What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2024-02-22 compared with 2023-02-23 · 373 added, 442 removed, 1411 unchanged (37% of the section changed)

15 unchanged sentences

Stock-Based Compensation

Investments and Acquisitions

Restructuring and Integration Costs

Accumulated Other Comprehensive Income (Loss)

3 unchanged sentences

Transactions with Variable Interest Entities

Restructuring and Integration Costs

Related Parties

22 unchanged sentences

Critical Audit Matter Description

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

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

As discussed in Notes 2 and 3, the Company has indefinite-lived brand intangible assets (“brand assets”).

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

1 unchanged sentence

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

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

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

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

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

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

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

How the Critical Audit Matter Was Addressed in the Audit

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

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

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

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

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

– Historical revenue and operating margins.

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

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

– Historical revenue and margins.

– Underlying analysis of business strategies and growth plans.

– Internal communication to senior management.

– Forecasted information in industry reports.

– Historical and forecasted peer data.

• We considered the impact of changes in management's forecast from the October 1, 2022 annual assessment date to December 31, 2022.

• With the assistance of our fair value specialists, we evaluated the reasonableness of the valuation methodology and discount rates, including testing the mathematical accuracy of the calculation, and developed a range of independent estimates and compared those to the discount rates selected by management.

– Historical peer data.

• With the assistance of our fair value specialists, we evaluated the reasonableness of the valuation methodology and discount rates.

/s/ Deloitte & Touche LLP

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Basis for Opinion

The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying management’s Report on Internal Control over Financial Reporting, appearing under item 9A.

The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Report on Internal Control over Financial Reporting, appearing under Item 9A.

Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

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(in millions, except per share data) 2023 2022 2021

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

Net sales $ 14,814 $ 14,057 $ 12,683

Cost of sales 6,734 6,734 5,706

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Income from operations 3,192 2,605 2,894

Interest expense 693 500 604

Interest expense, net 496 693 500

Loss on early extinguishment of debt — 217 105

1 unchanged sentence

Impairment of investments and note receivable — 12 17

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

Other (income) expense, net ( 61 ) 14 ( 2 )

Income before provision for income taxes 2,757 1,719 2,798

3 unchanged sentences

Net income attributable to KDP $ 2,181 $ 1,436 $ 2,146

$ 1,436 $ 2,146 $ 1,325

Earnings per common share:

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Cash and cash equivalents $ 267 $ 535

Restricted cash and restricted cash equivalents — 1

Trade accounts receivable, net 1,368 1,484

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Retained earnings 4,559 3,539

Accumulated other comprehensive income (loss) 129 ( 26 )

Accumulated other comprehensive income 315 129

Total stockholders' equity 25,676 25,126

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Net income attributable to KDP $ 2,181 $ 1,436 $ 2,146

$ 1,436 $ 2,146 $ 1,325

Adjustments to reconcile net income to net cash provided by operating activities:

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Gain on disposal of property, plant, and equipment ( 1 ) ( 80 ) ( 75 )

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

Unrealized (gain) loss on foreign currency ( 13 ) 26 9

Unrealized loss (gain) on derivatives 31 383 ( 70 )

Settlements of interest rate contracts 54 125 —

Equity in losses of unconsolidated affiliates 5 5 20

Equity in (earnings) loss of unconsolidated affiliates ( 33 ) 5 5

Earned equity ( 44 ) — —

Impairment of intangible assets 2 477 —

Impairment on investments and note receivable of unconsolidated affiliates 12 17 102

Impairment of investments and note receivable of unconsolidated affiliate — 12 17

Other, net 6 28 20

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Repayments of commercial paper ( 35,243 ) ( 948 ) ( 5,257 )

Proceeds from KDP Revolver — — 1,850

Repayment of KDP Revolver — — ( 1,850 )

Repayments of term loan — — ( 425 )

6 unchanged sentences

Payments on finance leases ( 95 ) ( 90 ) ( 54 )

Proceeds from controlling shareholder stock transactions — — 29

Other, net ( 6 ) ( 46 ) ( 36 )

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Transaction costs included in accounts payable and accrued expenses 6 8 —

Earned equity 44 — —

Conversion of note receivable to equity method investment — 6 15

Non-cash acquisition of controlling interest — — 3

Non-cash purchases of intangibles — 19 —

6 unchanged sentences

KEURIG DR PEPPER INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

Common Stock Issued Additional

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

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

Dividends declared, $ 0.7125 per share

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

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

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

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

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

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

2 unchanged sentences

Other comprehensive loss — — — — 155 155 — 155

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

Dividends declared, $ 0.775 per share

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

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

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

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— — — ( 1,160 ) — ( 1,160 ) — ( 1,160 )

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

Repurchases of common stock, inclusive of excise tax obligation ( 21.7 ) — ( 711 ) — — ( 711 ) — ( 711 )

Shares issued under employee stock-based compensation plans and other 3.7 — — — — — — —

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Stock-based compensation — — 117 — — 117 — 117

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

Balance as of December 31, 2023 1,390.4 $ 14 $ 20,788 $ 4,559 $ 315 $ 25,676 $ — $ 25,676

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Keurig Dr Pepper Inc.

is a leading coffee and beverage company in North America with a diverse portfolio of flavored CSDs, specialty coffee, and NCBs, and is a leader in single serve coffee brewers in the U.S.

is a leading coffee and beverage company in North America that manufactures, markets, distributes, and sells hot and cold beverages and single serve brewing systems.

References in this Annual Report on Form 10-K to "KDP" or "the Company" refer to Keurig Dr Pepper Inc.

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The fiscal year for Maple Parent Holdings Corp.

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

includes 52 weeks for the years ended December 31, 2023 and 2021 and 53 weeks for the year ended December 31, 2022.

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

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In these cases, the third party equity interest is referred to as non-controlling interest.

Non-controlling interests are presented as a separate component within equity in the Consolidated Balance Sheets, and net earnings attributable to the non-controlling interests are presented separately in the Consolidated Statements of Income.

Non-controlling interests, if any, are presented as a separate component within equity in the Consolidated Balance Sheets, and net earnings attributable to the non-controlling interests are presented separately in the Consolidated Statements of Income.

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

UNALLOCATED CORPORATE COST ALIGNMENT

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

Refer to Note 7 for current year presentation.

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

Year Ended December 31,

(in millions) 2021 2020

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

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

Packaged Beverages 1,023 1,010 835 822

Beverage Concentrates 1,047 1,044 935 932

Latin America Beverages 133 133 105 105

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

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

REPORTABLE SEGMENTS

As of January 1, 2023, the Company revised its segment structure to align with changes in how the Company’s CODM manages the business, assesses performance and allocates resources.

This change had no impact on the Company’s consolidated results of operations or financial position.

Prior period segment results have been recast to reflect the Company’s new reportable segments.

Refer to Note 7 for additional information on the Company’s reportable segments and Note 8 for the Company’s disaggregated revenue portfolio for each reportable segment.

The change in segment structure also resulted in a change to the Company’s reporting units.

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

Significant Accounting Policies

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The Company is exposed to potential credit risks associated with its accounts receivable, as it generally does not require collateral on its accounts receivable.

The Company determines the required allowance for expected credit losses using information such as its customer credit history and financial condition, industry and market segment information, credit reports, and economic trends and conditions such as the impacts of COVID-19 in the year ended December 31, 2022.

Allowances can be affected by changes in the industry, customer credit issues or customer bankruptcies or expectations of any such events in a future period when reasonable and supportable.

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Balance, end of the period $ 10 $ 9 $ 7

The majority of the Company's customers are located in the U.S.

Concentration of credit risk with respect to accounts receivable is limited due to the large number of customers in various channels comprising the Company's customer base.

Walmart is a major customer as of December 31, 2022 and 2021 as described in Note 7.

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

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Concentration of credit risk with respect to accounts receivable is limited due to the large number of customers in various channels comprising the Company's customer base.

Walmart is a major customer as described in Note 7.

As of December 31, 2023 and 2022, Walmart accounted for approximately $ 204 million and $ 303 million of trade receivables, respectively, which exceeded 10% of the Company's total trade accounts receivabl e.

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

25 unchanged sentences

In order to assess recoverability, the Company compares the estimated undiscounted future pre-tax cash flows from the use of the group of assets, as defined, to the carrying amount of such assets.

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

Measurement of an impairment loss is based on the excess of the carrying amount of the group of assets over the long-lived asset's fair value, and any impairment loss i s recorded in Other operating income, net, in the Consolidated Statements of Income .

For the years ended December 31, 2023, 2022, and 2021, the Company recorded no impairment loss related to these assets.

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

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

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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The Company's lease agreements do not contain any material restrictive covenants.

KDP has certain leases of manufacturing and distribution properties and the Frisco headquarters that contain a residual value guarantee at the end of the term.

KDP has certain leases of manufacturing and distribution properties and the Frisco headquarters with the Veyron SPEs that contain a residual value guarantee at the end of the term.

Refer to Note 18 for additional information about the Company’s residual value guarantees.

2 unchanged sentences

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

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

3 unchanged sentences

Sale-and-leaseback transactions occur when the Company sells assets to a third-party and subsequently leases them back.

The resulting leases that qualify for sale-and-leaseback accounting are evaluated and accounted for as an operating lease.

The resulting leases that qualify for sale-and-leaseback accounting are evaluated and accounted for as operating leases.

A transaction that does not qualify for sale-and-leaseback accounting as a result of finance lease classification or the failure to meet certain revenue recognition criteria is accounted for as a financing transaction.

6 unchanged sentences

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

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

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

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

3 unchanged sentences

The Company also holds non-controlling investments in certain privately held entities which are accounted for as equity method investments, equity securities with readily determinable fair value, or equity securities without readily determinable value.

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 Consolidated Statements of Changes in Stockholders’ Equity.

The Company also holds investments in certain entities which are accounted for as equity method investments, equity securities with readily determinable fair value, or equity securities without readily determinable value.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

The Company's equity method investments are reported at cost, which includes third-party transaction costs, and are adjusted each period for dividends paid, if any, as well as the Company’s share of the investee’s net income (loss), unless the investment agreement indicates an alternative allocation of earnings or losses.

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

To the extent the Company earns additional equity in these investments from achieving certain contractual milestones in our distribution activities, the earned equity is recorded as a reduction in Cost of sales and included in the Earned equity line on the Consolidated Statements of Cash Flows.

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

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

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

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

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

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company recorded impairment charges of $ 12 million and $ 17 million for the years ended December 31, 2022 and 2021.

No impairment charges were recorded for the year ended December 31, 2023.

Goodwill and Other Intangible Assets

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The Company also considers factors such as its ability to continue to protect the legal rights that arise from these intangible assets indefinitely or the absence of any regulatory, economic, or competitive factors that could truncate the life of these intangible assets.

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

If the criteria are not met, the brand is considered to have a finite useful life.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Amortization expense is recorded in Selling, general, and administrative expenses i n the Consolidated Statements of Income.

The estimated useful lives of the Company's intangible assets with definite lives are as follows:

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Acquired technology 20 years

Customer relationships 10 to 40 years

Trade names 10 years

Distribution rights 4 to 10 years

Brands 5 years

Contractual arrangements 10 to 20 years

Customer relationships 10 to 40 years

Distribution rights 4 to 10 years

Trade names 10 years

For intangible assets with definite lives, tests for impairment are performed if conditions exist that indicate the carrying value may not be recoverable.

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A reporting unit is the same as an operating segment or one level below an operating segment.

KDP's six reporting units are as follows:

KDP's reporting units are as follows:

Reportable Segments Reporting Units

Packaged Beverages DSD

Coffee Systems Coffee Systems

Beverage Concentrates Branded Concentrates

Fountain Foodservice

Latin America Beverages Latin America Beverages

Refreshment Beverages U.S.

Beverage Concentrates

International Canada Beverage Concentrates

Canada Coffee

Latin America Beverages

If the carrying value of the reporting unit or intangible asset exceeds its fair value, an impairment charge will be recorded in current earnings for the difference up to the carrying value of the goodwill or intangible asset recorded.

Refer to Note 3 for additional information.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capitalized Customer Incentive Programs

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

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Accounts Payable

KDP has agreements with third party administrators which allow participating suppliers to track payment obligations from KDP, and if

voluntarily elected by the supplier, to sell payment obligations from KDP to financial institutions.

KDP has agreements with third party administrators which allow participating suppliers to track payment obligations from KDP, and, if voluntarily elected by the supplier, to sell payment obligations from KDP to financial institutions.

Suppliers can sell one or more of KDP's payment obligations at their sole discretion, and the rights and obligations of KDP to its suppliers are not impacted.

1 unchanged sentence

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

KDP has been informed by the third party administrator that as of December 31, 2022 and 2021, $ 3,839 million and $ 3,194 million, respectively, of KDP's outstanding payment obligations were voluntarily elected by the supplier and sold to financial institutions.

The amount of the outstanding obligations confirmed as valid included in accounts payable as of December 31, 2023 and December 31, 2022 was $ 2,389 million and $ 4,113 million, respectively.

Structured Payables

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

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

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

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

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If the underlying hedged transaction ceases to exist, any associated amounts reported in AOCI would be reclassified to earnings at that time.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For derivatives that are not designated or for which the designated hedging relationship is discontinued, the gain or loss on the instrument is recognized in earnings in the period of change.

2 unchanged sentences

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

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Loss Contingencies

9 unchanged sentences

The Company recognizes revenue when performance obligations under the terms of a contract with the customer are satisfied.

Branded product sales, which include CSDs, NCBs, K-Cup pods, appliances and other, occur once control is transferred upon delivery to the customer.

Branded product sales, which include LRBs, K-Cup pods, appliances, and other, occur once control is transferred upon delivery to the customer.

Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods.

11 unchanged sentences

These amounts, which primarily relate to shipping and handling costs, are recorded in SG&A expenses in the Consolidated Statements of Income.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Advertising and Marketing Expense

7 unchanged sentences

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

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Stock-Based Compensation Expense

The Company recognizes compensation expense in the Consolidated Statements of Income related to the fair value of employee stock-based awards.

The Company recognizes stock-based compensation expense within SG&A expenses in the Consolidated Statements of Income related to the fair value of employee stock-based awards ratably over the vesting period and only for awards expected to vest.

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

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

Compensation cost is based on the grant-date fair value.

1 unchanged sentence

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

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

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

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

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

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

Refer to Note 11 for additional information .

Integration and Restructuring Costs

Restructuring and Integration Costs

The Company implements restructuring programs from time to time and incurs costs that are designed to improve operating effectiveness and lower costs.

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

Severance costs are recorded once they are both probable and estimable.

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

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

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

12 unchanged sentences

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

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

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

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Earnings per Share

Basic EPS is computed by dividing Net income attributable to KDP by the weighted average number of common shares outstanding for the period.

Diluted EPS reflects the assumed conversion of all dilutive securities.

Diluted EPS reflects the assumed conversion of all dilutive securities determined through the treasury stock method.

Repurchases of Common Stock

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

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Inflation Reduction Act of 2022 imposes a 1% excise tax on net share repurchases that occur after December 31, 2022.

The tax associated with shares repurchased is recorded to additional paid-in capital.

As of December 31, 2023, $ 5 million was included in additional paid-in capital related to the excise tax associated with shares repurchased during the year ended December 31, 2023.

Cash paid related to the excise tax on net share repurchases will be included in the Repurchases of common stock line in the Consolidated Statements of Cash Flows.

RECENTLY ISSUED ACCOUNTING STANDARDS

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

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

Deferral of the Sunset Date of Topic 848 .

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

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

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

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

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

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

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures .

The objective of ASU 2023-07 is to require entities to provide enhanced disclosures on significant segment expenses.

ASU 2023-07 is effective for public companies in annual periods beginning after December 15, 2023, and interim periods beginning after December 15, 2024.

The Company is currently evaluating the impact that ASU 2023-07 will have on the consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures .

The objective of ASU 2023-09 is to enhance disclosures related to income taxes, including specific thresholds for inclusion within the tabular disclosure of income tax rate reconciliation and specified information about income taxes paid.

ASU 2023-09 is effective for public companies starting in annual periods beginning after December 15, 2024.

The Company is currently evaluating ASU 2023-09 but expects the impact of the disclosures to be immaterial to KDP’s consolidated financial statements.

RECENTLY ADOPTED PROVISIONS OF U.S.

As of January 1, 2023, the Company adopted ASU 2022-04, Liabilities — Supplier Finance Programs (Subtopic 405-50):

Disclosure of Supplier Finance Program Obligations .

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

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

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

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

The disclosure previously included in the Company’s Form 10-K for the year ended December 31, 2022 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.

Refer to Note 2 for additional information on the Company’s obligations to participating suppliers.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Goodwill and Other Intangible Assets

Changes in the carrying amount of goodwill by reportable segment for the years ended December 31, 2023 and 2022 are as follows:

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

(in millions) U.S.

Refreshment Beverages U.S.

Coffee International Total

Balance as of December 31, 2021 $ 8,714 $ 8,622 $ 2,846 $ 20,182

11 unchanged sentences

Total $ 22,109 $ 21,993

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

Refer to Impairment Analysis below.

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

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

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) The increase in brands with indefinite lives was driven by $ 185 million of FX translation during the year ended December 31, 2023.

(2) As a result of the Company’s continued expansion and acquisition of distribution rights, the Company reclassified its contractual arrangements assets, which primarily represent relationships with bottlers and distributors that were fair valued at the DPS Merger, to definite-lived as of October 1, 2023.

(3) The Company acquired certain distribution rights during the year ended December 31, 2023, resulting in an increase of approximately $ 55 million, primarily attributable to Nutrabolt.

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

3 unchanged sentences

Customer relationships 638 ( 236 ) 402 638 ( 204 ) 434

Trade names (1)

127 ( 101 ) 26 128 ( 86 ) 42

Contractual arrangements (1)

146 ( 13 ) 133 24 ( 10 ) 14

Trade names 126 ( 114 ) 12 127 ( 101 ) 26

Brands 51 ( 25 ) 26 51 ( 19 ) 32

Distribution rights 29 ( 22 ) 7 29 ( 16 ) 13

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

Total $ 2,136 $ ( 958 ) $ 1,178 $ 2,015 $ ( 825 ) $ 1,190

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

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

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

(1) The increase in contractual arrangements is due to the reclassification of the Company’s indefinite-lived contractual arrangements to definite-lived.

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

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Amortization expense for intangible assets with definite lives $ 137 $ 138 $ 134

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

3 unchanged sentences

IMPAIRMENT ANALYSIS

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

The following table summarizes Impairment of intangible assets during the periods:

Year Ended December 31,

(in millions) 2023 2022 2021

Interim triggering analysis $ 311 $ — $ —

Quarterly triggering event analysis $ — $ 311 $ —

Annual analysis — 161 —

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

Total impairment of intangible assets $ 2 $ 477 $ —

Quarterly Triggering Event Analysis

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

Management identified specific performance and margin challenges for Bai and performed a Step 1 quantitative discounted cash flow analysis using the income approach.

As a result of this analysis, KDP recorded an impairment charge of $ 311 million in the Packaged Beverages segment.

KDP performs quarterly analyses to evaluate whether any triggering events have occurred which may indicate that the carrying amount of an asset may not be recoverable.

With the exception of the third quarter of 2022, as described below, management has not identified any indications that a material carrying amount of any goodwill or any intangible asset may not be recoverable.

In the third quarter of 2022, management identified specific performance and margin challenges for Bai and performed a Step 1 quantitative discounted cash flow analysis using the income approach.

As a result of this analysis, KDP recorded an impairment charge of $ 311 million in the U.S.

Refreshment Beverages segment.

Annual Analysis

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

For the year ended December 31, 2023, KDP performed a quantitative analysis on all goodwill and indefinite-lived intangible assets, using the income approach, or in some cases a combination of income and market based approaches, to determine the fair value of the Company's assets, as well as an overall consideration of market capitalization and enterprise value.

No impairments were recorded as a result of these quantitative analyses performed.

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

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

As a result of these quantitative analyses performed, impairment charges of $ 161 million were recorded specific to certain brands during the year ended December 31, 2022.

The primary factors that led to the brand impairment determination as of October 1, 2022, driven primarily by Schweppes, was the change in the macroeconomic environment leading to increases in discount rates, as shown in the table below, as well as supply chain disruptions within third-party distribution networks.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

The following table provides the range of rates used in the analysis as of October 1, 2023, 2022, and 2021:

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

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

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

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

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

The results of the impairment analysis of the Company's indefinite lived brands as of October 1, 2023, 2022, and 2021 are as follows:

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In excess of 50% 14,767 29,002 14,848 28,942 11,173 21,982

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

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

The Company’s indefinite lived trade names were tested for impairment as a part of the quantitative analysis performed as of October 1, 2023 and the resulting headroom percentages were in excess of 50% for all assets.

Long-term Obligations and Borrowing Arrangements

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Issuance Maturity Date Rate 2023 2022

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

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

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2032 Notes April 15, 2032 4.050 % 850 850

2038 Notes May 1, 2038 7.450 % — 125

2038 Merger Notes May 25, 2038 4.985 % 211 211

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

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

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

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

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

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

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

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

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As of December 31, 2023, the Company was in compliance with all financial covenant requirements of the Notes.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

BORROWING ARRANGEMENTS

Revolving Credit Agreement

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

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

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

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

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

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

5 unchanged sentences

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

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

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

3 unchanged sentences

Commercial Paper Program

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

KDP has a commercial paper program, under which the Company may issue unsecured commercial paper notes on a private placement basis.

Effective November 10, 2023, the maximum aggregate amount available under the facility was increased to $ 4,000 million.

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

9 unchanged sentences

Under this facility, $ 150 million is available for the issuance of letters of credit, $ 41 million of which was utilized as of December 31, 2023 and $ 109 million of which remains available for use.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FAIR VALUE DISCLOSURES

3 unchanged sentences

The fair value of the Company's Notes was $ 10,486 million and $ 10,495 million as of December 31, 2023 and December 31, 2022, respectively.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

INTEREST RATES

4 unchanged sentences

A natural hedging relationship exists in which changes in the fair value of the instruments act as an economic offset to changes in the fair value of the underlying items.

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

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

Additionally, during the year ended December 31, 2022, KDP entered into reverse treasury lock contracts in order to manage the interest rate risk related to changes in value of the tender offers in the 2022 Strategic Refinancing prior to the pricing date.

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

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, net in the Consolidated Statements of Income.

As of December 31, 2023, economic interest rate derivative instruments have maturities ranging from February 2024 to January 2038.

Cash Flow Hedges

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

In order to hedge the variability in cash flows from interest rate changes associated with the Company’s planned future issuances of long-term debt, in 2021, the Company entered into forward starting swaps with an aggregate notional value of $ 2.5 billion and designated them as cash flow hedges.

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

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

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

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

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

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

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

As the forecasted debt transaction is still probable to occur, the fair value of the these instruments as of the de-designation was recorded to AOCI.

Changes in fair value of the these instruments from the point of de-designation were recorded as unrealized gains or losses in Interest expense, net in the Consolidated Statements of Income until the instruments were terminated in the third quarter of 2023, at which time the realized gains in excess of the fair value as of the date of de-designation were recorded in Interest expense, net .

The fair value of the instruments as of the date of de-designation remains in AOCI as of December 31, 2023.

During the first quarter of 2023, KDP terminated the remaining forward starting swaps which were designated as cash flow hedges.

As the forecasted debt transaction associated with the terminated forward starting swaps was no longer considered probable, the realized gains associated with the termination were recorded in Interest expense, net during the first quarter of 2023.

FOREIGN EXCHANGE

2 unchanged sentences

Economic Hedges

During the years ended December 31, 2022, 2021 and 2020, KDP held 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 exchange 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 Consolidated Statements of Income as the associated risk.

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

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

KEURIG DR PEPPER INC.

2 unchanged sentences

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

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

Economic Hedges

KDP centrally manages the exposure to volatility in the prices of certain commodities used in its production process and transportation through various derivative contracts.

During the years ended December 31, 2022, 2021 and 2020, the Company held forward, future, swap and option contracts that economically hedged certain of its risks.

The Company generally holds some combination of future, swap and option contracts that economically hedge certain of its risks.

In these cases, a hedging relationship exists in which changes in the fair value of the instruments act as an economic offset to changes in the fair value of the underlying items or as an offset to certain costs of production.

Changes in the fair value of these instruments are recorded in earnings throughout the term of the derivative instrument and are reported in the same line item of the Consolidated Statements of Income as the hedged transaction.

Unrealized gains and losses are recognized as a component of unallocated corporate costs until the Company's operating segments are affected by the completion of the underlying transaction, at which time the gain or loss is reflected as a component of the respective segment's income from operations.

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

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 December 31, 2023, these commodity contracts have maturities ranging from January 2024 to December 2025.

NOTIONAL AMOUNTS OF DERIVATIVE INSTRUMENTS

2 unchanged sentences

Interest rate contracts

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

Forward starting swaps, not designated as hedging instruments $ 1,700 $ 1,000

Forward starting swaps, designated as cash flow hedges — 500

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

Swaptions, not designated as hedging instruments 3,200 —

Forward contracts, not designated as hedging instruments 710 490

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.

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

3 unchanged sentences

Not Designated as Hedging Instruments

The following table summarizes the fair value hierarchy and the location of the fair value of the Company's derivative instruments not designated as hedging instruments within the Consolidated Balance Sheets:

(in millions) Fair Value Hierarchy Balance Sheet Location 2022 2021

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

The following table summarizes the location of the fair value of the Company's derivative instruments which are not designated as hedging instruments within the Consolidated Balance Sheets.

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

(in millions) Balance Sheet Location 2023 2022

FX forward contracts Prepaid expenses and other current assets $ 5 $ 8

11 unchanged sentences

The following table summarizes the fair value hierarchy and the location of the fair value of the Company's derivative instruments which are designated as hedging instruments within the Consolidated Balance Sheets.

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

(in millions) Balance Sheet Location 2023 2022

3 unchanged sentences

FX contracts Other current liabilities $ 14 $ 3

Interest rate contracts Other current liabilities — 8

Interest rate contracts Other non-current liabilities — 128

KEURIG DR PEPPER INC.

6 unchanged sentences

(in millions) Income Statement Location 2023 2022 2021

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

Interest rate contracts Interest expense, net $ ( 26 ) $ 231 $ ( 25 )

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

FX forward contracts Cost of sales ( 2 ) ( 7 ) 4

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

FX forward contracts Other (income) expense, net 5 ( 9 ) —

Commodity contracts Cost of sales 22 12 ( 148 )

4 unchanged sentences

(in millions) Income Statement Location 2023 2022 2021

Interest rate contracts Interest expense $ ( 6 ) $ — $ —

Interest rate contracts (1)

Interest expense, net $ ( 74 ) $ ( 6 ) $ —

FX contracts Cost of sales — 5 18

KDP expects to reclassify approximately $ 8 million and $ 15 million of pre-tax net gains from AOCI into net income during the next twelve months related to interest rate contracts and FX contracts, respectively.

(1) Amounts recognized during the year ended December 31, 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 related to interest rate contracts and $ 7 million of pre-tax net losses related to FX contracts from AOCI into net income during the next twelve months .

KEURIG DR PEPPER INC.

29 unchanged sentences

Finance leases 9 years 9 years

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS

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Present value of minimum lease payments $ 907 $ 726

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SIGNIFICANT LEASES THAT HAVE NOT YET COMMENCED

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ASSET SALE-LEASEBACK TRANSACTIONS

Transactions with Special Purpose Entities with Same Sponsor

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

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

The following table presents details of the transactions.

2 unchanged sentences

March 31, 2023 (1)

$ 77 $ 39 $ 38

March 31, 2022 (2)

November 30, 2022 (3)

1 unchanged sentence

December 29, 2021 (4)

January 6, 2020 (5)

(1) Each sale-leaseback transaction included one distribution property.

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

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

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

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

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

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

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Refer to Note 18 for additional information about RVGs associated with asset sale-leaseback transactions.

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

The following table presents details of the transaction.

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

Sale Proceeds Carrying Value Gain on Sale

January 10, 2020 (1)

$ 50 $ 27 $ 23

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

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

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Effective January 1, 2023, the Company revised its segment structure to align with changes in how the Company’s CODM manages the business, assesses performance and allocates resources.

The prior period segment disclosures reflect the revised presentation.

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

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

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

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

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

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

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

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

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

Most of the brands in this segment are CSD brands.

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

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

As of December 31, 2023 and 2022 and for the years ended December 31, 2023, 2022, and 2021, the Company's operating and 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 accessories, and other coffee products to partners, retailers, and directly to consumers through the Company’s 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.

Segment results are based on management reports.

5 unchanged sentences

(in millions) 2023 2022 2021

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

Packaged Beverages 6,607 5,882 5,363

Beverage Concentrates 1,725 1,486 1,325

Latin America Beverages 743 599 497

Refreshment Beverages $ 8,821 $ 8,083 $ 7,120

Coffee 4,071 4,302 4,089

International 1,922 1,672 1,474

Total net sales $ 14,814 $ 14,057 $ 12,683

Income from operations

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

Packaged Beverages 1,014 1,023 835

Beverage Concentrates 1,061 1,047 935

Latin America Beverages 158 133 105

Refreshment Beverages $ 2,483 $ 1,961 $ 1,961

Coffee 1,158 1,215 1,306

International 475 373 382

Unallocated corporate costs ( 924 ) ( 944 ) ( 755 )

4 unchanged sentences

Identifiable operating assets

Coffee Systems $ 15,830 $ 15,397

Packaged Beverages 11,870 11,819

Beverage Concentrates 20,495 20,674

Latin America Beverages 1,885 1,763

Refreshment Beverages $ 28,750 $ 28,987

Coffee 13,944 14,220

International 7,155 6,873

Segment total 49,849 50,080

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MAJOR CUSTOMER

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

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

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

2 unchanged sentences

Walmart $ 2,476 $ 2,184 $ 1,989

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

Additionally, customers in the Company's U.S.

Refreshment Beverages and International segments buy concentrate from the Company, which is used in finished goods sold by the Company's third party bottlers to Walmart.

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

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

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

(in millions) U.S.

Refreshment Beverages U.S.

Coffee International Total

For the Year Ended December 31, 2023

1 unchanged sentence

— 3,207 477 3,684

K-cup pods (2)

3,772 — — — 3,772

Appliances — 725 74 799

4 unchanged sentences

— 3,328 444 3,772

K-cup pods (2)

3,546 — — — 3,546

Appliances — 837 86 923

4 unchanged sentences

— 3,122 424 3,546

K-cup pods (2)

3,369 — — — 3,369

Appliances — 834 73 907

1 unchanged sentence

Net sales $ 7,120 $ 4,089 $ 1,474 $ 12,683

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

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

LRB represents net sales of owned and partner brands within our portfolio and includes branded concentrates, syrup, and finished beverages, including contract manufacturing of KDP branded products for our bottlers and distributors.

K-Cup pods represents net sales from owned brands, partner brands, and private label owners.

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

1 unchanged sentence

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

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

For the Year Ended December 31,

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Diluted EPS 1.55 1.01 1.50

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

KEURIG DR PEPPER INC.

6 unchanged sentences

The Company also participates in various multi-employer defined benefit plans.

The Company's largest U.S.

defined benefit pension plan, which is a cash balance plan, was suspended and the accrued benefit was frozen effective December 31, 2008.

One of the Company's U.S.

defined benefit pension plans, which is a cash balance plan, was suspended and the accrued benefit was frozen effective December 31, 2008.

Participants in this plan no longer earn additional benefits for future services or salary increases.

9 unchanged sentences

Interest cost 9 7

Actuarial losses, net ( 53 ) ( 9 )

Actuarial losses (gains), net 11 ( 53 )

Benefits paid ( 5 ) ( 4 )

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Beginning balance $ 126 $ 190

Actual return on plan assets ( 49 ) 1

Actual return (loss) on plan assets 11 ( 49 )

Employer contributions 12 3

6 unchanged sentences

Non-current liability ( 33 ) ( 34 )

The accumulated benefit obligations for the defined benefit pension plans were $ 156 million and $ 195 million as of December 31, 2022 and 2021.

The pension plan assets and the projected benefit obligations of KDP's U.S.

pension plans represent approximately 98 % of the total plan assets and 92 % of the total projected benefit obligation of all plans combined as of December 31, 2022.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The accumulated benefit obligations for the defined benefit pension plans were $ 165 million and $ 156 million as of December 31, 2023 and 2022, respectively.

The pension plan assets and the projected benefit obligations of KDP's U.S.

pension plans represent approximately 97 % of the total plan assets and 89 % of the total projected benefit obligation of all plans combined as of December 31, 2023.

The following table summarizes key pension plan information regarding plans whose accumulated benefit obligations exceed the fair value of their respective plan assets:

23 unchanged sentences

Contributions and Expected Benefit Payments

The Company's contributions to its pension plans for the years ended December 31, 2022, 2021 and 2020, and its projected contributions for the year ended December 31, 2023, are insignificant.

The following table summarizes the contributions made to the Company's defined benefit plans for the years ended December 31, 2023, 2022, and 2021, as well as its projected contributions for the year ended December 31, 2024:

Projected For the Year Ended December 31,

(in millions) 2024 2023 2022 2021

Non-discretionary contributions $ 8 $ 12 $ 3 $ —

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

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Estimated future benefit payments $ 11 $ 11 $ 11 $ 11 $ 12 $ 64

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Actuarial Assumptions

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

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

For KDP's U.S.

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

plans, the Company used the Pri-2012 mortality tables for each of the years ended December 31, 2023 and 2022, and the Mortality Improvement Scales MP-2021 and MP-2020, published by the Society of Actuaries’ Retirement Plans Experience Committee, for the years ended December 31, 2023 and 2022, respectively.

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

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Expected long-term rate of return 4.75 % 6.00 % 6.50 %

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Investment Policy and Strategy

12 unchanged sentences

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

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

26 unchanged sentences

Investments are provided by the investment managers using a unit price or NAV based on the fair value of the underlying investments.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MULTI-EMPLOYER PLANS

The Company has three multi-employer plans, which are trustee-managed multi-employer defined benefit pension plans for union-represented employees under certain collective bargaining agreements.

The Company participates in several multi-employer plans, which are trustee-managed multi-employer defined benefit pension plans for union-represented employees under certain collective bargaining agreements.

The risks of participating in these multi-employer plans are different from single-employer plans, as assets contributed to the multi-employer plan by one employer may be used to provide benefits to employees of other participating employers.

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Contributions paid into the multi-employer plans are expensed as incurred.

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

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Multi-employer plan expenses were $ 6 million for the year ended December 31, 2023, and $ 5 million for each of the years ended December 31, 2022 and 2021.

Individually Significant Multi-Employer Plan

4 unchanged sentences

Expiration dates of collective bargaining agreements (1)

May 6, 2023 through March 20, 2025

January 25, 2024 through May 6, 2026

Financial Improvement Plan/Rehabilitation Plan status pending/implemented Implemented

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(1) Central States includes seven collective bargaining agreements.

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

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

The largest agreement, which is set to expire March 2, 2024, covers approximately 51 % of the employees included in Central States.

Four of the collective bargaining agreements, including the largest agreement, are set to expire during 2024, covering approximately 78 % of the employees included in Central States.

The most recent Pension Protection Act zone status available as of December 31, 2023 is for the plan's year-end as of December 31, 2022.

4 unchanged sentences

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

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DEFINED CONTRIBUTION PLANS

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

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

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

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

There were $ 6 million in gains, $ 8 million in losses, and $ 5 million in gains associated with these trading securities during the years ended December 31, 2023, 2022, and 2021, respectively.

Stock-Based Compensation

Stock-based compensation expense is primarily recorded in SG&A expenses in the Consolidated Statements of Income.

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

6 unchanged sentences

Stock-based compensation expense, net of tax $ 97 $ 45 $ 74

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

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

Refer to Note 2 for additional information.

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

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 year ended December 31, 2022.

DESCRIPTION OF STOCK-BASED COMPENSATION PLANS

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

During the year ended December 31, 2019, the Company adopted the 2019 Incentive Plan, which expires in 2029 and otherwise contains substantially similar provisions as the 2009 Incentive Plan.

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

Grants subsequent to the DPS Merger and prior to the adoption of the 2019 Incentive Plan were granted under the 2009 Incentive Plan.

The 2019 Incentive Plan was adopted in 2019, expires in 2029, and contains substantially similar provisions to the 2009 Incentive Plan.

Together, these incentive plans provide for the issuance of up to an aggregate of 27,425,720 shares of the Company's common stock in stock-based compensation awards.

RSUs generally vest on the following schedule:

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

RSUs granted during 2020, 2021, and 2022 5 -year term with graded vesting as follows:

RSUs granted in 2020 through 2023 5 -year term with graded vesting as follows:

0% in year 1, 0% in year 2, 60% in year 3, 20% in year 4, 20% in year 5

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

However, from time to time, the Company grants RSUs outside of the normal grant cycle which have different terms and vesting conditions.

For all RSU grants, the Company recognizes the expense ratably over the vesting period.

During the year ended December 31, 2020, the Company modified the terms of one RSU grant to a named executive officer.

A grant of 868,056 RSUs with a five-year vesting term which were previously granted in September 2020 were forfeited, and a corresponding grant of 651,042 PSUs and 217,014 RSUs were granted.

The PSUs will vest three years from the beginning date of a predetermined performance period, to the extent that the Company has achieved the performance criteria during the performance period.

The performance criteria for the modified award includes a specified market condition which compares total shareholder return to that of certain indices.

Additionally, the PSUs are required to be held by the grantee for one year after the awards have vested.

The RSUs will vest ratably over a three-year term.

As a result of the award modification, no incremental compensation expense will be recognized over the life of the award.

The Company's aforementioned incentive plans provide for the issuance of up to an aggregate of 27,425,720 shares of the Company's common stock in stock-based compensation awards.

RESTRICTED SHARE UNITS

6 unchanged sentences

Balance as of December 31, 2023 15,748,820 29.42 1.7 525

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The weighted average grant date fair value for RSUs granted for the years ended December 31, 2023, 2022, and 2021 was $ 30.60 , $ 35.76 , and $ 28.83 , respectively.

2 unchanged sentences

PERFORMANCE SHARE UNITS

In 2020, the Compensation Committee of the Board approved a PSU plan in connection with the aforementioned award modification.

In 2020, the Compensation Committee of the Board approved a PSU grant.

Each PSU is equivalent in value to one share of the Company's common stock.

The PSUs will vest three years from the beginning date of a predetermined performance period, to the extent that the Company has achieved the performance criteria during the performance period.

The performance criteria includes a specified market condition which compares total shareholder return to that of certain indices.

Additionally, the PSUs are required to be held by the grantee for one year after the awards have vested.

The maximum payout percentage for all PSUs granted by the Company is 100%.

The PSUs that are subject to the market condition are valued using a Monte Carlo simulation model, which requires certain assumptions, including the risk-free interest rate, expected volatility, and the estimated dividend yield.

The PSUs are valued using a Monte Carlo simulation model, which requires certain assumptions, including the risk-free interest rate, expected volatility, and the estimated dividend yield.

The risk-free interest rate used in the Monte Carlo simulation model is based on zero-coupon yields implied by U.S.

2 unchanged sentences

Expected volatility is based on historical data of the Company and certain indices over the most recent time period equal to the performance period.

For purposes of determining that the aforementioned award modification resulted in no incremental cost, the Monte Carlo simulation assumed a risk-free interest rate of 0.10 %, expected volatility of 29.83 % and a dividend yield of 2.08 %.

The table below summarizes PSU activity for the year ended December 31, 2023 :

3 unchanged sentences

Vested and released — — — —

Forfeited ( 214,844 ) 28.80 — —

Forfeited or expired ( 107,422 ) 28.80 — —

Balance as of December 31, 2023 328,776 28.80 0.0 11

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

As of December 31, 2023, the remaining unrecognized compensation cost related to unvested PSUs that is expected to be recognized in future periods is immaterial.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

STOCK OPTIONS

6 unchanged sentences

Exercisable as of December 31, 2023 37,452 14.76 3.2 1

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Investments and Acquisitions

INVESTMENTS IN UNCONSOLIDATED AFFILIATES

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

(in millions) Ownership Interest 2022 2021

29.8 % $ 874 $ —

Tractor 19.2 % 49 —

(in millions) 2023 2022

Nutrabolt (1)

Athletic Brewing (4)

Dyla LLC 12.4 % 12 12

Force Holdings LLC (2)

Beverage startup companies (5)

(various) 5 8

Other (various) 5 5

Investments in unconsolidated affiliates $ 1,387 $ 1,000

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

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

(1) The Company holds a 33.7 % interest on an as-converted basis in Nutrabolt, consisting of 32.2 % in Class A preferred shares acquired through the Company’s December 2022 investment, which are treated as in-substance common stock, and 1.5 % in Class B common shares earned through the achievement of certain milestones included in the Company’s distribution agreement with Nutrabolt.

(2) The Company holds a 4.6 % interest in Chobani.

(3) The Company holds a 19.2 % interest in Tractor.

(4) The Company holds a 13.1 % interest in Athletic Brewing.

(5) 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 .

Chobani Investment

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

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

In December 2023, La Colombe merged with a wholly-owned subsidiary of Chobani.

The Company’s investment in La Colombe was exchanged for common units representing a 4.6 % ownership interest in Chobani.

Nutrabolt Investment

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

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

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

Tractor Investment

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

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

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

BodyArmor Investment

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

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

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

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

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

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

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

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

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

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

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

The Company recorded preferred dividends of $ 44 million and $ 3 million during the years ended December 31, 2023 and 2022, respectively, which increased the investment balance for Nutrabolt.

KEURIG DR PEPPER INC.

1 unchanged sentence

Bedford Investment

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

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

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

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

Approximately $ 14 million of the Company’s responsibility under this credit agreement has been funded and impaired through December 31, 2022.

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

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

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

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

The Company recorded impairment charges related to its investment and notes receivable in Bedford of $ 12 million and $ 17 million during the years ended December 31, 2022 and 2021, respectively, and no impairment charges were recorded during the year ended December 31, 2023.

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

LifeFuels Investment

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

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

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

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

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

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

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

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

Income before provision for income taxes was as follows:

4 unchanged sentences

Total $ 2,757 $ 1,719 $ 2,798

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The provision for income taxes has the following components:

10 unchanged sentences

Total provision for income taxes $ 576 $ 284 $ 653

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

15 unchanged sentences

Total provision for income taxes 20.9 % 16.5 % 23.3 %

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Deferred tax assets and liabilities were comprised of the following:

8 unchanged sentences

Equity method investments 27 48

Derivative instruments 25 —

Total deferred tax assets 618 614

4 unchanged sentences

Property, plant and equipment ( 334 ) ( 343 )

Derivative instruments ( 9 ) ( 18 )

Right of use assets ( 226 ) ( 222 )

Derivative instruments — ( 9 )

Other ( 16 ) ( 12 )

1 unchanged sentence

Net deferred tax liabilities $ ( 5,729 ) $ ( 5,704 )

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CARRYFORWARDS

As of December 31, 2022 and 2021, the Company had $ 36 million and $ 39 million, respectively, in tax-effected Luxembourg net operating loss carry forwards.

As of December 31, 2023 and 2022, the Company had $ 36 million in tax-effected net operating loss carryforwards.

Of the $ 36 million of net operating loss carryforwards as of December 31, 2023, $ 33 million will not expire and $ 3 million will begin to expire in the year 2034.

As of December 31, 2022, the Company has $ 34 million of U.S.

foreign tax credit carryforwards and $ 1 million of other carryforwards, primarily related to U.S.

state income tax.

Foreign tax credits will begin to expire in 2024.

As of December 31, 2023 and 2022, the Company has $ 10 million and $ 35 million of credit carryforwards, respectively.

As of December 31, 2023, the $ 10 million of state tax credit carryforwards will begin to expire in the year 2027.

UNDISTRIBUTED INTERNATIONAL EARNINGS

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federal purposes and in various state jurisdictions.

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

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

and most state income tax returns for years prior to 2018 are closed to examination by applicable tax authorities.

2 unchanged sentences

The tax holiday for Singapore is effective through June 2024.

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

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

5376) was signed into law in the United States.

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

The impact of the tax holiday increased net income by approximately $ 4 million, $ 6 million, and $ 6 million for the years ended December 31, 2023, 2022, and 2021, respectively, resulting in no impact to basic and diluted EPS for each of the years ended December 31, 2023, 2022, and 2021.

On August 16, 2022, the IRA was signed into law in the United States.

The IRA added new tax provisions allowing certain taxpayers to elect to transfer an eligible credit to an unrelated transferee taxpayer where the transferee taxpayer is then able to use the transferred tax credit against its own taxable income for taxable years after December 31, 2022.

During the year ended December 31, 2023, the Company executed agreements with eligible taxpayers to purchase federal tax credits of $ 270 million, which will be used against KDP’s federal tax liability.

The discounts negotiated for the transfer of eligible federal tax credits of $ 16 million were recorded as an income tax benefit on the Consolidated Statements of Income.

KEURIG DR PEPPER INC.

13 unchanged sentences

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

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

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

Restructuring and Integration Costs

DPS Integration Program

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 2022.

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

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

Year Ended December 31,

(in millions) 2022 2021 2020

DPS Integration program $ 172 $ 202 $ 200

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

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

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

(in millions) Workforce Reduction Costs

Balance as of December 31, 2020 $ 14

Charges to expense

Cash payments

Balance as of December 31, 2021 19

Charges to expense

Cash payments

Balance as of December 31, 2022 $ 55

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

KDP recognized $ 1 million expense related to interest and penalties for uncertain tax positions for the year ended December 31, 2023, and recognized benefit of $ 1 million for the year ended December 31, 2021.

No expense or benefit was recorded for the year ended December 31, 2022.

The Company had a total of $ 3 million and $ 2 million accrued for interest and penalties for its uncertain tax positions reported as part of other non-current liabilities as of both December 31, 2023 and 2022.

Accumulated Other Comprehensive Income (Loss)

8 unchanged sentences

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

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

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

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

1 unchanged sentence

Amounts reclassified from AOCI — 1 ( 57 ) ( 56 )

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

Net current period other comprehensive income (loss) 288 ( 4 ) ( 98 ) 186

Balance as of December 31, 2023 $ 202 ( 14 ) $ 127 $ 315

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

5 unchanged sentences

Cash flow hedges:

Interest rate contracts Interest expense $ ( 6 ) $ — $ —

Interest rate contracts (1)

Interest expense, net $ ( 74 ) $ ( 6 ) $ —

FX contracts Cost of sales — 5 18

Total ( 74 ) ( 1 ) 18

Income tax benefit — ( 5 ) —

Income tax expense (benefit) 17 — ( 5 )

Total, net of tax $ ( 57 ) $ ( 1 ) $ 13

(1) Amounts reclassified from AOCI into Interest expense, net during the year ended December 31, 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 5 for additional information on the terminated forward starting swaps.

Property, Plant, and Equipment

10 unchanged sentences

Property, plant, and equipment, net $ 2,699 $ 2,491

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

4 unchanged sentences

Total depreciation expense $ 402 $ 399 $ 410

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Other Financial Information

25 unchanged sentences

Total other non-current assets $ 1,149 $ 1,252

(1) Equity securities are comprised of assets held in a rabbi trust in connection with a non-qualified defined contribution plan, as well as our ownership interest in Vita Coco.

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

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

(1) Equity securities are comprised of assets held in a rabbi trust in connection with a non-qualified defined contribution plan and our ownership interest in Vita Coco.

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

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

The Company recorded unrealized mark-to-market gains of $ 16 million, losses of $ 4 million, and losses of $ 5 million for the years ended December 31, 2023, 2022, and 2021, respectively, on its investment in Vita Coco.

KEURIG DR PEPPER INC.

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Interest accrual 72 76

Accrued professional fees 7 19

Other accrued expenses 435 349

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

As of December 31, 2022 and 2021, the Company had litigation reserves of $ 12 million and $ 14 million, respectively, which includes the specific amounts disclosed below.

The Company had litigation reserves of $ 12 million as of both December 31, 2023 and 2022.

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.

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In February 2014, TreeHouse Foods, Inc.

and certain affiliated entities filed suit against KDP’s wholly-owned subsidiary, Keurig, in the U.S.

and certain affiliated entities filed suit against KDP’s wholly-owned subsidiary, Keurig (formerly known as Green Mountain Coffee Roasters, Inc.), in the U.S.

District Court for the Southern District of New York (“SDNY”) (TreeHouse Foods, Inc.

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The TreeHouse complaint sought treble monetary damages, declaratory relief, injunctive relief and attorneys’ fees.

In March 2014, JBR, Inc.

filed suit against Keurig in the U.S.

District Court for the Eastern District of California (JBR, Inc.

Keurig Green Mountain, Inc.).

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

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

In June 2014, these various actions, including the TreeHouse and JBR suits, were transferred to a single judicial district for coordinated pre-trial proceedings (the “Multidistrict Antitrust Litigation”).

A consolidated putative class action complaint by direct purchaser plaintiffs was filed in July 2014.

In January 2019, McLane Company, Inc.

filed suit against Keurig (McLane Company, Inc.

Keurig Green Mountain, Inc.) in the SDNY asserting similar claims and was also transferred into the Multidistrict Antitrust Litigation.

These actions are now pending in the SDNY (In re:

Keurig Green Mountain Single-Serve Coffee Antitrust Litigation).

Discovery in the Multidistrict Antitrust Litigation concluded in 2021, with plaintiffs collectively claiming more than $ 5 billion of monetary damages.

In the months that followed, a number of additional actions, including claims from another coffee manufacturer (JBR, Inc.), as well as putative class actions on behalf of direct and indirect purchasers of Keurig’s products, were filed in various federal district courts, asserting claims and seeking relief substantially similar to the claims asserted and relief sought in the TreeHouse complaint.

Additional similar actions were filed by individual direct purchasers (including McLane Company, Inc., BJ’s Wholesale Club, Inc., Winn-Dixie Stores Inc.

and Bi-Lo Holding LLC) in 2019 and in 2021.

All of these actions were transferred to the SDNY for coordinated pre-trial proceedings (In re:

Keurig Green Mountain Single-Serve Coffee Antitrust Litigation) (the “Multidistrict Antitrust Litigation”).

In July 2020, Keurig reached an agreement with one of the plaintiff groups in the Multidistrict Antitrust Litigation, the putative indirect purchaser class, to settle the claims asserted for $ 31 million.

The settlement class consisted 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 settlement was approved and paid, and the indirect purchasers’ claims have been dismissed.

Discovery in all remaining matters pending in the Multidistrict Antitrust Litigation is concluded, with the plaintiffs collectively claiming more than $ 5 billion of monetary damages.

Keurig strongly disputes the merits of the claims and the calculation of damages.

As a result, Keurig has fully briefed a summary judgment motion that, if successful, would end the cases entirely.

As a result, Keurig has fully briefed summary judgment motions that, if successful, would end the cases entirely.

Keurig has also fully briefed other significant motions, including challenges to the validity of plaintiffs’ damages calculations.

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

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

filed suit against Keurig (BJ’s Wholesale Club, Inc.

Keurig Green Mountain, Inc.) in the U.S.

District Court for the Eastern District of New York (“EDNY”) asserting similar claims and also was transferred into the Multidistrict Antitrust Litigation.

In August 2021, Winn-Dixie Stores, Inc.

and Bi-Lo Holding LLC filed suit against Keurig (Winn-Dixie Stores, Inc.

Keurig Green Mountain, Inc.

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

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

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

In July 2020, Keurig reached an agreement with the putative indirect purchaser class plaintiffs in the Multidistrict Antitrust Litigation to settle the claims asserted for $ 31 million.

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.

Separate from the U.S.

actions described above, a statement of claim was filed in September 2014 against Keurig and Keurig Canada Inc.

in Ontario, Canada, by Club Coffee L.P., a Canadian manufacturer of single serve beverage pods, asserting a breach of competition law and false and misleading statements by Keurig.

To date, this plaintiff has not taken substantive action to prosecute its claims.

KDP intends to vigorously defend the remaining lawsuits described above.

Certain of Keurig’s motions and opposition have been pending in the SDNY since 2021, with others pending since 2023.

Keurig intends to continue vigorously defending the remaining lawsuits.

At this time, the Company is unable to predict the outcome of these lawsuits, the potential loss or range of loss, if any, associated with the resolution of these lawsuits or any potential effect they may have on the Company or its operations.

Accordingly, the Company has not accrued for a loss contingency.

Additionally, as the timelines in these cases may be beyond our control, we cannot assure you if or when there will be material developments in these matters.

Additionally, as the timelines in these cases may be beyond the Company’s control, KDP can provide no assurance as to whether or when there will be material developments in these matters.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

PROPOSITION 65 LITIGATION

In May 2011, CERT filed a lawsuit in the Superior Court of the State of California, County of Los Angeles, (Council for Education and Research on Toxics v.

Brad Barry LLC, et al., Case No.

BC461182), alleging that Keurig, and certain other defendants who manufacture, package, distribute or sell coffee, failed to warn persons in California that Keurig's coffee products expose persons to the chemical acrylamide in violation of Proposition 65.

Keurig, as part of a joint defense group organized to defend against the lawsuit, disputed CERT's claims and asserted multiple affirmative defenses.

The case was scheduled to proceed to a third phase for trial on damages, remedies and attorneys' fees, but such trial did not occur in light of California’s Office of Environmental Health Hazard Assessment proposal of a new Proposition 65 regulation clarifying that cancer warnings are not required for chemicals, such as acrylamide, that are present in coffee as a result of roasting coffee beans.

After the regulation took effect in October 2019, the litigation continued based on, among other items, CERT’s contentions that the regulation is legally invalid and, alternatively, cannot be applied to its pending claims.

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

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

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

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

ENVIRONMENTAL, HEALTH, AND SAFETY MATTERS

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The federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, also known as the Superfund law, as well as similar state laws, generally impose joint and several liability for cleanup and enforcement costs on current and former owners and operators of a site without regard to fault or the legality of the original conduct.

The Company was notified by the Environmental Protection Agency that it is a potentially responsible party for study and cleanup costs at a Superfund site in New Jersey.

The Company was notified by the Environmental Protection Agency that it is a potentially responsible party for study and cleanup costs at a Superfund site in New Jersey and in Michigan.

Investigation and remediation costs are yet to be determined, therefore no reasonable estimate exists on which to base a loss accrual.

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TRANSACTIONS WITH VEYRON SPEs

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

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

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

Leasing Arrangements

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

As of December 31, 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 6 for additional information about the asset sale-leaseback transactions.

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(in millions) 2023 (1)

Current assets $ — $ 19

Non-current assets $ 412 $ 430

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Non-current liabilities 402 419

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

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

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

Licensing Arrangement

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Such fixed service fee payments began on January 1, 2021.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fixed service fees over the next five years are expected to be as follows:

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Fixed service fees $ 8 $ 8 $ 7 $ 8 $ 8

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

TRANSACTION WITH NUTRABOLT

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

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

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

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

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

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

Refer to Note 12 for the carrying value of the Company’s investment in Nutrabolt.

TRANSACTION WITH CHOBANI

The Company has an investment in common units of Chobani.

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 Chobani 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 Chobani as a VIE.

KDP is not the primary beneficiary of the VIE and therefore is not required to consolidate Chobani, 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 Chobani, and thus the Company’s maximum exposure and risk of loss related to Chobani is limited to the carrying value of KDP’s investment.

Refer to Note 12 for the carrying value of the Company’s investment in Chobani.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Restructuring and Integration Costs

RESTRUCTURING PROGRAMS

2023 CEO Succession and Associated Realignment

In 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 appointment of a Chief Operating Officer, effective November 6, 2023, with the expectation that the new Chief Operating Officer will succeed Robert Gamgort as CEO of the Company during the second quarter of 2024.

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

The program is expected to incur charges of approximately $ 52 million, primarily driven by severance costs, which are expected to be incurred through 2024, and the sign-on bonus for the Company’s new Chief Operating Officer.

DPS Integration Program

Restructuring and integration charges for the defined programs during the years ended December 31, 2023, 2022, and 2021 were as follows:

Year Ended December 31,

(in millions) 2023 2022 2021

2023 CEO Succession and Associated Realignment $ 35 $ — $ —

DPS Integration — 172 202

Total restructuring and integration charges $ 35 $ 172 $ 202

Restructuring liabilities, primarily consisting of workforce reduction costs, as of December 31, 2023 and 2022 were as follows:

(in millions) Restructuring Liabilities

Balance as of December 31, 2021 $ 19

Charges to expense 66

Cash payments ( 30 )

Balance as of December 31, 2022 55

Charges to expense 18

Cash payments ( 46 )

Balance as of December 31, 2023 $ 27

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Related Parties

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Refer to Note 12 for additional information about the Company's investments in unconsolidated affiliates.

RECEIPT AND PAYMENT TRANSACTIONS WITH RELATED PARTIES

OPERATING TRANSACTIONS WITH RELATED PARTIES

Trade accounts receivable, net from related parties were $ 34 million and $ 12 million as of December 31, 2023 and 2022, respectively, primarily related to product sales and royalty revenues.

Accounts payable to related parties were $ 21 million and $ 8 million as of December 31, 2023 and 2022, respectively, primarily related to purchases of finished goods inventory for distribution.

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

Revenues from and expenses associated with these related parties were as follows:

For the Year Ended December 31,

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Revenues from related parties $ 143 $ 127 $ 113

Payments to related parties 64 67 73

NOTE RECEIVABLE FROM BEDFORD

Expenses associated with related parties 1

(1) Expenses associated with related parties includes a reduction of $ 42 million related to earned equity for the achievement of certain milestones included in the Company’s distribution agreement with related parties, which were recognized as a reduction of cost of sales on the Consolidated Statements of Income for the year ended December 31, 2023.

OTHER TRANSACTIONS WITH RELATED PARTIES

Payments to Related Parties for Distribution Rights

The Company made payments to Nutrabolt totaling $ 52 million to acquire certain distribution rights during the year ended December 31, 2023.

Refer to Note 3 for additional information.

Notes Receivable from Related Parties

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

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data