Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

239K characters. Original on sec.gov · Markdown

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


						Page Number
Consolidated Statements of Income						51
Consolidated Statements of Comprehensive Income						52
Consolidated Balance Sheets						53
Consolidated Statements of Cash Flows						54
Consolidated Statements of Changes in Stockholders' Equity						56
Notes to Consolidated Financial Statements						57
1. Business and Basis of Presentation						57
2. Significant Accounting Policies						58
3. JDE Peet's Acquisition and Related Transactions						70
4. Other Acquisitions						71
5. Long-Term Obligations and Borrowing Arrangements						73
6. Goodwill and Intangible Assets						77
7. Derivatives						80
8. Leases						83
9. Segments						85
10. Net Sales						88
11. Earnings per Share						88
1 2 . Employee Benefit Plans						89
1 3 . Stock-Based Compensation						93
1 4 . Equity Method Investments						95
1 5 . Income Taxes						95
16. Accumulated Other Comprehensive Income (Loss)						99
1 7 . Property, Plant, and Equipment						100
1 8 . Commitments and Contingencies						101
19. Transactions with Variable Interest Entities						102
2 0 . Restructuring						104
2 1 . Related Parties						105
2 2 . Subsequent Events						106
Reports of Independent Registered Accounting Firm (PCAOB ID No. 34)						107

KEURIG DR PEPPER INC.

CONSOLIDATED STATEMENTS OF INCOME


	Year Ended December 31,
(in millions, except per share data)	2025		2024		2023
Net sales	$	16,603	$	15,351	$	14,814
Cost of sales	7,604		6,822		6,734
Gross profit	8,999		8,529		8,080
Selling, general, and administrative expenses	5,351		5,013		4,912
Impairment of goodwill	—		306		—
Impairment of intangible assets	78		412		2

Other operating (income) expense, net	(5)		207		(26)
Income from operations	3,575		2,591		3,192
Interest expense, net	754		735		496



Other expense (income), net	134		(58)		(61)
Income before provision for income taxes	2,687		1,914		2,757
Provision for income taxes	608		473		576
Net income	$	2,079	$	1,441	$	2,181



Earnings per common share:
Basic	$	1.53	$	1.06	$	1.56
Diluted	1.53		1.05		1.55
Weighted average common shares outstanding:
Basic	1,358.1		1,362.2		1,399.3
Diluted	1,362.8		1,368.3		1,408.4

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

KEURIG DR PEPPER INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


	Year Ended December 31,
(in millions)	2025		2024		2023
Net income	$	2,079	$	1,441	$	2,181
Other comprehensive income
Foreign currency translation adjustments	401		(612)		288
Net change in pension and post-retirement liability, net of tax of $0, $0, and $2, respectively	(2)		—		(4)
Net change in cash flow hedges, net of tax of $13, $(24), and $29, respectively	(21)		21		(98)
Total other comprehensive income (loss)	378		(591)		186
Comprehensive income	2,457		850		2,367

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

KEURIG DR PEPPER INC.

CONSOLIDATED BALANCE SHEETS


	December 31,
(in millions, except share and per share data)	2025		2024
Assets
Current assets:
Cash and cash equivalents	$	1,026	$	510
Restricted cash and restricted cash equivalents	18		80
Trade accounts receivable, net	1,671		1,502
Inventories	1,733		1,299
Prepaid expenses and other current assets	818		606
Total current assets	5,266		3,997
Property, plant, and equipment, net	3,230		2,964
Equity method investments	1,660		1,543
Goodwill	20,247		20,053
Intangible assets, net	23,725		23,634
Deferred tax assets	36		39
Other non-current assets	1,295		1,200
Total assets	$	55,459	$	53,430
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	2,996	$	2,985
Accrued expenses	1,379		1,584
Structured payables	25		41
Short-term borrowings and current portion of long-term obligations	3,105		2,642
Other current liabilities	785		835
Total current liabilities	8,290		8,087
Long-term obligations	13,036		12,912
Deferred tax liabilities	5,526		5,435
Other non-current liabilities	3,091		2,753
Total liabilities	29,943		29,187

Stockholders' equity:
Preferred stock, $0.01 par value, 15,000,000 shares authorized, no shares issued as of December 31, 2025 and 2024	—		—
Common stock, $0.01 par value, 2,000,000,000 shares authorized, 1,358,663,795 and 1,356,664,609 shares issued and outstanding as of December 31, 2025 and 2024, respectively	14		14
Additional paid-in capital	19,778		19,712
Retained earnings	5,622		4,793
Accumulated other comprehensive income (loss)	102		(276)
Total stockholders' equity	25,516		24,243


Total liabilities and stockholders' equity	$	55,459	$	53,430

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

KEURIG DR PEPPER INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS


	Year Ended December 31,
(in millions)	2025		2024		2023
Operating activities:
Net income	$	2,079	$	1,441	$	2,181
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense	455		422		402
Amortization of intangibles	138		133		137
Other amortization expense	160		178		181
Provision for sales returns	60		70		61
Deferred income taxes	45		(254)		(4)
Employee stock-based compensation expense	97		98		116


(Gain) loss on disposal of property, plant, and equipment	(2)		16		(1)
Unrealized (gain) loss on foreign currency	(6)		33		(13)
Unrealized (gain) loss on derivatives	(1)		91		31
Settlements of interest rate contracts	—		—		54
Earnings of equity method investments	(81)		(42)		(33)
Earned equity from distribution arrangements	(54)		(94)		(44)
Impairment of goodwill	—		306		—
Impairment of intangible assets	78		412		2

Other, net	26		—		6
Changes in assets and liabilities, excluding the effects of business acquisitions:
Trade accounts receivable	(202)		(209)		70
Inventories	(405)		(92)		182
Income taxes receivable and payable, net	(141)		133		(199)
Other current and non-current assets	(216)		(227)		(192)
Accounts payable and accrued expenses	(212)		(196)		(1,618)
Other current and non-current liabilities	173		—		10
Net change in operating assets and liabilities	(1,003)		(591)		(1,747)
Net cash provided by operating activities	1,991		2,219		1,329
Investing activities:
Acquisitions of businesses, net of cash acquired	(149)		(1,000)		—

Purchases of property, plant, and equipment	(486)		(563)		(425)
Proceeds from sales of property, plant, and equipment	14		4		9
Purchases of intangibles	(17)		(59)		(56)
Investments in equity method investments	(1)		(7)		(316)

Other, net	66		11		4
Net cash used in investing activities	$	(573)	$	(1,614)	$	(784)

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

KEURIG DR PEPPER INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(CONTINUED)


	Year Ended December 31,
(in millions)	2025		2024		2023
Financing activities:
Proceeds from issuance of Notes	$	2,000	$	3,000	$	—
Repayments of Notes	(1,029)		(1,150)		(500)
Net issuance (repayment) of commercial paper	594		(480)		1,697
Proceeds from term loan	—		990		—
Repayment of term loan	(990)		—		—
Proceeds from structured payables	31		49		130
Repayments of structured payables	(47)		(129)		(148)
Cash dividends paid	(1,250)		(1,194)		(1,142)
Repurchases of common stock, inclusive of excise tax obligation	(9)		(1,110)		(706)

Tax withholdings related to net share settlements	(31)		(61)		(62)
Payments on finance leases	(129)		(115)		(95)
Deferred financing charges paid	(134)		(16)		—
Other, net	(5)		(7)		(6)
Net cash used in financing activities	(999)		(223)		(832)
Cash, cash equivalents, restricted cash, and restricted cash equivalents:
Net change from operating, investing, and financing activities	419		382		(287)
Effect of exchange rate changes	17		(41)		19
Beginning balance	608		267		535
Ending balance	$	1,044	$	608	$	267

Supplemental cash flow disclosures of non-cash investing and financing activities:
Capital expenditures included in accounts payable and accrued expenses	$	204	$	220	$	276


Acquisitions of businesses	—		98		—

Dividends declared but not yet paid	312		312		299
Mandatory redemption liability at acquisition	—		689		—

Supplemental cash flow disclosures:
Cash paid for interest	594		494		443

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

KEURIG DR PEPPER INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' 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)	Shares	Amount
Balance as of December 31, 2022	1,408.4	$	14	$	21,444	$	3,539	$	129	$	25,126	$	(1)	$	25,125

Net income	—	—		—		2,181		—		2,181		—		2,181
Other comprehensive income	—	—		—		—		186		186		—		186

Dividends declared, $0.83 per share	—	—		—		(1,160)		—		(1,160)		—		(1,160)
Repurchases of common stock, inclusive of excise tax obligation	(21.7)	—		(711)		—		—		(711)		—		(711)


Shares issued under employee stock-based compensation plans and other	3.7	—		—		—		—		—		—		—
Tax withholdings related to net share settlements	—	—		(62)		—		—		(62)		—		(62)
Stock-based compensation and stock options exercised	—	—		117		—		—		117		—		117
Non-controlling interest surrender of shares	—	—		—		(1)		—		(1)		1		—
Balance as of December 31, 2023	1,390.4	14		20,788		4,559		315		25,676		—		25,676
Net income	—	—		—		1,441		—		1,441		—		1,441
Other comprehensive loss	—	—		—		—		(591)		(591)		—		(591)

Dividends declared, $0.89 per share	—	—		—		(1,207)		—		(1,207)		—		(1,207)
Repurchases of common stock, inclusive of excise tax obligation	(38.0)	—		(1,114)		—		—		(1,114)		—		(1,114)


Shares issued under employee stock-based compensation plans and other	4.3	—		—		—		—		—		—		—
Tax withholdings related to net share settlements	—	—		(61)		—		—		(61)		—		(61)
Stock-based compensation and stock options exercised	—	—		99		—		—		99		—		99

Balance as of December 31, 2024	1,356.7	14		19,712		4,793		(276)		24,243		—		24,243
Net income	—	—		—		2,079		—		2,079		—		2,079
Other comprehensive income	—	—		—		—		378		378		—		378

Dividends declared, $0.92 per share	—	—		—		(1,250)		—		(1,250)		—		(1,250)

Shares issued under employee stock-based compensation plans and other	2.0	—		—		—		—		—		—		—
Tax withholdings related to net share settlements	—	—		(31)		—		—		(31)		—		(31)
Stock-based compensation	—	—		97		—		—		97		—		97

Balance as of December 31, 2025	1,358.7	$	14	$	19,778	$	5,622	$	102	$	25,516	$	—	$	25,516

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

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Business and Basis of Presentation

ORGANIZATION AND NATURE OF OPERATIONS

Keurig Dr Pepper Inc. is a leading coffee and beverage company in North America that manufactures, markets, distributes, and sells hot and cold beverages and single serve brewing systems.

References in this Annual Report on Form 10-K to "KDP", "we", "us", and "our" refer to Keurig Dr Pepper Inc. and all wholly-owned subsidiaries included in the consolidated financial statements. Definitions of terms used in this Annual Report on Form 10-K are included within the Master Glossary.

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

BASIS OF PRESENTATION

The accompanying consolidated financial statements have been prepared in accordance with U.S. GAAP.

FISCAL YEAR END

Our fiscal year end is December 31, and our interim fiscal quarters are March 31, June 30, and September 30. One of our significant subsidiaries, Maple Parent Holdings Corp., has a fiscal year end of the last Saturday in December, and its interim fiscal quarters end every thirteenth Saturday. The fiscal year for Maple Parent Holdings Corp. includes 52 weeks for the years ended December 31, 2025, 2024, and 2023. We do not adjust for the difference in fiscal year, as the difference is within the range permitted by the Exchange Act.

PRINCIPLES OF CONSOLIDATION

We consolidate all wholly owned subsidiaries.

We consolidate investments in companies in which we hold the majority interest. In these cases, the third-party equity interest is referred to as non-controlling interest. Generally, non-controlling interests are presented as a separate component within equity in the Consolidated Balance Sheets, and net earnings attributable to the non-controlling interests are presented separately in the Consolidated Statements of Income. However, if the investment agreement contains a mandatorily redeemable financial instrument for the non-controlling interests, such mandatorily redeemable interests are recorded as a liability, rather than equity, in the Consolidated Balance Sheets, and no earnings are attributable to the non-controlling interests.

We would be required to consolidate VIEs for which we have been determined to be the primary beneficiary. To determine if we are the primary beneficiary, we assess specific criteria and use judgment when determining if we have the power to direct the significant activities of the VIE and the obligation to absorb losses or receive benefits from the VIE that may be significant to the VIE. Factors considered include risk and reward sharing, voting rights, involvement in day-to-day capital and operating decisions, representation on a VIE's governance structure, existence of unilateral kick-out rights exclusive of protective rights or voting rights, and level of economic disproportionality between us and the VIE's other partner(s). We have determined that we are not the primary beneficiary of any VIEs. However, future events may require us to consolidate VIEs if we become the primary beneficiary.

We use the equity method to account for investments in companies if the investment provides us with the ability to exercise significant influence over operating and financial policies of the investee. Consolidated net income includes our proportionate share of the net income or loss of these companies. Judgment regarding the level of influence over each equity method investment includes considering key factors such as ownership interest, representation on the Board or similar governing body, participation in policy-making decisions, and material intercompany transactions.

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

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(CONTINUED)

RECLASSIFICATIONS

We reclassified certain current and prior period amounts within the Consolidated Statements of Income and Consolidated Statements of Cash Flows in order to conform to current year presentation. These reclassifications had no impact on our net income or total cash, cash equivalents, restricted cash, and restricted cash equivalents, respectively.

2. Significant Accounting Policies

USE OF ESTIMATES

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

SIGNIFICANT ACCOUNTING POLICIES

Fair Value

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Based upon the transparency of inputs to the valuation of an asset or liability, a three-level hierarchy has been established for fair value measurements. The three-level hierarchy for disclosure of fair value measurements is as follows:

Level 1 - Quoted market prices in active markets for identical assets or liabilities.

Level 2 - Observable inputs such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.

Level 3 - Valuations with one or more unobservable significant inputs that reflect the reporting entity's own assumptions.

The fair value of Notes and marketable securities as of December 31, 2025 and 2024 are based on quoted market prices for publicly traded securities.

We estimate fair values of financial instruments measured at fair value in the consolidated financial statements on a recurring basis to ensure they are calculated based on market rates to settle the instruments. These values represent the estimated amounts we would pay or receive to terminate agreements, taking into consideration current market rates and creditworthiness.

The mandatory redemption liability for GHOST is a liability measured on a recurring basis that is considered Level 3 within the fair value hierarchy. Refer to the Mandatory Redemption Liability section below for further information.

Transfers between levels are recognized at the end of each reporting period. There were no transfers of financial instruments between the levels of fair value hierarchy during the years ended December 31, 2025, 2024, and 2023.

Acquisitions

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

Asset Acquisitions

When substantially all of the fair value of the assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets, the transaction is accounted for as an asset acquisition. Direct transaction costs associated with asset acquisitions are capitalized.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(CONTINUED)

Business Combinations

We include the results of operations of the acquired business in the consolidated financial statements prospectively from the acquisition date. We allocate the purchase consideration to the assets acquired and liabilities assumed in the acquired entity generally based on their fair values at the acquisition date. The excess of the fair value of purchase consideration over the fair value of these assets acquired and liabilities assumed in the acquired entity is recorded as goodwill. During the measurement period, we will continue to obtain information to assist in determining the fair value of net assets acquired, which may differ from these preliminary estimates. Measurement period adjustments, if applicable, will be applied in the reporting period in which the adjustment amounts are determined. Certain of our acquisitions may include other forms of consideration, including mandatorily redeemable liabilities and other earn-out arrangements. As of the acquisition date, we record such consideration, as applicable, at the estimated fair value of the expected future payments associated with the obligation. Any changes to the recorded fair value of the consideration are recognized in earnings in the period in which they occur.

Transaction expenses are recognized separately from the business combination and are expensed as incurred. These charges primarily include direct third-party professional fees for advisory and consulting services and other incremental costs related to the acquisition.

Cash, Cash Equivalents, Restricted Cash, and Restricted Cash Equivalents

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

We are exposed to potential risks associated with its cash and cash equivalents. We place our cash and cash equivalents with high credit quality financial institutions. Deposits with these financial institutions may exceed the amount of insurance provided; however, these deposits typically are redeemable upon demand and, therefore, we believe the financial risks associated with these financial instruments are minimal.

The carrying value of cash, cash equivalents, restricted cash, and restricted cash equivalents is valued as of the balance sheet date equating fair value and is classified as Level 1. The following table provides a reconciliation of cash, cash equivalents, restricted cash, and restricted cash equivalents reported with the Consolidated Balance Sheets to the total of the same amounts shown in the Consolidated Statements of Cash Flows:


	December 31,
(in millions)	2025		2024
Cash and cash equivalents	$	1,026	$	510
Restricted cash and restricted cash equivalents(1)	18		80
Non-current restricted cash and restricted cash equivalents(2)	—		18
Total cash, cash equivalents, restricted cash, and restricted cash equivalents	$	1,044	$	608

(1)Restricted cash and restricted cash equivalents consists primarily of amounts held in escrow in connection with the acquisition of GHOST as of December 31, 2025 and 2024, as well as Kalil Acquisition as of December 31, 2024, with a corresponding holdback liability recorded in Other current liabilities. Refer to Note 4 for additional information.

(2)Non-current restricted cash and restricted cash equivalents, reported within Other non-current assets in the Consolidated Balance Sheets, consists of amounts held in escrow in connection with the acquisition of GHOST as of December 31, 2024, with a corresponding holdback liability recorded in Other non-current liabilities. Refer to Note 4 for additional information.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(CONTINUED)

Trade Accounts Receivable and Allowance for Expected Credit Losses

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

We are exposed to potential credit risks associated with our accounts receivable, as we generally do not require collateral on our accounts receivable. We determine the required allowance for expected credit losses using information such as customer credit history and financial condition, industry and market segment information, credit reports, and economic trends and conditions. Allowances can be affected by changes in the industry, customer credit issues, or customer bankruptcies, or expectations of any such events in a future period when reasonable and supportable. Historical information is utilized beyond reasonable and supportable forecast periods. Amounts are charged against the allowance when it is determined that expected credit losses may occur. Activity in the allowance for expected credit loss accounts was not significant for the years ended December 31, 2025, 2024, and 2023.

Concentration of credit risk with respect to accounts receivable is limited due to the large number of customers in various channels comprising our customer base. Walmart is a major customer as described in Note 9. As of December 31, 2025 and 2024, Walmart accounted for approximately $186 million and $205 million of trade receivables, respectively, which exceeded 10% of our total trade accounts receivable.

Inventories

Inventories consist of raw materials, WIP, and finished goods. Raw materials include various commodity costs for our ingredients and materials sourced from various providers. The costs of finished goods inventories manufactured by us include raw materials, direct labor, and indirect production and overhead costs. Finished goods also include the purchases of brewing systems and certain beverages from third-party manufacturers. Inventories are stated at the lower of cost or net realizable value. Cost is measured using standard cost, which approximates first-in, first-out. We make adjustments for excess and obsolete inventories based on an assessment of slow-moving and obsolete inventories, determined by historical usage and demand.

The following table summarizes our inventories:


	December 31,
(in millions)	2025		2024
Raw materials	$	706	$	520
WIP	8		9
Finished goods	1,019		770
Total	$	1,733	$	1,299

Property, Plant, and Equipment, Net

Property, plant, and equipment is stated at cost plus capitalized interest on borrowings during the actual construction period of major capital projects, net of accumulated depreciation. Significant improvements which substantially extend the useful lives of assets are capitalized, and expenditures for repairs and maintenance which do not improve or extend the life of the assets are expensed as incurred. We capitalize certain computer software and software development costs incurred in connection with developing or obtaining computer software for internal use, which are included in property, plant, and equipment. When property, plant, and equipment is sold, the costs and the related accumulated depreciation are removed from the accounts, and any net gain or loss is recorded in Other operating (income) expense, net in the Consolidated Statements of Income.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(CONTINUED)

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


Type of Asset	Useful Life
Buildings and improvements	3	to	40 years
Machinery and equipment	2	to	20 years
Cold drink equipment	2	to	7 years
Computer software	2	to	8 years

Leasehold improvements, which are primarily considered building improvements, are depreciated over the shorter of the estimated useful life of the assets or the lease term. Estimated useful lives are periodically reviewed and, when warranted, are updated.

We periodically review long-lived assets for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. In order to assess recoverability, we compare the estimated undiscounted future pre-tax cash flows from the use of the group of assets, as defined, to the carrying amount of such assets. Measurement of an impairment loss is based on the excess of the carrying amount of the group of assets over the long-lived asset's fair value, and any impairment loss is recorded in Other operating (income) expense, net, in the Consolidated Statements of Income. For the years ended December 31, 2025, 2024, and 2023, no impairment loss was recorded related to these assets.

Leases

We lease certain facilities and machinery and equipment, including fleet. These leases expire at various dates through 2044. Some lease agreements contain standard renewal provisions that allow us to renew the lease at rates equivalent to fair market value at the end of the lease term. Our lease agreements do not contain any material restrictive covenants. Certain leases with VIEs, which include manufacturing and distribution properties and our Frisco headquarters, contain an RVG at the end of the term. Refer to Note 19 for additional information about RVGs.

Operating leases are included within Other non-current assets, Other current liabilities, and Other non-current liabilities within the Consolidated Balance Sheets. Finance leases are included within Property, plant, and equipment, net, Other current liabilities, and Other non-current liabilities. Leases with an initial term of 12 months or less are not recognized in the Consolidated Balance Sheets.

Right of use assets and lease liabilities are recognized in the Consolidated Balance Sheets at the present value of future minimum lease payments over the lease term on the commencement date. When the rate implicit in the lease is not provided to us, we use our incremental borrowing rate based on information available at the commencement date to determine the present value of future minimum lease payments. Our incremental borrowing rate is determined using a portfolio of secured borrowing rates commensurate with the term of the lease and is reassessed on a quarterly basis.

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

Sale-and-leaseback transactions occur when we sell assets to a third-party and subsequently lease them back. The resulting leases that qualify for sale-and-leaseback accounting are evaluated and accounted for as operating leases. A transaction that does not qualify for sale-and-leaseback accounting as a result of finance lease classification or the failure to meet certain revenue recognition criteria is accounted for as a financing transaction. For a financing transaction, we retain the assets sold within Property, plant, and equipment, net and record a financing obligation equal to the amount of cash proceeds received. Rental payments under such transactions are recognized as a reduction of the financing obligation and as interest expense using an effective interest method.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(CONTINUED)

Investments

Deferred Compensation Plan

We have a U.S. non-qualified defined contribution plan. Contributions under the non-qualified defined contribution plan are maintained in a rabbi trust and are not readily available to us. The rabbi trust consists of readily marketable equity securities, which are included in Other non-current assets in the Consolidated Balance Sheets. Gains or losses from such investments are charged to Other expense (income), net in the Consolidated Statements of Income.

The corresponding deferred compensation liability is included in Other non-current liabilities in the Consolidated Balance Sheets, with changes in this obligation recognized as adjustments to compensation expense and recorded in SG&A expenses.

Investments in Other Equity Securities

Effective December 31, 2024, we hold a majority interest in GHOST. This investment contains a mandatorily redeemable financial instrument for the non-controlling interests. Refer to Note 4 for further information about the GHOST Transactions.

We also hold investments in certain entities which are accounted for as equity method investments, equity securities with readily determinable fair value, or equity securities without readily determinable value.

The companies over which we exert significant influence, but do not control the financial and operating decisions, are accounted for as equity method investments. Equity method investments are reported at cost, which includes third-party transaction costs, and are adjusted each period for dividends paid, if any, as well as our share of the investee's net income or loss, unless the investment agreement indicates an alternative allocation of earnings or losses. Our share of the net income or loss resulting from these investments is recorded in Other expense (income), net in the Consolidated Statements of Income. To the extent we earn additional equity in these investments from achieving certain contractual milestones in our distribution activities, the earned equity is recorded as a reduction in Cost of sales and included in the Earned equity from distribution arrangements line in the Consolidated Statements of Cash Flows. Any gains and losses resulting from the sale of these investments are recorded in Gain on sale of equity method investment. The carrying value of our equity method investments is reported in Equity method investments in the Consolidated Balance Sheets. Distributions received from equity method investments are classified using the cumulative earnings approach in the Consolidated Statements of Cash Flows.

Our equity method investments in certain privately held entities do not have readily determinable fair values and are periodically evaluated for impairment. An impairment loss would be recorded whenever a decline in value of an investment below its carrying amount is determined to be other than temporary.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(CONTINUED)

Investments with readily determinable fair values for which we do not have the ability to exercise significant influence are measured at fair value. 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 and reported in Other non-current assets in the Consolidated Balance Sheets. Unrealized mark-to-market gains and losses are recorded to Other expense (income), net. The following table presents the amount of unrealized mark-to-market losses (gains), net, on our Vita Coco investment recognized in the Consolidated Statements of Income related to these securities during the periods presented:


	For the Year Ended December 31,
(in millions)	2025		2024		2023
Unrealized mark-to-market losses (gains)(1)	$	32	$	(17)	$	(16)

(1)We sold our investment in Vita Coco and recorded a realized gain of $34 million in the first quarter of 2025.

Goodwill and Intangible Assets

Intangible assets are classified into two categories:

intangible assets with definite lives subject to amortization, and
intangible assets with indefinite lives not subject to amortization.

The majority of the intangible asset balance is made up of brands which we have determined to have indefinite useful lives. In arriving at the conclusion that a brand has an indefinite useful life, we review factors such as size, diversification, and market share of each brand. We expect to acquire, hold, and support brands for an indefinite period through consumer marketing and promotional support. We also consider factors such as our ability to continue to protect the legal rights that arise from these intangible assets indefinitely or the absence of any regulatory, economic, or competitive factors that could truncate the life of these intangible assets. If the criteria are not met, the brand is considered to have a finite useful life.

Identifiable intangible assets deemed to have determinable finite useful lives are amortized on a straight-line basis over the period of which the expected economic benefit is derived. Amortization expense is recorded in SG&A expenses in the Consolidated Statements of Income. The estimated useful lives of intangible assets with definite lives are as follows:


Type of Asset	Useful Life
Acquired technology			20 years
Brands	5	to	10 years
Contractual arrangements	10	to	20 years
Customer relationships	10	to	40 years
Distribution rights	4	to	10 years
Trade names			10 years
Other	3	to	10 years

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

For goodwill and indefinite lived intangible assets, we perform quarterly analyses to evaluate whether any triggering events have occurred which may indicate that the carrying amount of an asset may not be recoverable. We also conduct tests for impairment annually on the first day of the fourth quarter, or more frequently if events or circumstances indicate the carrying amount may not be recoverable.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(CONTINUED)

For both goodwill and other indefinite lived intangible assets, we have the option to first assess qualitative factors to determine whether the fair value of either the reporting unit or indefinite lived intangible asset is "more likely than not" less than its carrying value, also known as a Step 0 analysis. When performing a quantitative, or Step 1, analysis, we use the income approach, or in some cases a combination of income and market based approaches, to determine the fair value of our assets, as well as an overall consideration of market capitalization and enterprise value.

The tests for impairment include significant judgment in estimating the fair value of reporting units and intangible assets. Management's estimates of fair value, which fall under Level 3 and are non-recurring, are based on historical and forecasted revenues and profit performance and discount rates. Fair value is based on what the reporting units and intangible assets would be worth to a third-party market participant. Discount rates are based on a weighted average cost of equity and cost of debt, adjusted with various risk premiums.

Goodwill is assigned to reporting units for purposes of impairment testing. A reporting unit is the same as an operating segment or one level below an operating segment. As of October 1, 2025, our reporting units were as follows:


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

If the carrying value of the reporting unit or intangible asset exceeds its fair value, an impairment charge will be recorded in current earnings for the difference up to the carrying value of the goodwill or intangible asset recorded. Refer to Note 6 for additional information.

Capitalized Customer Incentive Programs

We provide support to certain customers to cover various programs and initiatives to increase net sales, including contributions to customers or vendors for cold drink equipment used to market and sell our products. These programs and initiatives generally directly benefit us over a period of time. Accordingly, costs of these programs and initiatives are recorded in Prepaid expenses and other current assets and Other non-current assets in the Consolidated Balance Sheets. The costs for these programs are amortized over the period to be directly benefited based upon a methodology consistent with our contractual rights under these arrangements.

Accounts Payable

We have agreements with third-party administrators which allow participating suppliers to track our payment obligations, and, if voluntarily elected by the supplier, to sell our payment obligations to financial institutions. Suppliers can sell one or more of our payment obligations at their sole discretion, and our rights and obligations to our suppliers, including amounts due and scheduled payment terms, are not impacted. We have no economic interest in a supplier's decision to enter into these agreements and no direct financial relationship with the financial institutions.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(CONTINUED)

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


	For the Year Ended December 31,
(in millions)	2025		2024
Balance, beginning of the period	$	1,740	$	2,389
Additions	3,424		2,999
Settlements	(3,791)		(3,639)

Effect of exchange rate changes	5		(9)
Balance, end of the period	$	1,378	$	1,740

Structured Payables

In the event that we determine that a commercial arrangement described above is more representative of a financing transaction, the payment obligation would be reclassified to structured payables.

Additionally, we have entered into an agreement with a supply chain payment processing intermediary, for the intermediary to act as a virtual credit card sponsor. The card sponsor bills us the original payment amount, effectively financing the transaction. The agreement permits us to utilize the third party to make a broad range of payments.

Structured payables have equal priority with accounts payable and are treated as non-recourse obligations. We record interest for the period the structured payables obligation is outstanding and reflect the proceeds and payments related to these transactions as a financing activity in the Consolidated Statements of Cash Flows.

Mandatory Redemption Liability

Certain of our acquisitions may include other forms of consideration, including mandatorily redeemable liabilities and other earn-out arrangements. As of the acquisition date, we record such consideration, as applicable, at the estimated fair value of the expected future payments associated with the obligation. Any changes to the recorded fair value of the consideration are recognized in earnings in the period in which they occur.

Subsequent to the date of acquisition, if future payments are expected to differ from our estimate as of the date of acquisition, any related fair value adjustments are recognized in the period that such expectation is considered probable. Changes in the fair value of payments are recorded within Other expense (income), net in the Consolidated Statements of Income.

For the year ended December 31, 2025, the fair value of our mandatory redemption liability for GHOST was estimated using the Monte Carlo simulation method, which incorporates significant inputs not observable in the market (Level 3 inputs) including forecasted EBITDA expectations, adjusting for market risks and volatility, calculating redemption prices, discounting to present terms with the cost of debt, and averaging results across scenarios to determine fair value, incorporating the market price of risk and volatility estimates from similar companies. As of December 31, 2025 and 2024, the fair value of our mandatory redemption liability associated with GHOST was $880 million and $689 million, respectively, and is included within Other non-current liabilities within the Consolidated Balance Sheets.

Pension and Post-retirement Medical Benefits

We have U.S. and foreign pension and PRMB plans which provide benefits to a defined group of employees who satisfy age and length of service requirements at our discretion. As of December 31, 2025, we have several stand-alone non-contributory defined benefit plans and PRMB plans. Depending on the plan, pension and PRMB benefits are based on a combination of factors, which may include salary, age, and years of service.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(CONTINUED)

Employee pension and PRMB plan obligations and the associated expense included in the consolidated financial statements are determined from actuarial analyses based on plan assumptions, employee demographic data, years of service, compensation, benefits and claims paid, and employer contributions. Non-cash settlement charges occur when the total amount of lump sum payments made to participants of various U.S. defined pension plans exceed the estimated annual interest and service costs.

The components of net periodic benefit cost other than the service cost component are included in Other expense (income), net, in the Consolidated Statements of Income. The service cost component is included in either Cost of sales or SG&A expenses, depending on the classification of the employee's other compensation costs.

The objective with respect to the funding of our pension plans is to provide adequate assets for the payment of future benefits. Pursuant to this objective, we will fund the pension plans as required by governmental regulations and may consider discretionary contributions as conditions warrant.

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

Risk Management Programs

We retain selected levels of property, casualty, workers' compensation, health, cyber, and other business risks. Many of these risks are covered under conventional insurance and reinsurance programs with deductibles or self-insured retentions. Accrued liabilities related to the retained casualty and health risks are calculated based on loss experience and development factors, which contemplate a number of variables including claim history and expected trends, and are recorded in Other current liabilities and Other non-current liabilities in the Consolidated Balance Sheets.

Income Taxes

Income taxes are accounted for using the asset and liability approach, which involves determining the temporary differences between assets and liabilities recognized for financial reporting and the corresponding amounts recognized for tax purposes and computing the tax-related carryforwards at the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be reversed. The resulting amounts are deferred tax assets or liabilities. The total of taxes currently payable per the tax return, the deferred tax expense or benefit, and the impact of uncertain tax positions represents the income tax expense or benefit for the year for financial reporting purposes.

We periodically assess the likelihood of realizing our deferred tax assets based on the amount that we believe is more likely than not to be realized. We base our judgment of the recoverability of deferred tax assets primarily on historical earnings, our estimate of current and expected future earnings, and prudent and feasible tax planning strategies.

We establish income tax liabilities to remove some or all of the income tax benefit of any of our income tax positions at the time we determine that the positions become uncertain based upon one of the following: (1) the tax position is not "more likely than not" to be sustained, (2) the tax position is "more likely than not" to be sustained, but for a lesser amount, or (3) the tax position is "more likely than not" to be sustained, but not in the financial period in which the tax position was originally taken. The evaluation of whether or not a tax position is uncertain is based on the following: (1) we presume the tax position will be examined by the relevant taxing authority such as the IRS that has full knowledge of all relevant information, (2) the technical merits of a tax position are derived from authorities such as legislation and statutes, legislative intent, regulations, rulings, and case law, and their applicability to the facts and circumstances of the tax position, and (3) each tax position is evaluated without considerations of the possibility of offset or aggregation with other tax positions taken. We adjust these income tax liabilities when our judgment changes as a result of new information. Any change will impact income tax expense in the period in which such determination is made.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(CONTINUED)

Derivative Instruments

We are exposed to market risks arising from adverse changes in interest rates, FX rates, and commodity prices. We manage these risks through a variety of strategies, including the use of interest rate contracts, FX forward contracts, commodity forward, future, swap, and option contracts, and supplier pricing agreements.

We do not hold or issue derivative financial instruments for trading or speculative purposes. All derivative instruments are recorded on a gross basis, including those subject to master netting arrangements.

We formally designate and account for certain interest rate contracts and FX forward 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 underlying 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.

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

Loss Contingencies

Legal Matters

From time to time, we are involved in various claims, proceedings, and litigation, including those described in Note 18. We accrue for specific legal proceedings when we determine that the likelihood of an unfavorable outcome is probable and the amount of loss can be reasonably estimated. Management has also identified certain other legal matters where it believes an unfavorable outcome is reasonably possible and/or for which no estimate of possible losses can be made, and where applicable, provides disclosure of such legal matters in Note 18.

Product Warranties

We provide for the estimated cost of product warranties associated with our brewers in cost of sales, at the time product revenue is recognized. Warranty costs are estimated primarily using historical warranty information in conjunction with current engineering assessments applied to the expected repair or replacement costs. The estimate for warranties requires assumptions relating to expected warranty claims which are based on historical claims and known current year factors.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(CONTINUED)

Supplemental Balance Sheet Information

The following table provides supplemental financial information from the Consolidated Balance Sheets:


	December 31,
(in millions)	2025		2024
Prepaid expenses	$	334	$	173
Other current assets	484		433
Total prepaid expenses and other current assets	$	818	$	606

Accrued customer trade	$	444	$	439
Accrued termination fees(1)	—		225
Other accrued expenses	935		920
Total accrued expenses	$	1,379	$	1,584

(1)We paid the termination fee related to the GHOST Transactions in full in the first quarter of 2025. Refer to Note 4 for additional information.

Revenue Recognition

We recognize revenue when performance obligations under the terms of a contract with the customer are satisfied. Branded product sales, which include LRBs, K-Cup pods, appliances, and other, occur once control is transferred upon delivery to the customer. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods. The amount of consideration we receive and revenue we recognize varies with changes in customer incentives offered to our customers and their customers. These incentives and discounts, which are recorded as a reduction of revenue, include cash discounts, price allowances, volume-based rebates, product placement fees, and other financial support for items such as trade promotions, displays, new products, consumer incentives, and advertising assistance. Accruals are established for the expected payout based on contractual terms, volume-based metrics, and/or historical trends, and require management judgment with respect to estimating customer participation and performance levels. 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.

Cost of Sales

Cost of goods sold includes all costs to acquire and manufacture our products including raw materials, direct and indirect labor, manufacturing overhead, including depreciation expense, and all other costs incurred to bring the product to salable condition. All other costs incurred after this condition is met are considered selling costs and included in SG&A expenses.

Selling, General, and Administrative Expenses

Transportation and Warehousing Costs

We incurred $2,087 million, $1,910 million, and $1,783 million of transportation and warehousing costs during the years ended December 31, 2025, 2024, and 2023, respectively. These amounts, which primarily relate to shipping and handling costs, are recorded in SG&A expenses in the Consolidated Statements of Income.

Advertising and Marketing Expense

Advertising and marketing production costs related to television, print, radio, and other marketing investments are expensed as of the first date the advertisement takes place. All other advertising and marketing costs are expensed as incurred. Advertising and marketing expenses were approximately $629 million, $657 million, and $640 million for the years ended December 31, 2025, 2024, and 2023, respectively. Advertising and marketing expenses are recorded in SG&A expenses in the Consolidated Statements of Income. Prepaid advertising and marketing costs are recorded as Other current and Other non-current assets in the Consolidated Balance Sheets.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(CONTINUED)

Research and Development Costs

Research and development costs are expensed when incurred and amounted to $70 million, $70 million, and $66 million for the years ended December 31, 2025, 2024, and 2023, respectively. These expenses are recorded primarily in SG&A expenses in the Consolidated Statements of Income.

Stock-Based Compensation Expense

Stock-based compensation expense is recognized within SG&A expenses in the Consolidated Statements of Income related to the fair value of employee stock-based awards, ratably over the vesting period, and only for awards expected to vest. Estimated forfeiture rates are based on historical data and are periodically reassessed.

Compensation cost is based on the grant-date fair value. The fair value of RSUs and PSUs is determined based on the number of units granted and the grant date price of common stock.

Restructuring and Integration Costs

We implement restructuring programs from time to time and incur costs that are designed to improve operating effectiveness and lower costs. When these programs are implemented, we incur expenses, such as employee separations, lease terminations, and other direct exit costs, that qualify as exit and disposal costs under U.S. GAAP. Severance costs are recorded once they are both probable and estimable. Restructuring liabilities that qualify as exit and disposal costs under U.S. GAAP are included in accounts payable and accrued expenses in the consolidated financial statements.

We also incur expenses that are an integral component of, and directly attributable to, the restructuring activities, which do not qualify as exit and disposal costs, such as accelerated depreciation, asset impairments, IT implementation costs, and other incremental costs. We have recorded these costs within SG&A expenses in the Consolidated Statements of Income, and these costs are held within unallocated corporate costs.

Foreign Currency Translation and Transactions

We translate assets and liabilities of our foreign subsidiaries from their respective functional currencies to U.S. dollars at the appropriate spot rates as of the balance sheet date. The functional currency of our operations outside the U.S. is generally the local currency of the country where the operations are located, or U.S. dollars. The results of operations are translated into U.S. dollars at a monthly average rate, calculated using daily exchange rates.

Differences arising from the translation of opening balance sheets of these entities to the rate at the end of the financial year are recognized in AOCI. The differences arising from the translation of foreign results at the average rate are also recognized in AOCI. Such translation differences are recognized as income or expense in the period in which we dispose of the operations.

Transactions in foreign currencies are recorded at the approximate rate of exchange at the transaction date. Assets and liabilities resulting from these transactions are translated at the rate of exchange in effect at the balance sheet date. Such differences are recorded in Cost of sales or Other expense (income), net in the Consolidated Statements of Income, depending on the nature of the underlying transaction.

Earnings per Share

Basic EPS is computed by dividing Net income by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the assumed conversion of all dilutive securities determined through the treasury stock method.

Repurchases of Common Stock

Shares repurchased under authorized share repurchase programs are retired, and the excess purchase price over the par value is recorded to additional paid-in capital.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(CONTINUED)

The 1% excise tax associated with shares repurchased is recorded to additional paid-in capital. Cash paid related to the excise tax on net share repurchases is included in the Repurchases of common stock, inclusive of excise tax obligation line in the Consolidated Statements of Cash Flows.

RECENTLY ISSUED ACCOUNTING STANDARDS

In February 2024, the FASB issued ASU 2024-03, Income Statement Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40). The objective of ASU 2024-03 is to require entities to provide enhanced disclosures of income statement expenses through disaggregation of specific expense captions. ASU 2024-03 is effective for public companies starting in annual periods beginning after December 15, 2026 and in interim periods beginning after December 15, 2027. We are currently evaluating ASU 2024-03 and the impact of the disclosures to our consolidated financial statements.

RECENTLY ADOPTED PROVISIONS OF U.S. GAAP

As of January 1, 2025 we prospectively adopted ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The objective of ASU 2023-09 is to enhance disclosures related to income taxes, including specific thresholds for inclusion within the tabular disclosure of income tax rate reconciliation and specified information about income taxes paid. ASU 2023-09 is effective for public companies starting in annual periods beginning after December 15, 2024. Refer to Note 15 for additional information on our income tax related disclosures.

3. JDE Peet's Acquisition and Related Transactions

JDE PEET'S ACQUISITION

On August 24, 2025, we entered into the JDE Peet's Acquisition Agreement, and on January 16, 2026, pursuant to JDE Peet's Acquisition Agreement, KDP commenced a tender offer to acquire all of the issued ordinary shares, excluding ordinary shares in treasury, of JDE Peet's for a cash offer price of €31.85 per share, without interest. JDE Peet's is a global pure-play coffee company with a portfolio of leading brands including Jacobs, L'OR, and Peet's. The JDE Peet's Acquisition is expected to occur early in the second quarter of 2026 and is subject to the satisfaction or waiver of closing conditions, including the acceptance of the offer by the shareholders of JDE Peet's.

We additionally entered into a series of transactions in order to fund a portion of the consideration of the JDE Peet's Acquisition, as described below. The JV Investment and Preferred Investment are subject to customary closing conditions, including the substantially concurrent closing of the JDE Peet's Acquisition.

BORROWING ARRANGEMENTS

In connection with the JDE Peet's Acquisition, we entered into the Bridge Credit Agreement and the Delayed Draw Term Loan Agreement. Refer to Note 5 for additional information on these borrowing arrangements.

JV INVESTMENT

On October 26, 2025, we entered into the JV Commitment Letter, under which we will contribute the Coffee Production Assets, as well as certain of our related coffee assets (including sales and distribution) in Canada to the Pod Manufacturing JV, and the JV Investors will contribute, through the JV Investor Partner, $4 billion in cash in exchange for a 49% interest in the Pod Manufacturing JV. The remaining 51% ownership interest will remain under our ownership. Further, the JV Commitment Letter names each of Apollo Global Securities, LLC and KKR Capital Markets, LLC as a joint lead arranger with respect to certain of the transactions. On February 23, 2026, the JV Transaction Agreement was executed. Refer to Note 22 for additional information on the significant terms of the JV Transaction Agreement.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(CONTINUED)

PREFERRED INVESTMENT

On October 27, 2025, we entered into the Preferred Investment Agreement with the KKR Investor and the Apollo Investor. Under the Preferred Investment Agreement, we agreed to issue and sell to the Preferred Investors, and the Preferred Investors agreed to purchase from us, 3 million shares of our Convertible Preferred Stock, with a par value of $0.01 per share, for a purchase price of $1,000 per share and an aggregate purchase price of $3 billion. The transaction is exempt from the registration requirements of the Securities Act of 1933, as amended. On February 23, 2026, we amended the Preferred Investment Agreement, under which the Preferred Investors agreed to purchase an additional 1.5 million shares of our Convertible Preferred Stock. Refer to Note 22 for additional information.

The Convertible Preferred Stock will rank senior to our common stock with respect to dividend and distribution on liquidation rights. The Convertible Preferred Stock will have a liquidation preference of $1,000 per share. The holders of the Convertible Preferred Stock will be entitled to dividends at a rate of 4.75% per annum, subject to increase in certain cases, and to participate in dividends paid to holders of our common stock on an as-converted basis, provided that any such dividends received on an as-converted basis will reduce, on a dollar-for-dollar basis, the dividends holders are entitled to receive on the Convertible Preferred Stock. Dividends on the Convertible Preferred Stock will be paid in cash. We may choose to defer payment of all or part of any dividends due on the Convertible Preferred Stock; however, we will accrue additional dividends until paid in cash and we will not be able to declare or pay any dividends on or make repurchases of our common stock, subject to certain conditions.

The Convertible Preferred Stock will be convertible into shares of our common stock, at our election or, in certain specified circumstances, the election of the Preferred Investors, at an initial conversion price of $37.25 (which will be subject to anti-dilution adjustments, as well as an adjustment in the event that we complete the Separation). Holders may convert up to, in the aggregate, 50% of the Convertible Preferred Stock allocated among such holders and their permitted transferees pro rata at any time, and may convert the remainder following the earliest of the closing of the Separation, the 18-month anniversary of the issuance of the Convertible Preferred Stock, upon foreclosure by a lender under a bona fide loan or other financing arrangement or the 12-month anniversary of any initial public offering of the remaining beverage business if the Separation has not yet occurred. We may require, at any time after the 3-year anniversary of the issuance of the Convertible Preferred Stock to be converted if the closing price per share of our common stock exceeds 150% of the conversion price then in effect for at least twenty trading days in any period of thirty consecutive trading days. After the seventh anniversary of the issue date, we will have the option to redeem the Convertible Preferred Stock at the then-applicable redemption price. In the case of a fundamental change, we will be required to offer to repurchase the Convertible Preferred Stock at a specified price. Preferred Investors will vote with holders of our common stock on an as-converted basis, following the satisfaction of certain conditions.

The Preferred Investment is subject to customary closing conditions, including, among others: (i) the continued accuracy of the representations and warranties contained in the Preferred Investment Agreement; (ii) the performance in all material respects by each party of its respective covenants and agreements under the Preferred Investment Agreement; (iii) the expiration of applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976; and (iv) the substantially concurrent closing of the JDE Peet's Acquisition.

4. Other Acquisitions

DYLA ACQUISITION

On June 2, 2025, we completed the acquisition of Dyla for aggregate consideration of $98 million. Dyla is a leading player in powdered drink mixes and liquid water enhancers. Prior to the acquisition, we held direct and indirect ownership interests in Dyla and accounted for the investment as an equity method investment. We paid $72 million in cash, net of our previous ownership interest, in order to complete the acquisition.

Our allocation of consideration exchanged to the net tangible and intangible assets acquired and liabilities assumed was based on estimated fair values as of June 2, 2025, and the consideration was primarily allocated to intangible assets and goodwill. In the third quarter of 2025, we finalized our allocation of consideration exchanged in the Dyla acquisition, with no significant measurement period adjustments recorded.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(CONTINUED)

GHOST TRANSACTIONS

On December 31, 2024, we acquired a 60% ownership interest in GHOST for aggregate consideration of $999 million. GHOST is a lifestyle sports nutrition business with a portfolio anchored by GHOST Energy, a leading RTD energy brand. As part of the GHOST Transactions, we also entered into an agreement which requires us to purchase the remaining equity interests in GHOST in 2028.

Additionally, we executed an agreement with GHOST and ABI which terminated the distribution rights for certain GHOST products by ABI, effective March 3, 2025, for a termination payment to ABI of $225 million, after which, we assumed the distribution of such products. The termination payment was accrued as of December 31, 2024 and paid in the first quarter of 2025, with the corresponding expense included within Other operating (income) expense, net in the Consolidated Statements of Income.

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


(in millions)	Total Consideration
Initial payment to acquire 60% of GHOST	$	999
Fair value of mandatory redemption liability for the remainder of the business on December 31, 2024(1)	689
Total consideration	$	1,688

(1)Refer to Note 2 for additional information on the estimation of fair value of our mandatory redemption liability.

The initial payment of $999 million was funded primarily by proceeds drawn from the Term Loan Agreement. Refer to Note 5 for additional information.

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


(in millions)	Fair Value
Brand	$	1,146
Assets acquired, net of liabilities assumed	82
Customer relationships	23
Goodwill(1)	437
Total consideration	1,688
Less: Holdback placed in escrow(2)	(90)
Acquisition of business	$	1,598

(1)The goodwill created in the GHOST Transactions is expected to be deductible for tax purposes and is included in our U.S. Refreshment Beverages segment.

(2)Amount includes both the current and non-current portion of the holdback liability as of December 31, 2024. Refer to Note 2 for additional information.

In the first quarter of 2025, we finalized our allocation of consideration, with no significant measurement period adjustments recorded.

KALIL ACQUISITION

On August 9, 2024, we acquired all of Kalil's production, sales, and distribution assets for total consideration of $103 million. Kalil is an independent bottler with bottling and distribution rights in Arizona to key KDP brands, including Canada Dry, 7UP, A&W, Snapple, and Core Hydration. Upon completion of the Kalil Acquisition, approximately $8 million of cash was held back and placed in escrow, which was released in the fourth quarter of 2025.

In 2025, we finalized our allocation of consideration to the net tangible and intangible assets acquired and liabilities assumed in the Kalil Acquisition, which was primarily allocated to property, plant, and equipment and other intangible assets, based on estimated fair values as of August 9, 2024. No significant measurement period adjustments recorded.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(CONTINUED)

5. Long-term Obligations and Borrowing Arrangements

The following table summarizes our long-term obligations:


	December 31,
(in millions)	2025		2024
Notes	$	13,931	$	12,948
Term loan	—		990
Less: current portion of long-term obligations	(895)		(1,026)
Long-term obligations	$	13,036	$	12,912

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


	December 31,
(in millions)	2025		2024
Commercial paper notes	$	2,210	$	1,616
Current portion of long-term obligations:
Notes	895		1,026

Short-term borrowings and current portion of long-term obligations	$	3,105	$	2,642

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(CONTINUED)

SENIOR UNSECURED NOTES

Our Notes consisted of the following:


(in millions)			December 31,
Issuance	Maturity Date	Rate	2025		2024

2025 Merger Notes	May 25, 2025	4.417%	$	—	$	529
2025 Notes	November 15, 2025	3.400%	—		500
2026 Notes	September 15, 2026	2.550%	400		400
2026-B Notes	November 15, 2026	Floating(2)	500		—
2027-B Notes	March 15, 2027	Floating(2)	350		350
2027-C Notes	March 15, 2027	5.100%	750		750
2027 Notes	June 15, 2027	3.430%	500		500
2028 Notes	May 15, 2028	4.350%	500		—
2028 Merger Notes	May 25, 2028	4.597%	1,112		1,112
2029-B Notes	March 15, 2029	5.050%	750		750
2029 Notes	April 15, 2029	3.950%	1,000		1,000
2030 Notes	May 1, 2030	3.200%	750		750
2030-B Notes	May 15, 2030	4.600%	500		—
2031 Notes	March 15, 2031	2.250%	500		500
2031-B Notes	March 15, 2031	5.200%	500		500
2032 Notes	April 15, 2032	4.050%	850		850
2034 Notes	March 15, 2034	5.300%	650		650
2035 Notes	May 15, 2035	5.150%	500		—
2038 Merger Notes	May 25, 2038	4.985%	211		211
2045 Notes	November 15, 2045	4.500%	550		550
2046 Notes	December 15, 2046	4.420%	400		400
2048 Merger Notes	May 25, 2048	5.085%	391		391
2050 Notes	May 1, 2050	3.800%	750		750
2051 Notes	March 15, 2051	3.350%	500		500
2052 Notes	April 15, 2052	4.500%	1,150		1,150
Principal amount			14,064		13,093
Adjustment from principal amount to carrying amount(1)			(133)		(145)
Carrying amount			$	13,931	$	12,948

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

(2)Our floating rate notes bear interest at a rate equal to Compounded SOFR (as defined in the respective supplemental indenture) plus a spread of 0.58% and 0.88% for the 2026-B Notes and the 2027-B Notes, respectively

On May 5, 2025, we completed the issuance of the 2026-B Notes, 2028 Notes, 2030-B Notes, and 2035 Notes, with an aggregate principal amount of $2 billion. The discount associated with these notes was approximately $4 million, and we incurred $10 million in debt issuance costs. The proceeds from the issuance were used for the repayment of outstanding commercial paper borrowings.

The 2025 Merger Notes and 2025 Notes were both repaid at maturity using proceeds from commercial paper.

Notes, among other things, contain customary default provisions and limit our ability to incur indebtedness secured by principal properties, to enter into certain sale and leaseback transactions, and to enter into certain mergers or transfers of substantially all of our assets. The Notes are fully and unconditionally guaranteed by certain of our direct and indirect subsidiaries. As of December 31, 2025, we were in compliance with all financial covenant requirements of the Notes.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(CONTINUED)

VARIABLE-RATE BORROWING ARRANGEMENTS

Delayed Draw Term Loan Agreement

In connection with the JDE Peet's Acquisition, we entered into the Delayed Draw Term Loan Agreement on December 18, 2025, among KDP, as borrower, the lenders party thereto, and Morgan Stanley Senior Funding, Inc. as administrative agent. We incurred approximately $15 million in deferred financing fees related to the issuance, which were capitalized and are being amortized to Interest expense, net through February 2027.

The Delayed Draw Term Loan Agreement provides for a 364-day senior unsecured term loan facility in an aggregate amount not to exceed €10.35 billion, the proceeds of which may be used to fund the JDE Peet's Acquisition, as well as related fees and expenses.

Borrowings under the Delayed Draw Term Loan Agreement will bear interest at a rate per annum equal to EURIBOR plus a margin of 0.750% to 1.750% depending on the rating of certain of our index debt. The undrawn commitments under the facility are subject to a commitment fee which commenced on December 23, 2025 at a per annum rate of 0.060% to 0.200% depending on the rating of certain of our index debt. The Delayed Draw Term Loan Agreement contains customary representations and warranties for investment grade financings. The Delayed Draw Term Loan Agreement also contains (i) certain affirmative covenants, including those that impose reporting and/or operating obligations on us and our subsidiaries, (ii) certain negative covenants that generally limit, subject to exceptions, us and our subsidiaries from taking certain actions, including incurring liens and consummating certain fundamental changes, (iii) financial covenants in the form of a minimum interest coverage ratio of 3.25 to 1.00 that will apply after the initial funding date and a maximum total net leverage ratio of 6.25 to 1.00 that will apply after the initial funding date only upon a downgrade in the ratings of certain of our index debt, and (iv) events of default customary for financings of this type.

As of December 31, 2025, the full amount of the Delayed Draw Term Loan Agreement remains available and undrawn.

Bridge Credit Agreement

In connection and concurrently with the entry into the JDE Peet's Acquisition Agreement, we entered into the Bridge Credit Agreement, a 364-day senior unsecured bridge loan facility in an aggregate amount not to exceed €16.2 billion, on August 24, 2025, among KDP, as borrower, with the lenders party thereto, and Morgan Stanley Senior Funding, Inc. as administrative agent. We incurred approximately $91 million in deferred financing fees related to the issuance, which were capitalized and are being amortized to Interest expense, net through February 2027. We paid additional fees of $15 million on December 23, 2025, as the facility remained undrawn.

Borrowings under the Bridge Credit Agreement will bear interest at a rate per annum equal to EURIBOR plus a margin of 0.750% to 2.500% depending on the rating of certain of our index debt and the period for which the bridge loan remains outstanding after the initial funding date. The undrawn commitments under the facility are subject to a commitment fee, which commenced on December 23, 2025, at a per annum rate of 0.060% to 0.200% depending on the rating of certain of our index debt. The Bridge Credit Agreement contains customary representations and warranties for investment grade financings. The Bridge Credit Agreement also contains (i) certain affirmative covenants, including those that impose reporting and/or operating obligations on us and our subsidiaries, (ii) certain negative covenants that generally limit, subject to exceptions, us and our subsidiaries from taking certain actions, including incurring liens and consummating certain fundamental changes, (iii) financial covenants in the form of a minimum interest coverage ratio of 3.25 to 1.00 that will apply after the initial funding date and a maximum total net leverage ratio of 6.25 to 1.00 that will apply after the initial funding date only upon a downgrade in the ratings of certain of our index debt, and (iv) events of default customary for financings of this type.

On December 18, 2025, the Bridge Credit Agreement facility was reduced to €5.85 billion as a result of the execution of the Delayed Draw Term Loan Agreement, as discussed above. As of December 31, 2025, the remaining amount of the Bridge Credit Agreement remains available and undrawn.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(CONTINUED)

Term Loan Agreement

On October 25, 2024, we entered into the Term Loan Agreement among KDP, as borrower, the lenders party thereto and Bank of America, N.A., as administrative agent. On December 31, 2024, we drew $990 million on the first tranche of the Term Loan Agreement and used the proceeds to fund the GHOST Transactions.

On January 31, 2025, we repaid the amount outstanding under the Term Loan Agreement using proceeds from commercial paper. On May 7, 2025, we terminated the Term Loan Agreement. We had no outstanding loan balances as of the termination date.

Revolving Credit Agreement

On March 31, 2025, we entered into the 2025 Revolving Credit Agreement among KDP, as borrower, the lenders from time to time party thereto and JPMorgan Chase, Bank, N.A., as administrative agent. We incurred approximately $4 million in deferred financing fees related to the issuance. On September 30, 2025, the 2025 Revolving Credit Agreement was amended to increase the capacity to $4.3 billion.

The following table summarizes information about the 2025 Revolving Credit Agreement:


(in millions)		December 31, 2025				December 31, 2024
Issuance	Maturity Date	Capacity		Carrying Value		Carrying Value
2025 Revolving Credit Agreement(1)	March 31, 2030	$	4,300	$	—	$	—

(1)The 2025 Revolving Credit Agreement has $200 million of letters of credit limit, with none utilized as of December 31, 2025.

Borrowings under the 2025 Revolving Credit Agreement will bear interest at a rate per annum equal to, at our option, the term SOFR rate plus a margin of 0.750% to 1.250% or the alternative base rate plus a margin of zero to 0.250%, in each case, depending on the rating of certain of our index debt. The 2025 Revolving Credit Agreement contains customary representations and warranties for investment grade financings. The 2025 Revolving Credit Agreement also contains (i) certain customary affirmative covenants, including those that impose certain reporting and/or performance obligations on us and our subsidiaries, (ii) certain customary negative covenants that generally limit, subject to various exceptions, us and our subsidiaries from taking certain actions, including, without limitation, incurring liens and consummating certain fundamental changes, (iii) a financial covenant in the form of a minimum interest coverage ratio of 3.25 to 1.00, and (iv) customary events of default (including a change of control) for financings of this type.

As of December 31, 2025, we were in compliance with our minimum interest coverage ratio with respect to the 2025 Revolving Credit Agreement.

Commercial Paper Program

We have a commercial paper program, under which we may issue unsecured commercial paper notes on a private placement basis. The maximum aggregate amount available under the facility is $4 billion. The maturities of the commercial paper notes vary, but commercial paper notes are classified as short-term, as maturities do not exceed one year. We issue commercial paper notes as needed for general corporate purposes. Outstanding commercial paper notes rank equally with all of the commercial paper notes' existing and future unsecured borrowings.

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


	For the Year Ended December 31,
(in millions, except %)	2025			2024			2023
Weighted average commercial paper borrowings	$	2,285		$	2,270		$	1,267
Weighted average borrowing rates	4.54		%	5.42		%	5.41		%

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(CONTINUED)

Letters of Credit Facility

In addition to the portion of the 2025 Revolving Credit Agreement reserved for issuance of letters of credit, we have an incremental letter of credit facility. Under this facility, $150 million is available for the issuance of letters of credit, $63 million of which was utilized as of December 31, 2025 and $87 million of which remains available for use.

FAIR VALUE DISCLOSURES

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

The fair values of our Notes are based on current market rates available to us and are considered Level 2 within the fair value hierarchy. The difference between the fair value and the carrying value represents the theoretical net premium or discount that would be paid or received to retire all the Notes and related unamortized costs to be incurred at such date. The fair value of our Notes was $13,196 million and $12,036 million as of December 31, 2025 and 2024, respectively.

6. Goodwill and Intangible Assets

GOODWILL

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


(in millions)	U.S. Refreshment Beverages		U.S. Coffee		International		Total
Balance as of December 31, 2023	$	8,714	$	8,622	$	2,866	$	20,202
Foreign currency translation	—		—		(290)		(290)
Acquisitions(1)	447		—		—		447
Impairment(2)	(306)		—		—		(306)
Balance as of December 31, 2024(3)	8,855		8,622		2,576		20,053
Foreign currency translation	—		—		179		179
Acquisitions(1)	15		—		—		15

Balance as of December 31, 2025(3)	$	8,870	$	8,622	$	2,755	$	20,247

(1)Refer to Note 4 for additional information on acquisitions.

(2)Impairment activity during the year ended December 31, 2024 represents impairment of our U.S. WD reporting unit. Refer to Impairment Analysis - 2024 Impairment Analysis below for further information.

(3)As of December 31, 2025 and 2024, goodwill for the U.S. Refreshment Beverages segment is inclusive of accumulated impairment losses of $306 million. There were no accumulated impairment losses for goodwill as of December 31, 2023.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(CONTINUED)

INTANGIBLE ASSETS OTHER THAN GOODWILL

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


	December 31, 2025						December 31, 2024
(in millions)	Gross Amount		Accumulated Amortization		Net Amount		Gross Amount		Accumulated Amortization		Net Amount
Intangible assets with definite lives:
Acquired technology	$	1,146	$	(694)	$	452	$	1,146	$	(621)	$	525
Customer relationships	683		(301)		382		666		(270)		396
Contractual arrangements	146		(30)		116		144		(21)		123
Trade names	126		(126)		—		126		(124)		2
Brands	76		(40)		36		51		(32)		19
Distribution rights	162		(35)		127		66		(23)		43
Other	25		(3)		22		—		—		—
Total intangible assets with definite lives	$	2,364	$	(1,229)	$	1,135	$	2,199	$	(1,091)	$	1,108

Intangible assets with indefinite lives:
Brands(1)					$	19,993					$	19,848
Trade names					2,478						2,478
Distribution rights					119						200
Total intangible assets with indefinite lives					22,590						22,526
Total intangible assets, net					$	23,725					$	23,634

(1)The change in brands with indefinite lives was driven by favorable foreign currency translation impacts of $223 million, which was partially offset by non-cash impairment charges of $78 million during the year ended December 31, 2025. Refer to 2025 Impairment Analysis below for further information.

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


	Year Ended December 31,
(in millions)	2025		2024		2023
Amortization expense	$	138	$	133	$	137

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


	For the Years Ending December 31,
(in millions)	2026		2027		2028		2029		2030
Expected amortization expense	$	134	$	117	$	109	$	106	$	100

GOODWILL AND INTANGIBLE ASSETS IMPAIRMENT

2025 Impairment Analysis

For the year ended December 31, 2025, we performed a Step 0 analysis for certain indefinite lived intangible assets, including trade names and certain distribution rights, and did not identify any indicators of impairment. For goodwill, indefinite lived brands, and reacquired distribution rights, we performed a Step 1 analysis. As a result, non-cash impairment charges of $78 million were recorded specific to certain brands in the U.S. Refreshment Beverages segment. The primary factor that led to the brand impairment determination as of October 1, 2025 was an increase in our discount rate.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(CONTINUED)

2024 Impairment Analysis

For the year ended December 31, 2024, we performed a Step 0 analysis for certain indefinite lived intangible assets, including trade names and distribution rights, and did not identify any indicators of impairment. For goodwill and indefinite lived brands, we performed a Step 1 analysis. As a result, non-cash impairment charges of $412 million were recorded specific to certain brands in the U.S. Refreshment Beverages segment, and a non-cash impairment charge of $306 million was recorded to goodwill related to the U.S. Warehouse Direct reporting unit in the U.S. Refreshment Beverages segment. The primary factors that led to the brand impairment determination as of October 1, 2024, primarily led by Snapple, were a downward outlook for operating cash flows in our strategic plan, which led to a reduction in the long-term growth rate. The primary factors that led to the goodwill impairment determination as of October 1, 2024, driven by our U.S. Warehouse Direct reporting unit, were headwinds experienced by certain brands in our still portfolio, including a downward outlook for operating cash flows in our strategic plan, which led to a reduction in the long-term growth rate.

2023 Impairment Analysis

For the year ended December 31, 2023, we performed a Step 1 analysis on all goodwill and indefinite lived intangible assets. No impairments were recorded as a result of these analyses.

Additional Impairment Considerations

The following table provides the range of rates considered to be significant inputs that were used in the annual impairment analyses as of October 1, 2025, 2024, and 2023:


	2025				2024				2023
Rate	Minimum		Maximum		Minimum		Maximum		Minimum		Maximum
Discount rates	9.5	%	12.0	%	7.0	%	9.5	%	8.0	%	13.5	%
Long-term growth rates	—	%	3.5	%	—	%	3.5	%	—	%	4.0	%
Royalty rates(1)	1.0	%	1.0	%	1.0	%	1.0	%	1.0	%	10.0	%

(1)Royalty rates were used in a Step 1 quantitative analysis of certain non-priority brands for the years ended December 31, 2025, 2024, and 2023, and trade names for the year ended December 31, 2023.

The results of the impairment analyses of our indefinite lived priority brands as of October 1, 2025, 2024, and 2023 were as follows:


	2025				2024				2023
Headroom Percentage	Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value
Brands
0%(1)	$	1,110	$	1,110	$	280	$	280	$	—	$	—
Less than 25%	2,847		3,110		2,580		2,900		2,274		2,493
26 - 50%	314		440		1,488		2,160		2,339		3,018
In excess of 50%	15,639		29,280		14,481		34,490		14,767		29,002

(1)Carrying value reflects the results of the annual impairment analysis recognized during the years ended December 31, 2025 and 2024.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(CONTINUED)

7. Derivatives

INTEREST RATES

Economic Hedges

We are exposed to interest rate risk related to our borrowing arrangements and obligations. We enter into interest rate contracts to provide predictability in our overall cost structure and to manage the balance of fixed-rate and variable-rate debt. We primarily enter into receive-fixed, pay-variable and receive-variable, pay-fixed swaps, and swaption contracts. A natural hedging relationship exists in which changes in the fair value of the instruments act as an economic offset to changes in the fair value of the underlying items. Changes in the fair value of these instruments are recorded in earnings throughout the term of the derivative instrument and are generally reported in Interest expense, net in the Consolidated Statements of Income. As of December 31, 2025, economic interest rate derivative instruments have maturities ranging from March 2027 to November 2046.

Cash Flow Hedges

From time to time, we designate certain interest rate contracts as cash flow hedges in order to manage the exposures resulting from changes in interest rates as described above. In October 2025, in order to hedge the variability in cash flows from interest rate changes associated with our planned future issuances of long-term debt, we entered into forward starting swaps with terms ranging from 5 to 30 years and designated them as cash flow hedges.

FOREIGN EXCHANGE

We are exposed to FX risk in our foreign subsidiaries and with certain counterparties in foreign jurisdictions, which may transact in currencies that are different from the functional currencies of our legal entities. Additionally, the balance sheets of these subsidiaries are subject to exposure from movements in exchange rates.

Economic Hedges

We hold FX forward contracts to economically manage the balance sheet exposures resulting from changes in the FX rates described above. The intent of these FX contracts is to minimize the impact of FX risk associated with balance sheet positions not in local currency. 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.

Additionally, we have significant anticipated Euro-denominated cash outflows resulting from the intended JDE Peet's Acquisition, as described in Note 3. To reduce our exposure to exchange rate fluctuations associated with the planned acquisition consideration and related financing, we entered into FX forward contracts during the third quarter of 2025.

Changes in the fair value of these instruments are recorded in earnings throughout the term of the derivative instrument and are reported in the same caption of the Consolidated Statements of Income as the associated risk. As of December 31, 2025, these FX contracts have maturities ranging from January 2026 to October 2026.

Cash Flow Hedges

We designate certain FX forward contracts as cash flow hedges in order to manage the exposures resulting from changes in the FX rates described above. These designated FX forward contracts relate to forecasted inventory purchases in U.S. dollars of our foreign subsidiaries. The intent of these FX contracts is to provide predictability in our overall cost structure. As of December 31, 2025, these FX contracts have maturities ranging from January 2026 to June 2027.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(CONTINUED)

COMMODITIES

Economic Hedges

We centrally manage the exposure to volatility in the prices of certain commodities used in our production process and transportation through various derivative contracts. We generally hold some combination of future, swap, and option contracts that economically hedge certain risks. In these cases, a hedging relationship exists in which changes in the fair value of the instruments act as an economic offset to changes in the fair value of the underlying items or as an offset to certain costs of production. Changes in the fair value of these instruments are recorded in earnings throughout the term of the derivative instrument and are reported in the same line item of the Consolidated Statements of Income as the hedged transaction. Unrealized gains and losses are recognized as a component of unallocated corporate costs until our reportable segments are affected by the completion of the underlying transaction, at which time the gain or loss is reflected as a component of the respective segment's income from operations. As of December 31, 2025, these commodity contracts have maturities ranging from January 2026 to January 2028.

NOTIONAL AMOUNTS OF DERIVATIVE INSTRUMENTS

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


	December 31,
(in millions)	2025		2024
Interest rate contracts
Forward starting swaps, not designated as hedging instruments	$	2,300	$	1,700
Forward starting swaps, designated as cash flow hedges	1,500		—



FX contracts
Forward contracts, not designated as hedging instruments(1)	12,436		490
Forward contracts, designated as cash flow hedges	597		486
Commodity contracts, not designated as hedging instruments(2)	595		515

(1)Includes €10 billion of FX forward contracts entered into during the third quarter of 2025 in connection with the planned JDE Peet's Acquisition.

(2)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 values of commodity contracts are valued using the market approach based on observable market transactions, primarily underlying commodities futures or physical index prices, at the reporting date. Interest rate contracts are valued using models based primarily on readily observable market parameters, such as SOFR forward rates, for all substantial terms of our contracts and credit risk of the counterparties. FX forward contracts are valued using quoted FX forward rates at the reporting date. Therefore, we have categorized these contracts as Level 2.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(CONTINUED)

Not Designated as Hedging Instruments

The following table summarizes the location of the fair value of our derivative instruments which are not designated as hedging instruments within the Consolidated Balance Sheets. All such instruments are considered Level 2 within the fair value hierarchy.


		December 31,
(in millions)	Balance Sheet Location	2025		2024
Assets:

FX forward contracts	Prepaid expenses and other current assets	$	5	$	7
Commodity contracts	Prepaid expenses and other current assets	47		32

FX forward contracts	Other non-current assets	—		4
Commodity contracts	Other non-current assets	3		2

Liabilities:
Interest rate contracts	Other current liabilities	$	16	$	22
FX forward contracts	Other current liabilities	38		4
Commodity contracts	Other current liabilities	9		82
Interest rate contracts	Other non-current liabilities	381		345

Commodity contracts	Other non-current liabilities	23		3

Designated as Hedging Instruments

The following table summarizes the location of the fair value of our derivative instruments which are designated as hedging instruments within the Consolidated Balance Sheets. All such instruments are considered Level 2 within the fair value hierarchy.


		December 31,
(in millions)	Balance Sheet Location	2025		2024
Assets:
FX contracts	Prepaid expenses and other current assets	$	2	$	41
FX contracts	Other non-current assets	1		—

Interest rate contracts	Other non-current assets	37		—

Liabilities:
FX contracts	Other current liabilities	$	16	$	—
Interest rate contracts	Other current liabilities	2		—

IMPACT OF DERIVATIVE INSTRUMENTS NOT DESIGNATED AS HEDGING INSTRUMENTS

The following table presents the amount of losses (gains) recognized in the 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.


		For the Year Ended December 31,
(in millions)	Income Statement Location	2025		2024		2023
Interest rate contracts	Interest expense, net	$	2	$	63	$	(26)

FX forward contracts	Cost of sales	(4)		(6)		(2)
FX forward contracts	Other expense (income), net	36		(10)		5
Commodity contracts	Cost of sales	(117)		28		22
Commodity contracts	SG&A expenses	1		10		17

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(CONTINUED)

IMPACT OF CASH FLOW HEDGES

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


		For the Year Ended December 31,
(in millions)	Income Statement Location	2025		2024		2023
Interest rate contracts(1)	Interest expense, net	$	(13)	$	(12)	$	(74)
FX contracts	Cost of sales	(17)		(3)		—

(1)Amounts recognized during the year ended December 31, 2023 include the realized gains associated with the termination of forward starting swaps designated as cash flow hedges of approximately $66 million.

We expect to reclassify approximately $14 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.

8. Leases

The following table presents the components of lease cost:


	For the Year Ended December 31,
(in millions)	2025		2024		2023
Operating lease cost	$	182	$	170	$	159
Finance lease cost
Amortization of right-of-use assets	113		95		81
Interest on lease liabilities	38		33		25
Variable lease cost(1)	36		37		39
Short-term lease cost	—		2		1
Sublease income	—		(1)		—
Total lease cost	$	369	$	336	$	305

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

The following tables present supplemental information about our leases:


		December 31,
(in millions)	Balance Sheet Location	2025		2024
Assets:
Operating lease right-of-use assets	Other non-current assets	$	845	$	880
Finance lease right-of-use assets(1)	Property, plant, and equipment, net	919		784

Liabilities:
Operating lease liability	Other current liabilities	$	127	$	128
Finance lease liability	Other current liabilities	179		125
Operating lease liability	Other non-current liabilities	764		790
Finance lease liability	Other non-current liabilities	745		677

(1)Amounts are presented net of accumulated amortization of $426 million and $334 million as of December 31, 2025 and 2024, respectively.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(CONTINUED)


	For the Year Ended December 31,
(in millions)	2025		2024		2023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	175	$	161	$	149
Operating cash flows from finance leases	38		32		25
Financing cash flows from finance leases	129		115		95
Right-of-use assets obtained in exchange for lease obligations:
Operating leases(1)	$	126	$	118	$	112
Finance leases(2)	278		196		109

(1)Includes impacts from lease modifications of $16 million during the year ended December 31, 2025.

(2)Includes impacts from lease modifications of $45 million during the year ended December 31, 2025.

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


	December 31,
	2025		2024
Weighted average discount rate
Operating leases	5.3	%	5.3	%
Finance leases	4.8	%	4.5	%
Weighted average remaining lease term
Operating leases	8 years		9 years
Finance leases	9 years		9 years

SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS

Future minimum lease payments for non-cancellable leases that have commenced and are reflected in the Consolidated Balance Sheets as of December 31, 2025 were as follows:


(in millions)	Operating Leases		Finance Leases
2026	$	156	$	221
2027	155		135
2028	123		124
2029	116		118
2030	108		115
Thereafter	446		420
Total future minimum lease payments	1,104		1,133
Less: imputed interest	(213)		(209)
Present value of minimum lease payments	$	891	$	924

SIGNIFICANT LEASES THAT HAVE NOT YET COMMENCED

As of December 31, 2025, we have entered into leases that have not yet commenced with estimated aggregated future lease payments of approximately $157 million. These leases will commence in 2026 and 2027, with initial lease terms ranging from 5 years to 10 years.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(CONTINUED)

ASSET SALE-LEASEBACK TRANSACTION

In 2023, we entered into an asset sale-leaseback transaction with the Veyron SPEs. A gain on the sale-leaseback of $6 million was recorded in Other operating (income) expense, net during the year ended December 31, 2023, and the leaseback is accounted for as an operating lease.

The initial term of the leaseback is 15 years, with two 10-year renewal options. The renewal options are not reasonably assured as (i) our position that the dynamic environment in which we operate precludes our ability to be reasonably certain of exercising the renewal options in the distant future and (ii) the options are contingent on us remaining investment grade and no change-in-control as of the end of the lease term. The leaseback has an RVG. Refer to Note 19 for additional information about RVGs associated with the asset sale-leaseback transaction.

9. Segments

Our three operating and 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, syrups, finished beverages, and other consumables, including the sales of 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 our K-Cup pods, single serve brewers and accessories, and other coffee products to partners, retailers, and directly to consumers through the Keurig.com website.
The International segment reflects sales in international markets, including the following:

◦Sales in Canada, Mexico, the Caribbean, and other international markets from the manufacture and distribution of branded concentrates, syrups, and finished beverages, including sales of our own brands and third-party brands, to third-party bottlers, distributors, and retailers.

◦Sales in Canada from the manufacture and distribution of finished goods relating to our single serve brewers, K-Cup pods, and other coffee products.

Segment results are based on management reports provided to the CODM, which is Tim Cofer, our CEO. Net sales and income from operations are the significant financial measures used to assess the operating performance of our operating segments. The CODM periodically monitors our actual results and remaining forecast versus our annual budget for these financial measures, and this information is used to assess performance of the reportable segments, determine the payout of short-term incentive plan compensation, and to establish management's base salaries.

Intersegment sales are recorded at cost and are eliminated in the Consolidated Statements of Income. We have not provided disclosures of intersegment sales or total assets for each reportable segment, as our CODM does not review and is not provided with this information. "Other segment expense (income)" includes Other operating (income) expense, net, as well as other financial statement captions for infrequent charges, such as impairment of goodwill or intangible assets, used to arrive at "Income from operations - reportable segments". "Unallocated corporate costs" are excluded from our measurement of segment performance and include unrealized commodity derivative gains and losses and certain general corporate expenses.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(CONTINUED)

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


(in millions)	U.S. Refreshment Beverages		U.S. Coffee		International		Total
For the year ended December 31, 2025
Net sales	$	10,439	$	3,990	$	2,174	$	16,603
Cost of sales	4,217		2,364		1,083
SG&A expenses	3,206		659		548
Other segment expense (income)(1)	77		5		(3)
Income from operations - reportable segments	$	2,939	$	962	$	546	$	4,447
Unallocated corporate costs							(872)
Income from operations							3,575
Interest expense, net							754

Other expense, net							134
Income before provision for income taxes							$	2,687

(1)During the year ended December 31, 2025, Other segment items within the U.S. Refreshment Beverages segment primarily consisted of non-cash impairment charges of $78 million recorded specific to certain indefinite lived brand assets. Refer to Note 6 for additional information about these non-cash impairment charges.


(in millions)	U.S. Refreshment Beverages		U.S. Coffee		International		Total
For the year ended December 31, 2024
Net sales	$	9,331	$	3,967	$	2,053	$	15,351
Cost of sales	3,608		2,210		996
SG&A expenses	2,904		684		521
Other segment expense (income)(1)	941		(6)		(9)
Income from operations - reportable segments	$	1,878	$	1,079	$	545	$	3,502
Unallocated corporate costs							(911)
Income from operations							2,591
Interest expense, net							735

Other income, net							(58)
Income before provision for income taxes							$	1,914

(1)During the year ended December 31, 2024, Other segment items within the U.S. Refreshment Beverages segment primarily consisted of non-cash impairment charges of $412 million recorded specific to certain indefinite lived brand assets and $306 million recorded to the WD reporting unit goodwill. Refer to Note 6 for additional information about these non-cash impairment charges. Other segment items within the U.S. Refreshment Beverages segment also included the $225 million termination payment to ABI for distribution rights related to the GHOST Transactions. Refer to Note 4 for additional information.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(CONTINUED)


(in millions)	U.S. Refreshment Beverages		U.S. Coffee		International		Total
For the year ended December 31, 2023
Net sales	$	8,821	$	4,071	$	1,922	$	14,814
Cost of sales	3,536		2,228		979
SG&A expenses	2,810		691		476
Other segment income	(8)		(6)		(8)
Income from operations - reportable segments	$	2,483	$	1,158	$	475	$	4,116
Unallocated corporate costs							(924)
Income from operations							3,192
Interest expense, net							496



Other income, net							(61)
Income before provision for income taxes							$	2,757

GEOGRAPHIC DATA

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


	For the Year Ended December 31,
(in millions)	2025		2024		2023
Net sales
U.S.	$	14,502	$	13,368	$	12,961
Foreign	2,101		1,983		1,853
Net sales	$	16,603	$	15,351	$	14,814


	December 31,
(in millions)	2025		2024
Property, plant, and equipment, net
U.S.	$	2,657	$	2,450
Foreign	573		514
Total property, plant, and equipment, net	$	3,230	$	2,964

MAJOR CUSTOMER

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


	For the Year Ended December 31,
(in millions)	2025		2024		2023
Net sales
Walmart	$	2,654	$	2,514	$	2,476

Additionally, customers in our U.S. Refreshment Beverages and International segments buy concentrate from us, which is used in finished goods sold by our third-party bottlers to Walmart. These indirect sales further increase the concentration of risk associated with our consolidated net sales as it relates to Walmart.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(CONTINUED)

10. Net Sales

The following table disaggregates our net sales by portfolio:


(in millions)	U.S. Refreshment Beverages		U.S. Coffee		International		Total
For the year ended December 31, 2025
LRB	$	10,144	$	69	$	1,389	$	11,602
K-Cup pods	—		3,213		564		3,777
Appliances	—		582		64		646
Other	295		126		157		578
Net sales	$	10,439	$	3,990	$	2,174	$	16,603

For the year ended December 31, 2024
LRB	$	9,196	$	38	$	1,332	$	10,566
K-Cup pods	—		3,112		502		3,614
Appliances	—		694		78		772
Other	135		123		141		399
Net sales	$	9,331	$	3,967	$	2,053	$	15,351

For the year ended December 31, 2023
LRB	$	8,675	$	—	$	1,230	$	9,905
K-Cup pods	—		3,207		477		3,684
Appliances	—		725		74		799
Other	146		139		141		426
Net sales	$	8,821	$	4,071	$	1,922	$	14,814

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

11. Earnings Per Share

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


	For the Year Ended December 31,
(in millions, except per share data)	2025		2024		2023
Net income	$	2,079	$	1,441	$	2,181

Weighted average common shares outstanding	1,358.1		1,362.2		1,399.3
Dilutive effect of stock-based awards	4.7		6.1		9.1
Weighted average common shares outstanding and common stock equivalents	1,362.8		1,368.3		1,408.4

Basic EPS	$	1.53	$	1.06	$	1.56
Diluted EPS	1.53		1.05		1.55

Anti-dilutive shares excluded from the diluted weighted average shares outstanding calculation	1.3		0.8		1.0

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(CONTINUED)

12. Employee Benefit Plans

DEFINED BENEFIT PENSION PLANS

Overview

We have several non-contributory defined benefit plans, each having a measurement date of December 31. To participate in the defined benefit plans, eligible employees must have been employed for at least one year. Employee benefit plan obligations and expenses included in the consolidated financial statements are determined using actuarial analyses based on plan assumptions including employee demographic data such as years of service and compensation, benefits and claims paid, and employer contributions, among others. We also participate in various multi-employer defined benefit plans.

One of our U.S. defined benefit pension plans, which is a cash balance plan, was suspended and the accrued benefit was frozen effective December 31, 2008. Participants in this plan no longer earn additional benefits for future services or salary increases. The cash balance plans maintain individual record-keeping accounts for each participant, which are annually credited with interest credits equal to the 12-month average of one-year U.S. Treasury Bill rates, plus 1%, with a required minimum rate of 5%. Additionally, accrued benefits for non-union employees in another of our U.S. defined benefit pension plans were frozen effective November 1, 2025. No additional benefits related to future services or salary increases were accrued for these certain non-union participants after October 31, 2025. This freeze resulted in no curtailment gain or loss.

Financial Statement Impact

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


	December 31,
(in millions)	2025		2024
Projected benefit obligations
Beginning balance	$	159	$	169
Service cost	3		3
Interest cost	9		9
Actuarial losses (gains), net	6		(5)
Benefits paid	(5)		(5)
Impact of changes in FX rates	3		(4)
Plan amendments	1		—
Settlements	(9)		(8)

Ending balance	$	167	$	159

Fair value of plan assets
Beginning balance	$	127	$	134
Actual return on plan assets	11		—
Employer contributions	7		6
Benefits paid	(5)		(5)

Settlements	(9)		(8)
Ending balance	$	131	$	127

Net liability recognized	$	(36)	$	(32)


Current liability	$	(2)	$	(1)
Non-current liability	(34)		(31)

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(CONTINUED)

The accumulated benefit obligations for all defined benefit pension plans were $161 million and $156 million as of December 31, 2025 and 2024, respectively. The following table summarizes key pension plan information regarding plans whose accumulated benefit obligations exceed the fair value of their respective plan assets:


	December 31,
(in millions)	2025		2024
Aggregate projected benefit obligation	$	167	$	159
Aggregate accumulated benefit obligation	161		156
Aggregate fair value of plan assets	131		127

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


	For the Year Ended December 31,
(in millions)	2025		2024		2023
Service cost	$	3	$	3	$	3
Interest cost	9		9		9
Expected return on assets	(6)		(6)		(8)

Settlements	1		1		1
Total net periodic benefit costs	$	7	$	7	$	5

We use the corridor approach for amortization of actuarial gains or losses. The corridor is calculated as 10% of the greater of the plans' projected benefit obligation or assets. The amortization period for plans with active participants is the average future service of covered active employees, and the amortization period for plans with no active participants is the average future lifetime of plan participants. The estimated service costs or net actuarial losses for the defined benefit pension plans amortized from AOCI into periodic benefit cost in 2026 are expected to be insignificant.

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


	December 31,
(in millions)	2025		2024
Net actuarial loss	$	13	$	12
Prior service cost	3		2
Total	$	16	$	14

Contributions and Expected Benefit Payments

The following table summarizes the contributions made to our defined benefit plans for the years ended December 31, 2025, 2024, and 2023, as well as our projected contributions for the year ended December 31, 2026:


	Projected		For the Year Ended December 31,
(in millions)	2026		2025		2024		2023
Non-discretionary contributions	$	8	$	7	$	6	$	12

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


(in millions)			2026						2027						2028						2029						2030						2031-2035
Estimated future benefit payments			$	15					$	13					$	13					$	14					$	14					$	75

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(CONTINUED)

Actuarial Assumptions

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

The following information is provided for our U.S. defined benefit pension plans, as our foreign defined benefit pension plans are not material to our consolidated financial statements.

The discount rate that was utilized for determining our projected benefit obligations as of December 31, 2025 and 2024, as well as projected 2026 net periodic benefit cost, for U.S. plans was selected based upon an interest rate yield curve. The yield curve is constructed based on the yields of a large number of U.S. AA rated bonds as of December 31, 2025. The population of bonds utilized to calculate the discount rate includes those having an average yield between the 10th and 90th percentiles. Projected cash flows from the U.S. plans are then matched to spot rates along that yield curve in order to determine their present value and a single equivalent discount rate is calculated that produces the same present value as the spot rates.

Expected mortality is a key assumption in the measurement for pension benefit obligations. For our U.S. plans, we used the Pri-2012 mortality tables and the Mortality Improvement Scale MP-2021, published by the Society of Actuaries' Retirement Plans Experience Committee, for the years ended December 31, 2025 and 2024.

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


	December 31,
	2025		2024
Discount rate	5.35	%	5.60	%

The following table summarizes the weighted-average actuarial assumptions used to determine the net periodic benefit costs for U.S. plans:


	For the Year Ended December 31,
	2025		2024		2023
Discount rate	5.35	%	5.60	%	5.10	%

Expected long-term rate of return	5.00	%	4.95	%	4.75	%

For the years ended December 31, 2025, 2024, and 2023, the expected long-term rate of return on U.S. pension fund assets held by our pension trusts was determined based on several factors, including the impact of active portfolio management and projected long-term returns of broad equity and bond indices. The plans' historical returns were also considered.

Investment Policy and Strategy

We have established formal investment policies for the assets associated with our U.S. defined benefit pension plans. Our investment policy and strategy are mandated by our Investment Committee. The overriding investment objective is to provide for the availability of funds for pension obligations as they become due, to maintain an overall level of financial asset adequacy, and to maximize long-term investment return consistent with a reasonable level of risk. We actively manage the investments in our portfolio, with periodic review of investment performance both by investment manager and asset class, as well as review of overall market conditions and consideration of our long-term investment objectives. The investments under our sponsored pension plan assets are currently well diversified. The plans' asset allocation policy is reviewed at least annually. Factors considered when determining the appropriate asset allocation include changes in plan liabilities, an evaluation of market conditions, tolerance for risk and cash requirements for benefit payments.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(CONTINUED)

As of December 31, 2025 and 2024, we were in compliance with the investment policy for our U.S. defined benefit pension, which allows for a varying asset allocation dependent on each plan's funded status, as follows:



			Target Allocation
Return-seeking(1)			40-60%
Liability-hedging(2)			40-60%

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

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

FAIR VALUE OF THE PENSION ASSETS

Assets contributed by us to our pension plans become the property of the individual plans. Even though we no longer have control over these assets, we are indirectly impacted by subsequent fair value adjustments to these assets. The actual return on these assets impacts our future net periodic benefit cost, as well as amounts recognized in the Consolidated Balance Sheets. As such, we use a variety of valuation techniques depending on the type of instrument in order to measure the fair value of assets held by our pension plans.

The following table presents the total fair value of major categories of the pension plan assets for the years ended December 31, 2025 and 2024:


		December 31,
(in millions)	Fair Value Hierarchy Level	2025		2024
Cash and cash equivalents	Level 1	$	3	$	23
Investments measured at NAV(1)	N/A	128		104
Total fair value of plan assets		$	131	$	127

(1)Primarily consists of common collective trust funds, which are valued using NAV as a practical expedient.

PRMB PLANS

We have several non-contributory defined benefit PRMB plans, each having a measurement date of December 31. The majority of these PRMB plans have been frozen. To participate in the defined benefit plans, eligible employees must have been employed by KDP for at least one year. The PRMB plans are limited to qualified expenses and are subject to deductibles, co-payment provisions, and other provisions. Our PRMB plans are not significant to the consolidated financial statements as of December 31, 2025 and 2024.

MULTI-EMPLOYER PLANS

We participate in several multi-employer plans, which are trustee-managed multi-employer defined benefit pension plans for union-represented employees under certain collective bargaining agreements. The risks of participating in these multi-employer plans are different from single-employer plans, as assets contributed to the multi-employer plan by one employer may be used to provide benefits to employees of other participating employers. Additionally, if a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers.

Contributions paid into the multi-employer plans are expensed as incurred. Multi-employer plan expenses were $8 million, $11 million, and $6 million for each of the years ended December 31, 2025, 2024, and 2023, respectively.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(CONTINUED)

Individually Significant Multi-Employer Plan

We participate in one multi-employer plan, Central States, which is considered to be individually significant. The following table presents information about Central States as of December 31, 2025:


Plan's employer identification number			36-6044243
Plan number			001
Expiration dates of collective bargaining agreements(1)			May 6, 2026 through March 1, 2028
Financial Improvement Plan/Rehabilitation Plan status pending/implemented			Implemented
Pension Protection Act zone status			Critical
Surcharge imposed			Yes

(1)Central States includes six collective bargaining agreements as of December 31, 2025. The largest agreement, which is set to expire February 28, 2027, covers approximately 59% of the employees included in Central States. One of the collective bargaining agreements is set to expire during 2026, covering approximately 10% of the employees included in Central States.

The most recent Pension Protection Act zone status available as of December 31, 2025 is for the plan's year-end as of December 31, 2024. Central States has not utilized any extended amortization provisions that affect the calculation of the zone status.

Our contributions to Central States did not exceed 5% of the total contributions made to Central States for the years ended December 31, 2025, 2024, and 2023.

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


(in millions)			2026						2027						2028						2029						2030
Future estimated contributions to Central States			$	2					$	2					$	2					$	2					$	2

DEFINED CONTRIBUTION PLANS

We sponsor various qualified defined contribution plans that cover U.S. and foreign based employees who meet certain eligibility requirements. The U.S. plans permit both pre-tax and after-tax contributions, which are subject to limitations imposed by IRS regulations. We make matching contributions and discretionary profit sharing contributions to these plans. We incurred contribution expense of $69 million, $67 million, and $64 million to the defined contribution plans for the years ended December 31, 2025, 2024, and 2023, respectively.

We also sponsor a non-qualified defined contribution plan for certain employees which is maintained in a rabbi trust and is not readily available to us. The fair value of the securities within this plan was $33 million as of both December 31, 2025 and 2024. There were $4 million, $4 million, and $6 million in gains associated with these trading securities during the years ended December 31, 2025, 2024, and 2023, respectively.

13. Stock-Based Compensation

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


	For the Year Ended December 31,
(in millions)	2025		2024		2023
Total stock-based compensation expense	$	97	$	98	$	116
Income tax benefit	(18)		(16)		(19)
Stock-based compensation expense, net of tax	$	79	$	82	$	97

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(CONTINUED)

DESCRIPTION OF STOCK-BASED COMPENSATION PLAN

The 2019 Incentive Plan, under which employees and non-employee directors can be granted stock options, stock appreciation rights, stock awards, RSUs, and PSUs, was adopted in 2019 and expires in 2029. This incentive plan provides for the issuance of up to an aggregate of 27,425,720 shares of our common stock in stock-based compensation awards.

RSUs generally vest on the following schedule:


Period Granted						Vesting Terms

RSUs granted in 2020 through 2024						5-year term with graded vesting as follows: 0% in year 1, 0% in year 2, 60% in year 3, 20% in year 4, 20% in year 5
RSUs granted in 2025						4-year term with ratable vesting

However, from time to time, we grant RSUs outside of the normal grant cycle which have different terms and vesting conditions. For all RSU grants, we recognize the expense ratably over the vesting period.

RESTRICTED SHARE UNITS

The table below summarizes RSU activity:


	RSUs	Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value (in millions)
Balance as of December 31, 2024	12,488,799	$	29.70	2.0	$	401
Granted	5,040,348	29.93
Vested and released	(2,930,040)	30.40			96
Forfeited	(1,478,270)	29.84
Balance as of December 31, 2025	13,120,837	29.62		1.8	368

The weighted average grant date fair value for RSUs granted for the years ended December 31, 2025, 2024, and 2023 was $29.93, $26.66, and $30.60, respectively. The aggregate fair value of the RSUs vested and released for the years ended December 31, 2025, 2024, and 2023 was $89 million, $165 million, and $134 million, respectively.

As of December 31, 2025, there was $187 million of unrecognized compensation cost related to unvested RSUs that is expected to be recognized over a weighted average period of 2.8 years.

PERFORMANCE SHARE UNITS

In March 2025, the Remuneration & Nomination Committee of the Board approved PSU grants. Each PSU represents the right to receive one share of our common stock. The PSUs vest 3 years from the grant date, to the extent that the performance metrics are achieved during a predetermined performance period. The performance metrics include net sales growth and adjusted diluted EPS growth, as defined in the respective grant agreement, and are measured on a constant currency basis. The payout percentage for all PSUs granted ranges from 0% to 200%. Beginning in 2025, the fair value of PSUs is determined based on the number of units granted and the grant date price of common stock.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(CONTINUED)

The table below summarizes PSU activity:


	PSUs	Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value (in millions)
Balance as of December 31, 2024	—	$	—	0.0	$	—
Granted	464,354	30.61
Vested and released	—	—			—
Forfeited or expired	(17,536)	30.71
Balance as of December 31, 2025	446,818	30.60		2.2	13

As of December 31, 2025, there was $10 million of unrecognized compensation cost related to unvested PSUs that is expected to be recognized over a weighted average period of 2.2 years.

14. Equity Method Investments

The following table summarizes our equity method investments:


	December 31,
(in millions)	2025		2024
Nutrabolt(1)	$	1,168	$	1,097
Chobani(2)	359		313
Tractor(3)	52		56
Athletic Brewing(4)	53		47
Other	28		30
Total equity method investments	$	1,660	$	1,543

(1)We hold a 35.8% interest on an as-converted basis in Nutrabolt, consisting of 30.4% in Class A preferred shares acquired through our initial investment, which are treated as in-substance common stock, and 5.4% in Class B common shares earned through the achievement of certain milestones included in the distribution agreement with Nutrabolt.

(2)We hold a 5.9% interest in Chobani, reflecting additional equity interests issued through the achievement of certain milestones included in the distribution agreement with Chobani.

(3)We hold a 21.9% interest in Tractor.

(4)We hold a 11.7% interest in Athletic Brewing, reflecting additional equity interests received in the first quarter of 2025 in accordance with our investment agreement. This earned equity is recorded in Other expense (income), net in the Consolidated Statements of Income.

Nutrabolt Investment

Our interest in preferred units earns the greater of (i) a 5% annual coupon on the preferred equity units plus any accretion for amounts not yet paid or (ii) our share of Nutrabolt's earnings as if our preferred equity was converted into common units. We recorded preferred dividends of $49 million, $46 million, and $44 million during the years ended December 31, 2025, 2024, and 2023, respectively, which increased the investment balance for Nutrabolt.

15. Income Taxes

Income before provision for income taxes was as follows:


	For the Year Ended December 31,
(in millions)	2025		2024		2023
U.S.	$	1,289	$	696	$	1,665
Foreign	1,398		1,218		1,092
Total	$	2,687	$	1,914	$	2,757

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(CONTINUED)

The provision for income taxes has the following components:


	For the Year Ended December 31,
(in millions)	2025		2024		2023
Current:
Federal	$	255	$	377	$	270
State	68		108		117
Foreign	240		242		193
Total current provision	$	563	$	727	$	580

Deferred:
Federal	$	10	$	(199)	$	31
State	13		(55)		2
Foreign	22		—		(37)
Total deferred provision	45		(254)		(4)
Total provision for income taxes	$	608	$	473	$	576

The following tables reconcile the provision for income taxes computed at the U.S. federal statutory tax rate to the provision for income taxes reported in the Consolidated Statements of Income:


	For the Year Ended December 31, 2025
($ in millions)	Amount		Percentage
Statutory federal income tax rate	$	564	21.0	%
State income taxes, net(1)	59		2.2
Impact of foreign operations
Ireland
Statutory tax rate difference between Ireland and U.S.	(71)		(2.6)
Other	20		0.7

Other foreign jurisdictions	21		0.8

Effect of cross-border tax laws	9		0.3





Tax credits	(28)		(1.0)

Nontaxable or nondeductible items	12		0.4
Changes in unrecognized tax benefits	22		0.8

Total provision for income taxes	$	608	22.6	%

(1)California, Tennessee, New Jersey, Florida, Illinois, and Texas comprise more than 50% of State income taxes, net.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(CONTINUED)


	For the Year Ended December 31,
	2024		2023
Statutory federal income tax rate	21.0	%	21.0	%
State income taxes, net	2.1		3.2
Impact of foreign operations	(1.4)		(1.7)
Tax credits	(6.2)		(3.7)
Valuation allowance for deferred tax assets	0.6		—
U.S. taxation of foreign earnings	5.1		3.0
Goodwill impairment	2.7		—
Deferred rate change	(0.4)		(0.3)
Uncertain tax positions	—		0.1
U.S. federal provision to return	0.2		—
Excess tax deductions on stock-based compensation	(0.2)		(0.3)
Other	1.2		(0.4)
Effective tax rate	24.7	%	20.9	%

Deferred tax assets and liabilities were comprised of the following:


	December 31,
(in millions)	2025		2024
Deferred tax assets:
Operating lease liability	$	236	$	229
Net operating losses carryforwards	24		30
Tax credit carryforwards	5		10
Accrued expenses	152		154
Research and development capitalization	45		94
Accrued termination fees	52		56




Other	84		107
Total deferred tax assets	598		680
Valuation allowances	(24)		(25)
Total deferred tax assets, net of valuation allowances	$	574	$	655
Deferred tax liabilities:
Brands, trade names and other intangible assets	$	(5,540)	$	(5,486)
Property, plant, and equipment	(230)		(299)
Right of use assets	(234)		(224)


Other	(60)		(42)
Total deferred tax liabilities	(6,064)		(6,051)
Net deferred tax liabilities	$	(5,490)	$	(5,396)

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(CONTINUED)

CASH PAID FOR INCOME TAXES

For the year ended December 31, 2025, our cash paid for income taxes, net of refunds received, consisted of the following:


(in millions)	For the Year Ended December 31, 2025
U.S.
Federal	$	103
State	95
Foreign
Mexico	103
Ireland	102
Canada	31

Other foreign jurisdictions	26
Total cash paid for income taxes, net of refunds received	$	460

We paid $331 million and $507 million in cash for income taxes, net of refunds received, during the years ended December 31, 2024 and 2023, respectively.

CARRYFORWARDS

As of December 31, 2025 and 2024, we had $24 million and $30 million, respectively, in tax-effected net operating loss carryforwards. Of the $24 million of net operating loss carryforwards as of December 31, 2025, $21 million will not expire, $1 million related to state income tax will begin to expire in 2027, and the remaining $2 million related to foreign income tax will begin to expire in the year 2035.

As of December 31, 2025 and 2024, we had $5 million and $10 million of credit carryforwards, respectively. As of December 31, 2025, the $5 million of state tax credit carryforwards will begin to expire in the year 2027.

VALUATION ALLOWANCES

For the year ended December 31, 2025, the changes in our valuation allowances were insignificant.

UNDISTRIBUTED FOREIGN EARNINGS

An actual repatriation from our foreign subsidiaries could still be subject to additional foreign withholding taxes. We have analyzed our global working capital and cash requirements and continue to be indefinitely reinvested in our undistributed earnings, except for amounts in excess of our working capital and cash requirements. We have recorded any potential withholding tax liabilities, if necessary, attributable to repatriation.

OTHER TAX MATTERS

We file income tax returns for U.S. federal purposes and in various state jurisdictions. We also file income tax returns in various foreign jurisdictions, principally Canada, Ireland, Mexico, and Singapore. The U.S. and most state income tax returns for years prior to 2020 are closed to examination by applicable tax authorities. Canadian and Mexican income tax returns are generally open for audit for tax years 2020 and forward, and Ireland income tax returns are open for audit for tax years 2021 and forward.

Certain taxpayers may elect to transfer an eligible credit to an unrelated transferee taxpayer where the transferee taxpayer is then able to use the transferred tax credit against its own taxable income. During the years ended December 31, 2025, 2024, and 2023, we executed agreements with eligible taxpayers to purchase federal tax credits of $266 million, $260 million, and $270 million, respectively, which will be used against our federal tax liability. The discounts negotiated for the transfer of eligible federal tax credits of $23 million, $20 million, and $16 million were recorded as an income tax benefit in the Consolidated Statements of Income for the years ended December 31, 2025, 2024, and 2023, respectively.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(CONTINUED)

On July 4, 2025, the OBBB was signed into law in the U.S., which includes a broad range of tax reform provisions. The OBBB resulted in no significant impacts to our consolidated financial statements.

UNRECOGNIZED TAX BENEFITS

The following is a reconciliation of the changes in the gross balance of unrecognized tax benefits:


	For the Year Ended December 31,
(in millions)	2025		2024		2023
Balance, beginning of the period	$	12	$	13	$	15
Increases related to tax positions taken during the current year	3		2		3
Increases (decreases) related to tax positions taken during the prior year	17		(1)		(2)

Decreases related to lapse of applicable statute of limitations	—		(2)		(3)
Balance, end of the period	$	32	$	12	$	13

The total amount of unrecognized tax benefits that would reduce the effective tax rate if recognized is $28 million after considering the federal impact of state income taxes.

We accrue interest and penalties on our uncertain tax positions as a component of our provision for income taxes. We recognized $5 million, $1 million, and $1 million of expense related to interest and penalties for uncertain tax positions for each of the years ended December 31, 2025, 2024, and 2023, respectively. We had a total of $9 million and $3 million accrued for interest and penalties for our uncertain tax positions reported as part of other non-current liabilities as of both December 31, 2025 and 2024.

16. Accumulated Other Comprehensive Income (Loss)

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


(in millions)	Foreign Currency Translation		Pension and PRMB Liabilities		Cash Flow Hedges		Total
Balance as of December 31, 2022	$	(86)	$	(10)	$	225	$	129
Other comprehensive income (loss)	288		(5)		(41)		242
Amounts reclassified from AOCI	—		1		(57)		(56)
Total other comprehensive income (loss)	288		(4)		(98)		186
Balance as of December 31, 2023	202		(14)		127		315
Other comprehensive (loss) income	(612)		(1)		33		(580)
Amounts reclassified from AOCI	—		1		(12)		(11)
Total other comprehensive (loss) income	(612)		—		21		(591)
Balance as of December 31, 2024	(410)		(14)		148		(276)
Other comprehensive income (loss)	401		(3)		2		400
Amounts reclassified from AOCI	—		1		(23)		(22)
Total other comprehensive income (loss)	401		(2)		(21)		378
Balance as of December 31, 2025	$	(9)	$	(16)	$	127	$	102

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(CONTINUED)

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


		For the Year Ended December 31,
(in millions)	Income Statement Caption	2025		2024		2023
Pension and PRMB liabilities	SG&A expenses	$	1	$	2	$	1
Income tax benefit		—		(1)		—
Total, net of tax		$	1	$	1	$	1

Cash flow hedges:
Interest rate contracts(1)	Interest expense, net	$	(13)	$	(12)	$	(74)
FX contracts	Cost of sales	(17)		(3)		—
Total		(30)		(15)		(74)
Income tax expense		7		3		17
Total, net of tax		$	(23)	$	(12)	$	(57)

(1)Amounts reclassified from AOCI into interest expense during the year ended December 31, 2023 include the realized gains associated with the termination of forward starting swaps designated as cash flow hedges of approximately $66 million.

17. Property, Plant, and Equipment

Property, plant, and equipment, net consisted of the following:


	December 31,
(in millions)	2025		2024
Land	$	57	$	58
Buildings and improvements	912		825
Machinery and equipment	3,862		3,290
Cold drink equipment	170		142
Software	543		517
Construction-in-progress	289		384
Property, plant, and equipment, gross	5,833		5,216
Less: accumulated depreciation	(2,603)		(2,252)
Property, plant, and equipment, net	$	3,230	$	2,964

The following table summarizes the location of depreciation expense within the Consolidated Statements of Income:


	For the Year Ended December 31,
(in millions)	2025		2024		2023
Cost of sales	$	246	$	234	$	231
SG&A expenses	209		188		171
Total depreciation expense	$	455	$	422	$	402

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(CONTINUED)

18. Commitments and Contingencies

We are occasionally subject to litigation or other legal proceedings. We accrue for specific legal proceedings when we determine that the likelihood of an unfavorable outcome is probable and the amount of loss can be reasonably estimated, and such accruals were $3 million and $2 million as of December 31, 2025 and 2024, respectively. We have also identified certain other legal matters where we believe an unfavorable outcome is reasonably possible and/or for which no estimate of possible losses can be made. We do not believe that the outcome of these, or any other, pending legal matters, individually or collectively, will have a material adverse effect on our results of operations, financial condition, or liquidity.

ANTITRUST LITIGATION

In February 2014, TreeHouse Foods, Inc. and certain affiliated entities filed suit against our 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 the months that followed, a number of additional actions, including claims from another coffee manufacturer (JBR, Inc.), as well as putative class actions on behalf of direct and indirect purchasers of Keurig's products, were filed in various federal district courts, asserting claims and seeking relief substantially similar to the claims asserted and relief sought in the TreeHouse complaint. Additional similar actions were filed by individual direct purchasers (including McLane Company, Inc., BJ's Wholesale Club, Inc., Winn-Dixie Stores Inc. and Bi-Lo Holding LLC) in 2019 and in 2021. All of these actions were transferred to the SDNY for coordinated pre-trial proceedings (In re: Keurig Green Mountain Single-Serve Coffee Antitrust Litigation) (the "Multidistrict Antitrust Litigation").

In July 2020, Keurig reached an agreement with one of the plaintiff groups in the Multidistrict Antitrust Litigation, the putative indirect purchaser class, to settle the claims asserted for $31 million. The settlement class consisted of individuals and entities in the United States that purchased, from persons other than Keurig and not for purposes of resale, Keurig manufactured or licensed single serve beverage portion packs during the applicable class period (beginning in September 2010 for most states). The settlement was approved and paid, and the indirect purchasers' claims have been dismissed.

In October 2025, the SDNY court denied the direct purchasers plaintiffs' motion for class certification. While the court’s order does not preclude individual purchasers from pursuing their own direct claims, the court found that the plaintiffs did not meet the federal requirements to pursue their case on a classwide basis. The direct purchaser plaintiffs have filed a petition with the United States Court of Appeals for the Second Circuit, seeking to appeal the SDNY court’s decision.

Discovery in all remaining matters pending in the Multidistrict Antitrust Litigation is concluded, with the plaintiffs (which no longer include the purported direct purchaser class) collectively claiming approximately $1.5 billion of monetary damages. Keurig strongly disputes the merits of the claims and the calculation of damages. Keurig has fully briefed summary judgment motions that, if successful, would end the cases entirely.

Keurig intends to continue vigorously defending the remaining lawsuits. At this time, we are unable to predict the outcome of these lawsuits, the potential loss or range of loss, if any, associated with the resolution of these lawsuits or any potential effect they may have on us or our operations. Accordingly, we have not accrued for a loss contingency. Additionally, as the timelines in these cases may be beyond our control, we can provide no assurance as to whether or when there will be material developments in these matters.

ENVIRONMENTAL, HEALTH, AND SAFETY MATTERS

We operate many manufacturing, bottling, and distribution facilities. In these and other aspects of our business, we are subject to a variety of federal, state, and local environmental, health, and safety laws and regulations. We maintain environmental, health, and safety policies and a quality environmental, health, and safety program designed to ensure compliance with applicable laws and regulations. However, the nature of our business exposes us to the risk of claims with respect to environmental, health, and safety matters, and there can be no assurance that material costs or liabilities will not be incurred in connection with such claims.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(CONTINUED)

The federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, also known as the Superfund law, as well as similar state laws, generally impose joint and several liability for cleanup and enforcement costs on current and former owners and operators of a site without regard to fault or the legality of the original conduct. We were notified by the Environmental Protection Agency that we are a potentially responsible party for study and cleanup costs at Superfund sites in New Jersey and in Michigan. Investigation and remediation costs are yet to be determined, therefore no reasonable estimate exists on which to base a loss accrual.

PRODUCT WARRANTIES

We offer a one year warranty on all Keurig brewing systems. We provide for the estimated cost of product warranties, primarily using historical information and current repair or replacement costs, at the time product revenue is recognized. Product warranties are included in accrued expenses in the accompanying Consolidated Balance Sheets.


(in millions)	Accrued Product Warranties
Balance as of December 31, 2023	$	11
Accruals for warranties issued	14
Settlements	(15)
Balance as of December 31, 2024	10
Accruals for warranties issued	8
Settlements	(12)
Balance as of December 31, 2025	$	6

19. Transactions with Variable Interest Entities

EQUITY METHOD INVESTMENTS WHICH QUALIFY AS VIES

Certain of our equity investments are in entities which qualify as VIEs. We have determined that we are not the primary beneficiary of these VIEs and therefore are not required to consolidate them, as the primary shareholder of each respective VIE has control over the board and decision-making for the activities that most significantly impact the VIE's economic performance, including sales, marketing, and operations. As of December 31, 2025 and 2024, our investments in Nutrabolt and Chobani represent investments in entities which qualify as VIEs but for which we are not the primary beneficiary. We have no obligation to provide additional funding to these VIEs, and thus our maximum exposure and risk of loss related to these VIEs is limited to the carrying value of our investment. Refer to Note 14 for the carrying value of these investments.

OTHER TRANSACTIONS WITH VIES

We have a number of leasing arrangements and one licensing arrangement with special purpose entities for which we are not the primary beneficiary, as we have limited power based on the contractual agreements to direct the activities that most significantly impact the VIEs' performance.

Leasing Arrangements

As of December 31, 2025, we have entered into sixteen lease transactions with VIEs. Each lease has an RVG based on a percentage of the VIEs' purchase price; however, we concluded it was not probable that we will owe an amount at the end of each individual lease term, as the fair values of the properties are not expected to fall below the RVGs at the end of each individual lease term. As such, we recorded each lease obligation excluding the associated RVG. The aggregate maximum undiscounted RVG associated with the leasing arrangements was $653 million and $652 million as of December 31, 2025 and 2024, respectively. This aggregate maximum value assumes that the fair value of each property at the end of either the original lease term or renewal term is equal to zero, which we have concluded is not probable.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(CONTINUED)

The following table provides the carrying amounts of the right-to-use assets and lease obligations recorded in the Consolidated Balance Sheets associated with these leasing arrangements related to the VIEs as of December 31, 2025 and 2024:


	December 31,
(in millions)	2025		2024

Non-current assets	$	361	$	386
Current liabilities	26		24
Non-current liabilities	351		376

The leasing agreements included as of December 31, 2025 and 2024 include nine manufacturing sites, five distribution centers, one multipurpose property, and our Frisco, Texas headquarters.

Licensing Arrangement

ABC, a wholly-owned subsidiary of ours, 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 we could pay under the RVG. 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, us no longer being investment grade at the end of the term, or the sale of the distribution rights by the Veyron SPEs. As of December 31, 2025, we have not recorded a liability as it is not probable that we will have to make any payments required under the RVG, as the fair value of the distribution rights is not expected to fall below $142 million over the term of the agreement.

As of December 31, 2025, we had $77 million in fixed service fee commitments related to the 15-year distribution agreement, which was effective on December 28, 2020, with the Veyron SPEs. These commitments were used to assist the Veyron SPEs in obtaining financing. Such fixed service fee payments began on January 1, 2021.

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


	For the Years Ending December 31,
(in millions)	2026		2027		2028		2029		2030
Fixed service fees	$	7	$	8	$	8	$	8	$	7

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(CONTINUED)

20. Restructuring

RESTRUCTURING PROGRAMS

Network Optimization

In March 2024, we announced a restructuring program designed to more effectively and efficiently meet the needs of consumers and customers. Our restructuring program includes the closure of certain facilities and other costs intended to optimize our manufacturing and distribution footprint throughout our operations.

The restructuring program is expected to incur pre-tax restructuring charges in an estimated range of $170 million to $190 million through 2026, primarily comprised of asset related costs.

2023 CEO Succession and Associated Realignment

In 2023, we began to implement succession planning for our CEO, including a realignment of our executive and operating leadership team, in order to reinforce enterprise capabilities to support growth and to control costs. The program is expected to incur charges of approximately $80 million, primarily driven by severance costs, which were substantially completed as of December 31, 2024, and the sign-on bonus for our CEO.

RESTRUCTURING CHARGES

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


	Year Ended December 31,
(in millions)	2025		2024		2023
2024 Network Optimization	$	62	$	51	$	—
2023 CEO Succession and Associated Realignment	1		40		35
Total restructuring charges	$	63	$	91	$	35

RESTRUCTURING LIABILITIES

Restructuring liabilities that qualify as exit and disposal costs under U.S. GAAP are included in accounts payable and accrued expenses in the consolidated financial statements. Restructuring liabilities, primarily consisting of workforce reduction costs, were as follows:


(in millions)	Restructuring Liabilities
Balance as of December 31, 2023	$	27
Charges to expense	34
Cash payments	(17)

Balance as of December 31, 2024	44
Charges to expense	(6)
Cash payments	(30)

Balance as of December 31, 2025	$	8

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(CONTINUED)

21. Related Parties

IDENTIFICATION OF RELATED PARTIES

JAB

Prior to February 28, 2025, JAB held a significant but non-controlling interest in KDP and representation on our Board. JAB and its affiliates also hold investments in a number of other companies that have commercial relationships with us. These commercial relationships may take the form of our purchase of raw materials, our license of the companies' trademarks for use in the manufacturing of K-Cup pods, our sale of products for resale to retail customers, or our manufacture or distribution of products to, or on behalf of, these companies. Prior to February 28, 2025, JAB and its affiliates were included in our disclosures of related party transactions.

On February 28, 2025, JAB BevCo B.V., a subsidiary of JAB, sold 87 million shares of our common stock through an underwritten secondary offering. Following this sale, JAB beneficially owned less than 10% of our outstanding common stock and the members of the Board affiliated with JAB resigned. Effective February 28, 2025, these disclosures are no longer applicable to JAB and its affiliates, and they are no longer included in our tabular disclosures below.

Other Related Parties

We hold investments in certain brand ownership companies, and in certain instances, we also have rights in specified territories to bottle and/or distribute the brands owned by such companies. We purchase inventory from these brand ownership companies and sell finished product to third-party customers, primarily in the U.S. Refer to Note 14 for additional information about our equity method investments.

OPERATING TRANSACTIONS WITH RELATED PARTIES

Trade accounts receivable, net from related parties were $31 million and $30 million as of December 31, 2025 and 2024, respectively, primarily related to product sales and royalty revenues. Accounts payable to related parties were $47 million and $35 million as of December 31, 2025 and 2024, respectively, primarily related to purchases of finished goods inventory for distribution.

Revenues from and expenses associated with these related parties were as follows:


	For the Year Ended December 31,
(in millions)	2025		2024		2023
Revenues from related parties	$	24	$	163	$	143
Expenses associated with related parties(1)	163		128		132

(1)Expenses associated with related parties includes a reduction of $53 million, $93 million, and $42 million related to earned equity for the achievement of certain milestones included in our distribution agreement with related parties, which were recognized as a reduction of Cost of sales in the Consolidated Statements of Income for the years ended December 31, 2025, 2024, and 2023, respectively.

OTHER TRANSACTIONS WITH RELATED PARTIES

We made payments to Nutrabolt totaling $2 million, $8 million, and $52 million to acquire certain distribution rights during the years ended December 31, 2025, 2024, and 2023, respectively.

KEURIG DR PEPPER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(CONTINUED)

22. Subsequent Events

JV INVESTMENT

In connection with the previously announced JV Commitment Letter, as described in Note 3, on February 23, 2026, we entered into the JV Transaction Agreement with the Pod Manufacturing JV, certain of our subsidiaries, and the JV Investor Partner.

Following completion of the transactions contemplated by the JV Transaction Agreement, the Pod Manufacturing JV will own or otherwise have access to our manufacturing assets and facilities used in the manufacturing of K-Cup pods and other unbrewed single-serve beverages in the United States and Canada. Following the closing of the JV Investment, the Pod Manufacturing JV intends to use the net proceeds from this transaction to fund a portion of the JDE Peet's Acquisition.

The JV Transaction Agreement provides that, at the closing of the JV Investment, we and the JV Investor Partner will enter into the Pod Manufacturing JV Agreement, which sets forth each partner's rights and responsibilities with respect to the Pod Manufacturing JV, including with respect to the limited partner committee (a majority of the members of which will be appointed by us), certain unanimous approval rights in favor of the JV Investor Partner, mechanisms for capital contributions to be made to the Pod Manufacturing JV, limitations on transfers by the partners, a call right exercisable by us beginning on the eighth anniversary of the closing of the JV Investment and ending on the fifteenth anniversary of the closing (or earlier upon the occurrence of certain triggering events), a conversion right exercisable by the JV Investor Partner after the fifteenth anniversary of the closing but before the thirtieth anniversary of the closing whereby the JV Investor Partner may elect to convert its interest in the Pod Manufacturing JV into shares of our common stock or its successor, based on the JV Investor Partner’s remaining economic interest (subject to the call right), and tag-along rights for the JV Investor Partner if we desire to transfer our units. The Pod Manufacturing JV Agreement also sets forth distribution mechanics, pursuant to which the Pod Manufacturing JV shall make quarterly distributions of available cash (subject to certain limitations, including for operating costs and reserves) to its partners generally in proportion to their ownership interests.

The closing of the JV Transaction Agreement is subject to limited customary conditions. The parties expect to close the transactions substantially concurrently with the completion of the JDE Peet's Acquisition. The JV Transaction Agreement provides certain termination rights for both us and the JV Investor Partner, including if the JV Investment does not occur on or before March 3, 2027, if there is a material breach of the JV Transaction Agreement by the other party that is not cured within the applicable cure period, or if a law or order prevents the consummation of the transactions.

PREFERRED INVESTMENT

On February 23, 2026, we amended the Preferred Investment Agreement, under which the Preferred Investors agreed to purchase an additional 1.5 million shares of Convertible Preferred Stock, resulting in a total purchase of 4.5 million shares. Refer to Note 3 for additional information on the Preferred Investment Agreement.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

OPINION ON THE FINANCIAL STATEMENTS

We have audited the accompanying consolidated balance sheets of Keurig Dr Pepper Inc. and subsidiaries (the "Company") as of December 31, 2025 and 2024, the related consolidated statements of income, comprehensive income, changes in stockholders' equity, and cash flows, for each of the three years in the period ended December 31, 2025, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 24, 2026, expressed an unqualified opinion on the Company's internal control over financial reporting.

BASIS FOR OPINION

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

CRITICAL AUDIT MATTER

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Indefinite-Lived Intangible Assets and Goodwill Valuation - Certain of the Brand Assets and Reporting Units - Refer to Notes 2 and 6 to the financial statements

Critical Audit Matter Description

As discussed in Notes 2 and 6, the Company has indefinite-lived brand intangible assets ("brand assets") and goodwill. The Company's evaluation of brand assets and goodwill for impairment is performed annually as of October 1, or more frequently if events or circumstances indicate the carrying amount may not be recoverable and involves the comparison of the fair value of each brand asset or reporting unit to its carrying value. The Company used the income approach and a combination of income and market based approaches to estimate the fair value of brand assets and reporting units, respectively. These methods required management to make significant estimates and assumptions, specifically related to discount rates and forecasted cash flows. Assumptions may be sensitive to future market or industry conditions, as well as company-specific conditions, and changes in these assumptions could have a significant impact on the calculation of fair value. Given the significant judgments made by management to estimate certain of the fair values, a high degree of auditor judgment and an increased extent of effort were required to perform audit procedures that evaluated the reasonableness of management’s estimates and assumptions.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures consisted of risk assessment and testing management's impairment analyses including the underlying business and valuation assumptions for certain of the fair values. Those procedures included, but were not limited to, the following:

We tested the effectiveness of controls over the Company's brand assets and goodwill impairment review process.
We evaluated the reasonableness of management's ability to forecast revenue growth and margins by considering:

–Historical revenue and margins.

–Analysis of current and future business strategies for the projected periods.

–Information in industry reports.

With the assistance of our fair value specialists, we evaluated the reasonableness of the valuation methodologies and assumptions, including discount rates.

/s/ Deloitte & Touche LLP

Dallas, TX

February 24, 2026

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

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

OPINION ON INTERNAL CONTROL OVER FINANCIAL REPORTING

We have audited the internal control over financial reporting of Keurig Dr Pepper Inc. and subsidiaries (the "Company") as of December 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2025, of the Company and our report dated February 24, 2026, expressed an unqualified opinion on those financial statements.

BASIS FOR OPINION

The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting, appearing under Item 9A. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

DEFINITION AND LIMITATIONS OF INTERNAL CONTROL OVER FINANCIAL REPORTING

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Deloitte & Touche LLP

Dallas, Texas

February 24, 2026

Previous: Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK · Next: Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE