What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-02-25 compared with 2024-02-22 · 903 added, 748 removed, 1036 unchanged (61% of the section changed)

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Reports of Independent Registered Accounting Firm (PCAOB ID No.

Consolidated Statements of Income

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Significant Accounting Policies

Goodwill and Other Intangible Assets

Long-Term Obligations and Borrowing Arrangements

Goodwill and Other Intangible Assets

Revenue Recognition

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Related Parties

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the stockholders and the Board of Directors of Keurig Dr Pepper Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Keurig Dr Pepper Inc.

and subsidiaries (the "Company") as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows, for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 22, 2024, expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company's financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Indefinite-Lived Intangible Assets Valuation - Certain Brand Assets - Refer to Notes 2 and 3 to the financial statements

Critical Audit Matter Description

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.

Management estimates the fair value of the brand assets using a multi-period excess earnings method, which is a specific discounted cash flow method.

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 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 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.

• 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.

– Forecasted information in industry reports.

– 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

Dallas, Texas

February 22, 2024

We have served as the Company’s auditor since 2016.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the stockholders and the Board of Directors of Keurig Dr Pepper Inc.

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of Keurig Dr Pepper Inc.

and subsidiaries (the "Company") as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2023, of the Company and our report dated February 22, 2024, expressed an unqualified opinion on those financial statements.

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 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.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Deloitte & Touche LLP

Dallas, Texas

February 22, 2024

Subsequent Events

Reports of Independent Registered Accounting Firm (PCAOB ID No.

KEURIG DR PEPPER INC.

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Selling, general, and administrative expenses 5,013 4,912 4,645

Impairment of intangible assets 2 477 —

Impairment of goodwill 306 — —

Impairment of other intangible assets 412 2 477

Gain on litigation settlement — — ( 299 )

Other operating income, net ( 26 ) ( 105 ) ( 70 )

Other operating expense (income), net 207 ( 26 ) ( 105 )

Income from operations 2,591 3,192 2,605

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

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

Net income $ 1,441 $ 2,181 $ 1,436

Earnings per common share:

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21 ( 98 ) 328

Total other comprehensive income (loss) 186 155 ( 103 )

Total other comprehensive (loss) income ( 591 ) 186 155

Comprehensive income 850 2,367 1,590

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Cash and cash equivalents $ 510 $ 267

Restricted cash and restricted cash equivalents 80 —

Trade accounts receivable, net 1,502 1,368

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Retained earnings 4,793 4,559

Accumulated other comprehensive income 315 129

Accumulated other comprehensive (loss) income ( 276 ) 315

Total stockholders' equity 24,243 25,676

Non-controlling interest — ( 1 )

Total equity 25,676 25,125

Total liabilities and equity $ 52,130 $ 51,837

Total liabilities and stockholders’ equity $ 53,430 $ 52,130

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

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Operating activities:

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

Net income $ 1,441 $ 2,181 $ 1,436

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

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

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

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

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

Loss (gain) on disposal of property, plant, and equipment 16 ( 1 ) ( 80 )

Unrealized loss (gain) on foreign currency 33 ( 13 ) 26

Unrealized loss on derivatives 91 31 383

Settlements of interest rate contracts — 54 125

Equity in (earnings) loss of unconsolidated affiliates ( 42 ) ( 33 ) 5

Earned equity ( 44 ) — —

Earned equity from distribution arrangements ( 94 ) ( 44 ) —

Impairment of goodwill 306 — —

Impairment of intangible assets 412 2 477

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Other, net ( 2 ) 6 28

Changes in assets and liabilities:

Changes in assets and liabilities, excluding the effects of business acquisitions:

Trade accounts receivable ( 209 ) 70 ( 398 )

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Investing activities:

Acquisitions of businesses, net of cash acquired ( 1,000 ) — —

Proceeds from sale of investment in unconsolidated affiliates — — 50

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Other, net 11 4 6

Net cash (used in) provided by investing activities $ ( 784 ) $ ( 1,135 ) $ 210

Net cash used in investing activities $ ( 1,614 ) $ ( 784 ) $ ( 1,135 )

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

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Repayment of Notes ( 1,150 ) ( 500 ) ( 3,365 )

Proceeds from issuance of commercial paper 36,940 1,198 5,406

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

Repayments of term loan — — ( 425 )

Repurchases of common stock ( 706 ) ( 379 ) —

Proceeds from issuance of common stock — — 140

Net (repayment) issuance of commercial paper ( 480 ) 1,697 250

Proceeds from term loan 990 — —

Proceeds from structured payables 49 130 155

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Cash dividends paid ( 1,194 ) ( 1,142 ) ( 1,080 )

Repurchases of common stock ( 1,110 ) ( 706 ) ( 379 )

Tax withholdings related to net share settlements ( 61 ) ( 62 ) ( 15 )

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Net cash used in financing activities ( 223 ) ( 832 ) ( 1,728 )

Net change from:

Operating, investing and financing activities ( 287 ) ( 26 ) 322

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

Net change from operating, investing and financing activities 382 ( 287 ) ( 26 )

Effect of exchange rate changes ( 41 ) 19 ( 7 )

Beginning of period 535 568 255

End of period $ 267 $ 535 $ 568

Non-cash investing activities:

Beginning balance 267 535 568

Ending balance $ 608 $ 267 $ 535

Supplemental cash flow disclosures of non-cash investing and financing activities:

Capital expenditures included in accounts payable and accrued expenses $ 220 $ 276 $ 213

Earned equity from distribution arrangements 94 44 —

Equity received in exchange for modification of related party contract 19 — —

Acquisitions of businesses 98 — —

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

Earned equity 44 — —

Conversion of note receivable to equity method investment — — 6

Non-cash purchases of intangibles — — 19

Non-cash financing activities:

Dividends declared but not yet paid 312 299 281

Mandatory redemption liability 689 — —

Accrued excise tax on net share repurchases 9 5 —

Supplemental cash flow disclosures:

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Common Stock Issued Additional

Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Total

Paid-In Capital Retained Earnings Accumulated Other Comprehensive (Loss) Income Total

Stockholders' Equity Non-Controlling Interest Total Equity

(in millions) Shares Amount

(in millions, except per share data) Shares Amount

Balance as of December 31, 2021 1,418.1 $ 14 $ 21,785 $ 3,199 $ ( 26 ) $ 24,972 $ — $ 24,972

Net income — — — 1,436 — 1,436 ( 1 ) 1,435

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

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

Other comprehensive income — — — — 155 155 — 155

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 — — — — — — —

Tax withholdings related to net share settlements — — ( 15 ) — — ( 15 ) — ( 15 )

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

Stock-based compensation and stock options exercised — — 53 — — 53 — 53

Balance as of December 31, 2022 1,408.4 14 21,444 3,539 129 25,126 ( 1 ) 25,125

Net income — — — 2,181 — 2,181 — 2,181

Other comprehensive loss — — — — 155 155 — 155

Other comprehensive income — — — — 186 186 — 186

Dividends declared, $ 0.83 per share

— — — ( 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 — — — — — — —

Tax withholdings related to net share settlements — — ( 62 ) — — ( 62 ) — ( 62 )

Stock-based compensation — — 53 — — 53 — 53

Stock-based compensation and stock options exercised — — 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

Net income — — — 1,441 — 1,441 — 1,441

Other comprehensive income — — — — 186 186 — 186

Other comprehensive loss — — — — ( 591 ) ( 591 ) — ( 591 )

Dividends declared, $ 0.89 per share

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Tax withholdings related to net share settlements — — ( 61 ) — — ( 61 ) — ( 61 )

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

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

Stock-based compensation and stock options exercised — — 99 — — 99 — 99

Balance as of December 31, 2024 1,356.7 $ 14 $ 19,712 $ 4,793 $ ( 276 ) $ 24,243 $ — $ 24,243

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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.

References in this Annual Report on Form 10-K to "KDP", “we”, “us”, and “our" refer to Keurig Dr Pepper Inc.

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

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

This Annual Report on Form 10-K 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 Annual Report on Form 10-K 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

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FISCAL YEAR END

KDP's fiscal year end is December 31, and its interim fiscal quarters are March 31, June 30, and September 30.

Our fiscal year end is December 31, and our interim fiscal quarters are March 31, June 30, and September 30.

KDP's significant subsidiary, Maple Parent Holdings Corp., has a fiscal year end of the last Saturday in December, and its interim fiscal quarters end every thirteenth Saturday.

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includes 52 weeks for the years ended December 31, 2024 and 2023 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.

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

PRINCIPLES OF CONSOLIDATION

KDP consolidates all wholly owned subsidiaries.

The Company consolidates investments in companies in which it holds the majority interest.

We consolidate all wholly owned subsidiaries.

We consolidate investments in companies in which we hold the majority interest.

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

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.

To determine if KDP is the primary beneficiary, the Company assesses specific criteria and uses judgment when determining if it has the power to direct the significant activities of the VIE and the obligation to absorb losses or receive benefits from the VIE that may be significant to the VIE.

Factors considered include risk and reward sharing, voting rights, involvement in day-to-day capital and operating decisions, representation on a VIE’s governance structure, existence of unilateral kick-out rights exclusive of protective rights or voting rights, and level of economic disproportionality between the Company and the VIE’s other partner(s).

The Company has determined that it is not the primary beneficiary of any VIEs.

However, future events may require the Company to consolidate VIEs if the Company becomes the primary beneficiary.

The Company uses the equity method to account for investments in companies if the investment provides the Company with the ability to exercise significant influence over operating and financial policies of the investee.

Generally, 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.

However, if the investment agreement contains a mandatorily redeemable financial instrument for the non-controlling interests, such mandatorily redeemable interests are recorded as a liability, rather than equity, in the Consolidated Balance Sheets, and no earnings are attributable to the non-controlling interests.

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

To determine if we are the primary beneficiary, we assess specific criteria and use judgment when determining if we have the power to direct the significant activities of the VIE and the obligation to absorb losses or receive benefits from the VIE that may be significant to the VIE.

We have determined that we are not the primary beneficiary of any VIEs.

However, future events may require us to consolidate VIEs if we become the primary beneficiary.

We use the equity method to account for investments in companies if the investment provides us with the ability to exercise significant influence over operating and financial policies of the investee.

Consolidated net income includes KDP's proportionate share of the net income or loss of these companies.

Judgment regarding the level of influence over each equity method investment includes considering key factors such as ownership interest, representation on the Board or similar governing body, participation in policy-making decisions, and material intercompany transactions.

KDP eliminates from its financial results all intercompany transactions between entities included in the consolidated financial statements.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

We eliminate from our financial results all intercompany transactions between entities included in the consolidated financial statements.

RECLASSIFICATIONS

We reclassified amounts in the Financing Activities section of the consolidated Statement of Cash Flows for the years ended December 31, 2023 and 2022 in order to conform to current year presentation, as maturities for our commercial paper program in both periods are 90 days or less.

Year Ended December 31,

(in millions) Prior Presentation 2023 2022

Net (repayment) issuance of commercial paper Proceeds from issuance of commercial paper $ 36,940 $ 1,198

Net (repayment) issuance of commercial paper Repayments of commercial paper ( 35,243 ) ( 948 )

Significant Accounting Policies

USE OF ESTIMATES

The process of preparing the Company's consolidated financial statements in conformity with U.S.

GAAP requires the use of estimates and judgments that affect the reported amount of assets, liabilities, revenue, and expenses.

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.

The process of preparing our 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 we believe to be reasonable under the circumstances.

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

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The fair value of Notes and marketable securities as of December 31, 2024 and 2023 are based on quoted market prices for publicly traded securities.

The Company estimates fair values of financial instruments measured at fair value in the Company’s consolidated financial statements on a recurring basis to ensure they are calculated based on market rates to settle the instruments.

These values represent the estimated amounts the Company would pay or receive to terminate agreements, taking into consideration current market rates and creditworthiness.

As of December 31, 2023 and 2022, the Company did not have any assets or liabilities measured on a recurring basis without observable market values that would require a high level of judgment to determine fair value (Level 3).

Transfers between levels are recognized at the end of each reporting period.

There were no transfers of financial instruments between the three levels of fair value hierarchy during the years ended December 31, 2023, 2022, and 2021.

We estimate fair values of financial instruments measured at fair value in the consolidated financial statements on a recurring basis to ensure they are calculated based on market rates to settle the instruments.

These values represent the estimated amounts we would pay or receive to terminate agreements, taking into consideration current market rates and creditworthiness.

As of December 31, 2023, we did not have any assets or liabilities measured on a recurring basis without observable market values that would require a high level of judgment to determine fair value (Level 3).

As of December 31, 2024, the mandatory redemption liability for GHOST is a liability measured on a recurring basis that is considered Level 3 within the fair value hierarchy.

Refer to the Mandatory Redemption Liability section below for further information.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company evaluates the facts and circumstances of each acquisition to determine whether the transaction should be accounted for as an asset acquisition or a business combination.

Transfers between levels are recognized at the end of each reporting period.

There were no transfers of financial instruments between the three levels of fair value hierarchy during the years ended December 31, 2024, 2023, and 2022.

We evaluate the facts and circumstances of each acquisition to determine whether the transaction should be accounted for as an asset acquisition or a business combination.

Asset Acquisitions

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Business Combinations

The Company includes the results of operations of the acquired business in the Company’s consolidated financial statements prospectively from the acquisition date.

The Company allocates the purchase consideration to the assets acquired and liabilities assumed in the acquired entity generally based on their fair values at the acquisition date.

We include the results of operations of the acquired business in the consolidated financial statements prospectively from the acquisition date.

We allocate the purchase consideration to the assets acquired and liabilities assumed in the acquired entity generally based on their fair values at the acquisition date.

The excess of the fair value of purchase consideration over the fair value of these assets acquired and liabilities assumed in the acquired entity is recorded as goodwill.

During the measurement period, the Company will continue to obtain information to assist in determining the fair value of net assets acquired, which may differ materially from these preliminary estimates.

During the measurement period, we will continue to obtain information to assist in determining the fair value of net assets acquired, which may differ from these preliminary estimates.

Measurement period adjustments, if applicable, will be applied in the reporting period in which the adjustment amounts are determined.

Certain of our acquisitions may include other forms of consideration, including mandatorily redeemable liabilities and other earn-out arrangements.

As of the acquisition date, we record such consideration, as applicable, at the estimated fair value of the expected future payments associated with the obligation.

Any changes to the recorded fair value of the consideration are recognized in earnings in the period in which they occur.

Transaction expenses are recognized separately from the business combination and are expensed as incurred.

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Cash and cash equivalents include cash and investments in short-term, highly liquid securities, with original maturities of three months or less.

The Company is exposed to potential risks associated with its cash and cash equivalents.

The Company places its cash and cash equivalents with high credit quality financial institutions.

We are exposed to potential risks associated with its cash and cash equivalents.

We place our cash and cash equivalents with high credit quality financial institutions.

Deposits with these financial institutions may exceed the amount of insurance provided;

however, these deposits typically are redeemable upon demand and, therefore, the Company believes the financial risks associated with these financial instruments are minimal.

however, these deposits typically are redeemable upon demand and, therefore, we believe the financial risks associated with these financial instruments are minimal.

Trade Accounts Receivable and Allowance for Expected Credit Losses

Trade accounts receivable are recorded at the invoiced amount and do not bear interest.

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.

We are exposed to potential credit risks associated with our accounts receivable, as we generally do not require collateral on our accounts receivable.

We determine the required allowance for expected credit losses using information such as customer credit history and financial condition, industry and market segment information, credit reports, and economic trends and conditions.

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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Amounts are charged against the allowance when it is determined that expected credit losses may occur.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Activity in the allowance for expected credit loss accounts was as follows:

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

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.

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

Walmart is a major customer as described in Note 8.

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.

As of December 31, 2024 and 2023, Walmart accounted for approximatel y $ 205 million and $ 204 million of trade receivables, respectively, which exceeded 10% of KDP's total trade accounts receivabl e.

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

Raw materials include various commodity costs for the Company's ingredients and materials sourced from various providers.

The costs of finished goods inventories manufactured by the Company include raw materials, direct labor, and indirect production and overhead costs.

Raw materials include various commodity costs for our ingredients and materials sourced from various providers.

The costs of finished goods inventories manufactured by us include raw materials, direct labor, and indirect production and overhead costs.

Finished goods also include the purchases of brewing systems and certain beverages from third-party manufacturers.

Inventories are stated at the lower of cost or net realizable value.

Cost is measured using standard cost method which approximates first-in, first-out.

The Company regularly reviews whether the net realizable value of its inventory is lower than its carrying value.

If the valuation shows that the net realizable value is lower than the carrying value, the Company takes a charge to cost of sales and directly reduces the carrying value of the inventory.

The Company estimates any required write downs for inventory obsolescence by examining its inventories on a quarterly basis to determine if there are indicators that the carrying values exceed net realizable value.

Cost is measured using standard cost, which approximates first-in, first-out.

We regularly review whether the net realizable value of inventory is lower than its carrying value.

If the valuation shows that the net realizable value is lower than the carrying value, we take a charge to cost of sales and directly reduce the carrying value of the inventory.

We estimate any required write downs for inventory obsolescence by examining inventories on a quarterly basis to determine if there are indicators that the carrying values exceed net realizable value.

Indicators that could result in additional inventory write downs include age of inventory, damaged inventory, slow moving products, and products at the end of their life cycles.

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Significant improvements which substantially extend the useful lives of assets are capitalized, and expenditures for repairs and maintenance which do not improve or extend the life of the assets are expensed as incurred.

The Company capitalizes certain computer software and software development costs incurred in connection with developing or obtaining computer software for internal use, which are included in property, plant, and equipment.

When property, plant, and equipment is sold, the costs and the related accumulated depreciation are removed from the accounts, and any net gain or loss is recorded in Other operating income, net in the Consolidated Statements of Income.

We capitalize certain computer software and software development costs incurred in connection with developing or obtaining computer software for internal use, which are included in property, plant, and equipment.

When property, plant, and equipment is sold, the costs and the related accumulated depreciation are removed from the accounts, and any net gain or loss is recorded in Other operating expense (income), net in the Consolidated Statements of Income.

For financial reporting purposes, depreciation is computed on the straight-line method over the estimated useful asset lives as follows:

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Estimated useful lives are periodically reviewed and, when warranted, are updated.

The Company periodically reviews long-lived assets for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable.

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, 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.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

We periodically review long-lived assets for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable.

In order to assess recoverability, we compare 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, and any impairment loss i s recorded in Other operating expense (income), net, in the Consolidated Statements of Income .

For the years ended December 31, 2024, 2023, and 2022, no impairment loss was recorded related to these assets.

We lease certain facilities and machinery and equipment, including fleet.

These leases expire at various dates through 2044.

Some lease agreements contain standard renewal provisions that allow us to renew the lease at rates equivalent to fair market value at the end of the lease term.

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 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.

Operating leases are included within other non-current assets, other current liabilities, and other non-current liabilities within our Consolidated Balance Sheets.

Our lease agreements do not contain any material restrictive covenants.

Certain leases of manufacturing and distribution properties and our Frisco headquarters contain an RVG at the end of the term.

Refer to Note 19 for additional information about RVGs.

Operating leases are included within other non-current assets, other current liabilities, and other non-current liabilities within the Consolidated Balance Sheets.

Finance leases are included within Property, plant, and equipment, net, other current liabilities, and other non-current liabilities.

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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.

When the rate implicit in the lease is not provided to the Company, KDP will use its incremental borrowing rate based on information available at the commencement date to determine the present value of future minimum lease payments.

KDP's incremental borrowing rate is determined using a portfolio of secured borrowing rates commensurate with the term of the lease and is reassessed on a quarterly basis.

KDP has lease agreements with lease and non-lease components, which are generally accounted for as a single lease component.

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

When the rate implicit in the lease is not provided to us, we use our incremental borrowing rate based on information available at the commencement date to determine the present value of future minimum lease payments.

Our incremental borrowing rate is determined using a portfolio of secured borrowing rates commensurate with the term of the lease and is reassessed on a quarterly basis.

We have lease agreements with lease and non-lease components, which are generally accounted for as a single lease component.

Sale-and-leaseback transactions occur when we sell assets to a third-party and subsequently lease them back.

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.

For a financing transaction, the Company will retain the assets sold within Property, plant and equipment, net and record a financing obligation equal to the amount of cash proceeds received.

For a financing transaction, we retain the assets sold within Property, plant, and equipment, net and record a financing obligation equal to the amount of cash proceeds received.

Rental payments under such transactions are recognized as a reduction of the financing obligation and as interest expense using an effective interest method.

Deferred Compensation Plan

The Company has a U.S.

We have a U.S.

non-qualified defined contribution plan.

Contributions under the non-qualified defined contribution plan are maintained in a rabbi trust and are not readily available to the Company.

Contributions under the non-qualified defined contribution plan are maintained in a rabbi trust and are not readily available to us.

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 (income) expense, net in the Consolidated Statements of Income.

Gains or losses from such investments 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.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Investments in Other Equity Securities

The Company consolidates investments in companies in which it holds the majority interest.

We consolidate investments in companies in which we hold the majority interest.

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.

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

As a result, KDP holds 100% ownership interest in Revive and has eliminated the Non-controlling interest component within the Consolidated Statements of Changes in Stockholders’ Equity.

As of December 31, 2024, we hold a majority interest in GHOST.

This investment contains a mandatorily redeemable financial instrument for the non-controlling interests.

Refer to Note 4 for further information about the GHOST Transactions.

We also hold 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.

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 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.

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 our share of the investee’s net income or loss, unless the investment agreement indicates an alternative allocation of earnings or losses.

Our share of the net income or loss resulting from these investments is recorded in Other (income) expense, net in the Consolidated Statements of Income.

To the extent we earn 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 from distribution arrangements 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.

The carrying value of the Company's equity method investments is reported in Investments in unconsolidated affiliates in the Company's Consolidated Balance Sheets.

The Company classifies distributions received from equity method investments using the cumulative earnings approach on the Consolidated Statements of Cash Flows.

Investments with readily determinable fair values for which we do not have the ability to exercise significant influence are measured at fair value and reported in Other non-current assets in the Company's Consolidated Balance Sheets.

The carrying value of our equity method investments is reported in Investments in unconsolidated affiliates in the Consolidated Balance Sheets.

Distributions received from equity method investments are classified using the cumulative earnings approach on the Consolidated Statements of Cash Flows.

As of December 31, 2024 and 2023, all such investments were categorized as Level 1.

Unrealized gains and losses on these investments are recorded in Other (income) expense, net in the Consolidated Statements of Income.

Investments without readily determinable fair values for which we do not have the ability to exercise significant influence are accounted for at cost and reported in Other non-current assets in the Company's Consolidated Balance Sheets.

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

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

Our 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.

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

We recorded impairment charges of $ 2 million and $ 12 million for the years ended December 31, 2024 and 2022, respectively, on the Impairment of investments and note receivable line in the Consolidated Statements of Income.

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

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Goodwill and Other Intangible Assets

The Company classifies other intangible assets into two categories:

Other intangible assets are classified into two categories:

• intangible assets with definite lives subject to amortization, and

• intangible assets with indefinite lives not subject to amortization.

The majority of the Company 's intangible asset balance is made up of brands which the Company has determined to have indefinite useful lives.

In arriving at the conclusion that a brand has an indefinite useful life, management reviews factors such as size, diversification, and market share of each brand.

Management expects to acquire, hold, and support brands for an indefinite period through consumer marketing and promotional support.

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.

The majority of the intangible asset balance is made up of brands which we have determined to have indefinite useful lives.

In arriving at the conclusion that a brand has an indefinite useful life, we review factors such as size, diversification, and market share of each brand.

We expect to acquire, hold, and support brands for an indefinite period through consumer marketing and promotional support.

We also consider factors such as our 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, 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.

Identifiable intangible assets deemed 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:

The estimated useful lives of intangible assets with definite lives are as follows:

Type of Asset Useful Life

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

For goodwill and indefinite-lived intangible assets, the Company conducts tests for impairment annually on the first day of the fourth quarter, or more frequently if events or circumstances indicate the carrying amount may not be recoverable.

For goodwill and indefinite-lived intangible assets, w e perform quarterly analyses to evaluate whether any triggering events have occurred which may indicate that the carrying amount of an asset may not be recoverable.

We also conduct tests for impairment annually on the first day of the fourth quarter, or more frequently if events or circumstances indicate the carrying amount may not be recoverable.

For both goodwill and other indefinite lived intangible assets, we have 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.

When performing a quantitative, or Step 1, analysis, we use the income approach, or in some cases a combination of income and market based approaches, to determine the fair value of our assets, as well as an overall consideration of market capitalization and enterprise value

The tests for impairment include significant judgment in estimating the fair value of reporting units and intangible assets.

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Discount rates are based on a weighted average cost of equity and cost of debt, adjusted with various risk premiums.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Goodwill is assigned to reporting units for purposes of impairment testing.

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

KDP's reporting units are as follows:

As of October 1, 2024, KDP's reporting units were as follows:

Reportable Segments Reporting Units

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Capitalized Customer Incentive Programs

The Company provides support to certain customers to cover various programs and initiatives to increase net sales, including contributions to customers or vendors for cold drink equipment used to market and sell the Company 's products.

These programs and initiatives generally directly benefit the Company over a period of time.

KDP provides support to certain customers to cover various programs and initiatives to increase net sales, including contributions to customers or vendors for cold drink equipment used to market and sell our products.

These programs and initiatives generally directly benefit KDP over a period of time.

Accordingly, costs of these programs and initiatives are recorded in Prepaid expenses and other current assets and Other non-current assets in the Consolidated Balance Sheets.

Refer to Note 17 for additional information.

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

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

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.

We have 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.

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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 December 31, 2023 and December 31, 2022 was $ 2,389 million and $ 4,113 million, respectively.

The table below summarizes activity in our outstanding obligations under supplier financing arrangements, which are confirmed as valid and included in accounts payable :

(in millions) For the Year Ended December 31, 2024

Balance as of December 31, 2023 $ 2,389

Additions 2,999

Settlements ( 3,639 )

Effect of exchange rate changes ( 9 )

Balance as of December 31, 2024 $ 1,740

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Structured Payables

The Company has entered into an agreement with a supply chain payment processing intermediary, for the intermediary to act as a virtual credit card sponsor, whereby the card sponsor pays amounts on behalf of the Company and sells the amounts due from the Company to a participating financial institution.

The card sponsor then bills the Company the original payment amount, effectively financing the transaction.

The agreement permits the Company to utilize the third party and participating financial institutions to make a broad range of payments, including commercial payables to suppliers, business acquisitions, purchases of property, plant, and equipment, and employee-related payments

Additionally, the Company has commercial arrangements with suppliers who use third party administrators to sell payment obligations from KDP to financial institutions.

The Company evaluates the commercial arrangements with suppliers to determine if they are more representative of debt or accounts payable classification.

If the Company determines these commercial arrangements are more representative of a financing transaction, then the Company records those payment obligations as structured payables.

We have entered into an agreement with a supply chain payment processing intermediary, for the intermediary to act as a virtual credit card sponsor, whereby the card sponsor pays amounts on behalf of KDP and sells the amounts due from KDP to a participating financial institution.

The card sponsor then bills KDP the original payment amount, effectively financing the transaction.

The agreement permits us to utilize the third party and participating financial institutions to make a broad range of payments, including commercial payables to suppliers, business acquisitions, purchases of property, plant, and equipment, and employee-related payments.

Additionally, we have commercial arrangements with suppliers who use third party administrators to sell payment obligations from KDP to financial institutions.

We evaluate these commercial arrangements with suppliers to determine if they are more representative of debt or accounts payable classification.

If we determine these commercial arrangements are more representative of a financing transaction, then we record those payment obligations as structured payables.

Structured payables have equal priority with accounts payable and are treated as non-recourse obligations.

The Company records interest for the period the structured payables obligation is outstanding and reflects the proceeds and payments related to these transactions as a financing activity on the Consolidated Statements of Cash Flows.

We record interest for the period the structured payables obligation is outstanding and reflect the proceeds and payments related to these transactions as a financing activity on the Consolidated Statements of Cash Flows.

Mandatory Redemption Liability

Certain of our acquisitions may include other forms of consideration, including mandatorily redeemable liabilities and other earn-out arrangements.

As of the acquisition date, we record such consideration, as applicable, at the estimated fair value of the expected future payments associated with the obligation.

Any changes to the recorded fair value of the consideration are recognized in earnings in the period in which they occur.

Subsequent to the date of acquisition, if future payments are expected to differ from our estimate as of the date of acquisition, any related fair value adjustments are recognized in the period that such expectation is considered probable.

Changes in the fair value of payments are recorded within Other nonoperating (income) expense, net, in the Consolidated Statements of Operations.

For the year ended December 31, 2024, the fair value of our mandatory redemption liability for Ghost was estimated using the Monte Carlo simulation method, which incorporates significant inputs not observable in the market (Level 3 inputs) including forecasted EBITDA expectations, adjusting for market risks and volatility, calculating redemption prices, discounting to present terms with the cost of debt, and averaging results across scenarios to determine fair value, incorporating the market price of risk and volatility estimates from similar companies.

Mandatory redemption liabilities are included within Other non-current liabilities within the Consolidated Balance Sheets.

Refer to Note 17 for additional information.

Pension and Post-retirement Medical Benefits

The Company has U.S.

and foreign pension and PRMB plans which provide benefits to a defined group of employees who satisfy age and length of service requirements at the discretion of the Company.

As of December 31, 2023, the Company has several stand-alone non-contributory defined benefit plans and PRMB plans.

and foreign pension and PRMB plans which provide benefits to a defined group of employees who satisfy age and length of service requirements at the discretion of KDP.

As of December 31, 2024, KDP has several stand-alone non-contributory defined benefit plans and PRMB plans.

Depending on the plan, pension and PRMB benefits are based on a combination of factors, which may include salary, age, and years of service.

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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 (income) expense, 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 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.

The Company's objective with respect to the funding of its pension plans is to provide adequate assets for the payment of future benefits.

Pursuant to this objective, the Company will fund the pension plans as required by governmental regulations and may consider discretionary contributions as conditions warrant.

The Company participates in three multi-employer pension plans and makes contributions to those plans, which are recorded in either Cost of sales or SG&A expenses, depending on the classification of the employee's other compensation costs.

The objective with respect to the funding of our pension plans is to provide adequate assets for the payment of future benefits.

Pursuant to this objective, KDP will fund the pension plans as required by governmental regulations and may consider discretionary contributions as conditions warrant.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

KDP participates in several multi-employer pension plans and makes contributions to those plans, which are recorded in either Cost of sales or SG&A expenses, depending on the classification of the employee's other compensation costs.

Risk Management Programs

The Company retains selected levels of property, casualty, workers' compensation, health, cyber, and other business risks.

Many of these risks are covered under conventional insurance programs with deductibles or self-insured retentions.

We retain selected levels of property, casualty, workers' compensation, health, cyber, and other business risks.

Many of these risks are covered under conventional insurance and reinsurance programs with deductibles or self-insured retentions.

Accrued liabilities related to the retained casualty and health risks are calculated based on loss experience and development factors, which contemplate a number of variables including claim history and expected trends, and are recorded in Other current liabilities and Other non-current liabilities in the Consolidated Balance Sheets .

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The total of taxes currently payable per the tax return, the deferred tax expense or benefit, and the impact of uncertain tax positions represents the income tax expense or benefit for the year for financial reporting purposes.

The Company periodically assesses the likelihood of realizing its deferred tax assets based on the amount that the Company believes is more likely than not to be realized.

The Company bases its judgment of the recoverability of its deferred tax assets primarily on historical earnings, its estimate of current and expected future earnings and prudent and feasible tax planning strategies.

The Company establishes income tax liabilities to remove some or all of the income tax benefit of any of the Company's income tax positions at the time the Company determines that the positions become uncertain based upon one of the following:

We periodically assess the likelihood of realizing our deferred tax assets based on the amount that we believe is more likely than not to be realized.

We base our judgment of the recoverability of deferred tax assets primarily on historical earnings, our estimate of current and expected future earnings, and prudent and feasible tax planning strategies.

We establish income tax liabilities to remove some or all of the income tax benefit of any of our income tax positions at the time we determine that the positions become uncertain based upon one of the following:

(1) the tax position is not "more likely than not" to be sustained, (2) the tax position is "more likely than not" to be sustained, but for a lesser amount, or (3) the tax position is "more likely than not" to be sustained, but not in the financial period in which the tax position was originally taken.

The Company's evaluation of whether or not a tax position is uncertain is based on the following:

(1) the Company presumes the tax position will be examined by the relevant taxing authority such as the IRS that has full knowledge of all relevant information, (2) the technical merits of a tax position are derived from authorities such as legislation and statutes, legislative intent, regulations, rulings, and case law, and their applicability to the facts and circumstances of the tax position, and (3) each tax position is evaluated without considerations of the possibility of offset or aggregation with other tax positions taken.

The Company adjusts these income tax liabilities when the Company's judgment changes as a result of new information.

The evaluation of whether or not a tax position is uncertain is based on the following:

(1) we presume the tax position will be examined by the relevant taxing authority such as the IRS that has full knowledge of all relevant information, (2) the technical merits of a tax position are derived from authorities such as legislation and statutes, legislative intent, regulations, rulings, and case law, and their applicability to the facts and circumstances of the tax position, and (3) each tax position is evaluated without considerations of the possibility of offset or aggregation with other tax positions taken.

We adjust these income tax liabilities when our judgment changes as a result of new information.

Any change will impact income tax expense in the period in which such determination is made.

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

KDP manages these risks through a variety of strategies, including the use of interest rate contracts, FX forward contracts, commodity forward, future, swap and option contracts, and supplier pricing agreements.

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

The Company records all derivative instruments on a gross basis, including those subject to master netting arrangements.

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

We manage these risks through a variety of strategies, including the use of interest rate contracts, FX forward contracts, commodity forward, future, swap and option contracts, and supplier pricing agreements.

We do not hold or issue derivative financial instruments for trading or speculative purposes.

All derivative instruments are recorded on a gross basis, including those subject to master netting arrangements.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

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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.

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.

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 our 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.

Loss Contingencies

Legal Matters

The Company is involved from time to time in various claims, proceedings, and litigation, including those described in Note 17.

The Company establishes reserves for specific legal proceedings when it determines that the likelihood of an unfavorable outcome is probable and the amount of loss can be reasonably estimated.

Management has also identified certain other legal matters where it believes an unfavorable outcome is reasonably possible and/or for which no estimate of possible losses can be made, and where applicable, the Company provides disclosure of such legal matters in Note 17.

KDP is involved from time to time in various claims, proceedings, and litigation, including those described in Note 18.

We establish reserves for specific legal proceedings when we determine that the likelihood of an unfavorable outcome is probable and the amount of loss can be reasonably estimated.

Management has also identified certain other legal matters where it believes an unfavorable outcome is reasonably possible and/or for which no estimate of possible losses can be made, and where applicable, provides disclosure of such legal matters in Note 18.

Product Warranties

The Company provides for the estimated cost of product warranties associated with its brewers in cost of sales, at the time product revenue is recognized.

Warranty costs are estimated primarily using historical warranty information in conjunction with current engineering assessments applied to the Company's expected repair or replacement costs.

The estimate for warranties requires assumptions relating to expected warranty claims which are based on the Company's historical claims and known current year factors.

We provide for the estimated cost of product warranties associated with our brewers in cost of sales, at the time product revenue is recognized.

Warranty costs are estimated primarily using historical warranty information in conjunction with current engineering assessments applied to the expected repair or replacement costs.

The estimate for warranties requires assumptions relating to expected warranty claims which are based on historical claims and known current year factors.

Revenue Recognition

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

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

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.

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

Revenue is measured as the amount of consideration 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 offered to our customers and their customers.

These incentives and discounts, which are recorded as a reduction of revenue, include cash discounts, price allowances, volume-based rebates, product placement fees, and other financial support for items such as trade promotions, displays, new products, consumer incentives, and advertising assistance.

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

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Cost of Sales

Cost of goods sold includes all costs to acquire and manufacture the Company's products including raw materials, direct and indirect labor, manufacturing overhead, including depreciation expense, and all other costs incurred to bring the product to salable condition.

Cost of goods sold includes all costs to acquire and manufacture our products including raw materials, direct and indirect labor, manufacturing overhead, including depreciation expense, and all other costs incurred to bring the product to salable condition.

All other costs incurred after this condition is met are considered selling costs and included in SG&A expenses.

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Transportation and Warehousing Costs

The Company incurred $ 1,783 million, $ 1,746 million, and $ 1,475 million of transportation and warehousing costs during the years ended December 31, 2023, 2022, and 2021, respectively.

We incurred $ 1,910 million, $ 1,783 million, and $ 1,746 million of transportation and warehousing costs during the years ended December 31, 2024, 2023, and 2022, respectively.

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

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Stock-Based Compensation Expense

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.

Stock-based compensation expense is recognized 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.

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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.

We implement restructuring programs from time to time and incur costs that are designed to improve operating effectiveness and lower costs.

When these programs are implemented, we incur 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.

1 unchanged sentence

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.

The Company has recorded these costs within SG&A expenses on the Consolidated Statements of Income, and these costs are held within unallocated corporate costs.

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

We have recorded these costs within SG&A expenses on the Consolidated Statements of Income, and these costs are held within unallocated corporate costs.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Foreign Currency Translation and Transaction

The Company translates assets and liabilities of our foreign subsidiaries from their respective functional currencies to U.S.

We translate assets and liabilities of our foreign subsidiaries from their respective functional currencies to U.S.

dollars at the appropriate spot rates as of the balance sheet date.

The functional currency of the Company's operations outside the U.S.

The functional currency of our operations outside the U.S.

is generally the local currency of the country where the operations are located, or U.S.

3 unchanged sentences

The differences arising from the translation of foreign results at the average rate are also recognized in AOCI.

Such translation differences are recognized as income or expense in the period in which the Company disposes of the operations.

Such translation differences are recognized as income or expense in the period in which we dispose of the operations.

Transactions in foreign currencies are recorded at the approximate rate of exchange at the transaction date.

1 unchanged sentence

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.

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

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

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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.

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

The IRA 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.

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

RECENTLY ISSUED ACCOUNTING STANDARDS

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):

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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.

We are currently evaluating ASU 2023-09 but expect the impact of the disclosures to be immaterial to KDP’s consolidated financial statements.

In February 2024, the FASB issued ASU 2024-03, Income Statement Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40) .

The objective of ASU 2024-03 is to require entities to provide enhanced disclosures of income statement expenses through disaggregation of specific expense captions.

ASU 2024-03 is effective for public companies starting in annual periods beginning after December 15, 2026 and in interim periods beginning after December 15, 2027.

We are currently evaluating ASU 2024-03 and the impact of the disclosures 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.

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) U.S.

Refreshment Beverages U.S.

Coffee International Total

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

Foreign currency translation — — ( 110 ) ( 110 )

Balance as of December 31, 2022 8,714 8,622 2,736 20,072

Foreign currency translation — — 130 130

Balance as of December 31, 2023 $ 8,714 $ 8,622 $ 2,866 $ 20,202

INTANGIBLE ASSETS OTHER THAN GOODWILL

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

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

$ 19,476 $ 19,291

Trade names 2,478 2,480

Contractual arrangements (2)

Distribution rights (3)

Total $ 22,109 $ 21,993

(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:

December 31, 2023 December 31, 2022

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

Acquired technology $ 1,146 $ ( 548 ) $ 598 $ 1,146 $ ( 475 ) $ 671

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

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

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

(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:

Year Ended December 31,

(in millions) 2023 2022 2021

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:

For the Years Ending December 31,

(in millions) 2024 2025 2026 2027 2028

Expected amortization expense for intangible assets with definite lives $ 133 $ 121 $ 117 $ 101 $ 93

IMPAIRMENT ANALYSIS

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

Year Ended December 31,

(in millions) 2023 2022 2021

Quarterly triggering event analysis $ — $ 311 $ —

Annual analysis — 161 —

Total impairment of intangible assets $ 2 $ 477 $ —

Quarterly Triggering Event Analysis

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.

As of January 1, 2024 we adopted 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.

Refer to Note 8 for additional information on our segment related disclosures.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

2023 2022 2021

Rate Minimum Maximum Minimum Maximum Minimum Maximum

Discount rates 8.0 % 13.5 % 7.3 % 10.3 % 6.5 % 10.0 %

Long-term growth rates — % 4.0 % — % 3.8 % — % 3.8 %

Royalty rates (1)

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 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:

2023 2022 2021

Headroom Percentage Carrying Value Fair Value Carrying Value Fair Value Carrying Value Fair Value

$ — $ — $ 2,136 $ 2,136 $ — $ —

Less than 25% 2,274 2,493 2,186 2,547 3,311 3,663

26 - 50% 2,339 3,018 — — 5,335 7,456

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 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

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

The following table summarizes our long-term obligations:

(in millions) 2024 2023

$ 12,948 $ 11,095

Term loan 990 —

current portion of long-term obligations ( 1,026 ) ( 1,150 )

Long-term obligations $ 12,912 $ 9,945

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

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

(in millions) 2024 2023

1 unchanged sentence

Current portion of long-term obligations:

Notes 1,026 1,150

Short-term borrowings and current portion of long-term obligations $ 2,642 $ 3,246

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SENIOR UNSECURED NOTES

The Company's Notes consisted of the following:

Our Notes consisted of the following:

(in millions) December 31,

Issuance Maturity Date Rate 2024 2023

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

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

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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.

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.

The Notes are fully and unconditionally guaranteed by certain direct and indirect subsidiaries of the Company.

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

BORROWING ARRANGEMENTS

(2) The 2027-B Notes bear interest at a rate equal to Compounded SOFR (as defined in the respective supplemental 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 we 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.

Notes, among other things, contain customary default provisions and limit our 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 KDP‘s assets.

The Notes are fully and unconditionally guaranteed by certain of our direct and indirect subsidiaries.

As of December 31, 2024, we were in compliance with all financial covenant requirements of the Notes.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

VARIABLE-RATE BORROWING ARRANGEMENTS

Term Loan Agreement

On October 25, 2024, we entered into the Term Loan Agreement among KDP, as borrower, the lenders party thereto and Bank of America, N.A., as administrative agent.

The deferred financing fees incurred in connection with the Term Loan Agreement were insignificant.

The Term Loan Agreement provides for a delayed draw term loan facility in an aggregate principal amount of $ 1.25 billion, available in a first tranche of up to $ 1 billion and second tranche of up to $ 250 million.

The proceeds of the Term Loan Agreement may be used by KDP for general corporate purposes, including to finance acquisitions (including the payment of any fees and expenses incurred in connection therewith).

Borrowings under the Term Loan Agreement are unsecured.

Borrowings under the first tranche and second tranche must be repaid on April 25, 2026, and February 23, 2027, respectively, but may be repaid earlier without penalty.

On December 31, 2024, we drew $ 990 million on the first tranche of the Term Loan Agreement, and the remaining capacity of the first tranche was forfeited.

As of December 31, 2024, the second tranche of up to $ 250 million remains available.

The interest rate applicable to borrowings under the Term Loan Agreement ranges from (i) a rate equal to SOFR plus a spread adjustment of 0.100 % and a margin of 0.875 % to 1.500 % to (ii) a rate equal to a base rate plus a margin of 0.000 % to 0.500 %, in each case depending on our credit rating as determined by Moody’s and S&P.

The Term Loan Agreement also contains (i) certain customary affirmative covenants, including those that impose certain reporting and/or performance obligations on KDP and its subsidiaries, (ii) certain customary negative covenants that generally limit, subject to various exceptions, KDP and its subsidiaries from taking certain actions, including, without limitation, incurring liens, consummating certain fundamental changes, and entering into transactions with affiliates, (iii) a financial covenant in the form of a minimum interest coverage ratio of 3.25 to 1.00, and (iv) customary events of default (including a change of control) for financings of this type.

As of December 31, 2024, we were in compliance with our minimum interest coverage ratio relating to the Term Loan Agreement .

Revolving Credit Agreement

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.

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

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

The following table summarizes information about the Revolving Credit Agreement:

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

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Borrowings under the 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.

The Revolving Credit Agreement contains customary representations and warranties for investment grade financings.

The 2022 Revolving Credit Agreement also contains (i) certain customary affirmative covenants, including those that impose certain reporting and/or performance obligations on KDP and its subsidiaries, (ii) certain customary negative covenants that generally limit, subject to various exceptions, KDP and its subsidiaries from taking certain actions, including, without limitation, incurring liens, consummating certain fundamental changes and entering into transactions with affiliates, (iii) a financial covenant in the form of a minimum interest coverage ratio (as defined therein) of 3.25 to 1.00, and (iv) customary events of default (including a change of control) for financings of this type.

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

The Revolving Credit Agreement also contains (i) certain customary affirmative covenants, including those that impose certain reporting and/or performance obligations on KDP and its subsidiaries, (ii) certain customary negative covenants that generally limit, subject to various exceptions, KDP and its subsidiaries from taking certain actions, including, without limitation, incurring liens, consummating certain fundamental changes and entering into transactions with affiliates, (iii) a financial covenant in the form of a minimum interest coverage ratio of 3.25 to 1.00, and (iv) customary events of default (including a change of control) for financings of this type.

As of December 31, 2024, we were in compliance with our minimum interest coverage ratio relating to the Revolving Credit Agreement .

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Commercial Paper Program

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

KDP has a commercial paper program, under which we 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.

The Company issues commercial paper notes as needed for general corporate purposes.

We issue commercial paper notes as needed for general corporate purposes.

Outstanding commercial paper notes rank equally with all of the commercial paper notes' existing and future unsecured borrowings.

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

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

For the Year Ended December 31,

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Letters of Credit Facility

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

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

Under this facility, $ 150 million is available for the issuance of letters of credit, $ 74 million of which was utilized as of December 31, 2024 and $ 76 million of which remains available for use.

FAIR VALUE DISCLOSURES

The fair values of the Company's commercial paper notes approximate the carrying value and are considered Level 2 within the fair value hierarchy.

The fair values of the Company's Notes are based on current market rates available to the Company 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 the Company's Notes was $ 10,486 million and $ 10,495 million as of December 31, 2023 and December 31, 2022, respectively.

The fair value of our Notes was $ 12,036 million and $ 10,486 million as of December 31, 2024 and 2023, respectively.

GHOST TRANSACTIONS

On October 23, 2024, we entered into a definitive agreement with GHOST, and certain other parties named therein, to acquire a controlling interest in GHOST.

Founded in 2016, GHOST is a lifestyle sports nutrition business with a portfolio anchored by GHOST Energy, a leading ready-to-drink energy brand.

Under the terms of the agreement, we initially purchased a 60 % stake in GHOST for aggregate consideration of $ 999 million, which included customary adjustments.

We also entered into an agreement which requires us to purchase the remaining equity interests in GHOST in 2028.

Separately from the above transaction, we also executed an agreement with GHOST and ABI which terminates the distribution rights for certain GHOST products by ABI, effective March 3, 2025, for a termination payment to ABI of $ 225 million.

At that time, we will assume the distribution of such products.

The termination payment was accrued as of December 31, 2024, with the corresponding expense included within Other operating expense (income), net in the Consolidated Statements of Income.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Under the acquisition method of accounting, total consideration was as follows:

(in millions) Total Consideration

Initial payment to acquire 60% of GHOST $ 999

Fair value of mandatory redemption liability for the remainder of the business on December 31, 2024 (1)

Total consideration $ 1,688

(1) The fair value of our mandatory redemption liability is estimated using the Monte Carlo simulation method which includes forecasted EBITDA expectations, adjusting for market risks and volatility, calculating redemption prices, discounting to present terms with the cost of debt, and averaging results across scenarios to determine fair value, incorporating the market price of risk and volatility estimates from similar companies.

The initial payment of $ 999 million was funded primarily by proceeds drawn from the Term Loan Agreement.

Refer to Note 3 for additional information.

Allocation of Consideration

Our preliminary allocation of consideration to the net tangible and intangible assets acquired and liabilities assumed in the GHOST Transactions is based on estimated fair values as of December 31, 2024.

The following is a summary of the preliminary allocation of consideration to the estimated fair values of assets acquired and liabilities assumed in the GHOST Transactions as of December 31, 2024:

(in millions) Fair Value

Brand $ 1,146

Assets acquired, net of liabilities assumed 82

Customer relationships 23

Total consideration 1,688

Holdback placed in escrow (1)

Acquisition of business $ 1,598

(1) Amount includes both the current and non-current portion of the holdback liability.

Refer to Note 17 for additional information.

The GHOST Transactions preliminarily resulted in $ 437 million of goodwill.

The goodwill to be recognized is attributable to revenue synergies, driven by a strong portfolio of brands with exposure to higher growth segments and the ability to leverage our collective distribution strength, as well as operational and general and administrative cost synergies.

The goodwill created in the GHOST Transactions is expected to be deductible for tax purposes.

All of the goodwill is included in our U.S.

Refreshment Beverages segment.

We have not presented estimated unaudited pro forma results of operations for the GHOST Transactions or the actual results of GHOST because it is not material to our consolidated financial statements.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

OTHER IMMATERIAL ACQUISITIONS

Kalil Acquisition

On May 30, 2024, we entered into an agreement with Kalil, under which we agreed to acquire all of Kalil’s production, sales, and distribution assets for total consideration of $ 103 million, subject to certain adjustments outlined in the agreement.

Kalil is an independent bottler with bottling and distribution rights in Arizona to key KDP brands, including Canada Dry, 7UP, A&W, Snapple, and Core Hydration.

On August 9, 2024, we completed the Kalil Acquisition, and approximately $ 8 million of cash was held back and placed in escrow.

Our preliminary allocation of consideration exchanged to the net tangible and intangible assets acquired and liabilities assumed in the Kalil Acquisition is based on estimated fair values as of August 9, 2024, and the consideration was primarily allocated to property, plant, and equipment and other intangible assets.

We spent $ 6 million in connection with an immaterial acquisition during the year ended December 31, 2024.

Goodwill and Other Intangible Assets

Changes in the carrying amount of goodwill by reportable segment are as follows:

(in millions) U.S.

Refreshment Beverages U.S.

Coffee International Total

Balance as of December 31, 2022 $ 8,714 $ 8,622 $ 2,736 $ 20,072

Foreign currency translation — — 130 130

Balance as of December 31, 2023 8,714 8,622 2,866 20,202

Acquisitions (1)

Impairment (2)

( 306 ) — — ( 306 )

Foreign currency translation — — ( 290 ) ( 290 )

Balance as of December 31, 2024 (3)

$ 8,855 $ 8,622 $ 2,576 $ 20,053

(1) Acquisition activity during the year ended December 31, 2024 represents goodwill recorded as a result of the 2024 acquisitions.

Refer to Note 4 for additional information.

(2) Impairment activity during the year ended December 31, 2024 represents impairment of our U.S.

WD reporting unit.

Refer to Impairment Analysis - 2024 Impairment Analysis below for further information.

(3) As of December 31, 2024, goodwill for the U.S.

Refreshment Beverages segment is inclusive of accumulated impairment losses of $ 306 million.

There were no accumulated impairment losses for goodwill as of December 31, 2023 or 2022.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

INTANGIBLE ASSETS OTHER THAN GOODWILL

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

December 31, 2024 December 31, 2023

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

Intangible assets with definite lives:

Acquired technology $ 1,146 $ ( 621 ) $ 525 $ 1,146 $ ( 548 ) $ 598

Customer relationships 666 ( 270 ) 396 638 ( 236 ) 402

Contractual arrangements 144 ( 21 ) 123 146 ( 13 ) 133

Trade names 126 ( 124 ) 2 126 ( 114 ) 12

Brands 51 ( 32 ) 19 51 ( 25 ) 26

Distribution rights 66 ( 23 ) 43 29 ( 22 ) 7

Total intangible assets with definite lives $ 2,199 $ ( 1,091 ) $ 1,108 $ 2,136 $ ( 958 ) $ 1,178

Intangible assets with indefinite lives:

$ 19,848 $ 19,476

Trade names 2,478 2,478

Distribution rights (2)

Total intangible assets with indefinite lives 22,526 22,109

Other intangible assets, net $ 23,634 $ 23,287

(1) The change in brands with indefinite lives was driven by the acquisition of the GHOST brand in the amount of $ 1,146 million, which was partially offset by non-cash impairment charges of $ 412 million and unfavorable foreign currency translation impacts of $ 362 million during the year ended December 31, 2024.

Refer to Impairment Analysis - 2024 Impairment Analysis below for further information.

(2) The increase in distribution rights with indefinite lives during the year ended December 31, 2024 was primarily driven by acquired distribution rights related to Electrolit of $ 49 million .

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

Year Ended December 31,

(in millions) 2024 2023 2022

Amortization expense $ 133 $ 137 $ 138

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

For the Years Ending December 31,

(in millions) 2025 2026 2027 2028 2029

Expected amortization expense $ 127 $ 123 $ 107 $ 99 $ 96

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

GOODWILL AND OTHER INTANGIBLE ASSETS IMPAIRMENT

2024 Impairment Analysis

For the year ended December 31, 2024, we performed a Step 0 analysis for certain indefinite lived intangible assets, including trade names and distribution rights, and did not identify any indicators of impairment.

For goodwill and indefinite-lived brands, we performed a Step 1 analysis.

As a result, non-cash impairment charges of $ 412 million were recorded specific to certain brands in the U.S.

Refreshment Beverages segment, and a non-cash impairment charge of $ 306 million was recorded to goodwill related to the U.S.

Warehouse Direct reporting unit in the U.S.

Refreshment Beverages segment.

The primary factors that led to the brand impairment determination as of October 1, 2024, primarily led by Snapple, were a downward outlook for operating cash flows in our strategic plan, which led to a reduction in the long-term growth rate.

The primary factors that led to the goodwill impairment determination as of October 1, 2024, driven by our U.S.

Warehouse Direct reporting unit, were headwinds experienced by certain brands in our still portfolio, including a downward outlook for operating cash flows in our strategic plan, which led to a reduction in the long-term growth rate.

2023 Impairment Analysis

For the year ended December 31, 2023, we performed a Step 1 analysis on all goodwill and indefinite-lived intangible assets.

No impairments were recorded as a result of these analyses.

2022 Impairment Analysis

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

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

Refreshment Beverages segment.

During our annual impairment analysis, we 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, we performed a Step 1 analysis which resulted in non-cash impairment charges of $ 161 million were recorded specific to certain brands during the year.

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

Additional Impairment Considerations

The following table provides the range of rates considered to be significant inputs that were used in the annual impairment analyses as of October 1, 2024, 2023, and 2022:

2024 2023 2022

Rate Minimum Maximum Minimum Maximum Minimum Maximum

Discount rates 7.0 % 9.5 % 8.0 % 13.5 % 7.3 % 10.3 %

Long-term growth rates — % 3.5 % — % 4.0 % — % 3.8 %

Royalty rates (1)

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

(1) Royalty rates were used in a Step 1 quantitative analysis of certain non-priority brands for the years ended December 31, 2024 and 2023, and trade names for the year ended December 31, 2023.

For the year ended December 31, 2022, royalty rates were not used, as we performed a Step 0 qualitative analysis for both trade names and certain non-priority brands.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The results of the impairment analyses of our indefinite lived brands as of October 1, 2024, 2023, and 2022 are as follows:

2024 2023 2022

Headroom Percentage Carrying Value Fair Value Carrying Value Fair Value Carrying Value Fair Value

$ 280 $ 280 $ — $ — $ 2,136 $ 2,136

Less than 25% 2,580 2,900 2,274 2,493 2,186 2,547

26 - 50% 1,488 2,160 2,339 3,018 — —

In excess of 50% 14,481 34,490 14,767 29,002 14,848 28,942

(1) Carrying value reflects the results of the annual impairment analysis recognized during the years ended December 31, 2024 and 2022.

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, 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.

As of December 31, 2024, economic interest rate derivative instruments have maturities ranging from May 2035 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, 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, net over the respective terms of the issued Notes.

In April 2022, KDP terminated $ 1.5 billion of notional amount of its $ 2.5 billion forward starting swaps, which had been designated as cash flow hedges.

Upon termination, KDP received $ 125 million to settle the contracts with the counterparties, which is 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 the de-designation was recorded to AOCI.

As the forecasted debt transaction was 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.

The fair value of the instruments as of the date of de-designation remained in AOCI until March 2024, when 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.

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

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FOREIGN EXCHANGE

KDP is exposed to foreign exchange risk in its international subsidiaries, which may transact in currencies that are different from the functional currencies of those subsidiaries.

The balance sheets of each of these businesses are also subject to exposure from movements in exchange rates.

We are exposed to foreign exchange risk in our foreign subsidiaries and 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 these subsidiaries are subject to exposure from movements in exchange rates.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Economic Hedges

KDP holds FX forward contracts to economically manage the balance sheet exposures resulting from changes in the FX exchange 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 Consolidated Statements of Income as the associated risk.

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

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2024, these FX contracts have maturities ranging from January 2025 to September 2026.

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.

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

dollars of our Canadian and Mexican businesses.

The intent of these FX contracts is to provide predictability in our overall cost structure.

As of December 31, 2024, these FX contracts have maturities ranging from January 2025 to December 2025.

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.

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 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 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.

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 December 31, 2024, these commodity contracts have maturities ranging from January 2025 to July 2026.

NOTIONAL AMOUNTS OF DERIVATIVE INSTRUMENTS

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

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

(in millions) 2024 2023

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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 — 3,200

3 unchanged sentences

(1) Notional value for commodity contracts is calculated as the expected volume times strike price per unit on a gross basis.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FAIR VALUE OF DERIVATIVE INSTRUMENTS

The fair values of commodity contracts, interest rate contracts and FX forward contracts are determined based on inputs that are readily available in public markets or can be derived from information available in publicly quoted markets.

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.

The fair values 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 our contracts and credit risk of the counterparties.

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

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

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Therefore, we have categorized these contracts as Level 2.

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 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 Consolidated Balance Sheets.

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

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Commodity contracts Prepaid expenses and other current assets 32 9

Interest rate contracts Other non-current assets — 49

FX forward contracts Other non-current assets 4 —

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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 which are designated as hedging instruments within the Consolidated Balance Sheets.

The following table summarizes the fair value hierarchy and the location of the fair value of our 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.

1 unchanged sentence

FX contracts Prepaid expenses and other current assets $ 41 $ 1

FX contracts Other non-current assets — 1

Interest rate contracts Other non-current assets — 88

FX contracts Other current liabilities $ — $ 14

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(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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

We expect to reclassify approximately $ 13 million and $ 38 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.

The following table presents the components of lease cost:

10 unchanged sentences

(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:

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

For the Year Ended December 31,

7 unchanged sentences

Finance leases 196 109 104

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

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

Weighted average discount rate

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Finance leases 9 years 9 years

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS

Future minimum lease payments under non-cancellable leases as of December 31, 2023 were as follows:

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

(in millions) Operating Leases Finance Leases

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SIGNIFICANT LEASES THAT HAVE NOT YET COMMENCED

As of December 31, 2023, the Company has entered into leases that have not yet commenced with estimated aggregated future lease payments of approximately $ 169 million.

These leases will commence between 2024 and 2026, with initial lease terms ranging from 4 to 10 years.

As of December 31, 2024, we have entered into leases that have not yet commenced with estimated aggregated future lease payments of approximately $ 148 million.

These leases will commence between 2025 and 2027, with initial lease terms ranging from 1 year to 7 years.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ASSET SALE-LEASEBACK TRANSACTIONS

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.

Gains on the sale-leasebacks are recorded in Other operating income, net, and the leasebacks are accounted for as operating leases.

(in millions) Sale Proceeds Carrying Value Gain on Sale

March 31, 2023 (1)

March 31, 2022 (2)

November 30, 2022 (3)

December 14, 2022 (1)

December 29, 2021 (4)

(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.

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

In 2022 and 2023, we entered into a number of asset sale-leaseback transactions with a single sponsor, the Veyron SPEs.

Gains on the sale-leasebacks are recorded in Other operating expense (income), net, and the leasebacks are accounted for as operating leases.

Gains on sale-leaseback transactions were as follows:

For the Year Ended December 31,

(in millions) 2024 2023 2022

Gain on sale $ — $ 6 82

The initial term of each leaseback is 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.

Each leaseback has a RVG.

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

Each leaseback has an RVG.

Refer to Note 19 for additional information about RVGs associated with asset sale-leaseback transactions.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

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

The prior period segment disclosures reflect the revised presentation.

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:

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.

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 operating segments.

◦ 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 provided to the CODM, which is Tim Cofer, our CEO.

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

The CODM periodically monitors our actual results and remaining forecast versus our annual budget for these financial measures, and this information is used to assess performance of the reportable segments, determine the payout of short-term incentive plan compensation, and to establish management’s base salaries.

Intersegment sales are recorded at cost and are eliminated in the 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.

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

We have not provided disclosures of intersegment sales or total assets for each reportable segment, as our CODM does not review and is not provided with this information.

“Other segment expense (income)” includes Other operating expense (income), net, as well as other financial statement captions for infrequent charges, such as impairment of goodwill or intangible assets, used to arrive at “Income from operations - reportable segments”.

“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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Information about our operations and significant expenses by reportable segment is as follows:

(in millions) U.S.

Refreshment Beverages U.S.

Coffee International Total

For the Year Ended December 31, 2024

(in millions) 2023 2022 2021

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

Net sales $ 9,331 $ 3,967 $ 2,053 $ 15,351

Cost of sales 3,608 2,210 996

SG&A expenses 2,904 684 521

Other segment expense (income) (1)

941 ( 6 ) ( 9 )

Income from operations - reportable segments $ 1,878 $ 1,079 $ 545 $ 3,502

Unallocated corporate costs ( 911 )

Income from operations 2,591

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

Coffee 1,158 1,215 1,306

International 475 373 382

Interest expense, net 735

Impairment of investments and note receivable 2

Other (income) expense, net ( 60 )

Income before provision for income taxes $ 1,914

(1) During the year ended December 31, 2024, Other segment items within the U.S.

Refreshment Beverages segment primarily consisted of non-cash impairment charges of $ 412 million recorded specific to certain indefinite-lived brand assets and $ 306 million recorded to the WD reporting unit goodwill.

Refer to Note 5 for additional information about these non-cash impairment charges.

Other segment items within the U.S.

Refreshment Beverages segment also included the $ 225 million termination payment to ABI for distribution rights related to the GHOST Transactions.

Refer to Note 4 for additional information.

(in millions) U.S.

Refreshment Beverages U.S.

Coffee International Total

For the Year Ended December 31, 2023

Net sales $ 8,821 $ 4,071 $ 1,922 $ 14,814

Cost of sales 3,536 2,228 979

SG&A expenses 2,810 691 476

Other segment income ( 8 ) ( 6 ) ( 8 )

Income from operations - reportable segments $ 2,483 $ 1,158 $ 475 $ 4,116

Unallocated corporate costs ( 924 )

Income from operations $ 3,192

Interest expense, net 496

Other (income) expense, net ( 61 )

Income before provision for income taxes $ 2,757

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions) 2023 2022

Identifiable operating assets

Refreshment Beverages $ 28,750 $ 28,987

Coffee 13,944 14,220

International 7,155 6,873

Segment total 49,849 50,080

Unallocated corporate assets 894 757

Total identifiable operating assets 50,743 50,837

Investments in unconsolidated affiliates 1,387 1,000

Total assets $ 52,130 $ 51,837

(in millions) U.S.

Refreshment Beverages U.S.

Coffee International Total

For the Year Ended December 31, 2022

Net sales $ 8,083 $ 4,302 $ 1,672 $ 14,057

Cost of sales 3,318 2,415 891

SG&A expenses 2,637 726 422

Other segment expense (income) (1)

167 ( 54 ) ( 14 )

Income from operations - reportable segments $ 1,961 $ 1,215 $ 373 $ 3,549

Unallocated corporate costs ( 944 )

Income from operations $ 2,605

Interest expense, net 693

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 14

Income before provision for income taxes $ 1,719

(1) During the year ended December 31, 2022, Other segment items under the U.S.

Refreshment Beverages segment primarily consisted of noncash impairment charges of $ 472 million recorded specific to certain indefinite-lived brand assets.

Refer to Note 5 for additional information.

This was offset by a $ 271 million gain on litigation settlement.

Other segment items under the U.S.

Coffee segment primarily consisted of a $ 30 million gain on sale related to asset sale-leaseback transaction.

GEOGRAPHIC DATA

The following table presents information about the Company's operations by geographic region:

The following tables present information about our operations by geographic region:

For the Year Ended December 31,

1 unchanged sentence

$ 13,368 $ 12,961 $ 12,454

International 1,853 1,603 1,416

Foreign 1,983 1,853 1,603

Net sales $ 15,351 $ 14,814 $ 14,057

2 unchanged sentences

$ 2,450 $ 2,247

International 452 403

Foreign 514 452

Total property, plant, and equipment, net $ 2,964 $ 2,699

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 three of the Company’s reportable segments.

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

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

The following table provides our net sales to Walmart:

For the Year Ended December 31,

1 unchanged sentence

Walmart $ 2,514 $ 2,476 $ 2,184

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.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Additionally, customers in our U.S.

Refreshment Beverages and International segments buy concentrate from KDP, which is used in finished goods sold by our third party bottlers to Walmart.

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

Revenue Recognition

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

The following table disaggregates our revenue by portfolio:

(in millions) U.S.

22 unchanged sentences

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

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Earnings Per Share

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

The following table presents our basic and diluted EPS and shares outstanding:

For the Year Ended December 31,

(in millions, except per share data) 2024 2023 2022

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

Net income $ 1,441 $ 2,181 $ 1,436

Weighted average common shares outstanding 1,362.2 1,399.3 1,416.8

4 unchanged sentences

Anti-dilutive shares excluded from the diluted weighted average shares outstanding calculation 0.8 1.0 —

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Employee Benefit Plans

DEFINED BENEFIT PENSION PLANS

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

To participate in the defined benefit plans, eligible employees must have been employed by the Company for at least one year.

Employee benefit plan obligations and expenses included in the Company's consolidated financial statements are determined using actuarial analyses based on plan assumptions including employee demographic data such as years of service and compensation, benefits and claims paid, and employer contributions, among others.

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

One of the Company's U.S.

We have several non-contributory defined benefit plans, each having a measurement date of December 31.

To participate in the defined benefit plans, eligible employees must have been employed for at least one year.

Employee benefit plan obligations and expenses included in the consolidated financial statements are determined using actuarial analyses based on plan assumptions including employee demographic data such as years of service and compensation, benefits and claims paid, and employer contributions, among others.

We also participate in various multi-employer defined benefit plans.

One of our U.S.

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

2 unchanged sentences

Treasury Bill rates, plus 1%, with a required minimum rate of 5%.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Financial Statement Impact

The following table sets forth amounts recognized in the Company's financial statements and the pension plans' funded status:

The following table sets forth amounts recognized in our financial statements and the pension plans' funded status:

As of December 31,

4 unchanged sentences

Interest cost 9 9

Actuarial losses (gains), net 11 ( 53 )

Actuarial (gains) losses, net ( 5 ) 11

Benefits paid ( 5 ) ( 5 )

Impact of changes in FX rates ( 4 ) 2

Plan amendments — 3

Settlements ( 8 ) ( 10 )

2 unchanged sentences

Beginning balance $ 134 $ 126

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

Actual return on plan assets — 11

Employer contributions 6 12

3 unchanged sentences

Net liability recognized $ ( 32 ) $ ( 35 )

Non-current assets $ — $ 2

Current liability $ ( 1 ) $ ( 2 )

Non-current liability ( 31 ) ( 33 )

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 accumulated benefit obligations for all defined benefit pension plans were $ 156 million and $ 165 million as of December 31, 2024 and 2023, respectively.

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

4 unchanged sentences

Aggregate fair value of plan assets 127 134

The following table summarizes the components of the Company's net periodic benefit cost:

The following table summarizes the components of our net periodic benefit cost:

For the Year Ended December 31,

5 unchanged sentences

Total net periodic benefit costs $ 7 $ 5 $ 3

The Company uses the corridor approach for amortization of actuarial gains or losses.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

We use the corridor approach for amortization of actuarial gains or losses.

The corridor is calculated as 10% of the greater of the plans’ projected benefit obligation or assets.

1 unchanged sentence

The estimated service costs or net actuarial losses for the defined benefit pension plans amortized from AOCI into periodic benefit cost in 2025 are expected to be insignificant.

The following table summarizes amounts included in AOCI for the Company’s defined benefit plans:

The following table summarizes amounts included in AOCI for our defined benefit plans:

As of December 31,

4 unchanged sentences

Contributions and Expected Benefit Payments

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:

The following table summarizes the contributions made to our defined benefit plans for the years ended December 31, 2024, 2023, and 2022, as well as our projected contributions for the year ended December 31, 2025:

Projected For the Year Ended December 31,

1 unchanged sentence

Non-discretionary contributions $ 7 $ 6 $ 12 $ 3

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

The following table summarizes the estimated future benefit payments for our defined benefit plans:

(in millions) 2025 2026 2027 2028 2029 2030-2034

Estimated future benefit payments $ 15 $ 13 $ 14 $ 13 $ 14 $ 69

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Actuarial Assumptions

The Company's pension expense was calculated based upon a number of actuarial assumptions including discount rates, retirement age, mortality rates, compensation rate increases and expected long-term rate of return on plan assets for pension benefits.

The discount rate that was utilized for determining the Company’s projected benefit obligations as of December 31, 2023 and 2022, as well as projected 2024 net periodic benefit cost, for U.S.

Our pension expense was calculated based upon a number of actuarial assumptions including discount rates, retirement age, mortality rates, compensation rate increases and expected long-term rate of return on plan assets for pension benefits.

The following information is provided for our U.S.

defined benefit pension plans, as our foreign defined benefit pension plans are not material to our consolidated financial statements.

The discount rate that was utilized for determining our projected benefit obligations as of December 31, 2024 and 2023, as well as projected 2025 net periodic benefit cost, for U.S.

plans was selected based upon an interest rate yield curve.

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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 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.

plans, we used the Pri-2012 mortality tables and the Mortality Improvement Scale MP-2021, published by the Society of Actuaries’ Retirement Plans Experience Committee, for the years ended December 31, 2024 and 2023.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

As of December 31,

Weighted average discount rate 5.10 % 5.40 %

Discount rate 5.60 % 5.10 %

Rate of increase in compensation levels 3.00 % 3.00 %

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2024 2023 2022

Weighted average discount rate 5.10 % 5.40 % 2.55 %

Discount rate 5.60 % 5.10 % 5.40 %

Rate of increase in compensation levels 3.00 % 3.00 % 3.00 %

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For the years ended December 31, 2024, 2023, and 2022, the expected long-term rate of return on U.S.

pension fund assets held by the Company's pension trusts was determined based on several factors, including the impact of active portfolio management and projected long-term returns of broad equity and bond indices.

pension fund assets held by our pension trusts was determined based on several factors, including the impact of active portfolio management and projected long-term returns of broad equity and bond indices.

The plans' historical returns were also considered.

The expected long-term rate of return on the assets in the plans was based on an asset allocation assumption for fixed income and equity as follows:

For the Year Ended December 31,

2023 2022 2021

Fixed income securities:

Asset allocation assumption 80.00 % 80.00 % 80.00 %

Expected long-term rate of return 4.75 % 6.00 % 3.40 %

Equity securities:

Asset allocation assumption 20.00 % 20.00 % 20.00 %

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

The Company has established formal investment policies for the assets associated with defined benefit pension plans.

The Company's investment policy and strategy are mandated by the Company's Investment Committee.

We have established formal investment policies for the assets associated with our U.S.

defined benefit pension plans.

Our investment policy and strategy are mandated by our Investment Committee.

The overriding investment objective is to provide for the availability of funds for pension obligations as they become due, to maintain an overall level of financial asset adequacy, and to maximize long-term investment return consistent with a reasonable level of risk.

The Company's pension plan investment strategy includes the use of actively-managed securities.

Investment performance both by investment manager and asset class is periodically reviewed, as well as overall market conditions with consideration of the long-term investment objectives.

None of the plan assets are invested directly in equity or debt instruments issued by the Company.

It is possible that insignificant indirect investments exist through its equity holdings.

The equity and fixed income investments under the Company's sponsored pension plan assets are currently well diversified.

We actively manage the investments in our portfolio, with periodic review of investment performance both by investment manager and asset class, as well as review of overall market conditions and consideration of our long-term investment objectives.

The equity and fixed income investments under our sponsored pension plan assets are currently well diversified.

The plans' asset allocation policy is reviewed at least annually.

Factors considered when determining the appropriate asset allocation include changes in plan liabilities, an evaluation of market conditions, tolerance for risk and cash requirements for benefit payments.

As of December 31, 2023 and 2022, the Company was in compliance with the investment policy for the U.S.

defined benefit pension plans, which contains allowable ranges in asset mix of 5 - 15 % for U.S.

As of December 31, 2023, we were in compliance with the investment policy for the U.S.

defined benefit pension plans, which contained allowable ranges in asset mix of 5 - 15 % for U.S.

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

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

The majority of these PRMB plans have been frozen.

To participate in the defined benefit plans, eligible employees must have been employed by the Company for at least one year.

The PRMB plans are limited to qualified expenses and are subject to deductibles, co-payment provisions and other provisions.

The Company's PRMB plans are not significant to the Company's consolidated financial statements as of December 31, 2023 and 2022.

FAIR VALUE OF THE PENSION AND PRMB ASSETS

The fair value hierarchy is not only applicable to assets and liabilities that are included in the Company's Consolidated Balance Sheets, but is also applied to certain other assets that indirectly impact the Company's consolidated financial statements.

Assets contributed by the Company to pension or other PRMB plans become the property of the individual plans.

Even though the Company no longer has control over these assets, we are indirectly impacted by subsequent fair value adjustments to these assets.

The actual return on these assets impacts the Company's future net periodic benefit cost, as well as amounts recognized in the Company's Consolidated Balance Sheets.

As such, the Company uses the fair value hierarchy to measure the fair value of assets held by the Company's various pension and PRMB plans.

The following tables present the major categories of plan assets and the respective fair value hierarchy for the pension and PRMB plan assets:

Fair Value Measurement as of December 31,

(in millions) Fair Value Hierarchy Level Pension Assets PRMB Assets Pension Assets PRMB Assets

Cash and cash equivalents Level 1 $ 1 $ — $ 3 $ —

During the year ended December 31, 2024, we revised our investment policy for our U.S.

defined benefit pension plans.

As of December 31, 2024, we were in compliance with the investment policy, which allows for a varying asset allocation dependent on each plan’s funded status, as follows:

Target allocation

Return-seeking (1)

Liability-hedging (2)

(1) Return-seeking assets generally consist of common collective trust funds comprised of equity securities, liquid alternatives, and fixed income securities.

(2) Liability-hedging assets consist of common collective trust funds comprised of a mix of fixed income securities and hedging instruments aimed to achieve a target interest rate.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FAIR VALUE OF THE PENSION ASSETS

Assets contributed by KDP to our pension plans become the property of the individual plans.

Even though we no longer have control over these assets, we are indirectly impacted by subsequent fair value adjustments to these assets.

The actual return on these assets impacts our future net periodic benefit cost, as well as amounts recognized in the Consolidated Balance Sheets.

As such, we use a variety of valuation techniques depending on the type of instrument in order to measure the fair value of assets held by our pension plans.

In conjunction with the revised investment policy discussed above, we implemented changes to the structure of assets held by our pension plans.

With the exception of Cash and cash equivalents, all pension assets are comprised of common collective trust funds, which are valued using NAV as a practical expedient.

Such assets have not been categorized in the fair value hierarchy.

The following table presents the total fair value of major categories of the pension plan assets for the year ended December 31, 2024:

(in millions) Level 1 NAV Total

Cash and cash equivalents $ 23 $ — $ 23

Investments measured at NAV (1)

Total fair value of plan assets $ 23 $ 104 $ 127

(1) Primarily consists of common collective trust funds, which are valued at NAV based on the fair value of the underlying investments.

The following table presents the total fair value of major categories of the pension plan assets for the year ended December 31, 2023:

(in millions) Level 1 Level 2 Total

Cash and cash equivalents $ 1 $ — $ 1

equity securities (1)(2)

Level 2 14 1 15 —

International equity securities (1)(2)

Level 2 6 6 5 6

Fixed income securities (3)

Level 2 113 1 103 1

Total $ 134 $ 8 $ 126 $ 7

Total fair value of plan assets $ 1 $ 133 $ 134

(1) Equity securities are comprised of actively managed U.S.

4 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

We have several non-contributory defined benefit PRMB plans, each having a measurement date of December 31.

The majority of these PRMB plans have been frozen.

To participate in the defined benefit plans, eligible employees must have been employed by KDP for at least one year.

The PRMB plans are limited to qualified expenses and are subject to deductibles, co-payment provisions, and other provisions.

Our PRMB plans are not significant to the consolidated financial statements as of December 31, 2024 and 2023.

MULTI-EMPLOYER PLANS

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.

We participate 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.

1 unchanged sentence

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

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.

Multi-employer plan expenses were $ 11 million, $ 6 million, and $ 5 million for each of the years ended December 31, 2024, 2023, and 2022, respectively.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Individually Significant Multi-Employer Plan

The Company participates in one multi-employer plan, Central States, which is considered to be individually significant.

We participate in one multi-employer plan, Central States, which is considered to be individually significant.

The following table presents information about Central States as of December 31, 2024:

2 unchanged sentences

Expiration dates of collective bargaining agreements (1)

January 25, 2024 through May 6, 2026

March 20, 2025 through May 3, 2027

Financial Improvement Plan/Rehabilitation Plan status pending/implemented Implemented

Pension Protection Act zone status Red

Pension Protection Act zone status Critical

Surcharge imposed Yes

(1) Central States includes seven collective bargaining agreements.

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.

(1) Central States includes six collective bargaining agreements as of December 31, 2024.

The largest agreement, which is set to expire February 28, 2027, covers approximately 61 % of the employees included in Central States.

Two of the collective bargaining agreements are set to expire during 2025, covering approximately 22 % of the employees included in Central States.

In January 2024, one union decertified, triggering a partial withdrawal liability.

The impact was immaterial to our consolidated financial statements.

The most recent Pension Protection Act zone status available as of December 31, 2024 is for the plan's year-end as of December 31, 2023.

Central States has not utilized any extended amortization provisions that affect the calculation of the zone status.

The Company's contributions to Central States did not exceed 5% of the total contributions made to Central States for the years ended December 31, 2023, 2022, and 2021.

Our contributions to Central States did not exceed 5% of the total contributions made to Central States for the years ended December 31, 2024, 2023, and 2022.

Future estimated contributions to Central States based on the number of covered employees and the terms of the collective bargaining agreements are as follows:

1 unchanged sentence

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

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DEFINED CONTRIBUTION PLANS

The Company sponsors various qualified defined contribution plans that cover U.S.

We sponsor various qualified defined contribution plans that cover U.S.

and foreign based employees who meet certain eligibility requirements.

plans permit both pre-tax and after-tax contributions, which are subject to limitations imposed by IRS regulations.

The Company makes matching contributions and discretionary profit sharing contributions to these plans.

The Company incurred contribution expense of $ 64 million, $ 61 million, and $ 73 million to the defined contribution plan for the years ended December 31, 2023, 2022, and 2021, respectively.

The Company also sponsors a non-qualified defined contribution plan for employees which is maintained in a rabbi trust and are not readily available to the Company.

Although participants direct the investment of these funds, the investments are classified as trading securities and are included in other non-current assets.

As such, the Company uses the fair value hierarchy to measure the fair value of these trading securities as follows:

As of December 31,

(in millions) Fair Value Hierarchy 2023 2022

Marketable securities - trading Level 1 $ 32 $ 30

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 (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.

We make matching contributions and discretionary profit sharing contributions to these plans.

We incurred contribution expense of $ 67 million, $ 64 million, and $ 61 million to the defined contribution plans for the years ended December 31, 2024, 2023, and 2022, respectively.

We also sponsor a non-qualified defined contribution plan for employees which is maintained in a rabbi trust and is not readily available to us.

The fair value of the securities within this plan was $ 33 million and $ 32 million as of December 31, 2024 and 2023, respectively.

Refer to Note 17 for additional information on mark-to-market activity for the deferred defined compensation plan.

Stock-Based Compensation

7 unchanged sentences

Stock-based compensation expense, net of tax $ 82 $ 97 $ 45

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

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.

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.

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

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.

We 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.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

We 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.

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

RSUs generally vest on the following schedule:

3 unchanged sentences

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.

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

For all RSU grants, we recognize the expense ratably over the vesting period.

RESTRICTED SHARE UNITS

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

The table below summarizes RSU activity:

RSUs Weighted Average Grant Date Fair Value Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value (in millions)

5 unchanged sentences

The weighted average grant date fair value for RSUs granted for the years ended December 31, 2024, 2023, and 2022 was $ 26.66 , $ 30.60 , and $ 35.76 , respectively.

The aggregate intrinsic value of the RSUs vested and released for the years ended December 31, 2023, 2022, and 2021 was $ 189 million, $ 42 million, and $ 333 million, respectively.

The aggregate fair value of the RSUs vested and released for the years ended December 31, 2024, 2023, and 2022 was $ 165 million, $ 134 million, and $ 28 million, respectively.

As of December 31, 2024, there was $ 170 million of unrecognized compensation cost related to unvested RSUs that is expected to be recognized over a weighted average period of 3.2 years.

1 unchanged sentence

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.

Each PSU is equivalent in value to one share of our common stock.

The PSUs vested three years from the beginning date of a predetermined performance period, to the extent that the performance criteria is met 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 maximum payout percentage for all PSUs granted by KDP is 100%.

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.

2 unchanged sentences

The performance period of the PSUs represents the period of time between the PSU grant date and the end of the performance period.

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

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

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

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The table below summarizes PSU activity :

PSUs Weighted Average Grant Date Fair Value Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value (in millions)

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

Granted — — — —

Vested and released ( 107,422 ) 28.80 3

1 unchanged sentence

Balance as of December 31, 2024 — — 0.0 —

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

As of December 31, 2024, there was no remaining unrecognized compensation cost related to unvested PSUs.

STOCK OPTIONS

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

The table below summarizes stock option activity :

Stock Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value (in millions)

Balance as of December 31, 2023 37,452 $ 14.76 3.2 $ 1

Granted — — — —

Exercised ( 37,452 ) 14.76 1

1 unchanged sentence

Exercisable as of December 31, 2024 — — 0.0 —

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

The following table summarizes our investments in unconsolidated affiliates:

(in millions) 2024 2023

Nutrabolt (1)

$ 1,097 $ 960

Athletic Brewing (4)

1 unchanged sentence

Investments in unconsolidated affiliates $ 1,543 $ 1,387

(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.

(1) KDP holds a 35.8 % interest on an as-converted basis in Nutrabolt, consisting of 31.1 % in Class A preferred shares acquired through our December 2022 investment, which are treated as in-substance common stock, and 4.7 % in Class B common shares earned through the achievement of certain milestones included in the distribution agreement with Nutrabolt.

(2) KDP holds a 5.0 % interest in Chobani.

(3) In May 2024, we modified our sales agent contract with Tractor.

In exchange, we received additional equity interests, raising our total interest to 22.5 % as of December 31, 2024.

(4) KDP holds an 11.6 % 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 .

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

We 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.

Our investment in La Colombe was exchanged for common units in Chobani.

Nutrabolt 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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Bedford Investment

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.

Our 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.

We recorded preferred dividends of $ 46 million, $ 44 million, and $ 3 million during the years ended December 31, 2024, 2023, and 2022, respectively, which increased the investment balance for Nutrabolt.

Income before provision for income taxes was as follows:

2 unchanged sentences

$ 696 $ 1,665 $ 789

International 1,092 930 445

Foreign 1,218 1,092 930

Total $ 1,914 $ 2,757 $ 1,719

4 unchanged sentences

State 108 117 97

International 193 156 100

Foreign 242 193 156

Total current provision $ 727 $ 580 $ 573

1 unchanged sentence

State ( 55 ) 2 ( 147 )

International ( 37 ) ( 1 ) ( 2 )

Foreign — ( 37 ) ( 1 )

Total deferred provision ( 254 ) ( 4 ) ( 289 )

8 unchanged sentences

State income taxes, net 2.1 % 3.2 % 2.6 %

Impact of non-U.S.

operations ( 1.7 ) % ( 2.3 ) % 0.1 %

Impact of foreign operations ( 1.4 ) % ( 1.7 ) % ( 2.3 ) %

Tax credits ( 6.2 ) % ( 3.7 ) % ( 3.9 ) %

1 unchanged sentence

taxation of foreign earnings 5.1 % 3.0 % 3.7 %

Goodwill impairment 2.7 % — % — %

Deferred rate change ( 0.4 ) % ( 0.3 ) % ( 5.2 ) %

11 unchanged sentences

Accrued expenses 154 145

Share-based compensation 37 41

Multi-year upfront payments 7 10

Equity method investments 27 48

Derivative instruments 25 —

Research and development capitalization 94 76

Accrued termination fees 56 —

Other 107 121

Total deferred tax assets 680 618

5 unchanged sentences

Right of use assets ( 224 ) ( 226 )

Derivative instruments — ( 9 )

Other ( 42 ) ( 16 )

4 unchanged sentences

CARRYFORWARDS

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

As of December 31, 2024 and 2023, we had $ 30 million and $ 36 million, respectively, in tax-effected net operating loss carryforwards.

Of the $ 30 million of net operating loss carryforwards as of December 31, 2024, $ 27 million will not expire, $ 1 million related to state income tax will begin to expire in 2027, and the remaining $ 2 million related to foreign income tax will begin to expire in the year 2035.

As of both December 31, 2024 and 2023, we had $ 10 million of credit carryforwards.

As of December 31, 2024, the $ 10 million of state tax credit carryforwards will begin to expire in the year 2027.

UNDISTRIBUTED INTERNATIONAL EARNINGS

For the tax year ended December 31, 2023, undistributed earnings in non-U.S.

subsidiaries for which no deferred taxes have been provided totaled approximately $ 532 million.

An actual repatriation from our non-U.S.

subsidiaries could still be subject to additional foreign withholding taxes.

The Company has analyzed our global working capital and cash requirements and continues to be indefinitely reinvested in its undistributed earnings except for amounts in excess of its working capital and cash requirements.

The Company has recorded any potential withholding tax liabilities, if necessary, attributable to repatriation.

VALUATION ALLOWANCES

For the tax year ended December 31, 2024, the Company recognized a net decrease of $ 26 million in its valuation allowances, primarily due to net decreases in the deferred tax assets and related valuation allowances on certain equity method investments.

UNDISTRIBUTED FOREIGN EARNINGS

For the tax year ended December 31, 2024, undistributed earnings in foreign subsidiaries for which no deferred taxes have been provided totaled approximately $ 879 million.

An actual repatriation from our foreign subsidiaries could still be subject to additional foreign withholding taxes.

We have analyzed our global working capital and cash requirements and continue to be indefinitely reinvested in our undistributed earnings, except for amounts in excess of our working capital and cash requirements.

We have recorded any potential withholding tax liabilities, if necessary, attributable to repatriation.

OTHER TAX MATTERS

The Company files income tax returns for U.S.

We file income tax returns for U.S.

federal purposes and in various state jurisdictions.

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

We also file income tax returns in various foreign jurisdictions, principally Canada, Ireland, Mexico, and Singapore.

and most state income tax returns for years prior to 2019 are closed to examination by applicable tax authorities.

Canadian and Mexican income tax returns are generally open for audit for tax years 2018 and forward.

The Company has a tax holiday in Singapore, whereby the local statutory rate is significantly reduced if certain conditions are met.

The tax holiday for Singapore is effective through June 2024.

Canadian and Mexican income tax returns are generally open for audit for tax years 2019 and forward, and Ireland income tax returns are open for audit for tax years 2020 and forward.

We previously had a tax holiday in Singapore, which was effective through June 2024, whereby the local statutory rate is significantly reduced if certain conditions are met.

The impact of the tax holiday increased net income by approximately $ 2 million, $ 4 million, and $ 6 million for the years ended December 31, 2024, 2023, and 2022, respectively, resulting in no impact to basic and diluted EPS for each of the years ended December 31, 2024, 2023, and 2022.

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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.

During the years ended December 31, 2024 and 2023, we executed agreements with eligible taxpayers to purchase federal tax credits of $ 260 million and $ 270 million, respectively, which will be used against KDP’s federal tax liability.

The discounts negotiated for the transfer of eligible federal tax credits of $ 20 million and $ 16 million were recorded as an income tax benefit on the Consolidated Statements of Income for the years ended December 31, 2024 and 2023, respectively.

KEURIG DR PEPPER INC.

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

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.

We recognized $ 1 million of expense related to interest and penalties for uncertain tax positions for each of the years ended December 31, 2024 and 2023 and no expense for the year ended December 31, 2022.

We had a total of $ 3 million accrued for interest and penalties for our uncertain tax positions reported as part of other non-current liabilities as of both December 31, 2024 and 2023.

Accumulated Other Comprehensive Income (Loss)

The following table provides a summary of changes in AOCI, net of taxes:

(in millions) Foreign Currency Translation Pension and PRMB Liabilities Cash Flow Hedges AOCI

(in millions) Foreign Currency Translation Pension and PRMB Liabilities Cash Flow Hedges Total

Balance as of December 31, 2021 $ 81 $ ( 4 ) $ ( 103 ) $ ( 26 )

OCI before reclassifications ( 14 ) — ( 102 ) ( 116 )

Other comprehensive (loss) income ( 167 ) ( 6 ) 329 156

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

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

Total other comprehensive (loss) income ( 167 ) ( 6 ) 328 155

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

OCI before reclassifications ( 167 ) ( 6 ) 329 156

Other comprehensive income (loss) 288 ( 5 ) ( 41 ) 242

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

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

Total other comprehensive income (loss) 288 ( 4 ) ( 98 ) 186

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

OCI before reclassifications 288 ( 5 ) ( 41 ) 242

Other comprehensive (loss) income ( 612 ) ( 1 ) 33 ( 580 )

Amounts reclassified from AOCI — 1 ( 12 ) ( 11 )

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

Total other comprehensive (loss) income ( 612 ) — 21 ( 591 )

Balance as of December 31, 2024 $ ( 410 ) $ ( 14 ) $ 148 $ ( 276 )

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

For the Year Ended December 31,

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Interest rate contracts (1)

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

Interest expense $ ( 12 ) $ ( 74 ) $ ( 6 )

FX contracts Cost of sales ( 3 ) — 5

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Total, net of tax $ ( 12 ) $ ( 57 ) $ ( 1 )

(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.

(1) Amounts reclassified from AOCI into interest expense 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 6 for additional information on the terminated forward starting swaps.

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Other Financial Information

CASH AND CASH EQUIVALENTS

The carrying value of cash, cash equivalents, restricted cash, and restricted cash equivalents is valued as of the balance sheet date equating fair value and is classified as Level 1.

The following table provides a reconciliation of cash, cash equivalents, restricted cash, and restricted cash equivalents reported with the Consolidated Balance Sheets to the total of the same amounts shown in the Consolidated Statements of Cash Flows:

(in millions) 2024 2023

Cash and cash equivalents $ 510 $ 267

Restricted cash and restricted cash equivalents (1)

Non-current restricted cash and restricted cash equivalents (2)

Total cash, cash equivalents, restricted cash, and restricted cash equivalents $ 608 $ 267

(1) Restricted cash and restricted cash equivalents consists primarily of amounts held in escrow in connection with the acquisitions of GHOST and Kalil, and have a corresponding holdback liability recorded in Other current liabilities, as shown below.

Refer to Note 4 for additional information.

(2) Non-current restricted cash and restricted cash equivalents, reported within Non-current assets on the Consolidated Balance Sheets, consists of amounts held in escrow in connection with the acquisition of GHOST, and has a corresponding holdback liability recorded in Other non-current liabilities.

Refer to Note 4 for additional information.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SELECTED BALANCE SHEET INFORMATION

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Raw materials $ 524 $ 409

Work in process 12 8

Work-in-progress 9 12

Finished goods 798 742

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Allowance for excess and obsolete inventories ( 32 ) ( 21 )

Inventories $ 1,142 $ 1,314

Total inventories $ 1,299 $ 1,142

Prepaid expenses and other current assets:

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Equity securities 89 69

Equity securities without readily determinable fair values — 1

Non-current restricted cash and restricted cash equivalents 18 —

Other 162 156

Total other non-current assets $ 1,200 $ 1,149

(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.

Equity Securities

Fair values of 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.

The following table presents the amount of unrealized mark-to-market (gains) losses, net, on our equity securities recognized in the Consolidated Statements of Income related to these securities during the periods presented.

For the Year Ended December 31,

(in millions) 2024 2023 2022

Unrealized mark-to-market (gains) losses

Vita Coco $ ( 17 ) $ ( 16 ) $ 4

Rabbi trust ( 4 ) ( 6 ) 8

KEURIG DR PEPPER INC.

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Accrued expenses:

Customer rebates & incentives $ 477 $ 429

Accrued customer trade $ 439 $ 477

Accrued compensation 235 208

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Interest accrual 107 72

Accrued termination fees (1)

Accrued transferable tax credits 130 152

Other accrued expenses 391 283

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Derivative instruments 108 150

Holdback liability 80 —

Total other current liabilities $ 835 $ 714

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Finance lease liability 677 620

Long-term pension and postretirement liability 35 37

Mandatory redemption liability (2)

Pension and post-retirement liability 31 35

Insurance reserves 95 85

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Deferred compensation liability 33 32

Holdback liability 18 —

Total other non-current liabilities $ 2,753 $ 1,833

(1) In connection with the GHOST Transactions, we executed an agreement which terminates the distribution rights for certain GHOST products by ABI, effective March 3, 2025, for a termination fee of $ 225 million.

Refer to Note 4 for additional information.

(2) The fair value of our mandatory redemption liability is estimated using the Monte Carlo simulation method which includes forecasted EBITDA expectations, adjusting for market risks and volatility, calculating redemption prices, discounting to present terms with the cost of debt, and averaging results across scenarios to determine fair value, incorporating the market price of risk and volatility estimates from similar companies.

KEURIG DR PEPPER INC.

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Commitments and Contingencies

KDP is occasionally subject to litigation or other legal proceedings.

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.

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.

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 are occasionally subject to litigation or other legal proceedings.

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

We had litigation reserves of $ 2 million and $ 12 million as of December 31, 2024 and 2023, respectively.

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

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

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.

In 2021, the parties filed motions challenging the validity of certain of the other parties’ proposed expert opinions.

In January 2025, the court issued a ruling on these motions, granting challenges to certain expert testimony—including Keurig’s challenge to JBR, Inc.’s damages expert—but largely denying the parties’ motions.

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

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

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

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 KDP or its operations.

Accordingly, we have not accrued for a loss contingency.

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

KEURIG DR PEPPER INC.

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ENVIRONMENTAL, HEALTH, AND SAFETY MATTERS

The Company operates many manufacturing, bottling, and distribution facilities.

In these and other aspects of the Company's business, it is subject to a variety of federal, state, and local environmental, health, and safety laws and regulations.

The Company maintains environmental, health, and safety policies and a quality environmental, health, and safety program designed to ensure compliance with applicable laws and regulations.

However, the nature of the Company's business exposes it to the risk of claims with respect to environmental, health, and safety matters, and there can be no assurance that material costs or liabilities will not be incurred in connection with such claims.

We operate many manufacturing, bottling, and distribution facilities.

In these and other aspects of our business, we are subject to a variety of federal, state, and local environmental, health, and safety laws and regulations.

We maintain environmental, health, and safety policies and a quality environmental, health, and safety program designed to ensure compliance with applicable laws and regulations.

However, the nature of our business exposes us to the risk of claims with respect to environmental, health, and safety matters, and there can be no assurance that material costs or liabilities will not be incurred in connection with such claims.

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 and in Michigan.

We were notified by the Environmental Protection Agency that we are a potentially responsible party for study and cleanup costs at Superfund sites 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.

The Company participates in a study for this site with other potentially responsible parties.

PRODUCT WARRANTIES

KDP offers a one year warranty on all Keurig brewing systems it sells.

KDP provides for the estimated cost of product warranties, primarily using historical information and current repair or replacement costs, at the time product revenue is recognized.

We offer a one year warranty on all Keurig brewing systems.

We provide for the estimated cost of product warranties, primarily using historical information and current repair or replacement costs, at the time product revenue is recognized.

Product warranties are included in accrued expenses in the accompanying Consolidated Balance Sheets.

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Balance as of December 31, 2024 $ 10

Transactions with Variable Interest Entities

INVESTMENTS IN UNCONSOLIDATED AFFILIATES WHICH QUALIFY AS VIEs

Certain of our equity investments are in entities which qualify as VIEs.

We have determined that we are not the primary beneficiary of these VIEs and therefore are not required to consolidate them, as the primary shareholder of each respective 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.

As of December 31, 2024 and 2023, our investments in Nutrabolt and Chobani represent investments in entities which qualify as VIEs but for which we are not the primary beneficiary.

We have no obligation to provide additional funding to these VIEs, and thus our maximum exposure and risk of loss related to these VIEs is limited to the carrying value of our investment.

Refer to Note 13 for the carrying value of these investments.

OTHER TRANSACTIONS WITH VIEs

We have a number of leasing arrangements and one licensing arrangement with special purpose entities 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.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 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, 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.

Each lease has a RVG based on a percentage of the Veyron SPEs’ 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 December 31, 2023 and 2022 were $ 653 million and $ 650 million, respectively.

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

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

As of December 31, 2024, we have entered into sixteen lease transactions with VIEs.

Each lease has an RVG based on a percentage of the VIEs’ purchase price;

however, we concluded it was not probable that we 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, we recorded each lease obligation excluding the associated RVG.

The aggregate maximum undiscounted RVG associated with the leasing arrangements was $ 652 million and $ 653 million as of December 31, 2024 and 2023, 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 we have concluded is not probable.

The following table provides the carrying amounts of the right-to-use assets and lease obligations recorded on the Consolidated Balance Sheets associated with these leasing arrangements related to the VIEs as of December 31, 2024 and 2023:

(in millions) 2024

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Non-current liabilities 376 402

(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.

The leasing agreements included as of December 31, 2024 and 2023 include nine manufacturing sites, five distribution centers, one multipurpose property, 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 December 31, 2023, KDP has not recorded a liability as it is not probable that the Company will have to make any payments required under the residual value guarantee, as the fair value of the distribution rights is not expected to fall below $ 142 million over the term of the agreement.

As of December 31, 2023, KDP had $ 93 million in fixed service fee commitments related to the 15-year distribution agreement which was effective on December 28, 2020, with Veyron SPEs.

As of December 31, 2024, we have not recorded a liability as it is not probable that we will have to make any payments required under the RVG, as the fair value of the distribution rights is not expected to fall below $ 142 million over the term of the agreement.

As of December 31, 2024, we had $ 85 million in fixed service fee commitments related to the 15-year distribution agreement, which was effective on December 28, 2020, with the Veyron SPEs.

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

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 $ 7 $ 8 $ 8 $ 8

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 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 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.

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RESTRUCTURING PROGRAMS

2024 Network Optimization

In March 2024, we announced a restructuring program designed to more effectively and efficiently meet the needs of consumers and customers.

The program initially included the closure of our manufacturing facility in Williston, Vermont, with operations and employees relocating to other existing manufacturing locations.

The relocation began during the second quarter of 2024 and was completed in the third quarter of 2024.

In July 2024, we also announced the closure of our Windsor, Virginia manufacturing facility, which is expected to begin in the first quarter of 2025.

Our restructuring program also encompasses other costs intended to optimize our manufacturing and distribution footprint throughout our operations.

The restructuring program is expected to incur pre-tax restructuring charges in an estimated range of $ 125 million to $ 145 million, primarily comprised of asset related costs, through the second quarter of 2025.

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.

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 Mr.

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

We have also realigned 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 $ 85 million, primarily driven by severance costs, which were substantially completed as of December 31, 2024, and the sign-on bonus for Mr.

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.

As part of the DPS Merger, we 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, we 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.

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

RESTRUCTURING CHARGES

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

Year Ended December 31,

(in millions) 2024 2023 2022

2024 Network Optimization $ 51 $ — $ —

2023 CEO Succession and Associated Realignment 40 35 —

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Total restructuring and integration charges $ 91 $ 35 $ 172

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

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

RESTRUCTURING LIABILITIES

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.

Restructuring liabilities, primarily consisting of workforce reduction costs, were as follows:

(in millions) Restructuring Liabilities

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Balance as of December 31, 2024 $ 44

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Related Parties

IDENTIFICATION OF RELATED PARTIES

Prior to August 19, 2020, KDP was indirectly controlled by JAB, a privately held investor group.

Prior to August 19, 2020, we were indirectly controlled by JAB, a privately held investor group.

Since August 19, 2020, JAB continues to hold a significant but non-controlling interest in KDP.

As of December 31, 2023, JAB beneficially owned approximately 28 % of KDP's outstanding common stock.

JAB and its affiliates also hold investments in a number of other companies that have commercial relationships with the Company.

These commercial relationships may take the form of KDP’s purchase of raw materials, KDP’s license of the companies’ trademarks for use in the manufacturing of K-Cup pods, KDP’s sale of products for resale to retail customers, or KDP’s manufacture or distribution of products to, or on behalf of, these companies.

KDP holds investments in certain brand ownership companies, and in certain instances, the Company also has rights in specified territories to bottle and/or distribute the brands owned by such companies.

KDP purchases inventory from these brand ownership companies and sells finished product to third-party customers, primarily in the U.S.

As of December 31, 2024, JAB beneficially owned approximately 16 % of our outstanding common stock.

JAB and its affiliates also hold investments in a number of other companies that have commercial relationships with us.

These commercial relationships may take the form of our purchase of raw materials, our license of the companies’ trademarks for use in the manufacturing of K-Cup pods, our sale of products for resale to retail customers, or our manufacture or distribution of products to, or on behalf of, these companies.

We hold investments in certain brand ownership companies, and in certain instances, we also have rights in specified territories to bottle and/or distribute the brands owned by such companies.

We purchase inventory from these brand ownership companies and sell finished product to third-party customers, primarily in the U.S.

Additionally, any transactions with significant partners in these investments, such as ABI, are considered related party transactions.

ABI purchases Clamato from KDP and pays the Company a royalty for use of the brand name.

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

ABI purchases Clamato from us and pays us a royalty for use of the brand name.

Refer to Note 13 for additional information about our investments in unconsolidated affiliates.

OPERATING TRANSACTIONS WITH RELATED PARTIES

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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.

(1) Expenses associated with related parties includes a reduction of $ 93 million and $ 42 million related to earned equity for the achievement of certain milestones included in our distribution agreement with related parties, which were recognized as a reduction of cost of sales on the Consolidated Statements of Income for the years ended December 31, 2024 and 2023, respectively.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

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.

Transactions with Related Parties for Distribution Rights

We executed an agreement between KDP, GHOST, and ABI, which terminates the distribution rights for certain GHOST products by ABI, effective March 3, 2025, for $ 225 million, which was accrued as of December 31, 2024, and is expected to be paid during the first quarter of 2025.

Refer to Note 4 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.

We made payments to Nutrabolt totaling $ 8 million and $ 52 million to acquire certain distribution rights during the years ended December 31, 2024 and 2023, respectively.

Refer to Note 5 for additional information.

Subsequent Events

On January 31, 2025, we repaid the first tranche of the Term Loan Agreement using proceeds from commercial paper.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the stockholders and the Board of Directors of Keurig Dr Pepper Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Keurig Dr Pepper Inc.

and subsidiaries (the "Company") as of December 31, 2024 and 2023, the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows, for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 25, 2025, expressed an unqualified opinion on the Company's internal control over financial reporting.