in contract manufacturing.

Net sales increased 13.5% to $1,756 million for the third quarter of 2022, compared to $1,547 million in the prior year period, driven by favorable net price realization of 13.6%, with volume / mix relatively flat, reflecting strong in-market execution, and unfavorable FX translation of 0.1%.

Income from Operations.

Income from operations decreased $281 million, or 96.6%, to $10 million for the third quarter of 2022, compared to $291 million for the prior year period, primarily driven by the $311 million non-cash impairment charge for Bai.

Other drivers of the change included the benefit of strong net sales growth, partially offset by broad-based inflation, higher operating costs, and increased marketing expenses.

BEVERAGE CONCENTRATES

The following table provides selected information about our Beverage Concentrates segment's results:

Third Quarter Dollar Percent

(in millions) 2022 2021 Change Change

Net sales $ 459 $ 392 $ 67 17.1 %

Income from operations 347 287 60 20.9

Operating margin 75.6 % 73.2 % 240 bps

Sales volume.

Sales volume for the third quarter of 2022 remained relatively flat compared to the prior year period, as increases in Dr Pepper and Crush were offset by declines in Schweppes and A&W.

Net sales increased 17.1% to $459 million in the third quarter of 2022, compared to $392 million for the prior year period, reflecting higher net price realization of 16.6% and volume/mix growth of 0.7%.

These benefits were slightly offset by unfavorable FX translation impacts of 0.2%.

Income from Operations.

Income from operations increased $60 million, or 20.9%, to $347 million for the third quarter of 2022 compared to $287 million in the prior year period.

This performance reflected the benefits of strong net sales growth and lower marketing expense, partially offset by broad-based inflation.

Operating margin increased 240 bps versus the year ago period to 75.6%.

LATIN AMERICA BEVERAGES

The following table provides selected information about our Latin America Beverages segment's results:

Third Quarter Dollar Percent

(in millions) 2022 2021 Change Change

Net sales $ 198 $ 156 $ 42 26.9 %

Income from operations 39 37 2 5.4

Operating margin 19.7 % 23.7 % (400) bps

Sales Volume.

Sales volume for the third quarter of 2022 increased 10.3% compared to the prior year period, led by Peñafiel and Squirt, driven by strong in-market execution .

Net sales grew 26.9% to $198 million for the third quarter of 2022, compared to $156 million in the prior year period, reflecting favorable net price realization of 17.3% and volume/mix growth of 11.5%, partially offset by unfavorable FX translation impacts of 1.9%.

Income from Operations.

Income from operations increased $2 million, or 5.4%, to $39 million for the third quarter of 2022 compared to $37 million in the prior year period, reflecting the benefit of net sales growth, partially offset by the impacts of broad-based inflation, higher costs associated with increased volumes, and higher marketing expense.

Operating margin decreased 400 bps versus the year ago period to 19.7%.

First Nine Months of 2022 Compared to First Nine Months of 2021

First Quarter of 2023 Compared to First Quarter of 2022

Consolidated Operations

The following table sets forth our unaudited condensed consolidated results of operations for the first nine months of 2022 and 2021:

First Nine Months Dollar Percentage

The following table sets forth our unaudited condensed consolidated results of operations for the first quarter of 2023 and 2022:

First Quarter Dollar Percentage

($ in millions, except per share amounts) 2023 2022 Change Change

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Selling, general and administrative expenses 1,165 1,018 147 14.4

Impairment of intangible assets 311 — 311 NM

Gain on litigation settlement — (299) 299 NM

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Impairment of investments and note receivable — 6 (6) NM

Other expense (income), net 22 (6) 28 NM

Other (income) expense, net (20) 9 (29) NM

Income before provision for income taxes 581 765 (184) (24.1)

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Gross margin 52.0 % 53.6 % (160) bps

Operating margin 18.8 % 23.3 % (450) bps

Operating margin 17.4 % 31.4 % NM

Effective tax rate 19.6 % 23.5 % (390) bps

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Percentage Change

K-Cup pod volume 0.9 %

Brewer volume

CSD sales volume 2.1

NCB sales volume 2.8

Net sales increased $962 million, or 10.4%, to $10,254 million for the first nine months of 2022 compared to $9,292 million in the prior year period.

This performance reflected favorable net price realization across all segments totaling 9.7% and volume/mix growth of 0.9%, as expected reductions driven by our coffee recovery program during the first quarter of 2022 moderated volume gains in our other segments.

These benefits were slightly offset by unfavorable FX translation of 0.2%.

K-Cup pods (0.6)

Net sales increased $275 million, or 8.9%, to $3,353 million for the first quarter of 2023 compared to $3,078 million in the prior year period.

This performance reflected favorable net price realization across all segments totaling 9.9%, slightly offset by unfavorable volume/mix of 1.0%.

Gross Profit.

Gross profit increased $122 million, or 2.3%, to $5,327 million for the first nine months of 2022 compared to $5,205 million in the prior year period.

This performance primarily reflected the strong growth in net sales and the benefit of productivity, partially offset by broad-based inflation and an unfavorable change in unrealized commodity mark-to-market impacts.

Gross profit increased $94 million, or 5.7%, to $1,744 million for the first quarter of 2023 compared to $1,650 million in the prior year period.

This performance primarily reflected the benefits of net sales growth and productivity, partially offset by broad-based inflation, and an unfavorable change in unrealized commodity mark-to-market activity.

Gross margin decreased 160 bps versus the year ago period to 52.0%.

Selling, General and Administrative Expenses.

SG&A expenses increased $378 million, or 12.4%, to $3,418 million for the first nine months of 2022 compared to $3,040 million in the prior year period.

The increase was driven by higher logistics costs and increases in other operating expenses.

Impairment of Intangible Assets.

Impairment of intangible assets reflected a non-cash impairment charge of $311 million associated with Bai, an indefinite lived brand asset.

Refer to Note 3 of the Notes to our Unaudited Condensed Consolidated Financial Statements for further information.

SG&A expenses increased $147 million, or 14.4%, to $1,165 million for the first quarter of 2023 compared to $1,018 million in the prior year period.

The increase was driven by broad-based inflation, an unfavorable comparison to the stock award forfeiture accounting policy change in the prior year period of $40 million, higher marketing expense and increases in other operating costs.

Gain on Litigation Settlement .

Gain on litigation settlement reflects the portion of the settlement payment from BodyArmor which was allocated to the gain on the full settlement of the existing claims against BodyArmor in the second quarter of 2022.

Refer to Note 12 of the Notes to our Unaudited Condensed Consolidated Financial Statements for further information.

Gain on litigation settlement reflected the portion of the settlement payment from BodyArmor which was allocated to the gain on the full settlement of the existing claims against BodyArmor in the first quarter of 2022.

Other Operating Income, net.

Other operating income, net increased $31 million for the first nine months of 2022 compared to the prior year period, primarily driven by a $38 million gain on an asset sale-leaseback transaction related to our strategic asset investment program in the first quarter of 2022.

Other operating income, net decreased $30 million for the first quarter of 2023 compared to the prior year period, primarily driven by a $32 million reduction in year-over-year asset sale-leaseback activity relating to our strategic asset investment program.

Income from Operations.

Income from operations decreased $237 million, or 10.9%, to $1,932 million for the first nine months of 2022 compared to $2,169 million in the prior year period, primarily driven by the non-cash impairment of Bai of $311 million, which was partially offset by the gain on the litigation settlement.

Income from operations decreased $382 million, or 39.5%, to $584 million for the first quarter of 2023 compared to $966 million in the prior year period, primarily driven by unfavorable comparison to the gain on the litigation settlement and on the reduction in asset sale-leaseback activity.

Other factors include higher SG&A expenses, partially offset by increased gross profit.

Operating margin decreased 450 bps versus the year ago period to 18.8%.

Interest Expense.

Interest expense increased $189 million, or 49.6%, to $570 million for the first nine months of 2022 compared to $381 million for the prior year period.

This change was primarily driven by the unfavorable comparison of unrealized mark-to-market losses of $254 million on interest rate contracts, which was partially offset by reduced interest expense on our senior unsecured notes as a result of our strategic refinancing initiatives.

Interest expense decreased $165 million, or 87.8%, to $23 million for the first quarter of 2023 compared to $188 million for the prior year period, primarily driven by the favorable change in unrealized mark-to-market activity of $164 million on interest rate contracts.

Loss on Early Extinguishment of Debt.

Loss on early extinguishment of debt reflected an unfavorable change of $112 million, with a loss of $217 million during the first nine months of 2022 related to our 2022 Strategic Refinancing and our early retirement of our 2038 Notes, the 2021 364-Day Credit Agreement and the KDP Revolver, as compared to a loss of $105 million in the prior year period associated with our 2021 strategic refinancing.

Loss on early extinguishment of debt reflected a loss of $48 million in the prior year period associated with our 2022 Strategic Refinancing and our early retirement of our 2038 Notes, the 2021 364-Day Credit Agreement and the KDP Revolver.

Gain on Sale of Equity Method Investment.

Gain on sale of equity method investment reflects the portion of the settlement payment from BodyArmor which was allocated to the satisfaction of the holdback amount owed to us in association with the sale of our equity interest in BodyArmor in 2021.

Refer to Note 12 of the Notes to our Unaudited Condensed Consolidated Financial Statements for further information.

Gain on sale of equity method investment reflected the portion of the settlement payment from BodyArmor in the first quarter of 2022 which was allocated to the satisfaction of the holdback amount owed to us in association with the sale of our equity interest in BodyArmor in 2021.

Impairment of Investments and Note Receivable.

Impairment on investments and note receivable reflected a non-cash impairment charge of $12 million in the first nine months of 2022 associated with the wind-down of Bedford.

Refer to Note 12 of the Notes to our Unaudited Condensed Consolidated Financial Statements for further information.

Impairment on investments and note receivable reflected a non-cash impairment charge of $6 million in the first quarter of 2022 associated with the wind-down of Bedford.

Other Non-operating (Income) Expense, net.

Other (income) expense, net reflected a favorable change of $29 million from the prior year period, driven by gains on the Company’s investments in equity securities, primarily led by Nutrabolt’s preferred dividend and mark-to-market on our Vita Coco investment.

Effective Tax Rate.

The effective tax rate decreased 750 bps to 15.4% for the first nine months of 2022, compared to 22.9% in the prior year period, primarily driven by the revaluation of state deferred tax liabilities due to state legislative changes and the favorable mix of our incremental income in low tax jurisdictions in the current period, partially offset by the unfavorable comparison to the excess tax deductions that were generated from the vesting of RSUs during the first nine months of 2021.

The effective tax rate decreased 390 bps to 19.6% for the first quarter of 2023, compared to 23.5% in the prior year period, primarily driven by the tax benefit received from favorable adjustments upon foreign tax return filing and excess tax deductions that were generated from the vesting of RSUs during the first quarter of 2023.

Net Income Attributable to KDP.

Net income attributable to KDP decreased $320 million, or 24.6%, to $983 million for the first nine months of 2022 as compared to $1,303 million in the prior year period, primarily driven by lower income from operations, increased interest expense, and the unfavorable change in loss on early extinguishment of debt, partially offset by the decrease in our effective tax rate.

Net income attributable to KDP decreased $118 million, or 20.2%, to $467 million for the first quarter of 2023 as compared to $585 million in the prior year period, primarily driven by lower income from operations and the unfavorable comparison to the gain in the prior year period for the sale of our equity method investment in BodyArmor, partially offset by reduced interest expense, the favorable comparison to the loss on extinguishment of debt in the prior year, and the decrease in our effective tax rate.

Diluted EPS decreased 19.5% to $0.33 per diluted share as compared to $0.41 in the prior year period.

Results of Operations by Segment

The following tables provide net sales and income from operations for our reportable segments for the first nine months of 2022 and 2021, as well as the other amounts necessary to reconcile our total segment results to our consolidated results presented in accordance with U.S.

The prior period segment disclosures reflect the revised presentation.

(in millions) First Nine Months

The following tables provide net sales and income from operations for our reportable segments for the first quarter of 2023 and 2022, as well as the other amounts necessary to reconcile our total segment results to our consolidated results presented in accordance with U.S.

(in millions) First Quarter

Net sales 2023 2022

Coffee Systems $ 3,497 $ 3,398

Packaged Beverages 4,925 4,352

Beverage Concentrates 1,278 1,095

Latin America Beverages 554 447

Refreshment Beverages $ 2,007 $ 1,781

Coffee 931 943

International 415 354

Total net sales $ 3,353 $ 3,078

Income from operations

Coffee Systems $ 878 $ 1,088

Packaged Beverages 728 731

Beverage Concentrates 915 780

Latin America Beverages 114 95

Refreshment Beverages $ 490 $ 704

Coffee 232 255

International 80 64

Unallocated corporate costs (218) (57)

Total income from operations $ 584 $ 966

COFFEE SYSTEMS

The following table provides selected information about our Coffee Systems segment's results:

First Nine Months Dollar Percent

REFRESHMENT BEVERAGES

The following table provides selected information about our U.S.

Refreshment Beverages segment's results:

First Quarter Dollar Percent

(in millions) 2023 2022 Change Change

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Sales Volume.

K-Cup pod volume increased 0.9% for the first nine months of 2022 compared to the prior year period, as the segment was implementing its coffee recovery program to increase pod manufacturing output and rebuild finished goods inventories to satisfy strong consumer demand and restore customer service levels.

Brewer volume decreased 8.9% in the first nine months of 2022, driven by the unfavorable comparison to significant brewer shipment growth of 22.5% in the prior year period.

Net sales increased 2.9% to $3,497 million for the first nine months of 2022 compared to $3,398 million in the prior year period, driven by favorable net price realization of 5.6%, partially offset by volume/mix declines of 2.3% and unfavorable FX translation effects of 0.4%.

Sales volumes for the first quarter of 2023 were flat compared to the prior year period.

Growth in Dr Pepper, driven by our Strawberries & Cream innovation, and C4 Energy as a result of our recently announced sales and distribution partnership, was fully offset by declines in our still portfolio.

Net sales increased 12.7% to $2,007 million in the first quarter of 2023, compared to $1,781 million in the prior year period, driven by favorable net price realization of 12.5% and volume/mix growth of 0.2%.

Income from Operations.

Income from operations decreased $210 million, or 19.3%, to $878 million for the first nine months of 2022, compared to $1,088 million in the prior year period, as a result of broad-based inflation, particularly in green coffee, lower volume/mix, unfavorable mark-to-market impacts and increased costs associated with productivity projects.

These decreases were partially offset by the benefits of pricing actions and productivity.

Operating margin declined 690 bps versus the year ago period to 25.1% due to these inflationary headwinds.

PACKAGED BEVERAGES

The following table provides selected information about our Packaged Beverages segment's results:

First Nine Months Dollar Percent

Income from operations decreased $214 million, or 30.4%, to $490 million for the first quarter of 2023 compared to $704 million for the prior year period, primarily driven by the unfavorable comparison to the gains on the settlement of litigation with BodyArmor of $271 million and a reduction in year-over-year asset sale-leaseback activity of $32 million for our strategic asset investment program.

Other drivers included the benefits of net sales growth and productivity, partially offset by broad-based inflation, higher marketing expense, and increases in other operating costs.

The following table provides selected information about our U.S.

Coffee segment's results:

First Quarter Dollar Percent

(in millions) 2023 2022 Change Change

3 unchanged sentences

Sales Volume.

Sales volume for the first nine months of 2022 increased 1.1% compared to the prior year period, due primarily to strength in CSDs, Motts, Core, Polar and Hawaiian Punch, which were partially offset by reductions in contract manufacturing and Bai.

Net sales increased 13.2% to $4,925 million in the first nine months of 2022, compared to $4,352 million in the prior year period, driven by favorable net price realization of 11.1% and volume/mix growth of 2.1%.

K-Cup pod volume decreased 1.9% for the first quarter of 2023 compared to the prior year period, as improvements in our away-from-home business, driven by increasing office occupancy, were more than offset by softness in our at-home business, driven by higher consumer mobility versus the prior year period.

Brewer volume decreased 29.0% in the first quarter of 2023, driven by retailer inventory shifts and category softness in small appliances.

Net sales decreased 1.3% to $931 million for the first quarter of 2023 compared to $943 million in the prior year period, driven by volume/mix declines of 6.6% partially offset by favorable net price realization of 5.3%.

Income from Operations.

Income from operations decreased $3 million, or 0.4%, to $728 million for the first nine months of 2022 compared to $731 million for the prior year period, primarily driven by the $311 million non-cash impairment charge for Bai, which was partially offset by the gain on the settlement of litigation with BodyArmor of $271 million.

Other drivers included the benefits of net sales growth, asset sale-leaseback activity in the first nine months of 2022 relating to our strategic asset initiative, and productivity, partially offset by broad-based inflation and higher costs to serve the ongoing strong consumer demand.

BEVERAGE CONCENTRATES

The following table provides selected information about our Beverage Concentrates segment's results:

First Nine Months Dollar Percent

Income from operations decreased $23 million, or 9.0%, to $232 million for the first quarter of 2023, compared to $255 million in the prior year period, as a result of inflation in input costs, declines in volume/mix and increases in other operating costs.

These decreases were partially offset by the benefits of pricing actions and productivity.

Operating margin declined 210 bps versus the year ago period to 24.9% due to these inflationary headwinds.

INTERNATIONAL

The following table provides selected information about our International segment's results:

First Quarter Dollar Percent

(in millions) 2023 2022 Change Change

3 unchanged sentences

Sales Volume.

Sales volume for the first nine months of 2022 increased 1.8% compared to the prior year period, primarily driven by Dr Pepper and Canada Dry, partially offset by Schweppes and Crush.

Net sales increased 16.7% to $1,278 million in the first nine months of 2022, compared to $1,095 million in the prior year period, reflecting higher net price realization of 14.8% and volume/mix growth of 2.1%, slightly offset by unfavorable FX translation effects of 0.2%.

The following table provides the percentage change in sales volumes for the International segment compared to the prior year period:

Percentage Change

K-Cup pods 9.5

Net sales increased 17.2% to $415 million in the first quarter of 2023, compared to $354 million in the prior year period, reflecting higher net price realization of 9.0%, volume/mix growth of 7.7%, and favorable FX translation effects of 0.5%.

Income from Operations.

Income from operations increased $135 million, or 17.3%, to $915 million for the first nine months of 2022 compared to $780 million in the prior year period.

This performance reflected the impact of net sales growth, partially offset by broad-based inflation.

Income from operations increased $16 million, or 25.0%, to $80 million for the first quarter of 2023 compared to $64 million in the prior year period.

This performance reflected the benefits of net sales growth and productivity, partially offset by broad-based inflation and higher costs associated with higher volumes.

Operating margin increased 120 bps versus the year ago period to 19.3%.

LATIN AMERICA BEVERAGES

The following table provides selected information about our Latin America Beverages segment's results:

First Nine Months Dollar Percent

(in millions) 2022 2021 Change Change

Net sales $ 554 $ 447 $ 107 23.9 %

Income from operations 114 95 19 20.0

Operating margin 20.6 % 21.3 % (70) bps

Sales Volume.

Sales volume for the first nine months of 2022 as compared to the prior year period increased 7.9%, led by Squirt and Peñafiel, driven by strong in-market execution.

Net sales grew 23.9% to $554 million for the first nine months of 2022, compared to $447 million in the prior year period, reflecting favorable net price realization of 14.1% and volume/mix growth of 10.7%, slightly offset by unfavorable FX translation of 0.9%.

Income from Operations.

Income from operations increased $19 million, or 20.0%, to $114 million for the first nine months of 2022 compared to $95 million in the prior year period, driven by the benefits of net sales growth and productivity, partially offset by the impacts of broad-based inflation, higher costs associated with incremental volumes, and increased marketing expense.

Operating margin decreased 70 bps versus the year ago period to 20.6%.

NON-GAAP FINANCIAL MEASURES

To supplement the consolidated financial statements presented in accordance with U.S.

GAAP, we have presented for certain constant currency adjusted or adjusted financial measures for the third quarter and first nine months of 2022 and 2021, which are considered non-GAAP financial measures.

GAAP, we have presented for certain constant currency adjusted or adjusted financial measures for the first quarter of 2023 and 2022, which are considered non-GAAP financial measures.

The non-GAAP financial measures provided should be viewed in addition to, and not as an alternative for, results prepared in accordance with U.S.

20 unchanged sentences

and (vii) other certain items that are excluded for comparison purposes to prior year periods.

For the third quarter and first nine months of 2022, the other certain items excluded for comparison purposes include (i) restructuring and integration expenses related to significant business combinations;

For the first quarter of 2023, the other certain items excluded for comparison purposes include productivity expenses.

For the first quarter of 2022, the other certain items excluded for comparison purposes include (i) restructuring and integration expenses related to significant business combinations;

(ii) productivity expenses;

(iii) costs related to significant non-routine legal matters;

(iii) costs related to significant non-routine legal matters, specifically the antitrust litigation;

(iv) the loss on early extinguishment of debt related to the redemption of debt;

(v) incremental costs to our operations related to risks associated with the COVID-19 pandemic;

(v) incremental costs to our operations related to risks associated with the COVID-19 pandemic, which were incurred to either maintain the health and safety of our front-line employees or temporarily increase compensation to such employees to ensure essential operations continue during the pandemic;

(vi) the gain on the sale of our investment in BodyArmor as a result of the settlement of the associated holdback liability;

(vii) the gain on the settlement of our prior litigation with BodyArmor, excluding recoveries of previously incurred litigation expenses which were included in our adjusted results;

(viii) losses recognized with respect to our equity method investment in Bedford as a result of funding our share of their wind-down costs;

(ix) transaction costs for significant business combinations (completed or abandoned) excluding the DPS Merger;

(x) foundational projects, which are transformative and non-recurring in nature;

and (xi) impairment recognized on the Bai brand.

For the third quarter and first nine months of 2021, the other certain items excluded for comparison purposes include (i) restructuring and integration expenses related to significant business combinations;

(ii) productivity expenses;

(iii) costs related to significant non-routine legal matters;

(iv) the loss on early extinguishment of debt related to the redemption of debt;

(v) incremental costs to our operations related to risks associated with the COVID-19 pandemic;

and (vi) gains from insurance recoveries related to the February 2019 organized malware attack on our business operation networks in the Coffee Systems segment.

Costs related to significant non-routine legal matters relate to the antitrust litigation.

Incremental costs to our operations related to risks associated with the COVID-19 pandemic include incremental expenses incurred to either maintain the health and safety of our front-line employees or temporarily increase compensation to such employees to ensure essential operations continue during the pandemic.

We believe removing these costs reflects how management views our business results on a consistent basis.

See Impact of COVID-19 on our Financial Statements for further information.

and (viii) losses recognized with respect to our equity method investment in Bedford as a result of funding our share of their wind-down costs.

Constant currency adjusted :

Defined as certain financial statement captions and metrics adjusted for certain items affecting comparability, calculated on a constant currency basis by converting our current period local currency financial results using the prior period foreign currency exchange rates.

For the third quarter and first nine months of 2022 and 2021, the supplemental financial data set forth below includes reconciliations of adjusted and constant currency adjusted financial measures to the applicable financial measure presented in the unaudited condensed consolidated financial statements for the same period.

For the first quarter of 2023 and 2022, the supplemental financial data set forth below includes reconciliations of adjusted and constant currency adjusted financial measures to the applicable financial measure presented in the unaudited condensed consolidated financial statements for the same period.

KEURIG DR PEPPER INC.

1 unchanged sentence

(Unaudited, in millions, except per share and percentages)

Cost of sales Gross profit Gross margin Selling, general and administrative expenses Impairment of intangible assets Income from operations Operating margin

For the Third Quarter of 2022

Cost of sales Gross profit Gross margin Selling, general and administrative expenses Gain on litigation settlement Other operating income, net Income from operations Operating margin

For the First Quarter of 2023

Reported $ 1,609 $ 1,744 52.0 % $ 1,165 $ — $ (5) $ 584 17.4 %

3 unchanged sentences

Stock compensation — — (5) — — 5

Restructuring and integration costs — — (33) — 33

Productivity (38) 38 (40) — — 78

Impairment of intangible assets — — — (311) 311

Non-routine legal matters — — (2) — 2

COVID-19 (3) 3 (2) — 5

Foundational projects — — (1) — 1

Adjusted $ 1,585 $ 1,768 52.7 % $ 1,074 $ — $ (5) $ 699 20.8 %

1 unchanged sentence

Constant currency adjusted 52.7 % 20.9 %

For the Third Quarter of 2021

For the First Quarter of 2022

Reported $ 1,428 $ 1,650 53.6 % $ 1,018 $ (299) $ (35) $ 966 31.4 %

7 unchanged sentences

COVID-19 (4) 4 (1) — — 5

Transaction costs — — (1) — 1

Malware incident — — 1 — (1)

Gain on litigation — — — 271 — (271)

Adjusted $ 1,455 $ 1,623 52.7 % $ 957 $ (28) $ (38) $ 732 23.8 %

3 unchanged sentences

(Unaudited, in millions, except per share and percentages)

Interest expense Other expense (income), net Income before provision for income taxes Provision for income taxes Effective tax rate Net income attributable to KDP Diluted earnings per share

For the Third Quarter of 2022

Interest expense Loss on early extinguishment of debt Gain on sale of equity method investment Impairment of investments and note receivable Other (income) expense, net Income before provision for income taxes Provision for income taxes Effective tax rate Net income attributable to KDP Diluted earnings per share

For the First Quarter of 2023

Reported $ 23 $ — $ — $ — $ (20) $ 581 $ 114 19.6 % $ 467 $ 0.33

4 unchanged sentences

Stock compensation — — — — — 5 2 3 —

Restructuring and integration costs — — 33 8 25 0.02

Productivity — — — — — 78 21 57 0.04

Impairment of intangible assets — — 311 77 234 0.16

Loss on early extinguishment of debt — — — — — (0.01)

Non-routine legal matters — — 2 — 2 —

COVID-19 — — 5 1 4 —

Foundational projects — — 1 1 — —

Change in deferred tax liabilities related to goodwill and other intangible assets — — — 31 (31) (0.02)

Adjusted $ 112 $ — $ — $ — $ (11) $ 598 $ 119 19.9 % $ 479 $ 0.34

1 unchanged sentence

Constant currency adjusted 20.2 %

For the Third Quarter of 2021

For the First Quarter of 2022

Reported $ 188 $ 48 $ (50) $ 6 $ 9 $ 765 $ 180 23.5 % $ 585 $ 0.41

7 unchanged sentences

Productivity — — — — — 50 12 38 0.03

Loss on early extinguishment of debt — — — (1) 1 —

Non-routine legal matters — — 7 2 5 —

COVID-19 — — 4 1 3 —

Transaction costs — — 1 — 1 —

Malware incident — — (1) (1) — —

Change in deferred tax liabilities related to goodwill and other intangible assets — — — 7 (7) —

Adjusted $ 110 $ 1 $ 820 $ 190 23.2 % $ 631 $ 0.44

Change - adjusted (19.1) % 4.0 % 4.5 %

Impact of foreign currency — % 0.3 % — %

Change - constant currency adjusted (19.1) % 4.3 % 4.5 %

Diluted earnings per common share may not foot due to rounding.

KEURIG DR PEPPER INC.

RECONCILIATION OF CERTAIN REPORTED SEGMENT MEASURES

TO CERTAIN NON-GAAP ADJUSTED AND CURRENCY NEUTRAL ADJUSTED SEGMENT MEASURES

(in millions) Reported Items Affecting Comparability Adjusted

For the third quarter of 2022:

Income from operations

Coffee Systems $ 295 $ 48 $ 343

Packaged Beverages 10 330 340

Beverage Concentrates 347 3 350

Latin America Beverages 39 2 41

Unallocated corporate costs (297) 170 (127)

Total income from operations $ 394 $ 553 $ 947

For the third quarter of 2021:

Income from operations

Coffee Systems $ 365 $ 43 $ 408

Packaged Beverages 291 24 315

Beverage Concentrates 287 3 290

Latin America Beverages 37 — 37

Unallocated corporate costs (185) 66 (119)

Total income from operations $ 795 $ 136 $ 931

Reported Impact of Foreign Currency Constant Currency

For the third quarter of 2022:

Coffee Systems 4.7 % 0.5 % 5.2 %

Packaged Beverages 13.5 0.1 13.6

Beverage Concentrates 17.1 0.2 17.3

Latin America Beverages 26.9 1.9 28.8

Total net sales 11.4 0.4 11.8

Adjusted Impact of Foreign Currency Constant Currency Adjusted

For the third quarter of 2022:

Income from operations

Coffee Systems (15.9) % 0.2 % (15.7) %

Packaged Beverages 7.9 — 7.9

Beverage Concentrates 20.7 0.3 21.0

Latin America Beverages 10.8 2.7 13.5

Total income from operations 1.7 0.3 2.0

Reported Items Affecting Comparability Adjusted Impact of Foreign Currency Constant Currency Adjusted

For the third quarter of 2022:

Operating margin

Coffee Systems 24.4 % 4.0 % 28.4 % (0.1) % 28.3 %

Packaged Beverages 0.6 18.8 19.4 — 19.4

Beverage Concentrates 75.6 0.7 76.3 — 76.3

Latin America Beverages 19.7 1.0 20.7 0.2 20.9

Total operating margin 10.9 15.2 26.1 — 26.1

CONSTANT CURRENCY ADJUSTED RESULTS OF OPERATIONS

Third Quarter of 2022 Compared to Third Quarter of 2021

The following discussion of our results for the third quarter of 2022 is presented on a constant currency adjusted basis.

These adjusted financial results are calculated on a constant currency basis by converting our current-period local currency financial results using the prior-period foreign currency exchange rates.

Consolidated Operations

Constant Currency Net Sales.

Constant currency net sales increased 11.8% in the third quarter of 2022 compared to the prior year period, driven by favorable net price realization of 12.1%, partially offset by decreased volume/mix of 0.3%.

Constant Currency Adjusted Income from Operations.

Constant currency adjusted income from operations increased 2.0% compared to the prior year period, primarily driven by strong growth in net sales and the benefit of productivity, partially offset by the impact of broad-based inflation, increases in other operating costs and higher marketing expense.

Constant Currency Adjusted Interest Expense.

Constant currency adjusted interest expense decreased 19.1% compared to the prior year period, driven by the favorable comparison to realized gains on certain interest rate contracts.

Constant Currency Adjusted Effective Tax Rate.

The c onstant currency adjusted effective tax rate was relatively flat, with a rate of 23.1% for the third quarter of 2022 compared to 23.2% for the prior year period.

Constant Currency Adjusted Net Income Attributable to KDP.

Constant currency adjusted net income attributable to KDP increased 4.3% compared to the prior year period, driven primarily by the impacts of lower interest expense and increased income from operations.

Constant Currency Adjusted Diluted EPS .

Constant currency adjusted diluted EPS increased 4.5% in the current period.

Results of Operations by Segment

COFFEE SYSTEMS

Constant Currency Net Sales.

Constant currency net sales increased 5.2%, reflecting higher net price realization of 7.8% and volume/mix declines of 2.6%.

Constant Currency Adjusted Income from Operations.

Constant currency adjusted income from operations for the third quarter of 2022 decreased 15.7% compared to the prior year period, driven by broad-based inflation, particularly in green coffee, unfavorable volume/mix, and increases in other operating costs, partially offset by the benefit of pricing actions taken and the benefit of productivity.

PACKAGED BEVERAGES

Constant Currency Net Sales.

Constant currency net sales increased 13.6%, reflecting favorable net price realization of 13.6%.

Constant Currency Adjusted Income from Operations.

Constant currency adjusted income from operations for the third quarter of 2022 increased 7.9% compared to the prior year period, driven primarily by the impact of net sales growth and productivity, partially offset by broad-based inflation, higher operating costs, and increased marketing expenses.

BEVERAGE CONCENTRATES

Constant Currency Net Sales.

Constant currency net sales increased 17.3%, reflecting higher net price realization of 16.6% and volume/mix growth of 0.7%.

Constant Currency Adjusted Income from Operations.

Constant currency adjusted income from operations for the third quarter of 2022 increased 21.0% compared to the prior year period.

This performance reflected the benefits of net sales growth and lower marketing expense, partially offset by the impacts of broad-based inflation.

LATIN AMERICA BEVERAGES

Constant Currency Net Sales.

Constant currency net sales increased 28.8%, driven by favorable net price realization of 17.3% and volume/mix growth of 11.5%.

Constant Currency Adjusted Income from Operations.

Constant currency adjusted income from operations for the third quarter of 2022 increased 13.5% compared to the prior year period, reflecting the benefit of net sales growth, partially offset by the impacts of broad-based inflation, higher costs associated with incremental volumes, and increased marketing expense.

KEURIG DR PEPPER INC.

RECONCILIATION OF CERTAIN REPORTED ITEMS TO CERTAIN NON-GAAP ADJUSTED ITEMS

(Unaudited, in millions, except per share and percentages)

Cost of sales Gross profit Gross margin Selling, general and administrative expenses Impairment of intangible assets Gain on litigation settlement Other operating income, net Income from operations Operating margin

For the First Nine Months of 2022

Reported $ 4,927 $ 5,327 52.0 % $ 3,418 $ 311 $ (299) $ (35) $ 1,932 18.8 %

Items Affecting Comparability:

Mark to market (130) 130 (29) — — — 159

Amortization of intangibles — — (100) — — — 100

Stock compensation — — (3) — — — 3

Restructuring and integration costs — — (89) — — (2) 91

Productivity (86) 86 (73) — — — 159

Impairment of intangible assets — — — (311) — — 311

Non-routine legal matters — — (9) — — — 9

COVID-19 (10) 10 (4) — — — 14

Gain on litigation — — — — 271 — (271)

Transaction costs — — (1) — — — 1

Foundational projects — — (3) — — — 3

Adjusted $ 4,701 $ 5,553 54.2 % $ 3,107 $ — $ (28) $ (37) $ 2,511 24.5 %

Impact of foreign currency (0.1) % — %

Constant currency adjusted 54.1 % 24.5 %

For the First Nine Months of 2021

Reported $ 4,087 $ 5,205 56.0 % $ 3,040 $ — $ — $ (4) $ 2,169 23.3 %

Items Affecting Comparability:

Mark to market 53 (53) 32 — — — (85)

Amortization of intangibles — — (101) — — — 101

Stock compensation — — (14) — — — 14

Restructuring and integration costs — — (145) — — — 145

Productivity (43) 43 (72) — — — 115

Non-routine legal matters — — (23) — — — 23

COVID-19 (22) 22 (9) — — — 31

Transaction costs — — (1) — — — 1

Malware incident — — 3 — — — (3)

Adjusted $ 4,075 $ 5,217 56.1 % $ 2,710 $ — $ — $ (4) $ 2,511 27.0 %

Refer to page 50 for reconciliations of reported net sales to constant currency net sales and adjusted income from operations to constant currency adjusted income from operations.

KEURIG DR PEPPER INC.

RECONCILIATION OF CERTAIN REPORTED ITEMS TO CERTAIN NON-GAAP ADJUSTED ITEMS

(Unaudited, in millions, except per share and percentages)

Interest expense Loss on early extinguishment of debt Gain on sale of equity method investment Impairment of investments and note receivable Other expense (income), net Income before provision for income taxes Provision for income taxes Effective tax rate Net income attributable to KDP Diluted earnings per share

For the First Nine Months of 2022

Reported $ 570 $ 217 $ (50) $ 12 $ 22 $ 1,161 $ 179 15.4 % $ 983 $ 0.69

Items Affecting Comparability:

Mark to market (247) — — — — 406 101 305 0.21

Amortization of intangibles — — — — — 100 25 75 0.05

Amortization of deferred financing costs (2) — — — — 2 — 2 —

Amortization of fair value debt adjustment (14) — — — — 14 3 11 0.01

Stock compensation — — — — — 3 (1) 4 —

Restructuring and integration costs — — — — — 91 22 69 0.05

Productivity — — — — — 159 32 127 0.09

Impairment of intangible assets — — — — — 311 77 234 0.16

Impairment of investment — — — (6) — 6 — 6 —

4 unchanged sentences

Gain on sale of equity-method investment — — 50 — — (50) (12) (38) (0.03)

Transaction costs — — — — — 1 — 1 —

Foundational projects — — — — — 3 1 2 —

Change in deferred tax liabilities related to goodwill and other intangible assets — — — — — — 81 (81) (0.06)

Adjusted $ 111 $ — $ — $ — $ 6 $ 615 $ 141 22.9 % $ 474 $ 0.33

Impact of foreign currency — %

Constant currency adjusted 22.9 %

Diluted earnings per common share may not foot due to rounding.

KEURIG DR PEPPER INC.

RECONCILIATION OF CERTAIN REPORTED ITEMS TO CERTAIN NON-GAAP ADJUSTED ITEMS

(Unaudited, in millions, except per share and percentages)

For the First Nine Months of 2021

Reported $ 381 $ 105 $ — $ — $ (6) $ 1,689 $ 387 22.9 % $ 1,303 $ 0.91

Items Affecting Comparability:

Mark to market 7 — — — — (92) (23) (69) (0.05)

Amortization of intangibles — — — — — 101 26 75 0.05

Amortization of deferred financing costs (6) — — — — 6 2 4 —

Amortization of fair value of debt adjustment (14) — — — — 14 3 11 0.01

Stock compensation — — — — — 14 14 — —

Restructuring and integration costs — — — — — 145 35 110 0.08

Productivity — — — — — 115 29 86 0.06

Loss on early extinguishment of debt — (105) — — — 105 24 81 0.06

Non-routine legal matters — — — — — 23 5 18 0.01

COVID-19 — — — — — 31 8 23 0.02

Transaction costs — — — — — 1 — 1 —

Malware incident — — — — — (3) (1) (2) —

Change in deferred tax liabilities related to goodwill and other intangible assets — — — — — — 1 (1) —

Adjusted $ 368 $ — $ — $ — $ (6) $ 2,149 $ 510 23.7 % $ 1,640 $ 1.15

Change - adjusted 0.9 % 1.1 % 3.0 %

6 unchanged sentences

(in millions) Reported Items Affecting Comparability Adjusted

For the first nine months of 2022:

For the first quarter of 2023:

Income from operations

Coffee Systems $ 878 $ 153 $ 1031

Packaged Beverages 728 94 822

Beverage Concentrates 915 9 924

Latin America Beverages 114 3 117

Refreshment Beverages $ 490 $ 18 $ 508

Coffee 232 53 285

International 80 4 84

Unallocated corporate costs (218) 40 (178)

Total income from operations $ 584 $ 115 $ 699

For the first nine months of 2021:

For the first quarter of 2022:

Income from operations

Coffee Systems $ 1,088 $ 145 $ 1,233

Packaged Beverages 731 74 805

Beverage Concentrates 780 6 786

Latin America Beverages 95 2 97

Refreshment Beverages $ 704 $ (249) $ 455

Coffee 255 46 301

International 64 7 71

Unallocated corporate costs (57) (38) (95)

1 unchanged sentence

Reported Impact of Foreign Currency Constant Currency

For the first nine months of 2022:

Coffee Systems 2.9 % 0.4 % 3.3 %

Packaged Beverages 13.2 — 13.2

Beverage Concentrates 16.7 0.2 16.9

Latin America Beverages 23.9 0.9 24.8

For the first quarter of 2023:

Refreshment Beverages 12.7 % — % 12.7 %

Coffee (1.3) — (1.3)

International 17.2 (0.5) 16.7

Total net sales 8.9 — 8.9

Adjusted Impact of Foreign Currency Constant Currency Adjusted

For the first nine months of 2022:

For the first quarter of 2023:

Income from operations

Coffee Systems (16.4) % 0.2 % (16.2) %

Packaged Beverages 2.1 — 2.1

Beverage Concentrates 17.6 0.2 17.8

Latin America Beverages 20.6 1.0 21.6

Refreshment Beverages 11.6 % — % 11.6 %

Coffee (5.3) — (5.3)

International 18.3 — 18.3

Total income from operations (4.5) — (4.5)

Reported Items Affecting Comparability Adjusted Impact of Foreign Currency Constant Currency Adjusted

For the first nine months of 2022:

For the first quarter of 2023:

Operating margin

Coffee Systems 25.1 % 4.4 % 29.5 % (0.1) % 29.4 %

Packaged Beverages 14.8 1.9 16.7 — 16.7

Beverage Concentrates 71.6 0.7 72.3 — 72.3

Latin America Beverages 20.6 0.5 21.1 — 21.1

Refreshment Beverages 24.4 % 0.9 % 25.3 % — % 25.3 %

Coffee 24.9 5.7 30.6 — 30.6

International 19.3 0.9 20.2 0.1 20.3

Total operating margin 17.4 3.4 20.8 0.1 20.9

CONSTANT CURRENCY ADJUSTED RESULTS OF OPERATIONS

First Nine Months of 2022 Compared to First Nine Months of 2021

The following discussion of our results for the first nine months of 2022 is presented on a constant currency adjusted basis.

First Quarter of 2023 Compared to First Quarter of 2022

The following discussion of our results for the first quarter of 2023 is presented on a constant currency adjusted basis.

These adjusted financial results are calculated on a constant currency basis by converting our current-period local currency financial results using the prior-period foreign currency exchange rates

1 unchanged sentence

Constant Currency Net Sales.

Constant currency net sales increased 10.6% in the first nine months of 2022 compared to the prior year period, driven by favorable net price realization of 9.7% and volume/mix growth of 0.9%.

Constant currency net sales increased 8.9% in the first quarter of 2023 compared to the prior year period, driven by favorable net price realization of 9.9%, partially offset by lower volume/mix of 1.0%.

Constant Currency Adjusted Income from Operations.

Constant currency adjusted income from operations increased 0.2% compared to the prior year period, primarily driven by the strong growth in net sales, the benefit of productivity and a $38 million gain on an asset sale-leaseback transaction related to our strategic asset investment program.

These benefits were almost entirely offset by the impact of broad-based inflation and increases in other operating costs.

Constant currency adjusted income from operations decreased 4.5% compared to the prior year period.

This decrease primarily resulted from the impacts of broad-based inflation, higher marketing expense, increases in other operating costs, and the unfavorable comparison of a number of prior year benefits, partially offset by the benefits of strong net sales growth and productivity.

In the prior year period, we had the benefit of the change in our accounting policy related to the recognition of forfeitures for our stock awards, the asset sale-leaseback activity related to our strategic asset investment program, and the portion of the settlement payment from BodyArmor for the reimbursement of attorney fees.

Constant Currency Adjusted Interest Expense.

Constant currency adjusted interest expense decreased 16.6% compared to the prior year period, driven by reduced interest expense on our senior unsecured notes as a result of our strategic refinancing initiatives.

Constant currency adjusted interest expense increased 0.9% compared to the prior year period, primarily driven by increased use of our commercial paper facility in the current year period.

Constant Currency Adjusted Effective Tax Rate.

The c onstant currency adjusted effective tax rate was 22.9% for the first nine months of 2022 compared to 23.7% for the prior year period, primarily driven by our incremental income in low tax jurisdictions during the first nine months of 2022.

The c onstant currency adjusted effective tax rate was 20.2% for the first quarter of 2023 compared to 22.9% for the prior year period, primarily driven by the tax benefit received from favorable adjustments upon foreign tax return filing and excess tax deductions that were generated from the vesting of RSUs during the first quarter of 2023.

Constant Currency Adjusted Net Income Attributable to KDP.

Constant currency adjusted net income attributable to KDP increased 3.0% compared to the prior year period, primarily driven by lower interest expense and the decrease in our effective tax rate.

Constant currency adjusted net income attributable to KDP increased 0.6% compared to the prior year period, as the decrease in our effective tax rate and the benefit of Nutrabolt’s preferred dividend was partially offset by lower constant currency adjusted income from operations.

Constant Currency Adjusted Diluted EPS.

Constant currency adjusted diluted EPS increased approximately 2.6% over the prior year period.

Constant currency adjusted diluted EPS increased approximately 3.0% over the prior year period, driven by lower weighted average shares outstanding compared to the prior year period and the increase in constant currency adjusted net income attributable to KDP.

Results of Operations by Segment

COFFEE SYSTEMS

Constant Currency Net Sales.

Constant currency net sales increased 3.3%, driven by higher net price realization of 5.6%, partially offset by unfavorable volume/mix of 2.3%.

Constant Currency Adjusted Income from Operations.

Constant currency adjusted income from operations for the first nine months of 2022 decreased 16.2% compared to the prior year period, as a result of broad-based inflation, particularly in green coffee, and lower volume/mix.

These decreases were partially offset by the benefits of pricing actions and increased productivity.

PACKAGED BEVERAGES

REFRESHMENT BEVERAGES

Constant Currency Net Sales.

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Constant Currency Adjusted Income from Operations.

Constant currency adjusted income from operations for the first nine months of 2022 increased 2.1% compared to the prior year period, driven by the benefits of net sales growth, increased productivity, and asset sale-leaseback activity in the first nine months of 2022 relating to our strategic asset initiative.

These benefits were partially offset by broad-based inflation, higher costs associated with higher volumes and increases in other operating costs.

BEVERAGE CONCENTRATES

Constant currency adjusted income from operations for the first quarter of 2023 increased 11.6% compared to the prior year period, driven by the benefits of net sales growth and productivity, partially offset by broad-based inflation, the unfavorable comparison to asset sale-leaseback activity relating to our strategic asset initiative in the prior year period, higher marketing expense and increases in other operating costs.

Constant Currency Net Sales.

Constant currency net sales increased 16.9%, reflecting higher net price realization of 14.8% and volume/mix growth of 2.1%.

Constant currency net sales decreased 1.3%, driven by unfavorable volume/mix of 6.6%, partially offset by higher net price realization of 5.3%.

Constant Currency Adjusted Income from Operations.

Constant currency adjusted income from operations for the first nine months of 2022 increased 17.8% compared to the prior year period.

This performance reflected the impact of net sales growth, partially offset by the impacts of broad-based inflation.

LATIN AMERICA BEVERAGES

Constant currency adjusted income from operations decreased 5.3% compared to the prior year period, as a result of inflation in input costs and declines in volume/mix.

These decreases were partially offset by the benefits of pricing actions and productivity.

INTERNATIONAL

Constant Currency Net Sales.

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Constant Currency Adjusted Income from Operations.

Constant currency adjusted income from operations for the first nine months of 2022 increased 21.6% compared to the prior year period, driven by the benefits of net sales growth and productivity, partially offset by the impacts of broad-based inflation, higher costs associated with incremental volumes, and increased marketing expense.

Constant currency adjusted income from operations increased 18.3% compared to the prior year period, driven by the benefits of net sales growth and productivity, partially offset by broad-based inflation and higher costs associated with higher volumes.

CRITICAL ACCOUNTING ESTIMATES

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These critical accounting estimates are discussed in greater detail in Part II, Item 7 of our Annual Report .

As of the date of our annual impairment test, performed as of October 1, 2021, certain brands were considered at risk of future impairment in the event of significant unfavorable changes in assumptions including forecasted cash flows along with macro-economic risks such as the continued prolonged weakening of economic conditions and cost inflation or significant unfavorable changes in long-term growth rates and discount rates utilized in the discounted cash flows analyses.

Cost inflation for certain inputs could put pressure on achieving cash flow projections and rising interest rates could cause unfavorable changes in the discount rates utilized in the discounted cash flow analyses.

During the third quarter of 2022, the Company recorded an impairment charge of $ 311 million for Bai, an indefinite lived brand asset.

Refer to Note 3 of the Notes to our Unaudited Condensed Consolidated Financial Statements for further information.

LIQUIDITY AND CAPITAL RESOURCES

We believe our financial condition and liquidity remain strong.

We continue to manage all aspects of our business, including, but not limited to, monitoring the financial health of our customers, suppliers and other third-party relationships, implementing gross margin enhancement strategies through our integration and productivity initiatives, and developing new opportunities for growth such as innovation and agreements with partners to distribute brands that are accretive to our portfolio.

The following summarizes our cash activity for the first nine months of 2022 and 2021:

Cash, cash equivalents, restricted cash and restricted cash equivalents increased $360 million from December 31, 2021 to September 30, 2022 primarily as a result of proceeds from the cash settlement with BodyArmor.

We continue to manage all aspects of our business, including, but not limited to, monitoring the financial health of our customers, suppliers and other third-party relationships, implementing gross margin enhancement strategies through our productivity initiatives, and developing new opportunities for growth such as innovation and agreements with partners to distribute brands that are accretive to our portfolio.

The following summarizes our cash activity for the first quarter of 2023 and 2022:

Cash, cash equivalents, restricted cash and restricted cash equivalents decreased $331 million from December 31, 2022 to March 31, 2023, primarily driven by the reduction in cash provided by operating activities, dividend payments and share repurchases, partially offset by net issuances of commercial paper.

Cash generated by our foreign operations is generally repatriated to the U.S.

periodically, as working capital funding requirements in those jurisdictions allow.

Foreign cash balances were $435 million and $216 million as of September 30, 2022 and December 31, 2021, respectively.

Additionally, in April 2022, we chose to undertake a strategic refinancing initiative, issuing approximately $3 billion of senior unsecured notes and using the net proceeds to voluntarily prepay and retire several tranches of existing senior unsecured notes with higher interest rates, which reduced our overall interest payments and our annual cash requirements.

As part of this transaction, we additionally unwound approximately $1.5 billion of notional amount of our outstanding designated forward starting swaps and received cash proceeds of approximately $125 million.

Refer to Note 2 of the Notes to our Unaudited Condensed Consolidated Financial Statements for further information about the 2022 strategic refinancing initiative.

periodically as working capital funding requirements, where allowed.

We do not expect restrictions or taxes on repatriation of cash held outside the U.S.

to have a material effect on our overall business, liquidity, financial condition or results of operations for the foreseeable future.

Principal Sources of Capital Resources

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Sources of Liquidity - Operations

Net cash provided by operating activities increased $165 million for the first nine months of 2022, as compared to the first nine months of 2021, driven by the increase in net income adjusted for non-cash items, led by the $349 million gain from BodyArmor, partially offset by a decline in working capital.

Net cash provided by operating activities decreased $592 million for the first quarter of 2023, as compared to the first quarter of 2022, driven by the decrease in net income adjusted for non-cash items, led by the unfavorable year-over-year impact of the $349 million gain from BodyArmor in the first quarter of 2022 and a reduction in our cash conversion cycle.

Cash Conversion Cycle

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The following table summarizes our cash conversion cycle:

September 30,

Cash conversion cycle (46) (70)

Our cash conversion cycle increased 24 days to approximately (46) days as of March 31, 2023 as compared to (70) days as of March 31, 2022.

The increase in DIO reflects our efforts to restore inventory to meet customer service levels and the build up of our inventory of C4, and the increase in DSO was primarily driven by rising inflation during the year.

The decrease in DPO was driven by the reduction of payment terms for certain suppliers.

Accounts Payable Program

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Excluding our suppliers who require cash at date of purchase or sale, our current payment terms with our suppliers generally range from 10 to 360 days.

We also entered into agreements with third party administrators to allow participating suppliers to track payment obligations from us, and if voluntarily elected by the supplier, sell payment obligations from us to financial institutions.

We also enter into agreements with third party administrators to allow participating suppliers to track payment obligations from us, and if voluntarily elected by the supplier, sell payment obligations from us to financial institutions.

Suppliers can sell one or more of our payment obligations at their sole discretion and our rights and obligations to our suppliers are not impacted.

We have no economic interest in a supplier’s decision to enter into these agreements and no direct financial relationship through this program with the financial institutions.

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

Our obligations to our suppliers, including amounts due and scheduled payment terms, are not impacted.

We have been informed by the third party administrators that as of September 30, 2022 and December 31, 2021, $3,923 million and $3,194 million, respectively, of our outstanding payment obligations were voluntarily elected by the supplier and sold to financial institutions.

The amounts settled through the program and paid to the financial institutions were $2,830 million and $2,492 million for the first nine months of 2022 and 2021, respectively.

Impact of the CARES Act

Beginning in the second quarter of 2020, we deferred payments of employer-related payroll taxes as allowed under the CARES Act.

Payment of at least 50% of the deferred amount was due on January 3, 2022, with the remainder due by January 3, 2023.

We deferred a total of $59 million in such payments since the CARES Act was implemented, and we timely paid approximately $30 million as of January 3, 2022.

Refer to Note 13 of the Notes to our Unaudited Condensed Consolidated Financial Statements for additional information on our obligations to participating suppliers.

Sources of Liquidity - Financing

In February 2022, we terminated our 2021 364-Day Credit Agreement and our KDP Revolver and replaced them with the 2022 Revolving Credit Agreement, which provides for a $4 billion revolving credit facility.

In April 2022, we undertook a strategic refinancing and issued a $3 billion aggregate face value of Notes, consisting of the 2029 Notes, the 2032 Notes, and the 2052 Notes.

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.

Refer to Note 2 of the Notes to our Unaudited Condensed Consolidated Financial Statements for management's discussion of our financing arrangements.

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These transactions are accounted for as sale-leaseback transactions.

We received $ 77 million of cash proceeds from our strategic asset investment program during the first nine months of 2022, which are included in Proceeds from sales of property, plant and equipment in the statement of cash flows.

We received $7 million and $77 million of cash proceeds from our strategic asset investment program during the first quarter of 2023 and 2022, respectively, which are included in Proceeds from sales of property, plant and equipment in the unaudited Condensed Consolidated Statements of Cash Flows.

Our credit ratings are as follows:

Rating Agency Long-Term Debt Rating Commercial Paper Rating Outlook

Baa1 P-2 Stable

S&P BBB A-2 Stable

(1) On April 3, 2023, Moody’s upgraded our long-term debt rating to Baa1 from Baa2 and affirmed our P-2 commercial paper rating and outlook.

These debt and commercial paper ratings impact the interest we pay on our financing arrangements.

A downgrade of one or both of our debt and commercial paper ratings could increase our interest expense and decrease the cash available to fund anticipated obligations.

As of March 31, 2023, we were in compliance with all debt covenants and we have no reason to believe that we will be unable to satisfy these covenants.

Principal Uses of Capital Resources

Over the past several years, our principal uses of our capital resources were deleveraging, providing shareholder return to our investors through regular quarterly dividends, and investing in KDP to capture market share and drive growth through innovation and routes to market.

Now that we have met our post-merger goals, we plan to invest in inorganic value creation through M&A, including portfolio expansion, distribution scale, geographic expansion, and new capabilities.

In addition to M&A, we may consider special dividends to our investors and have repurchased shares of our outstanding common stock, as described below.

Deleveraging and Other Debt Repayments

During the first nine months of 2022, we made net debt repayments of $514 million, which includes the redemption and retirement of the remainder of our 2023 Merger Notes and 2038 Notes, as well as the tender of portions of the 2025 Merger Notes, the 2028 Merger Notes, the 2038 Merger Notes, and the 2048 Merger Notes.

Now that we have met our post-merger goals, we plan to further reduce our leverage ratio.

We also plan to invest in inorganic value creation through mergers or acquisitions, which may include portfolio expansion, distribution scale, geographic expansion, and new capabilities.

In addition, we have repurchased shares of our outstanding common stock, as described below.

Regular Quarterly Dividends

For the first nine months of 2022, we have declared total dividends of $0.575 per share.

For the first quarter of 2023, we have declared total dividends of $0.20 per share.

Repurchases of Common Stock

Our Board authorized a four-year share repurchase program of up to $4 billion of our outstanding common stock potentially enabling us to return value to shareholders.

We repurchased and retired $ 88 million of common stock during the first nine months of 2022.

Our Board authorized a four-year share repurchase program, ending December 31, 2025, of up to $4 billion of our outstanding common stock, potentially enabling us to return value to shareholders.

We repurchased and retired $ 231 million of common stock during the first quarter of 2023.

As of March 31, 2023, $3,390 million remained available for repurchase under the authorized share repurchase program.

Capital Expenditures

We are investing in state-of-the-art manufacturing and warehousing facilities, including expansive investments in facilities in Newbridge, Ireland;

Spartanburg, South Carolina;

and Allentown, Pennsylvania, in 2022 and 2021, in order to optimize our supply chain network through integration and productivity projects and to mitigate risk of business interruption.

Purchases of property, plant and equipment were $ 260 million and $ 325 million for the first nine months of 2022 and 2021, respectively.

Capital expenditures, which includes both purchases of property, plant and equipment and amounts included in accounts payable and accrued expenses, for the first nine months of 2022 and 2021 primarily related to the manufacturing and warehousing facilities discussed above.

Capital expenditures included in accounts payable and accrued expenses were $ 179 million and $ 180 million for the first nine months of 2022 and 2021, respectively, which primarily related to these investments.

We are investing in state-of-the-art manufacturing and warehousing facilities, including expansive investments in facilities in Spartanburg, South Carolina;

and Allentown, Pennsylvania, in 2023 and 2022, in order to optimize our supply chain network.

Purchases of property, plant and equipment were $ 62 million and $ 109 million for the first quarter of 2023 and 2022, respectively.

Capital expenditures, which includes both purchases of property, plant and equipment and amounts included in accounts payable and accrued expenses, for the first quarter of 2023 and 2022 primarily related to the manufacturing and warehousing facilities discussed above.

Capital expenditures included in accounts payable and accrued expenses were $ 222 million and $ 139 million for the first quarter of 2023 and 2022, respectively, which primarily related to these investments.

Investments in Unconsolidated Affiliates

From time to time, we expect to acquire businesses or brands, invest in emerging companies, or enter into various licensing and distribution agreements to expand our product portfolio.

Our investments in emerging companies generally involve acquiring a minority interest in equity securities of a company with a protected path to ownership at our future option.

In the second quarter of 2022, we invested $ 50 million in Tractor for a 19.2% equity interest.

From time to time, we expect to invest in beverage startup companies or in brand ownership companies to grow our presence in certain product categories, or enter into various licensing and distribution agreements to expand our product portfolio.

Our investments in beverage startup companies generally involve acquiring a minority interest in equity securities of a company, in certain cases with a protected path to ownership at our future option.

Purchases of Intangible Assets

We have invested in the expansion of our DSD network through transactions with strategic independent bottlers to ensure competitive distribution scale for our brands.

We have invested in the expansion of our DSD network through transactions with strategic independent bottlers or third-party brand ownership companies to ensure competitive distribution scale.

From time to time, we additionally acquire brand ownership companies to expand our portfolio.

These transactions are generally accounted for as an asset acquisition, as the majority of the transaction price represents the acquisition of an intangible asset.

Purchases of intangible assets were $41 million and $ 31 million for the first nine months of 2022 and 2021, respectively.

Purchases of intangible assets were $51 million and $ 10 million for the first quarter of 2023 and 2022, respectively.

Uncertainties and Trends Affecting Liquidity

Disruptions in global financial and credit markets, including those caused by the ongoing COVID-19 pandemic and Russia’s invasion of Ukraine, may impact our ability to manage normal commercial relationships with our customers, suppliers and creditors.

Disruptions in financial and credit markets, including those caused by inflation, global economic uncertainty and rising interest rates, may impact our ability to manage normal commercial relationships with our customers, suppliers and creditors.

These disruptions could have a negative impact on the ability of our customers to timely pay their obligations to us, thus reducing our cash flow, or the ability of our vendors to timely supply materials.

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The Guarantors are 100% owned either directly or indirectly by us and jointly and severally guarantee, subject to the release provisions described below, our obligations under the Notes.

None of our subsidiaries organized outside of the U.S., immaterial subsidiaries used for charitable purposes, any of the subsidiaries held by Maple Parent Holdings Corp.

None of our subsidiaries organized outside of the U.S., any of the subsidiaries held by Maple Parent Holdings Corp.

prior to the DPS Merger or any of the subsidiaries acquired after the DPS Merger (collectively, the "Non-Guarantors") guarantee the Notes.

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The summarized financial information for the Parent and Guarantors were as follows:

(in millions) For the First Nine Months of 2022

(in millions) For the First Quarter of 2023

Net sales $ 2,082

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Net income attributable to KDP 467

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

(in millions) March 31, 2023 December 31, 2022

Current assets $ 1,842 $ 1,712

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$ 22,488 $ 22,260

(1) Includes $3 million and $209 million of intercompany receivables due to the Parent and Guarantors from the Non-Guarantors as of September 30, 2022 and December 31, 2021, respectively.

(2) Includes $115 million and $40 million of intercompany payables due to the Non-Guarantors from the Parent and Guarantors as of September 30, 2022 and December 31, 2021, respectively.

(1) Includes $4 million and $3 million of intercompany receivables due to the Parent and Guarantors from the Non-Guarantors as of March 31, 2023 and December 31, 2022, respectively.

(2) Includes $1,450 million and $1,186 million of intercompany payables due to the Non-Guarantors from the Parent and Guarantors as of March 31, 2023 and December 31, 2022, respectively.

Quantitative and Qualitative Disclosures About Market Risk

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What changed 10-Q

Item 2. Management’s Discussion and Analysis