What changed in this filing

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Item 1. Financial Statements

2023-07-27 compared with 2023-04-27 · 169 added, 95 removed, 755 unchanged (26% of the section changed)

3 unchanged sentences

( UNAUDITED )

First Quarter

Second Quarter First Six Months

(in millions, except per share data) 2023 2022 2023 2022

12 unchanged sentences

Income before provision for income taxes 613 213 1,194 978

Provision for income taxes 114 180

Provision (benefit) for income taxes 110 ( 5 ) 224 175

Net income including non-controlling interest 503 218 970 803

11 unchanged sentences

( UNAUDITED )

First Quarter

Second Quarter First Six Months

(in millions) 2023 2022 2023 2022

Net income including non-controlling interest $ 503 $ 218 $ 970 $ 803

Other comprehensive (loss) income

Other comprehensive income (loss)

Foreign currency translation adjustments 159 ( 133 ) 267 ( 34 )

Net change in pension and post-retirement liability, net of tax of $ 0 , $ 0 , $ 0 and $ 0 , respectively

— ( 3 ) — ( 3 )

Net change in cash flow hedges, net of tax of $ 3 , $( 38 ), $ 24 and $( 86 ), respectively

Total other comprehensive income 26 241

( 17 ) 126 ( 99 ) 268

Total other comprehensive income (loss) 142 ( 10 ) 168 231

Comprehensive income including non-controlling interest 645 208 1,138 1,034

5 unchanged sentences

( UNAUDITED )

March 31, December 31,

June 30, December 31,

(in millions, except share and per share data) 2023 2022

27 unchanged sentences

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

Common stock, $ 0.01 par value, 2,000,000,000 shares authorized, 1,403,720,858 and 1,408,394,293 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively

Common stock, $ 0.01 par value, 2,000,000,000 shares authorized, 1,396,909,564 and 1,408,394,293 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively

Additional paid-in capital 21,009 21,444

9 unchanged sentences

( UNAUDITED )

First Quarter

First Six Months

(in millions) 2023 2022

11 unchanged sentences

Gain on disposal of property, plant and equipment ( 2 ) ( 33 )

Unrealized gain on foreign currency ( 2 ) ( 11 )

Unrealized gain on derivatives ( 95 ) —

Unrealized (gain) loss on foreign currency ( 13 ) 2

Unrealized (gain) loss on derivatives ( 31 ) 187

Settlements of interest rate contracts — 125

Equity in (earnings) loss of unconsolidated affiliates ( 14 ) 5

23 unchanged sentences

( UNAUDITED, CONTINUED)

First Quarter

First Six Months

(in millions) 2023 2022

Financing activities:

Proceeds from issuance of Notes

Repayments of Notes

$ — $ ( 201 )

Proceeds from issuance of commercial paper 18,187 500

16 unchanged sentences

Transaction costs included in accounts payable and accrued expenses 6 —

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

Supplemental cash flow disclosures of non-cash financing activities:

21 unchanged sentences

1,403.7 14 21,210 3,724 155 25,103 ( 1 ) 25,102

Net income — — — 503 — 503 — 503

Other comprehensive income — — — — 142 142 — 142

Dividends declared, $ 0.20 per share

— — — ( 279 ) — ( 279 ) — ( 279 )

Repurchases of common stock ( 7.0 ) — ( 229 ) — — ( 229 ) — ( 229 )

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

Tax withholdings related to net share settlements — — ( 1 ) — — ( 1 ) — ( 1 )

Stock-based compensation and stock options exercised — — 29 — — 29 — 29

Balance as of June 30, 2023

1,396.9 $ 14 $ 21,009 $ 3,948 $ 297 $ 25,268 $ ( 1 ) $ 25,267

Common Stock Issued Additional

4 unchanged sentences

Net income — — — 585 — 585 — 585

Other comprehensive loss — — — — 241 241 241

Other comprehensive income — — — — 241 241 241

Dividends declared, $ 0.1875 per share

5 unchanged sentences

1,418.5 14 21,764 3,518 215 25,511 — 25,511

Net income — — — 218 — 218 — 218

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

Dividends declared, $ 0.1875 per share

— — — ( 265 ) — ( 265 ) — ( 265 )

Repurchases of common stock ( 2.5 ) — ( 88 ) — — ( 88 ) — ( 88 )

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

Tax withholdings related to net share settlements — — ( 3 ) — — ( 3 ) — ( 3 )

Stock-based compensation and stock options exercised — — 28 — — 28 — 28

Balance as of June 30, 2022

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

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

13 unchanged sentences

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

References to the "first quarter" indicate the Company's quarterly periods ended March 31, 2023 and 2022.

References to the "second quarter" indicate the Company's quarterly periods ended June 30, 2023 and 2022.

USE OF ESTIMATES

17 unchanged sentences

While the adoption of ASU 2022-04 did not have a material impact on the Company’s unaudited condensed consolidated financial statements, it did impact the nature of the disclosures.

The previous disclosure was specific to the amount of KDP’s outstanding payment obligations that were voluntarily elected by the supplier and sold to financial institutions as informed by the third party administrators.

The disclosure previously included in the Company’s Form 10-K was specific to the amount of KDP’s outstanding payment obligations that were voluntarily elected by the supplier and sold to financial institutions as informed by the third party administrators.

ASU 2022-04 instead requires disclosure of the amount of KDP’s outstanding obligations loaded into the supplier finance programs by the Company at each reporting period regardless of whether the outstanding obligation has been elected by the supplier to be sold to financial institutions.

5 unchanged sentences

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

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

(in millions) June 30, 2023 December 31, 2022

$ 11,581 $ 11,568

2 unchanged sentences

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

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

(in millions) June 30, 2023 December 31, 2022

Commercial paper notes $ 988 $ 399

4 unchanged sentences

(in millions, except %)

Issuance Maturity Date Rate March 31, 2023 December 31, 2022

Issuance Maturity Date Rate June 30, 2023 December 31, 2022

2023 Notes December 15, 2023 3.130 % $ 500 $ 500

27 unchanged sentences

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

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

(in millions) June 30, 2023 December 31, 2022

Issuance Maturity Date Capacity Carrying Value Carrying Value

1 unchanged sentence

February 23, 2027 $ 4,000 $ — $ —

(1) The 2022 Revolving Credit Agreement has $ 200 million letters of credit available, none of which were utilized as of March 31, 2023.

As of March 31, 2023, KDP was in compliance with its minimum interest coverage ratio relating to the 2022 Revolving Credit Agreement .

(1) The 2022 Revolving Credit Agreement has $ 200 million letters of credit available, none of which were utilized as of June 30, 2023.

As of June 30, 2023, KDP was in compliance with its minimum interest coverage ratio relating to the 2022 Revolving Credit Agreement .

Commercial Paper Program

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

First Quarter

Second Quarter First Six Months

(in millions, except %) 2023 2022 2023 2022

3 unchanged sentences

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

Under this facility, $ 150 million is available for the issuance of letters of credit, $ 68 million of which was utilized as of March 31, 2023 and $ 82 million of which remains available for use.

Under this facility, $ 150 million is available for the issuance of letters of credit, $ 68 million of which was utilized as of June 30, 2023 and $ 82 million of which remains available for use.

FAIR VALUE DISCLOSURES

2 unchanged sentences

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

The fair value of KDP's Notes was $ 10,777 million and $ 10,495 million as of March 31, 2023 and December 31, 2022, respectively.

The fair value of KDP's Notes was $ 10,680 million and $ 10,495 million as of June 30, 2023 and December 31, 2022, respectively.

KEURIG DR PEPPER INC.

8 unchanged sentences

Foreign currency translation — — 122 122

Balance as of March 31, 2023 $ 8,714 $ 8,622 $ 2,781 $ 20,117

Balance as of June 30, 2023 $ 8,714 $ 8,622 $ 2,858 $ 20,194

INTANGIBLE ASSETS OTHER THAN GOODWILL

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

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

(in millions) June 30, 2023 December 31, 2022

$ 19,462 $ 19,291

3 unchanged sentences

Total $ 22,220 $ 21,993

(1) The change in brands with indefinite lives was primarily driven by foreign currency translation of $ 72 million during the first quarter of 2023.

(2) The Company acquired certain distribution rights from Nutrabolt during the first quarter of 2023 for approximately $ 51 million.

(1) The change in brands with indefinite lives was primarily driven by foreign currency translation of $ 171 million during the first six months of 2023.

(2) The Company acquired certain distribution rights during the first six months of 2023 of approximately $ 55 million, primarily attributable to Nutrabolt.

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

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

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

7 unchanged sentences

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

First Quarter

Second Quarter First Six Months

(in millions) 2023 2022 2023 2022

17 unchanged sentences

Latin America Beverages

Management performed a step 0 analysis as of the effective date of the goodwill for the impacted reporting units.

The Company also performed an analysis as of March 31, 2023 to ensure that there were no additional triggering events which occurred during the quarter.

Management performed a step 0 analysis of the goodwill as of the effective date of the segment change for the impacted reporting units.

The Company also performed an analysis as of June 30, 2023 to ensure that there were no additional triggering events which occurred during the quarter.

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

23 unchanged sentences

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

As of March 31, 2023, economic interest rate derivative instruments have maturities ranging from February 2033 to December 2036.

As of June 30, 2023, economic interest rate derivative instruments have maturities ranging from September 2023 to January 2038.

Cash Flow Hedges

6 unchanged sentences

Economic Hedges

KDP holds FX forward contracts to economically manage the balance sheet exposures resulting from changes in the FX exchange rates described above.

KDP holds FX forward contracts to economically manage the balance sheet exposures resulting from changes in the FX rates described above.

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

1 unchanged sentence

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

As of March 31, 2023, these FX contracts have maturities ranging from April 2023 to September 2024.

As of June 30, 2023, these FX contracts have maturities ranging from July 2023 to October 2024.

Cash Flow Hedges

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.

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

dollars of the Canadian and Mexican businesses.

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

As of March 31, 2023, these FX contracts have maturities ranging from April 2023 to October 2024.

As of June 30, 2023, these FX contracts have maturities ranging from July 2023 to September 2024.

Economic Hedges

4 unchanged sentences

Unrealized gains and losses are recognized as a component of unallocated corporate costs until the Company's reportable 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 March 31, 2023, these commodity contracts have maturities ranging from April 2023 to June 2024.

As of June 30, 2023, these commodity contracts have maturities ranging from July 2023 to December 2025.

KEURIG DR PEPPER INC.

3 unchanged sentences

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

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

(in millions) June 30, 2023 December 31, 2022

Interest rate contracts

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

Forward starting swaps, not designated as hedging instruments $ 1,500 $ 1,000

Forward starting swaps, designated as cash flow hedges — 500

Receive-fixed, pay-variable interest rate swaps, not designated as hedging instruments 700 1,900

Swaptions, not designated as hedging instruments 500 —

Forward contracts, not designated as hedging instruments 382 490

5 unchanged sentences

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 or SOFR 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 SOFR forward rates, for all substantial terms of the Company's contracts and credit risk of the counterparties.

The fair value of FX forward contracts are valued using quoted forward FX prices at the reporting date.

3 unchanged sentences

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

(in millions) Balance Sheet Location March 31, 2023 December 31, 2022

(in millions) Balance Sheet Location June 30, 2023 December 31, 2022

FX contracts Prepaid expenses and other current assets $ 6 $ 8

7 unchanged sentences

Interest rate contracts Other non-current liabilities 187 194

FX contracts Other non-current liabilities 4 —

Commodity contracts Other non-current liabilities 2 1

5 unchanged sentences

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

(in millions) Balance Sheet Location March 31, 2023 December 31, 2022

(in millions) Balance Sheet Location June 30, 2023 December 31, 2022

FX contracts Prepaid expenses and other current assets $ 7 $ 21

2 unchanged sentences

FX contracts Other current liabilities 17 3

FX contracts Other non-current liabilities 1 —

IMPACT OF DERIVATIVE INSTRUMENTS NOT DESIGNATED AS HEDGING INSTRUMENTS

2 unchanged sentences

Amounts include both realized and unrealized gains and losses.

First Quarter

Second Quarter First Six Months

(in millions) Income Statement Location 2023 2022 2023 2022

Interest rate contracts Interest expense $ 41 $ 56 $ ( 55 ) $ 123

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

FX contracts Cost of sales ( 1 ) ( 7 ) — ( 2 )

4 unchanged sentences

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

First Quarter

Second Quarter First Six Months

(in millions) Income Statement Location 2023 2022 2023 2022

2 unchanged sentences

FX contracts Cost of sales ( 4 ) 2 ( 5 ) 5

(1) Amounts recognized during the first quarter of 2023 include the realized gains associated with the termination of forward starting swaps designated as cash flow hedges of approximately $ 66 million .

KDP expects to reclassify approximately $ 8 million and $ 9 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.

(1) Amounts recognized during the first six months of 2023 include the realized gains associated with the termination of forward starting swaps designated as cash flow hedges of approximately $ 66 million .

KDP expects to reclassify approximately $ 8 million of pre-tax net gains and $ 7 million of pre-tax net losses from AOCI into net income during the next twelve months related to interest rate contracts and FX contracts, respectively.

KEURIG DR PEPPER INC.

2 unchanged sentences

The following table presents the components of lease cost:

First Quarter

Second Quarter First Six Months

(in millions) 2023 2022 2023 2022

7 unchanged sentences

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

First Quarter

First Six Months

(in millions) 2023 2022

7 unchanged sentences

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

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Weighted average discount rate

4 unchanged sentences

Finance leases 9 years 9 years

Future minimum lease payments for non-cancellable leases that have commenced and are reflected on the unaudited Condensed Consolidated Balance Sheets as of March 31, 2023 were as follows:

Future minimum lease payments for non-cancellable leases that have commenced and are reflected on the unaudited Condensed Consolidated Balance Sheets as of June 30, 2023 were as follows:

(in millions) Operating Leases Finance Leases

8 unchanged sentences

SIGNIFICANT LEASES THAT HAVE NOT YET COMMENCED

As of March 31, 2023, the Company has entered into leases that have not yet commenced with estimated aggregated future lease payments of approximately $ 208 million.

These leases are expected to commence between the fourth quarter of 2023 and 2025, with initial lease terms ranging from 4 years to 10 years.

As of June 30, 2023, the Company has entered into leases that have not yet commenced with estimated aggregated future lease payments of approximately $ 208 million.

These leases are expected to commence between the fourth quarter of 2023 and the second half of 2025, with initial lease terms ranging from 4 years to 10 years.

ASSET SALE-LEASEBACK TRANSACTION

The Company entered into a sale-leaseback transaction with the Veyron SPEs during the first quarter of 2023.

The Company entered into a sale-leaseback transaction with the Veyron SPEs during the first six months of 2023.

The following table presents details of the transaction.

24 unchanged sentences

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

First Quarter

Second Quarter First Six Months

(in millions) 2023 2022 2023 2022

10 unchanged sentences

Income from operations $ 769 $ 572 $ 1,353 $ 1,538

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

(in millions) June 30, 2023 December 31, 2022

Identifiable operating assets

21 unchanged sentences

Coffee International Total

For the first quarter of 2023:

For the second quarter of 2023:

$ 2,296 $ — $ 331 $ 2,627

3 unchanged sentences

Net sales $ 2,330 $ 970 $ 489 $ 3,789

For the first quarter of 2022:

For the second quarter of 2022:

$ 2,052 $ — $ 274 $ 2,326

3 unchanged sentences

Net sales $ 2,084 $ 1,029 $ 441 $ 3,554

For the first six months of 2023:

$ 4,266 $ — $ 584 $ 4,850

K-Cup pods — 1,532 225 1,757

Appliances — 301 26 327

Other 71 68 69 208

Net sales $ 4,337 $ 1,901 $ 904 $ 7,142

For the first six months of 2022:

$ 3,805 $ — $ 477 $ 4,282

K-Cup pods — 1,547 215 1,762

Appliances — 362 33 395

Other 60 63 70 193

Net sales $ 3,865 $ 1,972 $ 795 $ 6,632

LRB represents net sales of owned and partner brands within our portfolio and includes CSDs, NCBs, and contract manufacturing of KDP branded products for our bottlers and distributors.

1 unchanged sentence

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

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, CONTINUED)

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.

First Quarter

Second Quarter First Six Months

(in millions, except per share data) 2023 2022 2023 2022

6 unchanged sentences

Anti-dilutive shares excluded from the diluted weighted average shares outstanding calculation 1.0 — 1.0 —

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, CONTINUED)

Stock-Based Compensation

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

First Quarter

Second Quarter First Six Months

(in millions) 2023 2022 2023 2022

1 unchanged sentence

$ 28 $ 27 $ 57 $ 12

Income tax (benefit) expense ( 5 ) 4

Income tax benefit ( 4 ) ( 5 ) ( 9 ) ( 1 )

Stock-based compensation expense, net of tax $ 24 $ 22 $ 48 $ 11

(1) The Company recorded a one-time $ 40 million reduction to stock-based compensation expense as a result of the change in forfeiture policy in the first quarter of 2022.

(1) The Company recorded a one-time $ 40 million reduction to stock-based compensation expense as a result of the change in forfeiture policy in the first six months of 2022.

RESTRICTED SHARE UNITS

6 unchanged sentences

Forfeited ( 716,400 ) 29.35

Outstanding as of March 31, 2023 18,874,241 $ 28.57 1.8 $ 666

As of March 31, 2023, there was $ 226 million of unrecognized compensation cost related to unvested RSUs that is expected to be recognized over a weighted average period of 3.4 years.

The following table summarizes investments in unconsolidated affiliates as of March 31, 2023 and December 31, 2022:

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

Outstanding as of June 30, 2023 17,696,242 $ 28.80 1.8 $ 553

As of June 30, 2023, there was $ 207 million of unrecognized compensation cost related to unvested RSUs that is expected to be recognized over a weighted average period of 3.3 years.

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, CONTINUED)

The following table summarizes investments in unconsolidated affiliates as of June 30, 2023 and December 31, 2022:

(in millions) Ownership Interest June 30, 2023 December 31, 2022

Nutrabolt 29.8 % $ 896 $ 874

10 unchanged sentences

The Company’s effective tax rates were as follows:

First Quarter

Second Quarter First Six Months

(in millions) 2023 2022 2023 2022

Effective tax rate 17.9 % ( 2.3 ) % 18.8 % 17.9 %

The change in the effective tax rate was largely 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.

The following is a reconciliation of the provision for income taxes computed at the U.S.

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

Second Quarter First Six Months

(in millions) 2023 2022 2023 2022

Statutory federal income tax rate 21.0 % 21.0 % 21.0 % 21.0 %

State income taxes, net 3.1 % 3.2 % 3.0 % 3.5 %

Impact of non-U.S.

operations (1)

( 6.3 ) % ( 1.9 ) % ( 4.7 ) % ( 0.8 ) %

Tax credits ( 3.0 ) % ( 3.0 ) % ( 3.1 ) % ( 1.6 ) %

taxation of foreign earnings 2.3 % 2.7 % 2.7 % 1.6 %

Deferred rate change (2)

0.6 % ( 24.5 ) % 0.3 % ( 5.8 ) %

Uncertain tax positions — % 0.2 % — % — %

Excess tax deductions on stock-based compensation — % ( 0.1 ) % ( 0.5 ) % ( 0.1 ) %

Other 0.2 % 0.1 % 0.1 % 0.1 %

Total provision for income taxes 17.9 % ( 2.3 ) % 18.8 % 17.9 %

(1) The Company recorded an immaterial non-cash true-up related to a prior period, which resulted in a $ 28 million reduction in its foreign deferred tax liabilities.

(2) Primarily driven by the revaluation of state deferred tax liabilities due to state legislative changes during 2022.

KEURIG DR PEPPER INC.

4 unchanged sentences

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

For the first quarter of 2023:

For the second quarter of 2023:

Beginning balance $ 22 $ ( 10 ) $ 143 $ 155

Other comprehensive (loss) income 159 — ( 12 ) 147

Amounts reclassified from AOCI — — ( 5 ) ( 5 )

Total other comprehensive income (loss) 159 — ( 17 ) 142

Balance as of June 30, 2023 $ 181 $ ( 10 ) $ 126 $ 297

For the second quarter of 2022:

Beginning balance $ 180 $ ( 4 ) $ 39 $ 215

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

Amounts reclassified from AOCI — — — —

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

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

For the first six months of 2023:

Beginning balance $ ( 86 ) $ ( 10 ) $ 225 $ 129

Other comprehensive income (loss) 267 — ( 41 ) 226

1 unchanged sentence

Total other comprehensive income (loss) 267 — ( 99 ) 168

Balance as of March 31, 2023 $ 22 $ ( 10 ) $ 143 $ 155

For the first quarter of 2022:

Balance as of June 30, 2023 $ 181 $ ( 10 ) $ 126 $ 297

For the first six months of 2022:

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

1 unchanged sentence

Amounts reclassified from AOCI — — 2 2

Total other comprehensive income 99 — 142 241

Balance as of March 31, 2022 $ 180 $ ( 4 ) $ 39 $ 215

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

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

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

First Quarter

Second Quarter First Six Months

(in millions) Income Statement Caption 2023 2022 2023 2022

6 unchanged sentences

Total, net of tax $ ( 5 ) $ — $ ( 58 ) $ 2

(1) Amounts reclassified from AOCI into interest expense during the first quarter of 2023 include the realized gains associated with the termination of forward starting swaps designated as cash flow hedges of approximately $ 66 million.

(1) Amounts reclassified from AOCI into interest expense during the first six months of 2023 include the realized gains associated with the termination of forward starting swaps designated as cash flow hedges of approximately $ 66 million.

Refer to Note 4 for additional information on the terminated forward starting swaps.

5 unchanged sentences

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

March 31, December 31,

June 30, December 31,

(in millions) 2023 2022

24 unchanged sentences

Unrealized mark-to market gains and losses are recorded to Other (income) expense, net.

For the first quarter of 2023 and 2022, the Company recorded an unrealized mark-to-market gain of $ 8 million and loss of $ 3 million, respectively, on its investment in Vita Coco.

For the first six months of 2023 and 2022, the Company recorded an unrealized mark-to-market gain of $ 17 million and loss of $ 2 million, respectively, on its investment in Vita Coco.

KEURIG DR PEPPER INC.

1 unchanged sentence

(UNAUDITED, CONTINUED)

March 31, December 31,

June 30, December 31,

(in millions) 2023 2022

27 unchanged sentences

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

The amount of the outstanding obligations confirmed as valid included in accounts payable as of March 31, 2023 and December 31, 2022 was $ 3,903 million and $ 4,113 million respectively.

The amount of the outstanding obligations confirmed as valid included in accounts payable as of June 30, 2023 and December 31, 2022 was $ 3,463 million and $ 4,113 million respectively.

KEURIG DR PEPPER INC.

4 unchanged sentences

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

As of March 31, 2023 and December 31, 2022, the Company had litigation reserves of $ 18 million and $ 12 million, respectively.

As of June 30, 2023 and December 31, 2022, the Company had litigation reserves of $ 9 million and $ 12 million, respectively.

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

33 unchanged sentences

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.

Following the conclusion of discovery in 2023, Keurig similarly filed a motion for summary judgment seeking dismissal of these cases and also filed other significant motions.

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.

19 unchanged sentences

Leasing Arrangements

As of March 31, 2023, the Company has entered into sixteen lease transactions with the Veyron SPEs, fifteen of which were associated with asset sale-leaseback transactions.

As of June 30, 2023, the Company has entered into sixteen lease transactions with the Veyron SPEs, fifteen of which were associated with asset sale-leaseback transactions.

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

2 unchanged sentences

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

The aggregate maximum undiscounted RVG associated with the leasing arrangements as of March 31, 2023 and December 31, 2022 were $ 653 million and $ 650 million, respectively.

The aggregate maximum undiscounted RVG associated with the leasing arrangements as of June 30, 2023 and December 31, 2022 were $ 653 million and $ 650 million, respectively.

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

The following table provides the carrying amounts of the right-to-use assets and lease obligations recorded on the Company’s Consolidated Balance Sheets associated with these leasing arrangements related to the VIEs as of March 31, 2023 and December 31, 2022.

(in millions) March 31, 2023 (1)

(in millions) June 30, 2023 (1)

December 31, 2022 (2)

2 unchanged sentences

Non-current liabilities 414 419

(1) The leasing agreements included as of March 31, 2023 include nine manufacturing sites, five distribution centers and our Frisco, Texas headquarters.

(1) The leasing agreements included as of June 30, 2023 include nine manufacturing sites, five distribution centers and our Frisco, Texas headquarters.

(2) The leasing agreements included as of December 31, 2022 include nine manufacturing sites, four distribution centers and our Frisco, Texas headquarters.

2 unchanged sentences

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

As of March 31, 2023, KDP has not recorded a liability as it is not probable that the Company will have to make any payments required under the residual value guarantee, as the fair value of the distribution rights is not expected to fall below $ 142 million over the term of the agreement.

As of March 31, 2023, KDP had $ 98 million in fixed service fee commitments related to the 15-year distribution agreement which was effective on December 28, 2020, with Veyron SPEs.

As of June 30, 2023, KDP has not recorded a liability as it is not probable that the Company will have to make any payments required under the residual value guarantee, as the fair value of the distribution rights is not expected to fall below $ 142 million over the term of the agreement.

As of June 30, 2023, KDP had $ 96 million in fixed service fee commitments related to the 15-year distribution agreement which was effective on December 28, 2020, with Veyron SPEs.

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

21 unchanged sentences

Cash payments

Balance as of March 31, 2023 $ 26

Balance as of June 30, 2023 $ 17

Subsequent Events

In July 2023, the Company executed definitive agreements with La Colombe to invest $ 300 million in exchange for 33.3 % ownership in La Colombe.

Simultaneously, the Company entered into a sales and distribution agreement for La Colombe RTD coffee and a licensing, manufacturing and distribution agreement for La Colombe branded K-Cup coffee pods.

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

What changed 10-Q

Item 1. Financial Statements