United States securities and exchange commission logo
October 30, 2023
Sudhanshu Priyadarshi
Chief Financial Officer
Keurig Dr Pepper Inc.
53 South Avenue
Burlington, Massachusetts 01803
Re: Keurig Dr Pepper
Inc.
Form 10-K for the
Year Ended December 31, 2022
Form 10-Q for the
Quarter Ended September 30, 2023
Form 8-K furnished
October 26, 2023
File No. 001-33829
Dear Sudhanshu Priyadarshi:
We have limited our review of your filing to the financial
statements and related
disclosures and have the following comment(s).
Please respond to this letter within ten business days by
providing the requested
information or advise us as soon as possible when you will respond. If
you do not believe a
comment applies to your facts and circumstances, please tell us why in
your response.
After reviewing your
response to this letter, we may have additional comments.
Form 10-K for the Year Ended December 31, 2022
Managements Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations, page 29
1. Where you describe two
or more business reasons that contributed to a material change in
a financial statement
line item between periods, please quantify, where possible, the extent
to which each factor
contributed to the overall change in that line item. Please apply this
comment to both your
consolidated and segment results of operations. As an example,
your disclosures on
page 30 attribute the increase in selling, general and administrative
expenses to higher
logistics costs, inflation, volume/mix impacts, increases in labor, and
unfavorable mark to
market losses and only the mark to market loss is quantified. See
Item 303 of Regulation
S-K and SEC Release No. 33-8350.
Supplemental Guarantor Financial Information, page 41
2. We note that the
summarized financial information disclosed for the Parent and
Sudhanshu Priyadarshi
FirstName LastNameSudhanshu Priyadarshi
Keurig Dr Pepper Inc.
Comapany
October 30,NameKeurig
2023 Dr Pepper Inc.
October
Page 2 30, 2023 Page 2
FirstName LastName
Guarantors includes net sales, income from operations and net income
attributable to
KDP. Please revise your disclosure in future filings to include the
disclosure of gross
profit. See Rule 13-01(a)(4) and Rule 1-02(bb)(1)(ii) of Regulation
S-X.
Non-GAAP Financial Measures, page 42
3. We note that several of your adjusted measures include an adjustment
for productivity.
Please tell us the nature of these productivity expenses adjustments
and explain to us why
you do not believe these costs represent normal operating costs. See
Question 100.01 in
the SEC Staff's Compliance & Disclosure Interpretations on Non-GAAP
Financial
Measures.
Financial Statements
Notes to Consolidated Financial Statements
3. Goodwill and Other Intangible Assets
Impairment Analysis, page 70
4. We note that you performed an interim impairment analysis as of
September 30, 2022,
recording a $311 million impairment and also performed your annual
impairment analysis
as of October 1, 2022, recording a $161 million impairment. Please
address the
following:
Summarize for us the changes in circumstances and/or assumptions
that led to the
multiple impairment charges over a relatively short period of
time.
Explain the timing for recognizing the $161 million impairment and
provide your
basis for concluding that this additional impairment did not
exist as of September 30,
2022.
Tell us whether your valuation assumptions changed between your
September 30,
2022 and October 1, 2022 impairment tests.
Form 10-Q for the Quarter Ended September 30, 2023
Financial Statements
Notes to Condensed Consolidated Financial Statements
1. General
Reportable Segments, page 8
5. We note that effective January 1, 2023, you revised your segment
structure to align with
changes in how the CODM manages the business, assesses performance and
allocate
resources. We further note that the change resulted in three
reportable segments from the
former four reportable segments. Please explain to us in detail, the
events that led to the
change in reportable segments. For example, please tell us if there
was a change in
segment managers that report to the CODM, level of detail of the
financial information
reviewed by the CODM, or other factors that led to this change. As
part of your response,
please also tell us, and revise future filings to disclose, if in this
new structure, any
Sudhanshu Priyadarshi
FirstName LastNameSudhanshu Priyadarshi
Keurig Dr Pepper Inc.
Comapany
October 30,NameKeurig
2023 Dr Pepper Inc.
October
Page 3 30, 2023 Page 3
FirstName LastName
operating segments have been aggregated into any of the reportable
segments. See
guidance in ASC 280-10-50-21. If you have aggregated certain operating
segments,
please provide us with a detailed analysis as to why you believe
aggregation is consistent
with the criteria in ASC 280-10-50-11.
7. Revenue Recognition, page 19
6. We note that you have changed the level of disaggregation of revenue
from five product
lines (CSD, NCB, K-Cup pods, Appliances, and Other), to four product
lines (LRB, K-
Cup pods, Appliances and Other). Please explain to us why you believe
it is no longer
useful to disclose the CSD and NCB product lines, or any other product
lines, but instead
combine them into the LRB line item. As part of your response, please
consider the
guidance in ASC 606-10-55-89 through 55-91.
Form 8-K furnished October 26, 2023
Exhibit 99.1 Earnings Release
Non-GAAP Financial Measures, page 4
7. Your disclosure indicates that the non-GAAP measures you present are
adjusted gross
profit, adjusted operating income, adjusted net income, adjusted
diluted EPS, and free
cash flow. However, your reconciliations beginning on page A-6 also
present adjusted
amounts for cost of sales, gross margin, SG&A, other income income,
net, operating
margin, interest expense, loss on early extinguishment of debt,
impairment of investments
and note receivable, other (income) expense, net, income before
provision for income
taxes, provision (benefit) for income taxes, effective tax rate,
EBITDA, Adjusted
EBITDA, and Management Leverage Ratio. Please revise to identify all
non-GAAP
measures and ensure the relevant disclosures of Item 10(e)(1)(i) are
provided for each,
including a statement why management believes the presentation of the
non-GAAP
financial measure provides useful information to investors regarding
your financial
condition and results of operations.
Reconciliation of Certain Non-GAAP Information, page A-8
8. We note that on pages A-8 and A-12, you disclose adjusted income from
operations by
segment, which is reconciled to the reported income from operations
segment measure, by
presenting a column titled Items Affecting Comparability.
However, we also note that
although you detail the amounts included in Items Affecting
Comparability earlier in the
press release on a consolidated basis, you have not provided detail of
these adjustments
for each segment. For segments that have a material amount of items
affecting
comparability, please revise future filings to include detail of the
nature and amount of
these adjustments.
Reconciliation of Adjusted EBITDA and Management Leverage Ratio, page A-13
9. Please note that EBITDA, by definition, should only reflect
adjustments for interest, taxes,
Sudhanshu Priyadarshi
Keurig Dr Pepper Inc.
October 30, 2023
Page 4
depreciation and amortization. Either remove the Other (income)
expense from your
calculation of EBITDA or revise to include the adjustment in your
Adjusted EBITDA calculation instead. Refer to Question 103.01 of the
SEC's
Compliance and Disclosure Interpretations on Non-GAAP Financial
Measure for further
guidance.
In closing, we remind you that the company and its management are
responsible for the
accuracy and adequacy of their disclosures, notwithstanding any review,
comments, action or
absence of action by the staff.
Please contact Heather Clark at 202-551-3624 or Claire Erlanger at
202-551-3301 with
any questions.
FirstName LastNameSudhanshu Priyadarshi Sincerely,
Comapany NameKeurig Dr Pepper Inc.
Division of
Corporation Finance
October 30, 2023 Page 4 Office of
Manufacturing
FirstName LastName