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Item 1. Financial Statements

2024-04-25 compared with 2023-10-26 · 220 added, 483 removed, 512 unchanged (58% of the section changed)

3 unchanged sentences

( UNAUDITED )

Third Quarter First Nine Months

First Quarter

(in millions, except per share data) 2024 2023

3 unchanged sentences

Selling, general and administrative expenses 1,176 1,165

Impairment of intangible assets 2 311 2 311

Gain on litigation settlement — — — ( 299 )

Other operating income, net ( 1 ) ( 5 )

Income from operations 765 584

Interest expense 237 207 432 570

Loss on early extinguishment of debt — — — 217

Gain on sale of equity method investment — — — ( 50 )

Impairment of investments and note receivable — — — 12

Other (income) expense, net ( 5 ) 4 ( 41 ) 22

Interest expense, net 178 23

Other income, net ( 7 ) ( 20 )

Income before provision for income taxes 594 581

Provision for income taxes 140 114

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

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

Net income attributable to KDP $ 518 $ 180 $ 1,488 $ 983

Net income $ 454 $ 467

Earnings per common share:

8 unchanged sentences

( UNAUDITED )

Third Quarter First Nine Months

First Quarter

(in millions) 2024 2023

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

Net income $ 454 $ 467

Other comprehensive (loss) income:

Foreign currency translation adjustments ( 56 ) 108

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

Net change in cash flow hedges, net of tax of $ 0 and $ 21 , respectively

9 35 ( 90 ) 303

Total other comprehensive (loss) income ( 58 ) 26

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

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

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

Comprehensive income $ 396 $ 493

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

2 unchanged sentences

( UNAUDITED )

September 30, December 31,

March 31, December 31,

(in millions, except share and per share data) 2024 2023

27 unchanged sentences

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

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

Common stock, $ 0.01 par value, 2,000,000,000 shares authorized, 1,355,571,438 and 1,390,446,043 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively

Additional paid-in capital 19,661 20,788

2 unchanged sentences

Total stockholders' equity 24,653 25,676

Non-controlling interest — ( 1 )

Total equity 25,364 25,125

Total liabilities and equity $ 51,763 $ 51,837

Total liabilities and stockholders’ equity $ 52,286 $ 52,130

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

2 unchanged sentences

( UNAUDITED )

First Nine Months

First Quarter

(in millions) 2024 2023

Operating activities:

Net income attributable to KDP $ 1,488 $ 983

Net income $ 454 $ 467

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

5 unchanged sentences

Employee stock-based compensation expense 28 29

Loss on early extinguishment of debt — 217

Gain on sale of equity method investment — ( 50 )

Gain on disposal of property, plant and equipment ( 3 ) ( 38 )

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

Unrealized loss on derivatives 44 387

Settlements of interest rate contracts 54 125

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

Impairment of intangible assets 2 311

Impairment on investments and note receivable of unconsolidated affiliate — 12

Loss (gain) on disposal of property, plant and equipment 1 ( 5 )

Unrealized loss (gain) on foreign currency 8 ( 2 )

Unrealized loss (gain) on derivatives 10 ( 95 )

Equity in earnings of unconsolidated affiliates ( 7 ) ( 9 )

Earned equity ( 45 ) ( 2 )

Other, net 3 ( 2 )

9 unchanged sentences

Investing activities:

Proceeds from sale of investment in unconsolidated affiliates — 50

Purchases of property, plant and equipment ( 158 ) ( 62 )

1 unchanged sentence

Purchases of intangibles ( 31 ) ( 51 )

Issuance of related party note receivable — ( 18 )

Investments in unconsolidated affiliates ( 6 ) —

Other, net 2 1

Net cash (used in) provided by investing activities $ ( 623 ) $ ( 213 )

Net cash used in investing activities $ ( 193 ) $ ( 105 )

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

2 unchanged sentences

( UNAUDITED, CONTINUED)

First Nine Months

First Quarter

(in millions) 2024 2023

2 unchanged sentences

Repayments of Notes

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

Net (repayment) issuance of commercial paper ( 188 ) 265

Proceeds from structured payables 23 34

5 unchanged sentences

Other, net ( 21 ) ( 3 )

Net cash used in financing activities ( 697 ) ( 1,515 )

Cash, cash equivalents, and restricted cash and cash equivalents:

Net cash provided by (used in) financing activities 158 ( 303 )

Cash and cash equivalents:

Net change from operating, investing and financing activities 50 ( 337 )

4 unchanged sentences

Capital expenditures included in accounts payable and accrued expenses $ 189 $ 222

Earned equity 45 2

Transaction costs included in accounts payable and accrued expenses 1 8

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

Non-cash purchases of intangibles — 22

Supplemental cash flow disclosures of non-cash financing activities:

Dividends declared but not yet paid 292 282

Accrued excise tax on net share repurchases 14 1

Supplemental cash flow disclosures:

6 unchanged sentences

Common Stock Issued Additional

Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income Total Stockholders' Equity Non-controlling Interest Total

Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income Total Stockholders' Equity

(in millions, except per share data) Shares Amount

10 unchanged sentences

1,355.6 $ 14 $ 19,661 $ 4,721 $ 257 $ 24,653

Net income — — — 503 — 503 — 503

Other comprehensive income — — — — 142 142 — 142

Dividends declared, $ 0.20 per share

— — — ( 279 ) — ( 279 ) — ( 279 )

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

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

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

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

Balance as of June 30, 2023

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

Net income — — — 518 — 518 — 518

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

Dividends declared, $ 0.215 per share

— — — ( 300 ) — ( 300 ) — ( 300 )

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

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

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

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

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

Balance as of September 30, 2023

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

Common Stock Issued Additional

7 unchanged sentences

— — — ( 282 ) — ( 282 ) — ( 282 )

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

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

3 unchanged sentences

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

Net income — — — 218 — 218 — 218

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

Dividends declared, $ 0.1875 per share

— — — ( 265 ) — ( 265 ) — ( 265 )

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

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

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

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

Balance as of June 30, 2022

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

Net income — — — 180 — 180 ( 1 ) 179

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

Dividends declared, $ 0.20 per share

— — — ( 284 ) — ( 284 ) — ( 284 )

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

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

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

Balance as of September 30, 2022

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

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

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

and all entities included in the unaudited condensed consolidated financial statements.

References in this Quarterly Report on Form 10-Q to "KDP", "the Company", "we", or "our", refer to Keurig Dr Pepper Inc.

and all wholly-owned subsidiaries included in the unaudited condensed consolidated financial statements.

Definitions of terms used in this Quarterly Report on Form 10-Q are included within the Master Glossary.

This Quarterly Report on Form 10-Q refers to some of KDP's owned or licensed trademarks, trade names and service marks, which are referred to as the Company's brands.

All of the product names included herein are either KDP registered trademarks or those of the Company's licensors.

This Quarterly Report on Form 10-Q refers to some of our owned or licensed trademarks, trade names and service marks, which are referred to as our brands.

All of the product names included herein are either KDP registered trademarks or those of our licensors.

BASIS OF PRESENTATION

4 unchanged sentences

In the opinion of management, all adjustments, consisting principally of normal recurring adjustments, considered necessary for a fair presentation have been included.

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

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

These unaudited condensed consolidated financial statements should be read in conjunction with our consolidated financial statements and accompanying notes included in our Annual Report.

References to the "first quarter" indicate the quarterly periods ended March 31, 2024 and 2023.

USE OF ESTIMATES

The process of preparing KDP's unaudited condensed consolidated financial statements in conformity with U.S.

The process of preparing our unaudited condensed consolidated financial statements in conformity with U.S.

GAAP requires the use of estimates and judgments that affect reported amounts.

These estimates and judgments are based on historical experience, future expectations and other factors and assumptions the Company believes to be reasonable under the circumstances.

These estimates and judgments are based on historical experience, future expectations and other factors and assumptions we believe to be reasonable under the circumstances.

These estimates and judgments are reviewed on an ongoing basis and are revised when necessary.

1 unchanged sentence

Actual amounts may differ from these estimates .

REPORTABLE SEGMENTS

As of January 1, 2023, the Company revised its segment structure to align with changes in how the Company’s Chief Operating Decision Maker 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 6 for additional information on the Company’s reportable segments and Note 7 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.

RECLASSIFICATIONS

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

(in millions) Prior Presentation First Nine Months of 2022

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

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

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, CONTINUED)

RECENTLY ADOPTED ACCOUNTING STANDARDS

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.

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

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

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

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

We reclassified amounts in the Financing Activities section of the unaudited condensed consolidated Statement of Cash Flows for the first quarter of 2023 in order to conform to current year presentation, as maturities for the Company’s commercial paper program in both periods are 90 days or less.

(in millions) Prior Presentation First Quarter of 2023

Net (repayment) issuance of commercial paper Proceeds from issuance of commercial paper $ 3,523

Net (repayment) issuance of commercial paper Repayments of commercial paper ( 3,258 )

Long-term Obligations and Borrowing Arrangements

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

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

The following table summarizes our long-term obligations:

(in millions) March 31, 2024 December 31, 2023

$ 12,929 $ 11,095

1 unchanged sentence

Long-term obligations $ 12,929 $ 9,945

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

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

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, CONTINUED)

The following table summarizes our short-term borrowings and current portion of long-term obligations:

(in millions) March 31, 2024 December 31, 2023

Commercial paper notes $ 1,908 $ 2,096

2 unchanged sentences

SENIOR UNSECURED NOTES

The Company's Notes consisted of the following:

(in millions, except %)

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

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

Our Notes consisted of the following:

(in millions, except %) Maturity Date Rate March 31, 2024 December 31, 2023

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

2 unchanged sentences

2026 Notes September 15, 2026 2.550 % 400 400

2027-B Notes March 15, 2027 Floating (2)

2027-C Notes March 15, 2027 5.100 % 750 —

2027 Notes June 15, 2027 3.430 % 500 500

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

2029-B Notes March 15, 2029 5.050 % 750 —

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

1 unchanged sentence

2031 Notes March 15, 2031 2.250 % 500 500

2031-B Notes March 15, 2031 5.200 % 500 —

2032 Notes April 15, 2032 4.050 % 850 850

2034 Notes March 15, 2034 5.300 % 650 —

2038 Merger Notes May 25, 2038 4.985 % 211 211

10 unchanged sentences

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

(2) The 2027-B Notes bear interest at a rate equal to Compounded SOFR (as defined in the respective indenture) plus 0.88 % per annum, and the rate is reassessed quarterly.

On March 7, 2024, we completed the issuance of the 2027-B Notes, the 2027-C Notes, the 2029-B Notes, the 2031-B Notes, and the 2034 Notes, with an aggregate principal amount of $ 3 billion.

The discount associated with these notes was approximately $ 5 million, and the Company incurred $ 16 million in debt issuance costs.

The proceeds from the issuance were used for our share repurchase program, to repay outstanding commercial paper, and to repay the 2024 Notes at maturity, with the remainder intended for general corporate purposes.

KEURIG DR PEPPER INC.

4 unchanged sentences

The following table summarizes information about the Revolving Credit Agreement:

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

Issuance Maturity Date Capacity Carrying Value Carrying Value

Amounts Outstanding

(in millions) Maturity Date Capacity March 31, 2024 December 31, 2023

Revolving Credit Agreement (1)

February 23, 2027 $ 4,000 $ — $ —

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

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

(1) The Revolving Credit Agreement has $ 200 million letters of credit available, none of which were utilized as of March 31, 2024.

As of March 31, 2024, KDP was in compliance with its minimum interest coverage ratio relating to the Revolving Credit Agreement .

Commercial Paper Program

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

Third Quarter First Nine Months

The following table provides information about our weighted average borrowings under our commercial paper program:

First Quarter

(in millions, except %) 2024 2023

3 unchanged sentences

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

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

Under this facility, $ 150 million is available for the issuance of letters of credit, $ 57 million of which was utilized as of March 31, 2024 and $ 93 million of which remains available for use.

FAIR VALUE DISCLOSURES

The fair value of KDP's commercial paper approximates the carrying value and are considered Level 2 within the fair value hierarchy.

The fair values of KDP's Notes are based on current market rates available to KDP and are considered Level 2 within the fair value hierarchy.

The fair value of our commercial paper approximates the carrying value and is considered Level 2 within the fair value hierarchy.

The fair values of our Notes are based on current market rates available to us and are considered Level 2 within the fair value hierarchy.

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

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

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, CONTINUED)

The fair value of our Notes was $ 12,085 million and $ 10,486 million as of March 31, 2024 and December 31, 2023, respectively.

Goodwill and Other Intangible Assets

5 unchanged sentences

Foreign currency translation — — ( 39 ) ( 39 )

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

Balance as of March 31, 2024 $ 8,714 $ 8,622 $ 2,827 $ 20,163

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, CONTINUED)

INTANGIBLE ASSETS OTHER THAN GOODWILL

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

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

(in millions) March 31, 2024 December 31, 2023

$ 19,443 $ 19,476

Trade names 2,478 2,478

Contractual arrangements 122 122

Distribution rights (2)

Total $ 22,107 $ 22,109

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

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

(1) The change in brands with indefinite lives was primarily driven by foreign currency translation of $ 33 million during the first quarter of 2024.

(2) The change in distribution rights with indefinite lives was primarily driven by acquired distribution rights related to Electrolit of $ 31 million.

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

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

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

1 unchanged sentence

Customer relationships 638 ( 245 ) 393 638 ( 236 ) 402

Contractual arrangements 146 ( 15 ) 131 146 ( 13 ) 133

Trade names 126 ( 116 ) 10 126 ( 114 ) 12

Brands 51 ( 27 ) 24 51 ( 25 ) 26

Contractual arrangements 24 ( 11 ) 13 24 ( 10 ) 14

Distribution rights 29 ( 22 ) 7 29 ( 22 ) 7

1 unchanged sentence

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

Third Quarter First Nine Months

First Quarter

(in millions) 2024 2023

Amortization expense $ 33 $ 34

Amortization expense of these intangible assets over the remainder of 2023 and the next five years is expected to be as follows:

Remainder of 2023 For the Years Ending December 31,

(in millions) 2024 2025 2026 2027 2028

Expected amortization expense $ 33 $ 127 $ 115 $ 111 $ 95 $ 87

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, CONTINUED)

IMPAIRMENT TESTING

KDP conducts impairment tests on goodwill and all indefinite lived intangible assets annually, or more frequently if circumstances indicate that the carrying amount of an asset may not be recoverable.

Changes to the Company’s operating segments effective January 1, 2023, as described in Note 6, resulted in a change to the Company’s reporting units.

The Company’s reporting units are as follows:

Reportable Segments Reporting Units

Refreshment Beverages U.S.

Beverage Concentrates

International Canada Beverage Concentrates

Canada Coffee

Latin America Beverages

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

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

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

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

1 unchanged sentence

KDP does not hold or issue derivative financial instruments for trading or speculative purposes.

KDP formally designates and accounts for certain foreign exchange forward contracts and interest rate contracts that meet established accounting criteria under U.S.

We formally designate and account for certain foreign exchange forward contracts and interest rate contracts that meet established accounting criteria under U.S.

GAAP as cash flow hedges.

5 unchanged sentences

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.

The Company has exposure to credit losses from derivative instruments in an asset position in the event of nonperformance by the counterparties to the agreements.

Historically, the Company has not experienced material credit losses as a result of counterparty nonperformance.

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.

1 unchanged sentence

(UNAUDITED, CONTINUED)

We have exposure to credit losses from derivative instruments in an asset position in the event of nonperformance by the counterparties to the agreements.

Historically, we have not experienced material credit losses as a result of counterparty nonperformance.

We select and periodically review counterparties based on credit ratings, limit our exposure to a single counterparty under defined guidelines, and monitor the market position of the programs upon execution of a hedging transaction and at least on a quarterly basis.

INTEREST RATES

Economic Hedges

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

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

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

We are exposed to interest rate risk related to our borrowing arrangements and obligations.

We enter into interest rate contracts to provide predictability in our overall cost structure and to manage the balance of fixed-rate and variable-rate debt.

We primarily enter into receive-fixed, pay-variable and receive-variable, pay-fixed swaps and swaption contracts.

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 generally reported in interest expense in the unaudited Condensed Consolidated Statements of Income.

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

As of March 31, 2024, economic interest rate derivative instruments have maturities ranging from April 2024 to July 2043.

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.

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 during the first quarter of 2023.

As of December 31, 2023, we had $ 500 million of notional amount of forward starting swaps which had been de-designated and terminated;

however, as the forecasted debt transaction was still considered probable, the fair value of the instruments as of the de-designation remained within AOCI.

In March 2024, the forecasted debt transaction took place with the issuance of the 2034 Notes, and the fair value of the instruments began amortizing to Interest expense, net over the term of the 2034 Notes.

FOREIGN EXCHANGE

KDP is exposed to foreign exchange risk in its international subsidiaries or with certain counterparties in foreign jurisdictions, which may transact in currencies that are different from the functional currencies of KDP’s legal entities.

Additionally, the balance sheets of each of the Company’s Canadian and Mexican businesses are subject to exposure from movements in exchange rates.

We are exposed to foreign exchange risk in our international subsidiaries or with certain counterparties in foreign jurisdictions, which may transact in currencies that are different from the functional currencies of our legal entities.

Additionally, the balance sheets of our Canadian and Mexican businesses are subject to exposure from movements in exchange rates.

Economic Hedges

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

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

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

1 unchanged sentence

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

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

As of March 31, 2024, these FX contracts have maturities ranging from April 2024 to February 2025.

Cash Flow Hedges

KDP designates certain FX forward contracts as cash flow hedges in order to manage the exposures resulting from changes in the FX rates described above.

We designate 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 forecasted inventory purchases in U.S.

dollars of the Canadian and Mexican businesses.

dollars of our Canadian and Mexican businesses.

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

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

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 unaudited Condensed 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 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 September 30, 2023, these commodity contracts have maturities ranging from October 2023 to June 2025.

As of March 31, 2024, these FX contracts have maturities ranging from April 2024 to June 2025.

KEURIG DR PEPPER INC.

1 unchanged sentence

(UNAUDITED, CONTINUED)

Economic Hedges

We centrally manage the exposure to volatility in the prices of certain commodities used in our production process and transportation through various derivative contracts.

We generally hold some combination of future, swap and option contracts that economically hedge certain of our risks.

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

As of March 31, 2024, these commodity contracts have maturities ranging from April 2024 to January 2026.

NOTIONAL AMOUNTS OF DERIVATIVE INSTRUMENTS

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

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

The following table presents the notional amounts of our outstanding derivative instruments by type:

(in millions) March 31, 2024 December 31, 2023

Interest rate contracts

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

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 1,350 3,200

6 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 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 our contracts and credit risk of the counterparties.

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

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

Therefore, we have categorized these contracts as Level 2.

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, CONTINUED)

Not Designated as Hedging Instruments

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 unaudited Condensed Consolidated Balance Sheets.

The following table summarizes the location of the fair value of our derivative instruments which are not designated as hedging instruments within the unaudited Condensed Consolidated Balance Sheets.

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

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

(in millions) Balance Sheet Location March 31, 2024 December 31, 2023

FX contracts Prepaid expenses and other current assets $ 4 $ 5

Commodity contracts Prepaid expenses and other current assets 16 9

Interest rate contracts Other non-current assets — 49

FX contracts Other non-current assets 2 —

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Interest rate contracts Other non-current liabilities 298 186

FX contracts Other non-current liabilities — 4

Commodity contracts Other non-current liabilities 2 11

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, CONTINUED)

Designated as Hedging Instruments

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

The following table summarizes the location of the fair value of our derivative instruments which are designated as hedging instruments within the unaudited Condensed Consolidated Balance Sheets.

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

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

(in millions) Balance Sheet Location March 31, 2024 December 31, 2023

FX contracts Prepaid expenses and other current assets $ 2 $ 1

FX contracts Other non-current assets — 1

Interest rate contracts Other non-current assets — 88

FX contracts Other current liabilities 13 14

FX contracts Other non-current liabilities 1 —

IMPACT OF DERIVATIVE INSTRUMENTS NOT DESIGNATED AS HEDGING INSTRUMENTS

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Amounts include both realized and unrealized gains and losses.

Third Quarter First Nine Months

First Quarter

(in millions) Income Statement Location 2024 2023

Interest rate contracts Interest expense $ 104 $ 96 $ 49 $ 219

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

Interest rate contracts Interest expense, net $ 26 $ ( 96 )

FX contracts Cost of sales ( 1 ) 1

FX contracts Other (income) expense, net ( 6 ) ( 10 ) ( 1 ) ( 9 )

FX contracts Other income, net ( 6 ) —

Commodity contracts Cost of sales 15 ( 15 )

Commodity contracts SG&A expenses ( 12 ) 14

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, CONTINUED)

IMPACT OF CASH FLOW HEDGES

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

Third Quarter First Nine Months

First Quarter

(in millions) Income Statement Location 2024 2023

Interest rate contracts (1)

Interest expense $ ( 2 ) $ ( 2 ) $ ( 72 ) $ ( 4 )

Interest rate contracts Interest expense, net $ ( 2 ) $ ( 68 )

FX contracts Cost of sales — ( 1 )

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

KDP expects to reclassify approximately $ 8 million and $ 1 million of pre-tax net gains from AOCI into net income during the next twelve months related to interest rate contracts and FX contracts, respectively.

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, CONTINUED)

We expect to reclassify approximately $ 13 million of pre-tax net gains and $ 10 million of pre-tax net losses from AOCI into net income during the next twelve months related to interest rate contracts and FX contracts, respectively.

The following table presents the components of lease cost:

Third Quarter First Nine Months

First Quarter

(in millions) 2024 2023

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Short-term lease cost 1 —

Sublease income — ( 1 ) — ( 1 )

Total lease cost $ 90 $ 77

(1) Variable lease cost primarily consists of common area maintenance costs, property taxes, and adjustments for inflation.

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

First Nine Months

The following table presents supplemental cash flow and other information about our leases:

First Quarter

(in millions) 2024 2023

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Finance leases 26 17

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

September 30, 2023 December 31, 2022

The following table presents information about our weighted average discount rate and remaining lease term:

March 31, 2024 December 31, 2023

Weighted average discount rate

4 unchanged sentences

Finance leases 9 years 9 years

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

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, CONTINUED)

Future minimum lease payments for non-cancellable leases that have commenced and are reflected on the unaudited Condensed Consolidated Balance Sheets as of March 31, 2024 were as follows:

(in millions) Operating Leases Finance Leases

4 unchanged sentences

Present value of minimum lease payments $ 892 $ 721

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, CONTINUED)

SIGNIFICANT LEASES THAT HAVE NOT YET COMMENCED

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

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

ASSET SALE-LEASEBACK TRANSACTION

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

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.

(in millions) Sale Proceeds Carrying Value Gain on Sale

March 31, 2023 (1)

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

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

The renewal options are not reasonably assured as (i) the Company's position that the dynamic environment in which it operates precludes the Company's ability to be reasonably certain of exercising the renewal options in the distant future and (ii) the options are contingent on the Company remaining investment grade and no change-in-control as of the end of the lease term.

The leaseback has a RVG.

Refer to Note 15 for additional information about the RVG associated with the asset sale-leaseback transaction.

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

The Company's reportable segments consist of the following:

As of March 31, 2024, we have entered into leases that have not yet commenced with estimated aggregated future lease payments of approximately $ 197 million.

These leases are expected to commence between the third quarter of 2024 through 2027, with initial lease terms ranging from 5 years to 10 years.

Our 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.

from the manufacture and distribution of branded concentrates, syrup and finished beverages, including the sales of our 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.

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

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

Segment results are based on management reports.

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

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

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

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

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

KEURIG DR PEPPER INC.

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(UNAUDITED, CONTINUED)

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

Third Quarter First Nine Months

Information about our operations by reportable segment is as follows:

First Quarter

(in millions) 2024 2023

10 unchanged sentences

Income from operations $ 765 $ 584

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

Identifiable operating assets

Refreshment Beverages $ 28,688 $ 28,987

Coffee 14,103 14,220

International 6,961 6,873

Segment total 49,752 50,080

Unallocated corporate assets 675 757

Total identifiable operating assets 50,427 50,837

Investments in unconsolidated affiliates 1,336 1,000

Total assets $ 51,763 $ 51,837

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, CONTINUED)

Revenue Recognition

KDP recognizes revenue when obligations under the terms of a contract with the customer are satisfied.

We recognize revenue when obligations under the terms of a contract with the customer are satisfied.

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

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

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

Revenue is measured as the amount of consideration that we expect to receive in exchange for transferring goods.

The amount of consideration we receive, and revenue we recognize, varies with changes in customer incentives that we offer our customers and end consumers.

Sales taxes and other similar taxes are excluded from revenue.

Costs associated with shipping and handling activities, such as merchandising, are included in SG&A expenses as revenue is recognized.

The following table disaggregates KDP's revenue by product portfolio and by reportable segment:

The following table disaggregates our revenue by product portfolio and by reportable segment:

(in millions) U.S.

1 unchanged sentence

Coffee International Total

For the third quarter of 2023:

$ 2,232 $ — $ 348 $ 2,580

K-Cup pods — 769 120 889

Appliances — 211 20 231

Other 38 32 35 105

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

For the third quarter of 2022:

$ 2,107 $ — $ 268 $ 2,375

K-Cup pods — 808 105 913

Appliances — 204 21 225

Other 37 33 39 109

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

For the first nine months of 2023:

For the first quarter of 2024:

$ 2,062 $ 4 $ 299 $ 2,365

3 unchanged sentences

Net sales $ 2,093 $ 911 $ 464 $ 3,468

For the first nine months of 2022:

For the first quarter of 2023:

$ 1,970 $ — $ 253 $ 2,223

3 unchanged sentences

Net sales $ 2,007 $ 931 $ 415 $ 3,353

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

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

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

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

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

3 unchanged sentences

Earnings Per Share

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

Third Quarter First Nine Months

The following table presents basic and diluted EPS and shares outstanding.

First Quarter

(in millions, except per share data) 2024 2023

Net income attributable to KDP $ 518 $ 180 $ 1,488 $ 983

Net income $ 454 $ 467

Weighted average common shares outstanding 1,380.7 1,406.2

6 unchanged sentences

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

Third Quarter First Nine Months

First Quarter

(in millions) 2024 2023

Total stock-based compensation expense $ 28 $ 29

$ 29 $ 31 $ 86 $ 43

Income tax benefit ( 4 ) ( 5 )

Stock-based compensation expense, net of tax $ 24 $ 24

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

RESTRICTED SHARE UNITS

6 unchanged sentences

Forfeited ( 134,802 ) 31.50

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

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

Outstanding as of March 31, 2024 15,041,763 $ 29.48 2.4 $ 461

As of March 31, 2024, there was $ 233 million of unrecognized compensation cost related to unvested RSUs that is expected to be recognized over a weighted average period of 3.5 years.

KEURIG DR PEPPER INC.

1 unchanged sentence

(UNAUDITED, CONTINUED)

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

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

The following table summarizes our investments in unconsolidated affiliates:

March 31, December 31,

(in millions) 2024 2023

Nutrabolt (1)

$ 1,014 $ 960

La Colombe 33.3 % 307 —

Chobani 307 307

Tractor 42 44

Athletic Brewing 50 50

Dyla LLC 12.5 % 13 12

Force Holdings LLC (2)

Beverage startup companies 5 5

(various) 5 5

Other (various) 5 5

Investments in unconsolidated affiliates $ 1,438 $ 1,387

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

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

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

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

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

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

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

The Company’s effective tax rates were as follows:

Third Quarter First Nine Months

2023 2022 2023 2022

(1) We hold a 33.6 % interest on an as-converted basis in Nutrabolt, consisting of 30.8 % in Class A preferred shares acquired through our December 2022 investment, which are treated as in-substance common stock, and 2.8 % in Class B common shares earned through the achievement of certain milestones included in our distribution agreement with Nutrabolt.

Our effective tax rates were as follows:

First Quarter

Effective tax rate 23.6 % 19.6 %

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

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

Third Quarter First Nine Months

2023 2022 2023 2022

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

State income taxes, net 3.0 % 1.7 % 3.0 % 3.3 %

Impact of non-U.S.

operations (1)(2)

( 0.7 ) % ( 5.9 ) % ( 3.3 ) % ( 1.7 ) %

Tax credits (2)

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

taxation of foreign earnings (2)

2.3 % 11.2 % 2.5 % 3.1 %

Deferred rate change (3)

( 0.4 ) % ( 18.5 ) % — % ( 7.8 ) %

Uncertain tax positions 0.2 % 0.4 % 0.1 % 0.1 %

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

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

Other 0.5 % 4.0 % 0.5 % 0.7 %

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

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

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

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

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, CONTINUED)

The change in the effective tax rate was largely driven by a shift in the mix of income from lower tax jurisdictions to higher tax jurisdictions and the unfavorable comparison to the prior year tax benefit received from favorable adjustments upon foreign tax return filing.

Accumulated Other Comprehensive Income

1 unchanged sentence

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

For the third quarter of 2023:

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

Other comprehensive (loss) income ( 135 ) — 7 ( 128 )

Amounts reclassified from AOCI — — 2 2

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

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

For the third quarter of 2022:

For the first quarter of 2024:

Beginning balance $ 202 $ ( 14 ) $ 127 $ 315

Other comprehensive (loss) income ( 249 ) — 36 ( 213 )

Other comprehensive loss ( 56 ) — — ( 56 )

Amounts reclassified from AOCI — — ( 2 ) ( 2 )

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

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

For the first nine months of 2023:

Total other comprehensive loss ( 56 ) — ( 2 ) ( 58 )

Balance as of March 31, 2024 $ 146 $ ( 14 ) $ 125 $ 257

For the first quarter of 2023:

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

2 unchanged sentences

Total other comprehensive income (loss) 108 — ( 82 ) 26

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

For the first nine months of 2022:

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

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

Amounts reclassified from AOCI — — 1 1

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

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

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

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, CONTINUED)

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

Third Quarter First Nine Months

First Quarter

(in millions) Income Statement Caption 2024 2023

2 unchanged sentences

Interest expense $ ( 2 ) $ ( 68 )

FX contracts Cost of sales 4 — ( 1 ) 5

Total 2 ( 2 ) ( 73 ) 1

Income tax expense — 16

Total, net of tax $ ( 2 ) $ ( 52 )

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

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

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, CONTINUED)

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

Other Financial Information

1 unchanged sentence

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

September 30, December 31,

March 31, December 31,

(in millions) 2024 2023

19 unchanged sentences

Equity securities (1)

Equity securities without readily determinable fair values — 1

Other 156 156

1 unchanged sentence

(1) Fair values of these equity securities are determined using quoted market prices from daily exchange traded markets, based on the closing price as of the balance sheet date, and are classified as Level 1.

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

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

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

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

For the first quarter of 2024 and 2023, we recorded unrealized mark-to-market losses of $ 2 million and gains of $ 8 million, respectively, on our investment in Vita Coco .

KEURIG DR PEPPER INC.

1 unchanged sentence

(UNAUDITED, CONTINUED)

September 30, December 31,

March 31, December 31,

(in millions) 2024 2023

4 unchanged sentences

Accrued interest 160 72

Accrued professional fees 6 7

Other accrued expenses 491 435

16 unchanged sentences

ACCOUNTS PAYABLE

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

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

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

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

The amount of the outstanding obligations confirmed as valid included in accounts payable as of September 30, 2023 and December 31, 2022 was $ 2,794 million and $ 4,113 million, respectively.

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

Suppliers can sell one or more of our payment obligations, at their sole discretion, and our rights and obligations to our suppliers, including amounts due and scheduled payment terms, are not impacted.

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

Outstanding obligations confirmed as valid included in accounts payable as of March 31, 2024 and December 31, 2023 were $ 1,999 million and $ 2,389 million, respectively.

KEURIG DR PEPPER INC.

4 unchanged sentences

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

As of September 30, 2023 and December 31, 2022, the Company had litigation reserves of $ 10 million and $ 12 million, respectively.

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

The Company does not believe that the outcome of these, or any other, pending legal matters, individually or collectively, will have a material adverse effect on the results of operations, financial condition or liquidity of KDP.

We had litigation reserves of $ 8 million and $ 12 million, respectively, as of March 31, 2024 and December 31, 2023.

We have 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.

We do not believe that the outcome of these, or any other, pending legal matters, individually or collectively, will have a material adverse effect on our results of operations, financial condition, or liquidity.

ANTITRUST LITIGATION

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.

2 unchanged sentences

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.

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

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.

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

These motions remain pending in the SDNY.

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

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

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

Separate from the U.S.

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.

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.

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, CONTINUED)

Transactions with Variable Interest Entities

TRANSACTIONS WITH VEYRON SPEs

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

The Veyron SPEs are VIEs for which KDP is not the primary beneficiary, 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 September 30, 2023, the Company has entered into sixteen lease transactions with the Veyron SPEs, fifteen of which were associated with asset sale-leaseback transactions.

Refer to Note 5 for additional information about the asset sale-leaseback transaction during the first nine months of 2023.

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

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

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

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

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

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

(in millions) September 30, 2023 (1)

December 31, 2022 (2)

Non-current assets $ 418 $ 430

Current liabilities 23 22

Non-current liabilities 408 419

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

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

Licensing Arrangement

ABC, a wholly-owned subsidiary of KDP, has provided a guarantee in connection with its distribution agreement with the Veyron SPEs to be paid only in the event the Veyron SPEs sell specific distribution rights and the value of those distribution rights does not exceed $ 142 million, which is the maximum undiscounted amount that KDP could pay under the guarantee.

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

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

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

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

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

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

Remainder of 2023 For the Years Ending December 31,

(in millions) 2024 2025 2026 2027 2028

Fixed service fees $ 1 $ 8 $ 8 $ 7 $ 8 $ 8

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, we are 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 us or our results of operations.

Accordingly, we have not accrued for a loss contingency.

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

KEURIG DR PEPPER INC.

1 unchanged sentence

(UNAUDITED, CONTINUED)

TRANSACTION WITH NUTRABOLT

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

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

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

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

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

TRANSACTION WITH LA COLOMBE

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

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

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

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

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

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

Restructuring

RESTRUCTURING PROGRAMS

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

2023 CEO Succession and Associated Realignment

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

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

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

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

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

DPS Integration Program

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

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

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

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, CONTINUED)

In 2023, we 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 Tim Cofer as Chief Operating Officer, effective November 6, 2023, with the expectation that Mr.

Cofer will succeed Robert Gamgort as our CEO during the second quarter of 2024.

We are also realigning our executive and operating leadership structure to enable faster decision making and to better support various strategic initiatives.

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 Mr.

Cofer as our new Chief Operating Officer.

2024 Network Optimization

In March 2024, we announced the closure of our manufacturing facility in Williston, Vermont, with operations and employees to be relocated to other existing manufacturing locations, in order to more effectively and efficiently meet the needs of consumers and customers.

The relocation is expected to take place during the second and third quarters of 2024, and the restructuring program is expected to incur pre-tax restructuring charges in an estimated range of $ 30 million to $ 40 million , primarily comprised of asset related costs.

RESTRUCTURING CHARGES

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

Third Quarter First Nine Months

First Quarter

(in millions) 2024 2023

2023 CEO Succession and Associated Realignment $ 2 $ —

DPS Integration Program — 33 — 91

2024 Network Optimization 2 —

RESTRUCTURING LIABILITIES

4 unchanged sentences

Balance as of January 1, 2024 $ 27

Charges to expense

Charges (credits) to expense ( 3 )

Cash payments ( 3 )

Balance as of September 30, 2023 $ 31

Subsequent Events

STRATEGIC PARTNERSHIP WITH GRUPO PISA

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

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

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

Balance as of March 31, 2024 $ 21

Transactions with Related Parties

REPURCHASE OF KDP COMMON STOCK

In March 2024, JAB BevCo B.V., a subsidiary of JAB, sold 100 million shares of KDP’s common stock through an underwritten secondary offering.

In connection with this offering, we repurchased 35 million shares at the per-share price paid by the underwriter, for a total of $ 1,012 million, which was effected under our existing share repurchase program.

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

What changed 10-Q

Item 1. Financial Statements