What changed in this filing

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Item 1. Financial Statements

2023-10-26 compared with 2023-07-27 · 181 added, 110 removed, 814 unchanged (26% of the section changed)

3 unchanged sentences

( UNAUDITED )

Second Quarter First Six Months

Third Quarter First Nine Months

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

3 unchanged sentences

Selling, general and administrative expenses 1,217 1,196 3,654 3,418

Impairment of intangible assets 2 311 2 311

Gain on litigation settlement — — — ( 299 )

7 unchanged sentences

Income before provision for income taxes 664 183 1,858 1,161

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

Provision for income taxes 146 4 370 179

Net income including non-controlling interest 518 179 1,488 982

11 unchanged sentences

( UNAUDITED )

Second Quarter First Six Months

Third Quarter First Nine Months

(in millions) 2023 2022 2023 2022

Net income including non-controlling interest $ 518 $ 179 $ 1,488 $ 982

Other comprehensive income (loss)

Other comprehensive (loss) income

Foreign currency translation adjustments ( 135 ) ( 249 ) 132 ( 283 )

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 $ 0 , $( 12 ), $ 24 and $( 98 ), respectively

9 35 ( 90 ) 303

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

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

Total other comprehensive (loss) income ( 126 ) ( 214 ) 42 17

Comprehensive income (loss) including non-controlling interest 392 ( 35 ) 1,530 999

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

Comprehensive income attributable to KDP $ 645 $ 208 $ 1,138 $ 1,034

Comprehensive income (loss) attributable to KDP $ 392 $ ( 35 ) $ 1,530 $ 999

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

2 unchanged sentences

( UNAUDITED )

June 30, December 31,

September 30, December 31,

(in millions, except share and per share data) 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, 1,396,909,564 and 1,408,394,293 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively

Common stock, $ 0.01 par value, 2,000,000,000 shares authorized, 1,398,322,033 and 1,408,394,293 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively

Additional paid-in capital 21,014 21,444

9 unchanged sentences

( UNAUDITED )

First Six Months

First Nine Months

(in millions) 2023 2022

12 unchanged sentences

Unrealized (gain) loss on foreign currency ( 4 ) 22

Unrealized (gain) loss on derivatives ( 31 ) 187

Unrealized loss on derivatives 44 387

Settlements of interest rate contracts 54 125

Equity in (earnings) loss of unconsolidated affiliates ( 24 ) 6

Impairment of intangible assets 2 311

Impairment on investments and note receivable of unconsolidated affiliate — 12

22 unchanged sentences

( UNAUDITED, CONTINUED)

First Six Months

First Nine Months

(in millions) 2023 2022

2 unchanged sentences

Repayments of Notes

Proceeds from issuance of commercial paper 18,187 500

Repayments of commercial paper ( 17,598 ) ( 649 )

Net issuance (repayment) of commercial paper 750 ( 149 )

Proceeds from structured payables 91 114

15 unchanged sentences

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

Non-cash purchases of intangibles — 22

Supplemental cash flow disclosures of non-cash financing activities:

15 unchanged sentences

— — — ( 282 ) — ( 282 ) — ( 282 )

Repurchases of common stock ( 6.6 ) — ( 232 ) — — ( 232 ) — ( 232 )

Repurchases of common stock, inclusive of excise tax obligation ( 6.6 ) — ( 232 ) — — ( 232 ) — ( 232 )

Shares issued under employee stock-based compensation plans and other 1.9 — — — — — — —

7 unchanged sentences

— — — ( 279 ) — ( 279 ) — ( 279 )

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

Repurchases of common stock, inclusive of excise tax obligation ( 7.0 ) — ( 229 ) — — ( 229 ) — ( 229 )

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

3 unchanged sentences

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

Net income — — — 518 — 518 — 518

Other comprehensive loss — — — — ( 126 ) ( 126 ) — ( 126 )

Dividends declared, $ 0.215 per share

— — — ( 300 ) — ( 300 ) — ( 300 )

Repurchases of common stock, inclusive of excise tax obligation — — 1 — — 1 — 1

Shares issued under employee stock-based compensation plans and other 1.4 — — — — — — —

Tax withholdings related to net share settlements — — ( 25 ) — — ( 25 ) — ( 25 )

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

Non-controlling interest surrender of shares — — — ( 1 ) — ( 1 ) 1 —

Balance as of September 30, 2023

1,398.3 $ 14 $ 21,014 $ 4,165 $ 171 $ 25,364 $ — $ 25,364

Common Stock Issued Additional

22 unchanged sentences

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

Net income — — — 180 — 180 ( 1 ) 179

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

Dividends declared, $ 0.20 per share

— — — ( 284 ) — ( 284 ) — ( 284 )

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

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

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

Balance as of September 30, 2022

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

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

13 unchanged sentences

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

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

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

USE OF ESTIMATES

12 unchanged sentences

Refer to Note 3 for additional information on the Company’s reporting units.

RECLASSIFICATIONS

The Company reclassified amounts in the Financing Activities section of the unaudited condensed consolidated Statement of Cash Flows for the first nine months of 2022 in order to conform to current year presentation, as maturities for the Company’s commercial paper program in both periods are 90 days or less.

(in millions) Prior Presentation First Nine Months of 2022

Net issuance (repayment) of commercial paper Proceeds from issuance of commercial paper $ 500

Net issuance (repayment) of commercial paper Repayments of commercial paper ( 649 )

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, CONTINUED)

RECENTLY ADOPTED ACCOUNTING STANDARDS

6 unchanged sentences

Refer to Note 13 for additional information on the Company’s obligations to participating suppliers.

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, CONTINUED)

Long-term Obligations and Borrowing Arrangements

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

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

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

$ 11,589 $ 11,568

2 unchanged sentences

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

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

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

Commercial paper notes $ 1,149 $ 399

4 unchanged sentences

(in millions, except %)

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

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

(in millions) September 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 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 .

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

As of September 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:

Second Quarter First Six Months

Third Quarter First Nine 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 June 30, 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 September 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 $ 10,680 million and $ 10,495 million as of June 30, 2023 and December 31, 2022, respectively.

The fair value of KDP's Notes was $ 10,242 million and $ 10,495 million as of September 30, 2023 and December 31, 2022, respectively.

KEURIG DR PEPPER INC.

8 unchanged sentences

Foreign currency translation — — 50 50

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

Balance as of September 30, 2023 $ 8,714 $ 8,622 $ 2,786 $ 20,122

INTANGIBLE ASSETS OTHER THAN GOODWILL

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

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

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

$ 19,380 $ 19,291

3 unchanged sentences

Total $ 22,135 $ 21,993

(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.

(1) The change in brands with indefinite lives was primarily driven by foreign currency translation of $ 89 million during the first nine months of 2023.

(2) The Company acquired certain distribution rights during the first nine 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:

June 30, 2023 December 31, 2022

September 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:

Second Quarter First Six Months

Third Quarter First Nine Months

(in millions) 2023 2022 2023 2022

18 unchanged sentences

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.

The Company also performed an analysis as of September 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 a material carrying amount of any goodwill or any intangible asset may not be recoverable.

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

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

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

Cash Flow Hedges

10 unchanged sentences

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

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

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

Cash Flow Hedges

3 unchanged sentences

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

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

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

As of September 30, 2023, these commodity contracts have maturities ranging from October 2023 to June 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) June 30, 2023 December 31, 2022

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

Interest rate contracts

16 unchanged sentences

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

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

(in millions) Balance Sheet Location September 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 299 194

FX contracts Other non-current liabilities 4 —

Commodity contracts Other non-current liabilities 1 1

5 unchanged sentences

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

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

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

FX contracts Prepaid expenses and other current assets $ 9 $ 21

2 unchanged sentences

FX contracts Other current liabilities 11 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.

Second Quarter First Six Months

Third Quarter First Nine Months

(in millions) Income Statement Location 2023 2022 2023 2022

7 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:

Second Quarter First Six Months

Third Quarter First Nine Months

(in millions) Income Statement Location 2023 2022 2023 2022

2 unchanged sentences

FX contracts Cost of sales 4 — ( 1 ) 5

(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.

(1) Amounts recognized during the first nine 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 and $ 1 million of pre-tax net gains from AOCI into net income during the next twelve months related to interest rate contracts and FX contracts, respectively.

KEURIG DR PEPPER INC.

2 unchanged sentences

The following table presents the components of lease cost:

Second Quarter First Six Months

Third Quarter First Nine Months

(in millions) 2023 2022 2023 2022

4 unchanged sentences

Variable lease cost (1)

Short-term lease cost 1 1 1 1

Sublease income — ( 1 ) — ( 1 )

Total lease cost $ 78 $ 68 $ 227 $ 201

1 unchanged sentence

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

First Six Months

First Nine 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:

June 30, 2023 December 31, 2022

September 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 June 30, 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 September 30, 2023 were as follows:

(in millions) Operating Leases Finance Leases

8 unchanged sentences

SIGNIFICANT LEASES THAT HAVE NOT YET COMMENCED

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.

As of September 30, 2023, the Company has entered into leases that have not yet commenced with estimated aggregated future lease payments of approximately $ 210 million.

These leases are expected to commence between the fourth quarter of 2023 through 2026, with initial lease terms ranging from 4 years to 10 years.

ASSET SALE-LEASEBACK TRANSACTION

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

The Company entered into a sale-leaseback transaction with the Veyron SPEs during the first nine 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:

Second Quarter First Six Months

Third Quarter First Nine Months

(in millions) 2023 2022 2023 2022

10 unchanged sentences

Income from operations $ 896 $ 394 $ 2,249 $ 1,932

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

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

Identifiable operating assets

21 unchanged sentences

Coffee International Total

For the second quarter of 2023:

For the third quarter of 2023:

$ 2,232 $ — $ 348 $ 2,580

3 unchanged sentences

Net sales $ 2,270 $ 1,012 $ 523 $ 3,805

For the second quarter of 2022:

For the third quarter of 2022:

$ 2,107 $ — $ 268 $ 2,375

3 unchanged sentences

Net sales $ 2,144 $ 1,045 $ 433 $ 3,622

For the first six months of 2023:

For the first nine months of 2023:

$ 6,498 $ — $ 932 $ 7,430

3 unchanged sentences

Net sales $ 6,607 $ 2,913 $ 1,427 $ 10,947

For the first six months of 2022:

For the first nine months of 2022:

$ 5,912 $ — $ 745 $ 6,657

11 unchanged sentences

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

Second Quarter First Six Months

Third Quarter First Nine Months

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

8 unchanged sentences

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

Second Quarter First Six Months

Third Quarter First Nine Months

(in millions) 2023 2022 2023 2022

3 unchanged sentences

Stock-based compensation expense, net of tax $ 24 $ 26 $ 72 $ 37

(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.

(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 nine months of 2022.

RESTRICTED SHARE UNITS

6 unchanged sentences

Forfeited ( 913,249 ) 29.43

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.

Outstanding as of September 30, 2023 15,371,967 $ 29.50 1.7 $ 485

As of September 30, 2023, there was $ 189 million of unrecognized compensation cost related to unvested RSUs that is expected to be recognized over a weighted average period of 3.1 years.

KEURIG DR PEPPER INC.

1 unchanged sentence

(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

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

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

Nutrabolt (1)

33.2 % $ 907 $ 874

La Colombe 33.3 % 307 —

Tractor 19.2 % 45 49

6 unchanged sentences

Investments in unconsolidated affiliates $ 1,336 $ 1,000

(1) The Company’s investment in Nutrabolt consists of preferred equity units, and the ownership interest is calculated on an as-converted basis.

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

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

In August 2023, the Company invested $ 300 million in exchange for common shares in La Colombe that represent a 33.3 % ownership interest.

The Company additionally capitalized $ 7 million of incremental third-party costs into the investment balance.

On July 31, 2023, the remaining shareholders of Revive surrendered their ownership interests.

As a result, the Company holds 100% ownership interest in Revive and has eliminated the Non-controlling interest component within the Company’s unaudited Condensed Consolidated Statements of Stockholder’s Equity.

The Company’s effective tax rates were as follows:

Second Quarter First Six Months

(in millions) 2023 2022 2023 2022

Third Quarter First Nine Months

2023 2022 2023 2022

Effective tax rate 22.0 % 2.2 % 19.9 % 15.4 %

1 unchanged sentence

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

Third Quarter First Nine Months

2023 2022 2023 2022

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

4 unchanged sentences

Tax credits (2)

( 3.8 ) % ( 11.7 ) % ( 3.4 ) % ( 3.2 ) %

taxation of foreign earnings (2)

2.3 % 11.2 % 2.5 % 3.1 %

Deferred rate change (3)

1 unchanged sentence

Uncertain tax positions 0.2 % 0.4 % 0.1 % 0.1 %

federal provision to return 0.4 % — % — % — %

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

1 unchanged sentence

Total provision for income taxes 22.0 % 2.2 % 19.9 % 15.4 %

(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.

(1) For the first nine months of 2023, primarily driven by an immaterial non-cash true-up related to a prior period, which resulted in a $ 28 million reduction in foreign deferred tax liabilities.

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

(3) For the third quarter and first nine months of 2022, primarily driven by the revaluation of state deferred tax liabilities due to state legislative changes 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 second quarter of 2023:

For the third quarter of 2023:

Beginning balance $ 181 $ ( 10 ) $ 126 $ 297

1 unchanged sentence

Amounts reclassified from AOCI — — 2 2

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

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

For the second quarter of 2022:

Total other comprehensive (loss) income ( 135 ) — 9 ( 126 )

Balance as of September 30, 2023 $ 46 $ ( 10 ) $ 135 $ 171

For the third quarter of 2022:

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

1 unchanged sentence

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

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

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

For the first six months of 2023:

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

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

For the first nine months of 2023:

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

2 unchanged sentences

Total other comprehensive income (loss) 132 — ( 90 ) 42

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

For the first six months of 2022:

Balance as of September 30, 2023 $ 46 $ ( 10 ) $ 135 $ 171

For the first nine months of 2022:

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

Other comprehensive income ( 34 ) ( 3 ) 266 229

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

Amounts reclassified from AOCI — — 1 1

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

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

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

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

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

Second Quarter First Six Months

Third Quarter First Nine Months

(in millions) Income Statement Caption 2023 2022 2023 2022

4 unchanged sentences

Total 2 ( 2 ) ( 73 ) 1

Income tax (benefit) expense 1 — 17 ( 1 )

Income tax expense — 1 17 —

Total, net of tax $ 2 $ ( 1 ) $ ( 56 ) $ 1

(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.

(1) Amounts reclassified from AOCI into interest expense during the first nine 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:

June 30, December 31,

September 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 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.

For the first nine months of 2023, the Company recorded an unrealized mark-to-market gain of $ 16 million on its investment in Vita Coco.

The Company recorded no mark-to-market gains or losses on its investment in Vita Coco for the first nine months of 2022.

KEURIG DR PEPPER INC.

1 unchanged sentence

(UNAUDITED, CONTINUED)

June 30, December 31,

September 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 June 30, 2023 and December 31, 2022 was $ 3,463 million and $ 4,113 million respectively.

The amount of the outstanding obligations confirmed as valid included in accounts payable as of September 30, 2023 and December 31, 2022 was $ 2,794 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 June 30, 2023 and December 31, 2022, the Company had litigation reserves of $ 9 million and $ 12 million, respectively.

As of September 30, 2023 and December 31, 2022, the Company had litigation reserves of $ 10 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.

25 unchanged sentences

Keurig is also pursuing its opposition to direct purchaser plaintiffs’ motion for class certification.

Keurig’s motions and opposition remain pending in the SDNY.

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

7 unchanged sentences

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.

These motions remain pending in the SDNY.

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

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

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

In June 2021, the Court granted final approval of the settlement, entered final judgment, and dismissed the indirect purchasers’ claims.

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

In June 2021, the SDNY granted final approval of the settlement, entered final judgment, and dismissed the indirect purchasers’ claims.

Separate from the U.S.

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Leasing Arrangements

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.

As of September 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 asset sale-leaseback transaction during the first nine months of 2023.

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

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

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

The aggregate maximum undiscounted RVG associated with the leasing arrangements as of September 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 June 30, 2023 and December 31, 2022.

(in millions) June 30, 2023 (1)

The following table provides the carrying amounts of the right-to-use assets and lease obligations recorded on the Company’s unaudited Condensed Consolidated Balance Sheets associated with these leasing arrangements related to the VIEs as of September 30, 2023 and December 31, 2022.

(in millions) September 30, 2023 (1)

December 31, 2022 (2)

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Non-current liabilities 408 419

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

(1) The leasing agreements included as of September 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.

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

As of June 30, 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.

As of September 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 September 30, 2023, KDP had $ 94 million in fixed service fee commitments related to the 15-year distribution agreement which was effective on December 28, 2020, with Veyron SPEs.

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

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Refer to Note 10 for the carrying value of the Company’s investment in Nutrabolt.

TRANSACTION WITH LA COLOMBE

The Company has an investment in common shares of La Colombe.

Under the terms of the investment agreement, KDP has certain contractual rights that will result in a return of investment at the greater of a specified floor or fair value.

As other investors of La Colombe will have to absorb more risk when the specified floor is greater than fair value, the other investors lack certain characteristics of a controlling financial interest, which qualifies La Colombe as a VIE.

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

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

Refer to Note 10 for the carrying value of the Company’s investment in La Colombe.

Restructuring

RESTRUCTURING PROGRAMS

The Company records severance costs provided under an ongoing benefit arrangement once they are both probable and estimable.

2023 CEO Succession and Associated Realignment

In the third quarter of 2023, the Company began to enact several organization movements to ensure succession plans, to reinforce enterprise capabilities to support growth, and to control costs.

A key component of the program was the announcement of the appointment of a Chief Operating Officer, effective November 6, 2023, with the expectation that the new Chief Operating Officer will succeed Robert Gamgort as Chief Executive Officer of the Company during the second quarter of 2024.

The Company is also planning to realign its executive and operating leadership structure to enable faster decision making and to better support various strategic initiatives of the Company.

Additionally, certain workforce reductions could occur as we assess our organization and upskill our talent and capabilities as needed.

The program is expected to incur charges of approximately $ 45 million, primarily driven by severance costs and the sign-on bonus for our new Chief Operating Officer.

DPS Integration Program

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

Although the program was initially expected to be completed in 2021, as a result of delays due to COVID-19, KDP continued to recognize expenditures for certain initiatives which began during the integration period through December 31, 2022.

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

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, CONTINUED)

RESTRUCTURING CHARGES

Restructuring and integration expenses for the defined programs during the periods presented were as follows:

Third Quarter First Nine Months

(in millions) 2023 2022 2023 2022

2023 CEO Succession and Associated Realignment $ 25 $ — $ 25 $ —

DPS Integration Program — 33 — 91

RESTRUCTURING LIABILITIES

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Cash payments

Balance as of June 30, 2023 $ 17

Balance as of September 30, 2023 $ 31

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.

STRATEGIC PARTNERSHIP WITH GRUPO PISA

Effective October 23, 2023, the Company executed an agreement for a strategic partnership with Grupo PiSA to sell and distribute Electrolit instant hydration beverages within the U.S.

Under the long-term sales and distribution agreement, KDP will sell and distribute Electrolit in the majority of KDP's company-owned direct store distribution territories.

The distribution is expected to begin in early 2024, and the Company estimates spending up to $ 57 million to transition the rights.

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