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Item 7. Management’s Discussion and Analysis

2026-02-24 compared with 2025-02-25 · 109 added, 154 removed, 248 unchanged (51% of the section changed)

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

We have a broad portfolio of iconic beverage brands, including Keurig, Dr Pepper, Canada Dry, Mott's, A&W, Peñafiel, Snapple, 7UP, Green Mountain Coffee Roasters, GHOST, Clamato, Core Hydration, and The Original Donut Shop.

KDP has some of the most recognized beverage brands in North America, with significant consumer awareness levels and long histories that evoke strong emotional connections with consumers.

We offer more than 125 owned, licensed, and partner brands, available nearly everywhere people shop and consume beverages through our sales and distribution network.

KDP operates as an integrated brand owner, manufacturer, and distributor.

We believe our integrated business model strengthens our route-to-market and provides opportunities for net sales and profit growth through the alignment of the economic interests of our brand ownership and our manufacturing and distribution businesses through both our DSD system and our WD system.

We market and sell our products to retailers, including supermarkets, mass merchandisers, club stores, pure-play e-commerce retailers, and office superstores;

to restaurants, hotel chains, office product and coffee distributors, and partner brand owners;

and directly to consumers through our website.

Our integrated business model enables us to be more flexible and responsive to the changing needs of our large retail customers and allows us to more fully leverage our scale and reduce costs by creating greater geographic manufacturing and distribution coverage.

We have a broad portfolio of iconic beverage brands, including Dr Pepper, Canada Dry, Mott's, A&W, Peñafiel, GHOST, 7UP, Snapple, Green Mountain Coffee Roasters, Clamato, The Original Donut Shop, and Core Hydration, as well as the Keurig brewing system.

Our beverage brands are some of the most recognized beverage brands in North America, with significant consumer awareness levels and long histories that evoke strong emotional connections with consumers.

We offer more than 125 owned, licensed, and partner brands, supported by powerful distribution capabilities.

Our operating and reportable segments are as follows:

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 our own brands and third-party brands, to third-party bottlers, distributors, and retailers.

from the manufacture and distribution of branded concentrates, syrups, finished beverages, and other consumables, 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.

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As Reported, in millions (except Diluted EPS)

Key Events During and Subsequent to the Fourth Quarter of 2024

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 approximately $1 billion on December 31, 2024.

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

The initial payment was funded primarily by proceeds drawn from the Term Loan Agreement.

We also executed an agreement with GHOST and ABI which transfers the distribution rights for GHOST products from ABI to us, effective March 3, 2025, for a termination payment to ABI of $225 million which will be paid during the first quarter of 2025.

Refer to Note 4 of the Notes to our Consolidated Financial Statements for additional information.

On January 31, 2025, we repaid the amount outstanding under the Term Loan Agreement using proceeds from commercial paper.

Uncertainties and Trends Affecting Our Business

We believe the North American beverage market is influenced by certain key trends and uncertainties.

Refer to Item 1A, Risk Factors , as well as the Uncertainties and Trends Affecting Liquidity and Capital Resources section below, for more information about risks and uncertainties facing us.

Refer to Note 6 of the Notes to our Consolidated Financial Statements and Item 7A, Quantitative and Qualitative Disclosures About Market Risk for management's discussion of how we manage our exposure to commodity risk.

Refer to Note 7 of the Notes to our Consolidated Financial Statements and Item 7A, Quantitative and Qualitative Disclosures About Market Risk for management's discussion of how we manage our exposure to foreign exchange risk, interest rate risk, and commodity risk.

RESULTS OF OPERATIONS

We eliminate from our financial results all intercompany transactions between entities included in our consolidated financial statements and the intercompany transactions with our equity method investees.

References in the financial tables to percentage changes that are not meaningful are denoted by "NM".

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Impairment of goodwill — 306 (306) NM

Impairment of other intangible assets 412 2 410 NM

Other operating expense (income), net 207 (26) 233 NM

Impairment of intangible assets 78 412 (334) NM

Other operating (income) expense, net (5) 207 (212) NM

Income from operations 3,575 2,591 984 38.0 %

Interest expense, net 754 735 19 2.6 %

Impairment of investments and note receivable 2 — 2 NM

Other (income) expense, net (60) (61) 1 NM

Other expense (income), net 134 (58) 192 NM

Income before provision for income taxes 2,687 1,914 773 40.4 %

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Effective tax rate 22.6 % 24.7 % (210) bps

Sales Volume.

The following table provides the change in sales volume compared to the prior year:

Sales Volumes

Percentage Change

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Appliances (18.0) %

Net sales increased $537 million, or 3.6%, to $15,351 million for the year ended December 31, 2024 compared to $14,814 million in the prior year.

This performance reflected volume/mix growth of 2.7% and favorable net price realization of 1.2%, slightly offset by unfavorable impacts from FX translation of 0.3%.

Gross Profit.

Net Sales Drivers

Percentage Change

Volume / mix (1)

Net price realization 3.8 %

(1) The acquisition of GHOST contributed 3.8 percentage points to our consolidated volume / mix growth for the year ended December 31, 2025.

Gross profit increased $470 million, or 5.5%, to $8,999 million for the year ended December 31, 2025 compared to $8,529 million in the prior year.

This performance primarily reflected the gross profit impact of net sales growth (3 percentage points), a net benefit from changes in ingredients, materials, and productivity (2 percentage points), and earned equity from the achievement of milestones associated with certain distribution agreements (1 percentage point), partially offset by net increases in other manufacturing costs (1 percentage point).

Selling, General and Administrative Expenses.

SG&A expenses increased $101 million, or 2.1%, to $5,013 million for the year ended December 31, 2024 compared to $4,912 million in the prior year, led by increases in transportation and warehousing expenses (2 percentage points) and people costs (1 percentage point), partially offset by reduced costs associated with productivity projects (1 percentage point).

Impairment of Goodwill.

Impairment of goodwill reflected a non-cash impairment charge of $306 million within the U.S.

This performance primarily reflected the gross profit impact of net sales growth (9 percentage points), partially offset by the net unfavorable impact from changes in ingredients, materials, and productivity, inclusive of tariffs (4 percentage points).

SG&A expenses increased $338 million, or 6.7%, to $5,351 million for the year ended December 31, 2025 compared to $5,013 million in the prior year, primarily driven by increased transportation and warehousing expenses (4 percentage points), costs associated with the JDE Peet's Acquisition and Separation (2 percentage points), and higher labor costs (2 percentage points).

Impairment of goodwill in the prior year reflected a non-cash impairment charge of $306 million within the U.S.

Warehouse Direct reporting unit in the U.S.

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Refer to Note 6 of the Notes to our Consolidated Financial Statements for further information.

Impairment of Other Intangible Assets.

Impairment of intangible assets reflected non-cash impairment charges of $412 million for intangible brand assets, primarily led by Snapple.

Impairment of intangible assets decreased $334 million to $78 million, driven by the favorable comparison of non-cash impairment charges for intangible brand assets compared to the prior year.

Refer to Note 6 of the Notes to our Consolidated Financial Statements for further information.

Other operating expense (income), net.

Other operating (expense) income, net reflected an unfavorable change of $233 million for the year ended December 31, 2024, primarily driven by the accrued $225 million termination fee associated with ABI.

Other operating (income) expense, net reflected a favorable change of $212 million for the year ended December 31, 2025, primarily driven by the favorable comparison of the $225 million termination fee associated with ABI incurred in the prior year.

Refer to Note 4 of the Notes to our Consolidated Financial Statements for further information.

Income from Operations.

Income from operations decreased $601 million, or 18.8%, to $2,591 million for the year ended December 31, 2024 compared to $3,192 million in the prior year, as our increase in gross profit (14 percentage points) was more than offset by the impacts of our non-cash impairment charges for goodwill and other intangible assets (22 percentage points) and the accrued termination fee associated with ABI (7 percentage points).

Interest Expense, Net.

Interest expense, net increased $239 million, or 48.2%, to $735 million for the year ended December 31, 2024 compared to $496 million for the prior year, primarily driven by increased debt and higher financing costs (32 percentage points) and an unfavorable year-over-year change in unrealized mark-to-market activity (17 percentage points).

Effective Tax Rate.

The effective tax rate increased 380 bps to 24.7% for the year ended December 31, 2024, compared to 20.9% in the prior year, primarily driven by the impact of our non-cash goodwill impairment charge (270 bps) and the unfavorable comparison to the prior year tax benefit received from a non-cash adjustment (100 bps).

Net income decreased $740 million, or 33.9%, to $1,441 million for the year ended December 31, 2024 as compared to $2,181 million in the prior year.

Diluted EPS decreased 32.3% to $1.05 per diluted share as compared to $1.55 in the prior year.

Income from operations increased $984 million, or 38.0%, to $3,575 million for the year ended December 31, 2025 compared to $2,591 million in the prior year, driven by the favorable comparison of our non-cash impairment charges for goodwill and intangible assets compared to the prior year, increased gross profit, and the favorable comparison to the termination fee associated with ABI incurred in the prior year.

These benefits were partially offset by increased SG&A expenses.

Interest expense, net increased $19 million, or 2.6%, to $754 million for the year ended December 31, 2025 compared to $735 million for the prior year, primarily driven by increased debt and higher financing costs (12 percentage points), which were mostly offset by a favorable year-over-year change in unrealized mark-to-market activity (10 percentage points).

Other expense (income), net reflected an unfavorable change of $192 million for the year ended December 31, 2025, primarily driven by an increase of $214 million in our mandatory redemption liability for GHOST.

The effective tax rate decreased 210 bps to 22.6% for the year ended December 31, 2025, compared to 24.7% in the prior year, primarily driven by the favorable comparison of the tax impact of our non-cash goodwill impairment charge in the prior year (230 bps).

Net income increased $638 million, or 44.3%, to $2,079 million for the year ended December 31, 2025, primarily driven by increased income from operations, partially offset by the increase in our mandatory redemption liability for GHOST.

Diluted EPS increased 45.7% to $1.53 per diluted share as compared to $1.05 in the prior year.

Results of Operations by Segment

The following tables set forth net sales and income from operations for our reportable segments for the years ended December 31, 2024 and 2023, as well as the other amounts necessary to reconcile our total segment results to our consolidated results presented in accordance with U.S.

For the Year Ended December 31,

The following tables provide certain results of operations for our reportable segments for the years ended December 31, 2025 and 2024:

For the Year Ended December 31, Percentage Change

(in millions) 2025 2024

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Total net sales $ 16,603 $ 15,351 8.2 %

For the Year Ended December 31,

(in millions) 2024 2023

Income from operations

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Total income from operations $ 3,575 $ 2,591 38.0 %

Operating margin

Refreshment Beverages 28.2 % 20.1 % 810 bps

Coffee 24.1 % 27.2 % (310) bps

International 25.1 % 26.5 % (140) bps

Sales Volumes

LRB K-Cup Pods Appliances

Refreshment Beverages 0.7 % — % — %

The following table provides selected information about our U.S.

Refreshment Beverages segment’s results:

For the Year Ended December 31, Dollar Percentage

(in millions) 2024 2023 Change Change

Net sales $ 9,331 $ 8,821 $ 510 5.8 %

Income from operations 1,878 2,483 (605) (24.4) %

Operating margin 20.1 % 28.1 % (800) bps

Sales Volume.

Sales volumes for the year ended December 31, 2024 increased approximately 1.0% compared to the prior year period.

Growth in carbonated soft drinks and the contributions from partnerships, such as Electrolit and C4, was partially offset by softness in our still beverages portfolio.

Net sales increased 5.8% to $9,331 million in the year ended December 31, 2024, compared to $8,821 million in the prior year period, driven by favorable net price realization of 3.1% and volume/mix growth of 2.7%.

Income from Operations.

Income from operations decreased $605 million, or 24.4%, to $1,878 million for the year ended December 31, 2024 compared to $2,483 million for the prior year period.

This decrease was primarily driven by the non-cash goodwill and intangible impairment charges (29 percentage points) and the accrued termination fee associated with ABI (9 percentage points).

Other drivers include the benefit to gross profit of net sales growth (13 percentage points), a net benefit from changes in ingredients, materials, and productivity (3 percentage points), and earned equity from the achievement of milestones associated with certain distribution agreements (3 percentage points), partially offset by increased transportation and warehousing expenses (3 percentage points).

The following table provides selected information about our U.S.

Coffee segment’s results:

For the Year Ended December 31, Dollar Percentage

(in millions) 2024 2023 Change Change

Net sales $ 3,967 $ 4,071 $ (104) (2.6) %

Income from operations 1,079 1,158 (79) (6.8) %

Operating margin 27.2 % 28.4 % (120) bps

Sales Volume.

K-Cup pod volume was flat for the year ended December 31, 2024 compared to the prior year period.

Appliance volume increased 7.3% in the year ended December 31, 2024, driven by Keurig market share momentum and improving coffeemaker category trends.

Net sales decreased 2.6% to $3,967 million for the year ended December 31, 2024 compared to $4,071 million in the prior year period, driven by unfavorable net price realization of 3.6%, partially offset by volume/mix growth of 1.0%.

Income from Operations.

Income from operations decreased $79 million, or 6.8%, to $1,079 million for the year ended December 31, 2024, compared to $1,158 million in the prior year period, driven by the gross profit impact of the net sales decrease (11 percentage points), partially offset by a net benefit from changes in ingredients, materials, and productivity (3 percentage points).

Coffee NM (4.8) % (19.9) %

International 2.3 % 2.0 % (1.7) %

The following table provides selected information about our International segment’s results:

For the Year Ended December 31, Dollar Percentage

(in millions) 2024 2023 Change Change

Net sales $ 2,053 $ 1,922 $ 131 6.8 %

Income from operations 545 475 70 14.7 %

Operating margin 26.5 % 24.7 % 180 bps

Sales Volume.

The following table provides the percentage change in sales volumes for the International segment compared to the prior year period:

Percentage Change

K-Cup pods 6.6

Appliances 8.2

Net sales increased 6.8% to $2,053 million in the year ended December 31, 2024, compared to $1,922 million in the prior year period, reflecting volume/mix growth of 6.2% and higher net price realization of 3.0%, partially offset by unfavorable FX translation of 2.4%.

Income from Operations.

Income from operations increased $70 million, or 14.7%, to $545 million for the year ended December 31, 2024 compared to $475 million in the prior year period.

This performance reflected the gross profit impact of volume/mix growth and higher net price realization (25 percentage points) and a net benefit from changes in ingredients, materials, and productivity (5 percentage points), partially offset by increased transportation and warehousing expenses (5 percentage points) and higher marketing investment (5 percentage points).

Net Sales Drivers

Volume / Mix (1)

Net Price Realization FX Total

Refreshment Beverages 9.0 % 2.9 % — % 11.9 %

Coffee (4.2) % 4.8 % — % 0.6 %

International 3.1 % 6.2 % (3.4) % 5.9 %

(1) The acquisition of GHOST contributed 6.2 percentage points to our volume / mix growth in U.S.

Refreshment Beverages for the year ended December 31, 2025.

Refreshment Beverages

Sales volume increased 0.7% for the year ended December 31, 2025, led by growth in our energy portfolio, including the acquisition of GHOST, and in carbonated soft drinks.

These benefits were partially offset by softness in our still beverages portfolio.

Net sales increased 11.9% to $10,439 million for the year ended December 31, 2025, led by volume / mix growth, including a benefit from the acquisition of GHOST, as well as higher net price realization.

Income from operations increased 56.5% to $2,939 million for the year ended December 31, 2025.

This performance was led by the favorable comparison of our non-cash impairment charges for goodwill and intangible assets compared to the prior year (34 percentage points), the gross profit impact of net sales growth (32 percentage points), and the favorable comparison of the termination fee associated with ABI incurred in the prior year (12 percentage points).

These benefits were partially offset by increased transportation and warehousing expenses (8 percentage points) and higher labor costs (5 percentage points).

Appliance volume decreased 19.9%, reflecting price elasticity impacts, category softness, and continued retailer inventory management.

K-Cup pod volume decreased 4.8%, reflecting price elasticity impacts.

Net sales increased 0.6% to $3,990 million for the year ended December 31, 2025, driven by higher net price realization, partially offset by unfavorable volume / mix.

Income from operations decreased 10.8% to $962 million for the year ended December 31, 2025, driven by a net unfavorable change in ingredients, materials, and productivity, inclusive of tariffs (22 percentage points), partially offset by the benefit of net sales growth (11 percentage points).

International

LRB sales volume increased 2.3%.

Appliance volumes decreased 1.7%, and K-Cup pod volumes increased 2.0%.

Net sales increased 5.9% to $2,174 million in the year ended December 31, 2025, reflecting higher net price realization and volume / mix growth, partially offset by unfavorable FX translation.

Income from operations increased 0.2% to $546 million for the year ended December 31, 2025, reflecting the benefit from the gross profit impact of net sales growth (17 percentage points), which was mostly offset by a net unfavorable impact from changes in ingredients, materials, and productivity (10 percentage points) and increased transportation and warehousing expenses (7 percentage points).

LIQUIDITY AND CAPITAL RESOURCES

We believe our financial condition and liquidity remain strong.

We continue to manage all aspects of our business, including, but not limited to, monitoring the financial health of our customers, suppliers, and other third-party relationships, implementing gross margin enhancement strategies through our productivity initiatives, and developing new opportunities for growth such as innovation and agreements with partners to distribute brands that are accretive to our portfolio.

We manage all aspects of our business, including monitoring the financial health of our customers, suppliers, and other third-party relationships, implementing gross margin enhancement strategies through our productivity initiatives, and developing new opportunities for growth such as innovation and agreements with partners to distribute brands that are accretive to our portfolio.

Cash generated by our foreign operations is generally repatriated to the U.S.

periodically as working capital funding requirements, where allowed.

periodically.

We do not expect restrictions or taxes on repatriation of cash held outside the U.S.

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Principal Sources of Capital Resources

Our principal sources of liquidity are our existing cash and cash equivalents, cash generated from our operations, and borrowing capacity currently available under our Revolving Credit Agreement and our Term Loan Agreement.

Our principal sources of liquidity are our cash and cash equivalents, cash generated from our operations, and borrowing capacity currently available under our 2025 Revolving Credit Agreement.

Additionally, we have an uncommitted commercial paper program where we can issue unsecured commercial paper notes on a private placement basis.

Based on our current and anticipated level of operations, we believe that our operating cash flows will be sufficient to meet our anticipated obligations for the next twelve months and thereafter for the foreseeable future.

To the extent that our operating cash flows are not sufficient to meet our liquidity needs, we may utilize cash on hand or amounts available under our financing arrangements, if necessary.

At any time, and from time to time, we may seek additional deleveraging, refinancing, or liquidity enhancing transactions, including entering into transactions to repurchase or redeem outstanding indebtedness or otherwise seek transactions to reduce interest expense, extend debt maturities, and improve our capital and liquidity structure .

Based on our current and anticipated level of operations, we believe that our operating cash flows will be sufficient to meet our anticipated obligations related to our normal course of business (excluding the impacts of the JDE Peet's Acquisition described below) for the next twelve months and thereafter for the foreseeable future.

To the extent that our operating cash flows are not sufficient to meet our liquidity needs, we may utilize cash on hand or amounts available under our financing arrangements.

From time to time, we may seek additional deleveraging, refinancing, or liquidity enhancing transactions, including entering into transactions to repurchase or redeem outstanding indebtedness or otherwise seek transactions to reduce interest expense, extend debt maturities, and improve our capital and liquidity structure .

Sources of Liquidity - Operations

Net cash provided by operating activities increased $890 million for the year ended December 31, 2024, as compared to the year ended December 31, 2023, driven by the favorable comparison in working capital versus the prior year period.

Cash Conversion Cycle

Our cash conversion cycle is defined as DIO and DSO less DPO.

The calculation of each component of the cash conversion cycle is provided below:

Component Calculation (on a trailing twelve month basis)

DIO (Average inventory divided by cost of sales) * Number of days in the period

DSO (Accounts receivable divided by net sales) * Number of days in the period

DPO (Accounts payable * Number of days in the period) divided by cost of sales and SG&A expenses

The following table summarizes our cash conversion cycle:

Cash conversion cycle 12 (8)

Our cash conversion cycle increased 20 days to approximately 12 days as of December 31, 2024 as compared to (8) days as of December 31, 2023, which was primarily driven by the decrease in DPO, reflecting the reduction of payment terms for certain suppliers.

Accounts Payable Program

We work with our suppliers to optimize our terms and conditions, which includes payment terms.

Excluding our suppliers who require cash at date of purchase or sale, our current payment terms with our suppliers generally range from 10 to 360 days.

We also enter into agreements with third party administrators to allow participating suppliers to track payment obligations from us, and, if voluntarily elected by the supplier, sell payment obligations from us to financial institutions.

Suppliers can sell one or more of our payment obligations at their sole discretion and our rights and obligations to our suppliers are not impacted.

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

Our obligations to our suppliers, including amounts due and scheduled payment terms, are not impacted.

Refer to Note 2 of the Notes to our Consolidated Financial Statements for additional information on our obligations to participating suppliers.

Net cash provided by operating activities decreased $228 million for the year ended December 31, 2025, as compared to the year ended December 31, 2024.

The decrease was driven by the unfavorable comparison in working capital, partially offset by a higher net income adjusted for non-cash items in the current period.

Sources of Liquidity - Financing

Refer to Note 5 of the Notes to our Consolidated Financial Statements for management's discussion of our financing arrangements.

As of December 31, 2025, we were in compliance with all debt covenants, and we have no reason to believe that we will be unable to satisfy these covenants.

We also have an active shelf registration statement, filed with the SEC on August 15, 2025, which allows us to issue an indeterminate number or amount of common stock, preferred stock, debt securities, and warrants from time to time in one or more offerings at the direction of our Board.

Credit Ratings

Our credit ratings are as follows:

Rating Agency Long-Term Debt Rating Commercial Paper Rating Outlook

Moody's Baa1 P-2 Stable

S&P BBB A-2 Stable

Rating Agency Long-Term Debt Rating Commercial Paper Rating Outlook Date of Last Change

Moody's Baa1 P-2 Ratings Under Review August 25, 2025

S&P BBB A-2 Watch Negative August 25, 2025

As a result of our announcement of the JDE Peet's Acquisition and the corresponding financing arrangements anticipated for the transaction, Moody's and S&P have revised their outlook on our credit ratings.

On August 25, 2025, Moody's placed KDP ratings under review for downgrade, and S&P has placed KDP on CreditWatch Negative.

These debt and commercial paper ratings impact the interest we pay on our financing arrangements.

A downgrade of one or both of our debt and commercial paper ratings could increase our interest expense and decrease the cash available to fund anticipated obligations.

As of December 31, 2024, we were in compliance with all debt covenants and we have no reason to believe that we will be unable to satisfy these covenants.

Principal Uses of Capital Resources

Our capital allocation priorities are investing to grow our business both organically and inorganically, continuing to strengthen our balance sheet, and returning cash to shareholders through regular quarterly dividends and opportunistic share repurchases.

Our capital allocation priorities are investing to grow our business both organically and inorganically, strengthening our balance sheet, and returning cash to shareholders through regular quarterly dividends.

We dynamically adjust our cash deployment plans based on the specific opportunities available in a given period, but over time we allocate capital to balance each of these priorities.

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We have declared total dividends of $0.92 per share and $0.89 per share for the years ended December 31, 2025 and 2024, respectively.

Repurchases of Common Stock

Our Board authorized a four-year share repurchase program, ending December 31, 2025, of up to $4 billion of our outstanding common stock.

Repurchases and retirements of common stock, including payments on our share excise tax obligation, were $1,110 million and $706 million during the years ended December 31, 2024 and 2023, respectively.

As of December 31, 2024, $1,810 million remained available for repurchase under the authorized share repurchase program.

Acquisitions of Businesses and Purchases of Intangible Assets

From time to time, we acquire brand ownership companies to expand our portfolio.

We also invest in the expansion of our DSD network through transactions with strategic independent bottlers or third-party brand ownership companies to enhance competitive distribution scale.

These transactions could be accounted for either as an acquisition of a business or, if the majority of the transaction price represents the acquisition of a single intangible asset, as an asset acquisition.

In the second quarter of 2025, we completed the Dyla acquisition.

Refer to Note 4 of the Notes to our Consolidated Financial Statements for additional information.

Purchases of intangible assets were $17 million and $59 million for the years ended December 31, 2025 and 2024, respectively.

Capital Expenditures

Purchases of property, plant, and equipment were $486 million and $563 million for the years ended December 31, 2025 and 2024, respectively.

Capital expenditures, which includes both purchases of property, plant, and equipment and amounts included in accounts payable and accrued expenses, for the years ended December 31, 2024 and 2023, primarily related to investments in manufacturing capabilities, both in the U.S.

and internationally.

Capital expenditures, which includes both purchases of property, plant, and equipment and amounts included in accounts payable and accrued expenses, primarily related to investments in manufacturing capabilities, both in the U.S.

and internationally, for the years ended December 31, 2025 and 2024.

Capital expenditures included in accounts payable and accrued expenses were $204 million and $220 million for the years ended December 31, 2025 and 2024, respectively, which primarily related to these investments.

Investments in Unconsolidated Affiliates

Repurchases of Common Stock

Our Board authorized a four-year share repurchase program of up to $4 billion of our outstanding common stock, which ended on December 31, 2025.

Repurchases and retirements of common stock, including payments on our share excise tax obligation, were $9 million and $1,110 million during the years ended December 31, 2025 and 2024, respectively.

Equity Method Investments

From time to time, we invest in beverage startup companies or in brand ownership companies to grow our presence in certain product categories, or enter into various licensing and distribution agreements to expand our product portfolio.

Our investments generally involve acquiring a minority interest in equity securities of a company, in certain cases with a protected path to ownership at our future option.

Investments in unconsolidated affiliates were $7 million and $316 million for the years ended December 31, 2024 and 2023, respectively.

Acquisitions of Businesses and Purchases of Intangible Assets

We have invested in the expansion of our DSD network through transactions with strategic independent bottlers or third-party brand ownership companies to enhance competitive distribution scale.

From time to time, we additionally acquire brand ownership companies to expand our portfolio.

These transactions could be accounted for either as an acquisition of a business or as an asset acquisition, if the majority of the transaction price represents the acquisition of a single intangible asset.

During the year ended December 31, 2024, we completed several acquisitions.

Refer to Note 4 of the Notes to our Consolidated Financial Statements for further information about these acquisitions.

Purchases of intangible assets were $59 million and $56 million for the years ended December 31, 2024 and 2023, respectively.

JDE Peet's Acquisition

We entered into various transactions in order to finance the JDE Peet's Acquisition, including the Bridge Credit Agreement and Delayed Draw Term Loan Agreement.

Refer to Note 5 of the Notes to our Consolidated Financial Statements for additional information on these borrowing arrangements.

We additionally entered into the JV Transaction Agreement, under which the JV Investors will make a minority investment into the Pod Manufacturing JV for an aggregate purchase price of $4 billion.

We also entered into the Preferred Investment Agreement, under which we will issue and sell 4.5 million shares of Convertible Preferred Stock for an aggregate purchase price of $4.5 billion.

These transactions are expected to be completed substantially concurrently with the closing of the JDE Peet's Acquisition.

Refer to Note 3 and Note 22 of the Notes to our Consolidated Financial Statements for additional information.

We may issue additional debt securities and pursue other financing options, as warranted.

Residual Value Guarantees

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Uncertainties and Trends Affecting Liquidity and Capital Resources

Disruptions in financial and credit markets, including those caused by global economic uncertainty and fluctuations in interest rates, may impact our ability to manage normal commercial relationships with our customers, suppliers, and creditors.

Disruptions in financial and credit markets, including those caused by inflation, global economic uncertainty or economic downturns, fluctuations in interest rates, or the imposition of new tariffs or changes to existing tariffs, trade wars, barriers or restrictions, or threats of such actions, and related uncertainty, may impact our ability to manage normal commercial relationships with our customers, suppliers, and creditors, and may also impact our ability to access liquidity through financial markets in a timely and cost-effective manner.

These disruptions could have a negative impact on the ability of our customers to timely pay their obligations to us, thus reducing our cash flow, or the ability of our vendors to timely supply materials.

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• Our ability to issue unsecured uncommitted commercial paper notes on a private placement basis;

• Financing and other funding arrangements entered into in connection to the JDE Peet's Acquisition;

• Future mergers, acquisitions, or debt or equity investments, which may include brand ownership companies, regional bottling companies, distributors, and/or distribution rights to further extend our geographic coverage;

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Beverage Concentrates, U.S.

Warehouse Direct, and Direct Store Delivery)

Warehouse Direct, Direct Store Delivery, and GHOST)

Coffee (reporting unit:

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(1) Goodwill attributed to the U.S.

WD reporting unit was impaired by the amount its carrying value exceeded its fair value.

(2) Indefinite lived brand assets, led primarily by Snapple for the year ended December 31, 2024, and Bai for the year ended December 31, 2022, were impaired to bring the respective carrying value equal to its fair value.

WD reporting units was impaired during the year ended December 31, 2024.

(2) Indefinite lived brand assets were impaired during the years ended December 31, 2025 and 2024 to bring the respective carrying values equal to their fair values.

Sensitivity Analysis - Discount Rate

For goodwill, holding all other assumptions in the analysis constant, including the revenue and profit performance assumption, the effect of a 0.50% increase in the discount rate used to determine the fair value of the reporting units as of October 1, 2024, would result in additional non-cash impairment charges of $198 million to our U.S.

WD reporting unit, but would not change our conclusion on any other reporting units.

For the indefinite-lived priority brand assets quantitatively assessed, holding all other assumptions in the analysis constant, including the revenue and profit performance assumption, the effect of a 0.50% increase in the discount rate used to determine the fair value of those assets as of October 1, 2024, would impact the amount of headroom over the carrying value of the following assets as follows (in millions):

Selected Discount Rate Discount Rate Increase of 0.50%

For goodwill, holding all other assumptions in the analysis constant, including the revenue and profit performance assumption, the effect of a 0.50% increase in the discount rate used to determine the fair value of the reporting units as of October 1, 2025, would not result in any impairment charges on any of our reporting units.

For the indefinite lived priority brand assets quantitatively assessed, holding all other assumptions in the analysis constant, including the revenue and profit performance assumption, the effect of a 0.50% increase in the discount rate used to determine the fair value of those assets as of October 1, 2025, would impact the amount of headroom over the carrying value of those assets as follows:

(in millions) Selected Discount Rate Discount Rate Increase of 0.50%

Headroom Percentage Carrying Value Fair Value Carrying Value Fair Value

5 unchanged sentences

Sensitivity Analysis - Long-Term Growth Rate

For goodwill, holding all other assumptions in the analysis constant, including the discrete period revenue and profit performance assumptions as well as the discount rates, the effect of a 0.50% decrease in the long-term growth rate used to determine the fair value of the reporting units as of October 1, 2024, would result in additional non-cash impairment charges of $147 million to our U.S.

WD reporting unit, but would not change our conclusion on any other reporting units.

For the indefinite-lived priority brand assets quantitatively assessed, holding all other assumptions in the analysis constant, including the discrete period revenue and profit performance assumptions as well as the discount rates, the effect of a 0.50% decrease in the long-term revenue growth rate used to determine the fair value of those assets as of October 1, 2024, would impact the amount of headroom over the carrying value of the following assets as follows (in millions):

Selected Long-Term Growth Rate Long-Term Growth Rate

For goodwill, holding all other assumptions in the analysis constant, including the discrete period revenue and profit performance assumptions as well as the discount rates, the effect of a 0.50% decrease in the long-term growth rate used to determine the fair value of the reporting units as of October 1, 2025, would not result in any impairment charges on any of our reporting units.

For the indefinite lived priority brand assets quantitatively assessed, holding all other assumptions in the analysis constant, including the discrete period revenue and profit performance assumptions as well as the discount rates, the effect of a 0.50% decrease in the long-term revenue growth rate used to determine the fair value of those assets as of October 1, 2025, would impact the amount of headroom over the carrying value of those assets as follows:

(in millions) Selected Long-Term Growth Rate Long-Term Growth Rate

Decrease of 0.50%

31 unchanged sentences

The fair value assigned to tangible and intangible assets acquired and liabilities assumed are based on management's estimates and assumptions, as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques.

Significant assumptions and estimates include, but are not limited to, the cash flows that an asset is expected to generate in the future, the appropriate weighted-average cost of capital, and the cost savings expected to be derived from acquiring an asset, if applicable.

Significant assumptions and estimates include the cash flows that an asset is expected to generate in the future, the appropriate weighted-average cost of capital, and the cost savings expected to be derived from acquiring an asset, if applicable.

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

34 unchanged sentences

Income from operations 1,523

Net income attributable to KDP 1,441

Net income 2,094

(in millions) 2025 2024

10 unchanged sentences

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

What changed 10-K

Item 7. Management’s Discussion and Analysis