UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED ~~March~~MARCH 31, ~~2023~~2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

Commission file number 001-33829

Keurig Dr Pepper Inc.

(Exact name of registrant as specified in its charter)


Delaware						98-0517725
(State or other jurisdiction of incorporation or organization)						(I.R.S. employer identification number)

53 South Avenue

Burlington, Massachusetts

01803

(Address of principal executive offices)

(781) 418-7000

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common stock

KDP

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer", "accelerated filer", "smaller reporting company", and "emerging growth company" in Rule 12b-2 of the Securities Exchange Act of 1934.

Large Accelerated Filer ☒ Accelerated Filer ☐ Non-Accelerated Filer ☐ Smaller Reporting Company ☐ Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes ☐ No ☒

As of April ~~25, 2023,~~23, 2024, there were ~~1,403,776,408~~1,355,574,275 shares of the registrant's common stock, par value $0.01 per share, outstanding.

KEURIG DR PEPPER INC.

FORM 10-Q

TABLE OF CONTENTS

Page
Part I.
Financial Information

Item 1.
Financial Statements (Unaudited)

Condensed Consolidated Statements of Income
1
Condensed Consolidated Statements of Comprehensive Income
2

Condensed Consolidated Balance Sheets
3

Condensed Consolidated Statements of Cash Flows
4
Condensed Consolidated Statements of Changes in Stockholders' Equity
6

Notes to Condensed Consolidated Financial Statements
7
1
General
7
2
Long-Term Obligations and Borrowing Arrangements
8
3
Goodwill and Other Intangible Assets
10
4
Derivatives
11
5
Leases
15
6
Segments
16
7
Revenue Recognition
18
8
Earnings Per Share
18
9
Stock-Based Compensation
19
10
Investments
19
11
Income Taxes
19
12
Accumulated Other Comprehensive Income
20
13
Other Financial Information
21
14
Commitments and Contingencies
23
15
Transactions with Variable Interest Entities
24
16
Restructuring Liabilities
25

Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
26
Item 3. Quantitative and Qualitative Disclosures About Market Risk
41

Item 4.
Controls and Procedures
41
Part II.
Other Information

Item 1.
Legal Proceedings
42
Item 1A.
Risk Factors
42
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
42

Item 6.
Exhibits
43


				Page
Part I	Financial Information
	Item 1	Financial Statements (Unaudited)
		Condensed Consolidated Statements of Income		1
		Condensed Consolidated Statements of Comprehensive Income		2
		Condensed Consolidated Balance Sheets		3
		Condensed Consolidated Statements of Cash Flows		4
		Condensed Consolidated Statements of Changes in Stockholders' Equity		6
		Notes to Condensed Consolidated Financial Statements		7
		1	General	7
		2	Long-Term Obligations and Borrowing Arrangements	7
		3	Goodwill and Other Intangible Assets	9
		4	Derivatives	10
		5	Leases	14
		6	Segments	15
		7	Revenue Recognition	16
		8	Earnings Per Share	17
		9	Stock-Based Compensation	17
		10	Investments	18
		11	Income Taxes	18
		12	Accumulated Other Comprehensive Income	18
		13	Other Financial Information	19
		14	Commitments and Contingencies	21

		15	Restructuring	22
		16	Transactions with Related Parties	22

	Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations		23
	Item 3	Quantitative and Qualitative Disclosures About Market Risk		33
	Item 4	Controls and Procedures		33

Part II	Other Information
	Item 1	Legal Proceedings		34
	Item 1A	Risk Factors		34
	Item 2	Unregistered Sales of Equity Securities and Use of Proceeds		34
	Item 5	Other Information		34
	Item 6	Exhibits		35

s-i

KEURIG DR PEPPER INC.

FORM 10-Q

MASTER GLOSSARY


Term						Definition



~~2021 364-Day Credit Agreement~~						~~The Company's $1,500 million credit agreement, which was entered into on March 26, 2021 and was terminated on February 23, 2022~~
~~2022 Revolving Credit Agreement~~						~~KDP’s $4 billion revolving credit agreement, which was executed in February 2022 and replaced the 2021 364-Day Credit Agreement and the KDP Revolver~~



Annual Report						Annual Report on Form 10-K for the year ended December 31, ~~2022~~2023
AOCI						Accumulated other comprehensive income or loss

Athletic Brewing						Athletic Brewing Holding Company, LLC, an equity method investment of KDP
~~Bedford~~						~~Bedford Systems, LLC, an equity method investment of KDP and the maker of Drinkworks~~
Board						The Board of Directors of KDP

~~BodyArmor~~bps						Basis points

CEO						~~BA Sports Nutrition,~~Chief Executive Officer
Chobani						FHU US Holdings LLC, ~~a former~~an equity method investment of KDP
~~bps~~Circana						~~basis points~~
~~CSD~~						~~Carbonated soft drink~~Circana, Inc., a market information provider
DIO						Days inventory outstanding
DPO						Days of payables outstanding
DPS						Dr Pepper Snapple Group, Inc.
DPS Merger						The combination of the business operations of Keurig and DPS ~~that was consummated on~~as of July 9, 2018 ~~through a reverse merger transaction, whereby a wholly-owned special purpose merger subsidiary of DPS merged with and into the direct parent of Keurig~~
DSD						Direct Store Delivery, KDP’s route-to-market whereby finished beverages are delivered directly to retailers
DSO						Days sales outstanding
EPS						Earnings per share
Exchange Act						Securities Exchange Act of 1934, as amended


FX						Foreign exchange


~~IRi~~JAB						~~Information Resources, Inc.~~JAB Holding Company S.a.r.l. and affiliates

KDP						Keurig Dr Pepper Inc.

~~KDP Revolver~~						~~The Company's $2,400 million revolving credit facility, which was entered into on February 28, 2018 and terminated on February 23, 2022.~~
Keurig						Keurig Green Mountain, Inc., a wholly-owned subsidiary of KDP, and the brand of our brewers
~~LIBOR~~						~~London Interbank Offered Rate~~
LRB						Liquid refreshment beverages
~~NCB~~						~~Non-carbonated beverage~~
Notes						Collectively, the Company's senior unsecured notes
Nutrabolt						Woodbolt Holdings LLC, d/b/a Nutrabolt, an equity method investment of KDP


Revolving Credit Agreement						KDP’s $4 billion revolving credit agreement, which was executed in February 2022
RSU						Restricted share unit
RTD						Ready to drink
~~RVG~~						~~Residual value guarantee~~
Tractor						Tractor Beverages, Inc., an equity method investment of KDP
SEC						Securities and Exchange Commission
SG&A						Selling, general and administrative
SOFR						Secured Overnight Financing Rate
U.S. GAAP						Accounting principles generally accepted in the U.S.
~~Veyron SPEs~~						~~Special purpose entities with the same sponsor, Veyron Global~~
~~VIE~~						~~Variable interest entity~~
Vita Coco						The Vita Coco Company, Inc.
WD						Warehouse Direct, KDP’s route-to-market whereby finished beverages are shipped to retailer warehouses, and then delivered by the retailer through its own delivery system to its stores

s-ii

Table of Contents

PART I - FINANCIAL INFORMATION

ITEM 1.Financial Statements (Unaudited)

KEURIG DR PEPPER INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)




		First Quarter						First Quarter
(in millions, except per share data)	(in millions, except per share data)		2023		2022		(in millions, except per share data)		2024	2023
Net sales	Net sales		$	3,353	$	3,078
Cost of sales	Cost of sales		1,609		1,428
Gross profit	Gross profit		1,744		1,650
Selling, general and administrative expenses	Selling, general and administrative expenses		1,165		1,018

Gain on litigation settlement			—		(299)

Other operating income, net

Other operating income, net

Other operating income, net	Other operating income, net		(5)		(35)
Income from operations	Income from operations		584		966
Interest expense			23		188
Loss on early extinguishment of debt			—		48
Gain on sale of equity method investment			—		(50)
Impairment of investments and note receivable			—		6
Other (income) expense, net			(20)		9
Interest expense, net

Other income, net

Other income, net

Other income, net
Income before provision for income taxes	Income before provision for income taxes		581		765
Provision for income taxes	Provision for income taxes		114		180
Net income including non-controlling interest			467		585
Less: Net loss attributable to non-controlling interest			—		—
Net income attributable to KDP			$	467	$	585
Net income

Earnings per common share:
Earnings per common share:
Earnings per common share:	Earnings per common share:
Basic	Basic		$	0.33	$	0.41
Diluted	Diluted		0.33		0.41
Weighted average common shares outstanding:	Weighted average common shares outstanding:						Weighted average common shares outstanding:
Basic	Basic		1,406.2		1,418.2
Diluted	Diluted		1,417.0		1,429.7

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

Table of Contents

KEURIG DR PEPPER INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

First Quarter
(in millions) 2023 2022
Net income including non-controlling interest $ 467 $ 585
Other comprehensive (loss) income
Foreign currency translation adjustments 108 99
Net change in pension and post-retirement liability, net of tax of $0 and $0, respectively — —
Net change in cash flow hedges, net of tax of $21 and $(48), respectively (82) 142
Total other comprehensive income 26 241
Comprehensive income including non-controlling interest 493 826
Less: Comprehensive income attributable to non-controlling interest — —
Comprehensive income attributable to KDP $ 493 $ 826


	First Quarter
(in millions)		2024		2023
Net income		$	454	$	467
Other comprehensive (loss) income:
Foreign currency translation adjustments		(56)		108

Net change in cash flow hedges, net of tax of $0 and $21, respectively		(2)		(82)
Total other comprehensive (loss) income		(58)		26
Comprehensive income		$	396	$	493

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

Table of Contents

KEURIG DR PEPPER INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)


		March 31,		December 31,			March 31,	December 31,
(in millions, except share and per share data)	(in millions, except share and per share data)	2023		2022		(in millions, except share and per share data)	2024	2023
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	204	$	535

Trade accounts receivable, net	Trade accounts receivable, net	1,451		1,484
Inventories	Inventories	1,391		1,314
Prepaid expenses and other current assets	Prepaid expenses and other current assets	540		471
Total current assets	Total current assets	3,586		3,804
Property, plant and equipment, net	Property, plant and equipment, net	2,480		2,491
Investments in unconsolidated affiliates	Investments in unconsolidated affiliates	1,009		1,000
Goodwill	Goodwill	20,117		20,072
Other intangible assets, net	Other intangible assets, net	23,273		23,183
Other non-current assets	Other non-current assets	1,160		1,252
Deferred tax assets	Deferred tax assets	35		35
Total assets	Total assets	$	51,660	$	51,837
Liabilities and Stockholders' Equity	Liabilities and Stockholders' Equity					Liabilities and Stockholders' Equity
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	4,947	$	5,206
Accrued expenses	Accrued expenses	1,046		1,153
Structured payables	Structured payables	137		137
Short-term borrowings and current portion of long-term obligations	Short-term borrowings and current portion of long-term obligations	2,310		895
Other current liabilities	Other current liabilities	687		685
Total current liabilities	Total current liabilities	9,127		8,076
Long-term obligations	Long-term obligations	9,929		11,072
Deferred tax liabilities	Deferred tax liabilities	5,739		5,739
Other non-current liabilities	Other non-current liabilities	1,763		1,825
Total liabilities	Total liabilities	26,558		26,712
Commitments and contingencies	Commitments and contingencies					Commitments and contingencies
Stockholders' equity:	Stockholders' equity:					Stockholders' equity:
Preferred stock, $0.01 par value, 15,000,000 shares authorized, no shares issued	Preferred stock, $0.01 par value, 15,000,000 shares authorized, no shares issued	—		—
Common stock, $0.01 par value, 2,000,000,000 shares authorized, 1,403,720,858 and 1,408,394,293 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively		14		14
Common stock, $0.01 par value, 2,000,000,000 shares authorized, 1,355,571,438 and 1,390,446,043 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively
Additional paid-in capital	Additional paid-in capital	21,210		21,444
Retained earnings	Retained earnings	3,724		3,539
Accumulated other comprehensive income	Accumulated other comprehensive income	155		129
Total stockholders' equity	Total stockholders' equity	25,103		25,126
Non-controlling interest		(1)		(1)
Total equity		25,102		25,125
Total liabilities and equity		$	51,660	$	51,837

Total liabilities and stockholders’ equity

Total liabilities and stockholders’ equity

Total liabilities and stockholders’ equity

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

Table of Contents

KEURIG DR PEPPER INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


		First Quarter					First Quarter
(in millions)	(in millions)	2023		2022		(in millions)	2024	2023
Operating activities:	Operating activities:					Operating activities:
Net income attributable to KDP		$	467	$	585
Net income
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense	Depreciation expense	107		106
Amortization of intangibles	Amortization of intangibles	34		34
Other amortization expense	Other amortization expense	45		42
Provision for sales returns	Provision for sales returns	10		12
Deferred income taxes	Deferred income taxes	—		8
Employee stock-based compensation expense	Employee stock-based compensation expense	29		(15)
Loss on early extinguishment of debt		—		48

Gain on sale of equity method investment		—		(50)
Gain on disposal of property, plant and equipment		(5)		(38)
Unrealized gain on foreign currency		(2)		(11)
Unrealized gain on derivatives		(95)		—

Equity in (earnings) loss of unconsolidated affiliates		(9)		3

Impairment on investments and note receivable of unconsolidated affiliate		—		6
Loss (gain) on disposal of property, plant and equipment

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

Loss (gain) on disposal of property, plant and equipment
Unrealized loss (gain) on foreign currency
Unrealized loss (gain) on derivatives

Equity in earnings of unconsolidated affiliates
Equity in earnings of unconsolidated affiliates
Equity in earnings of unconsolidated affiliates
Earned equity

Other, net

Other, net

Other, net	Other, net	(4)		13
Changes in assets and liabilities:	Changes in assets and liabilities:					Changes in assets and liabilities:
Trade accounts receivable	Trade accounts receivable	28		(73)
Inventories	Inventories	(74)		(147)
Income taxes receivable and payables, net	Income taxes receivable and payables, net	60		135
Other current and non-current assets	Other current and non-current assets	(151)		(284)
Accounts payable and accrued expenses	Accounts payable and accrued expenses	(391)		151
Other current and non-current liabilities	Other current and non-current liabilities	22		138
Net change in operating assets and liabilities	Net change in operating assets and liabilities	(506)		(80)
Net cash provided by operating activities	Net cash provided by operating activities	71		663
Investing activities:	Investing activities:					Investing activities:

Proceeds from sale of investment in unconsolidated affiliates		—		50

Purchases of property, plant and equipment

Purchases of property, plant and equipment

Purchases of property, plant and equipment	Purchases of property, plant and equipment	(62)		(109)
Proceeds from sales of property, plant and equipment	Proceeds from sales of property, plant and equipment	7		78
Purchases of intangibles	Purchases of intangibles	(51)		(10)
Issuance of related party note receivable		—		(6)

Investments in unconsolidated affiliates
Investments in unconsolidated affiliates
Investments in unconsolidated affiliates	Investments in unconsolidated affiliates	—		(3)

Other, net	Other, net	1		3
Net cash (used in) provided by investing activities		$	(105)	$	3
Other, net
Other, net
Net cash used in investing activities

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

Table of Contents

KEURIG DR PEPPER INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED, CONTINUED)


		First Quarter					First Quarter
(in millions)	(in millions)	2023		2022		(in millions)	2024	2023
Financing activities:	Financing activities:					Financing activities:
Proceeds from issuance of Notes
Repayments of Notes
Net (repayment) issuance of commercial paper

Repayments of Notes		$	—	$	(201)
Proceeds from issuance of commercial paper		3,523		—
Repayments of commercial paper		(3,258)		(149)

Proceeds from structured payables

Proceeds from structured payables

Proceeds from structured payables	Proceeds from structured payables	34		38
Repayments of structured payables	Repayments of structured payables	(32)		(37)
Cash dividends paid	Cash dividends paid	(281)		(265)
Repurchases of common stock	Repurchases of common stock	(231)		—

Tax withholdings related to net share settlements	Tax withholdings related to net share settlements	(31)		(5)
Tax withholdings related to net share settlements
Tax withholdings related to net share settlements
Payments on finance leases	Payments on finance leases	(24)		(20)
Other, net	Other, net	(3)		(5)
Net cash used in financing activities		(303)		(644)
Cash, cash equivalents, and restricted cash and cash equivalents:
Net cash provided by (used in) financing activities
Cash and cash equivalents:						Cash and cash equivalents:
Net change from operating, investing and financing activities	Net change from operating, investing and financing activities	(337)		22
Effect of exchange rate changes	Effect of exchange rate changes	6		4
Beginning balance	Beginning balance	535		568
Ending balance	Ending balance	$	204	$	594

Supplemental cash flow disclosures of non-cash investing activities:	Supplemental cash flow disclosures of non-cash investing activities:
Supplemental cash flow disclosures of non-cash investing activities:
Supplemental cash flow disclosures of non-cash investing activities:
Capital expenditures included in accounts payable and accrued expenses	Capital expenditures included in accounts payable and accrued expenses	$	222	$	139
Capital expenditures included in accounts payable and accrued expenses
Capital expenditures included in accounts payable and accrued expenses
Earned equity
Transaction costs included in accounts payable and accrued expenses	Transaction costs included in accounts payable and accrued expenses	8		—

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

Supplemental cash flow disclosures of non-cash financing activities:

Supplemental cash flow disclosures of non-cash financing activities:
Dividends declared but not yet paid	Dividends declared but not yet paid	282		266

Dividends declared but not yet paid
Dividends declared but not yet paid
Accrued excise tax on net share repurchases
Supplemental cash flow disclosures:	Supplemental cash flow disclosures:
Cash paid for interest	Cash paid for interest	39		27
Cash paid for interest
Cash paid for interest
Cash paid for income taxes	Cash paid for income taxes	49		37

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

Table of Contents

KEURIG DR PEPPER INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(UNAUDITED)


		Common Stock Issued			Additional Paid-In Capital				Retained Earnings		Accumulated Other Comprehensive Income				Total Stockholders' Equity				Non-controlling Interest				Total Equity				Common Stock Issued			Additional Paid-In Capital	Retained Earnings	Accumulated Other Comprehensive Income	Total Stockholders' Equity
(in millions, except per share data)	(in millions, except per share data)	Shares	Amount
Balance as of January 1, 2023		1,408.4	$	14			$	21,444					$	3,539			$	129			$	25,126			$	(1)		$	25,125
Balance as of January 1, 2024
Balance as of January 1, 2024
Balance as of January 1, 2024
Net income	Net income	—	—		—				467		—				467				—				467
Other comprehensive income	Other comprehensive income	—	—		—				—		26				26				—				26
Dividends declared, $0.20 per share		—	—		—				(282)		—				(282)				—				(282)
Dividends declared, $0.215 per share

Repurchases of common stock		(6.6)	—		(232)				—		—				(232)				—				(232)
Repurchases of common stock, inclusive of excise tax obligation
Repurchases of common stock, inclusive of excise tax obligation
Repurchases of common stock, inclusive of excise tax obligation
Shares issued under employee stock-based compensation plans and other	Shares issued under employee stock-based compensation plans and other	1.9	—		—				—		—				—				—				—
Tax withholdings related to net share settlements	Tax withholdings related to net share settlements	—	—		(31)				—		—				(31)				—				(31)
Stock-based compensation and stock options exercised	Stock-based compensation and stock options exercised	—	—		29				—		—				29				—				29
Balance as of March 31, 2023		1,403.7	$	14	$	21,210			$	3,724	$	155			$	25,103			$	(1)			$	25,102
Balance as of March 31, 2024


		Common Stock Issued			Additional Paid-In Capital				Retained Earnings		Accumulated Other Comprehensive Income (Loss)				Total Stockholders' Equity				Non-controlling Interest				Total Equity				Common Stock Issued			Additional Paid-In Capital	Retained Earnings	Accumulated Other Comprehensive Income (Loss)	Total Stockholders' Equity	Non-controlling Interest	Total Equity
(in millions, except per share data)	(in millions, except per share data)	Shares	Amount
Balance as of January 1, 2022		1,418.1	$	14			$	21,785					$	3,199			$	(26)			$	24,972			$	—		$	24,972
Balance as of January 1, 2023
Balance as of January 1, 2023
Balance as of January 1, 2023

Net income	Net income	—	—		—				585		—				585				—				585
Other comprehensive loss		—	—		—				—		241				241								241
Dividends declared, $0.1875 per share		—	—		—				(266)		—				(266)				—				(266)
Net income
Net income
Other comprehensive income
Dividends declared, $0.20 per share

Repurchases of common stock, inclusive of excise tax obligation
Repurchases of common stock, inclusive of excise tax obligation
Repurchases of common stock, inclusive of excise tax obligation
Shares issued under employee stock-based compensation plans and other	Shares issued under employee stock-based compensation plans and other	0.4	—		—				—		—				—				—				—
Tax withholdings related to net share settlements	Tax withholdings related to net share settlements	—	—		(5)				—		—				(5)				—				(5)
Stock-based compensation and stock options exercised	Stock-based compensation and stock options exercised	—	—		(16)				—		—				(16)				—				(16)
Balance as of March 31, 2022		1,418.5	$	14	$	21,764			$	3,518	$	215			$	25,511			$	—			$	25,511
Balance as of March 31, 2023

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

Table of Contents

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. General

ORGANIZATION

References in this Quarterly Report on Form 10-Q to "KDP", "the Company", "we", or ~~"the Company"~~"our", refer to Keurig Dr Pepper Inc. and all ~~entities~~wholly-owned subsidiaries included in the unaudited condensed consolidated financial statements. Definitions of terms used in this Quarterly Report on Form 10-Q are included within the Master Glossary.

This Quarterly Report on Form 10-Q refers to some of ~~KDP's~~our owned or licensed trademarks, trade names and service marks, which are referred to as ~~the Company's~~our brands. All of the product names included herein are either KDP registered trademarks or those of ~~the Company's~~our licensors.

BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete consolidated financial statements. In the opinion of management, all adjustments, consisting principally of normal recurring adjustments, considered necessary for a fair presentation have been included. These unaudited condensed consolidated financial statements should be read in conjunction with ~~KDP's~~our consolidated financial statements and accompanying notes included in ~~the Company's~~our Annual Report.

References to the "first quarter" indicate the ~~Company's~~ quarterly periods ended March 31, ~~2023~~2024 and ~~2022.~~2023.

USE OF ESTIMATES

The process of preparing ~~KDP's~~our unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires the use of estimates and judgments that affect reported amounts. These estimates and judgments are based on historical experience, future expectations and other factors and assumptions ~~the Company believes~~we believe to be reasonable under the circumstances. These estimates and judgments are reviewed on an ongoing basis and are revised when necessary. Changes in estimates are recorded in the period of change. Actual amounts may differ from these estimates.

~~REPORTABLE SEGMENTS~~RECLASSIFICATIONS

AsWe reclassified amounts in the Financing Activities section of ~~January 1,~~the unaudited condensed consolidated Statement of Cash Flows for the first quarter of 2023 ~~the Company revised its segment structure~~in order to align with changes in how the Company’s Chief Operating Decision Maker manages the business, assesses performance and allocates resources. This change had no impact on the Company’s consolidated results of operations or financial position. Prior period segment results have been recastconform to ~~reflect the Company’s new reportable segments. Refer to Note 6 for additional information on the Company’s reportable segments and Note 7~~current year presentation, as maturities for the Company’s ~~disaggregated revenue portfolio for each reportable segment. The change~~commercial paper program 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.~~both periods are 90 days or less.

(in millions)

Prior Presentation

First Quarter of 2023

Net (repayment) issuance of commercial paper

Proceeds from issuance of commercial paper

3,523

Net (repayment) issuance of commercial paper

Repayments of commercial paper

(3,258)

~~RECENTLY ADOPTED ACCOUNTING STANDARDS~~2. Long-term Obligations and Borrowing Arrangements

~~As of January 1, 2023, the Company adopted ASU 2022-04,~~ ~~Liabilities — Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations~~. The objective of ASU 2022-04 is to require entities to disclose information about the use of supplier finance programs in connection with the purchase of goods and services. While the adoption of ASU 2022-04 did not have a material impact on the Company’s unaudited condensed consolidated financial statements, it did impact the nature of the disclosures. The previous disclosure was specific to the amount of KDP’s outstanding payment obligations that were voluntarily elected by the supplier and sold to financial institutions as informed by the third party administrators. ASU 2022-04 instead requires disclosure of the amount of KDP’s outstanding obligations loaded into the supplier finance programs by the Company at each reporting period regardless of whether the outstanding obligation has been elected by the supplier to be sold to financial institutions. Refer to Note 13 for additional information on the Company’s obligations to participating suppliers.following table summarizes our long-term obligations:


(in millions)	March 31, 2024		December 31, 2023
Notes	$	12,929	$	11,095
Less: current portion of long-term obligations	—		(1,150)
Long-term obligations	$	12,929	$	9,945

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KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, CONTINUED)

~~2. Long-term Obligations and Borrowing Arrangements~~

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

(in millions) March 31, 2023 December 31, 2022
Notes $ 11,575 $ 11,568
Less: current portion of long-term obligations (1,646) (496)
Long-term obligations $ 9,929 $ 11,072

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


(in millions)	(in millions)	March 31, 2023		December 31, 2022		(in millions)	March 31, 2024	December 31, 2023
Commercial paper notes	Commercial paper notes	$	664	$	399
Current portion of long-term obligations	Current portion of long-term obligations	1,646		496
Short-term borrowings and current portion of long-term obligations	Short-term borrowings and current portion of long-term obligations	$	2,310	$	895

SENIOR UNSECURED NOTES

~~The Company's~~Our Notes consisted of the following:


(in millions, except %)	(in millions, except %)							(in millions, except %)	Maturity Date	Rate	March 31, 2024	December 31, 2023
Issuance		Maturity Date	Rate	March 31, 2023		December 31, 2022
2023 Notes		December 15, 2023	3.130%	$	500	$	500
2024 Notes	2024 Notes	March 15, 2024	0.750%	1,150		1,150
2025 Merger Notes	2025 Merger Notes	May 25, 2025	4.417%	529		529
2025 Notes	2025 Notes	November 15, 2025	3.400%	500		500
2026 Notes	2026 Notes	September 15, 2026	2.550%	400		400
2027-B Notes
2027-C Notes
2027 Notes	2027 Notes	June 15, 2027	3.430%	500		500
2028 Merger Notes	2028 Merger Notes	May 25, 2028	4.597%	1,112		1,112
2029-B Notes
2029 Notes	2029 Notes	April 15, 2029	3.950%	1,000		1,000
2030 Notes	2030 Notes	May 1, 2030	3.200%	750		750
2031 Notes	2031 Notes	March 15, 2031	2.250%	500		500
2031-B Notes
2032 Notes	2032 Notes	April 15, 2032	4.050%	850		850
2034 Notes
2038 Merger Notes	2038 Merger Notes	May 25, 2038	4.985%	211		211
2045 Notes	2045 Notes	November 15, 2045	4.500%	550		550
2046 Notes	2046 Notes	December 15, 2046	4.420%	400		400
2048 Merger Notes	2048 Merger Notes	May 25, 2048	5.085%	391		391
2050 Notes	2050 Notes	May 1, 2050	3.800%	750		750
2051 Notes	2051 Notes	March 15, 2051	3.350%	500		500
2052 Notes	2052 Notes	April 15, 2052	4.500%	1,150		1,150
Principal amount	Principal amount			11,743		11,743
Adjustment from principal amount to carrying amount(1)	Adjustment from principal amount to carrying amount(1)			(168)		(175)
Carrying amount	Carrying amount			$	11,575	$	11,568

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

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

On March 7, 2024, we completed the issuance of the 2027-B Notes, the 2027-C Notes, the 2029-B Notes, the 2031-B Notes, and the 2034 Notes, with an aggregate principal amount of $3 billion. The discount associated with these notes was approximately $5 million, and the Company incurred $16 million in debt issuance costs. The proceeds from the issuance were used for our share repurchase program, to repay outstanding commercial paper, and to repay the 2024 Notes at maturity, with the remainder intended for general corporate purposes.

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KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, CONTINUED)

VARIABLE-RATE BORROWING ARRANGEMENTS

Revolving Credit Agreement

The following table summarizes information about the ~~2022~~ Revolving Credit Agreement:

Amounts Outstanding

(in millions)

~~March 31, 2023~~

~~December 31, 2022~~

~~Issuance~~

Maturity Date

Capacity

~~Carrying Value~~March 31, 2024

~~Carrying Value~~December 31, 2023

~~2022~~ Revolving Credit Agreement(1)

February 23, 2027

4,000

—

(1)The ~~2022~~ Revolving Credit Agreement has $200 million letters of credit available, none of which were utilized as of March 31, ~~2023.~~2024.

As of March 31, ~~2023,~~2024, KDP was in compliance with its minimum interest coverage ratio relating to the ~~2022~~ Revolving Credit Agreement.

Commercial Paper Program

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


		First Quarter
		First Quarter
		First Quarter
		First Quarter
(in millions, except %)	(in millions, except %)		2023			2022			(in millions, except %)	2024		2023
Weighted average commercial paper borrowings	Weighted average commercial paper borrowings		$	506		$	45
Weighted average borrowing rates	Weighted average borrowing rates		4.86		%	0.30		%	Weighted average borrowing rates	5.62	%	4.86	%

Letter of Credit Facility

In addition to the portion of the ~~2022~~ Revolving Credit Agreement reserved for issuance of letters of credit, KDP has an incremental letter of credit facility. Under this facility, $150 million is available for the issuance of letters of credit, ~~$68~~$57 million of which was utilized as of March 31, ~~2023~~2024 and ~~$82~~$93 million of which remains available for use.

FAIR VALUE DISCLOSURES

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

The fair values of ~~KDP's~~our Notes are based on current market rates available to ~~KDP~~us and are considered Level 2 within the fair value hierarchy. The difference between the fair value and the carrying value represents the theoretical net premium or discount that would be paid or received to retire all the Notes and related unamortized costs to be incurred at such date. The fair value of ~~KDP's~~our Notes was ~~$10,777~~$12,085 million and ~~$10,495~~$10,486 million as of March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, respectively.

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~~KEURIG DR PEPPER INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED, CONTINUED)~~

3. Goodwill and Other Intangible Assets

GOODWILL

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


(in millions)	(in millions)	U.S. Refreshment Beverages		U.S. Coffee		International		Total
Balance as of January 1, 2023		$	8,714	$	8,622	$	2,736	$	20,072
(in millions)
(in millions)										U.S. Refreshment Beverages	U.S. Coffee	International	Total
Balance as of January 1, 2024
Foreign currency translation	Foreign currency translation	—		—		45		45

Balance as of March 31, 2023		$	8,714	$	8,622	$	2,781	$	20,117
Balance as of March 31, 2024
Balance as of March 31, 2024
Balance as of March 31, 2024

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KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, CONTINUED)

INTANGIBLE ASSETS OTHER THAN GOODWILL

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


(in millions)	(in millions)	March 31, 2023		December 31, 2022		(in millions)	March 31, 2024	December 31, 2023
Brands(1)	Brands(1)	$	19,363	$	19,291
Trade names	Trade names	2,480		2,480
Contractual arrangements		122		122

Distribution rights(2)
Distribution rights(2)
Distribution rights(2)	Distribution rights(2)	151		100
Total	Total	$	22,116	$	21,993

(1)The change in brands with indefinite lives was primarily driven by foreign currency translation of ~~$72~~$33 million during the first quarter of ~~2023.~~2024.

(2)The ~~Company acquired certain~~change in distribution rights ~~from Nutrabolt during the first quarter~~with indefinite lives was primarily driven by acquired distribution rights related to Electrolit of ~~2023 for approximately $51~~$31 million.

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


		March 31, 2023						December 31, 2022
	March 31, 2024																March 31, 2024				December 31, 2023
(in millions)	(in millions)	Gross Amount		Accumulated Amortization		Net Amount		Gross Amount		Accumulated Amortization		Net Amount		(in millions)	Gross Amount	Accumulated Amortization		Net Amount	Gross Amount	Accumulated Amortization		Net Amount
Acquired technology	Acquired technology	$	1,146	$	(494)	$	652	$	1,146	$	(475)	$	671
Customer relationships	Customer relationships	638		(212)		426		638		(204)		434
Contractual arrangements
Trade names	Trade names	127		(104)		23		127		(101)		26
Brands	Brands	51		(20)		31		51		(19)		32
Contractual arrangements		24		(10)		14		24		(10)		14
Distribution rights	Distribution rights	29		(18)		11		29		(16)		13

Total	Total	$	2,015	$	(858)	$	1,157	$	2,015	$	(825)	$	1,190
Total
Total

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

First Quarter
(in millions) 2023 2022
Amortization expense $ 34 $ 34

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

Remainder of 2023 For the Years Ending December 31,
(in millions) 2024 2025 2026 2027 2028
Expected amortization expense $ 101 $ 127 $ 115 $ 111 $ 95 $ 87

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~~KEURIG DR PEPPER INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED, CONTINUED)~~

~~IMPAIRMENT TESTING~~

KDP conducts impairment tests on goodwill and all indefinite lived intangible assets annually, or more frequently if circumstances indicate that the carrying amount of an asset may not be recoverable. Changes to the Company’s operating segments effective January 1, 2023, as described in Note 6, resulted in a change to the Company’s reporting units. The Company’s reporting units are as follows:


~~Reportable Segments~~						~~Reporting Units~~
~~U.S. Refreshment Beverages~~						~~U.S. Beverage Concentrates~~
						~~U.S. WD~~
						~~DSD~~
~~U.S. Coffee~~						~~U.S. Coffee~~
~~International~~						~~Canada Beverage Concentrates~~
						~~Canada WD~~
						~~Canada Coffee~~
						~~Latin America Beverages~~

Management performed a step 0 analysis as of the effective date of the goodwill for the impacted reporting units. The Company also performed an analysis as of March 31, 2023 to ensure that there were no additional triggering events which occurred during the quarter. As a result of these analyses, management did not identify any indications that the carrying amount of any goodwill or any intangible asset may not be recoverable.


	First Quarter
(in millions)		2024		2023
Amortization expense		$	33	$	34

4. Derivatives

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.

~~KDP~~We formally ~~designates~~designate and ~~accounts~~account for certain foreign exchange forward contracts and interest rate contracts that meet established accounting criteria under U.S. GAAP as cash flow hedges. For such contracts, the effective portion of the gain or loss on the derivative instruments is recorded, net of applicable taxes, in AOCI. When net income is affected by the variability of the underlying transaction, the applicable offsetting amount of the gain or loss from the derivative instrument deferred in AOCI is reclassified to net income. Cash flows from derivative instruments designated in a qualifying hedging relationship are classified in the same category as the cash flows from the hedged items. If a cash flow hedge were to cease to qualify for hedge accounting, or were terminated, the derivatives would continue to be carried on the balance sheet at fair value until settled, and hedge accounting would be discontinued prospectively. If the underlying hedged transaction ceases to exist, any associated amounts reported in AOCI would be reclassified to earnings at that time.

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~~

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KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, CONTINUED)

We have exposure to credit losses from derivative instruments in an asset position in the event of nonperformance by the counterparties to the agreements. Historically, ~~the Company has~~we have not experienced material credit losses as a result of counterparty nonperformance. ~~The Company selects~~We select and periodically ~~reviews~~review counterparties based on credit ratings, ~~limits its~~limit our exposure to a single counterparty under defined guidelines, and ~~monitors~~monitor the market position of the programs upon execution of a hedging transaction and at least on a quarterly basis.

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~~KEURIG DR PEPPER INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED, CONTINUED)~~

INTEREST RATES

Economic Hedges

~~KDP is~~We are exposed to interest rate risk related to ~~its~~our borrowing arrangements and obligations. ~~The Company enters~~We enter into interest rate contracts to provide predictability in ~~the~~ ~~Company~~'sour overall cost structure and to manage the balance of fixed-rate and variable-rate debt. ~~KDP~~We primarily ~~enters~~enter into receive-fixed, pay-variable and receive-variable, pay-fixed swaps and swaption contracts. A natural hedging relationship exists in which changes in the fair value of the instruments act as an economic offset to changes in the fair value of the underlying items. Changes in the fair value of these instruments are recorded in earnings throughout the term of the derivative instrument and are generally reported in interest expense in the unaudited Condensed Consolidated Statements of Income. As of March 31, ~~2023,~~2024, economic interest rate derivative instruments have maturities ranging from ~~February 2033~~April 2024 to ~~December 2036.~~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~~As of ~~long-term debt, during the first quarter~~December 31, 2023, we had $500 million of ~~2021, the Company entered into forward starting swaps and designated them as cash flow hedges. During the first quarter~~notional amount of ~~2023, KDP terminated the remaining~~ forward starting swaps which ~~were designated~~had been de-designated and terminated; however, as ~~cash flow hedges. As~~ the forecasted debt transaction ~~associated with the terminated forward starting swaps~~ was ~~no longer~~still considered probable, the ~~realized gains associated~~fair value of the instruments as of the de-designation remained within AOCI. In March 2024, the forecasted debt transaction took place with the ~~termination were recorded in interest~~issuance of the 2034 Notes, and the fair value of the instruments began amortizing to Interest expense, ~~during~~net over the ~~first quarter~~term of ~~2023.~~the 2034 Notes.

FOREIGN EXCHANGE

~~KDP is~~We are exposed to foreign exchange risk in ~~its~~our international subsidiaries or with certain counterparties in foreign jurisdictions, which may transact in currencies that are different from the functional currencies of ~~KDP’s~~our legal entities. Additionally, the balance sheets of ~~each of the Company’s~~our Canadian and Mexican businesses are subject to exposure from movements in exchange rates.

Economic Hedges

~~KDP holds~~We hold FX forward contracts to economically manage the balance sheet exposures resulting from changes in the FX ~~exchange~~ rates described above. The intent of these FX contracts is to minimize the impact of FX risk associated with balance sheet positions not in local currency. 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. Changes in the fair value of these instruments are recorded in earnings throughout the term of the derivative instrument and are reported in the same caption of the unaudited Condensed Consolidated Statements of Income as the associated risk. As of March 31, ~~2023,~~2024, these FX contracts have maturities ranging from April ~~2023~~2024 to ~~September 2024.~~February 2025.

Cash Flow Hedges

~~KDP designates~~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 ~~either~~ forecasted inventory purchases in U.S. dollars of ~~the~~our Canadian and Mexican ~~businesses or forecasted capital expenditures of certain equipment in euros for KDP’s U.S. manufacturing facilities.~~businesses. The intent of these FX contracts is to provide predictability in the Company's overall cost structure. As of March 31, ~~2023,~~2024, these FX contracts have maturities ranging from April ~~2023~~2024 to ~~October 2024.~~June 2025.

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KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, CONTINUED)

COMMODITIES

Economic Hedges

~~KDP~~We centrally ~~manages~~manage the exposure to volatility in the prices of certain commodities used in ~~its~~our production process and transportation through various derivative contracts. ~~The Company~~We generally ~~holds~~hold some combination of future, swap and option contracts that economically hedge certain of ~~its~~our risks. In these cases, a hedging relationship exists in which changes in the fair value of the instruments act as an economic offset to changes in the fair value of the underlying items or as an offset to certain costs of production. Changes in the fair value of these instruments are recorded in earnings throughout the term of the derivative instrument and are reported in the same line item of the unaudited Condensed Consolidated Statements of Income as the hedged transaction. Unrealized gains and losses are recognized as a component of unallocated corporate costs until ~~the Company's~~our reportable segments are affected by the completion of the underlying transaction, at which time the gain or loss is reflected as a component of the respective segment's income from operations. As of March 31, ~~2023,~~2024, these commodity contracts have maturities ranging from April ~~2023~~2024 to ~~June 2024.~~

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~~KEURIG DR PEPPER INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED, CONTINUED)~~

January 2026.

NOTIONAL AMOUNTS OF DERIVATIVE INSTRUMENTS

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

(in millions)

March 31, 2023

December 31, 2022

(in millions)

March 31, 2024

December 31, 2023

Interest rate contracts

Forward starting swaps, designated as cash flow hedges

—

500

Forward starting swaps, not designated as hedging instruments

1,500

1,000

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

700

1,900

Swaptions, not designated as hedging instruments

FX contracts

Forward contracts, not designated as hedging instruments

589

490

Forward contracts, designated as cash flow hedges

472

511

Commodity contracts, not designated as hedging instruments(1)

529

754

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

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 ~~LIBOR or~~ SOFR forward rates, for all substantial terms of ~~the Company's~~our contracts and credit risk of the counterparties. The fair value of FX forward contracts are valued using quoted forward FX prices at the reporting date. Therefore, ~~the Company has~~we have categorized these contracts as Level 2.

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KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, CONTINUED)

Not Designated as Hedging Instruments

The following table summarizes the location of the fair value of ~~the Company's~~our derivative instruments which are not designated as hedging instruments within the unaudited Condensed Consolidated Balance Sheets. All such instruments are considered level 2 within the fair value hierarchy.

(in millions) Balance Sheet Location March 31, 2023 December 31, 2022
Assets:
FX contracts Prepaid expenses and other current assets $ 5 $ 8
Commodity contracts Prepaid expenses and other current assets 7 6
Interest rate contracts Other non-current assets 36 49
FX contracts Other non-current assets 1 1
Commodity contracts Other non-current assets 1 1
Liabilities:
Interest rate contracts Other current liabilities $ 22 $ 58
FX contracts Other current liabilities 1 —
Commodity contracts Other current liabilities 46 51
Interest rate contracts Other non-current liabilities 123 194
Commodity contracts Other non-current liabilities 3 1

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~~KEURIG DR PEPPER INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED, CONTINUED)~~


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

FX contracts	Prepaid expenses and other current assets	$	4	$	5
Commodity contracts	Prepaid expenses and other current assets	16		9

FX contracts	Other non-current assets	2		—
Commodity contracts	Other non-current assets	—		3

Liabilities:
Interest rate contracts	Other current liabilities	2		80
FX contracts	Other current liabilities	1		3
Commodity contracts	Other current liabilities	47		53
Interest rate contracts	Other non-current liabilities	298		186
FX contracts	Other non-current liabilities	—		4
Commodity contracts	Other non-current liabilities	2		11

Designated as Hedging Instruments

The following table summarizes the location of the fair value of ~~the Company's~~our derivative instruments which are designated as hedging instruments within the unaudited Condensed Consolidated Balance Sheets. All such instruments are designated level 2 within the fair value hierarchy.

(in millions)

Balance Sheet Location

March 31, 2023

December 31, 2022

(in millions)

Balance Sheet Location

March 31, 2024

December 31, 2023

Assets:

FX contracts

Prepaid expenses and other current assets

FX contracts

Other non-current assets

FX contracts

Interest rate contracts

Other non-current assets

—

Liabilities:

FX contracts

Other current liabilities

FX contracts

IMPACT OF DERIVATIVE INSTRUMENTS NOT DESIGNATED AS HEDGING INSTRUMENTS

The following table presents the amount of (gains) losses, net, recognized in the unaudited Condensed Consolidated Statements of Income related to derivative instruments not designated as hedging instruments under U.S. GAAP during the periods presented. Amounts include both realized and unrealized gains and losses.




			First Quarter							First Quarter
(in millions)	(in millions)	Income Statement Location		2023		2022		(in millions)	Income Statement Location		2024	2023
Interest rate contracts	Interest rate contracts	Interest expense		$	(96)	$	67

FX contracts	FX contracts	Cost of sales		1		5
FX contracts	FX contracts	Other (income) expense, net		—		8
FX contracts
FX contracts
Commodity contracts	Commodity contracts	Cost of sales		(15)		(97)
Commodity contracts	Commodity contracts	SG&A expenses		14		(37)

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KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, CONTINUED)

IMPACT OF CASH FLOW HEDGES

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


			First Quarter
			First Quarter
			First Quarter
			First Quarter
(in millions)	(in millions)	Income Statement Location		2023		2022		(in millions)	Income Statement Location	2024	2023
Interest rate contracts(1)		Interest expense		$	(68)	$	—
Interest rate contracts
FX contracts	FX contracts	Cost of sales		(1)		3

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

~~KDP expects~~We expect to reclassify approximately ~~$8 million and $9~~$13 million of pre-tax net gains and $10 million of pre-tax net losses from AOCI into net income during the next twelve months related to interest rate contracts and FX contracts, respectively.

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~~KEURIG DR PEPPER INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED, CONTINUED)~~

5. Leases

The following table presents the components of lease cost:




		First Quarter						First Quarter
(in millions)	(in millions)		2023		2022		(in millions)		2024	2023
Operating lease cost	Operating lease cost		$	39	$	32
Finance lease cost	Finance lease cost
Amortization of right-of-use assets	Amortization of right-of-use assets		22		18
Amortization of right-of-use assets
Amortization of right-of-use assets
Interest on lease liabilities	Interest on lease liabilities		6		6
Variable lease cost(1)	Variable lease cost(1)		10		9

Short-term lease cost

Total lease cost	Total lease cost		$	77	$	65

Total lease cost
Total lease cost

(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~~our leases:


		First Quarter
	First Quarter								First Quarter
(in millions)	(in millions)	2023		2022		(in millions)	2024	2023
Cash paid for amounts included in the measurement of lease liabilities:	Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
Operating cash flows from operating leases
Operating cash flows from operating leases	Operating cash flows from operating leases	$	36	$	29
Operating cash flows from finance leases	Operating cash flows from finance leases	6		6
Financing cash flows from finance leases	Financing cash flows from finance leases	24		20
Right-of-use assets obtained in exchange for lease obligations:	Right-of-use assets obtained in exchange for lease obligations:
Operating leases	Operating leases	38		168
Operating leases
Operating leases
Finance leases	Finance leases	17		23

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

March 31, 2023

December 31, 2022

March 31, 2024

December 31, 2023

Weighted average discount rate

Operating leases

5.1

5.0

5.3

Finance leases

3.7

Finance leases

3.9

Weighted average remaining lease term

Operating leases

10 years

11 years

Operating leases

10 years

Finance leases

9 years

Finance leases

9 years

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KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, CONTINUED)

Future minimum lease payments for non-cancellable leases that have commenced and are reflected on the unaudited Condensed Consolidated Balance Sheets as of March 31, ~~2023~~2024 were as follows:

(in millions) Operating Leases Finance Leases
Remainder of 2023 $ 98 $ 90
2024 141 116
2025 133 111
2026 121 148
2027 100 61
2028 78 47
Thereafter 519 264
Total future minimum lease payments 1,190 837
Less: imputed interest (275) (131)
Present value of minimum lease payments $ 915 $ 706

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~~KEURIG DR PEPPER INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED, CONTINUED)~~


(in millions)	Operating Leases		Finance Leases
Remainder of 2024	$	107	$	98
2025	152		128
2026	139		165
2027	115		76
2028	90		65
2029	85		58
Thereafter	454		274
Total future minimum lease payments	1,142		864
Less: imputed interest	(250)		(143)
Present value of minimum lease payments	$	892	$	721

SIGNIFICANT LEASES THAT HAVE NOT YET COMMENCED

As of March 31, ~~2023, the Company has~~2024, we have entered into leases that have not yet commenced with estimated aggregated future lease payments of approximately ~~$208~~$197 million. These leases are expected to commence between the ~~fourth~~third quarter of ~~2023 and 2025,~~2024 through 2027, with initial lease terms ranging from 45 years to 10 years.

~~ASSET SALE-LEASEBACK TRANSACTION~~

The Company entered into a sale-leaseback transaction with the Veyron SPEs during the first quarter of 2023. The following table presents details of the transaction. The gain on the sale-leaseback is recorded in Other operating income, net, and the leaseback is accounted for as an operating lease.

(in millions) Sale Proceeds Carrying Value Gain on Sale
March 31, 2023(1)
$ 7 $ 1 $ 6

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

The initial term of the leaseback is approximately 15 years, with two 10-year renewal options. The renewal options are not reasonably assured as (i) the Company's position that the dynamic environment in which it operates precludes the Company's ability to be reasonably certain of exercising the renewal options in the distant future and (ii) the options are contingent on the Company remaining investment grade and no change-in-control as of the end of the lease term. The leaseback has a RVG. Refer to Note 15 for additional information about the RVG associated with the asset sale-leaseback transaction.

6. Segments

~~Effective January 1, 2023, the Company revised its segment structure to align with changes in how the Company’s Chief Operating Decision Maker manages the business, assesses performance~~Our operating and ~~allocates resources. The Company's~~ reportable segments consist of the following:

•The U.S. 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~~our own brands and third-party brands, to third-party bottlers, distributors and retailers.

•The U.S. Coffee segment reflects sales in the U.S. from the manufacture and distribution of finished goods relating to ~~the Company's~~our K-Cup pods, single-serve brewers and accessories, and other coffee products to partners, retailers and directly to consumers through the ~~Company’s~~ Keurig.com website.

•The International segment reflects sales in international markets, including the following:

◦Sales in Canada, Mexico, the Caribbean and other international markets from the manufacture and distribution of branded concentrates, syrup and finished beverages, including sales of ~~the Company's~~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 ~~the Company’s~~our single-serve brewers, K-Cup pods and other coffee products.

Segment results are based on management reports. Net sales and income from operations are the significant financial measures used to assess the operating performance of ~~the Company's reportable~~our operating segments. Intersegment sales are recorded at cost and are eliminated in the unaudited Condensed Consolidated Statements of Income. “Unallocated corporate costs” are excluded from ~~the Company's~~our measurement of segment performance and include unrealized commodity derivative gains and losses, and certain general corporate expenses.

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(UNAUDITED, CONTINUED)

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




		First Quarter						First Quarter
(in millions)	(in millions)		2023		2022		(in millions)		2024	2023
Segment Results – Net sales	Segment Results – Net sales
U.S. Refreshment Beverages
U.S. Refreshment Beverages
U.S. Refreshment Beverages	U.S. Refreshment Beverages		$	2,007	$	1,781
U.S. Coffee	U.S. Coffee		931		943
International	International		415		354
Net sales	Net sales		$	3,353	$	3,078

Segment Results – Income from operations	Segment Results – Income from operations
Segment Results – Income from operations
Segment Results – Income from operations
U.S. Refreshment Beverages
U.S. Refreshment Beverages
U.S. Refreshment Beverages	U.S. Refreshment Beverages		$	490	$	704
U.S. Coffee	U.S. Coffee		232		255
International	International		80		64
Unallocated corporate costs	Unallocated corporate costs		(218)		(57)
Income from operations	Income from operations		$	584	$	966

(in millions) March 31, 2023 December 31, 2022
Identifiable operating assets
U.S. Refreshment Beverages $ 28,991 $ 28,987
U.S. Coffee 14,155 14,220
International 6,903 6,873
Segment total 50,049 50,080
Unallocated corporate assets 602 757
Total identifiable operating assets 50,651 50,837
Investments in unconsolidated affiliates 1,009 1,000
Total assets $ 51,660 $ 51,837

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~~KEURIG DR PEPPER INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED, CONTINUED)~~

7. Revenue Recognition

~~KDP recognizes~~We recognize revenue when obligations under the terms of a contract with the customer are satisfied. Branded product sales, which include LRB, K-Cup pods and appliances, occur once control is transferred upon delivery to the customer. Revenue is measured as the amount of consideration that ~~KDP expects~~we expect to receive in exchange for transferring goods. The amount of consideration ~~KDP receives~~we receive, and revenue ~~KDP recognizes~~we recognize, varies with changes in customer incentives that ~~KDP offers to its~~we offer our customers and ~~their customers.~~end consumers. Sales taxes and other similar taxes are excluded from revenue. Costs associated with shipping and handling activities, such as merchandising, are included in SG&A expenses as revenue is recognized.

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


(in millions)	(in millions)	U.S. Refreshment Beverages		U.S. Coffee		International		Total		(in millions)	U.S. Refreshment Beverages	U.S. Coffee	International	Total

For the first quarter of 2024:

For the first quarter of 2023:

For the first quarter of 2024:

For the first quarter of 2024:
LRB
LRB
LRB	LRB	$	1,970	$	—	$	253	$	2,223
K-Cup pods	K-Cup pods	—		771		117		888
Appliances	Appliances	—		125		12		137
Other	Other	37		35		33		105
Net sales	Net sales	$	2,007	$	931	$	415	$	3,353

For the first quarter of 2022:
For the first quarter of 2023:
For the first quarter of 2023:
For the first quarter of 2023:
LRB
LRB
LRB	LRB	$	1,753	$	—	$	203	$	1,956
K-Cup pods	K-Cup pods	—		749		106		855
Appliances	Appliances	—		161		17		178
Other	Other	28		33		28		89
Net sales	Net sales	$	1,781	$	943	$	354	$	3,078

LRB represents net sales of owned, licensed, and partner brands within our portfolio and includes ~~CSDs, NCBs,~~branded concentrates, syrup, and finished beverages, including contract manufacturing of ~~KDP~~our branded products for our bottlers and distributors. K-Cup pods represents net sales from owned, ~~brands,~~licensed, and partner brands and private label owners. Net sales for partner brands and private label owners are contractual and long-term in nature.

~~8. Earnings Per Share~~

The following table presents the Company's basic and diluted EPS and shares outstanding. Anti-dilutive stock-based awards excluded from the calculations of diluted EPS were immaterial during the periods presented.

First Quarter
(in millions, except per share data) 2023 2022
Net income attributable to KDP $ 467 $ 585
Weighted average common shares outstanding 1,406.2 1,418.2
Dilutive effect of stock-based awards 10.8 11.5
Weighted average common shares outstanding and common stock equivalents 1,417.0 1,429.7
Basic EPS $ 0.33 $ 0.41
Diluted EPS 0.33 0.41
Anti-dilutive shares excluded from the diluted weighted average shares outstanding calculation 1.0 0.9

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, CONTINUED)

8. Earnings Per Share

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


	First Quarter
(in millions, except per share data)		2024		2023
Net income		$	454	$	467

Weighted average common shares outstanding		1,380.7		1,406.2
Dilutive effect of stock-based awards		7.0		10.8
Weighted average common shares outstanding and common stock equivalents		1,387.7		1,417.0

Basic EPS		$	0.33	$	0.33
Diluted EPS		0.33		0.33

Anti-dilutive shares excluded from the diluted weighted average shares outstanding calculation		2.1		1.0

9. Stock-Based Compensation

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


		First Quarter
		First Quarter
		First Quarter
		First Quarter
(in millions)	(in millions)		2023		2022		(in millions)	2024	2023
Total stock-based compensation expense(1)			$	29	$	(15)
Income tax (benefit) expense			(5)		4
Total stock-based compensation expense
Income tax benefit
Stock-based compensation expense, net of tax	Stock-based compensation expense, net of tax		$	24	$	(11)

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

RESTRICTED SHARE UNITS

The table below summarizes RSU activity:


		RSUs	Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value (in millions)		RSUs	Weighted Average Grant Date Fair Value	Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value (in millions)
Outstanding as of December 31, 2022		18,038,745	$	27.46	1.6	$	643
Outstanding as of December 31, 2023
Granted	Granted	3,090,196	31.53
Vested and released	Vested and released	(2,069,870)	23.41			71
Vested and released
Vested and released
Forfeited	Forfeited	(184,830)	28.24
Outstanding as of March 31, 2023		18,874,241	$	28.57	1.8	$	666
Outstanding as of March 31, 2024
Outstanding as of March 31, 2024
Outstanding as of March 31, 2024

As of March 31, ~~2023,~~2024, there was ~~$226~~$233 million of unrecognized compensation cost related to unvested RSUs that is expected to be recognized over a weighted average period of ~~3.4~~3.5 years.

~~10. Investments~~

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

(in millions) Ownership Interest March 31, 2023 December 31, 2022
Nutrabolt 29.8 % $ 885 $ 874
Tractor 19.2 % 48 49
Athletic Brewing 13.1 % 50 51
Dyla LLC 12.4 % 12 12
Force Holdings LLC(1)
33.3 % 4 4
Beverage startup companies(2)
(various) 5 5
Other (various) 5 5
Investments in unconsolidated affiliates $ 1,009 $ 1,000

~~(1)Force Holdings LLC has a 14.1% ownership interest in Dyla LLC.~~

~~(2)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.~~

~~11. Income Taxes~~

~~The Company’s effective tax rates were as follows:~~

First Quarter
(in millions) 2023 2022
Effective tax rate 19.6 % 23.5 %

The change in the effective tax rate was largely driven by the tax benefit received from favorable adjustments upon foreign tax return filing and excess tax deductions that were generated from the vesting of RSUs during the first quarter of 2023.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, CONTINUED)

10. Investments

The following table summarizes our investments in unconsolidated affiliates:


	March 31,		December 31,
(in millions)	2024		2023
Nutrabolt(1)	$	1,014	$	960
Chobani	307		307
Tractor	42		44
Athletic Brewing	50		50


Beverage startup companies	5		5
Other	20		21
Investments in unconsolidated affiliates	$	1,438	$	1,387

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

11. Income Taxes

Our effective tax rates were as follows:


	First Quarter
		2024		2023
Effective tax rate		23.6	%	19.6	%

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

12. Accumulated Other Comprehensive Income

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


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

For the first quarter of 2024:

For the first quarter of 2024:

For the first quarter of 2024:
Beginning balance
Beginning balance
Beginning balance
Other comprehensive loss
Amounts reclassified from AOCI
Total other comprehensive loss
Balance as of March 31, 2024

For the first quarter of 2023:	For the first quarter of 2023:
For the first quarter of 2023:
For the first quarter of 2023:
Beginning balance
Beginning balance
Beginning balance	Beginning balance	$	(86)	$	(10)	$	225	$	129
Other comprehensive income (loss)	Other comprehensive income (loss)	108		—		(30)		78
Amounts reclassified from AOCI	Amounts reclassified from AOCI	—		—		(52)		(52)
Total other comprehensive income (loss)	Total other comprehensive income (loss)	108		—		(82)		26
Balance as of March 31, 2023	Balance as of March 31, 2023	$	22	$	(10)	$	143	$	155

For the first quarter of 2022:
Beginning balance		$	81	$	(4)	$	(103)	$	(26)
Other comprehensive income		99		—		140		239
Amounts reclassified from AOCI		—		—		2		2
Total other comprehensive income		99		—		142		241
Balance as of March 31, 2022		$	180	$	(4)	$	39	$	215

Table of Contents

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, CONTINUED)

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


			First Quarter
			First Quarter
			First Quarter
			First Quarter
(in millions)	(in millions)	Income Statement Caption		2023		2022		(in millions)	Income Statement Caption	2024	2023
Cash Flow Hedges:	Cash Flow Hedges:
Interest rate contracts(1)	Interest rate contracts(1)	Interest expense		$	(68)	$	—
FX contracts		Cost of sales		—		3
Total				(68)		3
Income tax (benefit) expense				16		(1)
Interest rate contracts(1)
Interest rate contracts(1)

Income tax expense

Income tax expense

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

(1)Amounts reclassified from AOCI into interest expense during the first quarter of 2023 include the realized gains associated with the termination of forward starting swaps designated as cash flow hedges of approximately $66 million. ~~Refer to Note 4 for additional information on the terminated forward starting swaps.~~

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~~KEURIG DR PEPPER INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED, CONTINUED)~~

13. Other Financial Information

SELECTED BALANCE SHEET INFORMATION

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


		March 31,		December 31,			March 31,	December 31,
(in millions)	(in millions)	2023		2022		(in millions)	2024	2023
Inventories:	Inventories:
Raw materials
Raw materials
Raw materials	Raw materials	$	471	$	475
Work-in-progress	Work-in-progress	9		8
Finished goods	Finished goods	939		858
Total	Total	1,419		1,341
Allowance for excess and obsolete inventories	Allowance for excess and obsolete inventories	(28)		(27)
Total Inventories	Total Inventories	$	1,391	$	1,314
Prepaid expenses and other current assets:	Prepaid expenses and other current assets:
Other receivables	Other receivables	$	138	$	167
Other receivables
Other receivables
Prepaid income taxes	Prepaid income taxes	15		49
Customer incentive programs	Customer incentive programs	104		25
Derivative instruments	Derivative instruments	29		35
Prepaid marketing	Prepaid marketing	39		19
Spare parts	Spare parts	94		89

Income tax receivable
Income tax receivable
Income tax receivable	Income tax receivable	17		17
Other	Other	104		70
Total prepaid expenses and other current assets	Total prepaid expenses and other current assets	$	540	$	471
Other non-current assets:	Other non-current assets:					Other non-current assets:
Operating lease right-of-use assets	Operating lease right-of-use assets	$	892	$	881
Customer incentive programs	Customer incentive programs	40		46
Derivative instruments	Derivative instruments	39		140

Equity securities(1)	Equity securities(1)	59		48
Equity securities without readily determinable fair values		1		1
Equity securities(1)
Equity securities(1)

Other

Other

Other	Other	129		136
Total other non-current assets	Total other non-current assets	$	1,160	$	1,252

(1)Fair values of these equity securities are determined using quoted market prices from daily exchange traded markets, based on the closing price as of the balance sheet date, and are classified as Level 1. Unrealized ~~mark-to market~~mark-to-market gains and losses are recorded to Other ~~(income) expense,~~income, net. For the first quarter of 2024 and 2023, ~~and 2022, the Company~~we recorded an unrealized mark-to-market ~~gain~~losses of $2 million and gains of $8 million, ~~and loss of $3 million,~~ respectively, on ~~its~~our investment in Vita Coco.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, CONTINUED)


		March 31,		December 31,			March 31,	December 31,
(in millions)	(in millions)	2023		2022		(in millions)	2024	2023
Accrued expenses:	Accrued expenses:
Accrued customer trade	Accrued customer trade	$	352	$	429
Accrued customer trade
Accrued customer trade
Accrued compensation	Accrued compensation	127		246
Insurance reserve	Insurance reserve	39		53
Accrued interest	Accrued interest	152		76
Accrued professional fees		9		7

Other accrued expenses
Other accrued expenses
Other accrued expenses	Other accrued expenses	367		342
Total accrued expenses	Total accrued expenses	$	1,046	$	1,153
Other current liabilities:	Other current liabilities:
Dividends payable
Dividends payable
Dividends payable	Dividends payable	$	282	$	281
Income taxes payable	Income taxes payable	110		87
Operating lease liability	Operating lease liability	105		100
Finance lease liability	Finance lease liability	95		95
Derivative instruments	Derivative instruments	80		112

Other	Other	15		10
Other
Other
Total other current liabilities	Total other current liabilities	$	687	$	685
Other non-current liabilities:	Other non-current liabilities:
Operating lease liability
Operating lease liability
Operating lease liability	Operating lease liability	$	810	$	803
Finance lease liability	Finance lease liability	611		618
Pension and post-retirement liability	Pension and post-retirement liability	38		37
Insurance reserves	Insurance reserves	70		69

Derivative instruments	Derivative instruments	126		195

Derivative instruments

Derivative instruments
Deferred compensation liability	Deferred compensation liability	32		30
Other	Other	76		73
Total other non-current liabilities	Total other non-current liabilities	$	1,763	$	1,825

ACCOUNTS PAYABLE

~~KDP has~~We have agreements with third party administrators which allow participating suppliers to track our payment obligations, ~~from KDP,~~ and, if voluntarily elected by the supplier, to sell our payment obligations ~~from KDP~~ to financial institutions. Suppliers can sell one or more of ~~KDP's~~our payment obligations, at their sole discretion, and ~~the~~our rights and obligations ~~of KDP~~ to ~~its~~our suppliers, including amounts due and scheduled payment terms, are not impacted. ~~KDP has~~We have no economic interest in a supplier’s decision to enter into these agreements and no direct financial relationship with the financial institutions. ~~KDP's obligations to its suppliers, including amounts due and scheduled payment terms, are not impacted. The amount of the outstanding~~Outstanding obligations confirmed as valid included in accounts payable as of March 31, ~~2023~~2024 and December 31, ~~2022 was $3,903~~2023 were $1,999 million and ~~$4,113~~$2,389 million, respectively.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, CONTINUED)

14. 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. ~~As of March 31, 2023 and December 31, 2022, the Company~~We had litigation reserves of ~~$18~~$8 million and $12 million, ~~respectively. KDP has~~respectively, as of March 31, 2024 and December 31, 2023. We have also identified certain other legal matters where we believe an unfavorable outcome is reasonably possible and/or for which no estimate of possible losses can be made. ~~The Company does~~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 ~~the~~our results of operations, financial condition, or ~~liquidity of KDP.~~liquidity.

ANTITRUST LITIGATION

In February 2014, TreeHouse Foods, Inc. and certain affiliated entities filed suit against KDP’s wholly-owned subsidiary, Keurig (formerly known as Green Mountain Coffee Roasters, Inc.), in the U.S. District Court for the Southern District of New York (“SDNY”) (TreeHouse Foods, Inc. et al. v. Green Mountain Coffee Roasters, Inc. et al.). The TreeHouse complaint asserted claims under the federal antitrust laws and various state laws, contending that Keurig had monopolized alleged markets for single serve coffee brewers and single serve coffee pods. The TreeHouse complaint sought treble monetary damages, declaratory relief, injunctive relief and attorneys’ fees. In ~~March 2014, JBR, Inc. filed suit against Keurig in~~ the ~~U.S. District Court for the Eastern District~~months that followed, a number of ~~California~~additional actions, including claims from another coffee manufacturer (JBR, Inc. ~~v. Keurig Green Mountain, Inc.~~)~~. The~~, as well as putative class actions on behalf of direct and indirect purchasers of Keurig’s products, were filed in various federal district courts, asserting claims ~~asserted~~ and seeking relief ~~sought in the JBR complaint were~~ substantially similar to the claims asserted and relief sought in the TreeHouse complaint.

~~Beginning in 2014, a number of putative class~~ Additional similar actions ~~asserting similar claims and seeking similar relief to the matters described above~~ were filed ~~on behalf of purported~~by individual direct purchasers (including McLane Company, Inc., BJ’s Wholesale Club, Inc., Winn-Dixie Stores Inc. and Bi-Lo Holding LLC) in 2019 and in 2021. All of ~~Keurig’s products in various federal district courts. In June 2014,~~ these ~~various~~ actions ~~including the TreeHouse and JBR suits,~~ were transferred to ~~a single judicial district~~the SDNY for coordinated pre-trial proceedings (the “Multidistrict Antitrust Litigation”). A consolidated putative class action complaint by direct purchaser plaintiffs was filed in July 2014. In January 2019, McLane Company, Inc. filed suit against Keurig (McLane Company, Inc. v. Keurig Green Mountain, Inc.) in the SDNY asserting similar claims and was also transferred into the Multidistrict Antitrust Litigation. These actions are now pending in the SDNY (In re: Keurig Green Mountain Single-Serve Coffee Antitrust Litigation)~~. Discovery in the Multidistrict~~ (the “Multidistrict Antitrust Litigation concluded in 2021, with plaintiffs collectively claiming more than $5 billion of monetary damages. Keurig strongly disputes the merits of the claims and the calculation of damages. As a result, Keurig has fully briefed a summary judgment motion that, if successful, would end the cases entirely. Keurig has also fully briefed other significant motions, including challenges to the validity of plaintiffs’ damages calculations. Keurig is also pursuing its opposition to direct purchaser plaintiffs’ motion for class certification.Litigation”).

In July 2021, BJ’s Wholesale Club, Inc. filed suit against Keurig (BJ’s Wholesale Club, Inc. v. Keurig Green Mountain, Inc.) in the U.S. District Court for the Eastern District of New York (“EDNY”) asserting similar claims and also was transferred into the Multidistrict Antitrust Litigation. In August 2021, Winn-Dixie Stores, Inc. and Bi-Lo Holding LLC filed suit against Keurig (Winn-Dixie Stores, Inc. et al. v. Keurig Green Mountain, Inc. et al.) in the EDNY asserting similar claims and was also transferred into the Multidistrict Antitrust Litigation. These cases remain in the early stages of discovery.

~~A number of putative class actions asserting similar claims and seeking similar relief were previously filed on behalf of purported indirect purchasers of Keurig’s products.~~ In July 2020, Keurig reached an agreement with one of the plaintiff groups in the Multidistrict Antitrust Litigation, the putative indirect purchaser class, ~~plaintiffs in the Multidistrict Antitrust Litigation~~ to settle the claims asserted for $31 million. The settlement class ~~consists~~consisted of individuals and entities in the United States that purchased, from persons other than Keurig and not for purposes of resale, Keurig manufactured or licensed single serve beverage portion packs during the applicable class period (beginning in September 2010 for most states). The ~~court granted preliminary approval of the~~ settlement ~~in December 2020,~~was approved and ~~the Company~~ paid, ~~the settlement amount in January 2021. In June 2021, the Court granted final approval of the settlement, entered final judgment,~~ and ~~dismissed~~ the indirect purchasers’ ~~claims.~~claims have been dismissed.

~~Separate from~~Discovery in all remaining matters pending in the ~~U.S. actions described above,~~Multidistrict Antitrust Litigation is concluded, with the plaintiffs collectively claiming more than $5 billion of monetary damages. Keurig strongly disputes the merits of the claims and the calculation of damages. As a ~~statement~~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 ~~claim was filed~~plaintiffs’ damages calculations. 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 September 2014 against Keurig and Keurig Canada Inc. in Ontario, Canada, by Club Coffee L.P., a Canadian manufacturer of single serve beverage pods, asserting a breach of competition law and false and misleading statements by Keurig. To date, this plaintiff has not taken substantive action to prosecute its claims.the SDNY since 2021, with others pending since 2023.

~~KDP~~Keurig intends to continue vigorously ~~defend~~defending the remaining ~~lawsuits described above.~~lawsuits. At this time, ~~the Company is~~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 ~~the Company~~us or ~~its~~our results of operations. Accordingly, ~~the Company has~~we have not accrued for a loss contingency. Additionally, as the timelines in these cases may be beyond our control, we ~~cannot assure you if~~can provide no assurance as to whether or when there will be material developments in these matters.

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KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, CONTINUED)

15. ~~Transactions with Variable Interest Entities~~Restructuring

~~TRANSACTIONS WITH VEYRON SPEs~~RESTRUCTURING PROGRAMS

~~The Company has a number~~2023 CEO Succession and Associated Realignment

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 ~~leasing arrangements and one licensing arrangement with special purpose entities associated~~the program was the appointment of Tim Cofer as Chief Operating Officer, effective November 6, 2023, with the ~~same sponsor, which~~expectation that Mr. Cofer will succeed Robert Gamgort as our CEO during the second quarter of 2024. We are ~~referred~~also realigning our executive and operating leadership structure to ~~as the Veyron SPEs.~~enable faster decision making and to better support various strategic initiatives. The ~~Veyron SPEs are VIEs for which KDP~~program 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 March 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 5 for additional information about the current period asset sale-leaseback transaction. Each lease has a RVG based on a percentage of Veyron SPEs’s purchase price; however, the Company concluded it was not probable that the Company will owe an amount at the end of each individual lease term, as the fair values of the properties are not expected to ~~fall below the RVGs at the end~~incur charges 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 March 31, 2023 and December 31, 2022 were $653approximately $52 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,~~primarily driven by severance costs, 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 March 31, 2023 and December 31, 2022.

(in millions)
March 31, 2023(1)
December 31, 2022(2)
Non-current assets $ 430 $ 430
Current liabilities 22 22
Non-current liabilities 419 419

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

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

~~Licensing Arrangement~~

ABC, a wholly-owned subsidiary of KDP, has provided a guarantee in connection with its distribution agreement with the Veyron SPEs to be paid only in the event the Veyron SPEs sell specific distribution rights and the value of those distribution rights does not exceed $142 million, which is the maximum undiscounted amount that KDP could pay under the guarantee. All obligations with respect to the guarantee will cease upon termination of the distribution agreement, which would occur upon notice by ABC not to renew the distribution agreement, KDP no longer being investment grade at the end of the term, or the sale of the distribution rights by the Veyron SPEs. As of March 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 March 31, 2023, KDP had $98 million in fixed service fee commitments related to the 15-year distribution agreement which was effective on December 28, 2020, with Veyron SPEs. These commitments were used to assist the Veyron SPEs in obtaining financing. Such fixed service fee payments began on January 1, 2021.

~~Fixed service fees over the next five years~~ are expected to be incurred through 2024, and the sign-on bonus for Mr. Cofer as our new Chief Operating Officer.

2024 Network Optimization

In March 2024, we announced the closure of our manufacturing facility in Williston, Vermont, with operations and employees to be relocated to other existing manufacturing locations, in order to more effectively and efficiently meet the needs of consumers and customers. The relocation is expected to take place during the second and third quarters of 2024, and the restructuring program is expected to incur pre-tax restructuring charges in an estimated range of $30 million to$40 million, primarily comprised of asset related costs.

RESTRUCTURING CHARGES

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




		Remainder of 2023		For the Years Ending December 31,											First Quarter
(in millions)	(in millions)			2024		2025		2026		2027		2028		(in millions)		2024	2023
Fixed service fees		$	5	$	8	$	8	$	7	$	8	$	8
2023 CEO Succession and Associated Realignment
2024 Network Optimization

~~Table of Contents~~

~~KEURIG DR PEPPER INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED, CONTINUED)~~

~~TRANSACTION WITH NUTRABOLT~~

The Company has a preferred equity investment in Nutrabolt, which will earn the greater of (i) a 5% annual coupon on the preferred equity units plus any accretion for amounts not yet paid or (ii) KDP’s share of Nutrabolt’s earnings as if KDP’s preferred equity was converted into common units. As the other investors of Nutrabolt have to share in Nutrabolt's earnings with KDP if in excess of the 5% annual coupon, the other investors lack certain characteristics of a controlling financial interest, which qualifies Nutrabolt as a VIE. KDP is not the primary beneficiary of the VIE and therefore is not required to consolidate Nutrabolt, as the primary shareholder of the VIE has control over the board and decision-making for the activities that most significantly impact the VIE’s economic performance, including sales, marketing, and operations. KDP has no obligation to provide additional funding to Nutrabolt, and thus the Company’s maximum exposure and risk of loss related to Nutrabolt is limited to the carrying value of KDP’s investment. Refer to Note 10 for the carrying value of the Company’s investment in Nutrabolt.

~~16. Restructuring Liabilities~~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 unaudited condensed consolidated financial statements. Restructuring liabilities, primarily consisting of workforce reduction costs, were as follows:


(in millions)	Restructuring Liabilities
Balance as of January 1, ~~2023~~2024	$	5527
Charges (credits) to expense	—(3)
Cash payments	~~(29)~~(3)

Balance as of March 31, ~~2023~~2024	$	2621

16. Transactions with Related Parties

REPURCHASE OF KDP COMMON STOCK

In March 2024, JAB BevCo B.V., a subsidiary of JAB, sold 100 million shares of KDP’s common stock through an underwritten secondary offering. In connection with this offering, we repurchased 35 million shares at the per-share price paid by the underwriter, for a total of $1,012 million, which was effected under our existing share repurchase program.

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ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our audited consolidated financial statements and notes thereto in our Annual Report.

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act, including, in particular, statements about the impact of ~~the global COVID-19 pandemic, inflation,~~ future events, future financial performance, plans (including our executive succession plan), strategies, expectations, prospects, competitive environment, regulation, labor matters, supply chain issues, inflation, and availability of raw materials. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as “outlook,” “guidance,” “anticipate,” “expect,” “believe,” “could,” “estimate,” “feel,” “forecast,” “intend,” “may,” “plan,” “potential,” “project,” “should,” “target,” “will,” “would,” and similar words, phrases or expressions and variations or negatives of these words in this Quarterly Report on Form 10-Q. We have based these forward-looking statements on our current views with respect to future events and financial performance. Our actual financial performance could differ materially from those projected in the forward-looking statements due to the inherent uncertainty of estimates, forecasts and projections, and our financial performance may be better or worse than anticipated. Given these uncertainties, you should not put undue reliance on any forward-looking statements. All of the forward-looking statements are qualified in their entirety by reference to the factors discussed under "Risk Factors" in Part I, Item 1A of our Annual Report, as well as our subsequent filings with the SEC. Forward-looking statements represent our estimates and assumptions only as of the date that they were made. We do not undertake any duty to update the forward-looking statements, and the estimates and assumptions associated with them, after the date of this Quarterly Report on Form 10-Q, except to the extent required by applicable securities laws.

This Quarterly Report on Form 10-Q contains the names of some of our owned or licensed trademarks, trade names and service marks, which we refer to as our brands. All of the product names included in this Quarterly Report on Form 10-Q are either our registered trademarks or those of our licensors.

OVERVIEW

KDP is a leading beverage company in North America ~~with a diverse portfolio of LRBs, including flavored (non-cola) CSDs, water (enhanced~~that manufactures, markets, distributes, and ~~flavored), ready-to-drink tea~~sells hot and ~~coffee, juice, juice drinks, mixers~~cold beverages and ~~specialty coffee, and is a leading producer of innovative~~ single serve brewing systems. ~~With~~We have a ~~wide range~~broad portfolio of ~~hot and cold beverages that meet virtually any consumer need, our key~~iconic beverage brands, ~~include Keurig,~~including Dr Pepper, Canada Dry, Mott's, A&W, Snapple, ~~Mott's, Clamato, Core,~~Peñafiel, 7UP, Green Mountain Coffee Roasters, Core Hydration, and The Original Donut ~~Shop. We have~~Shop, as well as the Keurig brewing system. 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, ~~including the top ten best-selling coffee brands and Dr Pepper as a leading flavored CSD in the U.S., according to IRi, which are~~ available nearly everywhere people shop and consume ~~beverages.~~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 ~~systems. KDP markets~~system. We market and ~~sells its~~sell our products to retailers, including supermarkets, mass merchandisers, club stores, pure-play e-commerce retailers, and office ~~superstores, vending machines, grocery and drug stores, and convenience stores;~~superstores; to restaurants, hotel chains, office product and coffee distributors, and partner brand owners; and directly to consumers through ~~its websites.~~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.

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~~Effective January 1, 2023, the Company revised its segment structure to align with how the Company’s Chief Operating Decision Maker manages the business, assesses performance~~Our operating and ~~allocates resources. The Company's~~ reportable segments ~~consist of the following:~~are as follows:

•The U.S. 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.

•The U.S. 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 other coffee products to partners, retailers and directly to consumers through our 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.

COMPARABLE RESULTS OF OPERATIONS

Management believes that there are certain non-GAAP financial measures that allow management to evaluate our results, trends and ongoing performance on a comparable basis. In order to derive the adjusted financial information, we adjust certain financial statement captions and metrics prepared under U.S. GAAP for certain items affecting comparability and the impact of foreign currency. See ~~Non-GAAP Financial Measures~~ ~~for further information.~~

~~EXECUTIVE SUMMARY~~

~~Financial Overview - First Quarter of 2023 as compared to First Quarter of 2022~~

~~As Reported, in millions (except EPS)~~

~~As Adjusted, in millions (except EPS)~~

~~Table of Contents~~

~~RESULTS OF OPERATIONS~~

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

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

EXECUTIVE SUMMARY

Financial Overview - First Quarter of 2024 as compared to First Quarter of 2023

As Reported, in millions (except EPS)

Key Events During the First Quarter of 2024

March 2024 Debt Issuance

In March 2024, we completed the issuance of an aggregate principal amount of $3 billion of senior unsecured notes. The proceeds were used to repay the 2024 Notes at maturity, to repurchase KDP shares as described below, to repay outstanding commercial paper, and for general corporate purposes.

Repurchase of KDP Shares

Table of Contents

RESULTS OF OPERATIONS

First Quarter of 2024 Compared to First Quarter of ~~2022~~2023

Consolidated Operations

The following table sets forth our unaudited condensed consolidated results of operations for the first quarter of ~~2023~~2024 and ~~2022:~~2023:


		First Quarter						Dollar		Percentage				First Quarter												Dollar Change							Percentage Change
($ in millions, except per share amounts)	($ in millions, except per share amounts)	2023			2022			Change		Change
Net sales
Net sales
Net sales	Net sales	$	3,353		$	3,078		$	275	8.9	%	$	3,468			$		$	3,353			$					$	115			3.4			3.4		%
Cost of sales	Cost of sales	1,609			1,428			181		12.7
Gross profit	Gross profit	1,744			1,650			94		5.7
Selling, general and administrative expenses	Selling, general and administrative expenses	1,165			1,018			147		14.4

Gain on litigation settlement		—			(299)			299		NM

Other operating income, net

Other operating income, net

Other operating income, net	Other operating income, net	(5)			(35)			30		NM		(1)				(5)			(5)				4						4			NM					NM
Income from operations	Income from operations	584			966			(382)		(39.5)
Interest expense	Interest expense	23			188			(165)		(87.8)		Interest expense		178			23				23				155						155		NM						NM
Loss on early extinguishment of debt		—			48			(48)		NM
Gain on sale of equity method investment		—			(50)			50		NM
Impairment of investments and note receivable		—			6			(6)		NM
Other (income) expense, net		(20)			9			(29)		NM

Other income, net

Other income, net

Other income, net														(7)						(20)									13						NM
Income before provision for income taxes	Income before provision for income taxes	581			765			(184)		(24.1)
Provision for income taxes	Provision for income taxes	114			180			(66)		(36.7)
Net income including non-controlling interest		467			585			(118)		(20.2)
Less: Net loss attributable to non-controlling interest		—			—			—		NM
Net income attributable to KDP		$	467		$	585		(118)		(20.2)
Net income

Earnings per common share:
Earnings per common share:
Earnings per common share:	Earnings per common share:
Basic	Basic	$	0.33		$	0.41		$	(0.08)	(19.5)	%	Basic		$	0.33		$			$	0.33			$					$	—		—				—		%
Diluted	Diluted	0.33			0.41			(0.08)		(19.5)

Gross margin	Gross margin	52.0		%	53.6		%			(160) bps
Gross margin
Gross margin														55.9		%				52.0		%																390 bps
Operating margin	Operating margin	17.4		%	31.4		%			NM		Operating margin		22.1		%				17.4		%																470 bps
Effective tax rate	Effective tax rate	19.6		%	23.5		%			(390) bps		Effective tax rate		23.6		%				19.6		%																400 bps

Sales Volume. The following table provides the percentage change in sales ~~volumes~~volume compared to the prior year period:


	Percentage Change
LRB	~~0.8~~ (0.7)	%
K-Cup pods	(0.6)
~~Brewers~~Appliances	~~(25.7)~~21.7

Net Sales. Net sales increased ~~$275~~$115 million, or ~~8.9%~~3.4%, to ~~$3,353~~$3,468 million for the first quarter of ~~2023~~2024 compared to ~~$3,078~~$3,353 million in the prior year period. This performance reflected favorable net price realization ~~across all segments totaling 9.9%~~(3.1%) and favorable FX translation (0.6%), slightly offset by unfavorable volume/mix ~~of 1.0%~~(0.3%).

Gross Profit. Gross profit increased ~~$94~~$196 million, or ~~5.7%~~11.2%, to ~~$1,744~~$1,940 million for the first quarter of ~~2023~~2024 compared to ~~$1,650~~$1,744 million in the prior year period. This performance primarily reflected the ~~benefits~~impact to gross profit of the strong growth in net sales ~~growth~~(6 percentage points), the benefit from the earned equity from the achievement of milestones associated with certain distribution agreements (3 percentage points), and a net benefit from changes in ingredients, materials, and productivity ~~partially offset by broad-based inflation, and an unfavorable change in unrealized commodity mark-to-market activity.~~(2 percentage points). Gross margin ~~decreased 160~~increased 390 bps versus ~~the year ago period to 52.0%.~~

~~Table of Contents~~

~~Selling, General and Administrative Expenses.~~SG&A expenses increased $147 million, or 14.4%, to $1,165 million for the first quarter of 2023 compared to $1,018 million in the prior year period. The increase was driven by broad-based inflation, an unfavorable comparison to the stock award forfeiture accounting policy change in the prior year period ~~of $40 million, higher marketing expense and increases in other operating costs.~~

~~Gain on Litigation Settlement. Gain on litigation settlement reflected the portion of the settlement payment from BodyArmor which was allocated~~ to ~~the gain on the full settlement of the existing claims against BodyArmor in the first quarter of 2022.~~

~~Other Operating Income, net.~~ Other operating income, net decreased $30 million for the first quarter of 2023 compared to the prior year period, primarily driven by a $32 million reduction in year-over-year asset sale-leaseback activity relating to our strategic asset investment program.55.9%.

Income from Operations. Income from operations ~~decreased $382~~increased $181 million, or ~~39.5%~~31.0%, to ~~$584~~$765 million for the first quarter of ~~2023~~2024 compared to ~~$966~~$584 million in the prior year period, primarily driven by ~~unfavorable comparison to the gain on the litigation settlement and on the reduction in asset sale-leaseback activity. Other factors include higher SG&A expenses, partially offset by~~ increased gross profit. Operating margin increased 470 bps from the prior year period to 22.1%.

Table of Contents

Interest Expense. Interest expense ~~decreased $165~~increased $155 million ~~or 87.8%,~~ to ~~$23~~$178 million for the first quarter of ~~2023~~2024 compared to ~~$188~~$23 million for the prior year period, primarily driven by the ~~favorable~~unfavorable change in unrealized mark-to-market activity ~~of $164 million~~ on interest rate ~~contracts.~~

~~Loss on Early Extinguishment of Debt.~~ Loss on early extinguishment of debt reflected a loss of $48 million in the prior year period associated with our 2022 Strategic Refinancing and our early retirement of our 2038 Notes, the 2021 364-Day Credit Agreement and the KDP Revolver.

~~Gain on Sale of Equity Method Investment.~~ ~~Gain on sale of equity method investment reflected the portion of the settlement payment~~contracts, resulting from ~~BodyArmor in the first quarter of 2022 which was allocated to the satisfaction of the holdback amount owed to us in association with the sale of our equity~~increasing interest ~~in BodyArmor in 2021.~~

~~Impairment of Investments and Note Receivable.Impairment on investments and note receivable reflected a non-cash impairment charge of $6 million in the first quarter of 2022 associated with the wind-down of Bedford.~~

~~Other Non-operating (Income) Expense, net.~~ Other (income) expense, net reflected a favorable change of $29 million from the prior year period, driven by gains on the Company’s investments in equity securities, primarily led by Nutrabolt’s preferred dividend and mark-to-market on our Vita Coco investment.rates.

Effective Tax Rate. The effective tax rate ~~decreased 390~~increased 400 bps to ~~19.6%~~23.6% for the first quarter of ~~2023,~~2024, compared to ~~23.5%~~19.6% in the prior year period, ~~primarily~~ driven by a shift in the mix of income from lower tax jurisdictions to higher tax jurisdictions (210 bps) and the unfavorable comparison to the prior year tax benefit received from favorable adjustments upon foreign tax return filing ~~and excess tax deductions that were generated from the vesting of RSUs during the first quarter of 2023.~~(150 bps).

Net ~~Income Attributable to KDP.~~Income. Net income ~~attributable to KDP~~ decreased ~~$118~~$13 million, or ~~20.2%~~2.8%, to ~~$467~~$454 million for the first quarter of ~~2023~~2024 as compared to ~~$585~~$467 million in the prior year period, primarily driven by lower income from operations and the unfavorable comparison to the gain in the prior year period for the sale of our equity method investment in BodyArmor, partially offset by reducedas increased interest expense ~~the favorable comparison to the loss on extinguishment of debt in the prior year,~~ and ~~the decrease~~unfavorable changes in our effective tax ~~rate.~~rate offset our increased income from operations.

Diluted EPS. Diluted EPS ~~decreased 19.5%~~was flat relative to the prior year period at $0.33 per diluted ~~share as compared to $0.41 in the prior year period.~~share.

~~Table of Contents~~

Results of Operations by Segment

The following tables provide net sales and income from operations for our reportable segments for the first quarter of ~~2023~~2024 and ~~2022,~~2023, as well as the other amounts necessary to reconcile our total segment results to our consolidated results presented in accordance with U.S. GAAP.


	First Quarter								First Quarter
(in millions)	(in millions)	First Quarter				(in millions)	2024	2023
Net sales	Net sales	2023		2022
U.S. Refreshment Beverages
U.S. Refreshment Beverages
U.S. Refreshment Beverages	U.S. Refreshment Beverages	$	2,007	$	1,781
U.S. Coffee	U.S. Coffee	931		943
International	International	415		354
Total net sales	Total net sales	$	3,353	$	3,078

Income from operations	Income from operations
Income from operations
Income from operations
U.S. Refreshment Beverages	U.S. Refreshment Beverages	$	490	$	704
U.S. Coffee	U.S. Coffee	232		255
International	International	80		64
Unallocated corporate costs	Unallocated corporate costs	(218)		(57)
Total income from operations	Total income from operations	$	584	$	966

Table of Contents

U.S. REFRESHMENT BEVERAGES

The following table provides selected information about our U.S. Refreshment Beverages segment's results:


		First Quarter						Dollar		Percent			First Quarter						Dollar Change			Percentage Change
(in millions)	(in millions)	2023			2022			Change		Change
Net sales	Net sales	$	2,007		$	1,781		$	226	12.7	%
Net sales
Net sales													$	2,093		$	2,007			$	86		4.3	%
Income from operations	Income from operations	490			704			(214)		(30.4)
Operating margin	Operating margin	24.4		%	39.5		%			(1510) bps		Operating margin	29.4		%	24.4		%							500 bps

Sales Volume. Sales ~~volumes~~volume for the first quarter of ~~2023 were flat~~2024 decreased approximately 1.7% compared to the prior year ~~period. Growth~~period, as growth in ~~Dr Pepper, driven by our Strawberries & Cream innovation,~~Canada Dry and C4 Energy, ~~as a result~~combined with the launch of Electrolit within our ~~recently announced sales and~~ distribution ~~partnership,~~network, was ~~fully~~more than offset by ~~declines~~softness in the remainder of our ~~still~~ portfolio.

Net Sales. Net sales increased ~~12.7%~~4.3% to ~~$2,007~~$2,093 million in the first quarter of ~~2023,~~2024, compared to ~~$1,781~~$2,007 million in the prior year period, driven by favorable net price realization ~~of 12.5% and~~(5.6%), which was partially offset by unfavorable volume/mix ~~growth of 0.2%~~(1.3%).

Income from Operations. Income from operations ~~decreased $214~~increased $125 million, or ~~30.4%~~25.5%, to ~~$490~~$615 million for the first quarter of ~~2023~~2024 compared to ~~$704~~$490 million for the prior year ~~period, primarily driven~~period. This performance was led by the ~~unfavorable comparison~~benefits to the gains on the settlement of litigation with BodyArmor of $271 million and a reduction in year-over-year asset sale-leaseback activity of $32 million for our strategic asset investment program. Other drivers included the benefits ofgross profit from net sales growth (17 percentage points) and earned equity from the achievement of milestones associated with certain distribution agreements (9 percentage points), as well as a net benefit from changes in ingredients, materials, and productivity ~~partially offset by broad-based inflation, higher marketing expense, and increases in other operating costs.~~(2 percentage points). Operating margin improved 500 bps versus the year ago period to 29.4%.

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U.S. COFFEE

The following table provides selected information about our U.S. Coffee segment's results:


		First Quarter						Dollar		Percent			First Quarter						Dollar Change			Percentage Change
(in millions)	(in millions)	2023			2022			Change		Change
Net sales	Net sales	$	931		$	943		$	(12)	(1.3)	%
Net sales
Net sales													$	911		$	931			$	(20)		(2.1)	%
Income from operations	Income from operations	232			255			(23)		(9.0)
Operating margin	Operating margin	24.9		%	27.0		%			(210) bps		Operating margin	27.2		%	24.9		%							230 bps

Sales Volume. K-Cup pod volume decreased ~~1.9%~~1.1% for the first quarter of ~~2023~~2024 compared to the prior year period, ~~as improvements in our away-from-home business, driven by increasing office occupancy, were more than offset by softness in our~~reflecting softer at-home ~~business, driven by higher consumer mobility versus the prior year period. Brewer~~coffee category trends. Appliance volume ~~decreased 29.0%~~increased 26.1% in the first quarter of ~~2023,~~2024, driven by ~~retailer inventory shifts and category softness in small appliances.~~Keurig market share momentum.

Net Sales. Net sales decreased ~~1.3%~~2.1% to ~~$931~~$911 million for the first quarter of ~~2023~~2024 compared to ~~$943~~$931 million in the prior year period, driven by unfavorable volume/mix ~~declines of 6.6% partially offset by favorable~~(1.8%) and net price realization ~~of 5.3%~~(0.3%).

Income from Operations. Income from operations ~~decreased $23~~increased $16 million, or ~~9.0%~~6.9%, to ~~$232~~$248 million for the first quarter of ~~2023,~~2024, compared to ~~$255~~$232 million in the prior year period, asdriven by a ~~result of inflation~~net benefit from changes in ~~input~~ingredients, materials, and productivity (10 percentage points) and reduced costs ~~declines in volume/mix and increases in other operating costs. These decreases were~~associated with productivity projects (6 percentage points), partially offset by the ~~benefits~~impact to gross profit of ~~pricing actions and productivity.~~the decrease in net sales (8 percentage points). Operating margin ~~declined 210~~improved 230 bps versus the year ago period to ~~24.9% due to these inflationary headwinds.~~27.2%.

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INTERNATIONAL

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


		First Quarter						Dollar		Percent			First Quarter						Dollar Change			Percentage Change
(in millions)	(in millions)	2023			2022			Change		Change
Net sales	Net sales	$	415		$	354		$	61	17.2	%
Net sales
Net sales													$	464		$	415			$	49		11.8	%
Income from operations	Income from operations	80			64			16		25.0
Operating margin	Operating margin	19.3		%	18.1		%			120 bps		Operating margin	24.1		%	19.3		%							480 bps

Sales Volume. The following table provides the percentage change in sales ~~volumes~~volume for the International segment compared to the prior year period:


	Percentage Change
LRB	~~5.8~~4.0	%
K-Cup pods	~~9.5~~2.8
~~Brewers~~Appliances	~~2.5~~ (4.2)

Net Sales. Net sales increased ~~17.2%~~11.8% to ~~$415~~$464 million in the first quarter of ~~2023,~~2024, compared to ~~$354~~$415 million in the prior year period, reflecting volume/mix growth (4.8%), favorable FX translation (4.8%), and higher net price realization ~~of 9.0%, volume/mix growth of 7.7%, and favorable FX translation effects of 0.5%~~(2.2%).

Income from Operations. Income from operations increased ~~$16~~$32 million, or ~~25.0%~~40.0%, to ~~$80~~$112 million for the first quarter of ~~2023~~2024 compared to ~~$64~~$80 million in the prior year period. This performance reflected the ~~benefits~~impact to gross profit of higher net ~~sales~~price realization and volume/mix growth (30 percentage points) and ~~productivity, partially offset by broad-based inflation and higher costs associated with higher volumes.~~favorable FX impacts (9 percentage points). Operating margin ~~increased 120~~improved 480 bps versus the year ago period to ~~19.3%~~24.1%.

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~~NON-GAAP FINANCIAL MEASURES~~

To supplement the consolidated financial statements presented in accordance with U.S. GAAP, we have presented for certain constant currency adjusted or adjusted financial measures for the first quarter of 2023 and 2022, which are considered non-GAAP financial measures. The non-GAAP financial measures provided should be viewed in addition to, and not as an alternative for, results prepared in accordance with U.S. GAAP. The non-GAAP financial measures presented may differ from similarly titled non-GAAP financial measures presented by other companies, and other companies may not define these non-GAAP financial measures in the same way. The non-GAAP financial measures are not substitutes for their comparable U.S. GAAP financial measures, such as income from operations, net income, diluted EPS or other measures prescribed by U.S. GAAP, and there are limitations to using non-GAAP financial measures. We use these non-GAAP financial measures, in addition to U.S. GAAP financial measures, to evaluate our operating and financial performance and to compare such performance to that of prior periods and to the performance of our competitors. Additionally, we use these non-GAAP financial measures in making operational and financial decisions and in our budgeting and planning process. We believe that providing these non-GAAP financial measures to investors helps investors evaluate our operating performance, profitability and business trends in a way that is consistent with how management evaluates such performance and consistent with guidance previously provided by us. The non-GAAP measures are defined as follows:

~~Adjusted: Defined as certain financial statement captions and metrics adjusted for certain items affecting comparability.~~

~~Items affecting comparability~~: Defined as certain items that are excluded for comparison to prior year periods, adjusted for the tax impact as applicable. Tax impact is determined based upon an approximate rate for each item. For each period, management adjusts for (i) the unrealized mark-to-market impact of derivative instruments not designated as hedges in accordance with U.S. GAAP that do not have an offsetting risk reflected within the financial results, as well as the unrealized mark-to-market impact of our Vita Coco investment; (ii) the amortization associated with definite-lived intangible assets; (iii) the amortization of the deferred financing costs associated with the DPS Merger; (iv) the amortization of the fair value adjustment of the senior unsecured notes obtained as a result of the DPS Merger; (v) stock compensation expense and the associated windfall tax benefit attributable to the matching awards made to employees who made an initial investment in KDP; (vi) non-cash changes in deferred tax liabilities related to goodwill and other intangible assets as a result of tax rate or apportionment changes; and (vii) other certain items that are excluded for comparison purposes to prior year periods.

~~For the first quarter of 2023, the other certain items excluded for comparison purposes include productivity expenses.~~

For the first quarter of 2022, the other certain items excluded for comparison purposes include (i) restructuring and integration expenses related to significant business combinations; (ii) productivity expenses; (iii) costs related to significant non-routine legal matters, specifically the antitrust litigation; (iv) the loss on early extinguishment of debt related to the redemption of debt; (v) incremental costs to our operations related to risks associated with the COVID-19 pandemic, which were incurred to either maintain the health and safety of our front-line employees or temporarily increase compensation to such employees to ensure essential operations continue during the pandemic; (vi) the gain on the sale of our investment in BodyArmor as a result of the settlement of the associated holdback liability; (vii) the gain on the settlement of our prior litigation with BodyArmor, excluding recoveries of previously incurred litigation expenses which were included in our adjusted results; and (viii) losses recognized with respect to our equity method investment in Bedford as a result of funding our share of their wind-down costs.

~~Constant currency adjusted~~: Defined as certain financial statement captions and metrics adjusted for certain items affecting comparability, calculated on a constant currency basis by converting our current period local currency financial results using the prior period foreign currency exchange rates.

For the first quarter of 2023 and 2022, the supplemental financial data set forth below includes reconciliations of adjusted and constant currency adjusted financial measures to the applicable financial measure presented in the unaudited condensed consolidated financial statements for the same period.

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~~KEURIG DR PEPPER INC.~~

~~RECONCILIATION OF CERTAIN REPORTED ITEMS TO CERTAIN NON-GAAP ADJUSTED ITEMS~~

~~(Unaudited, in millions, except per share and percentages)~~

Cost of sales Gross profit Gross margin Selling, general and administrative expenses Gain on litigation settlement Other operating income, net Income from operations Operating margin
For the First Quarter of 2023
Reported $ 1,609 $ 1,744 52.0 % $ 1,165 $ — $ (5) $ 584 17.4 %
Items Affecting Comparability:
Mark to market 14 (14) (12) — — (2)
Amortization of intangibles — — (34) — — 34
Stock compensation — — (5) — — 5
Productivity (38) 38 (40) — — 78
Adjusted $ 1,585 $ 1,768 52.7 % $ 1,074 $ — $ (5) $ 699 20.8 %
Impact of foreign currency — % 0.1 %
Constant currency adjusted 52.7 % 20.9 %
For the First Quarter of 2022
Reported $ 1,428 $ 1,650 53.6 % $ 1,018 $ (299) $ (35) $ 966 31.4 %
Items Affecting Comparability:
Mark to market 59 (59) 26 — — (85)
Amortization of intangibles — — (34) — — 34
Stock compensation — — 7 — — (7)
Restructuring and integration costs — — (33) — (3) 36
Productivity (28) 28 (22) — — 50
Non-routine legal matters — — (4) — — 4
COVID-19 (4) 4 (1) — — 5
Gain on litigation — — — 271 — (271)
Adjusted $ 1,455 $ 1,623 52.7 % $ 957 $ (28) $ (38) $ 732 23.8 %

~~Refer to page~~ 35 ~~for reconciliations of reported net sales to constant currency net sales and adjusted income from operations to constant currency adjusted income from operations.~~

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~~KEURIG DR PEPPER INC.~~

~~RECONCILIATION OF CERTAIN REPORTED ITEMS TO CERTAIN NON-GAAP ADJUSTED ITEMS~~

~~(Unaudited, in millions, except per share and percentages)~~

Interest expense Loss on early extinguishment of debt Gain on sale of equity method investment Impairment of investments and note receivable Other (income) expense, net Income before provision for income taxes Provision for income taxes Effective tax rate Net income attributable to KDP Diluted earnings per share
For the First Quarter of 2023
Reported $ 23 $ — $ — $ — $ (20) $ 581 $ 114 19.6 % $ 467 $ 0.33
Items Affecting Comparability:
Mark to market 93 — — — 9 (104) (29) (75) (0.05)
Amortization of intangibles — — — — — 34 10 24 0.02
Amortization of fair value debt adjustment (4) — — — — 4 1 3 —
Stock compensation — — — — — 5 2 3 —
Productivity — — — — — 78 21 57 0.04
Adjusted $ 112 $ — $ — $ — $ (11) $ 598 $ 119 19.9 % $ 479 $ 0.34
Impact of foreign currency 0.3 %
Constant currency adjusted 20.2 %
For the First Quarter of 2022
Reported $ 188 $ 48 $ (50) $ 6 $ 9 $ 765 $ 180 23.5 % $ 585 $ 0.41
Items Affecting Comparability:
Mark to market (71) — — — (3) (11) (2) (9) (0.01)
Amortization of intangibles — — — — — 34 9 25 0.02
Amortization of deferred financing costs (1) — — — — 1 — 1 —
Amortization of fair value of debt adjustment (5) — — — — 5 1 4 —
Stock compensation — — — — — (7) (1) (6) —
Restructuring and integration costs — — — — — 36 9 27 0.02
Productivity — — — — — 50 12 38 0.03
Impairment of investment — — — (6) — 6 — 6 —
Loss on early extinguishment of debt — (48) — — — 48 11 37 0.03
Non-routine legal matters — — — — — 4 1 3 —
COVID-19 — — — — — 5 1 4 —
Gain on litigation — — — — — (271) (68) (203) (0.14)
Gain on sale of equity-method investment — — 50 — — (50) (12) (38) (0.03)
Adjusted $ 111 $ — $ — $ — $ 6 $ 615 $ 141 22.9 % $ 474 $ 0.33
Change - adjusted 0.9 % 1.1 % 3.0 %
Impact of foreign currency — % (0.5) % — %
Change - constant currency adjusted 0.9 % 0.6 % 3.0 %

~~Diluted earnings per common share may not foot due to rounding.~~

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~~KEURIG DR PEPPER INC.~~

~~RECONCILIATION OF CERTAIN REPORTED SEGMENT MEASURES~~

~~TO CERTAIN NON-GAAP ADJUSTED AND CURRENCY NEUTRAL ADJUSTED SEGMENT MEASURES~~

~~(Unaudited)~~

(in millions) Reported Items Affecting Comparability Adjusted
For the first quarter of 2023:
Income from operations
U.S. Refreshment Beverages $ 490 $ 18 $ 508
U.S. Coffee 232 53 285
International 80 4 84
Unallocated corporate costs (218) 40 (178)
Total income from operations $ 584 $ 115 $ 699
For the first quarter of 2022:
Income from operations
U.S. Refreshment Beverages $ 704 $ (249) $ 455
U.S. Coffee 255 46 301
International 64 7 71
Unallocated corporate costs (57) (38) (95)
Total income from operations $ 966 $ (234) $ 732

Reported Impact of Foreign Currency Constant Currency
For the first quarter of 2023:
Net sales
U.S. Refreshment Beverages 12.7 % — % 12.7 %
U.S. Coffee (1.3) — (1.3)
International 17.2 (0.5) 16.7
Total net sales 8.9 — 8.9

Adjusted Impact of Foreign Currency Constant Currency Adjusted
For the first quarter of 2023:
Income from operations
U.S. Refreshment Beverages 11.6 % — % 11.6 %
U.S. Coffee (5.3) — (5.3)
International 18.3 — 18.3
Total income from operations (4.5) — (4.5)

Reported Items Affecting Comparability Adjusted Impact of Foreign Currency Constant Currency Adjusted
For the first quarter of 2023:
Operating margin
U.S. Refreshment Beverages 24.4 % 0.9 % 25.3 % — % 25.3 %
U.S. Coffee 24.9 5.7 30.6 — 30.6
International 19.3 0.9 20.2 0.1 20.3
Total operating margin 17.4 3.4 20.8 0.1 20.9

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~~CONSTANT CURRENCY ADJUSTED RESULTS OF OPERATIONS~~

~~First Quarter of 2023 Compared to First Quarter of 2022~~

The following discussion of our results for the first quarter of 2023 is presented on a constant currency adjusted basis. These adjusted financial results are calculated on a constant currency basis by converting our current-period local currency financial results using the prior-period foreign currency exchange rates

~~Consolidated Operations~~

~~Constant Currency Net Sales.~~ Constant currency net sales increased 8.9% in the first quarter of 2023 compared to the prior year period, driven by favorable net price realization of 9.9%, partially offset by lower volume/mix of 1.0%.

~~Constant Currency Adjusted Income from Operations.~~Constant currency adjusted income from operations decreased 4.5% compared to the prior year period. This decrease primarily resulted from the impacts of broad-based inflation, higher marketing expense, increases in other operating costs, and the unfavorable comparison of a number of prior year benefits, partially offset by the benefits of strong net sales growth and productivity. In the prior year period, we had the benefit of the change in our accounting policy related to the recognition of forfeitures for our stock awards, the asset sale-leaseback activity related to our strategic asset investment program, and the portion of the settlement payment from BodyArmor for the reimbursement of attorney fees.

~~Constant Currency Adjusted Interest Expense.Constant currency adjusted interest expense increased 0.9% compared to the prior year period, primarily driven by increased use of our commercial paper facility in the current year period.~~

~~Constant Currency Adjusted Effective Tax Rate.The constant currency adjusted~~ ~~effective tax rate was 20.2% for~~ the first quarter of 2023 compared to 22.9% for the prior year period, primarily driven by the tax benefit received from favorable adjustments upon foreign tax return filing and excess tax deductions that were generated from the vesting of RSUs during the first quarter of 2023.

~~Constant Currency Adjusted Net Income Attributable to KDP.~~ Constant currency adjusted net income attributable to KDP increased 0.6% compared to the prior year period, as the decrease in our effective tax rate and the benefit of Nutrabolt’s preferred dividend was partially offset by lower constant currency adjusted income from operations.

~~Constant Currency Adjusted Diluted EPS.~~Constant currency adjusted diluted EPS increased approximately 3.0% over the prior year period, driven by lower weighted average shares outstanding compared to the prior year period and the increase in constant currency adjusted net income attributable to KDP.

~~Results of Operations by Segment~~

~~U.S. REFRESHMENT BEVERAGES~~

~~Constant Currency Net Sales.~~ ~~Constant currency net sales increased 12.7%, reflecting favorable net price realization of 12.5% and volume/mix growth of 0.2%.~~

~~Constant Currency Adjusted Income from Operations.~~Constant currency adjusted income from operations for the first quarter of 2023 increased 11.6% compared to the prior year period, driven by the benefits of net sales growth and productivity, partially offset by broad-based inflation, the unfavorable comparison to asset sale-leaseback activity relating to our strategic asset initiative in the prior year period, higher marketing expense and increases in other operating costs.

~~U.S. COFFEE~~

~~Constant Currency Net Sales.Constant currency net sales decreased 1.3%, driven by unfavorable volume/mix of 6.6%, partially offset by higher net price realization of 5.3%.~~

~~Constant Currency Adjusted Income from Operations.~~Constant currency adjusted income from operations decreased 5.3% compared to the prior year period, as a result of inflation in input costs and declines in volume/mix. These decreases were partially offset by the benefits of pricing actions and productivity.

~~INTERNATIONAL~~

~~Constant Currency Net Sales.~~ ~~Constant currency net sales increased 16.7%, driven by favorable net price realization of 9.0% and volume/mix growth of 7.7%.~~

~~Constant Currency Adjusted Income from Operations.~~Constant currency adjusted income from operations increased 18.3% compared to the prior year period, driven by the benefits of net sales growth and productivity, partially offset by broad-based inflation and higher costs associated with higher volumes.

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CRITICAL ACCOUNTING ESTIMATES

The process of preparing our consolidated financial statements in conformity with U.S. GAAP requires the use of estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses. Critical accounting estimates are both fundamental to the portrayal of a company’s financial condition and results and require difficult, subjective or complex estimates and assessments. These estimates and judgments are based on historical experience, future expectations and other factors and assumptions we believe to be reasonable under the circumstances. The most significant estimates and judgments are reviewed on an ongoing basis and revised when necessary. These critical accounting estimates are discussed in greater detail in Part II, Item 7 of our Annual Report.

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LIQUIDITY AND CAPITAL RESOURCES

Overview

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.

~~The following summarizes our cash activity for the first quarter of 2023 and 2022:~~

Cash, cash equivalents, restricted cash and restricted cash equivalents decreased $331 million from December 31, 2022 to March 31, 2023, primarily driven by the reduction in cash provided by operating activities, dividend payments and share repurchases, partially offset by net issuances of commercial paper.

Cash generated by our foreign operations is generally repatriated to the U.S. periodically as working capital funding requirements, where allowed. We do not expect restrictions or taxes on repatriation of cash held outside the U.S. to have a material effect on our overall business, liquidity, financial condition or results of operations for the foreseeable future.

The following summarizes our cash activity for the first quarter of 2024 and 2023:

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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 ~~2022~~ 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.~~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.

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Sources of Liquidity - Operations

Net cash provided by operating activities ~~decreased $592~~increased $14 million for the first quarter of ~~2023,~~2024, as compared to the first quarter of ~~2022,~~2023, driven by ~~the decrease~~an increase in ~~net income adjusted for non-cash items, led by the unfavorable year-over-year impact of the $349 million gain from BodyArmor in the first quarter of 2022 and a reduction in our cash conversion cycle.~~working capital.

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:


			March 31,
			2023	2022
		March 31,				March 31,
		2024			2024		2023
DIO	DIO		71	60
DSO	DSO		37	34
DPO	DPO		154	164
Cash conversion cycle	Cash conversion cycle		(46)	(70)

Our cash conversion cycle increased 2448 days to approximately 2 days as of March 31, 2024 as compared to (46) days as of March 31, 2023, as compared to (70) days as of March 31, 2022. The increase in DIO reflects our efforts to restore inventory to meet customer service levels and the build up of our inventory of C4, and the increase in DSOwhich was primarily driven by ~~rising inflation during~~ the ~~year. The~~ decrease in DPO, ~~was driven by~~reflecting the reduction of payment terms for certain suppliers.

Accounts Payable Program

As part of our ongoing efforts to improve our cash flow and related liquidity, we work with our suppliers to optimize our terms and conditions, which ~~include the extension of~~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 13 of the Notes to our Unaudited Condensed Consolidated Financial Statements for additional information on our obligations to participating suppliers.~~

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Sources of Liquidity - Financing

Refer to Note 2 of the Notes to our Unaudited Condensed Consolidated Financial Statements for management's discussion of our financing arrangements.

We also have an active shelf registration statement, filed with the SEC on August 19, 2022, 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.

~~Sources of Liquidity - Asset Sale-Leaseback Transactions~~

We have leveraged our strategic asset investment program to create value from certain assets to enable reinvestment in KDP. These transactions are accounted for as sale-leaseback transactions. We received $7 million and $77 million of cash proceeds from our strategic asset investment program during the first quarter of 2023 and 2022, respectively, which are included in Proceeds from sales of property, plant and equipment in the unaudited Condensed Consolidated Statements of Cash Flows.

Debt Ratings

Our credit ratings are as follows:

Rating Agency

Long-Term Debt Rating

Commercial Paper Rating

Outlook

Moody's~~(1)~~

Baa1

P-2

Stable

S&P

BBB

A-2

Stable

~~(1)On April 3, 2023, Moody’s upgraded our long-term debt rating to Baa1 from Baa2 and affirmed our P-2 commercial paper rating and outlook.~~

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 March 31, ~~2023,~~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

~~Over the past several years,~~Our capital allocation priorities are investing to grow our ~~principal uses of~~business both organically and inorganically, continuing to strengthen our ~~capital resources were deleveraging, providing shareholder return~~balance sheet, and returning cash to ~~our investors~~shareholders through regular quarterly dividends and ~~investing~~opportunistic share repurchases. We dynamically adjust our cash deployment plans based on the specific opportunities available in ~~KDP~~a given period, but over time we allocate capital to ~~capture market share and drive growth through innovation and routes to market.~~

Now that we have met our post-merger goals, we plan to further reduce our leverage ratio. We also plan to invest in inorganic value creation through mergers or acquisitions, which may include portfolio expansion, distribution scale, geographic expansion, and new capabilities. In addition, we have repurchased sharesbalance each of ~~our outstanding common stock, as described below.~~these priorities.

Regular Quarterly Dividends

~~For the first quarter of 2023, we~~We have declared total dividends of $0.215 per share and $0.20 per ~~share.~~share for the first quarter of 2024 and 2023, 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, potentially enabling us to return value to shareholders.~~stock. We repurchased and retired ~~$231~~$1,105 million of common stock during the first quarter of ~~2023.~~2024. As of March 31, ~~2023, $3,390~~2024, $1,810 million remained available for repurchase under the authorized share repurchase program.

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Capital Expenditures

We ~~are investing~~continue to invest in state-of-the-art manufacturing and warehousing facilities, including expansive investments in facilities in Spartanburg, South ~~Carolina; and Allentown, Pennsylvania, in 2023 and 2022,~~Carolina, in order to optimize our supply chain network.

Purchases of property, plant and equipment were ~~$62~~$158 million and ~~$109~~$62 million for the first quarter of ~~2023~~2024 and ~~2022,~~2023, respectively.

Capital expenditures, which includes both purchases of property, plant and equipment and amounts included in accounts payable and accrued expenses, for the first quarter of ~~2023~~2024 and ~~2022~~2023 primarily related to ~~the~~investments in manufacturing ~~and warehousing facilities discussed above.~~capabilities. Capital expenditures included in accounts payable and accrued expenses were ~~$222~~$189 million and ~~$139~~$222 million for the first quarter of ~~2023~~2024 and ~~2022,~~2023, respectively, which primarily related to these investments.

Investments in Unconsolidated Affiliates

From time to time, we expect to 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 ~~in beverage startup companies~~ 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.

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 ensure competitive distribution scale. From time to time, we additionally acquire brand ownership companies to expand our portfolio. These transactions are generally accounted for as an asset acquisition, as the majority of the transaction price represents the acquisition of an intangible asset. Purchases of intangible assets were ~~$51~~$31 million and ~~$10~~$51 million for the first quarter of ~~2023~~2024 and ~~2022,~~2023, respectively.

Uncertainties and Trends Affecting Liquidity

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

Customer and consumer demand for our products may also be impacted by the risk factors discussed under "Risk Factors" in Part 1, Item 1A of our Annual Report, as well as subsequent filings with the SEC, that could have a material effect on production, delivery and consumption of our products, which could result in a reduction in our sales volume.

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SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION

The Notes are fully and unconditionally guaranteed by certain of our direct and indirect subsidiaries (the "Guarantors"), as defined in the indentures governing the Notes. The Guarantors are 100% owned either directly or indirectly by us and jointly and severally guarantee, subject to the release provisions described below, our obligations under the Notes. None of our subsidiaries organized outside of the U.S., any of the subsidiaries held by Maple Parent Holdings Corp. prior to the DPS Merger or any of the subsidiaries acquired after the DPS Merger (collectively, the "Non-Guarantors") guarantee the Notes. The subsidiary guarantees with respect to the Notes are subject to release upon the occurrence of certain events, including the sale of all or substantially all of a subsidiary's assets, the release of the subsidiary's guarantee of our other indebtedness, our exercise of the legal defeasance option with respect to the Notes and the discharge of our obligations under the applicable indenture.

The following schedules present the summarized financial information for Keurig Dr Pepper Inc. (the “Parent”) and the Guarantors on a combined basis after intercompany eliminations; the Parent and the Guarantors' amounts due from and amounts due to Non-Guarantors are disclosed separately. The consolidating schedules are provided in accordance with the reporting requirements of Rule 13-01 under SEC Regulation S-X for the issuer and guarantor subsidiaries.

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The summarized financial information for the Parent and Guarantors were as follows:


(in millions)	For the First Quarter of ~~2023~~2024
Net sales	$	~~2,082~~2,180
Gross profit	1,227
Income from operations	~~188~~390
Net income ~~attributable to KDP~~	~~467~~454


(in millions)	(in millions)	March 31, 2023		December 31, 2022		(in millions)	March 31, 2024	December 31, 2023
Current assets	Current assets	$	1,842	$	1,712
Non-current assets	Non-current assets	45,795		45,721
Total assets(1)	Total assets(1)	$	47,637	$	47,433

Current liabilities	Current liabilities	$	6,007	$	4,797
Current liabilities
Current liabilities
Non-current liabilities	Non-current liabilities	16,481		17,463
Total liabilities(2)	Total liabilities(2)	$	22,488	$	22,260

(1)Includes $4$157 million and $3$56 million of intercompany receivables due to the Parent and Guarantors from the Non-Guarantors as of March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, respectively.

(2)Includes ~~$1,450~~$1,388 million and ~~$1,186~~$1,399 million of intercompany payables due to the Non-Guarantors from the Parent and Guarantors as of March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, respectively.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes to the disclosures on market risk made in our Annual Report.

ITEM 4. Controls and Procedures

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Based on evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Exchange Act) our management, including our Chief Executive Officer and Chief Financial Officer, has concluded that, as of March 31, ~~2023,~~2024, our disclosure controls and procedures are effective to (i) provide reasonable assurance that information required to be disclosed in the Exchange Act filings is recorded, processed, summarized and reported within the time periods specified by the SEC's rules and forms, and (ii) ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act are accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

No change in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) occurred during the quarter ended March 31, ~~2023~~2024 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

ITEM 1. Legal Proceedings

We are occasionally subject to litigation or other legal proceedings relating to our business. See Note 14 of the Notes to our Unaudited Condensed Consolidated Financial Statements for more information related to commitments and contingencies, which is incorporated herein by reference.

The Staff of the SEC (the “Staff”) has been investigating certain statements by the Company in its prior Exchange Act reports regarding the recyclability of our K-Cup pods. We have been cooperating with this investigation and have now reached what we believe to be an agreement in principle with the Staff to resolve the matter. This agreement is subject to finalizing documentation and must be approved by the SEC. If approved, this agreement, which includes a $1.5 million penalty, would not have a material impact on the Company.

ITEM 1A. Risk Factors

There have been no material changes from the risk factors set forth in Part I, Item 1A in our Annual Report.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

On October 1, 2021, our Board authorized a share repurchase program of up to $4 billion of our outstanding common stock, enabling us to opportunistically return value to shareholders. The $4 billion authorization is effective for four years, beginning on January 1, 2022 and expiring on December 31, 2025, and does not require the purchase of any minimum number of shares.

The following table summarizes shares repurchased by ~~the Company~~us under this program during the first quarter of ~~2023:~~2024:


Period	Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Program	Maximum Amount of Dollars that May Yet be Used to Purchase Shares Under the Program (in millions)(1)		Period	Total Number of Shares Purchased	Average Price Paid per Share	Total Number of Shares Purchased as Part of Publicly Announced Program	Maximum Amount of Dollars that May Yet be Used to Purchase Shares Under the Program
January 1 to January 31	January 1 to January 31	2,000,000	$	34.59	2,000,000	$	3,552
February 1 to February 28		471,803	35.74		471,803	3,535
February 1 to February 29
March 1 to March 31	March 1 to March 31	4,135,722	35.05		4,135,722	3,390
Total	Total	6,607,525	$	34.96	6,607,525	$	3,390

~~(1)The~~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, which was effected under our existing share repurchase ~~program was authorized prior to the issuance of the Inflation Reduction Act of 2022, which imposes a 1% excise tax on net share repurchases that occur after December 31, 2022. For~~program.

ITEM 5. Other Information

During the first quarter of ~~2023,~~2024, no directors or executive officers of the Company ~~recorded $1 million to additional paid-in capital~~adopted or terminated any contract, instruction or written plan for the ~~excise tax associated with shares repurchased during~~purchase or sale of Company securities that was intended to satisfy the ~~quarter.~~affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement,” as defined in Item 408 of Regulation S-K.

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ITEM 6. Exhibits


No.		Exhibit Description
3.1	Amended and Restated Certificate of Incorporation of Dr Pepper Snapple Group, Inc. (filed as Exhibit 3.1 to the Company's Current Report on Form 8-K (filed on May 12, 2008) and incorporated herein by reference).
3.2	Certificate of Amendment to Amended and Restated Certificate of Incorporation of Dr Pepper Snapple Group, Inc. effective as of May 17, 2012 (filed as Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q (filed July 26, 2012) and incorporated herein by reference).
3.3	Certificate of Second Amendment to Amended and Restated Certificate of Incorporation of Dr Pepper Snapple Group, Inc. effective as of May 19, 2016 (filed as Exhibit 3.1 to the Company's Current Report on Form 8-K (filed May 20, 2016) and incorporated herein by reference).
3.4	Certificate of Third Amendment to the Amended and Restated Certificate of Incorporation of Dr Pepper Snapple Group, Inc. effective as of July 9, 2018 (filed as Exhibit 3.1 to the Company's Current Report on Form 8-K (filed July 9, 2018) and incorporated herein by reference).
3.5	Amended and Restated By-Laws of Keurig Dr Pepper Inc. effective as of July 9, 2018 (filed as Exhibit 3.2 to the Company's Current Report on Form 8-K (filed July 9, 2018) and incorporated herein by reference).
4.1	Base Indenture, dated as of March 7, 2024, among Keurig Dr Pepper Inc., the guarantors party thereto and U.S. Bank Trust Company, National Association, as trustee (filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K (filed March 7, 2024) and incorporated herein by reference).
4.2	First Supplemental Indenture, dated as of March 7, 2024, among Keurig Dr Pepper Inc., the guarantors party thereto and U.S. Bank Trust Company, National Association, as trustee (filed as Exhibit 4.2 to the Company’s Current Report on Form 8-K (filed March 7, 2024) and incorporated herein by reference).
4.3	Form of Floating Rate Senior Note due 2027 (included in Exhibit 4.2 to the Company’s Current Report on Form 8-K (filed March 7, 2024) and incorporated herein by reference).
4.4	Form of 5.100% Senior Note due 2027 (included in Exhibit 4.2 to the Company’s Current Report on Form 8-K (filed March 7, 2024) and incorporated herein by reference).
4.5	Form of 5.050% Senior Note due 2029 (included in Exhibit 4.2 to the Company’s Current Report on Form 8-K (filed March 7, 2024) and incorporated herein by reference).
4.6	Form of 5.200% Senior Note due 2031 (included in Exhibit 4.2 to the Company’s Current Report on Form 8-K (filed March 7, 2024) and incorporated herein by reference).
4.7	Form of 5.300% Senior Note due 2034 (included in Exhibit 4.2 to the Company’s Current Report on Form 8-K (filed March 7, 2024) and incorporated herein by reference).
31.1*	Certification of Chief Executive Officer of Keurig Dr Pepper Inc. pursuant to Rule 13a-14(a) or 15d-14(a) promulgated under the Exchange Act.
31.2*	Certification of Chief Financial Officer of Keurig Dr Pepper Inc. pursuant to Rule 13a-14(a) or 15d-14(a) promulgated under the Exchange Act.
32.1**	Certification of Chief Executive Officer of Keurig Dr Pepper Inc. pursuant to Rule 13a-14(b) or 15d-14(b) promulgated under the Exchange Act, and Section 1350 of Chapter 63 of Title 18 of the United States Code.
32.2**	Certification of Chief Financial Officer of Keurig Dr Pepper Inc. pursuant to Rule 13a-14(b) or 15d-14(b) promulgated under the Exchange Act, and Section 1350 of Chapter 63 of Title 18 of the United States Code.
101*	The following financial information from Keurig Dr Pepper Inc.'s Quarterly Report on Form 10-Q for the quarter ended March 31, ~~2023,~~2024, formatted in Inline XBRL: (i) Condensed Consolidated Statements of Income, (ii) Condensed Consolidated Statements of Comprehensive Income, (iii) Condensed Consolidated Balance Sheets, (iv) Condensed Consolidated Statements of Cash Flows, (v) Condensed Consolidated Statement of Changes in Stockholders' Equity, and (vi) the Notes to Condensed Consolidated Financial Statements. The Instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
104*	The cover page from this Quarterly Report on Form 10-Q, formatted as Inline XBRL.

* Filed herewith.

** Furnished herewith.

++ Indicates a management contract or compensatory plan or arrangement.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	Keurig Dr Pepper Inc.
	By:	/s/ Sudhanshu Priyadarshi

	Name:	Sudhanshu Priyadarshi
	Title:	Chief Financial Officer
		(Principal Financial Officer)
Date: April ~~27, 2023~~25, 2024


				Page
Part I.	Financial Information
	Item 1.	Financial Statements (Unaudited)
		Condensed Consolidated Statements of Income		1
		Condensed Consolidated Statements of Comprehensive Income		2
		Condensed Consolidated Balance Sheets		3
		Condensed Consolidated Statements of Cash Flows		4
		Condensed Consolidated Statements of Changes in Stockholders' Equity		6
		Notes to Condensed Consolidated Financial Statements		7
		1	General	7
		2	Long-Term Obligations and Borrowing Arrangements	8
		3	Goodwill and Other Intangible Assets	10
		4	Derivatives	11
		5	Leases	15
		6	Segments	16
		7	Revenue Recognition	18
		8	Earnings Per Share	18
		9	Stock-Based Compensation	19
		10	Investments	19
		11	Income Taxes	19
		12	Accumulated Other Comprehensive Income	20
		13	Other Financial Information	21
		14	Commitments and Contingencies	23
		15	Transactions with Variable Interest Entities	24
		16	Restructuring Liabilities	25


	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations		26
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk		41
	Item 4.	Controls and Procedures		41

Part II.	Other Information
	Item 1.	Legal Proceedings		42
	Item 1A.	Risk Factors		42
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		42
	Item 6.	Exhibits		43


(in millions)	Sale Proceeds		Carrying Value		Gain on Sale
March 31, 2023(1)	$	7	$	1	$	6


(in millions)	Ownership Interest		March 31, 2023		December 31, 2022
Nutrabolt	29.8	%	$	885	$	874

Tractor	19.2	%	48		49
Athletic Brewing	13.1	%	50		51
Dyla LLC	12.4	%	12		12
Force Holdings LLC(1)	33.3	%	4		4
Beverage startup companies(2)	(various)		5		5
Other	(various)		5		5
Investments in unconsolidated affiliates			$	1,009	$	1,000


(in millions)	March 31, 2023(1)		December 31, 2022(2)
Non-current assets	$	430	$	430
Current liabilities	22		22
Non-current liabilities	419		419


(in millions)	Reported		Items Affecting Comparability		Adjusted
For the first quarter of 2023:
Income from operations
U.S. Refreshment Beverages	$	490	$	18	$	508
U.S. Coffee	232		53		285
International	80		4		84
Unallocated corporate costs	(218)		40		(178)
Total income from operations	$	584	$	115	$	699

For the first quarter of 2022:
Income from operations
U.S. Refreshment Beverages	$	704	$	(249)	$	455
U.S. Coffee	255		46		301
International	64		7		71
Unallocated corporate costs	(57)		(38)		(95)
Total income from operations	$	966	$	(234)	$	732


	Reported		Impact of Foreign Currency		Constant Currency
For the first quarter of 2023:
Net sales
U.S. Refreshment Beverages	12.7	%	—	%	12.7	%
U.S. Coffee	(1.3)		—		(1.3)
International	17.2		(0.5)		16.7
Total net sales	8.9		—		8.9


	Adjusted		Impact of Foreign Currency		Constant Currency Adjusted
For the first quarter of 2023:
Income from operations
U.S. Refreshment Beverages	11.6	%	—	%	11.6	%
U.S. Coffee	(5.3)		—		(5.3)
International	18.3		—		18.3
Total income from operations	(4.5)		—		(4.5)